Earnings Call: Q1 2021

May 6, 2021

Good morning. I am Eleonore from Kakao's IR team. Let's begin Kakao's Q1 2021 earnings release conference call. With me today are CEO, Mason Yao and Chief Investment Officer, Jay Bai. Please be reminded that the earnings results are consolidated estimates under the K IFRS basis and are hence subject to change upon the auditors' review. Let me now invite Mason for key business Good morning. This is Mason Yao. As Kakao signaled season 2 of its business last year, we embarked on a project named KakaoTalk Update for All. KakaoTalk is evolving from a platform that connects people to people to a platform that connects people to the rest of the world. People can prove their identification via KakaoTalk, subscribe to services essential to daily life and topics that they're interested in as KakaoTalk is becoming an essential tool that expands a person's scope of activity in the digital age that's coming our way faster than expected. 1st, Kakao digital wallet service introduced last December saw its user base break 10,000,000 mark as of end of Q1 and it continues to grow sharply. Users are adapting quickly to digital age using Kakao Talks to do their tax returns and to use Government 24 simple logins among others. In the future, use cases for the digital wallet will increase such as using the wallet QR to enter unmanned stores and offline sites. Also, if the user wishes to disclose one's credentials based on identification and qualification certificate in the wallet, user will be assigned profile certificate badge, whereby user certified qualifications are shared with other people. We are planning a new service like the personnel search based on this and expect this will lead to a new type of relationship forming among people. KakaoTalk is also offering a more evolved subscription service on the KakaoTalk channel. Product subscription service launched last year allows for a unique experience based consumption whereby users can make a purchase with only a several clicks inside the cathaoTalk channel of partner companies, renting out water coolers, massage chairs and subscribing to hand strip coffee and even salad dishes. Whereas our business partners are offered back office features, I. E, SSP, which help to improve operational efficiencies and better their experience as a business. We're also planning to launch content subscription service within the year using KakaoTalk Channel as a bridge to design a space that connect creators with subscribers. Any creator can distribute their content via KakaoTalk channel and users can add creators channel to their friends list, subscribing to content of their interest. People can make their own subscription platform in KakaoTalk space where daily activities take place and we expect once that happens, we it will kick start a more active consumption of content. So new service offerings like the digital wallet, which broadens the scope of activity of an individual both on and offline and subscription services will further bolster mid to long term growth engine behind the Talk bids. By introducing changes to KakaoTalk, which underpin all of the upcoming Kakao services, we will connect users and businesses from multiple angles, identify and develop business opportunities so as to bring tangible business outcomes. Let's now take a look at the platform business. 1st, Talk Biz ad revenue was up 59% Q on Q, sustaining high growth in the Q1. Advertisers of this board are increasing their budget on the back of successful marketing they already experienced and we are also seeing faster inflow of new advertisers who benchmark against such success cases and it drove this board Q1 revenue up more than twofold year over year. Brands who have expanded customer interface via this board are using KakaoTalk channel and simple sign up through KakaoTalk, which is called Sync, to attract hardcore customers, which led to a better customer retention. Since Q4, we have been providing tools that help better connect with Sync to hosting companies of 5 main shopping platform, including Cafe 24 and MakeShop. Since then, number of advertisers adopting sync has risen by 3 times, number of channel friends of advertisers using sync has gone up sharply, which all led to greater monthly average marketing spend by the advertisers on the KakaoTalk channel. Based on such positive loop, KakaoTalk channel revenue was up 72% year on year, rewriting historical high every single quarter. During the first half, we plan to showcase an upgraded version of KakaoTalk channel. Just as brands open up stores in locations where there is highest level of traffic, we believe businesses will open their Kakao branch stores on the Talk platform, which will facilitate activities such as purchase, payment and counseling, which will in turn further promote the KakaoTalk channel. For transactional commerce business of Talkbiz, Kakao Commerce GMV was up 58% year on year driven by even growth from gifts, talk store and makers. With the spread of content free gifting culture and luxury product lineup of fashion, beauty, high end living and other department store brands, there were increases in number of new buyers, repeat purchases and basket size, which led to 54% year over year GMV growth for CAFAL TALK gift. By onboarding new sellers and quickly securing lineup of products and improving customer experience via personalized recommendations promoting Talk Deal gift cards, Q1 GMV for Tuck store was up by more than twofold year over year. Kakao Shopping Live delivers live streaming of carefully selected items and is setting itself up as a live commerce platform with an exceptional attraction factor. In Q1, KAKAO Shopping Live was introduced enabling brand companies to produce content themselves And we are also increasing the number of live sessions on the shopping tab. We're going to focus on diversifying content through collaborations so that it may grow into a new commerce platform that can generate sizable transaction volume on a standalone basis. Next is on mobility. On the back of demand recovery, taxi service in Q1 recorded highest daily average calls, while t blue taxi fleet grew to 21,000 in Q1, driven by brand awareness, efficiency improvements and service expansions to Cheju. We've also seen greater demand increase for premium taxis, including T Blue, Venti and Flag. Kakao Navy has introduced new services like calling in for car wash, repair and car resale and is evolving into a platform for car owners by connecting partners with users. Also in the greater scope of mobility, we have introduced quick courier service, flower and snack delivery for Kakao Tea's business partners. Kakao Mobility will seek opportunities to connect objects and services that people need and become a smart mobility platform that can answer to all of the mobility needs people may have through one single platform. Next is Techfin Business. Kakao Pay's Q1 TPB was up 58% on year to KRW 22.8 trillion, breaking the KRW 20 1,000,000,000,000 quarterly mark for the first time. Excluding money transfer, both payments and financial services drove revenue expansion, which led to 127% year over year growth for Kakao Pay. Payment TPV was up 78% on year, still growing Q on Q despite Q1 being an off season, while the previous quarter had positive seasonality. What's noteworthy is that online payment from the non captive market, which is from the outside partner, showed steeper growth compared to payment volume from Kakao's captive market. And as such, online influence of Kakao's payment platform is propagating. Financial services underpinned by loan brokerage and investment was up more than 10 times year over year, reporting a very high growth. In loans, we are leading the market with highest amounts of loans brokered since September last year. And in just 1 year since the launch of investment services, there were 4,000,000 cumulative accounts openings And based on Kakaoi Securities account number of securities account, number of people who invested into funds reached 1,600,000. For money transfer, growth wasn't as high as payment or financial services, but is nonetheless sustaining an uptrend. Because P2P transfer works as a traffic builder, it is a leading indicator of total TPV and top line revenue. Therefore, higher money transfer TPV in Q1 will bring growth from non transfer businesses as we go forward. Next on paid content. Q1 global platform GMV was up 77% on year reporting KRW245.9 billion. First, Kakao Japan's Q1 GMV was KRW152.1 billion. On competitive content and aggressive promotion, number of users and payment size per user was up, leading to almost triple growth year on year in terms of both GMV and revenue. Vekoma ranked 3rd in global top line growth out of non game apps in Q1, taking its position in top 10 grossing app as the only digital comic application. PayPal Entertainment's page company saw ratio of global platform GMV grow sharply with total GMV including platform and IP distribution up 62% year on year, reporting KRW 167.2 billion. This year, page company will place full momentum behind network expansion of its global platform. We've seen clear GMV growth from increase in original IPs provided to Tapas, which is a North American platform, which is driving expectations for success in the North American market. Come June, starting with Taiwan and Thailand, we will bring to life innovation of story entertainment on a bigger global stage. And Company of Kakao Entertainment is also generating meaningful performance supported by content planning and production capabilities, which were internalized over the years. Vincent Zhou, produced by Logosilm, was number 1 drama across all channels in the concurrent time slot and is a popular content on both domestic and global OTT platforms, proving that we have competitiveness in making dramas in the global media market. Pachel's original contents are growing in popularity as they are featured on not only Kapow TV but other platforms, I. E, Netflix and Wave. In particular, March of the Ants was nominated for Paeksang Art Award, which is a first for a digital platform based entertainment content, leaving a strong impression of Kakao TV as a brand and attesting to quality of Kakao's original content. Lastly, on Kakao's ESG update. Last February, we defined our EFG activities as Kakao's promise and responsibility towards making a better world and we are actively pursuing such practices. In terms of environment, we are the 1st IT company to receive ISO 14,001 certificate and by building greenhouse gas inventory, we laid down the basis for environmental management. In terms of the social factor, in January, we declared Kakao's human rights based business management and announced principles on eradicating hate speech as part of the initiative. Also to grow together with our partners from an ethical basis, we developed sustainable management guide for Kakao and its partners. Lastly, ESG committee is given ESG risk management and supervision roles and we adopted evaluation mechanism for the Board of Directors to build a sound governance structure and to enhance BOD efficiency. As such, based on our promise and our responsibilities, we wish to practice ESG management and we'll be communicating Kakao's sustainable efforts and plans through the ESG report, which will be published in May. With then the highlights of the business, now Jay Wei, our Chief Investment Officer will present on Q1 financial results. Hello, this is Jay. I will present on the financials. Q1 consolidated operating revenue was KRW 1,258,000,000,000, up 2% on quarter 45% year on year. First, platform revenue was up 3% on quarter 51% on year to KRW668.8 billion. First on top of this revenue. Ad revenue on negative seasonality drove Bizboard revenue down slightly, but message ad products continued quarterly growth on the back of cross sales promotions with Bizboard offsetting the impact from slow seasonality. Supported by stronger product lineup and growing user base, gift and talk store revenue posted a steady growth driving total talk biz revenue of 2% on quarter 61% on year to KRW361.5 billion. Total biz revenue was down 4% on quarter due to negative seasonality, but on base effect from COVID pandemic was up 1% on year to KRW 117.5 billion. Driven by strong taxi revenue on expansion of GBLUE franchise and TPV growth on payment and franchise financial services of Kakao Pay, new business revenue was up 9% on quarter and 89% on year to KRW189.8 billion posting highest growth of all business segments. Content revenue was up 1% Q on Q and 38% year on year to KRW589.2 billion. First, paid content revenue was up 7% on quarter 80% on year to KRW 174.7 billion on the back of competitive IP of paid company and exclusive growth of global GMV underpinned by Kakao Japan's number one platform. For music content, we were able to keep paid subscriber base quite solid through stronger marketing of Menon platform and revamping of the app. But due to the base effect from accounting changes for the digital music distribution in Q4, there was 3% Q on Q decline, while growing 4% year on year with revenue coming in at KRW156.8 billion. For games, top line trend stabilized with the new title Elion, which was launched last quarter and with termination of overseas servicing of flat desert, game content revenue was down 7% Q on Q and up 35% year on year to KRW 130.3 billion. Lastly, IP business and other revenue was up 7% on quarter and 55% on year to KRW 127.4 billion on higher content production revenue from Kakao Entertainment's M Company and strong performance from music distribution. Next is on consolidated operating expense and operating profit. Q1 operating expense on a consolidated basis was up 1% on quarter and 41 percent on year to KRW11100.4 billion. Looking at key items. Labor cost was up 10% on quarter from bonus pay of treasury shares and salary increase. Compared to last year, on continuing new hires, cost was up 47 percent, totaling KRW292.9 billion. Revenue linked expense was flat Q on Q at KRW493 billion, which is 29% higher year over year. With continuous growth in Commerce, where its ad business has lower COGS and most of the top line on the book is net sales basis and an increase in mobility revenue, mostly around Kakao Tea Blue franchise, ratio of revenue linked expenses have been trending down every quarter. For your information, Q1 revenue linked expense was 39% against the revenue. Out sourcing and infrastructure expense was RMB144.5 billion flat Q on Q, while it was up 57% year on year on increase in commissions for mobility and content. Marketing expense was down 23% Q on Q on base effect from aggressive marketing in Q4 and changes in marketing schedule for some of the businesses. On increase in marketing for KAKO Japan and mobility, marketing expense was up 125 percent on year, totaling KRW67.2 billion. Just to note, Q1 marketing spend against revenue was at 5.3%. All in all, Q1 operating profit was up 5% on quarter and 79% on year to KRW157.5 billion, while operating profit margin came in at 12.5%. Next is non operating revenue and expense. Other revenue was KRW54.4 billion on the impact from disposition gains from shares subject to equity method treatment, driving the figure up 150% on year, but down 70% on quarter due to the base effect. On the back of base effect from previous quarters' impairment loss on intangibles, including Melon's goodwill, other expense was down 99% Q on Q and 31% year on year to KRW 6.6 billion. Equity method gain reported KRW 150,900,000,000, a significant rise Q on Q on the back of profit growth from Tunamu and Kakao Bank, which are subject to equity method treatment. Equity method loss was KRW 15,800,000,000 from invested companies. Financial revenue was KRW 47,900,000,000 on dividend from SK Telecom and rise in dollar value leading to FX translation gain from foreign currency deposit. It was up to 30% year on year and down 60% Q on Q from the base effect. Driven by FX translation loss and fund related financial expenses, financial expense was up 64% on quarter and 3 37% on year, reporting KRW 69.7 billion. Q1 corporate income tax expense was KRW 78,800,000,000, while consolidated net profit reported KRW239.9 billion. Lastly, Q1 CapEx breakdown is €36,000,000,000 for intangible assets, including service, dollars 20,300,000,000 for intangible assets, including intellectual property rights and €56,300,000,000 for investment activities. This concludes Q1 2021 earnings results highlights. We will now begin the Q and A. Please take consideration for time, limit your questions to 2 per person. The first question will be presented by Eric Cha from Goldman Sachs. I would like to ask you two questions. Under the Talk Biz advertisement business, Biz Board has been well highlighted while other areas, I believe, have been less highlighted and market's understanding of these other areas are less compared to Bizboard. You talked about how KakaoTalk channel could create good synergies with Swissboard and it will have a very effective role in locking in the user base. Could you elaborate a little more on what the strategy is? And also, you mentioned the content subscription service in the CopalTalk channel. Could you elaborate also a little more on what the strategy is? And what are the type of contents that we could expect through that service? 2nd is what is your strategy visavis the acquisition of Zig Zag, the commerce platform? And how does that acquisition fit under your overall Kakao's commerce strategy? This is Meiten. I will provide you with the answers regarding the synergies between top channel and Swiss Board and the content subscription service and I will turn it over to Jay to elaborate on Zig Zag acquisition. If you look at TalkDens ad revenue in Q1 on a year over year basis, there was a significant growth of around 59%. Basically, when people click through this board, it will be due to the top channel and also there will be seamless connection via sync. And because of these factors, the interfaces that the advertisers utilize have been very quickly expanded. Thanks to that, we were able to onboard user base by the use of the voice board and then through talk channel and sync provide strong connection to the user base, which will help with the customer retention. So by employing such an integrated marketing approach, we are integrated marketing approach, we were able to bring about a virtuous cycle and that is a key driver. So I just summarized how the synergies actually were generated between this broad and talk channel. So from and we were able to really see that and observe it in practice. Since Q4 of last year, we have been providing a tool that could easily connect the sync with other partners, the so called hosting companies, the ECPs, our 5 main shopping platforms, including Cafe 24 and MakeShop. And since that point in time, we've seen a number of advertisers who've adopted Cync actually rise by 3 times. And actually, those advertisers who utilize Cync have seen the increased trend in the and people adding them to their friends list actually go up by 3 times as well. So we see that after the adoption of the sync by these advertisers, monthly average KakaoTalk channel marketing spend has actually gone up quite significantly. Just to cite an example for your understanding, in Korea we have a mobile 3 market called Ponyejangdol and basically what they did was they adopted sync and they adopted sync, which will help with the talk channel and also connecting with their membership basis, subscriber basis. And they were able to communicate this aspect through their billboard advertisement. As a result, number of their talk channel friends before the adoption of this Think service was around 10,000. But in just 7 months after the adoption of this tool, they have seen a significant increase to 3,000,000 users. And so this platform has really grown to a mega sized talk channel. Another point on Talk Channel is in the first half of the year, there were large scale and small scale investments and rebounds on KakaoTalk Channel. And what we did was we provided a feature where KakaoTalk Channel Home as well as the company's own website could be very easily connected. A good case in point is Nike. Basically, they had a KakaoTalk channel that had already 3,460,000 of KakaoTalk channel friends. What Nike did was they connected that channel with their nike.com, the commerce site and they made use of this board and sync and conducted marketing activities. And as a result, they were able to significantly increase their channel friends. Regarding the content subscription services, basically we are preparing to launch this service in the second half of the year. So we will be able to share with you more detailed timeline as we go forward. Just as we were able to utilize top channel to and really was able to prove the strong relationship that the top channel has vis a vis users from a business perspective, we will be utilizing top channel to connect the creators of content and the users of the content. And we believe that through these efforts, we will be able to enrich this ecosystem further. So this is Jay responding to a question as to why we decided to acquire Zig Zag and what are the possible synergies that we could enjoy going forward. As you know, fashion is a category, it's quite large in size and the demand is actually growing as we go forward under the Commerce segment. So and also in this vertical, we have not yet seen any single dominant player emerge. So we believe that if we were to utilize the platform and technology of Kakao that we could really quickly gain an upper hand in this segment. So what we did was we physically spun off Kakao style and we decided to merge it with crookie.com that is the operator of Zig Zag. And as you know, this platform targets people in their 20s 30s for fashion products. We believe that Korea has a strength in the fashion and beauty vertical in the global market. So after the acquisition, what we are planning to do is to expand the category from fashion to beauty and also to have a stronger expansion on the global stage. In terms of the synergies that we can expect, there are actually 3 key drivers. First, we would utilize different ad services and tools that KakaoTalk has and bring on top of it the fashion content that Zig Zag could offer. We would therefore would like to showcase the products to these KakaoTalk users and also strengthen on boarding of users to the Zig Zag channel. 2nd is an expansion of our global commerce business. K content and celebrities are popular globally. And if we are to bring in global fashion and beauty trend on top of this popularity, we think that there could be a big and positive impact. And also, at the end of the day, on the global stage, we will be able to expand our commerce business in the future. Currently, Zig Zag has its capabilities around targeting people in their 20s 30s. And if we were to utilize Kakao's technology and its entertainment asset, we could expect quite a bit of synergy in the future. 3rd, from Kakao's Talk business. Now Kakao Talk Channel, we could also look forward to synergies with Kakao Talk Channel as well. In the second half of the year, we are going to add customized features for each of the verticals and categories, and we plan to increase the number of partners for each of the categories under the Talk Channel. In the fashion category, Zig Zag has more than 4,000 vendor pools and if we were to able to successfully link that up with KakaoTalk Channel, we think that that's going to bring about a very sharp growth in terms of the number of partners and traffic on KakaoTalk Channel. Just share with you a couple of numbers. Zig Zag's 2020 GMV was KRW 750 1,000,000,000,000. That was about up 25% compared to the previous year. This year, we're looking to post GMV of KRW 1,000,000,000,000 and top line growth of 70%. So more higher growth to come as we go into the future. And just to elaborate one more aspect, unlike what was that unlike what the press had mentioned with respect to the acquisition structure, it wasn't where we were acquiring the shares of that company by using cash. Basically, what we did was we spun off the style business unit of Kakao Commerce and then we valued that entity as well as crocky.com's business entity. Based on the valuation of those individual entities, we decided on the ratio of merger between the 2, and Kakao had gained Kakao through acquisition had gained the status of majority shareholder of croqui.com. Because this information was not correct as was mentioned in the press articles, I just wanted to clarify that point. The next question will be presented by Sung Joon Ho from CLSA. Please go ahead with your question. So just a follow-up on your comments on this. In Q1, I would like to understand what the total number of merchants or vendors or sellers that you have on top channels, hotels of gifts as well as makers. And what is the growth rate of number of merchants? And also if you could also shed light on the size of the GMV that would be helpful. And out of the total top bill, what's the percentage that e commerce counts? Do you have a guidance as to a full year GMV figure or full year top line figure for this? This is Jay. First, responding to your question on Kakao Commerce. In Q1, basically, if you look at the total Kakao Commerce GMV, which includes Gift, Top Store and Maker, it was up 58% year on year. Now Gift was up 54%, Maker's was up 79% and Top Store posted a 2 growth. So despite the fact that previous quarter, the growth rate was very high, but still we were able to continue on with a solid growth rate in Q1 as well. So if you look at the key drivers behind such solid growth, first, looking at Cocao Soft Gift, As a culture of giving online gifting really expanded, we have seen significant expansion of the user base and these users would revisit KakaoTalk Gifts on a repeated basis and also increase their purchases. So we are seeing that figure go up on a quarterly basis. In terms of the types of products that they're gifting, it's not only fashion, beauty, luxury products, which we increased and enhanced the lineup. Also, we've seen a significant growth in the delivery based GMV as well as the basket size. And that is really driving the overall growth of the commerce GMV. So on top of fashion and beauty, we see consumer electronics, high end living and premium food category also grew. And once again, delivery based gift growth rate has outperformed that of the total growth rate. In terms of the TOK store, thanks to the popularity of the TOK deal, in Q1, monthly average number of buyers and number of payments have really gone up by 2 fold and we see continuous uptrend, a very steep one that is in the number of users as well as the frequency of use. Talk store, the brand awareness is very high. For the talk store, basically branded company, the branded merchants that have high level of brand awareness and quite meaningful signs of transaction volume have really onboarded our top store. And basically, the number of top stores have actually gone up and really driving the overall GMV growth. On a Q on Q basis, number of these stores were up on by 10%. Year over year, it was up by 60%. Right now, we're in the process of laying down and solidifying the infrastructure to better support these merchants. And we believe that once we do that, we will be able to further drive up the number of stores on pocket Now if you look at makers, its Q1 growth rate was quite encouraging. That's because makers has become a quite popular space for brands to launch their new products as well as to communicate and do marketing for their new products. And branded companies really prefer to launch their new products as well as to communicate and do marketing for their new products. And branded companies are really preferring the use of makers. So in Q1, not just small and medium businesses, but larger scale brand companies have pre launched their new products on this platform and they were differentiated and unique products, which gained quite a bit of popularity. For instance, the hotel staycation, in line with that trend, there were also accommodation service accommodation products that were sold through the platform, and we have seen very good sales performance that drove the GMV. In terms of the specific figure, it will be difficult for me to give you a detailed or a specific number per se, but we believe that we will be able to sustain the GMV as well as top line growth since there is a continuous user increase and seller increase as well as higher level of purchases and bigger basket cases basket size. The next question will be presented by Jin Goongim from KTV Investment and Securities. Please go ahead with your question. So can you provide your performance guidance on a per annum basis for your top line revenue, operating profit and OP margin? And also since the launch of Kakao Entertainment, what are some of the business model related changes that you could elaborate on for Kakao M? And what is the mid to long term revenue and OP guidance for that entity? Hi, this is Mason. Responding to your question, in Kakao Q1, if you look at OP margin, it was 12.5%. So despite high increase in our labor costs, we were able to, on a Q on Q basis, further increase revenue and reduce marketing expense. Hence, we were able to slightly improve our margin. On a per annum basis, currently, Kakao engages in a top business, which entails high level of profitability and this business is continuing to grow. And if you look at our new businesses, including pay and mobility, they were able to successfully turn around. And so the business' fundamentals are structurally becoming better. So compared to where we are today, we believe that there is a significant offer for us to further up our OP margin. Now having said that, if you look at our Global Content business over the couple of quarters, basically the performance has significantly outperformed our internal plan as well as market expectations. And we were able to gain confidence in this business in the process. So for the time being, rather than maximizing profit, we believe that we want to bring better results in the future through the in the global business. We believe that is that should be our priority by making meaningful investments. So in light of these factors, we are currently planning a more aggressive global marketing and content investment. And also on our new business area, which is B2B, which we began last year, this year we plan to significantly increase the investment. All in all, in terms of spending our budget in order to accelerate the speed of growth this year, we're going to be quite bold and agile at the same time. And our precise of the operating profit will be determined based on such strategic approach. So to summarize, as we communicated at the beginning of the year, this year as well in all of the business areas, we will be able to see quite sizable growth in terms of volume. So we expect that we'll be able to achieve top line growth rate that similar to what we've experienced in the past. Thanks to a solid growth of advertisement and commerce under 12 biz, we're expecting more than 50% year on year growth. And also this year will be an important watershed and the initial year where our global sales mix is going to account for double digit as against the total top line revenue. I think this year, we will be able to show you that our revenue base will be globally diversified. Also on top of that, our new business platforms, including pay and mobility, will have been making a double fold growth. And also, we think since they were able to successfully turn around to profit, we expect to be able to bring about good performance in the new business areas as well. Now Kakao Entertainment basically we expect is going to evolve into a global content company that leverages off of original IPs. Recently, the story IPs have proven its unlimited scalability and that we see quite a bit of highlight and there is a fiercer competition to secure that original content IP. Kakao Entertainment currently owns more than 8,000 original IPs and also it has been able to internalize the entire value chain from planning, production and investment of content that cuts across different types of content, including webtoons like novels, music and videos or films. And so we at Cathown Entertainment has a global tier competitiveness that can actually best highlight the value intrinsic value of such original IPs. Now Kakao Entertainment, which is a merged entity between Kakao Page and Kakao M, their role is not going to stop at just bringing webtoons and webnovels to a motion picture. But we believe that the meaning lies in the fact that they could create a super IP based universe where the added value of the story IPs can be planned and developed through different myriad of avenues. In terms of the financial objectives, through this merger, we were able to set up an unrivaled value chain in the entertainment industry. So compared to the past where they existed separately, we believe that the growth rate is going to be much more accelerated, and we can actually achieve more than $1,000,000,000,000 in top line revenue in 2021. In terms of profitability, although there is going to be very aggressive investment with the view to expand the global paid content platform network and also to discover and identify story IPs and developing and distributing the secondary or derivative creative content. Yes, there will be aggressive investment. But based on very solid competitiveness of its core business, we believe that we can continue on with a quite sound financial structure that could bring about a strong a strongly grounded growth. The next question will be presented by Donghee Kim from Merck Securities. I would like to ask you 2 questions. First is on mobility. You're going to launch new services like car wash, flower delivery and quick courier service, what is the addressable size of the market? What's the target market and the size? And also aside from the existing services like Chikokashi Blue and designated driver service, Out from these new services, what's the size of revenue that you're expecting? And in Q1, what was the size of the operating loss that you booked for your new businesses? This is Jay responding to your question on mobility. Basically, Kakao Mobility wants to lead the mobility market by offering different connections for different mobile needs mobility needs. So on top of taxi and designated driver service, we are expanding into other new areas like parking, quick service and vehicle management. Starting this year, we started operating parking lot operation business starting with Everland and CoEdge, diversifying the revenue base. And also to strengthen our service as a car owners' platform, we added on the 3rd tab of Kakao Navy My Car Management features, which allows for repairs as well as you can call in for a car wash and charging up of your EV or resale of the cars. And also for the courier delivery service, which is moving objects rather than people, we are going to launch that service against our business partners within the first year first half of the year. In terms of investments to continuously up our service capabilities, we are actively investing into areas like parking, rental cars as well as pet related taxi services. We acquired MyValet, which is a smart parking management system and D. O. Car as a broker of rental vehicles and Pet Me Up, which is a service provider to people with pets. And by acquiring this, we are at this point looking at ways to maximize synergies within the Kakao T platform. In terms of the mobility platform from Q1, we will be filling in Kakao billboard advertisement on the main page as well as different pages of Kakao Tea. And also other than the use of the List Board, we could also think of other outside advertisement in vehicle for our franchise taxis and KAKOUTY BLUE, we will study further as to the user experience and the overall circumstances and make decisions going forward. In terms of the subscription model, we are very positively looking at introducing subscription service in consideration of the demand from the users and the market landscape, but nothing has yet been finally concerned. In terms of the size of the target market, domestic taxi market is estimated to be around 10,000,000,000,000 and the government has plans to encourage the platform taxi market and grow that into 15,000,000,000,000 by 2,000 and 30. So there's a lot of rules and regulations that are being put in place to further promote the platform taxi business. Kakao Mobility, through its Kakao T. Blue, is considered to be a leading company in the platform taxi segment and taxi companies are very actively participating in our initiative. So we believe that we could actually grow the entire pie and also contribute to the further growth of the taxi market. From a mid to long term perspective, it will be difficult for me to share with you specific market share numbers or our targets in the number of franchise fleet. But for Kakao Tzu Blue, we are planning to achieve about 30,000 vehicle units by end of the year and also expand on our larger size Venti fleet as well. So through these efforts, we seek to really solidify our position as the number one taxi provider in the market. In terms of designated driver, we think that the estimated market size is around KRW 3,000,000,000,000 to KRW 4,000,000,000,000. At this point, our mobile service market share is very low compared to the offline market. But we believe that we could utilize big data AI technology to further enhance matching efficiencies and also through very steady demand and supply dynamics, we are in the process of expanding on our market share. For the very new services like car wash and delivery, we have only started it, so we have not yet set a clear target for that business. So in terms of the operating loss for our new business, as you know, we have classified Kakao Pay, Mobility, Global Blockchain, AI under our new business since 2018 to 2020. And we've been communicating their operating loss sizes for each of the businesses. But these new businesses of our Kakao affiliate is continuously recording operating profit, while some are very close to turning around and is really setting itself up as core businesses that really contribute to the growth and bottom line of Kakao and its affiliates. Kakao Japan has posted a exclusive growth despite aggressive promotion and have been in the block since 2019 and its size of the profit is also going up quite sharply. Pay and mobility also supported by solid growth. We're expecting an annual turnaround for this year. So in light of these situations, starting Q1 of this year, we've decided and we are planning not to disclose separately the operating losses from these businesses. Just for your information from Kakao's new businesses, operating losses in 2018 was €209,900,000,000 in 2019, it was €172,200,000,000 and in 2020, it significantly declined to €97,400,000,000 In areas that require more long term investment like AI Blockchain as well as Kakao Enterprise, which is going to require quite a bit of investment in its B2B business, just as we've mentioned before, we're going to do our utmost so that these businesses could become a long term growth drivers. So it's 10:30. We will take the final question and then end the earnings release. The last question will be presented by Stanley Yang from JPMorgan. Please go ahead with your question. Can you provide some color on the IPO schedule for your subsidiary? There's been some press reports, but it's a bit confusing. So if you could clarify, that would be helpful. And also, do you have plans to list your Kakao Commerce business in the long run? And also, after the IPO, I think the investors would have room to do some pure play. Wouldn't that not, I guess, dispose the attractiveness of Kakao as a target of investment? What would be your strategy to offset that? In terms of the schedule, Kakao Pay and Kakao Bank has submitted their preliminary applications in April and also they have set the IPO date within the year and have started on their IPO process. Bank and Pay, basically, their position is that they will go IPO at the most optimal period in light of the market situation and their shareholder value. So the current preparations are underway as per the schedule of individual or each of these companies. For entertainment in Japan, the businesses are currently reviewing the possibility of IPO. But in terms of any specific timing or corporate value, it's difficult for us to disclose or communicate anything at this point in time. For commerce, once again, as same applies here, there are yet no specific plans or timing with respect to the commerce business as of yet. Even if our subsidiaries go IPO internally, we're not concerned about Kakao's corporate value being eroded. The reason is because Kakao's stock owns a very strong platform. And based on that, we think that high growth on top line and bottom line will continue. On the partner business side, our advertisement business is continuing a very high growth rate, and we expect this rate to continue into the future. And also on the user business side, we started new businesses like emoticons plus, emoji plus and subscription services and which will continuously build on top of that. And underpinned by strong platform power that Kakao wields, we believe that we can continue on with sustainable growth with very strong pillars of partner business and user business. Also, in many of the future business and industry areas, we're going to be adding new businesses on our portfolio and we'll continuously discover and identify new growth drivers. And also, in terms of ways whereby we could further enhance the business value of Kakao, the mother company, and also improving the operational, I guess, structure and the governance of our subsidiaries and Kakao and its affiliates as a whole, we're continuously reviewing multiple options and really endeavoring towards a better performance. Thank you. That brings us to the end of Q1 2021 earnings presentation. Thank you for joining us. Despite your very busy schedule.