LY Corporation FY2023 Earnings Summary

LY Corporation, the parent company of Yahoo! Japan and LINE, released its FY2023 full year and Q4 earnings report, highlighting significant growth and strategic shifts. Here are the key takeaways:

Financial Performance:

• Record Revenue and Profit: Both revenue and adjusted EBITDA reached record highs for the fourth consecutive year. Revenue increased by 8.5% YoY to JPY 1.8146 trillion, while adjusted EBITDA grew by 24.7% YoY to JPY 414.9 billion. This growth was primarily driven by PayPay’s strong performance and overall cost optimization efforts.
• Strategic Business Turns Profitable: For the first time, the Strategic Business segment, primarily comprised of PayPay, achieved full-year profitability. This milestone reflects PayPay’s impressive growth and its increasing contribution to LY Corporation’s overall performance.
• Adjusted Net Income Surges: Adjusted net income witnessed a remarkable 3.3 times YoY increase, mainly due to the rise in operating income and improvements in other non-operating income/expenses.

Segment Performance:

• Media Business: Revenue increased by 1.8% YoY, driven by the growth of account ads. The segment’s margin also improved, exceeding 35%. Growth in account ads (YoY +22.3%) contributed significantly to revenue growth for the entire Group.
• Commerce Business: Revenue and profit grew due to a recovery in domestic merchandise transaction value and cost optimization. The launch of LYP Premium also helped the domestic shopping transaction value bottom out.

PayPay performance supported the whole group

• Strategic Business: PayPay’s success propelled revenue growth in this segment. Consolidated GMV increased by JPY 2 trillion YoY, and consolidated revenue surpassed JPY 200 billion.

Security and Governance:

• Addressing Information Leakage: LY Corporation acknowledged multiple instances of unauthorized access to its systems, resulting in information leaks. The company outlined comprehensive measures to strengthen security, including separating employee systems and authentication systems from NAVER, and enhancing subcontractor management.
• Governance Changes: To bolster governance and separate management from business execution, LY Corporation is revising its management structure. The Board of Directors will have a majority of independent outside directors, and the roles of key executives will be redefined.

Future Plans and Outlook:

• Product Reinforcement: LY Corporation plans to focus on service gateways in FY2024 to drive further growth. Key initiatives include:
• LYP Premium: Expanding paid memberships by offering additional benefits.
• LINE App Revamp: Redesigning the app with new features and content to reaccelerate growth.
• Yahoo! JAPAN App Revamp: Revamping the app to increase daily active users and sessions, aiming for further growth.
• Search and Advertising: Reinforcing integrated commerce search and account ads to increase revenue.
• Commerce Business: Promoting cross-use of Group assets to enhance growth.
• PayPay: Focusing on top-line growth and improved profitability through new services and features.
• Generative AI: Accelerating the implementation of generative AI in services and aiming for JPY 110 billion in revenue over the medium-to-long term.
• Disciplined Cost Allocation: LY Corporation will prioritize allocating resources to security measures and product reinforcement initiatives.
• FY2024 Guidance: The company expects revenue to reach approximately JPY 1.93 trillion (YoY +7%) and adjusted EBITDA to be between JPY 430.0–440.0 billion (YoY +3.6–6.0%). Adjusted EPS is expected to stay at the FY2023 level due to the absence of one-time gains.
• Capital Allocation: LY Corporation plans to allocate approximately 70% of its capital to base investments and 30% to base shareholder returns.
• Long-Term Goal: The company aims to achieve an adjusted EPS exceeding JPY 20 in FY2025.

Overall, LY Corporation demonstrated strong financial performance in FY2023, driven by PayPay’s growth and strategic initiatives. The company is committed to addressing security concerns and strengthening its governance structure. With a focus on product reinforcement and disciplined cost allocation, LY Corporation is optimistic about achieving its FY2024 targets and its long-term growth objectives.

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