Ladies and gentlemen, thank you for joining the full year 2021 and Q4 business results call for Z Holdings Corporation. At this meeting, we will be using the presentation that's available on Z Holdings Corporation's website. Let me introduce the people who are here from Z Holdings. President and Representative Director, Co-CEO, Kentaro Kawabe. Representative Director, Co-CEO, Marketing and Sales CPO, Takeshi Idesawa. Director, Senior Managing Corporate Officer, E-Commerce CPO, Takao Ozawa. Senior Managing Corporate Officer, GCFO, Ryosuke Sakaue. Senior Managing Corporate Officer, CGIO, Chief Global Investment Officer, In Joon Hwang. First, Mr. Kawabe will explain the full year results for fiscal 2021 and Q4, and then this will be followed by a Q&A session. The entire meeting will be for about an hour and a half. This call is also being streamed live. Let me give you the details.
When you are watching, if there are any audio or video disruptions, please move to a different server from the bottom of the page. Now, without further ado, we would like to start the call. Mr. Kawabe, over to you.
Hello. I am Kentaro Kawabe from Z Holdings. Thank you very much for taking time out of your busy schedule today to join our full year and Q4 business results meeting. Today, I'll explain our business results for fiscal 2021 and our management policy for fiscal 2022. Please turn to the next slide. First are the topics of the full year results. Revenue was JPY 1,567.4 billion, and Adjusted EBITDA was JPY 331.4 billion, both reaching record highs.
I'll give a summary of FY 2021 and talk about the areas of focus for fiscal 2022 later in the presentation. In addition, in celebration of first year of integration of LINE, we announced today a commemorative dividend in addition to the regular dividend. Please turn to the next slide. This is a summary of fiscal 2021. The entire group has been working on reinforcing data governance as a top priority, as well as promoting PMI for business integration. We view the year as one in which we were able to implement a variety of measures, including achieving JPY 10 billion worth of cost synergies and promoting organizational and business restructuring. In addition to the promotion of PMI, steady growth in each business segment and improvement in investment discipline resulted in record consolidated results for the company.
By segment, both Yahoo! Japan and LINE Ads performed well in the media business. In particular, Yahoo! Japan Advertising achieved double-digit growth for the first time since fiscal 2013. In addition, collaboration between the two has progressed, with Yahoo! Japan beginning to distribute advertisements on the LINE News section from October last year. Moreover, sales collaboration for top-tier customers has been promoted, and Yahoo! Japan, LINE, and SoftBank have jointly started selling advertising package products. In the commerce business, the reuse business grew significantly, achieving the highest growth since fiscal 2013. In addition, cross-selling of LINE official accounts to merchants of Yahoo! Japan Shopping and PayPay Mall is progressing steadily, and the number of registered friend users has grown significantly. In addition, services that competitors cannot imitate, such as LINE Gift and Yahoo! JAPAN Mart, are expanding steadily as well.
In the strategic business, PayPay GMV has grown dramatically, reaching JPY 5.4 trillion for the full year. We also launched PayPay Card in December last year and PayPay Autopay in February this year. The cumulative total number of users registered for Autopay exceeded 1 million in the first three months after the launch of the service. Please turn to the next slide. This shows our consolidated business results for FY 2021. In Q4, the advertising businesses of Yahoo Japan and LINE performed well, and Adjusted EBITDA of the media business increased approximately 64%, making it a segment that grew significantly due to the effect of the business integration with LINE. In the commerce business, earnings declined due to investment for new shopping experiences utilizing LINE, but shopping GMV grew steadily.
In FinTech, although the release of PayPay Card and PayPay Autopay were delayed from the initial forecast, revenue in FinTech reached levels close to the revised guidance. Please turn to the next slide. From here on, I will talk about the points shown here in order. Please turn to the next slide. First is full year business results for the company. Please turn to the next slide. Consolidated revenue and earnings increased for the full year, with revenue recording a high growth of 30% year-on-year due to the effects of the integration with LINE and solid growth in the advertising business. Please turn to the next slide. This slide shows LINE's consolidated business results.
Growth was driven by the advertising business, and full-year revenue exceeded JPY 300 billion for the first time. In addition, profitability improved due to improved investment discipline, and the company achieved operating profitability for the full year, excluding one-time gains. Next page, please. This slide shows Yahoo! Japan advertising revenue. Full-year revenue was JPY 392.6 billion, up 11% year-on-year. We achieved double-digit growth for the first time since fiscal 2013 by capturing the recovery of demand in the market as a whole and improving our products, including the shift to a single platform. In particular, search ads achieved double digit growth for the first time in three fiscal years, thanks in part to ongoing UI improvements. Please turn to the next slide. This slide shows LINE advertising revenue.
Full year revenue was JPY 188.9 billion, up by 25% year-over-year, recording high growth for the second consecutive year. Display ads achieved 33.7% growth year-over-year due to round-the-clock display of ads and chat lists, the introduction of new products and the expansion of advertisers. Account ads grew by 17.5% year-over-year, recording double-digit growth for the first time in three fiscal years, mainly due to a steady increase in the number of accounts opened. Next slide, please. This slide shows the results of e-commerce transaction value.
Although the hurdle to surpassing the previous year's level was high due to the consumption tax hike in the previous fiscal year and last minute demand near the end of the government's cashless initiative, e-commerce transaction value achieved double-digit growth, reaching approximately JPY 3.6 trillion, up 10.9% year-on-year due to the integration with LINE and other factors. Please turn to the next slide. This slide shows the results for merchandise transaction value. Shopping business transaction value was approximately JPY 1.7 trillion, up 13% year-on-year, mainly due to the utilization of group assets. The reuse business also achieved the highest growth ever since fiscal 2013 due to spend per Yahoo! user and expansion of PayPay Flea Market.
This slide shows the major KPIs of payment and financial business. The full year GMV of PayPay grew to JPY 5.4 trillion level. Number of registered users exceeded 47 million as of April. In the Japanese QR code payment market, we have built a solid position. As for card and the bank business, we changed the trade name to PayPay Card and PayPay Bank. We would enhance the collaboration with PayPay for further growth. Lastly, let me talk about the major KPIs of the LINE's financial business in Japan, centering around LINE Securities and LINE Pocket Money. We are trying to tap into the potential financial needs through LINE and expanding steadily. As for overseas, we are offering the financial instruments which meet the needs of the local users and growing steadily.
In Taiwan and LINE Bank, we have increased the users up to 1.1 million since the launch of the service one year ago. At 75% of the users are in the 20s and up to 39 years old. We are increasing the customer in contact with the digital native generation, enhancing the LINE's strength and providing the convenient, innovative financial service. Next page shows the focus areas. Talking about the strategic investment and business results forecast. There are three focus areas. First is promotion of cross use and expansion of the group's ecosystem. Second is expansion of the commerce business, leveraging the strength of the Z Holdings. Third is expansion of the payment and financial business originating from PayPay. First, let me talk about the promotion of the cross use and expansion of the group's ecosystem.
As part of the initiatives to unify the loyalty program, T-Points used and granted in Yahoo Japan service were changed to PayPay Points. The strongest asset we have is Yahoo, LINE, PayPay. Linking those three points, we want to secure the biggest user base in Japan and build a foundation for the revenue and grow drastically at the three businesses of media, commerce and strategic business. Next is expansion of the commerce business, leveraging the strength of Z Holdings. We will continue to expand existing e-commerce business, but in fiscal 2022, we would enhance the strength of Z Holdings. In commerce business, our competitive edge is the collaboration with the LINE Social Graph and Yahoo! JAPAN Shopping and PayPay Mall. Utilizing the group asset, we will provide a new purchasing experience to the users.
We would enhance the services taking advantage of the characteristic of the Z Holdings and capture the diverse user needs so that we can increase the number of new buyers. Through those new initiatives, we'd accelerate the use of the e-commerce and increase the percentage of e-commerce in Japan. Next page. Finally, expansion of the payment and financial business originating from PayPay. A cumulative number of the registration for PayPay Atobarai exceeded 1 million after three months since the launch of the service. In comparison to the balance payment, a deferred payment, Atobarai has a higher average spend and the per capita spending is growing. Through the expansion of the PayPay Atobarai, the profitability of PayPay would improve.
We continue to increase the PayPay user in fiscal 2022 and to enhance the collaboration with other financial services so that we can build and expand the financial ecosystem originating from PayPay. In order to achieve our targets in the focus area, we have established the Chief Product Officer, the CPO, supervising specific domains. This is the second year after the integration. We will accelerate the decision making and business promotion with the focus on generating cross-sectional synergies. Next, let me talk about strategic investments. In fiscal 2021, mainly in the commerce business, we have executed JPY 22 billion strategic investment. In fiscal 2022, we plan to spend JPY 50billion-JPY 70 billion based on the investment policy of each segment. We would make the flexible decision-making according to the changes in environment and market condition to promote the three focus area. Lastly, our full year guidance.
We expect higher revenue and higher Adjusted EBITDA in fiscal 2022. By promoting three focus area, we try to achieve JPY 1.7 trillion in revenue. That is the double-digit growth. For the medium to long-term growth, we would expand the strategic investment, and we plan to achieve the Adjusted EBITDA of JPY 331.5 billion-JPY 340 billion. If the major events occurs, which would impact the revenue or Adjusted EBITDA, we will timely and appropriately disclose such events. That concludes my presentation. Thank you very much for your attention.
Mr. Kawabe, thank you very much. We will now go on to the Q&A session. If you have a question, please press zero one on your phone. When it's your time to ask a question and the moderator calls your name, please go ahead with your question. If you would like to cancel your question, please press zero two. Let me repeat this once again. If you have a question, please press zero one on your phone. When the moderator calls on you, please go ahead with your question. If you would like to cancel your question, please press zero two. We would like to now start the Q&A session. We would like to ask you kindly that one person should ask a maximum of two questions each, and please ask both of the questions at once.
If you would like to ask an English question, we will be interpreting it consecutively. Please give us some time while the interpreter interprets your question. Thank you. The first question is from SMBC Nikko Securities. Mr. Maeda, over to you.
Hello. Thank you for taking my question. I have two questions then. The first one, for FY 2022 and strategic investments of JPY 50 billion-JPY 70 billion, you gave out the breakdown regarding which areas you're going to invest into by segment. Can you give us more flavor on that? Is it going to be investing into sales promotions, or is it going to be CapEx related or personnel related investments? The way you're going to be making the investments is what I would like to learn about. That's my first question.
Secondly, for the equity accounted gains and losses, it went down somewhat in Q4, but can you give me the details of that? In Q3, I asked about this, and you weren't able to answer this, but for the equity accounted gains and losses, how far can you tolerate the losses and up until when? What will be the time horizon? And what kind of investment losses are you tolerating? Is another area I am interested to learn about. Thank you.
Thank you for your question. Our CFO, Mr. Sakaue, will take that question.
First of all, for strategic investments in fiscal 2022, by segment, for media, approximately 20% of the total is going to be allocated.
Details would be areas that we would like to put emphasis on is official accounts and social-based marketing or new development of new advertisement products, as well as hiring salespeople. Those are some things we have on mind. For media, personnel cost as well as R&D related investments are going to be made. That's the nature of that. Secondly, for commerce. We would like to leverage the assets of Z Holdings in order to proceed into new e-commerce areas. Those are the areas that we would like to invest into. LINE Gift already has been starting to expand, but quick commerce would be another area. Taiwan and Thailand, where LINE has strengthened e-commerce is an area that we would like to put emphasis on, as well as EC and sales promotion.
We, especially for Gift and overseas EC, we would like to acquire new customers. Sales promotion of related investments are what we are thinking about. Finally, for the last segment, strategic. More than half of the total of investments going into strategic is going to be for the acquisition of PayPay cardholders. We are currently offering benefits worth JPY 7,000 if they sign up. It's mainly going to be sales promotional costs that we're going to be investing in. For your second question about equity accounted gains and losses. In the appendix this time around, if you refer to page four, we have been showing a breakdown in detail. Please refer to that page.
Around the question until when we can tolerate the losses as a company, we haven't set a hard goal. However, whether it be PayPay or Demae-can, they are both currently on a growth trajectory. When you just simply look at the losses, it looks like they are contributing to losses. However, when you think about corporate value and the future prospect of growth, we believe it's quite substantial. We would like to look at the balance between the two. If it's a certain level of losses, we would like to tolerate that, especially for Demae-can. Because of IPO-related affairs, we would like to look at the valuations that they are able to get from the market as well. Those were my responses to your two questions. Thank you very much.
Thank you very much. Next, from Mitsubishi UFJ Morgan Stanley Securities, we have Araki-san.
Yes, this is Araki speaking. Can you hear me? Yes. I have two questions. For about the LINE ads. In Q3 and Q4, it's down, so I'd like to know the reasons for that. Probably through the integration with the Yahoo!, distribution of the news to the LINE News increased or started. So did revenue shift to the Yahoo! or display ads in Q3, Q4? It's down to JPY 23.9 billion from JPY 28.6 billion. So could you tell us the background? Also the question in relation to the LINE News. Second question is a detailed question about the commerce business, others.
In Q3 and Q4, I think it's up by more than JPY 4 billion from JPY 33.9 billion to JPY 38.4 billion. Was there any one-time revenue in Q4? Could you give us the breakdown of this increase?
Mr. Araki, thank you for your questions. Yes, you did ask a question on the details. From IR, we would like to respond to you as soon as possible. Is that agreeable?
Okay. I have another question. This is a major question that I have. Previously about the ID linkage, you talked about that, so between Yahoo and LINE. That cost of linking the ID, is that something that you explain in any of the presentation materials, and what would be the size of the cost?
I think it would be linked based on the phone number, so any additional comments or explanation that you can give us?
Yes. It's not the integration, it's linking the ID. That's what we plan to do. Yahoo! ID and LINE ID, which will be linked with each other. By doing so, we can link the services and data so that we can have more synergy. Last, in the last fiscal year, we started to prepare for this, and this fiscal year we'll continue to prepare, and we want to execute this or implement this as soon as possible. At the same time, we have to consider security matters and the protection of the personal information. We need to test, and we have to do the thorough system development, and that's what we are doing.
As of now, I cannot say specifically when we can execute this. Even if we start the ID linkage, there are 10s of millions of the users, so we won't be able to link them right away. We need to provide an incentive so that the users will be willing to link. We have to be very persistent in encouraging the users to do so. T-Point ID and Yahoo! ID, we do have experience of linking them. It took us several years to integrate mid tens of millions of the users. We have to be patient to increase the number of the linked IDs. That's what we plan to do. I hope you understand that.
Yes, thank you. Another question. Sales promotion and the personnel cost, you spend a lot in Q4.
Sales promotion JPY 51.8 billion. JPY 33.1 billion for Q4. In the shopping business and transaction, it's 10% YoY, so it doesn't appear to be increasing that much. When you spend more in the sales promotion, what would be the most obvious KPI? In which business did you spend the most?
Yes. This is Sakaue, CFO speaking. Yes. About sales promotion, until now rather than Yahoo Shopping, it's a new commerce. LINE Gift is where we enhance the promotion. Therefore, the total impact on GMV, that is something that we need to see. In terms of Gift for throughout the FY 2022, GMV tripled or more, and the users, cumulative number of users in the past year. Last year, it was 12 or 13 million, and it's now 24 million.
The cumulative number has more than doubled. Steadily, we are building the foundation of the LINE Gift. That's how we spend our investment money.
Thank you very much.
To go back to your questions, the first question and second question, if I may briefly answer to your questions. LINE advertising. Yes, the LINE Ads Q3 is usually a peak. Yahoo! conventionally Q4 was the peak toward the end of the year. Excuse me, toward the end of the fiscal year. The LINE comes at the end of the year. Because of the mix of the businesses for the LINE cosmetics and e-commerce, it's more linked to the e-commerce increase at the end of the year. Q&Q change or the increase is different from what is happening with Yahoo.
LINE NEWS related, whether the sales were taken by that is not the case. To your second question, as for the others, other revenue, there was no particular addition, but ASKUL, there's a difference of the accounting. In January to March, there was a big growth. Especially in the B2B area, order was very strong for ASKUL. That was the reason behind that growth. The state of emergency and quasi-state of emergency, depending on the cases, there were a lot of fluctuations for ASKUL. That was the background, and those are the answers that I can give you. If you need further details, IR can follow up. To your first answer, I understand about account ads Q3, Q4, Q3 peaking. During the holiday season, yes, you have a lot of campaign.
Last year, display ads Q3, Q4 were up. If you say seasonality, this time it's down. Last year's Q4, Q3, Q4 probably were special. If you say that, I don't really understand it because display ad usually Q4 is strong. Concerning that, in comparison to last year, Talk Head View gradually we increased the inventory to launch the new products. It's a mixture of those. Difficult to say. Maybe Idezawa-san can talk about the seasonal trends of LINE.
Yes. As you pointed out, Q4 year-on-year growth, but Q1 is down, as you pointed out. In that sense, the impression or inventory, the display expansion was what we saw. Compared to the previous year, the growth was limited, and that was more vulnerable to the seasonality.
Unlike Yahoo!, October, December, the ad posting display ads increases. It has been the past trend. That's those are the background. Thank you.
Thank you very much.
Thank you. Next is from JPMorgan Securities. Ms. Mori, over to you.
Thank you. I also have two questions. Both is associated with your guidance. First is regarding the media business and for advertising revenue and earnings and the way you're looking at the range in your forecast. So you look at pre-integration Z Holdings and LINE. How did you come up with this range? Can you give us more flavor on that? In addition to that, for Adjusted EBITDA, regardless of fluctuation in revenue, it seems you only have one single target. Does that mean because you want to invest by a certain extent, it's not going to be affected by a fluctuation of revenue? That's my first question.
Secondly is about the commerce business. If it's possible for the shopping business and your expectations for transaction value this year, can you divide it into shopping and reuse and the range you're anticipating as well as the internal-external environment? The economy is heading towards a reopening, so what is your view? That's all for my questions. Thank you.
Sorry to have kept you waiting. First of all, Mr. Sakaue, our CFO, will respond to your first question.
Regarding the media business and the range we have in our guidance, like last year, at the beginning of the year, we are not able to give a narrow range, and that is why we have this kind of breadth in our estimates.
Of course, as a company, we would like to try to reach the upper end as much as possible, but at this point in time, we hope that we could reach somewhere between this range. Whether it be Yahoo! or LINE, we have been able to grow both of the businesses steadily last fiscal year, so the starting point is rather high. Growth rates on a relative basis compared to the results from fiscal year 2021, guidance is relatively moderate. For EBITDA, as we pointed out, we will be investing into product development and this will lead to medium to long-term product development for the media business. For EBITDA, we're expecting, we have put together guidance that is at the lower range in this target. That's my answer for your first question.
For shopping and Yahoo! expectations, we would like to withhold breakdowns of guidance. From this time around, we have been giving out guidance on an e-commerce-wide basis because of Yahoo! JAPAN Mart as well as NFT businesses. These types of new areas of business are something we would like to leverage to grow the commerce business overall through cross views. That's why we're only giving out guidance for the commerce business this time around. For results, of course, like we have been doing from the past, it's going to be broken down into reuse as well as shopping. This will be ongoing. Regarding the reopening of the economy and external environment, Mr. Kawabe will respond to your question.
Yes.
Post-COVID or after the reopening of the economy, it has been close to three years that we have been experiencing COVID and e-commerce grew in a different way. It's been several years. We believe that the usage trends or have now turned into a routine by the users. Lately, Japan has been hit by the wave of digitalization, so the e-commerce ratio, I believe even after the economy resumes, will not slow down. Rather, I think it's going to move upwards. Not only for merchandise e-commerce, but for services e-commerce. Now, people will start to travel again as well as go out to dine again. So e.g., Yahoo! Travel, in our case, may be promising numbers-wise in the future. That's our view after the reopening. That's all for me.
Thank you.
If I'm able to ask a follow-up question, for the media business, the lower end of your guidance seems to be extremely conservative. As the market continues to recover, are there any company specific reasons why you are estimating this kind of conservative guidance at the lower end? And for commerce, I'm sure it's hard to come up with a range, but for the new areas of business that you will be engaging in, can you give us an update of where you are? And can you give us a bullish scenario and a bearish scenario, for this fiscal year, if possible?
For the first question and your follow-up question, Mr. Sakaue will take your question. And for the second question, Mr. Ozawa will give you an image of our thought process.
For the first question, company specific, negative apprehensions are not the case for the media business. It's just because the hurdle from the previous year is high, and we are not able to put together a good prediction yet. That is why the range is quite wide. That's all. For the second follow-up question, Mr. Ozawa will take that question.
Hello, this is Ozawa. For your second question, I will probably give you just an image.
For GMV that contributes to growth, mall would be a large part of it, as well as ZOZO, which are existing businesses, and also C2C, such as Yahoo! Auctions contributes too. It depends on the way we spend marketing expenses as well, but we would like to ensure that these businesses continue to grow. As for new businesses and what kind of contributions they are likely to make, massive numbers are probably not the case. We are not able to give you specific guidance, however, at this moment. Globally speaking, for e-commerce, it's not just for diversified EC, but for new businesses that we are currently engaging in. Although the performance is still small, we believe that we need to continue to invest, therefore, we will continue to invest.
For GMV growth, the mall part of our e-commerce business will be leveraged in order to get the numbers we need to achieve. That's all from me.
Thank you.
Thank you very much. Next from Citigroup.
Mr. Tsuruo, thank you very much. I have two questions. First, about the PayPay performance. Two questions. First, for this fiscal year, what will be the size of the loss? And the equity method number, PayPay and Demae-can, what would be the ballpark figure? And also in relation to that, PayPay's equity through exercising the preferred CB. You have not yet exercised this. When, on what base do you plan to exercise this? And could you give us just a hint of it? That's my first question.
Okay. Group company related loss and PayPay equity, Sakaue will answer to your questions.
Yes.
In relation to PayPay, yes, they are trying to make sure that they can acquire customers, and they are still going through trials and errors, so they cannot show you the clear guidance. We mentioned previously, before the acquisition operating income, excluding the customer acquisition in Q4, we were profitable. Concerning that, we'll continue for this fiscal year to maintain such status. The rest is that how to. Well, we have been collecting the fixed cost, so how to control the acquisition cost. We talked about Atobarai, but what do we do about it? That is something that we are discussing. That is something that we need to do. In terms of economics, if you can reduce the acquisition, we can be profitable.
I think we are building this business well. As for Demae-can, it is a listed company, so their guidance is something that we'd like you to refer to. Another is about the preferred stock of the PayPay. When we make all the decisions, we would like to disclose them. Right now, we are not disclosing that. Thank you for your understanding.
Okay. Thank you very much. My second question is about strategic investments of JPY 50 billion-JPY 70 billion for this fiscal year. Two questions concerning that. First, how much of that would be D&A? Could you talk about the JPY 22 billion of the last fiscal year? Because based on your business, software development, I think is the major portion. Because of that, amortization and depreciation, I think are included here.
Another is, say that it's JPY 70 billion, so that's JPY 92 billion in two years. Based on the JPY 500 billion for five years, you have only spent JPY 100 billion. JPY 400 billion in coming two years. You will need to spend a lot based on this calculation in coming two years. That means that the next fiscal year you plan to increase the strategic investments. Is this the correct calculation, or is this something that do I have any misunderstanding about those numbers?
The first question, Mr. Sakaue would answer. To the second question, Mr. Kawabe will, I would answer.
To your first question about D&A or depreciation and amortization. For fiscal 2021, it was not so much. I hope you understand that.
Sales promotion and logistics distribution, the delivery, paid delivery support were the major parts, so they were handled as OpEx. As for fiscal 2022, about 30% for the strategic segment, that is a PayPay Card. That portion to some extent, customer assets. We have our assets and that would include D&A. PayPay Card for, that would be, a part of that would be assets, so therefore there will be a depreciation. As for the remaining commerce, the sales promotion is the major one, so not much D&A. In advertising, media advertising development, depending on the development and the size, we need to develop the software, so that could be entered into the assets, but we are not disclosing the specific numbers for that. That's the answer for your first question.
As for the second point, this is Kawabe speaking. LINE and the former Z Holdings integrated, and the aspiration we had was to integrate our businesses so that we can take advantage of the profitability and make a lot of investments and to become the AI tech company, the first AI tech company in Asia and in from Japan. We continue to enhance our developments and continue to enhance our investments. The JPY 500 billion in five years that was a kind of a very good catchy slogan. Other, I think this led to the two misunderstandings, I'm sorry to say. One of them, as we explained, is that if you divided into them to each year, we are not spending JPY 100 billion each year.
As we develop products and, of course, sometimes we need initial investment or through the PDCA, we again spend a lot of promotion. In some cases, we need more promotion than the development. We cannot just divide the JPY 500 billion to each year. Toward the second half, I think we will spend more. At the same time, when we say JPY 500 billion in five years, we are trying to make the developments. For example, when users are being attracted, we want to spend more for the promotion. Of course, at the same time, we want to be efficient. We are not saying that we would spend all the JPY 500 billion in five years for sure. That's something that we'd like to communicate to you clearly.
The development and depending on the progress of the service usage, this overall amount of the investment will be flexibly reviewed. We have three more years, whether we spend JPY 300 billion in three more years, that is not the case. We'll be very flexible. Our basic idea is to have the development capability to become bigger. That is the aspiration of the two parties that were integrated. Thank you very much.
Thank you very much for your answers. Two follow-up questions. What Sakaue-san said, based on his answers. JPY 20 billion- JPY 30 billion out of JPY 50 billion-JPY 70 billion is the D&A, is that right?
Well, it's 30% strategic investment. If it was, it goes all to PayPay Card, yes.
We are thinking of investing in NFT as well, so it's not going to be as big as that. PayPay Card, in terms of accounting, depending on how the accounting is done, some of them will go to D&A and some of them won't. What Mr. Tsuruo said, I think that your number, I think D&A would be much smaller than that.
Okay, thank you.
Second part is about what Mr. Kawabe said. Yes, it's understandable you be flexible to make investments, but next fiscal year strategic investments, if you can give us some hints. For example, software development, what are the total expected spend for the software development? If you talk about that, I think we can get a good idea of the future D&A. Any hints that you can give us?
Thank you. Well, I repeat myself.
When you develop something, there is a design, and it takes time to develop, and you have to go through PDCA, and if it goes well, you need to spend more for promotion. Towards the second half, we need to spend more. That is the trend. That is the development of the services. Third year after the integration, next year, in comparison to first year, second year, there will be more things to do. That will be the general forecast. At the same time, 2023, fiscal 2023, the highest EBITDA, that is a commitment that we made. We have to keep that in our mind. Thank you very much. That's my answer to your question. Thank you. That's all.
Thank you. Next is from Okasan Securities, Mr. Okumura.
This is Okumura from Okasan Securities. Can you hear me? Yes, we can. Thank you. I also have two questions. First is about EBITDA and your guidance. Going back to that discussion. For this fiscal year's guidance, you were saying JPY 390 billion for next fiscal year. If it's possible for next fiscal year segmental profits as well as the direction of our investments, can you give us more direction about it? For strategic segment, are the losses going to be at peak this fiscal year and will start contributing to profits next fiscal year? That's my first question. Secondly, earlier there was a question about this, but for this fiscal year you were talking about making swift efforts around security. Are you doing something in particular?
Will the IT linkage be postponed into the second half of the year? For the impact from ID linkage, you were saying that impact will gradually emerge. For cost advertising, how have you accounted for the positive impact in your guidance this fiscal year? That's all from me. Thank you.
Thank you for your question. For your first and second questions, I, Kawabe, will answer your questions and Mr. Sakaue will also follow up on some points. For the first question, going back to the previous question that was asked, I responded, basically my response is the same as the previous question asked earlier, meaning five years, JPY 500 billion, which is our investment plan. We would like to leverage our development capabilities to take on various challenges, and we will continue to do so next fiscal year.
However, we will be investing flexibly depending on the circumstances we face at that point in time. For next fiscal year, it's going to be a special year and we are well aware about that as a company, and we would like to be mindful of trying to reach record high EBITDA in 2023. For strategic businesses or projects, during the five years, there may be some business that contribute to earnings, and for businesses like AI, they may require a longer time horizon before they start contributing. I think the contributions are going to vary depending on the business you're looking at. Regarding that, Mr. Sakaue, if you have anything to add to give more flavor, please go ahead. Well, for strategic investments and fiscal 2023, as a company, we will be rolling our midterm plan.
It really depends on this year's performance, which may largely change our expectations for next fiscal year. We don't want to be misleading if we communicate something now. We are not going to talk about it. For the strategic segment and the losses peak out regarding this as well, for fiscal 2023, we think the situation is going to not change that much compared to fiscal 2022. When LINE Securities as well as LINE Credit starts to contribute to earnings, that will be a little bit further ahead from a time horizon perspective. That's the answer for your first question. For your second question, ID linkage as well as services linkage beyond ID linkages, we believe that from PMI perspective it's really important and we have been preparing from last fiscal year.
For the revised personal information protection law, more than we expected, there has been a lot of late changes in law as well as a lot of changes in society sentiment. We would like to ensure that we are well prepared against the various security affairs in protecting information and so forth, so we are relevant. Therefore, in fiscal 2022, this fiscal year, at some point in time during the fiscal year, we wanted to go ahead with the linkage initiative. Cost or from a time perspective is something we're continuing to look at and have it decided on.
I think when Mr. Araki was asking a question, I talked about this, but after ID linkage starts, are we going to see a positive impact overnight with a huge inflow of users?
No, that's not the case. For each of the users, we'll have to have them consent to ID linkage, and we believe it's going to take time for the process to go through, and it's going to probably take a matter of several years. We hope you understand. Regarding the costs associated to this fiscal year for ID linkage, as far as I know, employees at our company are working on it, so costs are basically personnel costs. Mr. Sakaue will explain further.
As Mr. Kawabe just mentioned, for top line and effect of ID linkage, this is something that's to start going forward. We haven't accounted for bullish numbers. Also for expenses, development is going to be the main aspect.
Of course, we may be adding more employees or we may be outsourcing, by a certain extent, although negligible, we have accounted for it in the budget. The impact on overall performance is not going to be substantial.
That's all from me. Thank you very much for your kind response.
Thank you very much. Next is Yasuda-san from Ace Research Institute.
My name is Yasuda from Ace. Thank you very much for your presentation. I also have two questions. First is about PayPay, the campaign. You previously mentioned that you were successful in maintaining the customers, and the campaign ended in March. What has been the latest trend? Could you give us some hints? Second question is about commerce, the service transaction value. From now on, the economy is reopening. In the past two years or so, compared to two years ago, what is the current status of that? As for post-COVID, I think that you have accumulated your capability and, or in some cases, maybe there were some damages due to the pandemic.
Could you tell us the current status?
Sorry for the delay. For both of your questions, e-commerce and PayPay are the major parts. Ozawa-san will answer to your question.
About the PayPay campaign, you asked a question. For the merchants, it's a cashback campaign for the merchants. As we started to charge the fee, we started this campaign. Campaign is over, but still they are not going to disappear from PayPay as merchants. Of course, if there are no changes to the payment amount of the users, so merchants and the payment value is increasing steadily. As to your second question about the service EC, especially in the area of the travel.
After the pandemic continued for two years, what were the impact and what would happen now it's over. Ikyu during the COVID or pandemic, comparison to other companies, we had a very good number. People who want to take a trip but cannot go abroad, so instead they want to stay at a nice hotel or nice Japanese inn in Japan. That was the need. Ikyu is famous for having very high quality inns and hotels. They received a lot of reservations. In comparison to the pre-COVID timeframe, we did not see the major growth, but the decline, or it was about the same as the last year. We repeated that kind of situation in the past two years.
In comparison to other companies, when we do the interview of other parties, we hear that there have been a lot of reservations with Ikyu. Now after the pandemic, whether customers go abroad right away, that is not the case. Rather than the business demand, I think there is an increase of the casual trips. For travel, Ikyu is growing significantly. As for eating out, restaurants, yes, we had fewer people going to restaurants, so there was damage there. Travel is actually bigger in terms of our GMV. That is how we see the situation. I hope that answers your question. Thank you very much for the details. Now I understand.
Thank you. Next is from CLSA, Kiga-san.
Yes, please.
Hi. Actually, it's Oliver Matthew from CLSA. I have two questions. One, could you tell us how confident are you you will achieve JPY 390 billion EBITDA target in 2024. The second question, investment range for this year is very wide, JPY 50 billion-JPY 70 billion. If you only invest JPY 50 billion, would your EBITDA profit be JPY 20 billion higher? Thank you.
Thank you for your questions. For the first question, Kawabe will take your question, and the second question will be responded to by Mr. Sakaue, our CFO.
For the first question, we have been discussing this with other analysts on the call, but we will be investing into a lot of development. Prior to LINE's integration, we have been committing to March 2024's EBITDA target of JPY 390 billion. We are well aware that we have raised this target, and we would like to work hard in order to achieve it. If the management is well aware, we do believe it may be possible to reach this level. However, the world is changing and there's a lot more uncertainty in the world.
On the other hand, there may be a chance where we face more opportunities in the next two to three years. If there are any changes, we would like to swiftly disclose where we stand at that point in time. At this moment, it's not as if we're lacking confidence to reach our commitment. We don't expect at this point in time that we need to make necessary changes. The next question will be answered to you by Mr. Sakaue.
For your second question, let me take that question. For strategic investments, if they were to stay at JPY 57.5 billion, we believe that the EBITDA will reach our upper end, which is JPY 340 billion. If strategic investments were to reach JPY 70 billion, if we make all of the investments.
For strategic investments, if it's the lower end at JPY 50 billion, Adjusted EBITDA will be JPY 340 billion, presumably. That's what we're expecting now. As for if strategic investments were to be JPY 70 billion with successful investments being made, adjusted EBITDA will be JPY 331.5 billion, which is the lower end of our range. That's how we have put together our guidance. There is a JPY 20 billion difference, but EBITDA differences are now JPY 10 billion. Through cost reduction and other efforts, we would like to ensure that we are able to increase our profits. That is why we have set this target for the lower end. That's all from me. Thank you.
We are taking questions. If you have any questions, please push zero one. Next, from Nomura Securities, Mr. Masuno.
Thank you. This is Masuno speaking. I have two questions. Maybe it's a repeated question, but for this year's financials. Half of the strategic investment goes to commerce. The EBITDA guidance of commerce is not damaged so much, so it seems to be very conservative. Media EBITDA, I think is conservative. Maybe LINE advertising is a bit weak. LINE advertising, how do you see that? In the area of the strategic segment, there is a big deficit and also the adjustment deficit is down. It seems that the direction of the profit is not very clear. Including the adjustment, what is the current status of the business? That's my first question.
Yes, Sakaue-san will answer your question.
About the LINE Ads.
Talk Head View last year, the new products launch come to an end, last year it grew significantly. We had a very high hurdle to clear. Because of that, this is the range that we are showing as of now. Naturally, through the sales activities, and of course, we take various measures or initiatives. For example, a year ago, here in this meeting, we also showed a range like this. That is how we like to show the guidance at the beginning of the fiscal year. As for others and adjustments, please bear with me. Fiscal 2021, JPY 53.2 billion in red, and it's now JPY 40.5 billion. Concerning this, last year, after the integration, it was one year, in order to retain employees, there was a bonus.
After adjustment, the major difference here is the bonus based on the performance. For fiscal 2020, it was JPY 39 billion, and now it's JPY 40 billion, a little bit more than JPY 40 billion. It's going back to 2020. 2021 was different because of that bonus to commemorate the first year of integration. As for the strategic segment, EBITDA, Adjusted EBITDA, the strategic investments, we will be focused on the cards and LINE Securities and LINE Credit. The number of the users is increasing. Fiscal 2022, LINE Securities and LINE Credit, we have the large deficit, but we wanted to grow in these businesses. This is why we are having a larger deficit for strategic segment.
There was this sale of the YJFX, and without it should have been in red of JPY 30 billion. That would be the fiscal 2021 number without the one-time factor. Thank you.
Thank you very much. My second question about the next fiscal year. For this fiscal year, it was a transitional year and transition period preparing for the next year. Usually, with this type of number, I think you come up with those numbers for two years. JPY 390 billion, that is the target. Towards that, what would be the EBITDA number of each segment? The commerce, I think you have a lot of investments next year. In strategic business, the card and the financial, I think you would be investing.
If that is the case, media is the only one who would bring you profit, then that would not give you the JPY 50 billion plus. Which segment is going to have a higher profit? This is the basic direction that I would like to understand.
Yes. Mr. Sakaue, CFO, will answer.
Well, has to do with the strategic investments and what would be the allocation in fiscal 2023. Media, in terms of profit, the contribution of the media is going to be high. At the same time, in the area of the strategic segment, this year, the fintech business, new fintech business, and what would happen to that, will be the major factor, and that's what we are thinking internally. That's all I can say, as information that I can provide to outside of the company.
When you think about the medium-term, FinTech and financial, those are the areas that you really need to focus on next fiscal year. What do you think?
Yes. It depends on the acquisition of the customers and PayPay, what would happen to PayPay. Based on those, we would like to make our decisions.
Thank you. That's all.
Thank you. From MST Financial Services, Mr. David Gibson, over to you.
Thanks very much. Two questions. For this fiscal year, are there any cost synergies with integration of LINE that you've included in your guidance or do you think there are that you haven't included in your guidance? The second point is on the guidance itself. You now state that the group EC transaction value is JPY 3.92 trillion-JPY 4.29 trillion. That's a change in how you report the EC transaction value. Could you give us the same guidance number that you used previously just for the normal shopping EC transaction value, please? Thank you.
Thank you. Both questions will be taken by Mr. Sakaue, our CFO.
For cost synergies, first of all, in FY 2021, it was about JPY 10 billion of cost synergies that were generated, and we believe that in fiscal year 2022, we have accounted for the same amount in the guidance. For additional cost synergies, we are considering what we can do, but for that portion, we're not expecting to be that great, and we haven't accounted for it in the guidance. For the next year and how much cost synergies we're anticipating going forward, things that are on our mind is procurement related, such as servers. We could have a common specification so that we can strengthen our buying power. That's something we would like to work upon. That will be a depreciation associated.
It's not really going to hit our P&L. It's more going to be affecting our cash base. It probably won't immediately affect our P&L. Also, due to semiconductor shortages, as a buyer of servers, it's hard to strengthen your buying power, but that's where we are. That's my response to your first question. For the second question. There was a question about this, I believe, but for this fiscal year, due to LINE NFT and Quick Commerce, because we would like users to use a variety of our services, that's why we decided to set forth this guidance for group EC transaction value instead of our conventional way of disclosing. For the individual disclosures, we would like to withhold the disclosures from this time around.
Of course, for the results, whether it be for shopping or GMV at that level, it will be disclosed once we are able to generate the results. That's it for me. Thank you.
Thanks very much.
Thank you very much. Next, we have Mr. Maeda of SMBC Nikko.
Thank you. This is the second time that I'm asking questions. Just one question. Your view on EPS as a management, I'd like to clarify that. Through the integration with LINE, there was a major dilution, but at the same time, EBITDA is growing, but due to the equity loss, the EPS is not growing so much. In the growing phase, KPI is adjusted EBITDA, I understand that. From the shareholders' perspective, EPS is very important. There is an expectation that EPS is going to grow in the future. With the higher EBITDA, with the time lag, EPS, do you think EPS would recover or come back?
In relation to the equity in cost of the associate and joint ventures, if it enters into the recovery phase or collection phase, do you think that EPS will recover? How committed are you to EPS? If you can give us your way of thinking about the EPS.
Thank you very much for your questions. The EPS is down, and this is due to the integration, and that's something we expected. Yahoo! and LINE integration has a lot of potential, so we want to have understanding of the shareholders, and that's what we did. Concerning EPS, yes, of course, we have been aware of the EPS. We would make sure that this dilution will be recovered through the businesses so that we can improve the EPS.
We will keep that in our mind as we engage in our businesses. Thank you very much for your question. Thank you very much.
Thank you. Next is from JPMorgan Securities, Ms. Mori.
This is my second time around. I have two quick questions. My first one is, might not be a relevant question to ask, but regarding your guidance, the range is extremely narrow. Considering the size of your investments, I wonder if you even need to set forth this kind of range if it's so narrow. As a message, are you trying to say that you're definitely not going to see a decline in profits? Or are you trying to say that because you weren't going to be making substantial investments in the previous fiscal year, there was loyalty decreases, so you're able to exceed? Are you trying to say that this year you're going to invest a lot, so don't expect us to exceed or beat expectations?
What's your message? In setting forth this narrow range of guidance. That's my first question. My second question is for LINE. In the previous fiscal year, profitability improved quite a lot. For LINE, when you look at page seven, and when you think about this fiscal year, what kind of year is it going to be? Are we going to see continuous profitability improvement, or will you be able to maintain being profitable? Those are my two questions. Thank you.
For the first question. I will take the question and then Mr. Sakaue may follow up, and the second question will be taken by Mr. Sakaue. For the first question. It's the first part of what you were surmising that is relevant. Meaning, with both companies integrating while we grow EBITDA, we still have more capabilities to invest.
We would like to ensure that we invest well. At the same time, we would like to ensure that we will increase profits, especially on the lower end of our expectations. The backdrop to that is, we now know how to invest, and I think it's more about the recent economic situation, which is quite uncertain. Even on a global scale, it's pretty uncertain. Of course, we would like to respond to shareholder expectations. For the lower end of our range, we would like to ensure that we are able to grow earnings. That's the dialogue we're having between management. If the economic situation changes or if the environment were to change, we would like to consult our shareholders at that point in time. Do you have anything to add, Mr. Sakaue, for the first question?
No, I don't.
Okay, that was my response for the first question. Mr. Sakaue, can you take the second question, please?
For LINE, P&L, we're going to make more strategic investments in fiscal 2022 compared to 2021, especially for LINE e-commerce. We are going to make a deep dive into investments, so it's hard to give you a clear expectation about whether we're going to be profitable, definitely. We are not able to commit at this point in time. That's all from me.
Thank you.
Thank you very much. Next, Mr. Yasuda of Ace Research Institute.
This is Yasuda speaking. I have two questions. First question is about the marketing solution. How do you evaluate that as a product? In the past, from the sales target, I think you estimated the amount of the ads. So including that, the integrated marketing solution as a product, how do you evaluate that? Also, my second question: as of now, the external environment, it's complex. Supply chain, inflation, weak yen, and others. The server procurement, the shortage of the semiconductors were also mentioned. Those are the risk factors and probably there could be some tailwind. Could you talk about what you expect in terms of the external factors?
Thank you. About the first question, the integrated marketing solution, Yahoo and LINE, and also, we collaborate with it, with each other. Two co-presidents, Ozawa representing Yahoo and Idesawa representing LINE, they can give you the current evaluation. Starting with Mr. Ozawa of Yahoo!.
Yes. Fiscal 2021, we had a lot of experiments. In fiscal 2022, we also work on the various things. Manufacturers, we get the capital and when they make a payment through PayPay about a certain product, there will be some benefit of PayPay. But it's both online and offline. You can grasp the data. This is something that you could not do. You can link it to the purchase in the real physical store. This is something that has a lot of expectations. We are doing a lot of tests and getting a lot of results. Right now for each manufacturer, we are doing various tests and how to leverage this and how can we provide as a product.
That's something that we are working on right now. That's the current status. Based on your question, we will continue to have a high expectation, and we are confident that this will be effective and many effects. We want to make sure that we can have it in a continuous manner. That's something that we are working on.
Thank you. Idesawa.
I'd like to talk about the initiative at the LINE, and also make some conditional comments about the integrated marketing solution. The name itself is an extension of the Yahoo, I think. The reality is, as Ozawa said, there is an online and offline integration, and also the sales promotion market, and provide conduct the digital transformation of that.
In relation to LINE, the official account and LINE Points are utilized so that we can, we have been working on this fiscal 2021. We combine that with the Yahoo solution. That's what we have been doing. More specifically, in relation to the sales promotion, we integrated other teams, and also product planning and development is something that we are doing. Most recently, by combining the existing products, official account or Yahoo! various services, we are linking with them so that we can provide as a solution. Full-funnel solution is something that we are trying to offer. To your second question, the external factors and how would that affect our business. Yes. There are two different types of the changes.
One is the high material cost and the cost increase in relation to that, and another is FX, the very rapid depreciation of yen. Both of them, in our Z Holdings management meeting, we have checked on the recent movements and situation. So far, the high material cost and whether we are getting any impact, that is not the case as of now. As for the rapid depreciation of yen, we did various analysis. From the profit perspective, still, most of the profit is from the business in Japan, and also the revenues and expenses. From those perspectives, Thailand, Taiwan, Korea, in those countries, we do have revenue and other expenses, but from the FX, they offset each other. As a whole, there hasn't been a major impact. That is as of now.
As you point out, in the global economy, there are so much uncertainties, and especially the high natural resource costs. There could be, and there will be some kind of impact due to those uncertainties, and we need to reflect that in our expectations. As we discussed with you, with Ms. Mori, we want to make sure that we can generate the profit for fiscal 2022 to reassure our shareholders. We can still make some investments in those areas to reassure shareholders. That is the overall situation that I can give you.
Thank you very much for your answer. Now I think I have a good image of it.
Thank you. Since that, we ran out of questions, so we would like to conclude the Q&A session. Finally, I would like to hand over to Mr. Kawabe for closing remarks.
Thank you very much everyone for joining us for the call over a long period of time. Year one of the integration has passed for us as well as for our shareholders. There were many things that happened at Z Holdings for the past year. Although many things have happened, the management members of new Z Holdings are establishing a good teamwork and relationship.
Like I mentioned earlier, the situation in the world is extremely uncertain at this moment, but we would like to ride the waves of digitalization and make investments accordingly that are necessary for developing our services, so that even with this backdrop, our shareholders can feel assured to invest in our company as well as stay as our investors. That's the kind of management we would like to strive to achieve. In year two, which is fiscal 2022, after the business integration, we hope that you can continue to have good expectations towards us, and we will be mindful of the commitments we have made to the market as well as we run our business. We would like to ask you for your ongoing support. Thank you very much for joining once again.
This concludes Z Holdings conference call.