Yahoo Japan Corp (

YAHOF.PK

)

F1Q 2011 Earnings Conference Call

July 22, 2011 03:30 ET

Executives

Masahiro Inoue – President and Chief Executive Officer

Analysts

Yoneshima – Barclays Securities

Takeda – UBS Securities

Koike – Goldman Sachs

Tomimatsu – Merrill Lynch

Ishii – Tachibana Securities

Presentation

Operator

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Thank you for waiting. I’d now start the meeting reporting the business results of the First Quarter FY 2011. We have then seen the brief summary and the presentation material, and profit and loss statement as well as survey or questionnaire. We welcome your feedback. Mr. Inoue will first make the presentation about the business results for the first quarter in first 30 minutes and then we have Q&A.

Masahiro Inoue – President and Chief Executive Officer

Thank you very much. First of all, let me start with the highlights of the financial data. So still there are some impacts from the earthquake. And as a whole, the impact is becoming less and less and as for the first quarter listing advertising revenue was strong, compared with the previous year, both the revenue and profit increased.

The revenue, sales ¥71.8 billion, 1.9% increase year-on-year. As you can see on this slide, the research business was transferred to MACROMILL and that accounted for ¥1.2 billion decrease in quarterly revenue. So, because of that the growth looks smaller. As per the operating income and ordinary income ¥38.8 billion and ¥39.2 billion respectively, 3.3% and 4.6% increase year-on-year. Quarterly net income of ¥23.3 billion, that is an increase of 7.6% year-on-year.

Now, looking at the breakdown, first of all, starting with the media business, the listing advertising through advertising agencies, there are both paid-search advertising, sponsored-search and interest match. There is some impact from the earthquake, so the financial sector revenue declined, but at the same time the fashion, accessory, internet information service companies’ sales increased. And the growth rate has slowed down somewhat, but still the revenue rose.

As for the display advertising, the conclusion, first of all, is that the revenues were almost flat. And internet-related information companies as well as cosmetic and other sectors were strong. However, there was a biggest impact from the earthquake, for example, the automobile-related business. Their production has not yet recovered to the full-fledged level. And also the entertainment software, they are still suffering from the impact from the earthquake, they are restraining their activities. So that was seen in the display advertising.

As I touched upon earlier, the research business is now in the media business and ¥1.1 billion decline was observed. So, the revenue was ¥25.1 billion that is minus 1.9% year-on-year. The revenue was strong, but – sorry, the impact of the revenue was seen, but the impact in terms of the profit was very small. So, operating income was ¥13.7 billion that is an increase of 5.2% year-on-year.

Turning to BS, Business-Services business, the listing advertising through online order, revenue increased steadily and also the profit increased, especially the internet information related sales revenue increased. So, the data center-related revenues, this was strong. The cloud business was strong. After the earthquake or until the earthquake that many companies maintained the servers internally and they recognized that they need to transfer or move that to the outside data centers. So there has been more active interest in this business, and also there were companies, who had data center in the Kanto area, but from the BCP aspect, especially those companies, who are concerned about the shortage of the electricity have started to shift to the Kansai area, so that they can locate the data center in non-typical territories. So that also led to the increase of the demand, so because of that data center related revenue was strong.

Yahoo! Local started, so the information listing revenue started to increase and as I explained previously as a first step, we had the various information listing revenues for different industries and now we have consolidated this to the Yahoo! Local. So, we have not yet seen the major change from this, but if you look at the real estate in Rikunabi, they have been very strong.

Especially Rikunabi, the recruitment information, for example part time information and also the recruitment information of other companies actually started to be more active after the collapse of the Lehman Brothers. The companies started to be more active in recruiting and providing information in relation to the recruitment. So, we are seeing the growth of that. So, the revenue of the BS business was ¥19.8 billion, 7.6% increase year-on-year. Operating income was ¥9.9 billion, 12.2% year-on-year increase.

Now, turning to Consumer Business. First of all the e-commerce related revenue, the paid digital content, especially online gaming was very strong. Mobage and Sengoku IXA both of them grew favorably in terms of the revenue. As for Shopping, in the previous year I touched upon this briefly. After the earthquake, the goods, which are selling well, have changed. So, there are some products, which are selling well and some others, which have become weaker, but as a whole Shopping was strong, especially because of the full conversion to the digital terrestrial TV broadcasting, there has been a rush to buy TVs and also the products, which will save energy; people are more conscious about saving energy. So, home appliances, which can contribute to the power saving have sold well.

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