Earnings Call: LINE Yahoo! Reports Record Q2 Revenue, Raises Guidance

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Earnings Call: LINE Yahoo! Reports Record Q2 Revenue, Raises Guidance

LINE Yahoo! Corporation (LY) reported record levels for the second quarter of fiscal year 2024, achieving ¥462.2 billion in revenue, a 4.7% year-over-year increase, and ¥112.6 billion in adjusted EBITDA, a 9.1% increase. The company also announced a revision of its full-year guidance upward, citing strong performance in media and strategic segments, particularly in account advertising and PayPay consolidation. Additional focus areas include stock repurchases, the development of digital solutions, and capitalizing on the growing domestic GIFT market.

Key Highlights

  • Record Q2 revenue of ¥462.2 billion, a 4.7% year-over-year increase.
  • Adjusted EBITDA rose to ¥112.6 billion, a 9.1% increase.
  • Full-year guidance for adjusted EBITDA increased by ¥20 billion, and by ¥4.1 for adjusted earnings per share.
  • A stock repurchase plan of ¥150 billion was announced, with 6.4% of total shares to be canceled.
  • PayPay’s GMV increased by 23.8%.
  • The company targets a cumulative dividend payout ratio of over 70% within the next five years.
  • Expected growth in LINE GIFT services and the new shopping tab in the LINE app.
  • PayPay leads Japan's code payment service market with strong user and transaction growth.

Company Outlook

The revised full-year guidance anticipates continued strong performance. Plans to enhance official accounts, Mini Apps, LINE Commerce, and PayPay Finance. Targeting over 10% annual growth by focusing on results in the video advertising sector from the next fiscal year.

Negative Highlights

Weaker auction performance due to currency fluctuations and user changes. Video advertising revenue is expected to remain flat or slightly negative in the second half of the fiscal year. Concerns regarding media video advertising performance due to weak social media presence in video content.

Positive Highlights

Strong growth in PayPay and LINE Credit is expected to enhance the performance of the Strategic segment. Consolidated business results show growth due to an increase in monthly active users and cost reductions. Plans for a cash allocation of ¥310 billion for stock repurchases, depending on market conditions.

Shortcomings

A downward adjustment of ¥15.5 billion in other areas due to domestic distribution effects and management accounting corrections.

Q&A Highlights

Analysts inquired about the cumulative 70% dividend payout ratio and the growth potential of MINI apps. Management emphasized the importance of cost reduction and efficiency in ensuring PayPay's consolidation and growth.

LINE Yahoo! Corporation's earnings call reflected a rising company with record revenues and a positive outlook for the future. The company’s strategic initiatives, such as developing digital solutions and benefiting from PayPay's market leadership, demonstrate its commitment to growth and shareholder returns. Despite some concerns regarding video advertising performance and volatility in the auction sector, the overall tone of the call was optimistic, focusing on maintaining strong growth and effective capital allocation strategies.