LY Corporation

We will now begin LI Corporation's financial results briefing for the first quarter of FY2024. Thank you very much for joining us today. This briefing will use the financial results presentation materials posted on the company's website.

Let us introduce attendees from the company.

President and the representative director, CEO. Takeshi Idezawa, Executive Corporate Officer, CFO, Ryosuke Sakaue, Executive Corporate Officer, Marketing Solution Company, CEO, Ryuki Ikehata, Executive Corporate Officer, Commerce Company, CEO, Hide Makoto. In the beginning, Mr. Sakaue will take you through 2024 Q1 results, and after that, We will have a Q&A session. The overall session should end in 60 minutes. Live streaming of this session will be available on a later day. If there is any technical problem, either with audio or video, an instruction will be appearing on the bottom of the screen to guide the audience to an alternative server. Now let's begin. This is Sakaue from LY Corporation. Thank you very much for taking your time to attend the financial results briefing for the first quarter of FY24. I will now give you an overview of the first quarter results. These are the topics. There are four. First is security measures. Progress was reported to the Personal Information Protection Commission on June the 28th. and to the Ministry of Internal Affairs and Communications on July 1, our efforts have been well received. We have brought forward some of the schedule for security measures against unauthorized access that occurred last year and are making steady progress. Second is prime listing. In order to maintain listing on the prime market and return profits to shareholders, We will acquire 150 billion yen of share buyback from August 5th. The third is Q1 performance. Performance for the first quarter is going strong. Company-wide revenue grew 7.6% year-on-year, and the consolidated adjusted EBITDA grew 21.7% year-on-year. Our growth driver, account advertising, and pay-per-consolidation continue to grow steadily. Lastly, product enhancements for top-line growth. We strengthen our products to achieve top-line growth. We have renewed the Yahoo Japan app and strengthened our media capabilities. Security measures are progressing smoothly, and we have also carried out share buyback. We have announced a share buyback to maintain our position on the prime market. Going forward, we will shift gears to promote our business for the mid to long term. Here's the agenda. First is the consolidated business results. These are the details of the share buyback. The acquisition method will be tender offer, 388 yen per share. The cancellation of treasury shares will involve the existing treasury shares held at the company and the shares to be purchased, totaling 6.4% of the outstanding shares. This will be canceled. And this share buyback will increase the free floating share to maintain our listing on the prime market and improve EPS and ROE. We believe that our stock price is undervalued. so we will continue to consider share buybacks as appropriate within the scope of capital allocation. The first quarter results, we saw an year-on-year growth both in revenue and profit. Progress on each target is generally above 25%, except for revenue being below 25%. However, this is within expectations as we expect higher sales in the second half of the year, seasonally. So, so far, we are in line with the expectations. Revenue for the company, each product grew, so revenue grew by 7.6% year-on-year. Adjust to the EBDA grew by 21.7% year-on-year. Thanks to the structural reforms that we have been implementing since the second half of FY22, including efficiency improvement, sales promotions, review of outsourcing costs, and selective focus on key business areas, revenue and adjusted EBITDA reached a record high for the first quarter, and adjusted EBITDA margin increased to 26.3% due to improved profitability. This is EBITDA YOY. Due to product enhancement, promotion expenses increased in Yahoo Shopping and PayPay consolidation compared with the last year. However, increase in SG&A was more than offset by increase in revenue in respective segments, resulting in higher adjusted EBITDA year-on-year. In Q1, security-related measure costs of approximately 3 billion yen were recorded, and another factor is that for one-time gain, totaling 43 billion yen was included in operating income, while only 4.2 billion yen was included in adjusted EBITDA because there are some cash transactions. So these are included in adjusted EBITDA. Gain and loss of control of subsidiaries was recorded at IPX, which promotes character business such as Line Friends, Line Next, which plans and develops an NFT platform, and Value Commerce. Those are the three companies recorded it. Again, after one time gain, $6.9 billion comes from value commerce, and out of 6.9 billion, 4.2 billion is included in adjusted EBITDA. Excluding one time factor of 4.2 billion, adjusted EBITDA grew 17.5% year on year.