Ly Corporation · TSE:4689
Ly — Z Holdings — Q2 FY2021 Earnings Presentation
79 slides from Ly's earnings presentation, Nov 2, 2021
Slide 1: Z Holdings Corporation Business Results FY2021 Q2
Security Code: 4689 Z Holdings Corporation Business Results FY2021 Q2 November 2, 2021
Slide 2: FY2021 Q2 Financial Results – Topics
FY2021 Q2 Financial Results – Topics Revenue: JPY377.6 B (YoY +33.3%) Adjusted EBITDA: JPY100.8 B (YoY +35.4%) Both achieved record highs for the second quarter due to integration effects, steady PMI progress, etc. • Group total advertising revenue: JPY139.9 B (YoY +67.0%) due to recovery in demand
Slide 3: Handling of Data at LINE Corporation
Handling of Data at LINE Corporation Whole Group • Final report received from the Special Advisory Committee on Global Data Governance • Based on the recommendations, further promote initiatives already in place and implement new initiatives to strengthen governance of entire Group Future Policy of
Slide 4: FY21 H1 – Status of PMI
FY21 H1 – Status of PMI Whole Group • PMI after the integration with LINE is progressing steadily, while placing top priority on the strengthening of data governance • In addition to business synergies, implemented various measures to generate cost synergies and to focus on businesses that need to b
Slide 5: Cost Synergies
Cost Synergies Whole Group • Pursuing cost synergies through consolidation of offices of Group companies, reduction of operating expenses of LINE Pay (e.g. for sales promotion, acquisition of merchants), etc. • From FY22 onwards, aim to further realize cost synergies through internalization of data
Slide 6: Investment in Demae-can
Investment in Demae-can (Strengthening of Z Holdings Group Logistics ） Whole Group • Strengthening Z Holdings Group’s logistics by utilizing Group assets • Becoming no. 1 in distribution volume in the domestic food delivery market, while achieving further synergy in the last mile delivery domain, th
Slide 7: Privatization of eBOOK Initiative Japan (Scheduled)
Privatization of eBOOK Initiative Japan (Scheduled) Whole Group • Consolidating co-existing e-book businesses within Z Holdings Group • When all the transactions are completed, ZHD and NAVER will strengthen system to enable global expansion of e-book business Strengths of Each Platform Significance
Slide 8: Table of Contents
Table of Contents 1 Consolidated Business Results – Whole Group 2 Topics/Business Results – By Segment 3 FY2021 Business Results Forecast
Slide 9: Table of Contents
Table of Contents 1 Consolidated Business Results – Whole Group 2 Topics/Business Results – By Segment 3 FY2021 Business Results Forecast
Slide 10: FY2021 Q2 Consolidated Business Results
FY2021 Q2 Consolidated Business Results Whole Group • Over YoY+30% growth in revenue and adjusted EBITDA due to positive impacts from integration with LINE, etc. Item FY2020 Q2 FY2021 Q2 YoY Revenue ＆ Adjusted EBITDA1 (Adjusted EBITDA Margin) (JPY B) 373.3 377.6 Revenue 283.3 (JPY B) 377.6 (JPY B) +
Slide 11: FY2021 Q2 Consolidated Business Results LINE
｜ FY2021 Q2 Consolidated Business Results1 LINE • Achieved a consolidated operating profit for the fourth consecutive quarter as a result of growth in advertising business and improvement in efficiency of marketing expense, etc. Revenue (YoY) Operating Income (JPY B) (JPY B) 62.8 （+12.4%） 74.1 21.1
Slide 12: Whole Group – Total Advertising Revenue
Whole Group – Total Advertising Revenue Whole Group • In addition to the impact of LINE integration, recovery in advertisers’ demand, etc., drove revenue to JPY139.9 B (YoY+67.0%) Group Total Advertising Revenue Group Total Advertising Revenue – YoY Growth Rate (JPY B) (JPY B) 138.9 139.9 +68.4% +67
Slide 13: Whole Group – EC Transaction Value
Whole Group – EC Transaction Value Whole Group • Achieved JPY844.1 B (YoY+7.5%) as a result of expansion of transaction value driven by LINE integration, etc. EC Transaction Value1 EC Transaction Value - YoY Growth Rate (JPY B) 918.2 9.2 +33.0% 844.1 +29.8% 816.3 817.2 784.9 9.9 44.6 211.1 41.4 9.5
Slide 14: Table of Contents
Table of Contents 1 Consolidated Business Results – Whole Group 2 Topics/Business Results – By Segment 3 FY2021 Business Results Forecast
Slide 15: Media Business
Media Business
Slide 16: Main strategies in Media Business
Main strategies in To realize 1:1 full-funnel marketing solution, increase advertisers, improve value of ad products, Media Business expand sales promotion domains Strategies Measures Status • Cross-selling • Joint sales of ad package products among Yahoo! JAPAN/ LINE/SoftBank ▶ Expanding no. of Sal
Slide 17: Measures Taken in LINE Display Advertising
Updates on Business Strategy: Measures Taken in LINE Display Advertising Media Business • Provision of new advertising products in addition to improved functions of advertising platforms and expansion of advertisers through new business development • Efforts strengthened to improve profitability of
Slide 18: Business Overview (Yahoo Japan Total Advertising Revenue)
｜ Business Overview (Yahoo Japan – *Pre-Integration ZHD Total Advertising Revenue) Media Business • Although the impact of COVID-19 continues in certain industries, capturing of rebounding demand in the overall market and product improvements, etc., have resulted in steady performance Total Advertis
Slide 19: Business Overview (LINE Total Advertising Revenue)
｜ Business Overview (LINE – Total Advertising Revenue) Media Business • Display ads: Achieved YoY+39.8% growth by improving functions of ad platform, expanding no. of advertisers through new business development, etc. • Account ads: Performing steadily due to solid growth in the number of accounts o
Slide 20: Commerce Business
Commerce Business
Slide 21: Main strategies in Commerce Business
Main strategies in Aim to maximize transaction value by refining fundamental value and combining differentiation Commerce Business strategies that leverage LINE’s assets Strategies Measures Status • Effective sales promotional campaigns • Improved the effectiveness of investment in “Natsu no Strengt
Slide 22: Results of Natsu no PayPay Matsuri
Updates on Business Strategy: Results of “Natsu no PayPay Matsuri (Summer PayPay Festival)” in July Commerce Business • Improved return on investment: Achieved the same level of transaction value as Nov. 2020 “Cho PayPay Matsuri (Super PayPay Festival)” with less point-reward expenses • Aim to maxim
Slide 23: MySmartStore
Updates on Business Strategy: MySmartStore Commerce Business • Advance opening of MySmartStore that enables easy set up of e-commerce sites, on October 20, 2021 • Aim to develop own domain by utilizing LINE Official Accounts and linking with Group’s assets MySmartStore UI Differentiation with Compet
Slide 24: Measures to Increase LINE Official Accounts
Updates on Business Strategy: Measures to Increase LINE Official Accounts Commerce Business • Steady progress made in cross-selling to the merchants of Yahoo! JAPAN Shopping and PayPay Mall. Currently focusing on increasing the number of registered friends. • Moving on, aim to increase the number of
Slide 25: LINE GIFT
Updates on Business Strategy: LINE GIFT Commerce Business • Significant increase in transaction value. Merchants also increased as a result of sales collaboration with Yahoo! JAPAN. • PayPay can be used as a payment method. Will aim to further expand transaction value by strengthening collaboration
Slide 26: Business Overview (Merchandise Transaction Value)
Business Overview (Merchandise Transaction Value) Commerce Business • Shopping business transaction value landed at JPY387.0 B (YoY+20.8%) contributed by “Natsu no PayPay Matsuri (Summer PayPay Festival),” etc. • Reuse business transaction value achieved high single-digit growth due to higher spend
Slide 27: Strategic Business
Strategic Business
Slide 28: Main strategies in Strategic Business
Main strategies in Create a new revenue pillar centered on fintech while establishing a base for monetization by Strategic Business expanding the PayPay user base Strategies Measures Status • Introduction of payment fee to small ＆ medium- • Extremely small impact: 0.2% on no. of merchants1, 0.1% Inc
Slide 29: PayPay's Growth Potential
Updates on Business Strategy: PayPay’s Growth Potential Strategic Business • Tremendous room for growth in the cashless market, due to the Japanese government’s cashless promotion measures and the growing need for contactless payments • PayPay will capture cash market as well as cashless market and
Slide 30: PayPay's Growth Strategy
Updates on Business Strategy: PayPay’s Growth Strategy Strategic Business • PayPay monetization will be achieved in 3-tiers • Will monetize through payment fee, service for merchants (PayPay My Store), and financial services Monetization Methods • “Buy Now Pay Later” service Key monetization pillars
Slide 31: PayPay's Initiatives
Updates on Business Strategy: PayPay’s Initiatives Strategic Business • Introduction of payment fee for small & medium-sized merchants had extremely small impact on cancellation: 0.2% on the number of merchants1 and 0.1% on PayPay GMV2 • Steady introduction of PayPay My Store. Working together to pr
Slide 32: Integration Policy for Domestic QR/Barcode Payment Businesses
Updates on Business Strategy: Integration Policy for Domestic QR/Barcode Payment Businesses Strategic Business • Integration of domestic QR code payment to be achieved through the following three approaches. Aim to maximize no. of users and transaction value while pursuing cost synergies. • While ba
Slide 33: LINE Securities, LINE Pocket Money
Updates on Business Strategy: LINE Securities, LINE Pocket Money Strategic Business • In two years since service launch, number of LINE Securities accounts reached 1 million, while cumulative total amount of loans executed for LINE Pocket Money reached JPY30 B • Through LINE app, conducted efficient
Slide 34: Business Overview (PayPay's Major KPIs)
｜ Business Overview (PayPay’s Major KPIs) Strategic Business • Various KPIs performed well, driven by expansion of users and increase in no. of payments as a result of increased use frequency PayPay GMV No. of PayPay Payments Cumulative PayPay Registered No. of PayPay Merchants1 (Quarter) (Quarter)
Slide 35: Business Overview (Major KPIs of Credit Card Business)
｜ Business Overview (Major KPIs of Credit Card Business) Strategic Business • Changed trade name from YJ Card Corporation to PayPay Card Corporation on October 1, 2021 • Will continue to strengthen collaboration with PayPay and expand business Credit Card – Active Cardholders Credit Card – Transacti
Slide 36: Business Overview (Major KPIs of Banking Business)
｜ Business Overview (Major KPIs of Banking Business) Strategic Business • After the change of trade name to PayPay Bank Corporation, acquisition of PayPay users increased, and the no. of accounts, deposit balance and loan balance are growing steadily No. of Accounts Deposit Balance Loan Balance (Mil
Slide 37: Table of Contents
Table of Contents 1 Consolidated Business Results – Whole Group 2 Topics/Business Results – By Segment 3 FY2021 Business Results Forecast
Slide 38: FY2021 Full Year Guidance
FY2021 Full Year Guidance Whole Group • Although there are some factors contributing to increase in profit which were not factored in at the beginning of the term (e.g. termination of Yahoo Japan License Agreement), no change from previous guidance as of now Segment Item Estimate YoY Revenue JPY1.52
Slide 39: Unleashing the infinite potential of all people
Unleashing the infinite potential of all people, with the power of information technology
Slide 40: Appendix
Appendix
Slide 41: Whole Group – Financial Information
Whole Group – Financial Information
Slide 42: FY2021 Q2 Factors of Change in Operating Income
FY2021 Q2 Factors of Change in Operating Income Whole Group (JPY B) FY2021 Q2 YoY Difference YoY Major Factors of Change (JPY B) • Increase due to LINE consolidation +74.1 Revenue 377.6 +94.2 +33.3% • Yahoo Japan +9.9 • ZOZO +4.8 Cost of sales 120.4 +15.3 +14.6% • Increase due to LINE consolidation
Slide 43: Adjusted EBITDA – Breakdown of Adjustment Items
Adjusted EBITDA – Breakdown of Adjustment Items Whole Group (JPY B) Stock Adjusted EBITDA Depreciation Loss on compensation & retirement of Impairment amortization fixed assets losses expenses Other 100.8 Op. income ＋depreciation & amortization ± EBITDA adjustment items +0.2 +0.5 +0.3 +2.9 EBITDA ad
Slide 44: Impact from Consolidation of LINE Corporation
Impact from Consolidation of LINE Corporation Whole Group Item LINE FY2021 Q2 (JPY B) FY2021 Q2 (Excl. LINE ) (JPY B) YoY Revenue 74.1 303.4 +7.1% Operating income 4.7 59.2 +24.6% Net income -7.1 38.7 +43.3% Net income attributable to owners of the parent -7.1 34.7 +50.6% 43
Slide 45: Impact from Consolidation of LINE (Goodwill, PPA)
Impact from Consolidation of LINE Corporation (Goodwill, PPA) Whole Group • Measured based on assumptions such as estimated future cash flows, discount rate, declining rate for existing customers, future revenue generated from the trademarks, royalty rates, etc. • Began amortizing PPA from FY2021 Q1
Slide 46: Impact from Consolidation of ZOZO (Goodwill, PPA)
Impact from Consolidation of ZOZO, Inc. (Goodwill, PPA) Whole Group Item Amount (JPY B) Annual Amortization Amount (JPY B) Amortization Period (Straight Line) Goodwill 212.9 - - PPA 502.1 13.2 - Customer base (Shops/users) 322.0 - 18-25 years Trademarks1 178.7 - No amortization Others 1.4 - 4 years
Slide 47: FY2021 Q2 Consolidated Statement of Financial Position
FY2021 Q2 Consolidated Statement of Financial Position Whole Group (JPY B) FY2021 Q1 FY2021 Q2 Difference Assets 6,693.6 6,886.7 +193.1 Cash and cash equivalents 1,078.0 1,196.3 +118.2 Trade and other receivables 412.9 308.5 -104.4 Loans in credit card business 392.1 392.9 +0.8 Investment securities
Slide 48: Financial Data: CAPEX and Adjusted FCF
Financial Data Whole Group CAPEX1 Adjusted FCF2 (JPY B) (JPY B) 66.1 234.3 216.3 30.7 61.1 44.5 34.4 23.7 18.5 14.8 18.1 31.8 -8.9 29.6 -18.0 -26.4 -42.6 11.9 23.7 5.6 18.7 6.7 0.3 35.4 24.0 18.4 19.9 17.0 -231.7 -266.1 Q2'20 Q3'20 Q4'20 Q1'21 Q2'21 Q2'20 Q3'20 Q4'20 Q1'21 Q2'21 Property and Equipme
Slide 49: Interest-Bearing Debt and Net Leverage Ratio
Financial Data Whole Group Interest-Bearing Debt & Net Interest-Bearing Debt1 Net Leverage Ratio2 / Adjusted net leverage ratio3 (Excludes banking business) (Excludes banking business) (JPY B) (JPY B) 1,624.4 3.00 1,431.8 186.0 800 2.55x 1,357.9 165.6 105.0 2.50 1,176.7 1,177.7 700 169.1 2.03x 138.0
Slide 50: User Base
User Base Whole Group Yahoo Japan - Number of Monthly Logged-in User IDs LINE - Monthly Active Users (Million) (Million) September 2021 Global MAU1：189 52.7 54.5 167 169 171 173 51.3 51.1 51.9 167 11 10 10 13 12 49 50 52 47 48 21 21 21 21 21 86 86 88 89 89 Q2'20 Q3'20 Q4'20 Q1'21 Q2'21 Q2'20 Q3'20 Q
Slide 51: Change in Reporting Segments
Change in Reporting Segments Whole Group • Introduced 3 new business segments: Media, Commerce, and Strategic by classifying businesses according to the growth phase of each business FY2020 FY2021 Q1 – Commerce Media/Advertising, Search, Marketing solution, Vertical Media Business Business Media/Adv
Slide 52: Business Results (P/L): Media Business
Business Results (P/L): Media Business Media Business (JPY Million) FY2020 Q2 FY2021 Q2 YoY Revenue 83,263 154,991 +86.1% Yahoo Japan (pre-integration ZHD) Advertising revenue 72,685 80,203 +10.3% Search advertising 40,061 44,776 +11.8% Display advertising (Programmatic)1 28,612 30,740 +7.4% Display
Slide 53: Business Results (P/L): Commerce Business
Business Results (P/L): Commerce Business Commerce Business (JPY Million) FY2020 Q2 FY2021 Q2 YoY Revenue 178,096 192,622 +8.2% Merchandise EC 138,894 154,878 +11.5% Shopping business 60,887 73,771 +21.2% Reuse business 12,638 13,608 +7.7% ASKUL online BtoB business 65,368 67,498 +3.3% Services EC 5
Slide 54: Business Results (P/L): Strategic Business
Business Results (P/L): Strategic Business Strategic Business (JPY Million) FY2020 Q2 FY2021 Q2 YoY Revenue 20,468 29,524 +44.2% Fintech 20,468 29,055 +42.0% PayPay Card1,2 10,535 11,535 +9.5% PayPay Bank2 7,679 8,548 +11.3% Other fintech (LINE Fintech, etc.) 2,253 8,971 +298.2% Other Strategic Busi
Slide 55: Media Business
Media Business
Slide 56: Major Services and Products of Media Business Segment
Major Services and Products of Media Business Segment Media Business Item Breakdown Yahoo! JAPAN Ads Search advertising Yahoo! JAPAN Ads “Search advertising” Display advertising Programmatic advertising Yahoo! JAPAN Ads “Display advertising” (Programmatic-based), etc. Reservation advertising Yahoo!
Slide 57: Advertising Products
｜ Advertising Products Media Business Item Fee Calculation Placement Pages Type of Advertiser Search advertising Cost per-click Search results pages Major corporations/SMEs Display advertising Programmatic Top page Yahoo! JAPAN Ads “Display advertising” Cost per-click Interior pages of service sites
Slide 58: Advertising Products
｜ Advertising Products Media Business Item Fee Calculation Placement Pages/Product outline Type of Advertiser Display ads Cost per-click Major Timeline Timeline tab Cost per-view corporations/SMEs Cost per-click Major LINE NEWS NEWS tab Cost per-view corporations/SMEs Cost per-click Major Chat List
Slide 59: Commerce Business
Commerce Business
Slide 60: Major Services and Products of Commerce Business Segment
Major Services and Products of Commerce Business Segment Commerce Business Item Breakdown Merchandise EC - Yahoo! JAPAN Shopping, PayPay Mall, ZOZOTOWN, LOHACO, Charm, LINE SHOPPING, Shopping business LINE FRIENDS, LINE GIFT Reuse business YAHUOKU!, PayPay Flea Market, ZOZOUSED ASKUL online BtoB bus
Slide 61: KPI - Definition of EC Transaction Value
KPI - Definition of EC Transaction Value Commerce Business Item Major Services EC transaction value - Merchandise - Yahoo! JAPAN Shopping, PayPay Mall, ZOZOTOWN, LOHACO, Charm, LINE SHOPPING, Shopping business LINE GIFT, LINE FRIENDS Reuse business YAHUOKU!, PayPay Flea Market, ZOZOUSED ASKUL online
Slide 62: Social Commerce － LINE GIFT
｜ Social Commerce － LINE GIFT Commerce Business • A service that allows users to give gifts to family and friends connected through LINE • Two types of gifts: “E-Gifts” – suitably priced for casual presents; “Delivery Gifts” – available in wide price ranges to suit various purposes User Attribute Gi
Slide 63: Strategic Business
Strategic Business
Slide 64: Major Services and Products of Strategic Business Segment
Major Services and Products of Strategic Business Segment Strategic Business Item Breakdown Fintech - PayPay Card1 - PayPay Bank - PayPay Asset Management, PayPay Insurance, Magne-Max, Other fintech LINE Pay, LINE Securities, LINE Score, LINE Pocket Money, LINE BITMAX, etc. Others AI, LINE Search, L
Slide 65: PayPay Card Corporation – Business Results
PayPay Card Corporation1 – Business Results Strategic Business Revenue/Operating Income (Non-Consolidated IFRS)2 Statement of Financial Position (JGAAP)2 (JPY B) (JPY B) 11.1 11.4 11.5 FY2021 FY2021 10.5 10.9 Q1 Q2 Difference Assets 500.6 542.8 +42.1 Cash and cash equivalents 35.1 86.2 +51.0 5.4 Tra
Slide 66: PayPay Bank Corporation – Business Results
PayPay Bank Corporation – Business Results Strategic Business Revenue/Operating Income (Non-Consolidated IFRS)1 Statement of Financial Position (JGAAP)1 (JPY B) (JPY B) 8.9 FY2021 FY2021 Difference 8.4 8.3 Q1 Q2 8.1 Assets 1,401.1 1,468.2 +67.0 6.8 Cash and cash equivalents 330.4 475.3 +144.9 Trade
Slide 67: Capital Structure (Shareholding Ratio)
｜ Capital Structure (Shareholding Ratio) Strategic Business May 2018 As of end of As of end of As of end of As of end of After conversion of preferred stocks (At founding) May 2019 Mar 2020 Dec 2020 Sep 2021 & Yahoo Japan 50% 25% 25% 25% 25% Paytm’s exercise of stock option2 SoftBank 50% 25% 25% 25%
Slide 68: International Business
International Business
Slide 69: International Business Development
｜ International Business Development LINE • Overwhelming reach and market share in Asian countries and regions, mainly Taiwan, Thailand and Indonesia • Generating revenue mainly from advertising, stickers, and game businesses based on messaging International Business Revenue4 Taiwan 21 mil MAU1 （JPY
Slide 70: Major Subsidiaries and Affiliates in Overseas Business
｜ Major Subsidiaries and Affiliates in Overseas Business1 LINE Country/Region Business Name of Company Type of Company - LINE Taiwan Limited Consolidated subsidiary Fintech LINE Pay Taiwan Limited Consolidated subsidiary Taiwan Fintech LINE Bank Taiwan Limited Equity method affiliate O2O JDW Co., Lt
Slide 71: Non-Financial Information
Non-Financial Information
Slide 72: Acknowledgment as a Sustainable Company
Acknowledgment as a Sustainable Company Whole Group • Acknowledged by various evaluators • Aim to maintain/enhance a high third-party evaluation after integration, to secure our position as the industry- leading ESG issuer Note: As of 2021, Z Holdings Corporation receives an MSCI ESG Rating of AA. T
Slide 73: External ESG Evaluations
External ESG Evaluations Whole Group S&P Global - DJSI MSCI ESG Rating1 Interactive Media, Services & Score rising Home Entertainment sector every year since 2018 Selected as Received AA rating Named for the first time to MSCI Japan an Industry Leader ESG Select Leaders Index (June 2021) Received th
Slide 74: Materiality Matrix for Z Holdings Group
Materiality Matrix for Z Holdings Group1 Whole Group 11 17 The numbers and colors in the matrix Solving social coincide with the SDG icons. Corporate issues with 9 governance IT Data security 4 Quality Education 11 17 Disaster measures/ 8 9 Recovery support 5 Gender Equality Level of stakeholder con
Slide 75: Overall Picture of CSR, Materiality, and Our Four UPDATEs
Overall Picture of CSR, Materiality, and Our Four UPDATEs1 Whole Group Contribution to Stakeholders Risk Reduction Value Creation the SDGs • E-commerce for • Data security/network convenient & #01 Industry, comfortable life Users reliability Developing 9 Innovation and • Minimization of • Driving a
Slide 76: Carbon Neutral Initiatives
Carbon Neutral Initiatives (Announced: January 19, 2021) Whole Group • Aim to achieve neutrality well ahead of Japanese government’s “2050 Carbon Neutral” goal ▶ Pursue early membership in RE100 ZHD Group to announce mid-long renewable energy initiative1 environmental goals by the end of FY2021 Decl
Slide 77: Released Integrated Report Portal
Released “Integrated Report Portal” Whole Group • Financial/non-financial information useful for investment decisions will be updated as needed Vision and Strategy Sustainability Value Creation Business Performance URL: (English) https://www.z-holdings.co.jp/integrated-report/en/ (Japanese) https://
Slide 78: Disclaimer
Disclaimer Statements made at the meeting or included in the documents that are not historical facts are forward-looking statements about the future performance of Z Holdings Corporation (Company, Z Holdings, ZHD) and its consolidated subsidiaries and affiliates. The Company cautions you that a numb
Slide 79: Unleashing the infinite potential of all people
Unleashing the infinite potential of all people, with the power of information technology