This is Negi speaking. I hope that you can see my screen properly. This is a summary of our fourth quarter. Net sales was up by 21%. Total operating expenses increased by 33%. Operating income was down by 39%. We have started applying a new accounting standard. Therefore, it is very difficult to year-on-year comparison. After that adjustment, basically, this is -15% negative profit. I would like to talk about the details later. At the bottom, at the constant exchange rate, it's 9% plus. The Pre-GAAP basis, same growth for net sales, but Pre-GAAP operating income was the same number as the previous year. The net income, why is this -89%?
Well, in 2021, in FY 2021, there were some extraordinary factors, including gain on sales of stocks of a sales company in China. There are some details, but also the valuation loss on foreign exchanges as well as venture company that we're investing into in overseas. There was again a loss on evaluation. Looking at the sales by region, this is denominated in JPY. Excluding the FX impact, we have seen positive growth in all the divisions. Europe and EMEA are continuing with a double-digit growth. This is the FX impact. As I have mentioned, excluding this, 9% increase in profit. Now, segment and region, if you look at both of these, this is again denominated in JPY, Consumer versus Enterprise.
Consumer grew in all the four regions, and the Enterprise also grew in all the regions as well as all the segments. As I mentioned before, new accounting standards have been applied and 100 revenue is deferred. This is why we have a negative impact, approximately JPY 2 billion negative impact on revenue. In terms of sales, something is not counted as net sales and now it is accounted for and that's reflected in the total cost. Minus, excluding that minus 13%, this is operating income down by 13%. By region, if we apply the same accounting standard, this is what it looks like.
Forex and accounting standard change, if you combine the two, in the end, what we see is operating income is JPY 7.7 billion - 16%. Yen is stronger again. There was a bit of a surprise, and this is -1.5%. Subscription SaaS business continues to grow steadily. You can see the number of active customers here. In terms of ARR, approximately JPY 700 million, this is there is no FX impact. Approximately JPY 700 million, JPY 691 million, and 29% growth. This is share by region. I will skip this slide and go to pre-GAAP before deferred revenue. This is again in yen. Excluding FX impact, we have seen growth in all of the four regions.
Looking at Japan, as I mentioned before, JPY 400 million worth of impact was generated by the new accounting standards, which means that net sales is pushed up by this. Even if we exclude this impact, still, in this fourth quarter, Japan performs pretty well. On this slide, you can see the pre-GAAP situation without the FX impact and Consumer, 11% growth. This looks quite high, but this was actually impacted by the JPY 400 million. That should be about 7% in fact. Still, our Consumer business in Japan is strong and Enterprise is 9% and the total growth is 9%. This is the balance for deferred revenue. This is just revenue by region. I'll skip this slide. This may be of interest to you.
Cost is increasing. Let me explain the reasons. Starting from the top. This is basically cost of goods.
For example, hardware cost of goods as well as the software assets, hardware cost of goods and royalty payment are the big factors here. Especially in Asia and also in Japan, our Cloud Edge and TippingPoint sales is growing, and this is impacted by that. IOP security company related expenses are posted here. Selling and marketing is also growing, expanding. Revenue is trending quite strongly, which means that variable bonuses need to be paid, and that's included in selling and marketing. That is why the number is going up. Similarly, salary and benefit is also increasing because company performance bonus is something that we have as a system, and that is included in this salary and benefit. Outside services, this is a mobile market revenue in Japan.
This is the sales fee basically that we pay to this market. This is the cash flow situation. As for the headcount, here, there have been other tech companies that have been doing layoffs, but we have increased our headcount by 162. We did not hire that greatly, and we have stopped hiring to some extent. If we enter 2023, when we consider the people hired so far, we have to consider productivity, and therefore, we will continue recruiting this year in 2023. The hiring pace will not be as high as in 2022. As for the extraordinary items, we have the exchange loss because of the changes in the exchange rate with the yen. Also, there's an IoT dedicated security company, and there's financing that was involved.
For the evaluation, there was some adjustment of our holdings that was carried out. We have also made three investments into startup companies, and there was a loss on the valuation of the companies. Those companies are still operating. In according to the Japanese accounting standards, we have to look into what we can do with it. Ultimately, we have, for the reevaluation, we have been looking at their P&L. To summarize, I would like to talk about this quarter's highlights. It is the highest ever quarterly revenues. Also, on a pre-GAAP basis, we have a recovery. Also in all the regions, subscription business continues to grow.
As for the lowlights, because of the new accounting standards, the operating income went down by JPY 2.4 billion, there was also the loss on valuation of investment securities. For the total of the four quarters, the annual results, we have this result for net sales. We have increased this. We have this final result of, in terms of profits, down by 23%. We would like to look at the shareholder return. In our case, we are looking at the basic policy. Up until now, we had looked basically into the payout ratio, but there is also cash on hand that is increasing, ROE has gone down. For the company, it's necessary to consider what the minimum cash levels are.
For the company, it's necessary to look at the working capital, the necessary. Within the capital, there are future costs related to deferred revenue, which needs to be taken into consideration. Therefore, future service costs which have not yet been incurred, needs to be calculated. Also, as described here, there are downside scenarios or unexpected scenarios. Perhaps a major earthquake may occur in Japan, or there may be some geopolitical event. We need to prepare for such events that may occur. Those are the points that take into consideration for the minimum cash levels. We have to have the appropriate cash level calculated. We have not completed this yet, but we would like to complete that calculation by the end of this year. We'll be announcing what we consider to be the appropriate level of cash.
We will look at how to carry out shareholder returns. We haven't finished the calculation yet, but we get the feeling that perhaps the amount of cash we are holding on to is excessive. As mentioned, we have to look at shareholder returns. We'll look at the net income attributable to owners of the parent company by 100%. We will be looking at increasing treasury stock by carrying out share buybacks. Currently, we haven't finished the calculations. We believe that there is excess of capital of about JPY 10 billion. We hope to carry out the JPY 25 billion of annual share buybacks. We believe that we expect to return up to JPY 50 billion through share buybacks in the near future.
The cash dividends for fiscal 2022, we calculate the net income. According to the calculations, it comes to JPY 151 per share. Of course, this is subject to approval by the ordinary general meetings of shareholders held in late March. The compensation for shareholders and what changes have taken place, up until now, we had focused on dividends, but from here onwards, we'll be focusing on buybacks. As mentioned in 2020, we had a treasury stock of JPY 25 billion and JPY 21 billion of dividends, and it was 154% of net income. For the time being, it will exceed 100% as we move forward with this. The guidance for the full fiscal year, in Americas and Europe, we anticipate a high growth rate, and there's also the SaaS business.
Because of that, cloud costs are going to increase. We believe that net sales will increase by 11%. Operating income will also increase by 11%. In regard to why net income is minus 16%, this is because in 2022, there was the sales of the shares of a company. We are looking at net sales increase by 9%. That concludes my explanation. With that, I would like to close off my explanation. Thank you very much.
Hey. Hello, everyone. Happy New Year's. I think a lot of people like me are very welcoming to this 2023 as the new start after three years of lockdown and after all this roller coaster change in 2022. I think, at Trend, especially not only for that, we are very welcome to 2023 and like to conclude 2022, because we believe 2022 concludes our transformation, first steps of our transformation. Let me go back to why Trend Micro took this transformation and why it's so important. For Trend Micro, our growth has always been followed by three factors. First, infrastructure change. Second, customer change. Or third, threat landscape change. Whenever those three change, we need to change, and then we can grow. For instance, the infrastructure change, such as virtualization and cloud, brought us a wave of growth.
The Customer segment emerged, such as the SMB customers emerged in 2006, brought us another wave of change. The threat landscape change, the internet, the email virus or the ransomware, those are the change that brought Trend Micro the growth. In the past three years, actually, all those three has changed. First, on the infrastructure side, because of the lockdown, our customer accelerated their digital infrastructure transformation. On the customer side, we're seeing that customer are opening up the new budget. That budget is invested in Security Operations Center. Security Operations Center before have limited budget, now they're expanding that budget. Especially before, Security Operations Center mainly are focusing on policy enforcement, such as firewall or authentication, access control. These are the main policy enforcement and is where the SOC budget spending on.
Now we're seeing that budget moving more and more and growing on both sides onto threat defense. We're seeing there's severe damage caused by external attack, such as ransomware or supply chain attack. That was causing a lot of changes. That's why we think this growth require Trend Micro to transform, not just modification, but transform the whole company into a platform company so that we can catch up to this great opportunity. According to the IDC, the overall SOC operations budget is going to grow to $26 billion, and the total cybersecurity will grow more almost $50 billion. For Trend Micro to attain this growing market, we need to transform ourselves to serve better for the SOC operation center and for the CISO meet their challenge.
Both because their biggest challenge right now is first, the attack surface is growing. No matter the digital transformation, the OT environment or the IoT or even the vehicle and the work from home, these are increasing the attack surface. The second is that cybersecurity becomes so crucial for any company that Excuse me? Sorry, I cannot see my slide. Because of that, all the boardroom are placing their focus on the cybersecurity and the CISO need to provide the visibility and the complete report to the boardroom. At the same time, their biggest challenge right now is because before all these solutions, cybersecurity solution are very silo. Therefore, combining all these products together, they are having the alert overload. They cannot deal with so many different alerts come from different cybersecurity solutions.
Trend Micro solution must move into a platform-oriented overall risk management platform. That's why we need to transform. The second challenge that we're seeing or the opportunity that we are seeing is cloud security. Before, customer are just moving their workload onto the cloud and have another server workload there. Now, they are moving to cloud native application. They develop all their new customer-facing application based on the cloud computing technology, which means that that new challenge will require cybersecurity to be integrated into their application development process rather than just add on to their workload security. That's why Trend Micro also go for a platform approach for providing a DevOps security platform for the cloud. Finally, even the consumer, they have so many different application. There's so many different devices.
Their main concern is not just their device security, but mainly their identity safety. No matter what application they use, no matter what device they use, they need to protect their own identity. Therefore, Trend Micro's consumer product also need to move on to a platform approach to provide the security for all the Consumer customers. We believe what Trend Micro transform into is a Attack Surface Risk Management life cycle. That require us build a platform, so that means customer can get on Trend Micro's platform, continue to grow, no matter it's new application, new devices or new application that they were developing. These are all the Attack Surface Risk Management lifecycle. In 2022, we complete this whole risk management cybersecurity platform.
We launched Trend Vision One and got a lot of great feedback and our customer base are increasing. We started testing our, what we call the CNAPP, the cloud application, native cloud application, security platform. We received a lot of great customers feedback, including very big application developers such as Sony. These are the excitement part that we feel that we concluded in 2022. We were able to not only provide threat defense, but a overall risk management platform. That is the Attack Surface Risk Management, and this is our zero trust architecture that provide no matter it's IT infrastructure, platform operation, or security operation or cloud operation customers. Moving on to 2023.
After we complete the first milestone for our transformation, we believe that next step for us is to make this platform even more efficient, and we can deliver to more customers in a cost-effective way. I think this for last year's Mahendra-san's report, you can see our pre-GAAP revenue is already growing and our on the pre-GAAP base, our profit margin is already grown back. I'd like to take this chance to explain, I believe why a lot of our investors are worried about Trend Micro's profit margin is declining. I think our profit margin was declining in the previous three years is because first, we were investing on the investment of this SaaS transformation. We need to convert our customer from on-prem platform onto the SaaS platform.
Obviously, SaaS operation is much more costly than the original software licensing type of business model. That was why, when our SaaS sales grow, then our profit margin gets squeezed. In starting from 2022, we already starting the project of reducing our cloud costs, especially when our customer number increased, our per customer SaaS cost was reduced. We will continue that effort to make sure that our cloud costs will be optimized. The second important cost increase is about because we focus very much in developing and growing our Enterprise customers. Obviously for Enterprise customer services, no matter the R&D people or the technical support people or the sales force, it require a higher skill set. Of course, that means that higher compensation and higher cost for that to grow this Enterprise market.
Starting from 2023, we believe we have the way to make sure all these new hire Enterprise people will be more efficient, especially after we have this platform way of selling. We can understanding better how we can get the opportunity that is ready in front of our customer in front of our salespeople. We know how to prevent the customer problem happen even before customer find that they have that problem. That will reduce our support cost. That's the second thing that we are doing for our cost optimization. The third one, of course, we do, like Mahendra shows that in the past three years, we did grow our headcount, it grow.
Not like the other tech company during these three years, they have very ramp up growth very much, and now they need to do the cutdown. Rather, we do have the growth, but it's about the same pace as before. It's just the same pace. In this year, we are not planning any big size or those layoff like other tech company did. We do want to make sure that we have what we call the zero-based planning, budget planning process and mentality. After three years, we believe the organization learn another way of operation, like video conferencing, like some of the event or how we held the event, or after the work from home, how most efficiency using the office building or reduce some of the office building need.
Also, we believe that Actually, there is new technology such as OpenAI or recently, a lot of people are hearing the ChatGPT. Those new technology will transform how we work and make our work more productive and providing more value to our customers. We believe all of this we call it zero-based planning process. We're planning for the future, how will we adapt for the future, and not just go back to last year or go back to three years ago how we work. I believe that is the best way for Trend Micro to step into this new era of Trend Micro as a platform company. That is my strategy for 2023. Thank you.
Please allow me to talk about the domestic business situation in Japan for the fourth quarter of FY 2022. My name is Arai. First, this is our new corporate logo. Please hold on a second. Starting from January, we have changed our corporate logo. The Trend message is emphasized here. We're going to reinvest cybersecurity. We have especially focused on Trend. The vision is a world safe for exchanging digital information. The environment has changed, and it has become more complex. Therefore, in regard to the cyberattack threats, we have seen an increase in threats. We want to protect our customers solidly. Furthermore, it's necessary for us to realize our corporate vision. Therefore, in order to express that, we have made a change in the corporate logo. Now I'd like to talk about the situation within Japan.
First of all, for our Enterprise business, the business and market environment is shown here. IPA has shown the 10 major threats to information security, number one is ransomware. We hear it every day about ransomware threats. There's the issue of ransomware security. There's also the weaknesses of supply chain which are exploited maliciously. There are supply chain attacks so that the surrounding companies are impacted as well. Meanwhile, there is a lack of security talent. This has become more and more serious. In regard to the systems that need to be protected, such as critical systems, this is increasing in number. Furthermore, more and more companies are taking advantage of cloud in a full-fledged basis. Therefore, it's necessary to have security expertise, but there's a lack of talent capable of carrying this out.
It's necessary to see how we can adapt and provide support in this area. Therefore, it is necessary to focus on this. Next, in regard to business towards the individuals, there was malware attacks, but there's also net fraud and leakage of personal information and attacks against individuals. There's much concern that has increased about this. In fact, incidents have increased in this area. We believe that that's the situation. In regard to information leakage or net fraud, we see, according to our research, that it has been increasing over the past several years. Therefore, it's necessary to respond to this and to support efforts in this area. Therefore, we need to have the resources available. We believe that it is necessary to take steps here.
With this kind of social background in mind, it's necessary to look at our business opportunities. We have the Enterprise business as well as the business towards individuals and the new business areas. For the Enterprise business, our CEO, Eva Chen, has already talked about the cybersecurity platform. In regard to this concept, we believe that this is a very important thing to focus upon. I would like to summarize the points. We need to look at the Attack Surface Risk Management. We have to find places which are vulnerable to attacks, and we must do risk evaluation and risk assessment. It's important for security to do that. It's necessary to look at IT infrastructure and look at security, as well as security for the security operations.
As the shift to the cloud is taking place, it is necessary to look at applications built on the cloud. We have to think about security, taking into consideration that situation. We need to have integration over a cybersecurity platform. It's necessary to take advantage of our threat intelligence and also our intelligence about vulnerabilities to see where problems exist and how they should be fixed as quickly as possible. This will be very important in the future. The second point is in regard to the area of new businesses. We have been talking about this for some time. We are now in the era of IoT. The market is expanding. In IoT, in addition to the existing IT arena, there are more security needs in this area. We have to look at OT and 5G, and also the connected car.
In these three areas, there's going to be increased demand for security on a medium to long-term basis. The third is for the individuals. As you know, we have Virus Buster. This is for PCs owned by individuals, and this is providing security against malware. This was the existing business that we've had. As already mentioned, from PC devices, we need to look at how to protect users. We have to make a shift in our thinking in regard to security, and we believe that this is beyond device security, and we want to expand and grow our business in this area. We have to have countermeasures against fraud, protect personal information, and protect privacy, as well as realize home network security. By providing all of this, we believe that we can provide safety and security to our customers.
Next, I'd like to report on our business progress in the fourth quarter, starting with Enterprise business. One item relates to the platform very strongly, XDR, Extended Detection and Response. Corporate adoption is accelerating. Specifically, deals, including NDR, with managed service, is increasing. This is partly due to the lack of security personnels. The companies need to respond to this reality. This is a type of service that requires insights, and it is in great demand. This actually grew 4.2 x compared to the same quarter last year, and we expect it to continuously grow. Secondly, cloud on self is very strong, especially sales through AWS Marketplace is very strong, growing at 75% year-on-year. Thirdly, SaaS-based security, especially for SMBs. We are seeing continuous growth in the SMB segment.
Currently, more than 70% of the customers, from the endpoint now use the SaaS model. This is how much the environment has changed, and we will continue to provide this to our customers. Now, SaaS-type security means that the latest functionalities can be provided without delay, making operation from the customer's perspective, much easier. The fourth bullet point is OT security demand. This is also growing over time, and it grew approximately twice, 111% compared to the quarter from the previous year, especially centering around manufacturing customers. We're getting a very good sense that this is growing. Number of deals is increasing. There are some challenges in promoting our business. Competition in the endpoint market is getting harder. This is the same as we reported in the last earnings call.
We believe that the situation, the approach of the customer is changing. Rather than protecting endpoint on a point-by-point basis, they want to think about the countermeasures for cybersecurity as a whole. This is why it connects nicely to XDR. We want to capture this growth and continue to deliver a strong message. Moving on to the progress of new businesses. As I said, OT security is showing strong growth. Together with the Ministry of Economy, Trade and Industry, we conducted a joint webinar for Guidelines for Cyber and Physical Security Measures for Factory Systems Ver. 1.0. Through this online seminar, we are trying to improve awareness. In 5G security, we have a new subsidiary called CTOne, and this subsidiary was established. This provides cybersecurity for 5G and local 5G environments, and post 5G high-speed communication standards.
Currently, at Fujitsu Nasu Plant, local 5G, drone, and security are combined for demonstration. Thirdly, this is the area of connected car security. There have been some exhibitions of automotive security, and we have exhibited at these exhibitions. We are getting good response in this year. In the connected car, importance of security should not be an add-on. There is a movement to embed it into the process. We have also issued the Automotive Cybersecurity Threat Prediction Report. This is something we're doing on a regular basis. Some overseas topics. OT security, this is one of the new businesses, and there we have TXOne Networks, which is one of our affiliates. The OT Security Executive Briefing Center was opened in the head office.
Here, we conduct demonstrations, we share best practices so that industry leaders and supply chain manufacturers can share insights and experience from global perspective. There is another topic related to TXOne Networks. A study session for the media on the latest security trends in the semiconductor industry was held. SEMI E187, this is the new Semiconductor Manufacturing Security Guidelines, which was issued. Based on this, we have explained the specific countermeasures. Moving on to the Consumer business. For the fourth quarter, as I stated before, beyond device security. Virus Buster Total Security is another name. This grew by 52%. Again, antivirus, virus, malware countermeasures. From there, we are moving towards protecting the information. We are conducting the internet, a fraud, awareness promotion together with the Metropolitan Police, as well as Prefectural Police.
We are regularly holding a joint awareness event. We provide supports and services for our customers, which we are enhancing. For example, Rakuraku support for smartphone users. This is support that is provided by chat. Number of users is increasing. We are also conducting test marketing for security posture diagnosis, as well as advice. We interview the customers first. We will look into to what extent the email address of the customer is used or available on the internet. What kind of risks these customers would be exposed in the future. We are getting very good response. We are hoping to increase the number of implementations of these services. As for device security, We are seeing continued growth in the usage. Over full year, we had some challenges.
PC demand increased during the pandemic. After that, the sales of PC decelerated very quickly. Since we provide software-related businesses, there was some deceleration on our part. We will continue to increase the attach rate, and also continuously increase the product value in order to further promote implementation, introduction of our products and services. This is the countermeasure that will be continuously worked on. Moving on to the Consumer business overseas. Maybe I should talk about the third bullet point. The customers are continuously using our services, and we are seeing growth in the mobile-related application business. Depending on the region, there are some different characteristics. In the U.S., Mac Windows-related utility is growing. In Oceania, in both GMS and online business, we're doing pretty well.
In Asia and Africa. It's unique to this region, but we are growing through collaboration with telecom partners in the Consumer segment. Last but not least, I would like to talk about the Cybersecurity Institute. First of all, I would like to talk about Transparency Center. 138 inquiries were received by this center in 2022. Most of them were related to procurement and a security checklist, as well as development process. Cloud is being used, environment is changing, and there are many inquiries coming in about security mostly from government as well as critical infrastructure operators. There is also this is probably in response to the new regulation. The next one is Threat Intelligence Center. Second item. We are trying to remove electronic payment fraud.
This is a joint effort with Nagasaki Prefectural Police Headquarters. This is just an example. We jointly prepared flyers and distribute them in big home appliance stores and convenience stores, as well as mobile phone stores within Nagasaki Prefecture in order to improve awareness about these frauds. This is also an ongoing continuous effort. This is another item related to Threat Intelligence Center. Support website analysis for fake shopping websites. We received a certificate of gratitude from Hokkaido Police. We conducted analysis, and the results were shared with Hokkaido Prefectural Police, JC3, in order to raise awareness among the users and prevent damage. Next one is Knowledge and Education Center. We conduct security education. We collaborated with SBI Shinsei Bank on security personal training.
Last year, in August and December, we have trained a group management of cybersecurity personnel. After that, within this bank, on their website, they stated declaration for cybersecurity management. I understand that the fonts are too small for you to read, but you can find this probably online. SBI Shinsei and Trend Micro will continuously collaborate on security persons training, as they have announced on their website. That's all about the business in Japan. Thank you very much for your kind attention.
My name is Tanaka of Mitsubishi UFJ Morgan Stanley Securities. Can you hear me? Best of regards. There are three questions that I'd like to ask, and if you could briefly reply to each, that would be appreciated. First, in regard to pre-GAAP in the APAC area, there was, without the Forex impact, plus 9%. In Q3 and Q4, it's single-digit growth. You are growing, so it's not a problem, but it seems like it's a weak growth. How do you anticipate the future?
Thank you very much. This is Negi, and I will reply. Last year, to last year in 2021, there was large business in EMEA, but in 2022, there were not so many large projects, and there was high ROS.
I see. Considering these levels, then you'll be increasing and can we expect double digit growth or single digit?
Well, in our assumptions, we have shown this.
The second question. For this fiscal year's plans, you've talked about net sales and profits. You're looking at 2021, JPY 213.7 billion, which is a plus JPY 21 billion. Do you have a breakdown on how you plan to increase?
The wages are going to be high because for 2022, it was about 700 persons. We'll have a full year of wages to be paid, so this will increase things.
Mr. Habara, is there more additional points?
Also, there's the cloud costs. We're enhancing our SaaS business, and so therefore, for the wages, as Mr. Negi has mentioned, there's going to be an increase. There's also the SaaS and cloud costs. This should represent about 60%-70% of the total amount.
I see. Thank you. Third question I have, this time for the fourth quarter. The pre-GAAP margin was 29%, you've got quite a recovery. I think that's a good thing. In regard to have this reflected in the P&L, what would be the timing? I think that it's going to be on a long-term basis, how should we look at this? The timing, that's difficult. For pre-GAAP and post-GAAP, it's just a matter of how you look at it. In the case of pre-GAAP, there were the hardware sales that was high and there was the deferred portion. On a quarterly basis, both for pre-GAAP and post-GAAP, this has increased, and we believe that there'll be recovery from this year. Mr. Omikawa, do you have any comments? That's a tough question to answer.
However, as Mr. Negi has mentioned, this may sound rough, on a pre-GAAP basis, operating income should be focused upon, and then after deferring, then there is going to be the operating income that appears on the accounting. In this regard, on a pre-GAAP basis, if we're going to try to increase the operating income, then this will lead to the post-GAAP increase. There's a time lag. It should be at longest six months. I see. At longest it'll be six months, and you are planning to increasing the net sales by 11%. One thing that can be said, there's the first half and the second half, and it won't be completely the same all four quarters, and I believe that we should be seeing a greater improvement.
I see. Thank you.
Well, if I may add to that, as Mr. Negi has mentioned, on an annual forecast basis, in Q1, it may be tough. As Eva's materials indicated, there's going to be a sales kickoff which was not held last year. This was being held for the first time for a long time. We didn't have that cost last year, but it'll occur this year. This will be a major factor. After reopening, since summer of 2022, there had not been any business trips in Q1 and so on. Administration costs would increase in our Q1. The cost would increase, so it'll be difficult to generate profit in Q1, but we'll generate more profits in the second half. It can be anticipated that that will be the case.
Thank you very much. In regard to the kickoff meeting, how much did it cost? Negi-san?
We're paying this. Consider this as being several hundred million yen. Thank you very much for the question.
When your microphone is unmuted, please state your affiliation and your name before asking a question.
Yes. My name is Tsuru. Thank you for this opportunity. First, about profitability. It's flat for this fiscal year and better in the second half. The next fiscal year, if the profitability is going to increase, where do you see a big leverage or big factor for improvement? As Eva mentioned, I know that you will be doing certain things, but can you please talk about that perspective first?
Margining will improve due to productivity improvement of individuals and also our cloud cost. I think these are the two different factors that. As Eva has mentioned, we will make main efforts to control those costs.
I have two more questions. If you cannot improve the profitability, if you cannot maintain the current business level, will you abandon the policy of no laying off?
As a company, what we want to do is follow this theory. As Eva said, we're not doing this in a large scale. We don't need to. In the end, we will have to see what happened and then respond to the situation.
I see. Thank you. My third question, if possible, could you please answer the following question? Management compensation scheme. You have various indices or metrics, and how are they connected? In other words, proxy statement is usually issued, so I would like to know how this is decided. I understand that you are focused on shareholder return, but performance is not as good and long-term investors require certain things. Is the company really aligned to those requirements?
It really depends on the management zone, but, there's options and also, basically if the stock price doesn't go up, our revenue doesn't go up, and also the performance-based bonus. First is a pre-GAAP sales increase that is reflected and also the subscription service growth, this is also reflected. If a pre-GAAP profit doesn't go up, that is not really reflected, or if a certain level of growth is not achieved, we cannot receive this. I believe that our view is very much aligned with those of our long-term investors.
Yes, I understand. Thank you.
Thank you very much for the question. Now we'll unmute the next person. If you're unmuted, please tell us your name and company.
My name is Hasegawa, Morgan Stanley Securities. Can you hear me? There are three major questions I'd like to ask. First, for the net sales of 2023 in Japan, according to the material, I see the assumptions, and in Japan, there's going to be a single-digit growth. America will be 10%, and you also have the other growth rates. In America, there's going to be macro impacts. For this fiscal year, it seems that the outlook calls for further growth. What are the assumptions that are the basis for the net sales forecast? Do you think that the macro impact will not be so high, or you're planning to increase sales price?
Could you tell us about your thoughts in regard to the guidance for net sales? Yes. There is some macro impact that is taken into consideration, but as Eva has mentioned, we're providing much more wider services than before. Therefore, we have a bigger budget. We are looking at the negotiations and the pipeline and our budget. Based on that, we provide the outlook. What about the impact of the price increase? The price increase in Japan will be after April. Even if the price increase takes place, even if it announced on January 1st, there's still a period of time. In case of new negotiations, that new price will be applied. The impact will probably appear from the second half.
It doesn't mean that the increase will take place just because of the increase in price. Thank you very much. Next, in regard to expenses. In regard to the wages, how many are you assuming will be recruited? Last year, it's a net increase by 650, and we believe that it'll be less than half of that. It'll depend on the macro environment and what conditions exist, but it'll be less than half of the last year's number. Next, in regard to the profit rate for 2022, in regard to per capita compensation, there seems to be an increase. What is the compensation per head, your thoughts on this? In regard to 2023, what is your forecast for per head? In regard to the expenses per head, there is a combination of different countries.
There are countries where wages are high and others where the wages are low. When regard to a per capita basis for the overall company, that's difficult to say. At any rate, we're looking at productivity shown over the past two years and various factors are looked at, and we focus on those points. We believe that we can anticipate greater productivity. To follow up, for 2023, when we look at the case of other security companies, if we look at the increase in wages for 2022, can we assume that for 2023 the things will be more stable? It's hard to say, but about the other companies, but when in regard to our expenses and also the recruiting plans, it might be about 300 persons recruited per year.
In regard to how that will increase the situation can't really be said. Does that answer your question? Yes, I understand. Thank you. This may be very soft, but you were asking from 2022 to 2023. In the case of other companies, there's an increase in the wages and perhaps, you were asking if there's going to be a major increase in the wages like other companies, but there is not going to be such a large increase. There is some inflation. 100 basis points may increase because of inflation factor. In regard to 30% or 40% increase, we do not believe that that will take place.
Thank you. The growth rate per head will be more stable in 2023 than the growth rate in 2022.
There is a drive. In 2022, as already explained, there was the Asian R&D expenses and we had to increase because this was lower compared to the other competition. There was no other factors in 2022. If we consider that there's nothing that we need to catch up to, then, we don't. Overall, we're not probably going to see an increase rate that we had seen in the past of 10% or 20%.
I see. Thank you very much for the concise answer.
Thank you. I will unmute the next person's microphone. Please state your name and affiliation.
Yes, this is Sato, Jefferies Securities. Can you hear me?
Yes, we can.
Thank you. I have three questions. First of all, about the shareholders return. You started the share buyback program. Historically speaking, and also speaking from the previous earnings call, 70%, very high payout ratio has always been maintained. Share buyback is basically Our shareholder return is covered by this high ratio, as was explained in the last earnings call. Now, you are adding share buybacks. Is this because on the request from your major shareholder? Is that why the company changed its view? That's my first question. Thank you.
If we continue to have high level of cash, well, this was pointed out from before, but small sized share buyback, was done in the past. According to the logic that I explained, today, we believe that we have to explain this more logically. If the return is increased, of course, we had a conversation with, major shareholders and the dividend is, high, payout ratio is not bad. If we want to do this, a share buyback should be for the capital efficiency improvement. In order to reduce the number of shares, this is the opinion that we received from the shareholder. In the end... Well, the dividend will continue as is. We are not trying to reduce the dividend. We're not changing the focus, by the way.
I understand. This was based on the discussion with your major shareholder?
Yes, that's correct.
I understand.
I think, I also want to mention that before we consider all these shareholder returns. During our transformation, we're not sure how is our SaaS model's profitability going to be. There, like I say, in the past, there was lots of transformation, including the Consumer products. It transformed from the PC base to a lot of device-based revenue and also the channel transformed into a mobile channel. The profitability and all of this are different. We are not sure what this model will be. Before, we are not very aggressive in all this capital restructuring. Now, I think, we're more confident that we have a whole. We know what is the new profit model for SaaS, and we have the confidence that even in the SaaS model, we can continue to generate cash flow.
That's why we were agree to have this, bigger, say, buyback program or shareholder returns.
Okay, thank you. Second question. Thank you. The second question about this fiscal year that just finished. There was a downward revision in the third quarter, including operating income. In the fourth quarter, I think the landing was actually even lower than that. I did get the impression from covering your company that it may happen, but downward revision guidance and also the fourth quarter as well as full year number, it looks like there was a gap in terms of profit again. I want to understand what didn't work. Can you please maybe talk about the factors behind this?
Level of a deferral, we could not really estimate. We can talk about pre-GAAP
The hardware sales may be increasing, and at the end of December, there was a big sales and there was a deferral increase. That was one factor, as Habara-san mentioned. Another factor was, we expect the net sales to hit a higher level. Maybe we were a little bit too optimistic. Current pre-GAAP is in line with internal expectation, but we were expecting it to be a little bit higher than that. Oh, I see. Maybe we should talk about the specific numbers. As you have mentioned, Sato-san, JPY 37 billion, this was run revision on the 2nd of November, two weeks before the Q3 announcement. The landing was JPY 31.3 billion, which means that this was down by JPY 5.6 billion.
The biggest factor was, as Negi-san said, the revenue recognition difference. This was big in Q3, but the JPY 2.4 billion, a bigger number, was posted in Q4, which was not expected. This is the biggest factor. Then, as I mentioned, in terms of cost, a hardware ratio is high in the sales mix, so cost of sales. Cost of sales, this was quite big. Revenue is basically deferred, which means that the profitability has to suffer as a result of that. This impact was going to be about JPY 1.0 billion-JPY 1.5 billion. In terms of product mix, we didn't expect the cost to be so high.
Another revenue recognition perspective, going back to the first point, when Q3 earnings announcement and revision was made, there was a lag of one week in between. Revenue recognition impact was about JPY 800 million, as we explained in the Q3 announcement, but this was not reflected in the revision. From the start of Q3, we already knew that we were behind the plan, but it's mostly about the revenue recognition. That is why in the end, we did not really fill the gap. As Negi said, on a pre-GAAP basis, it is according to expectation, but the net sales we didn't really achieve. This is basically due to the revenue recognition. Excuse me. What was JPY 800 million? This is the Q3 recognition impact. Oh, I see.
I remember you saying that. We made a downward revision, After the downward revision, there was something else that happened in between this period. Q3 revenue recognition was not reflected in our JPY 37 billion forecast. Q3 and Q4 revenue recognition was basically not in line with our expectation. Thank you very much for your very detailed explanation. That's very clear. Additional questions. What about guidance of this fiscal year? I understand you're using new accounting standard, and the gap in revenue recognition, well, will not happen because this is going to be apples to apple. Yes, exactly. It's going to be apples to apple compared to the previous fiscal year. Okay, I understand. You are always focused on net sales rather than profit. The last term, you had maybe FX problem and the revenue was suffering.
This new guidance, are you paying extra attention to the profit this time around? What do you mean by that question? Well, Negi-san, you say that the net scale is more important than profit usually. In the previous fiscal year, you had FX and some assumptions that did not work. For this fiscal year, I feel like you may have paid more attention in terms of planning the profit. I just want to check my understanding is correct. Well, as Eva mentioned, in the last couple of years, we have hired people and done many things, so investment will continue. Productivity improvement will also happen, which will help push up the profit. I see. Arai-san, I have a question to you. Guidance for Japan, don't you think this is too weak?
Cybersecurity, that is the theme that people are shifting to. Why only 3% or lower end of the single digit? Why not a double digit, but low end of the single-digit growth? Arai-san, can you please answer this question? Well, rather than the low end of the single digit, Japan is always lagging behind the European and American markets, as you may know. This year, we understand that there are many opportunities. On the other hand, as we found out, well, shifted to cloud will mostly happen in 2024. In 2023, we have to get ourselves ready, and we need to implement midterm plans or measures. That's what's important for FY 2023. As I have mentioned before, we have to strengthen the team. We need to be clever with this.
We are also planning for new services too, and it will take time for these new initiatives to take root. In terms of profitability, internal organizational structure is already being worked on. It's not about headcount reduction or increase. We are actually talking about transforming our business into something that is suited to the market, and that will take some time. Please understand it that way. Maybe I'm giving a more conservative point of view. I understand. Direct sales being increased and the platform solution and XDR to promote that, maybe direct sales is better. Shifting people to more to direct sales rather than using agencies or distributors. Well, one of the things that we are trying to do is really understand the end user behaviors and reflect that into our activities. That's really important.
We're talking about internal changes, transformations. We have a partner business as well, and we have been doing this for decades. This is still important to us. The mechanism for that is already in place. How to contact the end users, well, we want to increase the contact points, and that's how we are changing our activities. I hope that answers your question. Yes, that's clear. Thank you. We intend to promote this strongly. Thank you. That's all for me.
Thank you very much for the questions. Now we will unmute the next person. If you are unmuted, please identify your name and company.
This is Kikuchi. This is from SMBC Nikko Securities. There are three questions, and there's some overlap with previous questions. First of all, Mr. Negi, around the tenth of November, when you made an explanation about the results for the new fiscal year, you explained about the points, but you've seen that it's lower than your outlook. After you made a downward revision, the numbers are lower. It seems then the goals for the new fiscal year has changed, and there is the new accounting system that has already been carried out. When it comes to the profit outlook, it seems that it has gone down compared to the past. It's just a slight increase, and it may not have been precisely calculated. Are there any reasons for this?
I'm sure that, your feeling about this has not changed. Are you just being conservative? That's the first question I have.
Thank you. In this regard, one thing, before November, for the first half, we were going smoothly, but the external environment started to influence things in the second half. With that, expenses were incurred. This year, we will have those expenses reflected for the full fiscal year this year. If we strive for higher productivity, then things could get better. Rather than error in our outlook, we want to look at it. As we see increase in net sales, then the profits will also increase, and we will be able to achieve more continuity. Rather than generate profits by reducing expenses, on the short term, we may lose out on opportunities. For the profits, I believe that we have reached one turning point.
You say that it's a turning point. What do you mean?
For two years, we see a decrease in profits, and I believe that it's a turning point from that trend.
I see. The second question. This came up in the discussion about Japan. When we look at the results in Japan over the past several years here in Japan's business had supported your company, especially a little while ago. Over the past five years, the shop, there were sales, and the Consumer sales were pressed up by JPY 10 billion in four years, which is quite a large number. On a quarter-to-quarter basis, it had been solidly increasing. From last year, from the first quarter to the fourth quarter, it's become more flat and on a quarterly basis. Perhaps you've peaked out despite the impact of Docomo stores. It seems that way at any rate. For the Japan guidance, you have this growth outlook.
For the Consumer mobile channel, is it possible that you are assuming that there will not be much growth? There is the docomo shops and the, some, shop operations that have been acquired. Do you believe that in your guidance, you indicated the Consumer business may change from here onwards? Mr. Arai, what do you think? For the Japanese. We are looking at the corporate market as well as the overseas market. What about the mobile business, Mr. Arai? As mentioned, in regard to the mobile shops, there's more integration taking place. There is reorganization that is taking place, and there are risk factors there, we believe. For the mobile demand itself, we don't think that this will go down. Under those circumstances, we are dependent on device shipments. I think that there's a direct impact.
Meanwhile, in regard to what we're trying to make an effort on is, as mentioned, we're looking at beyond device security. We're not just focusing on the device itself. We're looking at how to provide added value to our customers, and that's how we intend to carry out our transformation. For our customers, we want to offer the right type of security in the Consumer business as well. When we look at this, it may seem as if the mobile shop business is flat, but for this business model, there's several patterns, and it's difficult to answer what will be the case, but that's an aspect that needs to be taken into consideration. I see. Well, I'd like to ask about details later, but the third question, in regard to return to shareholders, I'd like to confirm about how this will take place.
You mentioned about JPY 50 billion in excess capital, and you'll be looking at JPY 25 billion for buyback. After calculations, we don't know when, but there may be another JPY 25 billion buyback. Starting from next fiscal year, from fiscal 2025, it is the 70% payout ratio, and then there's the buyback. Aside from the dividends, you'll be looking at the excess capital as of December, and if there's hardly any change, then after the end of the fiscal year, about 30% of net income will be for buyback and 70% for dividend. From the profits, you'll subtract the dividend portion, and you'll look at the 30% buyback. When you announce the fiscal results, the numbers will be realized then?
In regard to our working capital and in regard to other aspects that cannot be calculated, we don't know specifically what will happen. In regard to buyback, we'll be looking at the payout ratio, we'll increase the efficiency of the balance sheet, we're looking at JPY 25 billion. For the remaining JPY 25 billion, we'll look at the excess capital situation, we believe we should be able to do that extent. We will look at how much capacity we have by calculating, we'll explain about it. I see. Naturally, as a company, there may be other factors that cause increases. If we, I think that we are able to move forward on the 100% basis for the time being.
There's a period of adjustment, and you'll be looking at what kind of appropriate level of cash level is necessary. Once you make the adjustments, you're not sure when that will be concluded. Once that is concluded, for working capital or M&A capital, you'll need to have some amount. Otherwise, 70% will be for dividend and 30% for stock buybacks. That's the nature of the announcement for return to shareholders. Yes. That's the format we're thinking about. For the remaining $25 billion, when we consider the $50 billion, let's say that there's $25 billion and then the remaining $25 billion. It seems to be quite easy to calculate, but is there any barriers to the calculations?
Well, we have to look at the balance sheet of the parent company and the excess capital as of the end of December. We have to look at the surplus situation there. To explain, Mr. Kikuchi mentioned about dividends from the subsidiaries that can be used. According to corporate law, that cannot be done. We have the JPY 25 billion. This has been decided on the board of directors meeting. For the JPY 25 billion for dividend, this is on a non-consolidated basis. That will be the limit as for our surplus, and we will not be able to do more for 2023. Even if we have the dividends with the subsidiaries, we have to wait until February of next year before we can be able to use this as surplus capital.
For the current dividend and the buyback, no further efforts can be made for 2023 because the balance sheet for the non-consolidated results is not clear yet. For the remaining JPY 25 billion, it will be something that will be coming up from next fiscal year onwards.
Yes. It can be expressed in different way, but it was mentioned about JPY 50 billion. There is an appropriate cash level that is not clear to us yet. If we are able to have, if you have an annual income of JPY 10 million, then it's like trying to buy a car for JPY 1 million. It depends on the impact on one's life. We're looking at what level of cash is necessary and what level we are able to spend is a matter which we are still calculating.
I see. Thank you very much. That concludes my questions.
Thank you. I will unmute the microphone for the next person. Please state your affiliation and name.
Yes. My name is [audio distortion] Asset Management. I have several questions. About the revenue recognition impact, from the first quarter to fourth quarter, it continuously went up. In other companies, usually the number tends to decline toward the end of the year, but in your case, it increased toward the fourth quarter. Why is the impact bigger in the fourth quarter? Asia Pacific's impact is really big in the fourth quarter. Can you really explain why? Yes, I would like to try to explain this. As Negi-san mentioned, cost-wise, our cost of goods is pushed up by the higher ratio of hardware. Hardware sales revenue recognition changed under the new accounting standards. That is the biggest factor for this Q4.
Last year, we would have been able to include everything in the revenue, now we have to defer the revenue. In itself is small, cost is higher. That is why the profit level is lower. In Asia Pacific, we saw a more pronounced impact of this. Software capitalization, is this the line item you were talking about? Yes. In terms of cost of goods? Yes. TippingPoint hardware and CloudEdge edge hardware, can you please explain these? CloudEdge in Japan is one, in other regions in Asia, I think it's TippingPoint Deep Discovery and TXOne for IoT. I think those were the big factors. I understand.
Sato-san asked a question earlier about the impact of revenue recognition, it was not really identified during the revision, that basically pushed down the profit by JPY 3 billion. That's JPY 5.7 billion in the fourth quarter, downward revision. In the beginning of November, when you made the revision, maybe you didn't know it was revenue recognition, but you knew that the profit was going down. I think this was already reflected in the number. Is this understanding wrong? I would not say it's wrong, hardware product mix in Q4 was a little bit different. Software and license renewal would not have been impacted as much. In terms of a sales mix, high ratio of hardware was not expected in the beginning.
That's limited to the fourth quarter and the JPY 700 million, JPY 800 million in the third quarter profit. Well, if the question is the Q3, our revenue recognition impact had to be analyzed post-mortem, so this was a reverse calculation after the results came in. When we made announcement on the 10th of November, and we use the numbers on the 2nd of November, and we actually knew the impact after the fact. Oh, I see. You had the total number. Maybe you didn't know the details, but the number was already available to you. Is that correct? No, the number was available to us afterwards. On the 2nd of November, we didn't know how much of this was impacted by revenue recognition. I understand that you don't know the impact or breakdown, but you already had the overall number.
JPY 5.7 billion down, and out of that, JPY 3 billion is impacted by revenue recognition. I think this is too exaggerated because in the third quarter, you already knew about the numbers. JPY 700 million-JPY 800 million was already included, which means that maybe JPY 2.2 billion or JPY 2.3 billion was the downward factor. What about the remaining factor? I do think it is really true because in the third quarter. We said that our outlook already included. It was not including the JPY 800 million behind the plan. With the actual in Q3, we were already behind by JPY 800 million against the plan, as we explained. Okay, that's fine. What about the remaining half, JPY 2.7 billion down? We know how much is revenue commission.
I think that's that explains the net sales decline. The profit was still further down by JPY 2.7 billion. How can you explain this? I'm not quite sure what you mean by this. I'm not following your logic. JPY 11.1 billion was the target, and you did five something, and JPY 5.7 was the gap for the fourth quarter. For net sales, I understand this was mostly due to revenue commission, and I understand that part. It's not the top-line factor. There must have been some cost factor to push down the profit even further. Your question is, these factors don't cover everything. I said these are the major factors. It's only 50%. There are multiple factors. As Negi-san mentioned, sales commission is one factor.
Pre-GAAP. If a difficult product is sold, then they would receive a bigger bonus. These people achieve their quota and receive the commissions, for example. Sales line commission, several hundred million yen a year. Also outside services. For Japanese Consumer mobile channel, the business is strong, as we have explained. Also U.S. legal cost in Q2 and Q3, and also in Q4, went up. These are the some of the cost factors which was higher or stronger than when we made assumptions for Q3. JPY 5.6 billion is reflective of those. But the revenue commission is still the biggest factor, as I explained. Right. Number of headcounts. In the third quarter there was an increase of about 300 quarter-on-quarter.
I asked a question about outlook for the fourth quarter, and you said for the third quarter, this was mostly for Asia-Pacific. You started hiring for the first time in three years, and it was temporary. Japan, America and Europe only increased slightly. In the fourth quarter, you didn't expect a big increase. Now, outside of Japan, you increased the headcount a lot, in total 160 or so. Why did you increase so much? For the next fiscal year, is it going to be really 300? That seems just too little. Right. When third quarter number was disclosed, we were not really freezing hire. We were making offers. There's a time lag until people actually join the company.
In the fourth quarter, some of the headcounts are already decided in the third quarter. I do understand what's happening, and that is why I'm asking. You say that there's not going to be much headcount increase, but there was a big increase. I understand there's time lag, of course. That is why I'm questioning your focus of 300. In the first quarter and second quarter, there may be some time lags. For the full year, are you going to stick to 300?
Well, right. Depending on how the environment changes, we have to explain to you the new factors at the earnings announcement.
Understand. Thank you.