NEXON's (NEXOF) CEO Owen Mahoney on Q2 2016 Results - Earnings Call Transcript

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Nexon Co Ltd. (OTCPK:NEXOF) Q2 2016 Earnings Conference Call August 10, 2016 8:00 AM ET


Maiko Ara - Head of Global IR

Owen Mahoney - President and CEO

Shiro Uemura - CFO


Han Joon Kim - Deutsche Bank


Good day everyone, and welcome to Nexon's 2016 Second Quarter Earnings Conference Call. Today's call is being recorded. At this time I would like to turn the call over to Maiko Ara, Head of Global Investor Relations. Please go ahead, ma'am.

Maiko Ara

Hello, everyone, and welcome. Thank you for joining us today. With me are Owen Mahoney, President and CEO of NEXON, and Shiro Uemura, CFO. Today's call will contain forward-looking statements including statements about our results of operations and financial conditions such as revenues attributable to our key titles', growth prospects including with respect to the online games industry, our ability to compete effectively, adapt to new technologies, and address new technical challenges, our use of intellectual property, and other statements that are not historical facts.

These statements represent our predictions, projections, and expectations about future events, which we believe are reasonable or based on reasonable assumptions. However, numerous risks and uncertainties could cause actual results to differ materially from those expressed or implied in the forward-looking statements.

Information on some of these risks and uncertainties can be found in our earnings related IR documents. We assume no obligation to update or alter any forward-looking statements. Please note, net income refers to net income attributable to owners of the parent as stated in NEXON's consolidated financial results.

Furthermore, this conference call is intended to provide investors and analysts with financial and operational information about NEXON, not to solicit or recommend any sale or purchase of stock or other securities of NEXON. Please note, we may be using Japanese-English interpretation during the Q&A session. A recording of this conference call will be available on our Investor Relations website this call. Unauthorized recording of this conference call is not permitted. I'd now like to turn the call over to Owen.

Owen Mahoney

Hello, everyone, and thank you all for joining us today. Before we get into second quarter results, I’d like to offer few comments regarding the recent reports about a founder in the media. In the Q&A after our prepared remarks, we are only going to take questions about the quarter and our outlook, and not on this topic.

As you probably saw, we made a voluntary TSE timely disclosure on July 12th regarding the investigation by Korean prosecutors office into NXC Corporation is Representative Director Mr. Jungju Kim in Nexon Korea. Subsequently, Mr. Kim was indicted on charges stemming from this investigation. NXE Corporation is a privately held corporation that is a major shareholder of Nexon.

The indictment of alleges that beginning in 2005, Mr. Kim provided financial benefits to Korean prosecutor and received unspecified favors in return. In response to this indictment, Mr. Kim resigned from his role as the Director of Nexon. Mr. Dohwa Lee, who is the Director of both NXC Corporation and Nexon also resigned from his role as a Director of Nexon, although, no charges were brought against Mr. Lee.

The key point is that to our knowledge, Nexon is not implicated in the alleged transaction in anyway. No charges having brought or allegations made against Nexon or its subsidiaries. It would be inappropriate for Nexon to comment on what actions NXC Corporation may or may not have taken. However, we are fully cooperating with the authorities and their investigation and we will keep you all updated as best we can.

It’s worth reiterating that Mr. Kim has not been involved in the day-to-day operations of the company for many years, since well before the IPO. By design and intention he setup years ago, the Nexon management team is independent, and we take our fiduciary responsibility to all our shareholders and stakeholders and our integrity generally, extremely seriously.

The focus of this management team and of all the employees in Nexon remains to create great online games and bring them to a massive worldwide audience. These media issues will not distract us from that mission.

Okay. Now getting to FY2016 first half financial results, first half revenues were ¥95.6 billion, up 1% year-over-year on an as reported basis, and up 15% year-over-year on a constant currency basis.

Revenues were roughly flat year-over-year on an as reported basis, due to significant FX headwinds, as the Japanese yen appreciated against our major functional currencies including the Korean won and the Chinese Yuan.

Adjusted for the impairment loss on gloops’ goodwill, we recorded in the first quarter of ¥22.6 billion. First half operating income would have been ¥39.7 billion, up 18% year-over-year on an as reported basis, and up 32% year-over-year on a constant currency basis. Including the impairment loss, first half operating income was ¥17.1 billion, down 49% year-over-year on an as reported basis, and down 35% year-over-year on a constant currency basis.

Adjusted for the impairment loss on gloops’ goodwill, first half net income would have been ¥23.9 billion, down 24% year-over-year on an as reported basis, and down 13% year-over-year on a constant currency basis.

Including the impairment loss, first half net income was ¥1.3 billion, down 96% year-over-year on an as reported basis, and down 85% year-over-year on a constant currency basis, due primarily to FX losses from foreign currency denominated cash deposits and trade accounts receivables in addition to the impairment loss.

Uemura-san will review -- will be reviewing our second quarter results and third quarter outlook later in the presentation.

The second quarter was a good one strategically on many fronts, so let me now turn to some of our recent milestones on our progress toward our longer term goals. In July, we announced our strategic partnership with the Japanese Game Developer, Sansho Studio. Sansho Studio is renowned for their talented and experience game development team, who previously led development of some of the most popular franchises at CAPCOM, including Monster Hunter and Resident Evil.

The partnership is consistent with our objective of delivering unique and high quality games specifically for the Japanese market. Going forward, we plan to expand our partnerships with other highly talented game developers in Japan. We also announced that our consolidated subsidiary Nexon GT entered into a definitive agreement to acquire 100% of wellgames, a Korean developer of the mobile First Person Shooter Special Soldier.

Special Soldier is a unique -- is unique a high quality FPS for mobile devices and in the short time they have garner a large and growing fan base. Looking forward we are excited to see how these new partnerships will turn out and continues to seek more opportunities to work with best in class developers around the world.

Lastly I’ll turn to our pipelines for the second half and beyond. As many of you know our pipeline remains extremely rich for both PC online games and mobile games. We believe we have one of the best pipelines in the industry and we are thrilled to see these games reaching gamer across the world. We are preparing many games through in-house development, partnership and investments to meet the preferences of gamers and various regions worldwide.

As we touched on last quarter, in Japan we plan to launch mobile native games on a monthly basis starting from July in the second half of 2016. These include Fantasy War Tactics, which we launched in the late July and HIDE AND FIRE, which is a popular third person shooter mobile game development developed by Tencent.

We recently started the preregistration for this game as we near launch. In addition our new PC online game Tree of Savior will start open beta test in late August in Japan. As I said upfront the focus of this management team and employees of Nexon remains to develop and publish great online game content and bring those games to a massive worldwide audience.

Our industry has been going through considerable consolidation recently, with high valuation is going to company that own and can develop great intellectual property. Nexon already has some of the very biggest franchises in the industry and we've been relentless over the last few years about building up a substantial pipeline of new games that we’re now starting to launch.

With that I turn it over to Uemura-san to run through the second quarter results and third quarter outlook.

Shiro Uemura

Thanks, Owen. Now let me go through the Q2 results. Revenues were ¥38.1 billion, down 11% year-over-year on an as reported basis, and up 4% year-over-year on a constant currency basis. Operating income was ¥13.4 billion and net income was ¥7.6 billion.

Second quarter revenues were within the range of our outlook for both PC online and mobile games. Operating income was also within the range of our outlook. The fact that revenues was at the low end of our outlook, while operating income was at the high end, but primarily due to the strong performance of our China business. In addition to lower than planned variable costs and marketing costs. Net income was below our outlook. Mainly due to the FX loss in the U.S. dollar denominated cash deposits in relation to Japanese yen appreciation against the U.S. dollar.

Turning to our performance by platform. Second quarter PC online game revenues were ¥28.9 billion, down 11% year-over-year on an as reported basis and up 5% year-over-year on a constant currency basis. Please refer to the reference materials to the investor presentation for our selected performance metrics for PC online games. Overall revenues were ¥9.2 billion, down 9% year-over-year on an as reported basis and up 2% year-over-year on a constant currency basis. As a reminder about 70% of our mobile revenues are from native games.

Continuing on with second quarter results highlights. Revenues from the China business were ¥15.6 billion, down 2% year-over-year on an as reported basis and up 16% year-over-year on a constant currency basis. We conducted large scale updates for Dungeon & Fighter in the second quarter. The Labor Day update in April and 8th Anniversary update in June, which included an introduction of a new character. Both of these updates were well received by users.

As you all know in the first quarter revenue from Dungeon & Fighter significantly outperformed, our outlook driven by exceptionally strong item sales in time for the Luna New Year update. As a result, in the second quarter we took measures to reframe from aggressive monetization the revenue remains strong, thanks to well received item sales in time for these updates.

As we usually see MAUs for Dungeon & Fighter decreased quarter-over-quarter due to typical seasonality in the second quarter. Nonetheless the total number of paying users was roughly flat quarter-over-quarter. On a year-over-year basis MAUs were roughly flat, on the other hands paying users increased significantly year-over-year thanks to the increased base of paying users, which went up significantly in the fourth quarter of last year.

Dungeon & Fighter revenue for 2016 first half increased by a single-digit percent year-over-year on an as reported basis. As for Dungeon & Fighter, we continue to prioritize and focus on games stability and longevity. In June we announced that we are scheduled to conduct a close data test for 2-D Dungeon & Fighter mobile within 2016, our mobile action RPG game to be published in China by Tencent. Revenues from the Korean business were ¥15.0 billion, down 8% year-over-year on an as reported basis and up 10% year-over-year on a constant currency basis.

PC online game revenues were ¥10.6 billion, down 17% year-over-year on an as reported basis and roughly flat year-over-year on a constant currency basis. Mobile game revenues were ¥4.4 billion, up 26% year-over-year on an as reported basis and up 51% year-over-year on a constant currency basis. Revenues from key mobile titles such as HIT and DomiNations mainly contributed to the year-over-year growth.

During the second quarter we conducted a second closer beta test of our in-house titles including Durango and Sangokushi Sousouden Online. Revenues from our Japan business was ¥3.9 billion, a 29% decrease versus a year ago. Mobile revenues were ¥3.0 billion, a 25% decrease year-over-year and a 15% decrease quarter-over-quarter. Revenues decreased sequentially for both native games and browser games.

PC online revenues were ¥0.9 billion, down 38% year-over-year and down 15% sequentially. Revenues in North America were ¥1.7 billion, a 39% decrease versus a year ago on an as reported basis and a 31% decrease on a constant currency basis. This decline was due to the difficult comparisons with last year’s second quarter when DomiNations was newly launched and off to a very strong start. When we launched the game we made a significant marketing investment in it. This marketing spend was really successful in driving activity in the game and DomiNations performed exceptionally in last year’s second quarter.

For that strong the game had issues scaling and we lost users. I’m pleased to say that DomiNations is now very stable with targeted marketing that has been highly effective and efficient. Our revenues in the Europe and other regions were ¥1.9 billion, a 9% decrease versus a year ago on an as reported basis and a 4% increase on a constant currency basis. In April we conducted a second closed beta test for the Action Adventure MMRPG Riders of Icarus in North America, South America and Oceania.

Now turning to our Q3 2016 outlook, for the third quarter of 2016, we expect revenues in the range of ¥38.4 billion to ¥41.3 billion, representing a 23% to 17% decrease year-over-year on an as reported basis. On the constant currency basis, we expect revenues in the range of ¥43.7 billion to ¥47.1 billion, representing a 12% to 5% decrease year-over-year.

We expect operating income to be in the range of ¥10.6 billion to ¥12.9 billion. We expect net income to be in the range of ¥9.6 billion to ¥11.6 billion. For the third quarter, we expect some major currencies in our business, including the Korean won and the Chinese Yuan to depreciate against Japanese yen by 13% and 20% respectively year-over-year.

As you are all aware, depreciation of these currencies against the Japanese yen would have a negative impact on our revenues, operating income and net income. As a reminder, we expect every ¥1 move against the U.S. dollar would have an impact of ¥0.35 billion on our revenues and ¥0.1 billion on our operating income.

For simplicity, ForEx sensitivity is calculated based on the assumption that Korean won and Chinese Yuan move similarly against Japanese yen, when there is an exchange rate movement in U.S. dollar and Japanese yen.

In China for third quarter revenue, we expect a 20 plus to high-teens percent decrease year-over-year on an as reported basis and low teens to high single-digit percent decrease year-over-year on a constant currency basis.

Our major PC online game Dungeon & Fighter received a tier 1 content update on July 14th in time for summer vacation. Also, the National Day update is scheduled in September. The planned timing of the National Day update for the third quarter is later than in last year’s in the third quarter on September 22nd. For this reason, the financial impact from this update is expected to be more in the fourth quarter than in the third quarter.

In Korea, for third quarter revenues, we expect a 20 plus to high teens percent decrease year-over-year on an as reported basis and the low teens to high single-digit percent decrease year-over-year on a constant currency basis.

We expect a year-over-year decrease in revenues from Korea, primarily due to expected decrease in revenues key PC online games, such as FIFA Online 3 and Sudden Attack. We started service for our in-house PC online game Sudden Attack II in July. While Sudden Attack II was a highly anticipated sequel to the popular FPS Sudden Attack, which we have served for over 10 years in Korea.

We decided to discontinue it at the end of September as a result of the feedback we’ve had from users since launch. The game is simply not resonating for several reasons, and we believe our capital is better allocated elsewhere.

On the mobile side, we conducted the closed beta test for Epic of Three Kingdoms 2 in July. We also started Pre-registration for Atlantica Heroes on August 4th. In Japan, we expect third quarter revenues to decrease 30 plus to 20 plus percent year-over-year on an as reported basis.

On the mobile side, in-house developed stimulation RPG game Fantasy War Tactics starting service on July 28th. Also, we started pre-registration for HIDE AND FIRE, which is publishing title built by on Tencent on August 10th.

On the PC online side, an open beta test for the MMORPG Tree of Savior is scheduled to start on August 24th.

In North America for third quarter revenues, we expect low single-digit to low teens percent increase year-over-year on an as reported basis and 20 plus percent increase year-over-year on a constant currency basis.

For PC online games an open beta test for the new MMORPG Riders of Icarus started on July 6th. Also an open beta test for Ghost in the Shell S.A.C - First Assault Online. XPS base on the popular animate IP Ghost in the Shell started on July 28.

For the mobile side, HIT a blockbuster action RPG in Korea launched in North America on July 7. In Europe and other regions for third quarter revenues, we expect a high single-digit to high teen percent increase year-over-year on an as reported basis and the 20 plus percent to 30 plus percent increase on a constant currency basis.

As in North America PC online games Riders of Icarus and Ghost in the Shell S.A.C - First

Assault Online were released into open beta test in July. Also mobile game HIT launched in Europe and other regions on July 7th. It is off to a good start particularly in Asian countries including Hong Kong, Taiwan, Thailand and Vietnam, which are included in other components of Europe and others.

In the third quarter we expect operating income to be in the range of ¥10.6 billion to ¥12.9 billion, showing a 42% to 30% decrease year-over-year. We expect Q3 operating income to decrease year-over-year, driven by a decrease in revenues in China and Korea. Also negatively impacted by significant depreciation of the Korean won and the Chinese yuan against the Japanese yen.

Our revenue decline in our Chinese business with higher margin particularly impact our operating margin due to the high margin of our revenue there. On the other hand we expect it to be partially offset by lower variable cost, including royalty cost associated with third party licensed games and lower amortization. While we expect new publishing titles such as global service of HIT to drive revenue increases. We expect lower sales from FIFA Online 3 and the FIFA Online 3 M.

In addition we expect lower royalty cost for DomiNations in relation to our acquisition of its Developer Big Huge Games in the fourth quarter. We also expect lower amortization year-over-year due to the completion of the amortization associated with Dungeon & Fighter IP.

Lastly, I would like to give update on the 2016 interim dividend. We are scheduled to pay out interim dividend of ¥5 per share to shareholders registered on our shareholder register as of June 30, 2016.

Having shared that context on our performance and our outlook we’d be happy to take your questions.

Question-and-Answer Session


Thank you, Uemura-san. Next we would like to open up the lines to Q&A. [Operator Instructions]. Our first question comes from Han Joon Kim from Deutsche Bank. Please go ahead.

Han Joon Kim

Hi, guys. Thanks for the call. Just two questions, I have noticed that LAPLACE LINK is now missing from the presentation. So if you could just give us an update on what the status of that has been?

And the second one pertains to Sudden Attack. Just want to get a comprehensive understanding of what you feel the impact has been from 1 over launch in 2, Sudden Attack 2? So how should we be thinking about Sudden Attack I impact, the comprehensive impact between those two games that are, sort of I would assume that impacted your structure in 2Q, and how they sort of stand down in 3Q.

Shiro Uemura

It is indeed too that plus link that appear on this presentation material. But gloops is still working on this game aiming at attaining very high quality. The reason why did not include that in the presentation material is, as you know, we have so many titles in our pipeline and we just wanted to include the titles that we focus on.

So once again, the fact that LAPLACE LINK does not appear on presentation material does not mean that the development is over. We are still working on the development.

Owen Mahoney

Han Joon, this is Owen. Your second question was about Sudden Attack I, I believe and the impact from Overwatch and the impact from Sudden Attack II. Just to provide some background on that, we as you probably know from following it in Korea, we chose to make a transition from Sudden Attack I to Sudden Attack II in many respects the features of Sudden Attack II are a continuation of Sudden Attack I. And meaning, we did -- we moved to new graphics engine, and we moved to a new physics engine and we added some features.

And that transition was rougher than we expect move from Sudden Attack I to Sudden Attack II and we decided to close down Sudden Attack II.

As for the impact on Sudden Attack I from Overwatch, I think that anytime you’re trying to do a transition and you make -- try to make that transition, if you’re in a bit of a tricky situation. And then with the timing with Overwatch turned out to be just very, very tough for us.

As far as, how it goes, we’re going to have to watch it from here, but clearly wasn’t our preferred outcome in terms of Sudden Attack franchise. Having said that, we also have a robust pipeline of games, we have a strong position with our existing games, but we’ll have to see how it goes with Sudden Attack I from here.

Han Joon Kim

If I may just follow-up on that briefly, I mean -- and during that transition, I’m just wondering, if those gamers have come back to Sudden Attack I are sticking around or as we attempted to transition them have we somehow ended up losing them as we shutdown Sudden Attack II and then we’re now seeing a rebound back in Sudden Attack I. Just wondering, what the latest data points have been after your announcement you’re going to shutdown Sudden Attack II?

Owen Mahoney

So at this stage, it’s early days Han Joon, and it’s tough to really tell, we certainly might have lost some of those there is a lot of noise in the market right now there are certainly a lot of players who have been big fans of Sudden Attack and obviously Overwatch is a very different game in many respects from an FPS perspective or within the FPS, genre. So it's early days but we're going to have to watch it closely because there is a lot of noise in the market right now and we’ll have to see my guess is that we’ve lost some.

Han Joon Kim

Understood. Just one last follow-up and I know you guys will prefer to reframe from discussing this topic. But just in regards to what's been happening on the sort of investigation level. I am little bit more interested in the ramifications on employee morale and I guess shareholder moral and I’m sure you guys have been fielding enough questions and enough issues as it is.

But I still want to get a sense as to -- I mean, on one part we've all have seen some level of delays and I know in game pipeline and I know part of that is to ensure the quality of games, but back of the mind I'm just wondering if there is going to be a limit of employee moral that gets impacted that causes games to get further delayed and what not and so forth. So I mean there is going to be fallout I just wanted to get a better assessment of how you guys are looking at it?

Owen Mahoney

So sure, look the in terms of the investigation we obviously are not in a position to comment about that at all. And but as you know from reading in the Korean press it hasn’t been the easiest month for us. But I want to emphasize something that I said upfront in my prepared remarks. The management -- the executive team and the employees are laser focused on building great games that we’re proud of and they are highly differentiated and delivering those to a very large global audience.

And on behalf of all of those employees, we are just very, very focused on that topic. So I don't think I would be remiss in saying that it's fun to watch the news flow in the last month that is definitely not the case. But we are very focused on our mission, our mission is very clear and that is what we're focused on. So that's what I can say about the moral around the company.

Han Joon Kim

Okay, understood. Appreciate that. Thank you.

Owen Mahoney

Thank you.


[Operator Instructions] The next question comes from Brett Marshall from Alwin [ph]. Please go ahead.

Unidentified Analyst

Hi and thanks for the update. Two questions from me first of all as regards to China, as we look at your Q3 outlook, does this indicate deterioration in condition within China particularly as you look at the results in the quarter to-date? Or is the decline nearly a consequence of the scheduling of your update? And also with respect to China and Korea if you could just speak to the prospects of the DNF mobile launch and what to anticipate from that?

And my second question relates to share buybacks, I know that was something that was on the table as you restructured your capital and what’s the latest with respect to that seems timely opportunities given your launch cash that you're holding and the fact that you stock passes down what are your thoughts on share buybacks?

Maiko Ara

Hi, Brett, thank you very much for your questions. Please give us some moment while we translate.

Unidentified Analyst

Thank you.

Owen Mahoney

Hey Brad sorry for the delay there. Just really quickly on your first question on China. The answer is the ladder in it, it’s about scheduling and just I'd say an overall comment relative to Dungeon & Fighter in China where we're feeling very good about it. And so this was really about the ladder -- this is about the timing and the way that the day sale. Regarding DNF mobile launch, 3-D is we're going to be doing a test this year in Korea. And so it will start in Korea and then be going locally. The 2-D version we're going to be testing within 2016 in China. So that's the timing of that, sorry 3-D we're going to be launching in 2016 for Dungeon & Fighter mobile and then the 2-D as I said we’ll be testing within 2016 in China. Okay and then regarding… go ahead.

Unidentified Analyst

The expectations so with respect to DNF mobile is again that you’re particularly excited about and when should we start to see the impact on your income statement?

Owen Mahoney

This is late this year so impact that we see will be next year. In terms of how we're feeling about the game I reviewed it most recently a few weeks ago. We're focused very hard on driving quality on this and we feel like we're making terrific progress. So it would be premature for me to talk about what we think the impact on financials would be that's why we say very hard call, but we're feeling good about how the game is coming together.

And then you had a question about share buyback. Yes, I guess what I would say there is we are continue to be very committed to shareholder returns. And we have a few ways to spend the cash position, which is as large relative to our company size. One is by investing in game development and game launches; second, is in marketing; a third is in M&A and equity investments; and the fourth is in returning the money to shareholders in some form either as buyback or as dividend. We're not in a position to talk about any changes in our policy at this time, but we remain focused on making sure that we do the right thing relative to our shareholders.

Unidentified Analyst

Just on the [indiscernible] we have authorities in place to do share buyback so that you don't have to wait from an AGM together to find the opportune time you could buyback your stock at any time.

Owen Mahoney

Albeit authority meaning do we have the…

Unidentified Analyst

I mean do you need to back to your shareholders or is it just the Board resolution that's required to...

Owen Mahoney

To do share buyback, no that does not require Board -- or it doesn't require shareholder resolution it's only a Board decision.

Unidentified Analyst

Okay, thank you. Thanks that's all from me.

Owen Mahoney

Thank you, yeah thank you very much.


[Operator Instructions] The next question comes from [indiscernible]. Please go ahead.

Unidentified Analyst

Sorry I had one other follow-up question. You stated I think Uemura stated in the presentation that the MAU was stable. But if I look at the data you put in the presentation materials it looks like there is a very large decline quarter-on-quarter and even year-on-year. Just wondering what the difference is, is it that presentation material reflect the total MAU where as you’re talking about Dungeon & Fighter? And if so what is the differences at Sudden Attack or is it something else?

Shiro Uemura

It is in D2 that MAU wise you see a decline year-over-year. But this is not attributable to China Dungeon & Fighter. When I look only at China Dungeon & Fighter year-over-year MAU is stable and see that MAU is trending to be relatively flat and other than MAU other KPIs pertaining to China Dungeon & Fighter are trending favorably. So when you look at titles other than Dungeon & Fighter in China we can say that Counter Strike online MAU wise went down and also in Korea FIFA Online 3 MAU went down slightly from the last update, which we conducted last year. And also there were roll backs in Q1 and Q2, which led to the decrease of MAU of FIFA Online 3 in Korea.

So in terms of the overall decline of MAU year-over-year, we can say that this trend is attributable to two titles one being in Counter Strike Online of China and another one being FIFA Online 3 in Korea. Regarding the declines quarter-over-quarter this is mere seasonality as usual.

Unidentified Analyst

Thank you. That’s very helpful.


[Operator Instructions] This concludes the question-and-answer session. Ms. Ara at this time I'd like to turn the conference back over to you for any additional or closing remarks.

Maiko Ara

Thank you. If there are no further questions, I would like to take this opportunity to thank you for your participation in this call. Please feel free to contact the Nexon IR team at should you have any further questions. We appreciate your interest in Nexon and look forward to meeting you whether it is here in Tokyo or in your corner of the world.


Thank you. That concludes today's conference. Thank you for your participation. You may now disconnect.

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