Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)

Executives

Manabu Miyasaka – President and CEO

Toshiki Oya – CFO

Osamu Aranami – COO

Analysts

Keiichi Yoneshima – Barclays Securities

Taro Ishihara – Daiwa Securities

Takashi Watanabe – Goldman Sachs

Yoshitaka Nagao – Nomura Securities

Yosuke Tomimatsu – Merrill Lynch

Shinsuke Iwasa – Mizuho Securities

Yahoo Japan Corporation (OTCPK:YAHOF) F4Q13 Earnings Call April 25, 2014 3:30 AM ET

Unidentified Company Representative

(Interpreted). Thank you very much for participating in this presentation today. We would like to start Yahoo Japan Corporation FY 2013 Full Year and Fourth Quarter Business Results Presentation. We will be showing the slide via the internet. And also we can provide you with the on-demand distribution.

Without further ado, I would like to introduce the speakers today. To your right, we have CEO and President, Mr. Manabu Miyasaka.

Manabu Miyasaka

(Interpreted). Good afternoon.

Unidentified Company Representative

(Interpreted). Next, we have CFO, Mr. Toshiki Oya. Firstly, Mr. Miyasaka will give you the presentation then the floor will be opened for Q&A. We plan to end this session at 6 ‘o clock. Please start the presentation.

Manabu Miyasaka

(Interpreted). Good afternoon everybody. We would like to start FY 2013 full year and fourth quarter business results presentation. In terms of the first part, I will talk about the full year.

This is the summary of the financials. Revenue, ¥386.2 billion, 12.6% up, and in operating income it was ¥197.4 billion up 5.9%. And in terms of the revenue, we were able to increase by two-digit. And in terms of the operating income, since October, we started new strategy in eCommerce. So in half year, we invested about ¥10 billion.

And so, if we do not invest that amount, I’m sure that operating income wise we would have enjoyed a two-digit figure. And so, we do believe that there is a momentum to provide us with the two-digit growth. And in terms of ¥10 billion investment in the eCommerce, with the result, I’ll give you the details later.

In terms of the annual revenue for 17 consecutive years, we were able to increase our net revenue and net profit.

Now this is the backend of the revenue in terms of the marketing solutions business. We increased by 15.8% and consumer business increased by 0.8%. As mentioned before, because of the eCommerce by conducting eCommerce revolution, we encountered a revenue decrease.

In the growth, advertisement related revenue grew dramatically, so let me give you the details. In terms of the revenue, it was ¥215.7 billion up 13.3%. Display advertisement went up by 22% and sponsor search, ePay search went up by 8.6% and premium advertisement went down by minus 4.3%. And YDN increased by 129.7%.

In terms of the premium, in terms of the brand panel, we were able to enjoy the increase and both in terms of the premium advertisement in the prime display, it is shifting to YDN that is why you see the decreasing number.

Now, what is the smartphone advertisement related revenue. Yahoo’s advertisement is shifting more and more to smartphone and therefore the advertisement increasing rapidly. And throughout the year, in terms of the advertising revenue, it increased by about ¥100 million and increased up 80.7%. Therefore, in terms of the revenue ratio of the smartphone, it went up from 13.1% to 21%. And so we are enjoying more than 20% in terms of the ratio of revenue being generated by the smartphone advertisement.

Now, let’s talk about the annual eCommerce. In terms of the transaction volume, in total, it was about ¥1.7 trillion up by 7.6% year-on-year. In terms of the shopping, it went up by 5.2%, auction related went up by 7.7%. And others went up by 8.7%. And so, by conducting eCommerce revolution, we are seeing an increase in these numbers.

Fourth quarter is very important so I will give you the details later.

In terms of the annual profit, as you can see, ever since the start of the service for 17 consecutive years, we were able to increase our profit.

Now, let’s review the full year FY 2013. You see the comparison of the forecast and the actual. And as a result, in terms of the cash dividend, as compared to the previous year, it went up by 10.5% and in terms of the dividend payout ratio, it is about 20% of the consolidated net income being ¥4.43 per share. This was the report of 2013. So, from here onwards I would like to give you the details of the fourth quarter.

And this is the highlight. Revenue in the fourth quarter, for the first time we went above ¥100 billion so it is ¥101 billion. And year-on-year, we increased by 3.5%. On the other hand, in terms of the operating income, we are conducting eCommerce strategy and it is minus 1.3%. So, as compared to the previous quarter, we are seeing a negative figure.

As a result, in terms of the revenue of the fourth quarter, you see the comparison vis-à-vis the fourth quarter of the previous year. This shows the growth trend as you can see, after conducting eCommerce strategies, we intentionally try to focus more on the investment rather than the growth of the revenue. So in terms of the revenue growth year-on-year it was 3.5%.

From here on, I will give you the details of the revenue breakdown. As compared to year ago, we were able to increase the revenue by ¥3.3 billion up 3.5%. Marketing solution business went up by 9% and consumer business went down by minus 7.6%.

Now, let’s look at the details of advertisement, display advertisement increased by 18% and YDN went up by 109%. On the other hand, premium advertisement, Brand Panel was okay but others did not do well. So it was minus 7.2%.

In terms of paid search advertisement, it went up by 2.4%. And we are seeing growth in smartphone related advertisement. And in the fourth quarter, instead of focusing on the sales, we try to focus more or less on the ease of use. And we control the sales rather. Therefore the process search went up by 2.4%.

And this shows the fourth quarter advertisement revenue via smartphone. It was a plus ¥6.3 billion, up 72.6% and the revenue ratio smartphone went up from 16% to 25.4%. And this shows the display in advertisement, the breakdown of display and paid search of the quarterly advertisement related revenue.

Now, let’s focus on the eCommerce. In terms of transaction value as compared to the previous year, there was an increase of ¥57.8 billion up 14.5% and especially in terms of Yahoo Shopping and auction, those are the main pillars. And in terms of shopping, after the announcement of eCommerce strategies, we increased our number of listed items and made improvements and also there was a hike in sales before the consumption tax raise. So our shopping related revenue went up by 20.5%.

And in terms of the auction related business, it went up about two-digit figure in terms of the transaction volume. And in terms of the ratio of smartphone from 23.3% it went up to 31.4% which is above 30%.

This shows the quarterly profit trend. After conducting eCommerce strategies, the sales including royalties and listing charges were excluded. And therefore we are trying more or less to focus more on the investment in the promotion. And so momentarily we are seeing a decrease.

This shows quarterly operating income and this is in the ratio format. And by conducting eCommerce strategies we are recording minus 1.3%.

Now, I would like to give you the business outlook of the first half of 2014. After June, we will be having eAccess as our consolidated subsidiary company. And so, in revenue and operating income those factors are incorporated in the numbers as you can see here.

From now, let me talk about the marketing solutions business. When it comes to the marketing solution business and to put in other words, that’s – they’re providing the user first services by a development of a lot of services and by getting a lot of users on which we’re going to do into the advertisement business.

And they’re very, very simple and traditional business since we have started business at Yahoo Japan. The festival was most important is that although now the smartphone has penetrated more, but at the same time that how we can make that users use our services.

But on top of 20 services about, we’re going to have at top of this over 80% of services are really growing. And the growth of these services are very important. But when we look at these graphics, you can understand that although now profit moving more underperformance at our services had been frequently used by the users stably.

On the other hand, when it comes to the download of the applications and that now we’re shifting more and more on the smartphone platforms and a lot of application is downloaded. And now we understand that now, whose service is using a browser, but when it happens on the applications.

But also for these application downloading, we have done a lot. And one year ago, we had a total of 80 million downloads, but now we have about doubled number of 160 million downloads have achieved now.

And the part of the application is now used in also the overseas market. But now we have about 100 million that also, the 40 million of internet users so that about 160 million downloads for the 40 million users is very substantial we think in Japan.

And just like this, now our service has been growing but at the same time, and in the past three months, but have a runoff that efforts for making the increasing the traffic and now let just explain some of them.

The first service is that now we have started providing the iPad version of the official application for Yahoo News. And to search and the news is two of the flagship services as Yahoo Japan. Although there are a lot of these similar services is coming out in the market but for us in Yahoo Japan, would like to just have head competitions without the competitors and providing that traditional services of the news and search.

And this is so they were providing starting – start providing the iPad version of the news. And then now, the Japanese professional season have started. And also the sports navigations and sports navi or sports information is the very important services that were provided the new services for the sports information.

And next one is a smart search. Now what would be that the idea of such services in the smartphones and this is the basis of ideas to come, can opt with the idea of the smart search, just like this. But doing all these efforts, we would like to just offer that kind of excellent services to users for having more traffic in the users.

Then after this, let me explain about first we gather about the users and then how we had been monetizing for all these users. So let me explain some of our efforts. First of all, and the paid search advertising, and now it had been growing steadily like this.

And when it comes to display advertising, as I mentioned earlier, now the display was aimed just a soft patch but when you look at the brand panel and now we are introducing a lot of the rich advertising so that’s not like to just improve that forward efforts for providing much – more and more on the rich type of advertising just like the brand panel.

And when it comes to YDN and the YDN have taken a leading role into going to business but it didn’t fold more than double.

And in the first year, with the page search took to lead than last year, the YDN and had holding very favorable and with these are two in the areas of advertising will be down to me, would played major role for our business. But now also we’re needed to come up with number three, number four products. That’s why also we’d like to start and to providing the new products and this unit next year also.

And this is that Yahoo premium DSP and then also BDO format advertising. These are the two additional advertising products on top of these two traditional products.

And also, and let me introduce the new additional services and that’s treat promo products. Now we’ll have a contract with the Twitter advertising. And to form that the management – the tools of the sponsor says in YDN that’s the client hand accounts the posting the advertising on Twitter. That’s with the advertising business, let me move on to the consumer business.

First of all, let me talk about the Yahoo Shopping. Last year, we have started the eCommerce revolutions and providing the free of charge for this, for all these days, commissions and the fees. And but, first we’d like to increase the number of the products and the sellers. So this is much debated stuff and it was all of that.

And now, and six months have passed since we have started the efforts of this revolutions. And now the number of stores have been growing steadily, now we have the increased by 60,000 more stores now. And in the total we have 70, more than 78,000 stores now open in terms of the IDs in the Yahoo Shopping.

So, now that we are starting to deliver the goods of our efforts. And not only for that, the professional and the corporate sellers but since this is internet, performed with and emphasize both for the corporate and also individual sellers. So that we have started providing services in which the individual, so that can open the stores.

And also, we are providing 50 free of charge ATIs, with which is sort of all the individuals and all the users can, and to manage and follow commodities and also this management and commodity management.

By doing all this and now we have steadily growing in the number of the sellers and the potential, the shops. But compared to this and U-basis, now we have about 40% the increase than earlier. Now we have more sellers and also we have more merchandizing the products there. And we’re now getting close to that in the tie-it, but no, we’re not certified yet so that we’d like to do more for this.

But now it seems like that we are starting to deliver the goods on this. Then, when it comes to that and what happens on the transaction values and what happens on the number of buyers, so let me introduce some count statistics.

And March is the month that’s – we have some kind of the peak and spike but not only for that – due to that, then increase in the number of the sellers and the products. And but combined on both of these factors in this March, and our business have been really favorable, the number of orders, the number of buyers and also average unit prices, everything, everything had grown more than 20% year-on-year basis in March.

And as a result of that if you can understand looking at this graphics and from that we can have the record high transaction value in this generally to March this year. When compared to that, we have three which is very, very slow and very initial in the staging to when we have started this effort of these services.

But when you compare the – to this December, we always had a record high transaction value in December, and year end shopping season. But this year, now we have a record high, this transaction value in this, the Q4, the January to March, due to all those efforts we have implemented and all those factors combined.

And this is the monthly transaction value growth year-on-year basis of the Yahoo Shopping. And just like this, the graphics saying very clearly that we have been strengthening for a long time but after we implemented this eCommerce revolutions. Now, these transactions values of our Yahoo Shopping have recovered substantially.

And in the future also, we’d like to have more the transaction values and more transaction value means that that’s for all days, the sales and revenues of the sellers also increases so that it will have win-win situations whether of the buyers and then also we have a very good cycle and synergy in this business model.

Next, let me talk about YAHUOKU, the auction service. When it comes to auction service, YAHUOKU and the switch of the ecosystem is not that the sellers but the buyers. So because first of all, many people, first participate into the auction as the buyers and they’re shifting on more, also tried per day on items. That’s why first we focused on this, the increase in the number of the buyers and the result of that when it comes to number of bidders and they have increased like this.

And then also, now we have more than 10% of new bidders. And the average, the winning bid values also have went up more than 10% and then also – and for the first time in the past four years, that’s now we have the number of buyers have grown in three straight months in the past.

Just like this generally and also the transaction values of YAHUOKU, on a long term basis and this was on a quarterly transaction value shifting. And also we have been struggling for this a long time and there would be some of the fluctuating plus they had started to recover. And in the past year, now, that we have that all the positive growth in all the quarters in the past year.

On top of that, of course everything is starts out by having more and more buyers. But then at the same time we were seeing more sellers. In terms of the corporate sellers, because of the easy strategy, in terms of YAHUOKU, the listing choice is nil. And that has worked to the benefit. And we are seeing more and more corporate sellers.

And in terms of the number of items listed, let’s compare to the previous year. We were able to increase by 10% and also this means that we have more merchandisers. And in terms of sellers, including the individuals in March, and compared to the previous month or the previous year same month we were able to see an increase for the first time in two years in March.

And in terms of Yahoo Auction, we have about 80% to 90% own line and we want to increase furthermore, we have to incorporate offline or we have to further expand the reuse market. Therefore, we started reuse Japan market project. And we went to offline venue for the first time and conducted the fleet market event last year.

And as a new endeavor as announced yesterday, we decided to have the capital and business alliance with Bookoff. And we will have about 43.22% voting share ratio of Bookoff in the end of the day. And simply put, a Bookoff has about 1,000 stores and that covers about 85% of the total population in Japan.

And so, the reuse items will be handled by these stores and those will be sold by YAHUOKU.

And in terms of coming directly to YAHUOKU, will be free of charge but then some people feel very cumbersome to having to deal with the processes. Therefore for all those people we will use Bookoff as the entrance point for them and to sell their items over the net.

And we believe that YAHUOKU, we should try to open door to offline mortar and bricks rather than just continue yourself to the internet world. First of all we will start up from used books. We have about 2 million books and we want to increase it to 20 million books. And we have 10 million books then we can be the number one reused books. And so, our initial goal is 10 million books to begin with.

We will use Bookoff stores as a real brick and mortar stores. And there are different items that I want to be sold by the people. So, instead of having to go through YAHUOKU by themselves, as another option they can trade in their products at Bookoff.

And so, in terms of the product, that times of course we cannot handle everything all at once, so firstly we will focus on mobile phones, smartphones and mobile phones. Those devices are in existence in one hustle and maybe one or two or more devices are not used. So we will try to tackle those mobile phones and make them reused over the net.

And we will open the largest reused center. Bookoff will conduct trading and Bookoff will be just to avalanched with products. Therefore, we will try to have the reused center and keep those products there so that they would be a centralized distribution center. And so, this is a reused dedicated center and this is very rare. In case, but we would like to handle this facility.

And Yahoo will not be the dominant only user but in terms of the sellers and companies that are listing, and some companies say that it’s very difficult to get the merchandize that they can sell.

In terms of new products, they will have no problem but in terms of the reuse market, they need to get the merchandize on their store. And therefore the merchandisers will come to the reused center, perhaps in the future and buy the products that they want to sell. That’s innovation.

In the end of the day, YAHUOKU’s ecosystem will be focused on the royalty and membership fees and by the increase of those components we will be able to enjoy further sales.

Now let’s talk about the premium membership. The concern is because of the easy strategy, there is no special point to be provided to the premium members. And therefore people were concerned that there might be an decrease proportionately by conducting different measures, we’ll be able to reach 9.87 million which is highest in number to date.

We provided YAHUOKU to be enjoyed and also we have the right to bid on high priced items that had been extended to non-premium members as well.

We have partnership with Japan Net and on April 30, we will have 41.16% in terms of the share that we have. And we have different financial flow within YAHUOKU and by combining the settlement mechanism of Japan Net Bank, we will be able to cater to the needs of the users.

Next we started Yahoo Wallet fast pay. In terms of Yahoo Wallet, this is the service that was contained in Yahoo. But since this is so easy to use, so we would like to accommodate the needs in non-Yahoo site as well, just by adding the lines of program called as listed over here.

You will be able to use, Yahoo Wallet outside Yahoo. We call it as off Yahoo and we open the venue in which they can use Yahoo Wallet. So, this has been the explanation of the settlement and payment business.

Next I want to talk about the internet carrier business, this is the new pillar that we will be establishing, so let’s look back. In March, we announced that eAccess will be incorporated in Yahoo. And so, let’s recap.

We’re not going to explain to you any new terry plan that is not on our mind yet. In April, we have new operational strategy and by 21X we would like to have the operating income double fold to be about the bigger right now. And we tried our very best for one year and what happened a year ago? In terms of operating income, it was 20.9% which is two-digit growth.

So, Yahoo Japan can grow by two-digit and we were able to deploy ourselves. And we can continue to digit the growth we will be able to double the operating income by 21X. And so, I guess we prove our point.

But in terms of our operating income, we were able to have the double-digit growth. And in terms of the advertisement revenue increase it was 15%. And if we can continue this growth, then our plan is feasible. But in order to make sure that we can double the operating income, we need to focus on EC. And that has been in the comment we made last year.

And in terms of the transactional volume, it was negative. And so we were not able to do as better as the previous year. But we believe that we can do better. And so, in fold we announced the eCommerce strategies in shopping and auction wise. We came out with a new strategy.

And so, as a result in terms of the operating income and also transactional volume and also the number of listed items, I believe that we were able to do pretty well.

And in terms of the first arrow, which is the advertisement, maybe in for now it is good but then it is not guarantee as in terms of the research, it did well. And with the end it did well, but we have to always look with the new engine that would drive us forward.

Therefore, as new services, we have our DSP and we have a bigger advertisement and also Twitter that has been announced today. And so, we will try to come up with new measures in the advertisement area. So, instead of just focusing on what we have right now, we will like to be creative and come up with new strong pillars.

And so, what is the position of internet carrier business. And in terms of the advertisement business, we can grow by two-digit every year. And in terms of eCommerce business, we are conducting different measures. So, I’m very sure that in terms of transaction value, we are seeing a gradual momentum. And I’m sure that it will, at the end of the day, we plugged in the operating profit.

And in terms of the internet carrier business, as you can see, the arrow, it is in the bottom which is in the infrastructure. And in terms of the internet carrier business, I believe that the telecommunication will grow. So the telecommunication itself will be one of the major revenue resource.

But if we can grow the internet carrier business, then advertisement and eCommerce will grow further more. So, in terms of the carrier business this is not the third bill about rather, this is the foundation for the two pillars that exist above it.

And this is what I have announced already.

So, there were plans to acquire eAccess shows and on June 2, and first of all eAccess and welcome that manages together. And this is by company, and Axis will be acquired by Yahoo Japan.

So, when it comes to the telecom business, it has been all more competitive that’s true. But we think there is still, there is much potential to grow any further in this telecom business. But also now we have EBITDA, we have about ¥75 billion to ¥80 billion, but we’re still we have to take an advantage of the synergy, we still have to grow this EBITDA even further.

The other thing is that the first one is that telecom business, and telecom business, it’s also the source of revenue. But at the same time, we will not enhance our at the premium membership’s business can also be enhanced by implementing this via mobile. And once it’s permanent membership is it. And also, we have about 7.5 million members, only on online channels. But there are still limited. That’s why we would like to expand the channels, are quite product, there are premium members by taking advantage of this in the mobile services.

Then we would like to exceed the total number of members to 10 million so that possible, we entered make much use of the channels with softer mobile. We have to jump it to the 9.5 million so that now we can fully control this that telecom services, mobile telecom services with one mobile.

And we have all these in the sales forces. And so, we don’t have to just – what to get that ways, there are to do soft about and we can have the direct control of this mobile services and we can acquire that, the members, all the memberships and also we have to grow in our business.

And also, as long as we provide that to mobile handsets and like to just and provide something of the pre-installed services for the near future of the services and this mobile handsets and mobile services. And so they are now try to come up with a lot of services and ideas to make much of the use of this mobile.

And also we’d like to utilize that the still front of the Y-Mobile, and Y-Mobile shops. And we’re thinking a lot of things for example and now we have that 1,000 stops in the Kelly shops and also 2,000 of massive merchandisers, there are still front that we have. And also we have about more than 600,000 our sales forces. We’ll be added on top of the content. So of course so that put all these 6,000 sales pass and they can provide a lot of services to the potential users.

And for example, this is still on the drawing board but for example, and we can acquire the membership of Yahoo card, for example, for that open account in the Yahoo or the Japan are back. There are lot of the ideas are there.

And on the other hand, now, after we break into this, the Y-Mobile telecom markets and that we can revitalize that this internet, the Y-Mobile internet market. And we’ll be more competitive and also we can reactivate for all these markets. And there are all the other competitors will come up with different pricing schemes, different ideas and also, and a lot of the other new, of these telecom benches will also try to break into the market.

So, I think that’s Y-Mobile and we’d like to compete with them, all the newcomers and the traditional competitors and like to bid went up.

And what was important is that in the weekend, now, so we penetrate world of smartphone and tablets. And to for all the population in the Japan, we can have the benefit because we are doing a role, the business on the top of this internet sale force.

And same, it is true also for that Yahoo BB when we started business at Yahoo BB 10 years ago, at a time that broadband services of the Japan was the slowest in the world. But after we implemented by Yahoo BB and when we supported the soft bank’s effort the time that 10 years ago, after we started in the service update, Yahoo BB, the first that we have – we have the revenue source for this ADSL, for the telecom piece.

But at the same time, that Yahoo Auctions will be enhanced where there is a Yahoo BB. And what’s most important at that time was that – by introducing this new broadband service 10 years ago, and a lot of the other different websites, were also being accessed and they were totally revitalizes our all the internet market as a whole.

So that I would like to do the same, breaking into this and mobile telecom markets by ourselves is we’d like to revitalize the whole of that – all the general Japanese Mobile, smartphones markets. And we’d like to work together with all these market people.

And we would like to achieve as Yahoo Japan is that we’d like to achieve the 330 beating up on the income by the March 21X. And also in order to do that not only for advertising business, and although we would like to and grow that advertising part, also we’d like to become number one eCommerce where the number one and transaction values.

And also on top of that as we have announced now, and on top of all these business models, we’d like to provide that the subscribers of the viva would get more than the double as the foundation of all the business. And so that was actually making out to achieving that objective more accurately. That’s all my presentation. Thank you very much.

Question-and-Answer Session

Unidentified Company Representative

(Interpreted). Now we would like to open the floor for Q&A. If you have any question please raise your hand, we will fetch you a microphone. So, please mention your affiliation and name and then pose a question. So, if you have multiple questions, please ask one at a time. Thank you. Now the floor is yours, person sitting in the front, at the center.

Keiichi Yoneshima – Barclays Securities

(Interpreted). Thank you very much. I’m Yoneshima of Barclays Securities. I will ask you multiple questions. Firstly, about sponsor search. In the fourth quarter, I think that grew very much. But you mentioned that you tried to focus more or less on the usability.

And in order to advance the usability, how do you think the growth will stay at the level it is now? At one point in time, I’m sure that you’re going to shift gears and move more to the profitability rather than the usability. And so, how long should we be patient so to speak?

Manabu Miyasaka

(Interpreted). As compared to the previous year, we tried to focus on the usability. Therefore, the growth was not very high. And I guess the impact was about more or less about two points.

And so maybe I should give you some forecast. We tried to average out, I believe that the growth rate will be the single digit, middle to the upper half. And in the next fiscal year, say the first half, we will grow by a single digit and middle to the higher half of the single-digit growth. And I think that will be the scenario.

Keiichi Yoneshima – Barclays Securities

(Interpreted). Okay, moving on to the second question, in terms of second quarter forecast you would be impacted by eAccess, so what will be the impact on revenue and operating income? And also in terms of EEC, i.e. the Shopping you said that ¥10 billion has been used as an investment. But then, if you include that as compared to the previous year, it has been increase of 5%.

And so, if you exclude the investment that you’ve made, you have the double digit growth rather. So what kind of scenario do you have for the second quarter, you were talking about the forecast of eAccess right?

Toshiki Oya

(Interpreted). Yes, in terms of the first half, in terms of the revenue, we were about ¥24 billion. And in terms of the profit, we have some news. So, this is just for your reference. It will be about ¥1 billion contribution.

Manabu Miyasaka

(Interpreted). In terms of the growth rate being pretty sluggish, we don’t have any particular number per say. But looking at the trend of the sales, in terms of the advertisement, we believe that we can grow by two digits.

Regarding eCommerce, because of the impact of the strategy, there will be a decrease in the revenue. But other business wise, the growth rate will be first digit middle to the higher half.

In terms of the expenses, we have the new recruits and in terms of the shopping business, we want to be aggressive and we have the mid hires as well therefore, putting all those factors together. In terms of the revenue and the profit, we tend to be pretty conservative as usual.

Keiichi Yoneshima – Barclays Securities

(Interpreted). Thank you. Moving to the third question, which is related to Bookoff, you have the capital and business alliance with Bookoff. And I watch eStream yesterday. And in terms of the performance impact, I believe that the transaction volume will be impacted in the YAHUOKU area. And you can talk qualitatively as well, but what would be the timing in which YAHUOKU will be positively impacted, do you have any target and if you can tell me the ballpark figure?

Manabu Miyasaka

(Interpreted). Both companies want to be ¥1 trillion in aggregate figure as soon as possible. It’s very difficult to give you any quantitative number. But simply put, people who have not experienced YAHUOKU might start getting into the YAHUOKU world.

Maybe in the past, they entertained themselves in YAHUOKU but it is not to anymore. But then maybe by having the alliance with the Bookoff, we might be able to solicit them to come into a market again. So the more players we have, the better off we are. And so, more uses are there, we will be able to see the number improvement.

Keiichi Yoneshima – Barclays Securities

(Interpreted). Thank you. Last question. You have 1,000 stores of Bookoff and eAccess and Welcome, altogether you have 3,000 stores. So, you have physical stores under your umbrella so to speak. And in terms of the business alliance with a Bookoff, I don’t know the details.

But in terms of Bookoff and eAccess and Welcome, are you thinking of any collaboration, I’m sure that you have different measures on your mind but are you coming up with any collaboration scheme?

Manabu Miyasaka

(Interpreted). Well, I do have visions semi-rise so to speak. And we made an announcement yesterday so from today we will have concrete discussions. So we do not have anything tangible yet. But of course there will be different mix and matches and it’s very visible to come up with variations and scenarios.

Keiichi Yoneshima – Barclays Securities

(Interpreted). Thank you.

Unidentified Company Representative

Do you have any other question? Okay, sitting in the second row from the front please, in the middle.

Taro Ishihara – Daiwa Securities

(Interpreted). I’m Ishihara from Daiwa Securities. Thank you very much. And I have a couple of questions I’d like to make question one by one. My first question is, that a new strategy in eCommerce and status of the new strategy on eCommerce.

And initially and I remember that about the ¥3 billion to ¥5 billion for the quarterly operating income you would expect. And for then you have just leave up to your expectations of last year and the last quarter. But now, you have some additional effect is coming out.

So, what is the kind of status of the business performance and you can alleviate that’s the impact of that additional investments or you have increasing the recruitments for the stuff so that you have some negative impact on that or something like that?

Manabu Miyasaka

(Interpreted). Yes, when we look at about ¥5 billion for the quarter and about, ¥10 billion that’s for each of the half and they also when – in this first half and we expect a similar impact, also in the first half of this year.

And, because that although the revenue had decline, although in a control environment and that’s true, and also for example, promotion fees or the labor costs or there are all expected additional cost.

And, but everything is on our schedule and ideas so that but again that’s the ¥10 billion for in the first half of this year is that our expectation again.

Taro Ishihara – Daiwa Securities

(Interpreted). That’s true. Okay, my second question is that when it comes to the eAccess or as a whole and at March 2015 or March 2016 it would be that deprecations and the CapEx plan, that would be different after the acquisition of this new acquisitions and which would please qualify new ideas on this the CapEx and deprecation?

Manabu Miyasaka

(Interpreted). Yes. When it comes to CapEx spending for this 700 mega investment for – mega and then also including these, and everything, about the ¥90 billion or the approximately ¥90 billion of the CapEx was would be needed.

And when you look at the trend and, we’re going to spend the most in the 2014 that would be gradual decline after that. And when it comes to that depreciations of the tangible fixed assets and I have no clear about that but when it comes to intangible and fixed assets in that way we have about ¥70 billion.

So, and in 2014 and 2015, it is about standing over ¥16 billion for each. And also, gradually decline after that. This is my image about them, depreciation.

Taro Ishihara – Daiwa Securities

(Interpreted). Okay, thank you very much. My last question is that, my question about the plan in the first half of this year. And the impact of this new strategy on eCommerce or that – now your acquisition of eAccess and the positive effects of the Axis acquisition excluding all these and excluding all these additional factors in the first half.

And when you look at on an upward basis on a traditional basis, there is no way of almost a flat or this is my – long forecast or about ¥4 billion. But you have some incremental profits of ¥10 billion and better of ¥4 billion. Now, it seems like a very, very conservative forecast. But what’s your comment on that?

Manabu Miyasaka

(Interpreted). Well, that depends on the how to calculate so that like to just explain the details. But we don’t think it’s so much conservative, we don’t think so.

Taro Ishihara – Daiwa Securities

(Interpreted). Okay. Thank you very much.

Unidentified Company Representative

(Interpreted). Any other question? Yes, person sitting in the very front row.

Takashi Watanabe – Goldman Sachs

(Interpreted). I am Watanabe. I have three questions so I will go one by one. First number is confirmation of the numbers in terms of the advertisement this term, you said that you can grow by two digits. But in terms of search it is like first half of the single-digit growth, that’s what you mentioned. And I want to know whether that has changed or not?

You also mentioned it might be between and the middle of the single and upper single digit. And I want to know the big time between search and display. And if you can further breakdown display into premium and others?

Manabu Miyasaka

(Interpreted). In terms of search, as mentioned before, it will be like mid to upper single digit growth. As far as YDN is concerned, we believe that we can enjoy a very high growth. So far on a quarterly basis, we can see an increase of ¥1 billion quarter-on-quarter. And I believe that this quarter-on-quarter trend will continue.

And y-on-y, of course you have more denominator. Therefore, we are doubling but y-o-y I guess it will not be double but lower than that.

In terms of display, we have premium, we have video and new types of products. And we want that to be a driver. But in terms of the forecast, the growth will be about negative 10% one year-on-year.

Takashi Watanabe – Goldman Sachs

(Interpreted). Thank you. Going to the second question and this is quite qualitative. President Miyasaka, I want to know your mind, what you are thinking looking back for the past two years, you’ve conducted different measures and we were very stunned.

And not in order to be taken by surprise, I want to know what is on your mind now, say looking back the past two years in terms of the advertisement you want to grow the applications, and but display advertisement they must be reinforced in order to increase the profit. But including EC and other non-advertisement business, you purchased or acquired Car be and other businesses.

In terms of the business that you are not very strong, you made it for your choice so that the service can be reinforced and you can redefine in those services. And thirdly, not only internet carrier but you want to solicit offline people to the world of online. And in Japan, we are lacking behind in the world of the internet.

And that is why we have the alliance with the Bookoff. And so you have the advertisement and non-advertisement business and you’re going to reinforce the media. And also you’re going to actually reinforce your online business by actually embracing the offline as well. And I think these are the three major points.

And is that correct to understand that you will be coming up with different strategies that will cater to those three points, am I correct or are there any other points that you want to be reinforced in the future? And if you can disclose those points, I will really appreciate it? And two or three years down the road, what are the major components that you would be focusing on?

Manabu Miyasaka

(Interpreted). In terms of our objective, we want to double the operating income, that’s the mountain that I have to climb. And that means that we have to put a full-fledged effort. And the higher we go up the hill more difficult it is. So, if a goal is not to double fold our operating income, we would be more relaxed. But since that is not the case, we just have to continue putting our best effort.

In terms of our business, it’s not written on stone. The strength of our company is that we have many people, meaning that we actually entice and attract many people. So, whether it be news search on weather, and stock prices and SNS maybe it’s not very popular yet. But then we provide venue or business which we can attract people. And that is the area that we have to reinforce and reinforce the existing services. And if we do not have those services, we should acquire those businesses.

And so, we will be and we are the pull-through that attracts the most people. And on top of that we need to capture the enterprises whether it be the seller, the auctioneers, the bidders and also the advertisement sponsors. And on top of the mass people, we want to capture the enterprise and people who want to do business above that foundation in interest of eCommerce, we have about 80,000 stores.

And the auction we’re increasing business, and I did not talk about it but in terms of travel and reservation, it is free of charge. And so the business in those areas, are participating on the net. And there are many users and on top of that we have the providers, the business. And the more we have the people and if we have more businesses, then we need to cater to the settlement portion.

And so, in short, we will gather people and increase the business and also be the integrator or i.e. in which we will be able to consolidate the ins and outs of the businesses that go between the users and the business.

Takashi Watanabe – Goldman Sachs

(Interpreted). Okay. Last question, it’s interrelated. But in terms of the mobile, you have services that are popular PC, and maybe you can convert that to the application for the mobile. Do you think that would suffice or do you think that you have to start from new and come up with a new business that is based on mobile?

And if the latter is true and if that becomes the mystery in the world at large, it maybe Yahoo might be at a risk, because you are very PC oriented. And I guess, you still have that legacy. And so, regarding your counter measure, again it’s the mobile. Can you elaborate it on your scheme?

Manabu Miyasaka

(Interpreted). We have a company business and we will empower people and delegate the authority. And company wise it used to be PC, so PC applications will be more converted to mobile applications. And not only that but in terms of the people, people wanted the PC. And there are people who go for smartphone.

And more people might use smartphone to look the weather. And so, in terms of the device, whether it be PC, the smartphone or the variables, we would focus on the media business the way to capture the needs.

And at the same time, and maybe there are very smartphone oriented businesses that did not exist on PC. And so, CFO Mr. Murakami will be the leader in this area. And maybe it’s not very flashy but we have the application that will be very power efficient and try to look at the battery level and memory level of the smartphone.

And smartphone application that caters to that needs monitoring is becoming very favorable and popular. And our team members have put in years together to come up with new ideas.

And also, in terms of the tablet, I don’t know why but it’s not very high in penetration as compared to other parts of the world. Tablet doesn’t grow but if that is the end of the story that’s no good for us. So, we will try to help assist the growth of tablet and we have news tablet application and try to come up with different applications that will cater to the tablet. So that will drive the growth of tablet in the future.

Unidentified Company Representative

(Interpreted). Okay. Those sitting in the front line, please.

Yoshitaka Nagao – Nomura Securities

(Interpreted). Thank you very much for the presentation. I’m Nagao from Nomura Securities. I have three questions. Would you please respond one by one?

My first question is, in the forecast of the first half and Yahoo Shopping and Auction, how much of the transaction value do you expect in those, and this is my first question please?

Manabu Miyasaka

(Interpreted). Okay. And when it comes to Yahoo Shopping, January to March, it has grown very good. And but now, in the average unit price have gone up. And so, in April, it would just get back to that – the usual level, average level but it’s still uncertain how much that will come back to that the year average level. But we expect about double digit growth and this is our target.

But although that now, the average unit price has declined but now we literally get a conversion rate that has still been stated at a very high level. So that way, we don’t worry so much about it and we can maintain the comp momentum.

And when it comes to the auction, it’s not so much dramatic impact as Shopping. So, in about in April and about 100% - a little over 100% of growth we have maintained. So, we would expect double-digits growth through the year. This is our expectation.

Yoshitaka Nagao – Nomura Securities

(Interpreted). Okay. My second question is about the media and particularly for advertising. And after four last year November and apply the D&P of premium DSP or that’s new products and service was announced. But for example in a premium DB or I don’t exactly what happens with – where that’s an also – and over all these new efforts and have what kind of impact and how it contributes to that revenues and profits.

And for example, that how to – into working where the data, where the these products all that – what kind of new products will be coming up based on that the new platform or, so how will these new services and product will make a contribution to that revenues and profits?

Toshiki Oya

(Interpreted). Okay. I’m going to respond to about specific numbers and figures. And in the Q4, DSP and also the video advertising and we have about several couple of millions Japanese yen. So we’d like to get off to a very good start, better steel. And we have to be sales activity will be really gradual and so acquire the customer one by one. So that if it doesn’t happen ¥1 billion to ¥2 billion, will be that expected contributions in the first half.

And our idea is that for all these business and products, it’s really attractive rate. So, in the future, each of these business will make a contribution of about more than ¥10 billion for each in the future. Do you have any other additional comments?

Manabu Miyasaka

(Interpreted). I don’t know, from a marketing solution company. DSP and the video advertising and we already have started selling in the first half and, in last year. And now we have a 500 sales force and would like to make out rule out of service activity this year. And so that we like to just make it grow to that business, towards ¥10 billion of revenues. And when it comes to D&P, and currently it’s still enough so certain but sometime before the sum-up with like to release before the summer time.

But it takes a lot of – a long time and efforts for the releasing so first we’d like to focus on the several limited clients and we’d like to start a baby step from the summer time.

Yoshitaka Nagao – Nomura Securities

(Interpreted). Okay. Thank very much. My third question is about your Korea business? Although you kind of mentioned so much about this business and the bet for it, a lot of those handsets or their services and the pricing again, then we’re getting full structure. There is a lot of factors are there. What emphasis would you put on it and as a carrier? So, do you have any kind of the focus of the strategy or an outline or some kind of ideas you can disclose of the strategy on the Korea business, I’d like to know about it?

Manabu Miyasaka

(Interpreted). We’re very sorry that at this moment of time, but a lot of things I cannot clearly mention. So would you please take more time, please?

Yoshitaka Nagao – Nomura Securities

(Interpreted). Okay. Then, let me just confirm one thing that when it comes to services and the pricing scheme and you’re the one who starts the service from that about the June, so we’re going to announce but end of May, for pricing and services. And for the preinstalled special handsets, will it be launched from after summer or while you’re on schedule?

Manabu Miyasaka

(Interpreted). We want to go preinstalled applications or that depends on case by case. But some of the preinstalled application can be offered as soon as possible. But when it comes to handset, we ordered handsets it’s not new, because that for all these handset have already been developed and been prepared to be launched even before that announcement of acquisition.

But we need to get off to a really good start so that we learn to release that our with a unique handset and services. But it’s still and want to come service plan and handset which is really unique only to the Y-Mobile.

And they won’t like to take more time so that as of the June this year, first of all we’ll like to insist and the stick to that current business and to be maintained so that that our first priority this June is that for all the business, which are the base of the current business model of Welcome and eAccess should stay very fast so that we’d like to solidify it basis, on which we’d like to make our own unique business model on top of that after that. And including that our only unique handset.

Yoshitaka Nagao – Nomura Securities

(Interpreted). And one or more additional questions. And contribution to the open income, have you mentioned about the couple of tens of billions yen, but for example you have change the brand name or that for example, the interior of the shops to be replaced the refurbishing that you need to do the investments. And would you have any ideas about that kind of an impact?

Toshiki Oya

(Interpreted). When it comes to the contribution to the operating income, it would be approximately about ¥1 billion. And when it comes to this and some kind of refurbishing of this the stores and next tellers, it would be about couple of hundred millions of yen, that we already have factored in focus already.

Yoshitaka Nagao – Nomura Securities

(Interpreted). Okay. Thank you very much.

Unidentified Company Representative

(Interpreted). Then person sitting at the corner, third person from the back.

Yosuke Tomimatsu – Merrill Lynch

(Interpreted). I’m Tomimatsu of Merrill Lynch, I have two questions. In terms of smartphone and tablet, I know that you tried to create many people getting over your system. You mentioned about the downloading your application. And I know that you have different services and I know that you have varieties of applications.

And by just accumulating all those applications, do you think that people will gather to your side and it’s very difficult to imagine that in the day and age of smartphone. And you have to have the control of the communications part or maybe you should try to leverage on the settlement venue as well. But I want to know more in concrete terms, how you would be able to gather people over the smartphone and what kind of services do you have on my – I know that you can now give us the details. But can you give me the image of what kind of services you plan to provide?

Manabu Miyasaka

(Interpreted). I repeat myself, Yahoo has strong services. And I believe that we should try to have those services over the smartphone as well. And so, tablet is not an exception, we’re going to encompass them as well. And also at the same time, we should try to have business like LINE or like post dragon games. And those can be unique services that we can provide over the smartphone.

And if we can create those services over the night, then that would be a winning proposition. But it’s not a piece of cake. So we will put our effort. And we are putting up effort but even without the existence of those killer applications so to speak, we want to use – reuse and search and shopping. And those are likelihood related services should be provided. And we are increasing the accessory.

And so, we are not being pessimistic but rather by coming out with the basic menu and services, we can capture people to use our services. And if we can have mega-hit, one or two of them, then we would be better off.

Yosuke Tomimatsu – Merrill Lynch

(Interpreted). In terms of Twitter advertisement alliance that you have, I don’t really understand. And I guess you have the alliance being announced already. And I want to know whether this alliance is more or less like an Asian contract and it’s not going to provide you with much revenue in the future?

And in terms of real time search, I guess it is increasing in its importance. And so can you tell me about how real-time search is used and whether it is growing or not?

Manabu Miyasaka

(Interpreted). Okay, so Mr. Aranami will be explaining.

Osamu Aranami

(Interpreted). In terms of real time search, that’s a separate contract. So it’s an agent contract. And in terms of profitability for each individual contract, I cannot give you the details. But of course we have the scheme defined in such a manner so that we can have a profitable business.

And in terms of real-time search growth Mr. Mizaba (ph) will give you the answer.

Unidentified Company Representative

(Interpreted). I am Miazaba (ph) of a research company. Based on smartphone, real time search is growing dramatically and year-on-year it is increasing by four-fold.

We don’t have any advertisement per say now but in terms of the search, we are trying to cater to the real-time which is different from the ordinary search. And we will come up with new schemes in the future but now we just focus on the usability for all the people who want to enjoy the real-time search.

Manabu Miyasaka

(Interpreted). And if I may add, I conduct a real-time search and I don’t see any advertisement. And I’m surprised because there is a potential. And you mentioned that the growth rate is maybe middle of single digit.

Yosuke Tomimatsu – Merrill Lynch

(Interpreted). And I want to understand those factors, how are they interrelated?

Manabu Miyasaka

(Interpreted). Well, this is the Twitter.

Yosuke Tomimatsu – Merrill Lynch

(Interpreted). And thank you very much for your very valuable proposition. We would like to look at it positively. My last question, and in terms of DSP and video advertisement, I want to know whether that would be the third area? You said that you have 500 salespeople and it seems that’s labor intensive if you are going to leverage on those 500 salespeople. You have brand panel.

And if you think of DSP and the video as the replacement of the current mainstream product, I want to know whether it has the potential to overtake the current main pillar of your product, if you can give us your insight as this potential?

Manabu Miyasaka

(Interpreted). Regarding DSP, in terms of the billing, it is about ¥5 million to ¥10 million per transaction contract we have regarding DSP. So, it is a very big contract. And once we have the sponsorship but it is not one time but rather it is a continuous sponsorship. So in terms of premium advertisement, it is one-time at a time.

But in terms of DSP, it is a continuous sponsorship and also in terms of the unit price that is very high, and that we have to note that. So, in terms of prime display, it is about 30% higher in terms of the unit price if you compare DSP and our prime display.

Yosuke Tomimatsu – Merrill Lynch

(Interpreted). Thank you.

Unidentified Company Representative

(Interpreted). Do you have any other question, okay please, sitting in the third row from front please?

Shinsuke Iwasa – Mizuho Securities

(Interpreted). I’m Iwasa from Mizuho Securities. I have three questions so would you please respond one by one. First of all, my first question is that it is the paid search in smartphone. One thing is that the history of good trend since last year and what is the trend? And also what’s your forecast for the future trends to have an idea on that?

Manabu Miyasaka

(Interpreted). Yes. We don’t have any former statistics so this is just for your reference and just for your information. But currently it depends on the OS. This is different from IOS and Android. In the case of IOS, and it gradually share had been going up.

And approximately about we’re getting closer to that Google’s share now. And when it comes to Android, as far as Android platform is concerned, unfortunately we are lot of gap with Google and we still have a 30%.

And it stands reason that we are doing a lot of things to catch up and improving that market share. And so, personal improving for the services and also the upstream side of the business so that we try to in the growing and having more shares on that.

Shinsuke Iwasa – Mizuho Securities

(Interpreted). Okay, thank you very much. My second question is that and my question about the advertisement with shopping. And when you look at January to March and also and for the forecast on the April to July for example, and you mentioned once that when do you plan to start that ad menu for the shopping and so would you be specific about your schedule and how are you going to launch that advertising programs and menus on the shopping site?

Manabu Miyasaka

(Interpreted). Yes, currently, yes, first of all we’d like to focus on the increasing number of that sellers and merchants and the products. So that, but now, now we have a very good contributions to the transaction value and so far we have been, our strategy have been kind of favorable. But we need to still focus on as this year and also next year to increasing this transaction values.

So, after – only after that we have a tremendous improvement of transaction value and for the first time at the advertising business model would be we tend to be effective so that they will be just one or two years within the time span, we’re launching that kind of program.

Shinsuke Iwasa – Mizuho Securities

(Interpreted). Okay, thank you very much. My last question is that and your ideas and one day after this award, now you have acquired eAccess. And now you have – your net cash would be zero as a level. And any case that for example, in any possible M&A targets that you implement, M&A even with that kind of a debt financing and the leveraging that’s all with a couple hundred billions of yen. So, it’s not the possibility?

Manabu Miyasaka

(Interpreted). Yes. Now when you look at this current balance sheet that, we have to be very careful and about stay next for M&A if there is any ideas. But when we think about that if any kind of M&A which would be essential for the growth potential, the growth strategy, we have to deny the possibility to do that.

Unidentified Company Representative

(Interpreted). Any other questions. No question. Thank you very much. This is the end of the presentation. Thank you very much for your participation.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Yahoo Japan's CEO Discusses F4Q13 Results - Earnings Call Transcript

Check out Seeking Alpha’s new Earnings Center »

This Transcript
All Transcripts