SoftBank(SOBKY) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics - Consolidated revenue increased by JPY 172 billion (2.9%) year-on-year, reaching JPY 6.06 trillion, exceeding the upwardly revised forecast [5][23] - Adjusted EBITDA increased by JPY 100 billion year-on-year, driven by non-consumer segments [6] - Operating income rose by JPY 110.7 billion to JPY 876.1 billion, with all segments contributing to the increase [24] - Net income saw a significant increase due to higher operating income and the absence of impairment losses recorded in the previous year [30] - Free cash flow exceeded JPY 600 billion, with adjusted free cash flow at JPY 532 billion after accounting for long-term growth investments [15][51] Business Line Performance - Consumer Segment: Revenue decreased by JPY 59.1 billion, but segment income improved by JPY 33.1 billion due to reduced depreciation and revised sales promotion measures [7][10] - Electricity Business: Revenue declined by JPY 131.5 billion due to a decrease in electricity trading, impacting gross profit [8][11] - Mobile Business: Revenue increased by JPY 8.3 billion, driven by subscriber growth despite price reductions [8] - Enterprise Segment: Recurring revenue in Business Solutions grew steadily, contributing to a double-digit growth in segment income [12][28] - Media & EC Segment: Revenue increased by 3.4% to JPY 52.4 billion, with segment income up by JPY 38.2 billion (23.9%) due to cost optimization and strategic deconsolidation [13] - Financial Segment: PayPay's consolidated GMV grew by 22.2%, with standalone revenue up by 26.1%, though operating income remains negative [18] Market Performance - Smartphone subscribers increased by 1.4 million year-on-year, with a churn rate of 1.23% [17] - Broadband subscribers showed steady growth, while electricity subscribers continued to decline [17] - PayPay's user base grew by 6.4 million, with payment transactions increasing by 23.8% [52] Strategic Direction and Industry Competition - The company aims to achieve mid-term targets while investing in growth during FY 2024 and FY 2025, focusing on generative AI and other long-term growth areas [22][35] - CapEx for FY 2024 is projected at JPY 330 billion, with JPY 150 billion allocated for generative AI investments [35][74] - The company plans to maintain a dividend payout of JPY 86 per share, with a focus on achieving JPY 600 billion in free cash flow [36][51] Management Commentary on Operating Environment and Future Outlook - Management highlighted the positive impact of revised sales promotion measures and customer acquisition strategies on mobile revenue [25][27] - The company expects to achieve profitability in PayPay by FY 2025, with continuous growth in non-telecom GMV driving overall performance [18][52] - Management remains cautious about the impact of price reductions in the mobile segment but is optimistic about subscriber growth and ARPU improvements [17][81] Other Important Information - The company received several ESG-related awards and is focused on improving corporate governance by adding new external directors [19] - A stock split was announced to attract younger shareholders and enhance shareholder benefits [37] Q&A Session Summary Question: Generative AI Investment and R&D Costs - The company confirmed that JPY 30 billion is allocated for generative AI, with additional funds for other R&D initiatives [60][61] Question: Mobile Revenue and Acquisition Measures - Management expects mobile revenue to improve through subscriber growth and ARPU stabilization, with acquisition costs being absorbed by revenue increases [41][81] Question: Data Center Investments and Profitability - Investments in data centers, including Nara and Tomokomai, are part of the CapEx plan, with profitability expected in the long term [74][79] Question: CapEx Allocation and Dividend Policy - The company plans to maintain a balance between CapEx investments and dividend payouts, with JPY 330 billion allocated for telecommunications and generative AI [35][74] Question: PayPay's Path to Profitability - PayPay's EBITDA showed positive trends, and the company aims to achieve profitability in the new fiscal year [18][52]