© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, we will now start Z Holdings' Fiscal '22 Full Year and Q4 Business Results Briefing. Thank you very much for joining today. At this briefing, we will use the material that is available on our website entitled Z Holdings Corporation Business Results Fiscal Year 2022, Full Year and Q4.
From Z Holdings today, we have the President and CEO, Idezawa Takeshi; the GCPO, Group Chief Product Officer, Shin Jungho; the GCSO, Chief Group Synergy Officer, Ozawa Takao; the CGIO Chief Global Investment Officer, Hwang In Joon; the GCFO, the Chief Financial Officer, Sakaue Ryosuke.
We will first have Mr. Idezawa explain full year '22 -- fiscal year '22 full year results and Q4 results. Then after, this will be followed by a Q&A session. This briefing is scheduled to end in 1 hour and 30 minutes. We are also streaming this meeting live. Here are some housekeeping announcements. If your audio or video is not working well, please go to the bottom of the screen and move and migrate to a different server.
Now we would like to go into the presentation.
Hello. This is Idezawa of Z Holdings. Thank you very much for taking time out of your busy schedule today to participate in fiscal '22 full year and Q4 business results briefing. I will provide the business results overview.
First of all, I would like to explain the topics of the full year financial results. In fiscal '22, both revenue and adjusted EBITDA reached record highs for the third consecutive year. Operating income also reached a record high of JPY 314.5 billion, the fourth consecutive year of increased income. Highlights of fiscal '22 include the steady double-digit growth in account advertising sales and the steady increase in the number of registered PayPay users with consolidated transaction volume -- value surpassing JPY 10 trillion only -- in only 4.5 years after the service was launched.
In fiscal '23, we plan to complete the merger of our core subsidiaries, including Z Holdings, Yahoo! and LINE on October 1, and our new company name will be LY Corporation. The new company will make maximum use of the assets of LINE and PayPay to reemphasize media and search. In addition, we aim to achieve double-digit growth in adjusted EBITDA through increased profits from subsidiaries, increased business efficiency and selection and concentration.
From here on, I'll explain our fiscal '22 business results and fiscal year '23 policies in this order. First is business performance for fiscal '22. Fiscal '22 revenue reached a record high of JPY 1.67 trillion. This was a record high even after excluding the PayPay consolidation impact. Adjusted EBITDA also exceeded our revised guidance. Adjusted EBITDA margin was approximately 20%. Factors of change in adjusted EBITDA are shown here. Despite the absence of the gain on the sale of YJ FX recorded in fiscal '21, although there was a onetime negative impact of the consolidation of PayPay, we were able to increase income due to cost optimization, particularly in the Commerce Business and business growth in each segment. Next is total advertising revenue. Search ads revenue increased year-on-year due to ongoing UI/UX improvements. In addition to the fact that this product is relatively defensive to market conditions, account adds continue to grow by double digits due to an increase in the number of messages distributed by major clients and an increase in a number of small and medium-sized merchant paid accounts. Display ad revenue declined year-over-year due to the impact of market conditions, a decline in revenue of commerce ads linked to shopping transaction value as a result of cost optimalization in the Commerce Business and the impact of the renewal of LINE VOOM.
This slide shows the performance of the Media business. As explained on the previous page, although revenue was affected by deteriorating market conditions from Q3 onwards, the group's unique strength in search advertising and account advertising led to an increase of revenue. Adjusted EBITDA was affected by the deconsolidation of eBOOK Initiative Japan and the consolidation of Line Music, when increased due to controlling marketing expenses.
This is the performance trend of the Commerce business. Regarding revenues, as the shopping business shifted to a policy of balancing growth and profitability and while the growth rate of the business declined, growth of subsidiaries contributed to the increase in revenue. On the other hand, due to the policy change, cost optimization and sales promotion expense control led to significant adjusted EBITDA and adjusted EBITDA margin improvements.
EC transaction value results are shown here. Domestic service e-commerce grew significantly, especially travel due to the economy reopening, and transaction value increased 36.3% year-over-year. In addition, Yahoo! reuse grew steadily due to the steady combined use of PayPay free market and overseas e-commerce was also strong, resulting in approximately JPY 4.1 trillion e-commerce transaction value, which was up by 7.4% year-over-year.
This is the performance trend of the Strategic Business. Sales revenue increased significantly due to the consolidation of PayPay. Going forward, we aim to bring the Strategic Business back into the black as soon as possible by consolidated duplicated businesses and improving the profitability of PayPay, which has been consolidated.
Business overview of PayPay. PayPay GMV has grown an exceptionally fast pace, exceeding JPY 10 trillion in GMV, only 4.5 years after the launch of the service. PayPay revenue grew by 64% year-over-year due to the increase in the number of registered users and increase in the number of transactions. Losses have gone down due to revenue growth, and EBITDA is steadily on track to turn positive.
Next is the management policy and outlook for fiscal year '23. First of all, I'd like to explain the progress on group reorganization, including, most importantly, the merger. The merger is scheduled for October 1, 2023, and preparations are progressing smoothly. Offices are being gradually consolidated to the Kyoto office which is currently occupied by the Z Holdings and Yahoo!. The new company name has been decided as LY Corporation in order to leverage recognized assets in the market and future strategies. Now looking around the business environment of this new company. First of all, for external environment, we still do expect tough situation to continue for the time being. As for internal factors, we see a decline in competitiveness of core business as well as delayed group synergy. And so therefore, we cannot expect a short-term growth in our revenue. With this situation in mind, the top priority for the new company for FY 2023 is to improve business efficiency to materialize double-digit growth and profit and also to make sure we solidify renewed growth of core business from FY 2024 and onwards.
In terms of improved business efficiency, we will be reducing the fixed cost of the new company by JPY 30 billion. And we will pursue selective focus in key businesses, including consolidation of overlapping businesses. The renewed growth from FY '24 and onwards will redefine growth strategy and steadily implement fundamental measures to realize strategy. And I would like to go over one by one. First of all, improving business efficiency. First of all, we'd like to go through a radical cost reduction. Compared to FY 2022, the new merged company will be reducing this cost by approximately JPY 30 billion. Expenses around HR will include hiring freeze and thorough revision of business commissions and reduction of executive remuneration. We will also keep on doing -- narrowing down marketing expense. Furthermore, through this merger, we will consolidate office and integrate rationalized duplicated functions. Through this cost reduction, we will raise fund to invest while securing profit growth as well as stabilize foundation for renewed growth.
Next, about our selection and concentration. We will selectively reorganize business, mainly in loss-making domains, so that we'll be able to consolidate management resources to areas where we expect to pursue win. Video business domain, as have already been announced, we have terminated LINE Live and GyaO! services and consolidate to LINE VOOM. Within financial business domain, incorporation of Line Bank was canceled in Japan, and we are working to consolidate overlapping business. And as we have gone for absorption-type merger towards mobile Japan in April 1 for reorganization of NAVER. And we will also implement other measures for selection and concentration in FY 2023.
I will now explain our strategy for renewed growth from FY 2024 and onwards. Since the business integration 2 years ago, we have been working on various initiatives with synergy creation. But because there were hurdles posed between the different legal entities, we have not been able to fully pursue speed in this process. Through the merger, we will work to quickly promote ID linkage, reintegrate a membership program, integrate points, consolidate various services and ad platforms as well as integrate organization, thereby maximizing our synergy.
Growth strategy of the new company will be about reinforcing media and search, which are domains with high profitability. Our utmost strength lies in our robust group assets such as LINE and PayPay, but we will also focus on strengthening flow of our users through our commerce, local media and search, utilizing our ID linkage and new premium membership program to further increase our ad revenue.
We will begin ID linkage at the same timing as the merger. We will first begin ID linkage between LINE and Yahoo! Japan in October 2023. We will then prepare so that we can begin ID linkage with PayPay during FY 2024. We will also start LYP premium membership, our new group-wide premium membership program, from this November. Our current Yahoo! Premium membership benefits will be the starting base, topped with benefits such as unlimited use of LINE stickers and video album function. We will keep on working to strengthen LINE backups as well as expand multiple accounts function to make the membership program even more appealing. Current Yahoo! premium members can become LYP premium member by linking LINE ID and will be able to enjoy LINE benefits as well. We will accelerate ID linkage through LYP premium membership program to strengthen flow of users between LINE and Yahoo! to restrengthen media and search business.
This is our FY 2023 consolidated full year guidance. We expect whole group revenue to be approximately JPY 1.9 trillion. We will aim to achieve double-digit growth of full group adjusted EBITDA versus FY 2022 and mark JPY 356 billion to JPY 366 billion. We also have the breakdown of our adjusted EBITDA for major segments. As for Media business, in light of the current market situation, we forecast almost flattish growth year-over-year of JPY 265 billion. For our Commerce Business, we expect our cost optimization effect as well as increased profit for our subsidiaries to contribute, thus expecting 4%.
First of all, from JPMorgan. We would like to invite Mori-san.
This is Mori from JPMorgan. I have 2 questions. One question is for the plans for the new fiscal year regarding top line assumptions, I wasn't able to find any information in your deck. So for revenue, ad revenue as well as e-commerce, shopping businesses, GMV assumptions, can you give me a flavor on your assumptions? And also regarding your point of view, regarding ad revenue, I believe that uncertainty is ongoing. So if ad revenue deteriorates more than expected, how should we view the impact on EBITDA? Because the marginal profitability is high, depending on the degree of decline, it may hit your EBITDA, but there is uncertainty. Are you going to try to make up for that through other businesses so that you could definitely reach JPY 356 billion to JPY 366 billion? That is my first question. My second question is regarding the strategy of the Commerce Business. From the outside, it's becoming hard to understand. ZOZO announced their results the other day. And the assumption for Yahoo! Shopping was 0% growth. That was what was said. And also for NAVER, by using their engine, Yahoo! Japan Shopping Search implementation is underway, I presume. Originally, there was some overlap with Yahoo! Shopping. And for shopping search, you weren't in the business. But under the new company, you are saying reinforcing media and search. So regarding strategy of the Commerce Business, are you going to try to go after more ad revenue? Are you trying to transform the business? So can you sort things out for me? Those are my 2 questions.
So regarding the first question, Sakaue-san will take your question.
Regarding your first question, for the Media segment, single-digit, low single-digit growth in revenue is our assumption. For fiscal '23, we believe that the current market impact is going to be ongoing. So we are not expecting substantial increases in revenue. However, for account adds, that was able to grow in the high teens. We believe double-digit growth can be ongoing. So that is our assumption for the media segment. For commerce, for ZOZO, ASKUL and group company growth, we expect continued revenue growth. Overall, for commerce, high single-digit revenue growth is what we are anticipating.
Regarding Yahoo! Shopping that you referred to in your question, for fiscal '23 first half, we believe that trends are going to be similar to the second half of fiscal '22. So GMV is likely to decline, growth-wise. However, for the second half, because we are comping against the previous year, the situation will be different. And this might be explained later when you talk about our strategy. For LYP premium members, whether it be LINE members, we would like to leverage our user base so that we could reestablish our shopping business in some ways. So during the course of the full year, as ZOZO referred to, we would like Yahoo! Shopping to see positive GMV growth.
For the Strategic segment, PayPay is going to be fully contributing, which is the major reason why we are expecting revenue growth. So that's a positive. Apart from that, in the Strategic Business, we will be focusing more and deciding on which business areas we're going to be working on so that we can reduce cost. So excluding PayPay, regarding revenue growth, we are expecting low single digit as part of our plan assumptions.
Because gross margins are high for advertisements, regarding the impact on EBITDA, we are assuming in a conservative way. And with that, we have put together a guidance of JPY 356 billion to JPY 366 billion, and we do believe we can achieve it, but we will be working on cost reduction during the year so that we can reach our EBITDA guidance. That's all for myself.
For account adds, you gave me the assumption, but what about display as well as search. Can you give me some flavor on that?
For display, we believe it's going to be low single digit. And for search, although there's still some uncertainty, it should be a little bit higher than display ads, but still in the low single digit.
For display, does this apply to both Yahoo! and LINE?
Yes, in total.
So Ozawa will be answering your second question.
Yes, this is Ozawa. So first of all, GMV in 2022, we're saying it -- we were saying that it's going to be difficult to achieve, number one. And so the GMV portion, larger portion comes from shopping mall. And, when it comes to ad business, we know it was highly profitable, I mean. And so we were using -- we were utilizing points to make sure we'd be able to expand the GMV. But then the ad market is sluggish. And so therefore, it is becoming quite difficult for us to pursue this line of growth. In other words, how can we still create a healthy growth in terms of revenue and profit without relying on points. And so the question is how. And so that goes back to LYP premium membership, something that we just announced. And so this would be one of the factors that we'll be utilizing to make sure we'd be able to find growth.
However, the type of the growth rate that we have -- we will be showing will become lower. So we will be able to secure a profit. But then LYP premium, this is the year that we will be starting the premium service. And so Sakaue has been talking about this flattish 100%. That is what we're trying to foresee at this point for this year.
But then how do we look at the Commerce Business as a whole with the new company?
First of all, we're not just going to rely on shopping mall because the shopping mall business, at the moment, the profitability is yet low. ZOZO, ASKUL and other subs or EC, like, these are really growing at the moment, and Reuse is starting to find growth. The traffic itself -- the traffic flow, we are finding this, and how we'd be able to utilize that to make sure we'd be able to enhance the profit is something that we want to think as we try to manage our portfolio.
Now you also pointed out to the -- for example -- you talked about NAVER, would we be looking at this when we think about our ad?
Now we are doing our test in terms of search ads, et cetera. In other words, we're not just going to rely on shopping mall business. We're going to be looking at the entire business portfolio. One is to go for ad business utilizing our mall business.
And so the strategy that you mentioned?
Yes, it's one option that we would like to pursue, so that would be all for me.
Mr. Ozawa, if you can. What about the Smart Store? Can you also give me some quick updates?
Yes. Thank you. Smart Store, at the moment, we still have not been able to start this on a full-fledged scale. There are still some arrangements, adjustments still required. We would have wanted to make a full-fledged start much earlier. But then LINE, [ OEA ] and PayPay linkage, we are looking at the back-end adjustment, and this is something that we still are trying to do. In other words, we would like to be given a little more time. We're trying to make sure we'd be able to find -- start during this fiscal year. Thank you very much.
The next question is from Maeda-san from SMBC Nikko.
This is Maeda from Nikko Securities. I also have 2 questions. The first one is regarding the media business for each of the ad products. I just wanted to confirm what conditions they are in, in environment-wise. For Q4, LINE display was minus 10%. The market was weak this quarter, I presume. But decline in competitiveness wise, what do you think has happened? And by changing the product, I am sure that you have been seeing some impact there as well. So I'd like to learn more about that. And for search ads, right now, I think you're doing fairly well. But going forward, considering the impact from ChatGPT, what are your thoughts? For Yahoo's top page, is there -- are you anticipating any impact? But of course, I'm sure that you will be thinking about new products that are AI based, but how do you view this? And based off your assumptions, display single low digit was what you are assuming, but I think the plan is a little bit high when you think about your results from Q4. When are you going to start to turn positive? So -- and what is the backdrop to that? So by product, can you talk about how ads are doing as well as your outlook for the future? That's my first question.
Regarding the second question, the cost reduction of JPY 30 billion for this year, can you break that down in detail, including the actual numbers? When you look at the actual trends for commerce, shopping, you have been reducing promotion cost quite a lot. So do you think you can do more than JPY 30 billion? I think you have that potential. So the breakdown of cost and the possibility of reducing more is what I am interested to hear about and confirm.
Thank you very much. Regarding the first question, I will -- Idezawa will explain, and Mr. Sakaue will follow up if necessary. So for each of our products and its environment and outlook, for display, well, LINE and Yahoo! have different schemes. But for Q4, the results were not good. LINE, on an ongoing basis, year-over-year, because we changed the renewed VOOM and we saw media impression decline. That also had a negative impact. For Yahoo!, commerce ads that are linked with GMV saw a decline. So based on that assumption for display, solidifying the foundation is what we're going to be working on for this year, and we will be going through the merger as well. So if we could do anything, mutually, on a cross basis, we will be working on that. So we're going to be solidifying the base of a business. And because the market is uncertain and hard to predict, we are assuming a flattish or slightly positive growth. Having said that, from next fiscal year onward, we will have the platform integration and other types of events as well. So we would like to ensure -- and we are -- we would like to grow the businesses, which we believe can happen.
For search and AI, and what's going to happen going forward, I think the amount of knowledge queries are high. So for search, we are not expecting an impact on our earnings over the short term. But of course, it's not just the Internet advertising industry, but for generative AI, this is something that will impact us all in a broad sense. So under the merged company, we have been thinking about what we can do in facing these trends. So once we are able to put our thoughts together, we would like to update you in a timely manner. And we think there are various approaches. Our existing services interfaces maybe can turn it to a chat-based AI and make our internal organization more efficient and also new B2B businesses can be considered. And for the engine foundation, there are some that are developed internally, and we also have external partnerships as well. But we are looking at various options so that we could handle this new opportunity. But we also have search, and we have the [ Tenor ] faced through LINE. And we also have knowledge, immense data through Yahoo! [ Java cURL ] and we also have a vast user base. So in this generative AI area, we believe we are in a good position.
And also, we have been seeing increased customers. And going forward, in June, we will be changing the plan, and we can expect more from the price improvements, and also PayPay linkage as well. So Dx Software as a Service evolution will be ongoing. So we believe this will be a foundation for our future growth. So Mr. Sakaue will answer your second question.
Well, first of all, for a product in Q4, I'd like to follow up on some points. For LINE, display ads went down in revenue by approximately JPY 3 billion, and approximately 70% was what we've been communicating from before, a time line VOOM strategic switchover impact hit us. And the remaining 30% was due to the news portion. The number of impressions was about the same. And actually, it's been growing, but rather the unit prices for advertisers has been slowing down. So for other products, we have been seeing a negative impact on revenue. That's for LINE.
For Yahoo!, for commerce ads mainly, the majority of the revenue came from lower shopping GMV. So shopping ad revenue went down. That was the biggest impact. And another structural thing is the reservation type, ads went down by JPY 1.8 billion in revenue. And this has been a trend that has been ongoing.
For display, when it's going to turn into trend, like shopping GMV, in the second half compared to the previous year, we will see better comps. And for search, in Q4, it was doing relatively well because we've been making steady improvements around UI and UX. And apparently, this contributed. So that's my comment for the first question. For the second question about the JPY 30 billion reduction in fixed cost. Specifically, I'd like to withhold on explaining the details, but approximately 60% to 70% is outsourcing cost-related cost reduction that we would like to achieve. And freezing on hiring-wise, we are continuing on in hiring new graduates. So the freeze on hiring is not going to have a major impact.
For marketing expenses, from the second half of '22, we have been reducing the amount of expenses. So at least 6 months' worth of cost-cutting will have a material impact, but we have been starting to do this from 2022. So from the second half, basically, you can understand how much reduction we can expect. And regarding how much more space we have, we believe that we could continue to keep the pace of cost reduction that we have started from the second half of 2022. So we are not expecting any additional cost reduction at this point in time. Thank you very much.
We will now ask Ms. Munakata from Goldman Sachs to ask your question.
Yes, this is Munakata from Goldman Sachs Securities. I also have 2 questions I'd like to ask. My first question is about ID linkage. So this time, Yahoo! and LINE ID linkage is going to start from October. And PayPay ID linkage is going to start from next fiscal year. So that was what you mentioned.
Now you haven't really been mentioning about this specific timing. And so I think that made it quite challenging to really specify what kind of a model you'd be able to pursue. But then now you have been able to show us the time line. So can you give us a little more flavor about the time line updates on how each milestone will be contributing to your business?
Now you're also going to do this in 2 phases. And so is this because it's going to be easier system-wise? That's what I thought. But can you also share with us why is it going to be in 2 phases? That's my first question. My second question has to do with PayPay. So looking at GMV or other major KPI in Q4, I understand that year-over-year, you have been able to find a positive growth. But then compared to Q3, I do feel that there are some areas where the growth has actually gone down.
And so during this March -- this January-March quarter, there have been some campaigns that you launched. And did you find any changes? Or was everything in line with your expectation? Or was there anything that wasn't? Can you also update that part for us? That's my second question.
Thank you very much. So first of all, for ID linkage, and then after that, I'd also would like to also talk about what kind of business impact we'd be able to find. Now this is something that we have been talking from before, but the ID linkage, it doesn't mean that the linkage rate would just suddenly shoot up once we start. It is going to take some time through the years. And how can we accelerate that is probably going to be the key, is exactly where we have to focus on. Now as we have more ID linkage, where we find most contribution would be in the ad revenue and so some of the signals. So the users will be looking at ad -- ads, probably would be able to see a more optimal ads. And that is also going to offer more value from the advertisers. And I think we'd be able to create a situation like that even more from now on. And so 5% to 15% is the range that we are talking about, but we do believe that will be the type of the increase in the unit price of ads we'll be able to push.
And also, we also want to provide seamless experience of our services. So LINE to LINE Shopping or LINE from -- to Yahoo! Shopping or LINE to PayPay. Those dual flow is something that we hope we'd be able to accelerate. And doing this will enable us to find new users and more active users. That's exactly what we're trying to pursue. Now yes, we're doing this in 2 phases. Why? Now there is some reasons behind the development side. But then also, while we try to manage the data, there are some data that will be completed within 1 entity, but then there are some data that will be done in 2 entities. Now -- and PayPay, this is a settlement company. And so we do have to be more careful in utilizing the data and trying to think of this linkage. And that is why we're going to be doing this in 2 phases. Now Mr. Sakaue will also answer the questions in regards to PayPay.
Yes. So Q3 and Q4, as we try to compare the performance of PayPay. So some of the major points. So at the point of Q3, around Q3, I do believe that was when people started to really go out more. In other words, there's been a lot of reopen post-COVID. And so I think this is something that we found in Q3, but it also continued into Q4. And in addition, December is when we find highest GMV in the year due to seasonality. And Q3, churn-wise, used to -- it does give you a higher figure. And then next would be, like, March. Now it is just the balance that we find for every month. And for example, the growth rate of the users is, like, a linear growth. And I would say, at the moment, we're finding everything in line with our expectation. So that is my answer.
So Mr. Sakaue, can I confirm one more thing? In other words, so basically, this January-March PayPay sales promotion was done within the budget that you were thinking in mind? And the KPI is also trending in line with expectations? Is that it?
Yes, that's absolutely true.
Next is from Citigroup, Tsuruo-san.
This is Tsuruo. Most of the important questions have already been asked. So I'm going to go into detail. First of all, for the Strategic Business EBITDA guidance, you're expecting a JPY 20 billion decline. So what are the assumptions for the PayPay business? And what are the losses that are going to be coming from PayPay?
And you're making steady progress to turn positive. So when is the timing when you can reach profitability? And also regarding the fixed cost reduction of JPY 30 billion, you're going to be integrating offices. So I think costs may be incurred to cancel the leases and so forth. So can you give us more flavor on that about how much that's going to cost you?
So both questions will be answered by Sakaue-san.
For the strategic segment, for PayPay, we are not going to disclose the specific numbers. They are undisclosed items, but the amount of losses is expected to be smaller for this fiscal year compared to last fiscal year. Although PayPay contribution is going to be over the full year this year, that's our first assumption.
In addition to that, LINE [ Clover ] and the NAVER reorganization was mentioned. But for the strategic segment, we will be going through a process of concentration and focus, and various things are underway. So this focus and selection process will lead to lower losses. JPY 17.9 billion of loss reduction is expected to come from this process. So for your second question, where our office is. As you rightly pointed out, in order to cancel space, many things will be involved. So -- but the impact on our performance is not going to be that large. And we believe there will be a benefit by consolidating our offices. So that's why we included this as one of the items. But the quantitative impact is not that material.
Regarding the first question, I have a follow-up question about turning profitable. If you can give us some guidance on when you're expecting to turn positive?
No, unfortunately, we continue to not disclose that guidance. Thank you.
Will next ask Ms. Sato from Jefferies Securities to ask her questions.
Yes, this is Sato from Jefferies Securities. I hope you can hear me.
Yes, we absolutely can.
Yes. So I have, like, 1 big question. So this time, you presented a guidance. And so you're saying you're going to pursue cost reduction. However, you're trying to pursue profit. Perhaps it might be sacrificing some of the revenue growth, but is this the right way to take it? That's part one of my big question.
So my second question. So you're saying you're going through a cost reduction. You're going through streamlining, and you're trying to make sure you'd be able to mark a regrowth from next fiscal year. Does that mean that's also going to be the timing when we will be hearing about this new strategy? Because Yahoo! Z Holdings, I wanted to hear more about where you are directing yourself. That was exactly what I was expecting to hear, but now you're saying you're just going to focus on cleaning up your business this year. So from next fiscal year, what can we look forward to hear from you? Can we look forward to hear from you some great message? I mean if you can give us some hint for us?
And also, I also had a question on ID linkage. So you're going to be integrating with LINE. And I think this is, like, 3 years ago that you started this endeavor. And so through these 3 years, you had nothing? I'm sure there's been a lot of work around this integration linkage, but weren't you're able to do this linkage much earlier? And was there any technical or regulatory reasons why you were not able to do it and that's why it took you all the way to October for 2023? So I also wanted to hear some updates on that front.
So your first question, part of it will be answered from Sakaue, and the remaining will be answered from Idezawa.
So for FY '23, it is true that we're going to be focusing on cost reduction. That's absolutely true. But then as we said in our presentation, it's really going to be -- it's really going to be like a preparation to make sure we have a foundation for the regrowth in FY 2024, which is also another important message for us.
And I guess this really relates to your second question. It's really about having a good ID linkage so that we'd be able to have this nice flow of users in between the 2 IDs. And also, we have, like, 23 million LINE premium users and if we be -- and -- be able to offer them benefits of LINE, then some LINE users, we know that we have this very large population of, like, 95 million, we'll be able to really pursue these people to really start utilizing our services.
And once we have a solid foundation as such, like Yahoo! Shopping GMV, like 70% or 80% it's coming from premium members' repeat order. And so how -- so it's going to be important that we'd be able to solidify the foundation with this premium users, premium members. Then Yahoo! Shopping or ad business, we won't be able to find a very positive rippling effect. And so FY '23 is not just about cost reduction, but it's really about making sure we'd be able to prepare ourselves to solidify the foundation for the growth in FY '24. So that's what we're going to be looking at. That's how we look at FY '23, this is 1 year.
Now where are we directing ourselves in this FY '24? And also, why did it take ID linkage. That's something that Mr. Idezawa will be answering.
Yes. So for the overall strategy, I think this presentation slide really explains it well. But we wanted to reinforce our media. And so it's really about the starting point of the users, and we have a lot of services within the group. And media is -- media and search is really going to be, like, the entry point of the users. And it's also a very high profitable business, this media search. And so it's going to be important that we leverage this part so that we'd be able to embark on this regrowth of the -- of our performance. So that's going to be very important.
And to do that, commerce -- we also want to offer more various commerce experience. We will also be offering more local type of service. And that's really part of the ID linkage, trying to make sure we increase the number of premium numbers. And this is exactly what we want to do for this FY '23.
And also, this Yahoo!, LINE. Today, we are focusing on this merged company. But then we're also looking into a more wider scope, like, what can we do with the finance service, including PayPay or ZOZO, ASKUL. We also have a lot of other group entities. And so what kind of overall strategy do we envision is something that we do believe we'd be able to share it with you update as we try to go into this ID linkage in this October. Now your question, why did it take us this long time? Why couldn't we do it earlier? Now one reason is technology and also for -- and as for -- and also about information management. These are the 2 factors that we always have been focusing. Now ever since our business integration, yes, there's been a lot of developments required. And we also wanted to make sure we'd be able to have a stronger data governance in place. Now we had hoped that we'd be able to do it earlier. But then in the end, we have concluded that it is going to start from '23 October. So that's my response.
So in other words, so from next fiscal year, can we hear more exciting story from you in terms of the outcome of your integration?
Yes. That's absolutely so.
And at the moment, this 2 and 3 years, I feel like you've been always showing us a very similar slide, and it sort of gives me the impression that nothing really has drastically changed. But from next fiscal year, I can expect to hear you some new strategy, new story from you and is also an accelerated execution? That's what we'd be able to find for the entire Z Holdings. Can I really expect to hear a message like that?
Yes, absolutely. So now 2 years ago, when LINE and Yahoo!, when we talked about, announced our integration. Now last year, we also added PayPay. And so we have all the parts, very strong parts. We have all these strong parts in place. Now to tie that, we also need to have this more larger strategy in place. And we do expect that we should be able to give you a strategy that will give you more excitement down the road.
The next person is from UBS, Fukuyama-san.
I also have 2 questions. First of all, is about LINE VOOM. The second one is about ID linkage. So for this year, for LINE VOOM, I believe you will be implementing measures to strengthen the business. Can you share anything with us now already? The reason I'm asking this question is when I look at the results of other companies, the momentum of TikTok is so strong and ad revenue is growing, is what I've been hearing. So regarding strategies against TikTok, what can we anticipate? Also, over the medium to long term, for video ads, if this increases, I think this will be an upside on your margins. So can you also share expectations there? So that's the first question about LINE VOOM. Secondly, about ID linkage. In the previous results meeting, you were saying, once people increase their linkage, coupon issuances and point issuances are measures that you may implement. So for this year, it's going to be 6 months' worth of measures. Including the 12 months of next fiscal year, how much of promotional expenses have you accounted for in wake of ID linkage proceeding?
First of all, regarding LINE VOOM, Shin-san will talk about this later as well. But for ad revenue, from a time line perspective, it's something that is yet to pick up. But user KPIs are steadily increasing. The strength here is -- and it's in the lineup and it's something that people can visit casually and frequently. So -- so we are trying to reinforce the recommendation logic as well as make improvements on the interface so that people could view it in an easier way. So those are things that we are working on right now. As for video ad, too, the format of the video are things that we are fine-tuning at this moment. We're putting a lot of effort in that. Therefore, as an integrated company, we are hoping that ad revenue can grow, and LINE VOOM can contribute. So Shin-san, would you like to add any comments?
This is Shin speaking. Regarding LINE VOOM. Up until now, it was about -- we have been working on contents alignment and so forth. But in order to increase users, we have been working on other elements. And we are now working on other areas so that people can view the videos in a fun manner.
So theme-wise, hobbies and other diverse range of content, we're trying to create a scheme so that products can be generated. And service KPIs are improving. So we hope that this can lead to better ad revenue. And during this fiscal year, we will be reinforcing efforts to implement these measures increasingly.
So Sakaue-san will answer your second question.
For ID linkage, the assumptions have changed. Regarding LYP premium members, which we are also going to launch from November. For LYP premium member, by having them do ID linkage, they will be able to receive a variety of benefits. So that's the condition of which they will be able to gain these benefits. And the members, on a monthly basis, we will be able to receive revenue from them.
So CAC will take approximately single-digit billions of yen. But ID linkage originally was a system where we weren't able to expect instant revenue growth. But by pairing this up with the acquisition of LYP premium members, we can expect contribution to revenue more. Although we're not going to disclose any specific numbers, we have accounted for this upside in our guidance by a certain degree. From fiscal '24 onwards, it's going to be about subscription. So there might be some deviance in time line, but we will be spending cost, but we will be able to recoup the investments through better revenue. So we would like to combine the 2 together. Thank you.
So you're rather saying that rather than issuing coupons, it's more about 1 month free if you become an LYP premium member?
Well, this is yet to be considered, and we would like to hopefully make some announcements or updates by November. Thank you.
I look forward to that.
Next, we will ask Mr. Okumura from Okasan Securities.
This is Okumura from Okasan Securities. So I also have 2 questions. My first question, I guess, it's an overlap of the earlier questions, but then how are you looking at the next fiscal year in light of this year? So this year, you're going to be focusing on revisiting the organization, reducing the cost. And so the core business will not be like a robust surge of growth. But then all these initiatives, for example, like shopping GMV -- or what are the works for this year going to most contribute for the positive growth in next year? Like, is it going to be in-shop or ads?
Like, there was an earlier question that was talking about ID linkage and VOOM. And you also said that these are also going to require some years before you'd be able to full -fledged-ly see the contribution. So I wanted to work -- I wanted to hear from you which KPI next year do you think will see a positive change through the initiatives that you're going to be working on this year? That's my first question. And my second question, maybe I missed it, but then this EBITDA -- this year's EBITDA guidance. So I also do find that there is going to be an increase in the loss by JPY 12 billion. Can you give me some assumptions behind that?
So let -- so go from your second question. So the others part, the others part, and so these are the areas where it is, like, IT systems or any areas where we would not be able to allocate to some specific businesses, but it is something like -- it is something to be shared by the entire entity, and that part is going to increase. So that's my response to your question.
So as for your first question, where do we find most positive growth? Now it's really about where do we want to find positive growth. So again, it's going to be in media, especially Yahoo! and Search, Yahoo! Media and as well as Yahoo! Search is where we would like to have more users use. So that's the first area.
And also, in between that, it is -- we did have a slide for that, but we also have Commerce Business, which is also going to be the secondary area where we expect to see positive growth. So these are the 2 areas where we have actually designed the initiatives as to see some growth. So GMV growth as well as the ad revenue growth are the 2 areas where we expect to find the most contribution from the works we're doing this year.
Can I have -- ask 1 follow-up? So you talked about EBITDA. You talked about double-digit growth. You're going to aim for a double-digit growth. But then for next fiscal year, you talked about media. You also have these initiatives, but you also are saying that you have less visibility due to the market situation. Now do you think there will be room for profit growth through further cost reduction next year as well?
So next year, that would be FY '24 and onwards. But again, cost reduction is where we're really going to do most on FY '23. And in other words, FY '24 is the year where we want to make sure we'd be able to enhance revenue growth as well as gross profit growth through the initiatives that we're going to be doing for this fiscal year.
The next person is from Mizuho Securities, Kishimoto-san. Over to you.
This is Kishimoto from Mizuho. I have one question regarding PayPay. GMV has been growing steadily. But for a settlement commission, for the second and third levels, how much progress are you making? I don't think this is accounted for in your plan. That's what I'm assuming. But for this fiscal year or from fiscal '24 onwards, how much can we expect from this business? Can you give us some flavor on that?
Regarding My Store, which is the second level, we have been making steady expansion. We haven't touched upon this today. But for Level 3, for the credit card business, this is our utmost priority right now that we're working on. As you can see in our KPIs, credit card business has been growing by 20% to 30% GMV wise. And for Gold Card, by steadily expanding this business, customer ARPU contribution has been observed. So for Level 3 or the card business, we would like to see good contribution from fiscal '23 onwards as well.
That's it for me. So just one more additional question is when you were readdressing your budget, were there any investment items that you reviewed? Or are you making investments accordingly as planned for PayPay? Has anything changed in the past 6 months or recently?
For PayPay, no, we haven't been doing any major review. The power of the product is what we would like to maximize. So once we finalize the product, we would like to make the investments accordingly, and that is not a change. We already have secured -- we always have a budget in place. But it depends on the product, whether it's been finalized. And depending on the timing, there might be some differences in the actual amount that is used.
Next, we will ask Mr. Araki from Mitsubishi UFJ and Morgan Stanley.
I have 2 questions. My first question is just around the numbers. So within the supplement materials, you also talk about LINE Bank. And I think this has to do with the equity held entity. So that's JPY 7.8 billion that you have there. So from next fiscal year, you're not going to have that JPY 7.8 billion? That's my first question. My second question is something I would like to ask Mr. Ozawa. So within your -- the presentation, you talked about Commerce ad that is seeing a sluggish growth, and it's related to GMV, sluggish GMV growth. But then before, I think when you talked about the more mid- to long-term growth of GMV, it's more about finding better distribution. In other words, better merchants and some promotion package. I think, it has -- had to do with one of the ideas behind this. So you're seeing commerce ads go down. And I wasn't exactly sure how that is related to GMV because GMV, I think, could be controlled. I mean, in other words, with the ad being held down, the commerce went down. But GMV being held down and logistics being more emphasized, I think this is something that I would like to be -- explained a little more.
So thank you. So your first question, Sakaue will be -- Sakaue will answer, and the second will be answered by Ozawa-san.
So LINE Bank, so yes, you're absolutely right. In other words, we canceled LINE Bank. And so there is this tentative or one-off allowance that's been booked. And this is just a one-off type of expense. So let's go to the second question.
Yes, this is Ozawa. So Mr. Araki, what you're saying, I think it goes back to what I mentioned in some of the previous earnings results. And Yahoo! Search, when we look into the ranking, there was this conditions of delivery. And some of the -- I think I talked about a parameter that says a more preferable delivery. And so even if we don't use ads, if we'd be able to utilize this delivery, the logistics, that does pose a risk of reducing the ad revenue. I think this is what I said.
Now from just jumping into the conclusion, the impact to add, as far as we look at the take rate, it's not that large in terms of magnitude. So in this -- the impact that we're finding is really the sluggish growth of GMV, and that is what's causing this. And in parallel, we're seeing the ad revenue go down. And so what's going on around GMV, we find that a lot of stores.
When they looked into this delivery, the logistics, and the stores that would be doing very good logistics, even these stores would be competing about how they'd be able to show ad. In other words, there is this healthy competition, if you will, in the mall. And so it's not because we focused too much on the logistics, and that's not really the reason why the ad is becoming sluggish. So that's my message to you.
Next is CLSA, Mr. Oliver Matthew.
My first question could -- sorry, I couldn't hear what you said about the account adds, but could you tell me what the outlook for those is? Also, you didn't mention competition, but seems TikTok is doing very well in Japan. Which of your ad products do they compete with? And are you losing share to them? If so, what are your plans to gain back the share from TikTok?
Second question, on your LYP membership, does there have any link to ZOZO? It doesn't seem that you're doing very much with ZOZO. So I wonder why you invested in their shares if you don't include them in your e-commerce initiatives.
Thank you for your questions. First of all, regarding the competitive environment against TikTok, Shin-san will explain.
This is Shin speaking. For TikTok, they are growing, and we have confirmed that. But for LINE users, our user base or the number of users or time spent, it's not as if TikTok has affected us negatively. For all the service KPIs, they have not gone down. So we are not seeing TikTok take away our share.
But for new services that didn't exist before, which is the short video type of products, rather than saying cannibalization, it's more about generating new needs. So our service-wise, LINE VOOM, as explained earlier, basically accommodate those new needs. And LINE has 90 million users, and we basically want to offer new user experiences. And we hope that LINE VOOM can drive more traffic. That's it for me.
So concerning the second question about ID linkage, Mr. Ozawa will explain. But before that, regarding the outlook, we are expecting a double-digit growth for this year as well. And in June, many changes and additional functionalities will be available. So that's where we are. So for Ozawa-san, please go ahead.
So synergies after the acquisition of ZOZO, we believe that we have been able to generate strong synergies. For ZOZO, on a stand-alone basis and their growth, to be honest, ZOZO itself is strong. Therefore, spending additional cost is not happening right now. But ZOZO's products, we are carrying those products on Yahoo! Shopping in order to generate more revenue. So that has become a large portion of the ZOZO business. And for Yahoo! Premium members, or LYP members in the future, for ZOZO who have their products on Yahoo! Shopping, if the LYP members buy something, this will be a very strong weapon, whether it be for delivery charges or point accruals. This will be a benefit for the members. And this is something that new customers may be acquired through the synergy we have with ZOZO. So for LYP members, we believe that by having them buy more -- in order to have them buy more ZOZO products, this will be one measure that we will be utilizing. That's it for me.
Could I ask a follow-up just -- so account, very strong. Why are they so successful still? Could you share some of the customer feedback and maybe a little bit more detail around the new functionality?
Thank you for that question. First of all, as a way of communicated in Japan, LINE is dominant. So by distributing messages, this is the only way to communicate with customers. Therefore, it is a platform that could facilitate better communication. So that is a very simple, straight reason.
Customer feedback-wise, whether it be e-mail or phone, or web ads, touch points with customers have become smaller and it's hard to reach customers. However, account ads is a very easy way to communicate to their customers. That's the feedback we've been getting. So customer -- it is a very strong tool in order to retain customers.
And regarding functionality expansions going forward, things that we've been adding is making reservations. And also placing TV orders are a series of functionalities that have been added. And especially SMBs, small businesses, have been utilizing these additional functions to -- in order to transform digitally. So Dx SaaS platform is what is starting to turn into. So it's not just a CRM tool or a messaging tool. It's starting to turn into a Dx Software as a Service tool.
Next, we would like to take questions from Mr. David Gibson from MST Financial Services, Pty Limited.
Two questions. First on PayPay, just want to clarify for this coming fiscal year. Do you expect it in the total for the year to be loss-making, but reach profitability during the course of the year, is the first question.
The second, could you elaborate on how you came up with the new LY name? Because LY in English is lie, to tell false things. It doesn't seem like a really good name. Could you explain, please?
So as for your first question, as for the specific numbers, of course, this is something that we do not disclose, but we do, yes, believe that we should be able to reduce the loss during this year for PayPay. And also your question about LY. It's just simply LINE and Yahoo!, just acronym from these 2 companies. And that's why we decided to use the name LY.
Okay. But just to clarify on the first one, PayPay, you expect it to reach profitability this fiscal year at some point, like a monthly or quarterly basis?
Sorry, this is another area where we want to keep it -- sorry, undisclosed.
Next is from Nomura, Masuno-san.
I have 2 questions. This is Masuno. First of all, segmental EBITDA and the way you approach is my question. Over the long term, for the next several years, for adjusted EBITDA, we believe the strategic business is going to be dynamic and change. And when you look at the guidance for this year, the losses for EBITDA is likely to be reduced, but for PayPay, PayPay Card, PayPay Bank, the PayPay-related business expansion is going to lead to loss reduction.
And also due to your selection and concentration process, efficiency measures are going to contribute. But what would be the breakdown? What kind of image should we have in contribution from the two? Is it going to be mainly coming from selection and concentration? Because by expanding businesses, typically, losses can be reduced. And also, apart from the PayPay business, why are there so many losses that are so great? So how can you realize selection and concentration? So for the strategic assessment, can you explain a little bit more?
Thank you for your question for PayPay, PayPay Card and PayPay Bank and contribution to our earnings. We're expecting it's going to account for approximately 2/3. So for the selection of concentration contribution piece, it will be the balance.
For fiscal '23, LINE Credit and some other businesses were still -- are still going to be loss-making. So that's why we are -- have given out this guidance. And towards fiscal '24 and '25, for the businesses that are in investment mode right now, we would like to ensure they turn positive. And if we deem that they cannot turn profitable, we will try to focus on growing profits. So we may switch and gear. But right now, we still need to make a little bit of more investments. And that is why we have ended up with this guidance for this fiscal year.
Just to confirm, for this fiscal year, with the strategic business EBITDA and reduction in losses, 2/3 of the losses that are going to be reduced is attributed to PayPay operations, an improvement, right? So for the reduction of JPY 18 billion, 2/3 are going to come from PayPay or Card. Is that the way we can look at that 2/3?
Yes. Just to be a little bit clearer, PayPay consolidation comes from PayPay Card as well as PayPay on a stand-alone basis. And PayPay Bank is inclusive of the 2/3 comment.
And for the second question, for shareholder equity and your stock prices, you're below onetime in PBR and ROE is low as well. So financially, do you feel that there is a need to change your structure because you're below onetime PBR and several low percentages in ROE. So a big share buyback or something like that. Unless you change how you are structured, it's hard to think that the current situation is going to change. But what are your thoughts on this?
Well, we do believe we are causing concern on that front. But in essence, we believe what we need to do is, first of all, double-digit profit growth and to do that on an ongoing basis. So I think, in principle, we need to strive to grow our earnings so that we can improve our price-to-book ratio as well as ROE levels.
Of course, over the short term, share buybacks as a way of capital policy is constantly being considered as an option. And we would like to consider timing accordingly. And if we decide to do so, we would like to share that with you in a timely manner.
Thank you very much. We are waiting for the participants' question. [Operator Instructions] We will ask [ Takahashi-san ] from GAM to ask your question.
Yes. Hope you can hear me.
Yes, we hear you. This is Takashi from GAM Investment. It's like a follow-up to the earlier question. So recently, the PBR TSA would be talking about companies who will be under 1x for PBR is requested to make some improvements. And so what -- how do you look at this? And in order to make some improvements, I mean, yes, there was an earlier discussion about financial structure, but then how you'd be able to really create this growth story?
How you'd be able to tell that to the shareholders? And especially in terms of the capital efficiency, even in short or long term, I do not believe that you talk about that in your presentation. And, when it comes to growth story, I think earlier, there was a person who was asking about not feeling much excitement to your narrative, and that's exactly what I feel as well. So from those perspectives, I feel like there could be some more disclosure that we'll be able to connote some improvements. But how does the management look at this? Would there be any sense of issues here?
Yes. This is Idezawa, especially about PBR under 1x. Yes, this is an area where we do feel a very -- we do feel concerns, and we do have a sense of urgency here. And as you mentioned, yes, perhaps it's about the structure, but then in essence, in the end, it's really about to be able to envision our growth strategy as well as to realize profit growth.
But for the time being, we're going to be committing to profit. And that is the first and foremost thing we want to really focus on. And it's really from there on that we'd be able to find this more growth in the essence of our business.
The concerns that you have is something that, yes, I feel like you're not really focusing on there. That's how I would feel. So when you create this mid- to long-term growth or can you go, like, a step further? And if you'd be able to put such KPIs that as some of the areas where the management would also be looking at, because that's also going to be part of our interest.
Well, thank you very much for your advice. Thank you very much.
Next is from, Citigroup, Tsuruo-san.
This is Tsuruo. One is a numbers question. And it's -- the second one is a more big picture question. So the JPY 38 billion cost reduction by segment, how should -- are you going to -- how is the JPY 38 billion cost reduction going to impact each segment? [ Matsuno-san ], you -- in your conversation, you were talking about the strategic businesses, and I didn't really get clarity there. So can you confirm? So can you please answer the first question?
Yes. Sakaue-san will answer the first question.
Regarding fixed cost reduction in media, the impact is not expected to be that large. Although we're not going to disclose the numbers, Commerce should be accounting for about 1/3, and 2/3 will affect the Strategic Business.
So then my second question is, upon hearing your comments so far, for top-line growth and the surety, we have been able to hear your confidence. And for JPY 30 billion cost reductions, it seems that you're not really expecting any additional cost items, cost reductions. So if that's right, what's going to be -- if top-line growth doesn't happen, so what are the options available?
Because economic circumstances are unsure and uncertain, and things are changing dynamically. So in order to achieve your new EBITDA guidance with tenaciousness, what kind of things do you have available as Plan B if in the case your assumptions don't prove to be right?
For top line, we have been conservative in our guidance so that we can ensure that we secure a certain degree of profits. So that is how we have put together our earnings guidance. So we would like to well control our business as we move forward this year. Of course, from time to time, we will look at where we are conditions-wise. And as a menu, we will like to constantly have Plan B available as a menu list. And we would like to consider, at that point in time, whether we may need to sacrifice our medium- to long-term growth. But the scale of our P&L is quite big, and we are a large company. So we would like to make decisions accordingly when the time comes. Thank you.
Thank you very much. It is now almost the time to close, but we'd like to entertain one more question from Mr. David Gibson from MST Financial Services.
If we look back to several years ago when LINE acquisition was planned and completed, if you think since then, the macro has been tougher, LINE integration has not been as expected, would there be a chance for reviewing the acquisition cost? And the goodwill, it's been on the balance sheet, which is currently almost JPY 300 billion, was that a possibility in the future?
Thank you very much. Well, at this moment, as for LINE, ever since the acquisition of LINE, we do believe we have been able to turn a profitable business. Now yes, it is true, the environment is tough, but still in terms of revenue, we have been able to find growth. That is something that we have been able to put through.
Now we do have the P&L of LINE only within our appendix pages. I hope you'll be able to look at that. Now I understand that there's a lot of concerns around how well we've been able to exercise the synergy. We certainly are aware of that. So we do have to show our works here, but then, like, goodwill or those areas. It's not that we feel that we need to revisit. And that's exactly something that we agree with together with our accountants.
Thank you very much. With that, we'd like to conclude our Q&A. So we will ask Mr. Idezawa to give a final closing remark.
So once again, thank you very much, everyone, for sharing us your time. And we have been able to hear many very useful inputs. And we will make sure that we take that seriously so that we'd be able to steadfastly pursue our business as we engage and communicate with everyone. So once again, thank you very much for today, and I hope we'll be able to keep a good communication between each other.
Thank you very much. With that, we will end our full year's result as well as the next fiscal year outlook for Z Holdings. Thank you very much for attending.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]