NTT(NTTYY) - 2023 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Operating revenue increased by ¥176.3 billion year-on-year, reaching record high levels for the first quarter, driven primarily by NTT Data and NTT Limited [6][5] - Operating income rose by ¥17.1 billion year-on-year, attributed to increased revenue from NTT Data and NTT Limited [6] - Profit increased by ¥28.6 billion year-on-year, supported by tax deferred assets [7] - Overseas operating income margin improved by 2.1 percentage points to 6.1% due to increased operating income at NTT Data and cost reductions at NTT Limited [7] Business Segment Data and Key Metrics Changes - Integrated ICT business segment saw revenue increases in enterprise and Smart Life businesses, but overall revenue declined due to price reductions in the consumer business, offset by cost reductions [8] - Regional Communication Business segment experienced a decline in fixed line voice revenue, with expectations for revenue and operating income growth from system integration and cost reductions in the full year [9] - Global Solutions Business segment reported increased revenue from robust digitalization demand at NTT Data and value-added services at NTT Limited, along with cost reductions from structural transformations [10] Market Data and Key Metrics Changes - The company is experiencing strong demand for digital transformation (DX) both domestically and internationally, reinforcing its portfolio to accommodate this demand [11] - The company has entered a capital and business partnership with Genesis Healthcare Company to enhance its medical and healthcare business, acquiring a 19.3% stake [12] Company Strategy and Development Direction - The company is focusing on decentralizing its organization to enhance resilience, with plans to establish decentralized offices in Takasaki City and Kyoto [13] - The company is conducting field testing for hydrogen transportation, aiming to participate in hydrogen power generation systems [14] - New solutions are being developed in collaboration with SAP to improve logistics and insurance processes through IoT technology [15] - The medium-term management strategy initiatives are being emphasized, although detailed explanations were not provided [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the ongoing structural transformation and its positive impact on profitability, with expectations for continued revenue growth in the second half of the fiscal year [25][28] - The company is monitoring the semiconductor shortage closely, which has impacted equipment sales, but remains hopeful for improvements in the supply chain [22][61] - Management acknowledged the challenges posed by rising electricity prices but indicated that hedging strategies are in place to mitigate risks [50][52] Other Important Information - The company anticipates a full-year cost reduction target of ¥930 billion, with significant progress already made in the first quarter [68] - Free cash flow remains stable compared to the previous fiscal year, with no specific problems identified in operating activities [71] Q&A Session Summary Question: Inquiry about NTT Limited's top line and profit - Management confirmed that the data center business drove revenue growth, while equipment sales were impacted by semiconductor shortages [21][22] Question: Clarification on operating income and net profit - Management explained that net profit was influenced by tax deferred assets and gains from subsidiary sales, with structural transformation expected to positively impact profitability [24][25] Question: Demand outlook for data centers - Management indicated strong ongoing demand for data centers, although macroeconomic changes could impact customer investments [31] Question: Cost reduction progress and synergies from integration - Management reported ahead of plan cost reductions and emphasized the importance of integrating operations for further efficiencies [68][69] Question: Free cash flow situation - Management stated that free cash flow is stable, with specific variances attributed to DOCOMO's performance and investment activities [71]