Yahoo Japan CEO Discusses F3Q10 Results - Earnings Call Transcript

Yahoo Japan Corporation ( YAHOF.PK)

F3Q10 (12/31/10) Earnings Conference Call

January 25, 2011 2:30 AM EST

Executives

Masahiro Inoue – President and CEO

Kentarou Kawabe – President and CEO, GyaO!

Analysts

Yoneshima – Barclays Securities

Nema – Morgan Stanley

Tomimatsu – Merrill Lynch Securities

Araki – Mitsubishi UFJ, Morgan Stanley Securities

Hayakawa – Credit Suisse

Maruyama – Nomura Securities

Vega [ph] – Mitsubishi Research Center

Presentation

Unidentified Company Speaker

Thank you very much for waiting. We would like to now start the meeting to announce the third quarter business results of the Yahoo Japan Corporation. In front of you, I think you have the [inaudible] as far as the presentation material and the trend of the profit and loss statement. And one announcement talks about the dividend. And also, in relation to BB Mobile Corporation, this is related to the sale of the preferred shares back to the SOFTBANK. And we also have a sheet of survey or questionnaire included in our package. We have about 30 minutes to make the presentation based upon the presentation material.

I would like to ask Mr. Inoue to start.

Masahiro Inoue

Thank you very much for coming. First of all, about the third quarter highlights. This time, the research business and NewsWatch were sold, so they were excluded from the consolidated company. And because of that, the revenue came down. However, e-commerce and advertising, we have done very well in the third quarter.

Revenues and income, both of them were at record high. The revenue was 75 billion Yen compared with the previous year was the increase of 5.8%. Operating income and ordinary income 41.1 billion Yen and 41.3 billion Yen respectively, 13% increase, 13.6% increase respectively. Quarter and net income was 24.7 billion Yen. That is an increase of 18.4% year-on-year.

This is the break down. I’m starting with the Media Business. First of all, the listing advertising. The travel related and mail order related companies expanded the advertising and also the cosmetic related, Internet information service related companies increased the advertising.

In the previous meeting, probably I mentioned this, but the quality of the advertising we have been trying to improve the quality. And we said that we would do many things to improve the quality, and because of that, there was a downward pressure on the revenue. But despite that, we increased the revenue as a whole.

High-quality advertising is important and also that led to the higher revenues, so the result was quite good heavily. The smartphone is increasing in terms of the number of units and this was seen as an impact on the listing advertising.

As for the display advertising, it was very strong as well. We increased the price. Probably this contributed to some extent. But rather than that, the advertisers were very enthusiastic about advertising, so I believe that was the major reason behind the increase of display advertising revenue.

Brand panel targeting advertising for the mobile and the smartphones, all of them were very strong.

The Media Business as a whole, as you see, the revenue was 28.1 billion Yen that is an increase of 9% year-on-year. Operating income was 15.4 billion Yen, 24.5% increase year-on-year.

Turning to BS Business, for the small, medium sized companies mainly, you have our listing advertisings through online order, and this was also very strong. And the details are shown there, we conducted the seminars and we had the online agencies which grew in numbers steadily. And here again, we try to improve the quality of the pages and size, and this had some negative impact. But overcoming that, we increased our revenue.

Datacenter related revenues, IDC was acquired, and with that the cloud computing related revenues or the related businesses are something that we are working on. And the revenue from that has increased steadily.

Information listing revenues, real estate and Rikunabi area, after the collapse of the Lehman Brothers, those were affected the most, and the last year we struggled in this business area. But starting from the previous quarter as we mentioned the decline has bottomed out and stopped, and gradually we started to see the recovery. It’s not the quick recovery, but we are seeing recoveries, so revenue has increased as a result. The revenues 19.2 billion Yen, that is an increase of 8.9% year-on-year. Operating income was 9.5 billion Yen, 19.4% increase year-on-year.

Next is Consumer Business. First, e-commerce related revenues. Shopping was strong. There were tie-ups and other alliances. As we informed you, T Point tie-up and ZOZOTOWN tie-up were done. And the quarterly transaction increased more than 20% year-on-year basis, so it was very good results.

For auctions, slowly it was declining and some people were concerned. But here again, the transaction value was almost flat, and I think that we are hitting the bottom of this. And here again, the transaction through smartphone is increasing greatly.

And our non-product sales; that is the digital content distribution and sales, especially games, the new services are very strong, so digital content revenue is on the rise. The premium membership is at the record high of 7.68 million IDs were achieved. Revenue of this segment was 27.5 billion Yen that is an increase of 1.1% year-on-year. Operating income was 18.1 billion Yen, 1.1% increase year-on-year.

Turning to game business, tie-up with SQUARE ENIX and also the DeNA, we have partnerships with them. For each one of them, we are doing very well. With the SQUARE ENIX, we have Sengoku IXA, this is the only title that we have. But it’s a paid service and many people are paid users, and therefore this has had a positive impact on the revenue side. And from now on, we would try to increase the number of the titles and that is something that we are discussing with to partners.

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