Yahoo Japan Corporation (YAHOF.PK)

F1Q2012 Results Earnings Call

July 25, 2012 12:00 PM ET

Executives

Manabu Miyasaka - President and CEO

Masatsugu Shidachi – Manager, Marketing Solution Company

Kentaro Kawabe - Chief Operating Officer

Shin Murakami - Chief Mobile Officer

Analysts

Keiichi Yoneshima - Barclays Securities

Yosuke Tomimatsu - Merrill Lynch

Yoshio Ando - Deutsche Bank Securities

Yoshitaka Nagao - Nomura Securities

Oliver Matthew - CLSA

Takayoshi Koike - Goldman Sachs

Hiroshi Naya - Ichiyoshi Research Institute Inc.

Sumito Takeda - UBS

Presentation

Manabu Miyasaka

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Yes. I’d like to now present the Business Results of the First Quarter of FY 2012 of Yahoo Japan Corporation. I’d like to first of all spend about 30 minutes to make the overview.

So I’d like to first of all give you the financial highlights. The revenue was 77.5 billion yen that is 8% year-on-year increase and quarterly net income was 25 billion yen, increase of 7.6% year-on-year. Now the trend of the revenue is shown here and we have been growing in quarterly revenue.

Now looking at the growth trend, this is the new information that we added and starting with this year, we renewed the management team and this was the first quarter after the new management, so we try to avoid the drastic worsening of the business performance. We have been very careful. But from the aspect of the growth, I think we made a pretty good growth.

Now let’s look at the breakdown of the 77.5 billion yen. First of all, the Marketing Solutions business that is including advertising and information listing. This business grew by 12.5% year-on-year, consumer business including e-commerce and premium members, and so known advertising business that is the business that we receive fees from the users, the consumer business grew by 1.2% year-on-year.

Now turning to the advertising, let’s look at the breakdown of the advertising on page six, and the overall sales revenue was 43 billion yen and that is an increase of 4.9 billion yen year-on-year, double-digit growth was achieved.

Now looking at the listing and display, listing grew by 12% and display grew by 15% and from this time we started to show the ratio of the smartphone advertising revenue. And the PC business, of course, we tried to maintain other business and we try to grow the PC business, but also we try to grow in the smartphone advertising revenue, and this I believe is a new challenge for us that to provide the information on the smartphone revenue ratio.

Compared with the previous year, the percentage increased from 3% to 10%, especially for the listing advertising and also the display advertising part for smartphone. Despite the fact that that the value is still small but growth percentage is quite high. Now this is the year-on-year growth trend of the listing and the display advertising. At the first quarter both listing and display advertising grew in double-digit.

Next please turn to page eight. This shows the listing advertisement revenue breakdown by industry. In particular, you have the transportation and leisure and recruitment services doing very well, and in terms of the transportation, especially the travel did very well.

Last year we were impacted by the disaster caused by the earthquake and therefore, there was plummeting of the segment. But this year we did very well in terms of the transportation and leisure.

And in terms of the negative which is the Internet information service, we have the so called flat market and last year around this year, we had many flat market, but now if we see a decline in that domain.

Now you see the display advertisement revenue breakdown by industry. As in the previous case, transportation and leisure did very well and on the other hand Internet information services declined.

Now, let’s take a look at the e-commerce transaction value. In terms of Shopping as compared to the previous year, we did 74.6 billion, increased by 4% and in terms of Auction, there was negative as compared to the previous year of 1.9% and you have card and digital content, which is others, which is not a physical products that are being sold and bought, and there was an increase of 2.1%.

And in terms of e-commerce, it went up by 0.7% and in terms of the total it is 2.8 billion, and as compared to the general market that this was relatively weak, so we would like to realize two-digit growth.

And in terms of the good news, smartphone did very well in EC and last year it was 7.6%, but in terms of the Shopping and Auctions transaction, due to the smartphone it increased to 17.6%, which is more than doubled of the previous year.

So that was very quick summary of the revenue and now let’s take a look at quarterly profit trend. This shows the first quarter comparison of the previous years and you see a growing trend.

This shows the quarterly operating income year-on-year growth trend. We were able to increase by 8.6% and this is a reference point that you might want to look at as compared to the previous year.

This is the review of the first quarter. In terms of revenue operating income and ordinary income, we surpass our forecast that range. But in terms of the quarterly net income, we have Firstserver, which is 100% subsidiary company, there was a data loss incident and because of the expenses incurred upon this incident, the quarterly net income fell within the range and so this is all for the first quarter. And the next page you see the business outlook for Q2. This is quite tough explanatory.

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