Earnings Results for the Three Months Ended June 30, 2020
Investor Briefing
SoftBank Corp.
August 4, 2020
Disclaimer
Important Notice Regarding Forward Looking Statements and Other Information
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For the definitions of numbers on this presentation, please refer to SoftBank Corp.'s data sheet. | 2 |
Contents
1 | Results for Q1 FY2020 | p.4 - p.20 |
2 | ||||
Road to Achieve JPY 1 Trillion | p.21 - p.26 | |||
Operating Income | ||||
3
Results for Q1 FY2020
Results for Q1 FY2020
- Revenue, operating income and net income are progressing at a steady pace towards full-year forecasts
- Net income decreased due to the temporary factors such as gain from sales of shares in previous year
Revenue | ||||
[JPY bn] | Progress 24% | Progress 24% | ||
FY Actual | FY Forecast | |||
52,000 | 4,861.2 | 4,900.0 | ||
50,000 | ||||
48,000 | 14,000 | |||
46,000 | ||||
44,000 | ||||
42,000 | 12,000 | |||
40,000 | ||||
38,000 | ||||
36,000 | ||||
34,000 | 10,000 | |||
32,000 | ||||
30,000 | 37,274 | |||
28,000 | 8,000 | |||
26,000 | ||||
24,000 | ||||
22,000 | ||||
20,000 | +7.8 | 6,000 | ||
18,000 | ||||
16,000 | +0.7% | |||
14,000 | 4,000 | |||
12,000 | ||||
10,000 | ||||
8,000 | 2,000 | |||
6,000 | Q1 | 1,164.9 | 1,172.6 | |
4,000 | ||||
2,000 | ||||
0 | 0 | |||
FY19Q1 | FY20Q1 |
Operating Income
[JPY bn]
Progress 29% | Progress 30% |
FY Actual | FY Forecast |
911.7 | 920.0 |
6,401 | |
+11.1 | |
+4.1% | |
268.9 | 279.9 |
FY19Q1 | FY20Q1 |
Net Income*1
[JPY bn]
Progress 35% | Progress 31% |
FY Actual | FY Forecast |
473.1 | 485.0 |
-12.7 | 3,329 |
-7.7% | |
164.8 | 152.1 |
FY19Q1 | FY20Q1 |
*Actuals for FY19 have been adjusted retrospectively to have consolidated ZHD from April 1, 2018, same hereafter | |
*1: Net income: net income attributable to owners of SoftBank Corp., same hereafter | 5 |
Revenue (1/2)
- Yahoo: JPY +35.2 bn (+14.8%) YoY, Enterprise: JPY +8.1 bn (+5.2%) YoY
-
Consumer: JPY -32.6 bn (+0.6%) YoY, due to decrease of revenue JPY -31.1 bn from sales of goods and others.
Service revenues remained flat YoY, due to impact of First-yearand Half-yeardiscounts of c. 10 bn (including accounting changes)
14,000
12,000 Other
Yahoo
10,000
Distribution
8,000
Enterprise
6,000
4,000
Consumer
2,000
0
Adjustments
-2,000
By Segment
[JPY bn]
1,164.9 | +7.8 | 1,172.6 | ||
+0.7% | YoY | |||
23.3 | 29.5 | +6.2 | +26.6% | |
238.6 | 273.9 | +35.2 | +14.8% | |
116.4 | 109.9 | -6.6 | -5.6% | |
154.5 | 162.5 | +8.1 | +5.2% | |
658.1 | 625.4 | -32.6-5.0% |
-26.0-28.6
FY19Q1FY20Q1
Consumer Breakdown
[JPY bn]
*Disclose "Electricity" separately in breakdown (previously included in Revenues from sales of goods and others)
-32.6
Revenue from | 658.1 | -5.0% | 625.4 | YoY | ||
sales of goods | ||||||
128.4 | -31.1 | -24.2% | ||||
and others | 97.4 | |||||
Electricity | 11.3 | 18.9 | +7.6 | +67.5% | ||
Broadband | 95.0 | 97.2 | +2.2 | +2.3% | ||
Mobile | 423.3 | 412.0 | -11.4 | -2.7% | ||
Service | 529.6 | 528.1 | -1.6 | -0.3% | ||
revenues | ||||||
FY19Q1 | FY20Q1 |
6
Revenue (2/2)
- Enterprise: JPY +8.1 bn (+5.2%) YoY in Business solution and others
- Yahoo: double-digit growth. Commerce has grown significantly, JPY +41.2 bn (+25.0%) YoY
Enterprise Breakdown | Yahoo Breakdown | |
4,000 | ||
[JPY bn] | [JPY bn] |
+35.2 | 273.9 | ||||||||||
+14.8% | YoY | ||||||||||
2,000 | +8.1 | 238.6 | 0.5 | -0.9 | -63.2% | ||||||
+5.2% | 162.5 | YoY | Other | 67.5 | -5.1 | -7.0% | |||||
154.5 | 1.4 | ||||||||||
Business solution | 43.4 | +5.8 | 2,000 | Media | 72.6 | ||||||
37.5 | +15.6% | ||||||||||
and others | |||||||||||
Fixed-line | 49.1 | 47.3 | -1.8 | -3.7% | 205.9 | +41.2 | +25.0% | ||||
Commerce | 164.7 | ||||||||||
ZOZO | |||||||||||
71.9 | +4.0 | +6.0% | |||||||||
Mobile | 67.8 | consolidation | |||||||||
0 | 0 | c.+33.4 bn | |||||||||
FY19Q1 | FY20Q1 | FY19Q1 | FY20Q1 | ||||||||
*Revenue for Commerce and Media is restated for FY2019 to reflect the transfer of | 7 | ||||||||||
certain services and subsidiaries from Commerce to Media in April 2020 |
Operating Income/Adjusted EBITDA/Segment Income
- Adjusted EBITDA: JPY +18.9 bn (+4.4%) YoY, operating income: JPY +11.1 bn (+4.1%) YoY, recorded good progress in Q1
- Yahoo made significant increase YoY, income also increased in Enterprise and Distribution.
Consumer: JPY -16.4 bn (-8.0%) YoY, however, its full-year income for FY20 expected to increase YoY
Operating Income/Adjusted EBITDA*1 | Segment Income |
[JPY bn] | +18.9 | |||
Adjusted EBITDA | 434.3 | +4.4% | 453.2 | |
4,000 | ||||
+11.1 | 3,600 | |||
Operating Income | 268.9 | +4.1% | 279.9 | |
Yahoo | ||||
Distribution | ||||
2,000 | Enterprise | |||
1,600 | ||||
Consumer | ||||
0 | Other*2 | |||
FY19Q1 | FY20Q1 | -400 |
[JPY bn]
+11.1
268,689.9 +4.1% 279.9
2,799
36.2 | 3.2 | |
50.6 | ||
5.3 | ||
5.5 | ||
28.1 | ||
31.3 |
205.7189.4
-6.5
FY19Q1FY20Q1
YoY
Other*2
+9.6
+14.5 +40.0%
+0.2 +4.3%
+3.1 +11.1%
-16.4-8.0%
*1: Adjusted EBITDA=operating income+depreciation and amortization | *2: Other includes inter-segment adjustments (FY19Q1 6bn, FY20Q1 -6 bn), same hereafter | 8 |
(including loss on disposal of non-current assets) ±other adjustments | ||
Operating Income (YoY Comparison)
- Income of Consumer decreased due to mobile device related factors and impact from introduction of First-yearand Half-yeardiscounts (accounting change, etc.). Increase of income in Yahoo and enterprise drove overall performance
-16.4 | +3.1 | +0.2 | +14.5 | +9.6 | ||||||||||||
[JPY bn] | Consumer | Enterprise | Distribution | Yahoo | Other | |||||||||||
-1.6 | -31.1 | -3.2 | +8.1 | -4.9 | -6.6 | +6.8 | +14.5 | +9.6 | ||||||||
Service | +19.5 | |||||||||||||||
revenues | Revenues | Cost of | Other | Revenue | Expenses | Revenue | Expenses | |||||||||
expenses | ||||||||||||||||
from sales | goods sold | |||||||||||||||
of goods | ||||||||||||||||
Mobile | -11.4 | Cost of service | -7.2 | Cost of goods/ | Cost of goods sold +7.2 | Commerce* | +19.7 | |||||||||
Broadband | +2.2 | Sales commissions and | service sold | -5.6 | Other | -0.4 | Media* | -1.5 | 279.9 | |||||||
268.9 | Electricity | +7.6 | sales promotion expenses | +15.6 | Other | +0.7 | Other | -3.7 | ||||||||
Telecom network charges | -2.7 | |||||||||||||||
Other | -6.2 | |||||||||||||||
Depreciation and | ||||||||||||||||
amortization | -2.7 | |||||||||||||||
+11.1 bn |
FY19Q1FY20Q1
*Figures of Commerce and Media in Yahoo segment represent segment income/loss of ZHD | 9 |
Summary of Results
- Negative impact of COVID-19 was limited compared to assumptions as of May when financial guidance was
[億円announced,]cost reduction is in good progress, and upside effects such as telework demand was larger than expected
[JPY bn] | FY19Q1 | FY20Q1 | YoY | Reasons for variance | |
Operating income | 268.9 | 279.9 | +11.1 | ||
Consumer | 205.7 | 189.4 | -16.4 | -12.0 | Mobile device related (recording of reserve, decrease in mobile device sales, etc.) |
-10.0First-year and Half-year discounts (including accounting changes) | |||||
Enterprise | 28.1 | 31.3 | +3.1 | Increase in telework demand | |
Distribution | 5.3 | 5.5 | +0.2 | - | |
+7.0 | ZOZO consolidation | ||||
Yahoo | 36.2 | 50.6 | +14.5 | +7.0 | EC usage increase |
+3.0 | Cost reduction effect | ||||
-4.0 Ad placement decline | |||||
Other | -6.5 | 3.2 | +9.6 | - | |
10
Cumulative Subscribers (Main Subscribers/Smartphones)
- Cumulative main subscribers reached 36.87 mil (+1.86 mil YoY)
- Cumulative smartphones reached 24.50 mil (+2.04 mil YoY), similar increase to last year, steady growth in all 3 brands
Cumulative Subscribers*1 | Smartphone Subscribers |
[Mil] | YoY | [Mil] | |||||||||||||||||
40 | 36.87 | 40 | |||||||||||||||||
35.01 | 36.50 | +1.86 | |||||||||||||||||
Main Subscribers | |||||||||||||||||||
12.56 | 12.36 | 12.37 | -0.19 | ||||||||||||||||
Other*2 | 22.45 | 24.13 | 24.50 | ||||||||||||||||
20 | 20 | ||||||||||||||||||
Smartphones | 22.45 | 24.13 | 24.50 | +2.04 | |||||||||||||||
QoQ | |||||||||||||||||||
QoQ | |||||||||||||||||||
(+0.36) | |||||||||||||||||||
(+0.37) | |||||||||||||||||||
0 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | 0 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 |
FY18 | FY19 | FY20 | FY18 | FY19 | FY20 |
*1: Cumulative subscribers include Wireless Home Phone subscribers (FY19Q1: 0.48 mil, FY20Q1: 0.55 mil)
*2: Feature phones, tablets, mobile data communications devices, Wireless Home Phones, etc. | 11 |
Churn Rate (Main Subscribers/Smartphones)
- Churn rates for main subscribers and smartphones reached record lows, smartphone churn rate dramatically improved, YoY -0.28%
0.01
0.01
0.01
0.01
0.01
0.00
0.00
0.00
1.03% |
0.99% |
0.81% |
0.72%
YoY
0.73% | -0.29% Main subscribers |
0.53% -0.28% Smartphones
Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 |
FY18 | FY19 | FY20 |
12
ARPU (Main Subscribers)
- ARPU before discount decreased due to introduction of unbundling plan (including family discounts and Smartphone Debut Plan), effects from First-year and Half-year discount*1, and a rise in composition ratio of Y!mobile and LINE MOBILE subscribers (a)
- Discount ARPU gradually decreasing due to unbundling plan (b)
[JPY] | YoY | |||||||||
5,250 | 4,920 | 4,810 | (a) | -440 | ||||||
4,500 | ||||||||||
4,450 | 4,330 | 4,300 | (c) | -140 | ||||||
2,500 | ||||||||||
500 | ||||||||||
-800 | -590 | -510 | (b) | +300 | ||||||
-1,500 | ||||||||||
Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | ||
FY18 | FY19 | FY20 |
ARPU before discount
Total ARPU (after discount)
-
= (a) + (b)
Discount ARPU*2
*1: Change in the method of recording discount on service fees (First-year discount); deferred over a 24-month period before amendment of Telecommunications Business Act in | |
October 2019, recorded over a 12-month period after amendment | 13 |
*2: Revenue deductions relating to reward points and programs supporting handset payments are not included in calculation of ARPU |
Broadband Service
- SoftBank Hikari cumulative subscribers (connected lines) reached 6.60 mil, steadily increased by 0.55 mil YoY
- Increase in subscribers accelerated partly from increase in telework demand (Net adds of FY20Q1 +0.14, FY20Q1 +0.06) Home Bundle Discount Hikari Set steadily increased
Cumulative Subscribers | Home Bundle Discount Hikari Set | |||||||||||||||||||
(Number of Connected Lines) | Cumulative Subscribers | |||||||||||||||||||
[Mil] | YoY | [Mil] | YoY | |||||||||||||||||
8 | 7.70 | 7.85 | 7.99 | +0.28 | 10.09 | 10.19 | +0.55 | |||||||||||||
9.64 | ||||||||||||||||||||
1.46 | 1.39 | -0.27 | 10 | Mobile | ||||||||||||||||
1.65 | ||||||||||||||||||||
Other | ×2.1*2 | |||||||||||||||||||
6 | 8 | |||||||||||||||||||
4 | 6 Broadband | 4.53 | 4.75 | 4.83 | +0.30 | |||||||||||||||
6.60 | ||||||||||||||||||||
*1 | 6.05 | 6.39 | +0.55 | 4 | ||||||||||||||||
QoQ | ||||||||||||||||||||
QoQ | ||||||||||||||||||||
(+0.14) | ||||||||||||||||||||
2 | (+0.06) | |||||||||||||||||||
2 | ||||||||||||||||||||
0 | 0 | |||||||||||||||||||
Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | |||
FY18 | FY19 | FY20 | FY18 | FY19 | FY20 |
*1: SoftBank Hikari includes SoftBank Air | *2: Number of mobile lines under bundled discount per SoftBank Hikari line | 14 |
Net Income (YoY Comparison)
- Effect from one-time factors of last fiscal year such as gains on sales and valuations of shares (a)
- Shares of profit/losses of associates accounted for using the equity method: Loss increased from upfront marketing investment to new businesses, such as PayPay (b)
- Impact on net income attributable to non-controlling interests mainly came from ZHD earning growth (c)
[JPY bn] | (a) | ||||
(b) | |||||
+11.1 | -9.9 | (c) | |||
-3.6 | +0.2 | -2.3 | |||
Operating | Effect from one- | -8.2 | |||
income | Shares of | Financing | Income taxes | ||
time factors of | Net income | ||||
profit/losses of | income/costs, | ||||
last FY | |||||
associates | Gains on sales of | attributable to | |||
(gains on sales | |||||
accounted for | equity method | non-controlling | |||
and valuations) | using the equity | ||||
investments | interests | ||||
method | |||||
164.8 | 152.1 | ||||
-12.7 bn | |||||
FY19Q1 | FY20Q1 |
15
CAPEX/Adjusted Free Cash Flow
- CAPEX was JPY 76.2 bn. CAPEX excluding ZHD was JPY 58.3 bn
- Adjusted free cash flow excluding ZHD (including IFRS 16 impact) was JPY 236.3 bn. Steady progress towards full-year target of JPY 670.0 bn
CAPEX*1
[JPY bn] | |||
90 | |||
80 | 76.1 | 76.2 | |
70 | 17.9 | ||
ZHD | 25.6 | ||
60 | |||
50 | |||
40 | Full-year forecast | ||
30 | 58.3 | 400.0 | |
SoftBank | 50.5 | ||
(excluding IFRS 16) | (Progress 15%) | ||
20 | |||
10 | |||
0 | |||
FY19Q1 | FY20Q1 |
Adjusted FCF*2
[JPY bn]
(Total) (126.5) | (179.2) |
Full-year target
236.3 | 670.0 |
(Progress 35%) | |
34.0 | 120.0 | ||
SoftBank | 159.0 | ||
IFRS 16 impact | 31.0 | ||
202.3 | 550.0 | ||
128.0 | |||
-32.5*3 | -57.1 | ||
FY19Q1 | FY20Q1 |
*1: CAPEX is on acceptance basis. Excludes CAPEX for rental | *2: Adjusted FCF = FCF ± total CF relating to non-recurring transactions with SoftBank Group Corp. + (proceeds from the |
mobile phones and impact from IFRS 16 | securitization of installment sales receivables - repayments thereof) |
*3: Sum of ZHD's disclosed FCF and dividend payments from ZHD to SoftBank Corp. (5.4 bn) (including impact of IFRS 16 in ZHD) 16 |
Interest-bearing Debt/Net Interest-bearing Debt
and Net Leverage Ratio
- Accumulated cash in hands to prepare for COVID-19 by full securitization of sales receivables. Interest-bearing debt increased QoQ partly due to the issuance of bonds by ZHD of JPY 200.0 bn
- Net leverage ratio slightly increased due to seasonal factors such as payments of dividends and income tax, JPY 495.5 bn in total
Interest-bearing Debt/ | Net Leverage Ratio*4,5 | |||
Net Interest-bearing Debt*1 | ||||
[JPY tn] | 5.58 | Interest-bearing debt |
5.08 | 0.48 | IFRS 16 | 2.8 | |
4.64 | 0.50 | |||
0.49 | 1.10 | ZHD consolidation | ||
Net interest-bearing debt | ||||
0.38 | 0.98 | |||
0.19 | 4.03 | |||
0.01 | 3.87 | Other | ||
3.70 | 0.16 | 2.3x | ||
1.19 | 1.11 | Lease liabilities*2 | |
1.8 | |||
1.14 | |||
Securitization of | |||
0.96 | 1.09 | ||
sales receivables | |||
0.69 | 1.7x | ||
Including IFRS 16 | |||
2.4x | 2.5x | ||
2.5x | 2.4x | ||
2.2x | 2.3x | ||
Excluding IFRS 16 |
1.9x | 1.9x | |
1.7x | ||
1.5x | Adjusted net leverage ratio |
(excluding effect of securitization | ||||||||||||||
1.60 | 1.61 | 1.61 | Bank loans*3 | of sales receivables and IFRS 16) | ||||||||||
0.8 | ||||||||||||||
Q1 | Q2 | Q3 | Q4 | Q1 | Q1 | Q2 | Q3 | Q4 | Q1 | |||||
FY19 | FY20 | FY19 | FY20 | |||||||||||
*1: Net interest-bearing debt = Interest-bearing debt - Cash and cash equivalents - Cash reserve of securitization | ||||||||||||||
of sales receivables. Cash reserve for securitization of sales receivables is included in net interest-bearing debt | ||||||||||||||
from FY20, figure of FY19 is restated accordingly | *4: Net leverage ratio = Net interest-bearing debt / Adjusted EBITDA (LTM) | |||||||||||||
*2: Lease liabilities for FY19 are liabilities and borrowings related to sale and leaseback transactions of | *5: LTM EBITDA of ZOZO retrospectively adjusted for FY19Q3, Q4 and FY20Q1 | |||||||||||||
SoftBank Corp. (standalone basis) and WCP (including payables from purchase of installments) | 17 | |||||||||||||
*3: Senior Loan Agreements which SoftBank Corp. entered in October 2019 |
Major Financing Activities (Excluding ZHD)
- Secured sufficient liquidity on hand in preparation for COVID-19
- Succeeded in the large-scale straight bond issuance of JPY 100.0 bn due to strong investors' appetite
Category | Events | Purpose, effect, etc. | FY20Q1 | Time | ||
balance | period | |||||
Securitization of telecom | Receivables securitization facility to secure working | JPY 298.0 bn | From | |||
service fee receivables | capital (Facility amount: JPY 300.0 bn) | Apr 2020 | ||||
Secure | Securitization of | Improve efficiency by securitization of installment | From | |||
liquidity on | installment receivables | JPY 52.3 bn | ||||
receivables (Facility amount: JPY 250.0 bn) | Apr 2020 | |||||
hand | through self settled trusts | |||||
Issuance of short-term | Financing of working capital with low interest | JPY 129.1 bn | From | |||
corporate bonds (CP) | Apr 2020 | |||||
2nd issuance of bonds | Diversification of medium-tolong-term financing | JPY 100.0 bn | ||||
sources | (Proceeds, | Jul 2020 | ||||
Corporate | Financing for repayment of borrowings | Issued in Jul) | ||||
bonds | ||||||
Renewal of credit ratings | Preparations for the issuance of corporate bonds | R&I | A+ | Jul 2020 | ||
Obtaining opinions on financial independence | JCR | AA- | ||||
18
Status of Assets and Equity
- Shareholders' equity ratio is 9.5%, -0.7% from end of March 2020 (Ratio of total equity to total asset 16.4%)
- Shareholders' equity ratio would be 12.7%, excluding the accounting treatment in connection with ZHD consolidation
[JPY bn] | As of | As of | Variance |
Mar 31, 2020 | Jun 30, 2020 | ||
Cash and cash equivalents | 1,143.8 | 1,469.4 | +325.6 |
Others | 8,648.5 | 8,609.1 | -39.4 |
Total assets | 9,792.3 | 10,078.5 | +286.2 |
Interest-bearing debt | 5,082.3 | 5,575.4 | +493.1 |
Others | 3,002.4 | 2,846.0 | -156,4 |
Total liabilities | 8,084.7 | 8,421.4 | +336.7 |
Total equity attributable to owners of | 1,000.5 | 957.4 | -43.1 |
the Company | |||
Others | 707.0 | 699.7 | -7.3 |
Total equity | 1,707.6 | 1,657.1 | -50.5 |
Shareholders' equity ratio* | 10.2% | 9.5% | -0.7% |
Ratio of total equity to total asset | 17.4% | 16.4% | -1.0% |
* Shareholders' equity ratio = total equity attributable to owners of the Company ÷ total assets
10.2% | Decrease of | Increase of | ||
equity | asset | 9.5% | ||
-0.4%-0.3%
Equity ratio -0.7% | |
As of | As of |
Mar 31, 2020 | Jun 30, 2020 |
(Reference) | [JPY bn] |
Acquisition price of ZHD | 677.5 |
Market price of ZHD (SB's share) | 1396.4 |
(As of Aug 3, 2020) | |
Consolidated book value* | 371.6 |
(As of Jun 30, 2020) | |
*Including an impact of deduction in capital surplus of 321.4 bn, which is equivalent to goodwill, associated with ZHD consolidation
19
Timeline of Business Integration between ZHD and LINE
Nov. 18, | Dec. 23, | Aug 4, | Jan 2021 | Mar 2021 |
2019 | 2019 | 2020 | (Plan) | (Plan) |
Commencement of | Commencement of | |||
joint tender offer for | tender offer for | |||
Signing of | Signing of | LINE shares by | ZHD shares by | |
SoftBank & NAVER | LINE | |||
Memorandum of | Definitive | Closing | ||
Understanding | Agreement |
Various filings / examination / procedures
- Anti-trustfiling
- Execution of transactions including TOB
20
Road to Achieve JPY 1 Trillion
Operating Income
Financial Targets
FY19 Actual | FY20 Forecast | FY22 Forecast | |||
Revenue | JPY 4,861.2 bn | JPY 4,900.0 bn | JPY 5,500.0 bn | ||
Adjusted EBITDA*1 | 1,603.1 bn | 1,630.0 bn | 1,700.0 bn | ||
Operating income | 911.7 bn | 920.0 bn | 1,000.0 bn | ||
Net income*2 | 473.1 bn | 485.0 bn | 530.0 bn | ||
CAPEX*3 | 371.3 bn | 400.0 bn | c. 400.0 bn | ||
Adjusted FCF*4 | 644.7 bn | 670.0 bn | Over 670.0 bn | ||
Net leverage ratio*5 | 2.4 times | - | Improve from 2.4 times |
*1: Adjusted EBITDA=operating income+depreciation and amortization (including loss on disposal of non-current assets) ±other adjustments | |
*2: Net income: net income attributable to owners of SoftBank Corp. | |
*3: CAPEX is on acceptance basis. Excludes CAPEX for ZHD, rental mobile phones, and impact from IFRS 16 | |
*4: Adjusted FCF = FCF ± total CF relating to non-recurring transactions with SoftBank Group Corp. + (proceeds from the securitization of installment sales receivables - repayments thereof). Excludes ZHD | 22 |
*5: Net leverage ratio = Net interest-bearing debt/ Adjusted EBITDA (LTM) |
Profit and Business Targets by Segments (FY20-FY22)
-
Continue to accelerate "Beyond Carrier" strategy to achieve operating income of over JPY 1 tn and pursue
[億円growth]continuously thereafter
Operating Income
[JPY]
over 1 tn | Profit targets by Segment |
911.7 bn | 920 bn | |
Other | ||
Yahoo | ||
Distribution | ||
Enterprise | ||
Consumer | ||
FY19 | FY20 | FY22 |
Forecast | Forecast |
Consumer | Profit increase every year |
Enterprise | Double-digit profit increase every year |
Yahoo | Profit increase / Operating profit 225.0 bn in FY23 |
Business targets
30 mil smartphone users in FY23
Double-digit growth in revenue of Business Solution and Others (Enterprise)
Achieve No.1 in e-commerce transaction value in Japan by mid-2020s (Yahoo)
Reduce loss on equity investments
23
Structural Reform - Cost Efficiency
- We aim to reduce fixed costs to absorb increase from new business expansion, and thus keep total fixed costs flat
Cost of Sales and Selling, General and
Administrative Expenses
[JPY]
ZHD | Depreciation | |
c. 1 tn | and amortization | |
Operating | Other | |
expenses | fixed costs |
c. 4 tn
Sales
commissions
and others Costs of goods sold
Fixed costs of Consumer and Enterprise business
c. 1 tn
Depreciation, network-related, personnel, advertising, sales promotion, shop and office expenses, etc.
Cost Efficiency Measures
Consumer and | Flat fixed costs |
Enterprise business |
- Productivity improvement and workstyle reform through digitalization
- Digitization of operations in mobile shops, etc.
- Workstyle reform in "New Normal"
- Network efficiency and optimization
- Optimization of equipment after termination of PHS, 3G, etc.
- Infrastructure sharing with KDDI
[JPY] | c. 50 bn | c. 50 bn |
Variable costs
c. 2 tn
FY19
Fixed | Cost increase | Create strategic | Fixed |
costs | due to growth | funds through | costs |
c. 1 tn | strategy | efficiency | c. 1 tn |
FY19 | FY22 | 24 |
Financial Discipline
- We aim to generate stable free cash flow, and strengthen financial position by decreasing interest-bearing debt over years
Over 670 bn every year | Improve from 2.4x |
(excluding impact from LINE TOB) | (excluding impact from LINE TOB) |
[JPY bn] | 644.7 | over 670 | ||
IFRS 16 | ||||
512.0 | impact | |||
FY18 | FY19 | FY20 | FY21 | FY22 |
2.7x | 2.4x | Including IFRS 16 impact |
2.4x 2.3x
Excluding IFRS 16 impact
FY17 | FY18 | FY19 | FY22 |
*1: Adjusted FCF = FCF ± total CF relating to non-recurring transactions with SoftBank Group Corp. | *2: Net leverage ratio = Net interest-bearing debt/ Adjusted EBITDA (LTM) |
+ (proceeds from the securitization of installment sales receivables - repayments thereof). Excludes ZHD | 25 |
Shareholder Returns
- Continue stable and high dividend payments
Achieve both growth and
shareholder returns
Shareholder
Growthreturns
Shareholder Returns
No dividend reduction every year / total shareholder return ratio of c. 85%
(3-year weighted average*) | |||
[JPY] | 86+α | ||
86 | Share | ||
85 | |||
buyback | |||
75 | Dividend | ||
Per | |||
share | |||
FY18 | FY19 | FY20 | FY22 |
*Total dividends and share buybacks for FY20-FY22 / total net income attributable to | 26 |
owners of SoftBank Corp. for FY20-FY22 |
Appendix
Consolidated Statements of Income
[億円] | [JPY bn] | FY19Q1 | FY20Q1 | Variance | Reasons for Variance |
Revenue | 1,164.9 | 1,172.6 | +7.8 | ||
Cost of sales | -579.8 | -569.6 | +10.2 | ||
Gross profit | 585.1 | 603.1 | +18.0 | ||
Selling, general and administrative expenses | -316.2 | -323.1 | -6.9 | ||
Operating Income | 268.9 | 279.9 | +11.1 | ||
Share of gain / losses (-) of associates | -5.7 | -9.3 | -3.6 | Increase in investments for business expansion of PayPay | |
accounted for using the equity method | |||||
Financing income | 5.3 | 3.4 | -1.8 | ||
Financing costs | -14.3 | -16.7 | -2.3 | ||
Gains on sales of equity method investments | 5.5 | - | -5.5 | ||
Profit before income taxes | 259.5 | 257.4 | -2.2 | ||
Income taxes | -86.9 | -89.2 | -2.3 | ||
Net income | 172.6 | 168.1 | -4.5 | ||
Net income attributable to | |||||
Owners of the Company | 164.8 | 152.1 | -12.7 | ||
Non-controlling interests | 7.8 | 16.0 | +8.2 | Increase due to profit increase of ZHD | |
28
Consolidated Statements of Financial Position (Assets)
[億円円]] | [JPY bn] | As of | As of | Variance | Reasons for Variance |
Mar 31, 2020 | Jun 30, 2020 | ||||
Total assets | 9,792.3 | 10,078.5 | +286.3 | ||
Current assets | 3,364.3 | 3,674.2 | +309.9 | ||
Cash and cash equivalents | 1,143.8 | 1,469.4 | +325.6 | Increase in funds procured from securitization of sales receivables | |
Trade and other receivables | 1,800.3 | 1,759.7 | -40.6 | ||
Other financial assets | 94.9 | 86.0 | -8.9 | ||
Inventories | 96.9 | 117.1 | +20.2 | ||
Other current assets | 228.4 | 242.0 | +13.6 | ||
Non-current assets | 6,428.0 | 6,404.3 | -23.6 | ||
Property, plant and equipment | 986.1 | 1,037.0 | +50.9 | Increase in telecommunication facilities | |
Goodwill | 618.6 | 624.8 | +6.2 | ||
Intangible assets | 1,709.5 | 1,694.7 | -14.8 | ||
Right-of-use assets | 1,234.5 | 1.1 | -96.6 | Decrease from depreciation | |
Contract costs | 212.6 | 216.6 | +4.0 | ||
Investments accounted for using the | 80.1 | 88.5 | +8.4 | ||
equity method | |||||
Other financial assets | 905.6 | 904.2 | -1.4 | ||
Investment securities | 175.2 | 182.3 | +7.2 | ||
Investment securities in banking business | 343.0 | 357.7 | +14.8 | ||
Deferred tax assets | 55.9 | 52.6 | -3.3 | ||
Other non-current assets | 106.9 | 108.0 | +1.1 | ||
29
Consolidated Statements of Financial Position (Liabilities)
[億円] | [JPY bn] | As of | As of | Variance | Reasons for Variance |
Mar 31, 2020 | Jun 30, 2020 | ||||
Total liabilities | 8,084.7 | 8,421.4 | +336.7 | ||
Current liabilities | 4,496.6 | 4,631.2 | +134.6 | ||
Interest-bearing debt | 1,811.3 | 2,119.8 | +308.6 | Increase from securitization of sales receivables | |
Trade and other payables | 1,253.8 | 1,165.9 | -87.8 | ||
Deposits for banking business | 880.8 | 987.5 | +106.7 | Increase in saving accounts of The Japan Net Bank | |
Contract liabilities | 127.7 | 126.8 | -0.8 | ||
Other financial liabilities | 3.8 | 2.8 | -1.0 | ||
Income taxes payable | 153.4 | 60.9 | -92.4 | Decrease from tax payment | |
Provisions | 6.8 | 12.4 | +5.6 | ||
Other current liabilities | 259.1 | 154.9 | -104.2 | Withholding tax related to dividends paid from Yahoo Japan to ZHD | |
Non-current liabilities | 3,588.1 | 3,790.2 | +202.1 | ||
Interest-bearing debt | 3,271.0 | 3,455.5 | +184.5 | Bond issuance by ZHD of 200.0 | |
Other financial liabilities | 36.8 | 35.9 | -0.9 | ||
Defined benefit liabilities | 16.3 | 16.4 | +0.1 | ||
Provisions | 83.9 | 81.8 | -2.0 | ||
Deferred tax liabilities | 168.2 | 188.7 | +20.5 | ||
Other non-current liabilities | 11.9 | 11.9 | -0.0 | ||
30
Consolidated Statements of Financial Position (Equity)
[億円] | [JPY bn] | As of | As of | Variance | Reasons for Variance |
Mar 31, 2020 | Jun 30, 2020 | ||||
Total equity | 1,708 | 1,657 | -50.4 | ||
Equity attributable to owners of the Company | 1,001 | 957 | -43.7 | ||
Common stock | 204 | 204 | - | ||
Capital surplus | -134 | -141 | -7.5 | ||
Retained earnings | 1,004 | 954 | -49.4 | -201.5 from dividend payments by SoftBank Corp and +152.1 from | |
net income in FY20Q1 | |||||
Treasury stock | -68.7 | -56.5 | +12.2 | ||
Accumulated other comprehensive income | -4.7 | -3.2 | +1.5 | ||
Non-controlling interests | 707 | 700 | -7.3 | ||
31
Consolidated Statements of Cash Flows
[JPY bn] | FY19Q1 | FY20Q1 | Reasons for Variance |
Cash flows from operating activities | 205.2 | 246.4 | |
Net income | 172.6 | 168.1 | |
Depreciation | 164.0 | 170.8 | |
Change in working capital | -46.7 | -26.2 | |
Interest paid | -12.9 | -14.8 | |
Income taxes paid/refunded | -128.6 | -270.3 | Increase related to withholding tax related to dividends paid within ZHD group |
Other | 56.8 | 218.7 | Increase in deposits for banking business |
Cash flows from investing activities | -107.7 | -154.2 | |
Purchases of/proceeds from sales of property, plant and | -107.8 | -108.7 | |
equipment and intangible assets | |||
Proceeds from sales/redemption of investments | 3.3 | -21.6 | Effect from sale of shares in FY19Q1 |
Proceeds from obtaining control of subsidiaries | - | -9.1 | |
Other | -3.2 | -14.8 | |
Cash flows from financing activities | -163.9 | 233.3 | |
Proceeds from interest-bearing debt | 589.4 | 612.2 | |
Repayment of interest-bearing debt | -298.1 | -468.5 | Repayment of bank borrowings by ZHD |
Net increase/decrease of short-terminterest-bearing debt | 320.3 | 321.4 | |
Cash dividends paid | -191.4 | -198.7 | |
Cash dividends paid to non-controlling interests | -23.9 | -26.6 | |
Purchase of treasury stock by subsidiaries | -526.8 | - | Purchase of treasury stock by ZHD in FY19Q1 |
Other | -57.2 | -33.1 | |
Effect of exchange rate changes on cash and cash equivalents | -0.4 | 0.0 | |
Cash and cash equivalents at the beginning of the period | 938.4 | 1,143.8 | |
Cash and cash equivalents at the end of the period | 871.5 | 1,469.4 | |
0.0 | 0.0 | ||
Adjusted free cash flow | 126.5 | 179.2 |
32
Subsidiaries (1/2)
- 265 group companies at the end of Jun 2020 (of which, 203 subsidiaries and 62 affiliate*1 companies)
Segment | Company Name | Ratio of Voting | Business Description | Blue: listed company |
Rights Held | ||||
Wireless City Planning Inc. | 32.2% | Telecommunication services (Economic interests: 99.5%) | ||
LINE MOBILE Corporation | 60.0% | Telecommunication services | ||
Consumer | WILLCOM OKINAWA, Inc. | 100.0% | Telecommunication services | |
SB Power Corp. | 100.0% | Sales and purchases of power and mediating power transaction | ||
SB Mobile Service Corp. | 100.0% | Call center business | ||
Enterprise | IDC Frontier Inc. | 100.0% | Data center business | |
Telecom Engineering CO.,LTD.*2 | 100.0% | Construction and operation related to telecommunications | ||
Distribution | SB C&S Corp. | 100.0% | Distribution and sales of IT-related products, provision of IT-related services | |
Z Holdings Corporation*3 | 44.6% | Holdings company | ||
Yahoo Japan Corporation | 100.0% | E-commerce, internet advertising business | ||
ZOZO, Inc. | 50.1% | Operation of an e-commerce fashion website, distribution of private brand, operation of fashion media | ||
Ikyu Corporation | 100.0% | Operation of internet sites that provide reservation services for high-end hotels and restaurants, etc. | ||
YJ Card Corporation | 100.0% | Credit card, card loan, credit guarantee business | ||
Yahoo | ASKUL Corporation | 45.1% | Mail-order service of office-related products and other delivery services | |
YJFX, Inc. | 100.0% | Foreign exchange margin trading business | ||
The Japan Net Bank, Limited | 46.6% | Banking business | ||
eBOOK Initiative Japan Co., Ltd. | 43.4% | Content digitization and distribution service, planning, development, and production of digital content, | ||
and publishing and editorial service for magazines and books | ||||
ValueCommerce Co., Ltd. | 52.0% | Advertisement business, CRM business | ||
*1: Affiliate companies include joint ventures | 33 |
Subsidiaries (2/2), Affiliates
Segment | Company Name | Ratio of Voting | Business Description | Blue: listed company |
Rights Held | ||||
HAPSMobile Inc. | 92.9% | R&D and manufacturing of network equipment for HAPS business | ||
SB Payment Service Corp. | 100.0% | Payment processing | ||
SB Cloud Corp. | 60.0% | Sales of public cloud services | ||
One Tap BUY Co., Ltd. | 67.9% | Securities business specializing in smartphones | ||
Other | SB Media Holdings Corp. | 100.0% | Intermediate holdings company that owns ITmedia Inc. | |
ITmedia Inc. | 52.8% | Operation of comprehensive IT information site ITmedia | ||
SB Players Corp. | 100.0% | Solution services for government | ||
SoftBank Technology Corp.*1 | 53.3% | Cloud service, security monitoring service, provision of IoT solution | ||
Vector Inc. | 42.4% | Sales of download licenses for PC software and advertising sales | ||
Category | Company Name | Ratio of Voting | Business Description | Blue: listed company |
Rights Held | ||||
PayPay Corporation | 50.0% | |
WeWork Japan G.K. | 25.0% | |
OYO Hotels Japan G.K. | 24.9% | |
Affiliate | Tpoint Japan Co., Ltd. | 34.0% |
companies | J.Score CO., LTD. | 50.0% |
Geniee, Inc. | 31.3% | |
Scigineer Inc. | 32.1% | |
Development and offering of electronic payment services such as mobile payment Provision of co-working spaces
Provision of accommodation and hotel services
Point management business
FinTech services using AI-scoring
Marketing technology business
Internet marketing support services utilizing "deqwas", a personalized engine for e-commerce businesses and retailers
34
Business Integration Between ZHD and LINE
- After the business integration is completed, the JV (consolidated by SoftBank) between NAVER and SoftBank will own 65.3% of ZHD
Post-Integration Structure
50% 50%
Consolidated
JV (former LINE) Delist
65.3%
Maintain
listing
・SoftBank will have control of the majority of the board of directors (three out of five nominees)
・President, Representative Director: Ken Miyauchi, Chairperson of the Board, Representative Director: Hae Jin Lee
・LINE's business will be integrated with ZHD, the post-integration holding
company
・JV will have control of the majority of the board of directors (six out of ten nominees)
・President, Representative Director and Co-CEO: Kentaro Kawabe Representative Director and Co-CEO: Takeshi Idezawa
Joint tender offer with | ・JPY 5,380 per share |
NAVER for LINE shares | ・Total c. JPY 372 bn (c. JPY 186 bn each) |
*The structure is partially omitted or simplified. | 35 |
*The structure of each of the proposed transactions and their ordering relative to one another may be changed within the scope of the purpose of this business integration and with the agreement of all parties concerned. |
Proposed Transaction Structure
As of the commencement | Tender offer for LINE shares/ | Transfer of | Integration of |
of transaction | 100% subsidization | ZHD shares | ZHD and LINE business |
Joint tender offer and squeeze-out |
SB |
100%
Shiodome-Z
NAVER | SB | NAVER |
100% | 13.7% | 86.3% | ||||
72.6% | Shiodome-Z | LINE | ||||
SB | NAVER |
50% | 50% |
JV
(former L)
SB | NAVER |
50% | 50% |
Unlisted | JV |
44.6%
Delisted |
44.6% |
44.6%
Unlisted
65.3% | Demerger and | |||
integration | ||||
of LINE | ||||
Listed | ZHD | business | ||
ZHD
LINEZHD
ZHD
Listed | Listed | Listed |
Listed
Yahoo | LINE | |
Successor | ||
Cash outflow of c. JPY 186 bn | 1) | LINE will acquire ZHD shares from | Integration of LINE Successor and ZHD | |
for each company | Shiodome-Z through tender offer | (share exchange with ZHD shares) | ||
2) | LINE and Shiodome will merge, and in | |||
*The structure is partially omitted or simplified. | exchange LINE will issue shares to SB | |||
36 | ||||
*The structure of each of the proposed transactions and their ordering relative to one another may be changed within the scope of the purpose of this business integration and with the agreement of all parties concerned. |
SoftBank's Priority Issues (Materiality)
- Identified priority issues (materiality) to contribute to the achievement of Sustainable Development Goals (SDGs)
social Solving through issues business
social Solving through issues activities corporate
Building society and
industry through
digital transformation
Contributing to the global
environment with the power of technology
Connecting people to information to create new excitement
Building high-quality
social networks
Creating new business
through open
innovation
Developing a resilient
management
foundation
37
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SoftBank Group Corporation published this content on 04 August 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 04 August 2020 08:07:09 UTC