LY Corp
XMUN:YOJ
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Mastercard Inc
NYSE:MA
|
Technology
|
| US |
|
UnitedHealth Group Inc
NYSE:UNH
|
Health Care
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Walmart Inc
NYSE:WMT
|
Retail
|
| US |
|
Verizon Communications Inc
NYSE:VZ
|
Telecommunication
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
2.08
3.16
|
| Price Target |
|
We'll email you a reminder when the closing price reaches EUR.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Mastercard Inc
NYSE:MA
|
US |
|
|
UnitedHealth Group Inc
NYSE:UNH
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Walmart Inc
NYSE:WMT
|
US |
|
|
Verizon Communications Inc
NYSE:VZ
|
US |
This alert will be permanently deleted.
You don't have any saved screeners yet
Thank you very much for joining us today. This is the conference call for the meeting for the Z Holdings to report result of the Q1 of FY '22.
Now this presentation materials is available on Z Holdings' web page. The attendees from the Z Holdings: Kentaro Kawabe, Representative Director and President and CEO; Takao Ozawa, Director, Senior Managing Corporate Officer; Ryosuke Sakaue, Managing Corporate Officer and Group CFO; Chiaki Fujimon, Managing Corporate Officer and Group CTO; and Gen Miyazawa, Corporate -- Managing Corporate Officer.
First of all, Mr. Sakaue is going to present about the result of this Q1 of FY 2020. After that, we'd like to set up the Q&A session. Now we'd like to set up about 1.5 hour for the whole session today. Thank you very much for your cooperation.
Now let's get started. Mr. Sakaue, please.
I am group CFO, Sakaue of Z Holdings. Thank you very much for participating in this earnings session despite your very busy schedule.
For the first and third quarters, I will be in charge of giving the details. Without further ado, please turn to Page 2. These are the major topics of Q1 financial results. Regarding revenue, cocooning consumption and the consolidation of ZOZO drove the growth of Commerce business, resulting in the revenue increase of 14.8% year-on-year. Also, shopping business transaction value rose 85.9% year-on-year, a dramatic growth.
Next, about operating income. For the first time, operating income of Commerce business surpassed that of Media business due to company-wide cost cuts and synergy effects among ASKUL, ZOZO and other group companies. Ever since the EC revolution, we have put different efforts in the Commerce area, especially putting effort in our defensive measures, thus ending in a positive number for our revenue. And so far, Commerce has grown to be the second pillar.
Talking about net income. Net income decreased year-on-year in the absence of JPY 10.8 billion gain on change in equity interest in PayPay Corporation, which was recorded in Q1 of FY '19. Regarding the full year, we are not in the position to give you any concrete outlook, but we aim at achieving 2 consecutive terms of increasing revenue and operating income.
There's one topic to talk about the business. We have provided you the press release today. And we have decided that we are going to unify our financial services under the brand name of PayPay, so that we will be able to position it as the third pillar in growing our business as a whole.
Next page, please. This is our consolidated income statement. We've seen a different impact of COVID-19 in Q1, and they are both positive and negative impacts, as you can see here. We have a large variety of businesses, so there are differences in the impact amongst the businesses. Nonetheless, group companies and services complemented each other to realize the growth of 14.8% regarding the revenue. Regarding operating income, we were able to grow by 40% year-on-year.
Next page, please. This shows the factors of change in operating income as compared to the previous year. Please take a look at the third bar graph, which is the Media business. The marginal income decreased. But when you exclude ZOZO, it was JPY 6.9 billion. And also by having ZOZO consolidation, we are seeing a dramatic growth. And also, we started the reduction of fixed costs, so we were able to increase by JPY 3.3 billion.
And regarding COVID-19, starting from February, we have been concerned about the pandemic. So from early on, we have taken different measures. Therefore, from the outset, we have dramatically reduced the cost. Therefore, we were able to get the operating income of JPY 50.6 billion. I repeat myself, in Q1, Commerce was JPY 36.3 billion, and the Media was JPY 33.5 billion. So the operating income of Commerce outdid Media.
Next page, please. This shows the impact of COVID-19 on our businesses.
Please turn to the next page. On the top, you see the positive impact. And at the bottom, you see the negative impact.
Firstly, merchandise of EC. There has been increase of cocooning consumption, so this was a tailwind. Yahoo! Shopping and PayPay total, regarding the number of new buyers and stores, you see a hike. And we believe that the domestic EC market has grown by embracing more new buyers and participants.
On the right, you see Media and advertising. So time spent online has increased steadily, and -- especially people work at home. So in the past, the usage via PC went down. But in actuality in Q1, it grew by 2 digits mostly or almost 10%. COVID-19 created uncertainty, so the demand of advertising went down. This is particularly true in travel as well as recruitment industries.
Please turn to the next page. As a result, regarding the total advertising revenue, the environment was very challenging. Nonetheless, by conducting different measures, as compared to the previous year, we were able to grow by 1.2% year-on-year. So this is the positive figure that we were able to record. Regarding EC, the momentum of the transaction value growth was different from the business as usual.
Next page, this is on services. Under COVID-19, our lifestyle has changed very dramatically. User first is the motto that we uphold, and we develop services as well as functions that are in alignment with the new normal. We have about 70 new functions launched in the past 3 months, whether it be a large new function or a small one. And as you know, today, we are seeing more newly impacted people. But I guess it is very important that you provide services that are in line with the need, especially visualization of congestion. And so I want people to look at the congestion situation as if they're looking at weather forecast.
Next page, please. In April and June, we conducted different countermeasures, and the number of service usage as well as trust were enhanced. This shows the results of the third-party service, and we have been ranked very high. As a domestic platform, we want to continue contributing to the society, and at the same time, grow our business as a whole.
Please turn to the next page. We grew our business and contributed to the society, and I believe that maximization of performance of talents will be very critical. At Yahoo!, our subsidiary, we made the announcement that IT will be levered so that different constraints can be eliminated. And this new work style will be challenged as of October. We want to be a forerunner in trying new work style in Japan, and we want to live by our vision of UPDATE JAPAN, so that in actuality, we will be able to update how Japanese work.
This is the target for this fiscal year. Still -- and we have still uncertainty about the demand of advertising, so that's why when it comes to guidance, this isn't -- we don't make any clear to the public about that guidance. So in all of our and -- the business environment, and now we have a diversified portfolio and services, and this is very unique of Z Holdings. And we think that we're also rated by the investors, and thus we are a unique business with a diversified portfolio, so that we want to have the cutting costs and diversifying the services. So that's why these are the offense and defense. And this -- we'd like to make a balanced approach for the growth in both revenue and income. That's all the highlights and -- highlights on the topics of the business performance in Q1.
Next, I'd like to move on to the business topics one by one. Please turn to next page. I'd like to start with the Commerce business, and Page 14 represents the KPIs for the Commerce business. The e-Commerce transaction value is JPY 707.3 billion and have grown by 21.1% year-on-year. So compared to the current growth momentum, it was higher than the past. When it comes to the merchandising, the ZOZO has been rather favorable and Yahoo! Shopping and PayPay Mall due to this cocooning shopping trend that was pushed up on the other channels. And when it comes to Reuse business, although we reduced the kind of cost for the product expenses, but now the PayPay Flea market have contributed a lot. When it comes to service and digital content transactions, the travel and restaurant reservations have dramatically declined. But on the other hand, after the release of the emergency declarations, now we have to get back to that level and -- to the level of -- before the collection is made.
So next page. Let me talk about a little bit more and specific about this Commerce business. And just like this -- and Yahoo! Shopping. Now just like this -- for this -- and shrinking of this significant motto, the shopping activities and experience, now here comes the importance of all these online and off-line and the combination of it. And we now have announced cross-shopping initiative. So this means that now actually, the shoppers can check out the inventory of the brick-and-mortar and physical stores on the PayPay Mall. And we already have good reputation from the merchants and for -- the retailers can expand and diversify the channels. And also, we can cover all this inventory not only on online, but also on off-line, so that we can extend our coverage not only for this -- the online, but also for the brick-and-mortar type of physical stores operation. So in this business environment, it would take a longer time to actually deliver the good. But now we'll have to make steady progress on this cost shopping initiative, so that we can diversify and also push up the business of the merchants, so that we can achieve the target.
Next page, please. Next, let me talk about our ZOZO business. So yesterday -- and ZOZO business has been explained in the results yesterday. So that's why I'd like to focus on the progress of the synergy of ZOZO business in the holdings.
Please look at Page 18. This is what we have announced so far, but now the part of the synergy -- strategy between ZOZO and Z Holdings. First of all, now I'd like to have the working together with them, so that they can show that an offer that's the part of ZOZO and the PayPay Flea Markets. And also, the PayPay will be now introduced for the payments of ZOZO. And now we have over 30 million PayPay users. So now we would like to just make all these -- as many as of these PayPay members to this ZOZO markets and shops. So that we'd like to do -- like to emphasize the synergy with ZOZO and many of the other diversified projects.
Next. This is about payment services. This is for the PayPay. First of all, this is for the off-line. Now we have a decline in off-line payments like this on the other hand, but the PayPay has been basically growing. And so that's why for all this, the KPI have been steadily growing like this. Particularly -- and in the last quarter, we had focused on online. So that's why -- and then all in all, we have a very good balance sheet growth like this.
About monetization, we are moving up our schedule and sequentially launching new services. Especially this year, we will work on financial services and expansion of O2O. And also, we will expand and monetize user base as well. So that will be the fundamentals of managing PayPay.
Next page, this is the financial business. I'm referring to Page 23. So for the financials, we do not have unified brand. So we want the financials to be the third pillar following e-Commerce and -- shopping and e-Commerce, so we want to use PayPay as a unified brand. So to do so, we enable the usage of PayPay online, change the point reward to PayPay and launch PayPay for the market and more. These are just a few examples of our endeavors. So including EC, we want to have unified brand PayPay, so that user-friendly services can be provided in making finance as our third pillar of the group as a whole.
Next page, please. Having said that, we will consolidate all the services under the name of PayPay, but we do understand that the needs of financial products are diverse amongst the users. Therefore, I believe that it is almost impossible to stand alone, but rather we have to collaborate with other financial entities, so that we can provide a large selection of financial vehicles that users can opt for.
Next page, please. Commemorating the brand integration under the name of PayPay, we plan to launch various campaigns, and we will provide you with details on a later date.
Next page, please. During the last term, we announced scenario finance initiative, and this is progressing smoothly. So we will try to align our financial services with our other solutions that we provide, and we want to provide unique services, so that financial products can be linked with our existing services and provide original user experiences.
We can now provide you with full year consolidated performance guidance, so we would like to walk you through the major current KPIs for our business. Page 28, please. This is on shopping business transaction value. In April to June because of cocooning consumption and government cashless promotion, shopping growth surpassed normal pace. Having said that, however, in July, there was softening of cocooning consumption and termination of governments cashless promotion, and we changed a part of our point reward program, which somehow weakened the growth rate. But in September, government individual number card point program will start, so we don't know whether the growth rate will be further accelerated or stay at the current rate or not.
Next page. This is on Media, Page 30. Premium ads and YDN were different platforms, but we decided to integrate them on one. Since these products existed on different platforms, advertisers had difficulties measuring the effect as well as managing diverse products. By building one platform, we can provide distribution functions across the board that fit our clients' purpose and serve the intuitive advertising and management mechanisms.
So for integrating advertising platform, we have rebranded. So with that, just like this, we have changed the base of the disclosure on IR. There's no any basic changes -- it's just changes in the classifications. Now the display advertising is now divided into 2: in operation and this -- programmatic and reservations. So these are all divided like this, but -- and PR option for many of them are not -- are included in this programmatic advertising like this. Based on this new integration, new and segment classification, this is the results. JPY 79.1 billion is the actual total advertising revenue, 1.2% growth year-on-year. So search advertising was adversely affected by COVID-19, so the growth was minus 11.6%. But on the other hand, when it comes to the programmatic advertising, it has grown together with -- along with expansion of the shopping and also improvement of the product all contributed. And now it has grown by 21.5%, substantial growth from the year earlier. This is about the programmatic advertising. So just like this, it's an advantage from the segment to segments but all in all, as a whole. And although we have difficult demand and difficult environments, we can have a positive growth year-on-year.
Next page, please. So this is our efforts of the Yahoo! and Media, Page 34. So this -- when it comes to the business, we have provided that -- this visibility service for the visitors of the advertising, just like this. Please look at this Page 35. This is the verification of the store business measurements. So just mentioned in short that now advertising is in place, and we check out that's the -- visualize the effects of the advertising. Actually -- well, how many visitors actually visit there, so that's the tenants and the shops not only in visualizing, but also we're using just like [ that AP test like for the ] approaches for the -- so the different approaches. So after this onward, we also will like to expanding the reporting features, so that we can boost efforts to support marketing activity of the clients.
Next page, please. Just like this, these are -- on top of these developments on the new marketing products, we also have been making the efforts for the sales activity. So this is synergy at the sales and JPY 4.4 billion, and they have annual. But now we have just JPY 3 billion for just 1 quarter of like this. So the joint business plan is on the right-hand side.
And let me explain about this joint business plan. This means that we share that to clear the target of the marketing and try to join together from the upstream of the marketing process. And we're going to closely join and work together, so that we can have a very big annual contract with the customers. And we work together from the upstream that we can have very good proposals. So now as -- volume and value basis have been growing very well. So that's like this. And we have been emphasizing business sales activity, so that we can expand that business further.
Next, please. These are the current situation and the future outlook of Media business, Page 38. So this is about the outlook of advertising business, and still -- and COVID-19, the very persistence, and it's very difficult for us to have the steady growth and -- about the demand from the advertisers. And still, we have a lot of uncertainty about the demand of advertising after December due to the COVID-19. But on the other hand, we make -- emphasizing efforts onto the marketing and sales activities and also focusing on promising the clients and customers. That's why we have to make this kind of activity.
And last of all, let me talk about the company-wide initiative, Page 40. So when it comes to integration with LINE, June 30, we made the release. And part of the countries, nations still -- we are still working on the procedures of the integrations. And we -- it would be a little bit later -- end of October 2020, this is planned integrations, completion dates. But anyway, we think that everything is making very good progress when it comes to the integration of the LINE. If -- after everything will be scheduled, we'll be qualified a lot to just announce it again.
Last of all, this is the last page of my presentation. That's all my presentation today. Thank you very much for joining today. Still -- and we have a lot of uncertainty, but I highly appreciate the cooperation of our business. Thank you very much.
After this, I would like to open the floor to the QA sessions. And now we are joining from this -- online from the different places, so that's why all the attendees. Well, it might be likely that some members have some time to get connected to the line.
But before getting into the QA -- now usually, he doesn't attend this conversation. But the President, Mr. Kawabe is going to make some comments.
I am Kawabe of Z Holdings. Before moving on to QA, I would like to give some comments.
Globally speaking, all the companies are taking Q1 of 2020 to be a very important period. Needless to say, we have put our very best effort to get the results for Q1. Z Holdings has a scale, and we are, akin to jumbo jet. And each group companies are putting their effort. And as President of Z Holdings, I am away in an automatic pilot mode, and that is business as usual. However, in Q1 of 2020, I took the handle of the airplane, so that the plane will not crash or the plane will keep its path to get to its destination. So I was very cautious in taking the lead, not only me, but other management. representatives were very serious in cruising the plane. And we concentrated on coming up with the new services that are in demand. So we were able to harmonize the ambience between the management and the people working out in the field. By doing so, we believe that we were able to come up with the results that are quite satisfactory to the investors. I know that under COVID-19, uncertainties are still there. And we are going to buckle our belt tighter, so that we will definitively attain our initial goal of an increase in revenue as well as operating income.
And with that, I hope that you will give us very good questions during the next Q&A session. Thank you.
Thank you very much, Mr. Kawabe, Mr. Sakaue. From now, I would like to invite the questions. From SMBC Nikko Securities, Mr. Maeda, please.
I'm Maeda. I have 2 questions. I'd like to make these questions together or...
Would you please make your question one by one, hopefully, okay?
Okay. Now when we look at Page 38, so you -- that represents projections of the demand of the advertising market. When it comes to the shopping advertising, now Media advertising and shopping-related advertising, there was a big difference between these 2 categories. Now this is just only representing total of these 2. And we'd like to know about the breakdown of -- and pure advertising and shopping-related advertising. Particularly, I would like -- would you be a little more specific about your Media-related advertising business?
Would you please make your second question together, please? I'm sorry. Please continue.
My second question is about the PayPay. So in equity method and later the loss have trimmed down substantially, and I think that this is due to the PayPay business. So can we expect about what would be the projection of the loss after this? And now this loss has been trimmed down strong due to that monetizations or the -- are the other reasons. So I'd like to know about the factor of this -- shrinking this loss due to -- of this equity method.
Okay. To answer your first question, particularly for the Media-related advertising demand forecast, and Page 32. So this is the new classifications. And let me explain about this. In Q1 and based on this new classifications, particularly for the programmable advertising, it's a mix -- it is mixed to -- combined with Media and the -- for this performance. But now -- and -- but Media have grown by 7% and JPY 17.6 billion and JPY 2.7 billion for that. And this is -- so far, we mentioned about the YDN and others. But when we focus only on YDN, the traffic have grown dramatically, and they have grown by 11% year-on-year.
And for the other -- the Commerce-related advertising, including PL auctions about the 10 and a couple billion yen. So this is about growing, over 80% has been significantly grown. And also, we have started PayPay Mall service that -- it has -- take rate as a whole has been increased.
So when it comes to the Q2 and after, first of all, for a sponsored search, it seems like demand will come back, recover from Q1, and it would gradually recover. But when it comes to Commerce advertising, it has been closely related to the growth of the Commerce business. That's why it has been slower than that. And first of all, when it comes to this, the reserve in advertising in Q2, a cashless campaign is implemented by the government. It was -- we have a big order on August and September. So that's why so far -- and we could not expect a similar LINE size of the demand this year. So that's why it would be more struggling than Q1. So -- and as a whole, when it comes to Q2, Q2 as a whole, it will be just almost on par with Q1 in terms of the demand. So Maeda-san, this is my answer to your first question. Is that all right?
Yes.
Okay. So your second question is about the equity method related to PayPay, right? So first of all, compared to the last year, last April, we had 50% of stake owned of PayPay last year, 50% last year. So the 50% in April and 25% in May and June this year that -- from the April to June, we have taken 25%. So this -- now we have just one that's negative, the fact that it hasn't declined like this. So when it comes to the expected level of the loss after this, still, we needed to implement the promotions. We have to spend promotional costs after this onward. So when it comes to this fiscal year, we would like to make investments after promotion just like we did last year. This is our plan.
And when it comes to the revenue, this is [ stance ] reason that the revenue were expected to grow slowly, steadily, but still and we have to spend more costs for the investment for the promotion than the revenue growth.
Ozawa-san, do you have any other comments about this business from the business perspective?
Yes. I'm Ozawa speaking. Thank you very much. There's not anything. But when it comes to revenues, PayPay stand-alone sales for the PayPay alone or just like the financial businesses and -- so this will be recognized of Z Holdings, not on the PayPay alone. So that's why -- and part of that -- what's represented in the PL is different. So this is my comment.
Maeda-san, is that all right? Okay.
Next from Nomura Securities, Nagao-san, please.
I am Nagao, Nomura Securities. I have 2 questions. First question is on Commerce. So you were able to increase by 54% about embracing new users. I want to know the profile of those new users. I want to know the breakdown between the male and female, where they live? And what is the segment that you are succeeding so far? And also in Q1, regarding operating income of Commerce, it was 18%. So it was record high. And what is the potential of keeping this momentum in the future to come? That's my first question.
Let's move on to the second question, which is on advertising. You said that there are differences in demand depending on the industry. And when you look at the product, what are the products that are being sought for by the advertisers? And what are the media? And what are the types of data that are being sought by the advertisers? And is there any change during pre- and post-COVID? Please tell me about the differences.
Thank you very much, Nagao-san. The first question is on business. So I want Mr. Ozawa to answer the question. About the second question, you're talking about the demand of the advertisers, so Miyazawa-san will be responding to that. So firstly, Ozawa-san, please.
This is Ozawa speaking. In terms of the profile of the users, there is no skew to any particular segment. So when you look at the demographic distribution, we are in line with such a demographic distribution. Given the characteristics of Yahoo!, the age is slightly higher than others, and there are many people who come through search engine. So people in their 30s and 40s are the majority. And if I have to choose between the 2, male surpasses female as usual, meaning as our ordinary business. So there is not much of a change. But at the same time, there is inflow from PayPay. And as compared to Yahoo! customers, the profile is quite different. Age bracket wise, we see more younger generation than Yahoo! clients. But there is no major trend that is conspicuous.
Talking about profitability, I want Sakaue-san to confirm that point. So I will give back the microphone to Sakaue-san.
So regarding profitability, in Q1, we took a discipline and tried to control the ins and outs of cash, so we hope that the mid- to long-term investment. So for Commerce, our profitability improved because of those measures. There are seasonalities in Commerce. I cannot give you any blanket statement. But we do not think that in the sequential quarters, there will not be high profitability as that of Q1, but we will make -- do investments, so that we can continue growing. I cannot give you any tangible figure, but please be aware of the fact that most probably, we will not be enjoying the same profitability as that of Q1.
This is Miyazawa-san. I'm in charge of Media.
Regarding the changes of the demand amongst the advertisers, with a hindsight we got in Q1, search was a challenge, but display advertising did well. Amongst that, compared to premium, performance advertising effect was higher. And regarding search advertising by industry due to the negative impact of COVID-19, there was almost no demand for search advertising because a search word is used for search advertising. So if there is no demand for that, we will miss that segment. But regarding that space that we have, we were able to complement by other industry who was going for search advertising.
Regarding the advertising whose impact can be visualized, we saw an increase of budget in that area. So if you can visualize a number of store visits after the lifting of emergency measures, there has been an increase. And also regarding the area that is close to the shopping itself, budget was enhanced. This integrated marketing solution is the mechanism that we are pursuing, and I believe that we are aligning ourselves with the needs of the advertisers. That's all from me.
I want to ask you a follow-up question. Is it okay? This is a question to Miyazawa-san. The end users' demand is very uncertain, and I believe that data that is being sought for by the advertisers will be a very important point. So Yahoo! Shopping is positioned in Media as well. And given COVID-19 impact, I think you can leverage on your strength. And regarding shopping advertising, can you tell me what is the trend among the advertisers, including the trend that you saw in Q1?
So regarding our shopping advertising, Mr. Ozawa is in charge. So I want him to answer that question.
I see.
Please hold on.
So is it okay, if I respond?
Yes. Ozawa-san, please.
So Shopping and PayPay Mall will be used as the venue for advertising, and that will grow. And from July and August, PayPay advertising will be launched. And I believe that we will be able to enjoy relative amount of listing. And we have Amazon and Rakuten, which is a shopping venue, and their volume is higher than ours. So we now at this point include ourselves only within the realm of shopping. So we are trying to leverage on PayPay, so that we can connect online and off-line together. And even though the consumption online will be increasing, but when you look at the global trend, 20% to 30% are online, and the remaining 80% to 70% are off-line.
The strength of Yahoo! is that you can connect with PayPay, and we will be able to attract off-line transaction as well. And that is the nature of the proposals that we are making to the advertisers, so that we can identify the right product under the integrated marketing solution. So we have Yahoo! and PayPay Mall, and we can combine these services with PayPay, so that it will be the right combination for the advertisers.
Next from Citigroup Securities, Mr. Tsuruo, please.
My first question is -- so this is Page 6 of the summary report. Now you've mentioned about the contract with Google. So I want to change it with the contract on Google from the past. And would you be a little bit more specific, if you can -- disclosure?
What's your second question, please?
My second question is on Page 44 of the presentation material. So this is that -- the reason for the change in the factors and about the -- it's over 2%. We have succeeded in over 2% of cost reductions. And would you also be a little specific about what kind of effect of the cost reduction we particularly emphasized? These are the 2 questions.
Okay. And I'd like to respond to 2 questions for me. When it comes to contract with Google, now as you can support that, it's very difficult for us to disclose the details because we have a counterpart, but -- and it has been -- the end of May 2020, we have renewed the contract. And so far, it was end of March 2021, but now we have extended 2 to 4 years, so the March of 2025 is the next end of the term. This is a renewed contract. And when it comes to all the details, not so much substantial difference and there's not any impact on the revenues or the income, okay?
So there's not anything that's about the -- raising the rates or anything?
Yes. That's about it. Yes. There's not any impact on the businesses, okay? There's no impact on business from this contract.
Now your second question is about this fixed cost. About 70% to 80% of the cost reduction is about the promotion cost. We trimmed down and suppressed this -- the promotional costs. This is the major efforts. And other than that -- and for example, we have just postponed and shrunk the plan of the CapEx for the servers. And also, we could reduce that expense -- travel expenses under this COVID-19 environment. So in Q1, we have successfully compressed the costs. And also part of that market and promotion is suspended. So -- but anyway, that depends on the recovery of the business, and we'd like to reopen -- restart the spending from these expenses and costs again. So on a full year fiscal year basis, we'd like to secure that increase of both revenue and income. This is our basis of strategy.
Okay. Then if it's the case -- and now JPY 40 billion -- it's not a JPY 40 billion of cost reduction on a full year basis, right? Right?
No. Yes, you're right. It's not that.
So why would be -- is there any good rule of thumb for us? How much of the cost reduction do you think about the full year basis?
Okay. So this is -- it's not the JPY 10 billion by fourth quarter. It's not that. Okay? And then also, for when it comes to the operating income for Q1, it's not -- again, it's not multiplied by 4 on a full year basis. It's not that. Is that right?
This is Kawabe speaking. And as I mentioned initially, now we have to take into consideration about what has to happen with this COVID-19 environment, and we have to just -- not have to manipulate and operate the planes and vehicles by looking at this uncertainty due to the COVID-19.
So under this circumstance, anyway by -- but I would like to achieve the positive growth of revenue and income even in this difficult environment. So the cost of control is also within this context and -- with the promotion and progress of the digital transformation and digitalization, and it would be really happy for us that we can take advantage of that into further growth of the business. And if it's the case, we can make more investments on further promotion, for example. But now today, we have another and new record high number of the COVID-19 infections reported in Tokyo today. So it's something like that is very, very uncertain, and looking at all the environments and also we'd would like to make a commitment and would like to fulfill our commitments to the shareholders and investors. And by -- anyway, it's very difficult for us because everything is subject to change. And so it's very difficult for us to -- and what happens and -- a couple of months ahead, but this is what we're doing. And we'd like to do our best and utmost, okay? And I think this is really very and -- a wonderful operating income. So all the investors will be happy, I think. This is my comment.
Mitsubishi UFJ Morgan Stanley, Araki-san, please.
I have 2 questions. Maeda-san asked a question before. And regarding equity method, I understand that on a quarterly basis, it has been declining. And in terms of the promotional cost, it is down to JPY 12.2 billion. And in COVID-19, you try to reduce the expense? Or is it correct to understand that this is not a onetime-off situation, but rather it will continue for some time? So in terms of the gains both from the equity method companies, can you combine that element with the SGA?
Second question, this is on LINE. And I know that the fair trade commission is discussing the details. And I want to know whether you're communicating with LINE or there is no communication with LINE people? Or is there any regular meetings between the top representatives between the companies? That's the second question. That's all for me.
So the equity earnings in the previous year was minus JPY 5.9 billion, and now it is minus JPY 3.7 billion. And as mentioned to Mr. Maeda, in terms of April, the equity ratio last year was 50%. But this year, it is 25%. And that is a major factor changing the situation.
I understand that. I want to know quarter-on-quarter, is -- the ratio is the same. So I guess, the result is the effort of cost reduction, and you are reducing your promotional expense as well. And do you plan to continue that?
I'm sorry. I misunderstood the question. So regarding Q-on-Q, you're talking about PayPay. And regarding promotional cost, you are including Commerce business as well, and you want to know the quarter-to-quarter comparison.
Yes. That's right.
There are some seasonal factors. In terms of Q4 for PayPay, different promotions have been conducted during Q4. So there are some seasonality and -- that is reflecting the differences of promotional cost. And in terms of consolidated sales, promotional cost of Z Holdings, from the end of March, the cocooning consumption has been increasing. And instead of conducting full-fledge promotional activities, we believe that we will be able to increase our revenue. Therefore, in Q1, we try to limit the promotional cost. And after Q2, I already gave you some figures for July, and we are seeing some weakening of growth. So we're going to be flexible in launching different activities using our promotional expense. We will look at the revenue, as mentioned by Mr. Kawabe, and try to tweak the expense accordingly. That's the answer for the first question.
And moving on to the second question, which is online, we are under gun jumping restriction. So regarding the detail, we are not allowed to conduct discussion with each other. But under the publicly known information framework, we conduct a dialogue. So we want to further understand each other, so Yahoo! and LINE and other group companies convene on a regular basis to get to know each other's business better.
From [indiscernible].
Do you hear me?
Yes.
And after April, on Page 28, now this is the forecast of slowed down growth. But now there's still 35% -- still growing by 35% with ZOZO, but what is the growth rate without ZOZO?
You have 2 questions? That's your only question. Do you have another question?
Yes. I have only one question.
Just wait a minute. Okay. So this is in July, about half of this -- so also for the April to June, about half of the growth is from ZOZO and the other 50% of the Yahoo!, ZOZO -- PayPay Mall and Yahoo! Shopping. So it is also from the other events. And anyway, there's almost about half of this growth is coming up from ZOZO this month.
Next, from Okasan Securities, Okumura-san, please.
I am Okumura of Okasan Securities. Can you hear me?
Yes. We hear you okay.
I have 2 questions. First question is on the advertisement you get through the collaboration with SoftBank. I know that given COVID-19, it's very difficult to get new orders, but you were able to get revenue of JPY 3 billion. And are you going to keep the momentum in Q2? And I want to know the potential going forward. That's my first question.
So can you give me your second question as well?
Okay. So second question is on iOS demand. IDF usage will be restricted. So in the second half, regarding targeting advertising, will it be negatively impacted or you will not be impacted by the restriction on IDF?
So you're talking about the impact of IDFA on advertising? So Mr. Miyazawa will be responding to the first and the second question. Please give us a few minutes.
This is Miyazawa speaking. About the collaboration with SB in Q1, it was difficult to have face-to-face sales talk, so we had to change our business mode. So we held webinar and we used Zoom and other tools, so that we can approach the existing clients of SoftBank. And through Zoom, we conducted proposal, and that is the collaboration that we had with SoftBank.
About the future, we don't know what will be the impact of COVID-19. Nonetheless, we do have a concrete plan. But depending on how COVID-19 evolves, we don't know how we will be able to implement our plan.
Now about the second question, which is on iOS, the impact of IDFA in the end of June was announced by Apple. And we are looking at the situation, so that we will be able to abide the new restrictions.
Regarding the impact on revenue, there will be an impact. Having said that, we will try to get the consent from the users. And based on that, we can provide new marketing solution. So we will try our best, so that the new solutions will be provided to make up for the restrictions of IDFA.
Next, Mr. Han Joon Kim from Macquarie Securities, please.
Great. Thank you for the chance to ask questions in relation to your financial services that you're doing for PayPay, and it seems like LINE is trying to invest a lot into securities and the bank business as well. So under the assumption that the regulators are okay with the deal and that we do go through with it, is this something where we have to figure out how to integrate them better? Or is it that both sides lack sufficient kind of resources on the financial services side? So if you can combine the both assets together, it will be more the merrier? Or is there going to be some cleanup needed over on that side given that we both tend to have different products and both of us are working on these at the same time?
LINE is conducting different financial services, and PayPay will be moving more into the financial area and what kind of consolidation is optimal for the 2. As mentioned before, we are under the restriction of gun jumping, so we cannot exchange information regarding the future investment, for example. So that is the situation that both parties are in right now. So we cannot talk about the details until we get the approval from the regulatory body. So the reality is that we did not iron out the details related to what kind of financial services we will be launching together. And FCA will take some time to give us a go. So please be more patient with us.
Next from JPMorgan Securities, Mr. Mori, please -- Ms. Mori, please.
I have 2 questions. My first question is about the O2O and strategy for -- with the PayPay and which -- is there any change in the priority of the service you put on emphasis? So PayPay pickup is deployed, for example, this year. But at this moment of time, coupons or the information were distributed. But when I look into further future, would you please give us that what kind of future plan do you have for the additional strategy for the PayPay? And also when it comes to the finance businesses, you were just talking about the partner strategy, for example. What are you thinking about this balance with your own service and the partner service?
My second question is about Reuse business. So there's no major big trend we observed this year, but is that due to the impact of the COVID-19? Or is there any positive COVID-19 for this -- the business? That's why you don't have to use so much of the promotional cost. Now also you're starting with the Flea market and, for example, PayPay. So anyway, what's your current ideas about the business?
Okay. Thank you very much. First of all, the O2O strategy, the PayPay and your first question and also future strategy. And second is that Reuse business. Is there any impact from the COVID-19 or change in trend for the Reuse business? Well, these 2 are also -- both are related to the e-Commerce. So Mr. Ozawa is going to respond to your question, okay?
So when it comes to O2O -- PayPay O2O strategy in the COVID-19 environment, the requirements from the tenant is that now -- and the less visitors visit their restaurants or some kind of brick-and-mortar stores and for these shops. And that's why we have very -- many inquiries from potential merchants. So that's why we are trying to emphasize more on the O2O side of the PayPay.
Now we'd like to be aggressive in promoting this O2O-related service to PayPay, including PayPay pickup. So now we are an increasing number of the business in this O2O aspect of PayPay, but -- for example, we had Uber Eats or we had Mercari, they're providing that eatery to delivery services. So -- but originally, as the PayPay is -- are the payment tool and we can work together with them, with delivery service companies. But looking from the users' perspective, user can have diversified services and -- when it comes to the PayPay and when it comes to coupons. And now we have a lot more additional features will be available in terms of coupons. So that's why now we are investing that promotional cost for PayPay, but we would like to expand these services, and we can share that part of the promotional cost with the merchants of the stores. And we can control the share of that promotional efforts between PayPay and merchants of the stores. So that's why we'd like to make PayPay grow as the basic platform of this type of O2O business. Does this answer to your question?
Yes.
Okay. And for second question, when it comes to Reuse business, there's not any major change in trend so far. So still, we'd like to have more of the business on Reuse now. But -- and also in Q3, we have -- the last Q3, we had minus 5% of the growth. So that's why we spend more on the promotional cost. And together, we recovered to the -- close to the 100%. But in Q1, a lot of different uncertainties. And also, we substantially trimmed down the promotional costs. But still, we have a good result of the business. So in this sense, we can say that -- and I think that we could have a positive impact of COVID-19 environment, and PayPay Flea Market and YAHUOKU!, we can have a positive growth and achievement, so that -- also, we'd like to carefully watch -- looking at and watching the market trends, so that we can control the promotional costs -- promotional expenses and also would like to improve the products themselves.
But when it comes to Q1 this fiscal year, we had a certain level of positive impact. And we have just started the efforts and -- so -- and then we have good merchandising and products increasing. So that's why -- how we're going to make them sold in the case of the apparel for the ZOZO and with a lot of tons of SKUs in case of apparel. So that's why -- and it's very difficult to control the product assortment and SKU assortments. So that's why when it comes to ZOZO, we need a little more time to make it more brushed up.
From Jefferies Securities, we have Sato-san. Sato-san, please.
I am Sato of Jefferies Securities. I have a question online. I know that the schedule is delayed and is it because the government representatives are working from home, so the process is being delayed? Is my understanding correct? That's question number one. So can you answer that question?
Maybe you might want to ask the second question as well?
Okay. I will move on to the second question, and I want to talk about the big picture. When you think about quarters after Q2, the management might have some concerns about risk factors. So the second wave of COVID-19 is coming to Tokyo. And as compared to wave 1, people don't have the panic shopping trend. And when you look at the trend of July, about 30% and half of that shopping is from ZOZO and organic growth might be 20% even without ZOZO. And I want to know what kind of risk concern that the management has? That's my question.
So I want Mr. Kawabe to answer question 1 and 2.
About the first question about the delay in the approval schedule, we have been impacted by COVID-19, and there is nothing more or less to it. So it's not that the review is getting more complex. That is not the case. This is a major integration, and we are providing many documents. And before COVID-19, fair trade commission representatives went to office and looked at the documents on a daily basis, but now they take turns to go to the office. And some of them, it's their first time to experience working from home. And given that backdrop, I know that they are taking very serious steps in trying to complete the review. And there might be delay, but I'm sure that it will be concluded as scheduled.
So moving on to the second question, what are the risks that the management feel regarding COVID-19 wave 1 and 2? I do not think that there will be changes in the risks. Emergency declaration has been made, and the pandemic has been controlled to some extent at one point in time. But with the second wave coming, even though advertising and service, digital, e-commerce as compared to April and May, we were able to recover in June. And the risk might be the dampening of the business in July. So in terms of search advertising and also EC-related services, if we are negatively impacted by the second wave, we are concerned that there will be plummeting in these businesses. Any other point?
Say if there is the second emergency declaration, what will happen? Maybe you have been impacted by the cocooning consumption that dampened the advertising, and you implemented about JPY 10 billion. And do you plan to have, say, JPY 80 billion cost reduction in Q2 and onward because I know that you have to look at the situation and be agile and taking countermeasures?
Regarding the first quarter, including the history of Yahoo!, i.e., given the history of 25 years, I believe that close to Q1 was the most untransparent risky period. And I've been working as a President for 2 years, and we have been promoting diversified business portfolio. And even though the risk was very high and even with the emergency declaration, because of the cocooning consumption, e-commerce went up. And with the lifting of the declaration, O2O and advertising revamped. So structurally, since we have portfolio, we can hedge each other. And even though we live in the day and age of uncertainty, I am very confident that we will be able to leverage on different business segments.
So if there is any emergency declaration, I believe that cocooning consumption will go up because that is in line with the actual shopping. And it is true that advertising might go down, but without investing in promotion, cocooning consumption will hike our e-Commerce. So even under COVID-19, we are determined to attain a positive increase of revenue and operating income. And we don't know whether we will reduce the cost by JPY 10 billion. It all depends on the scale of the second wave. So we want to be very agile, so that we will be able to hedge different businesses, and that is the lesson that we have learned in Q1, and I do hope that you share our thoughts.
You were able to reduce the cost by JPY 10 billion, and I think that is a superb achievement that you were able to make. And if you have to reduce the cost in Q2 or Q3, you will be able to reduce the cost by JPY 10 billion because you proved yourself in Q1.
Well, given the situation of Z Holdings, when you look at the composition of expense, in order to expand our business, we are conducting much investment in promotion, and that register a large percent. So if we freeze that promotion, we will be able to reduce the cost to some extent. So regarding the fixed cost such as HR, it is quite contained.
Starting from the end of March to the beginning of April, we conducted major cost reduction. And during that time, the situation was very uncertain, and we thought that the e-Commerce might slow down. But at the same time, we wanted to keep the commitment of increasing revenue and operating income.
So even though we have to sacrifice growth to some extent, we went for the cost reduction given COVID-19 because people do not go out shopping and be contaminated by COVID-19, but rather they will use e-Commerce. So the e-Commerce transaction value increased despite the fact that we reduced our promotional costs.
The brands that are being chosen are limited to 3. So Rakuten and Amazon are forerunners, and we have Yahoo! Shopping and PayPay Mall. And they will recall the existence of our platform. And that was a backdrop upon which COVID-19 has emerged. And I think in the past years, we have invested in raising the awareness of our brand, and we were very successful.
So when you look at the performance results of Google, when you just look at the advertising, you see that we are in a challenging situation, so they are trying to develop, I believe, e-Commerce products. And given COVID-19, we were able to have the users remember our brand name even though there were no hints or solidation made by the interviewers. We wanted to be #1 in e-Commerce in Japan. And the effort that we have put so far has become very fruitful given COVID-19. But we are still ranked as #3, so we want to be #1. And whether it would be advertising or e-Commerce, we want to be #1. And because of the efforts that we have put in the past, we were able to risk hedge amongst different business segments.
Next, Mr. Nagao of Nomura Securities, please.
I'm sorry. This is my second round. I have just one quick question. For the -- now -- and post payment of the PayPay will be introduced this fall, but this -- the post payment feature can be done at ZOZO and -- shopping site. If there's anything you can disclose today, would you please tell me?
Post payment of PayPay can be applied to ZOZO, right? Mr. Ozawa is going to answer to that question.
Okay. Now we're still working on and there's no -- nothing has determined yet that -- and the post payment of PayPay can be applied to that -- a lot of the platforms for the e-Commerce operators. So this is our grand design. So that's why at some point of time after this and -- I'd like to implement that.
But anyway, also that depends on the ZOZO's decision, so -- as for that and the future per se we offer. But whether or not it will be applied, deployed or -- that depends on each of the e-Commerce operator. And so they -- so that depends on their decisions. That's all.
On the other hand, that would be deployed at PayPay Mall, Yahoo! Shopping, right? Okay. Do you understand that?
Yes. I understand that.
So post payment, you mean that sort of credit card type of payment is not the -- [ doesn’t involve this or ] supports payment for the shopping mall or credit card features. So this -- what you offer this is -- what kind of post payment? Just like the credit card payment to...
It's just like that. It's not that -- so that they -- will they -- they're going to base this feature on that for the Yahoo! Shopping and PayPay Mall. They're adding functions to do that. But anyway, this is the framework.
It is close to 6, so we would like to solicit last question.
So David from Astris Advisory Japan. Mr. David Gibson, please.
Two questions. Just to clarify on the Shopping transaction value in 1Q. How much -- excluding ZOZO, which I think was about JPY 290 billion, how much of that was PayPay Mall-related? I think you said last quarter, it was 40%. How much it was this quarter?
And the second question is on the LINE transaction. If you have dissenting shareholders and they petition the Tokyo court for a fair price negotiation, would that delay the closing of the transaction or could the transaction still close anyway?
Please repeat your second question and be more specific about the second question, please.
Sure. So under the filing, dissenting shareholders can elect to not accept for the squeeze out petition, and they can file with Tokyo court to determine a fair price. If LINE and the shareholders do not agree to a price, they can petition in the court. Just asking if that process begins, would actually this delay the closing of the transaction? Or can you actually close the transaction anyway using a squeeze out?
Okay. Thank you very much. First of all, and to -- for answering to your first question and -- about the transaction value of Q1 of shopping business, there's not any change from the -- to the Q2. That was almost the same as Q1 and Q2.
In your second question and conclusion, we will make the progress. We will proceed with the procedure. And it might be likely that -- also possible that if some shareholders of LINE make some reservations, objections in the general shareholders meeting of the LINE, so -- although, still NAVER have about majority of the voting rights. So that's why -- and [ then we can be the fast ], and we can go on all this integration process on at any time as we planned, and we can proceed with it. And this is your question, but is there any other additional comments or question about this?
Just to clarify, if the shareholders don't accept the LINE offer and they go to court, it doesn't impact the closing of the transaction?
Yes. You're right. Yes. No impact. Yes. You're right. There's no impact on the procedure.
Now that's time's up. So that's all the sessions. And first of all, would you please give us some closing remarks, please?
Okay. Thank you very much for joining us today in a very busy schedule. And before getting into the Q1, it was really uncertain and -- but still, we can have this very good performance. But still, the uncertainty which goes on after the Q2, but anyway, we will try to achieve this positive growth on a full year basis on both revenue and operating income. So that's why I heavily appreciate your understanding and cooperation. And also, Mr. Kawabe is going to give us his remarks, okay?
And looking from the corporate management, now offense and defense, these 2 aspects have to balance and -- so that we can fulfill our commitments to achieve the targets, so that we can trust from the -- all the parties concerned. But anyway, as Mr. Sakaue has mentioned, now we're getting into the more difficult environment, and that's why we need to grip that holding out just the [indiscernible] of the planes, the family.
So now -- and this is half a year, the 6 months, it seems like that a lot of the challenges and problems comes out in terms of the digital transformation, the digitalization. We already have announced with the integration with the LINE, so that we'd like to become the top 1, top 3 companies in this field. And a lot of people have difficulties to do business. And -- so that's why, when it comes to digital business and AI-based businesses, we think that we'd like to fulfill our mission and commitment, so that we can deliver that result of AI and digitalization to all of the people and the consumers and the people in the world. So that's why I highly appreciate you understanding our businesses and support us. Thank you very much. Thank you.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]