Q4 2023 Rakuten Group Inc Earnings Call
Meeting.
Well, we have disclosed the latest consolidated financial reports at three P. M. Today.
You can view this data on our corporate website page for investors.
And in terms of audio and video if it's adopted.
Please in the bottom there is a button, where you would be able to utilize other streaming service. So now without further ado, we'd like to invite Mr. Gagnon.
Hello, everyone and despite your busy schedule. Thank you for joining us for the FY 'twenty two 'twenty three fourth quarter and full year consolidated financial results meeting. Thank you very much for your kind participation. So first of all at the outset are to the victims of the 2024, it's not opinions the earthquake those who have been victims.
And the family members, we would like to extend a heartfelt sympathy and support to all of you.
So what else would you do.
Our 2023.
Our full year and fourth quarter financial results, we'd like to offer you the summary.
So first of all in terms of consolidated operating results.
The sales.
And revenue.
It's as you can see.
The fourth quarter.
Is 3.3% positive.
And there has been a lot of optimization that has been conducted in various means and consolidated non-GAAP ETV Ids EBITDA. It is $74 5 billion yen positive.
So it's an increase extensively are significantly for Eddie Dop database and in each of the business as you can see on this matrix so into need service segment.
Holidayed at five 9% increase in Fintech.
Is 10, 4% increase and they'll go to their mobile $12 six.
But with that being said like within Symphony a large of course a significant deal.
Has been conducted so there are some deviation in terms of the reflecting on the ledger books in a month. So non-GAAP slots Internet service segment is a 33.9 and authentic.
There are 30, 417 and mobile is minus.
71 point too so that has been the result, so as a result of that.
The non-GAAP.
Operating profit the fourth quarter.
The minus $3 6 million so on yeah on a same quarter.
It has been a improvement by 69 million. So in terms of the ethos operating profit. This is.
It was $54 5 billion.
Positive so 55.4, so non-GAAP E D VA is.
$74 5 billion.
And there has been improvement.
By $74 five so there is a significant improvement that has made that we had been able to do that.
And in terms of the consolidated revenue as you can see here. So soon see establishment 27th consecutive a month, we have been able to turn positive. So 2.07 trillion yen, we have been able to achieve.
So respectively in detail if you can follow in terms of the consolidated EBITDA.
So as you can see continuously there has been an improvement over last year.
Spending 12 month.
The various optimization that has been extended we had been able to surpass achieved $75 5 million in terms of EBITDAR.
So on top of that in terms of non fintech.
The fourth quarter.
For this as you can see again achieved surplus on EBITA basis.
And in terms of non-GAAP operating profit so last December.
Well, we'd be describing this in more detail, but it was 21 point to a billion in terms of positive. So non-GAAP operating income we have ceased seek also profitability in this segment as well. So why has it been a returning to a positive environment or Internet service segment improved.
And compared to two years ago in the fourth quarter are it is positive by $18 nine in fin Tech segment also improved by positive a 13.2 and mobile segment improvement by 36.6 billion positive. So the other detail of course is.
Plus by 400 million, but all the segment over all.
We have been able to improve the profitability.
And 'twenty two and the two in terms of the <unk> fourth quarter and non-GAAP operating profit of $72 six the third quarter last year.
It's $3 6 billion.
So in terms of what we are going to achieve this year. So first of all.
So for year and consolidated non-GAAP operating profit, we're going to try to achieve profitability last December.
We have achieved profitability in the single month of last year, but we like to make sure that this is going to be achieved throughout the full year and the other is that.
The cash management.
We have not been putting a lot of emphasis in those areas.
The.
Various of course, our project to capitalize and based on this.
A higher better circulation of cash is going to be achieved and also as.
Many of you are looking at.
In terms of non-GAAP EBITDAR for mobile are we are going to also make sure that within this year, we're going to turn this into surplus and at the same time.
The other areas how are we going to leverage AI, which is going to be the key factor moving forward well work with NN group, we have the so called Triple 'twenty in terms of achieving a 20% increase in marketing and productivity and also another 20% increase in operating productivity and client productivity in other words, meaning that clients operating.
He is going to also increase by 20%.
So in the mid term this is going to be our goal.
And in terms of financial strategy, if I may.
There's some months.
And in terms of the senior bond has been issued a dollar denominated. So 2025 refinance risk has therefore has been overcome and addressed in 2025 and after our free cash flow will be secured and at the same time the various of course improvement in.
Terms of the funding of 2024 and after.
Our financing.
Status basically is not of.
A concern.
So from here onwards, I like to explained by segment.
First of all.
Domestic E C market you see business.
The three year CAGR.
Has improved by 10% and so we have now achieved six trillion yen, especially lockdown each about amdocs they travel ducting each bar.
Our.
Three year CAGR is plus eight one person 818, 1% our industry average is three 5%, which means that our more than 5%.
We he have over achieved the industry average warehouse for a doctor in travel in 2019, a that is a pre COVID-19.
As you can see E. D. G. T V has increased by 42, 5% for industry.
Unfortunately is minus nine 5%, which means that the difference is more than 51% we have been growing.
In excess of 51% compared to other market and also AD business revenue our industry average is 2% and we're growing at about 17% and card shopping Rakuten card has been growing nicely. So three ihrke AGR Ah is $22 six.
6% where of industry average is 13, 4% so in excess of 9%.
We are growing faster.
Then the average them yesterday, and we disclose the financial results and Oh Rocketcam Bank the bank deposits outstanding AR as well as revenue is doing.
A very good job.
And for Internet service, if I may.
Revenue.
Year on year basis, a nine 8% growth. So now we have achieved one two trillion yen its a big number for a non-GAAP operating income grew by 18, 9% year on year. So now we're at 76.8 billion and that is the level of operating income.
We have come to achieve so.
There are costs that we incurred.
And minority investment businesses.
Yes.
If we exclude.
Those factors are then our operating income would have grown by 23, 6% as I mentioned about.
G T V are quite successful.
And AD business has high.
Profit stability.
So oh now it has achieved more than 200 billion, so that spike up by 12, 9% year on year basis, and we've done a lot of initiatives. So Oh of course support from the government and changes are indeed, a hometown tax.
Rule and SBA U zero five rule change took place as well and here.
Our sustainable point of strategy is something that we wanted to put together, so basically more than 80% they do have points.
But for heavy users.
We he visited a somewhat.
And also this year at Ashish Conference, we made an announcement.
Back in 1997 are in the world for the first time, a or we were the first one is to come up with B to B to C market and now this has evolved with our various services organically are connecting with each other he has grown to become an ecosystem and from this on your own.
Words are where are trying to evolved further into AI empowerment company in that sense us month lockout and EG Bob.
E change that we announced that there'll be change in monthly merchant V. E. So all we would like to improve G. M. S and also reduce the operating cost of the merchants and for overseas business.
Back in 2022.
In January.
Ukraine was invaded by Russia.
Russia.
And there was an impact on us as well, especially Viper.
In Ukraine.
The utilization rate was 97 or night, the 8%. So it has been a very popular business and also Russia was a quite a big market for US. However, we lost the revenue from those countries, but we are quickly improving our our.
Revenue now moving onto Fintech segment.
Lockwood and card knuckled down payment.
These two are leading the growth and it says most services but.
Almost all of the major services are contributing to growth for non-GAAP operating income with Iraq and Securities are Rakuten Bank, yes. They are the growth drivers in terms of revenue 11, 2% increase year on year.
$725 2 billion yen are it's a quite a big business for us and for non-GAAP operating income grew by 36, 8% year on year basis.
And.
Has achieved $122 9 billion yen. Our these are our main kpis are first of all Rakuten card.
We have issued more than 30 million or.
So it has grown by seven 1% and Luckily tank car shopping G. T V or a G. M. S. A 21.1 trillion yen, so 64% increase year on year and longer term Securities General accounts are the number of accounts that have grown by 18, 1% year on year basis.
Now exceeded 10 million accounts and also deposited assets. It is now 25 trillion yen.
So that's an increase of 37, 7% year on year basis. So apart from commission fee. They're trading P are we have been able to successfully increase our revenue. So first of all I'll go 10 card as I mentioned earlier, we now have exceeded a 30 million $21 one trillion.
Yen and G T V.
23, 2%.
So orange target is to achieve 30% share.
And absolute value Oh, we're trying to achieve a 30 trillion yen.
Actually E operating income.
As I mentioned are optimizing our point program point initiatives, we've carried those out so non-GAAP operating income for fourth quarter I was.
$15 1 billion yen. So that's 63, 6% year on year basis, and operating income from 11, 6%. We have now grown to 17, 7% a big improvement for Rakuten Bank yesterday.
When we.
Announced.
The financial results, yes, it was announced but very briefly ordinary income 13, 3% increase is so that's 101 billion yen ordinary profit 23, 4% increased $35 2 billion and especially our O N E and this is now 13, 9%.
So compared to other banks, yes are we have been enjoying high R O E.
And in terms of the number of accounts in January.
We have achieved more than 15 million.
The total deposit balanced 10.32 million and a G&A expense ratio of 42, 9% capital adequacy ratio of 11, 1% or.
So oh capital efficiency is very high with a high.
Ordinary income in the ordinary profit next moving on to the Doctor and Securities Holdings.
So.
Cold.
In-kind will transaction our of our stock now it is zero Commission trades trade and because of this with a non consolidated basis and 500 or six D.
And decrease five.
Six eight as it says here.
And are down by 2 billion for a commission.
But however trading income financial revenue all included.
So as a result, our rocket and Securities Holdings.
It may have been a concern.
However, the operating profit Oh it was.
3678 built in but now this year, we achieved 381 3 billion and the number of accounts has been increasing and domestic.
Stock trades, it's now Zero Commission and other general count is increasing and so now we have achieved a more than 10 million, but not only that accumulation type of investment trust.
Oh roughly.
<unk> 15 billion.
Gives me 150 billion yen. So yes, it has seen an improvement.
So starting from the January Theres, New Nissan program that has been implemented therefore, we have been able to enjoy a good trajectory of safe in terms of like within security's domestic.
Third three point.
Right.
The 34, 4% market share so a full point.
Seven a market share so therefore continuously and we would I do.
Span on this market share.
So next is mobile segment.
So like with any mobile in terms of revenue and also a non-GAAP operating income EBITDA or on an increase and magazines Symphony and accident energy.
The operational cost optimization has been achieved so therefore, we have been able to extend.
Extend the revenue.
In terms of we have revenue of $364 6 billion plus by three 9% year on year and.
And non-GAAP operating income last the previous year, we had been able to improve by 141 points and doing so in other words overall ease throughout the year. It was a 337 45 billion negative, but a quarter by quarter. We have made a major stride in improvement and non-GAAP EBT.
Again, $159 9 billion plus improvement on a year on year basis. So this is a quarter by quarter the graph.
As you can see already the non-GAAP EBITDA.
And year 'twenty to 'twenty two the first quarter. It was a minus 92 billion, but now the fourth quarter of 'twenty. Three it is minus 29. So there has been a billion. So am I use service again is also increasing and accelerating our the nub.
Or are subscribers is a 600, Oh 9 million and.
The backup of course is there still are within this but again in terms of applying <unk> nine 6 million as a bank by bank. So of that the it is high of 6.09 million and also the attrition rate of churn rate is going down significantly so twenty-twenty V. The cost.
One was I mean objective on a monthly basis are we have been able to reduce the cost by minus 16 alumina. So symphony Monaco, Dan has been supporting.
The first open ran network in Europe.
One and one bridge has started in Germany.
And in terms of the mobile I would like to show you the transition.
Where we are at in this phase of development with a strategy moving forward. So in many ways are there has been a lot of debate but for us.
There are two things one is that with this business. There are social of course, a benefit that we would be able to bring about and the second is a new technology and knuckle down and ecosystem will be leveraged by doing so.
Well, we would be able to create a revenue business model, that's quite different from the others and Luckily then symphony.
We are going to transfer technology. So is three phase. So in other words. It is one so with three budge, so but with that being said that without the network. This is going to be undermined. So there is a quite aggressive ways and means in 2022 to 2022 three excuse me are we.
<unk> been able to expand the foundation by 2022 'twenty to 'twenty. Two so we had been making major investment in these phase one and of course, we have been able to achieve 96% of population coverage and now 99, 9% plus we had been able to achieve the coverage of population to this level by doing so.
We are going to utilize Richard technology, many of the mobile phone telecommunication companies are now looking to Oran and this is going to be the de facto standard by utilizing virtual technologies.
And in Symphony like the mobile App.
<unk> had been a spear heading our there's a whole effort altogether and we hadn't even afford for front runner and last year, we had been quite.
Audacious in making investments so we need to make profit out of this meaning that we decided to conduct it sort of a diet. So lean operation. So lumpy of course cost are we have been.
Able to reduce this by 16 billion and at the same time with KDD I, we have a looming a revision of the contract. So 99, 9% population coverage has been achieved and also new marketing methodology has been implemented yesterday.
We also had made a cycle kazuko strongest family program announcement and at the same time, we need to be serviced 40 enterprise institution. We have launched this service. So we have been able to see an increase in the numbers of subscribers and <unk> This year and after we.
We like to go into the next phase for growth. So in other words the general.
Users, we liked to increase them and also enhance the institution. So EBITDA is going to be in black.
And.
To be a domestic number one a more by carrier. So this is a phase in order to trail blaze in creating that trajectory moving forward and specific target as you can see in terms of subscribers target. There are some sort of a width, but $8 million to $10 million and ARPA is 2500 degrees at three.
<unk> 3000, the cost as of now we like to contain our costs as much as possible as we have done and that I think is going to be the key to success in terms of the subscriber acquisition.
We have stopped a zero fee and this is again coming back to the original growth.
Directory once again, so we have various of course surveys that have been conducted a we have a call third party us of a research institution that help us and of course price unaided awareness is like with their mobile apps with price.
And also in transition into other in mobile we are number one candidate and also satisfaction level is also number one.
And in terms of the quality of the signals no signal availability as you can see here is that we have made a major improvement in this area. So a b C companies as you can see in comparison is quite close in.
In terms of knows you can barely Vod competitiveness. So the latency. This is literally latency like.
Looking at Youtube, how can you be snappy indicate new Youtube and we arrange second in the industry. So we have high quality network that we have been able to offer to the community as a result of that after adjustment. So in one month the as those people who are aggressively going out.
The points and the churn rate.
It is one 1% so 7% at the time was the highest but compared to that there has been a dramatic improvement that we need. So we believe that this is going to be a important kpis for customer satisfaction. So at the same time being supplied to our mobile network and the fact that the churn rate is good.
Dropping and that of course equation is both important to increase and the decrease of churn rate and also in terms of the AR.
Some of the Oh of course, our churn rate Oh, the technological aspect is reducing.
The network related churn is declining and new roaming.
Network optimization with Godaddy I has been concluded and.
There has been some time lag.
But for the Metropolitan area. This has been already finished and completed in the month of February and besides from the other areas sort of FICO is already.
We have been able to complete the first phase so those users.
The network itself has made a major improvement and that is something that they are.
It's feeling a and we believe that we'd be able to make further progress in this area as well and as you can see here.
Area by area in terms of quality of connectivity. A this is a detailed transparency. So 'twenty one three sectors are the connection is the best is the results that we have been able to be evaluated. So the end users there may be some gap.
But we believe that we'd be able to improve the recognition and awareness about Iran and December in terms of subscribers at the end of the year. So therefore, they are big of course deals that have been concluded and excluding these big deals are we have been slowly increasing the number of.
<unk> subscribers and at the same time as I mentioned.
The ecosystem enhancement, which is one of these three goals that we have hosted so I'll go then membership and I go than a merchant and.
The number of of course, the users so to speak or we'd like to increase the numbers overall and just as a reference that I gotta be mobile by joining up with their mobile what effect would you be able to enjoy is in the center like within each about the G. M. S is per user base.
About 60%.
Plus meaning that more.
Purchase are being made on a good day.
And Luckily 10 travel G T V.
It is a close to double.
The usage.
Or spend on marketing travel and towards the right Oh once you become a subscriber.
Compared to before subscribing, a 2.56 average increase in service usage of M. N O users in one year or so in total a $13 3 million or more users.
Yeah.
So.
$13 3 million services. So group overall contribution was 10 billion and EBITDA I E 6 billion. So that's a total of 24 billion EBITDA contribution so.
We are out doing a lot of services first a referral campaign has been upgraded those who subscribe to a doctor in mobile or if he or she introduces somebody then you can get 7000 points and for M. N P transfers 13000 points and.
It's a new a number and then 6000 points are these are the points given.
And from yesterday.
It has been well accepted side kill family program.
So basically up to 20 lines and.
Fee will come down by 100 yen up to three Giga gig.
Then.
880 Japanese yen.
And referral.
Campaign, you can combine so which means that a family of six and then in total you'll be able to get 100000 points and Oh.
If you are using unlimited data and.
And voice and then within the family you'll be able to save about 360000, a Japanese yen per year. So this.
This will be a great benefit for the users.
And when it comes to B to B.
So for corporate subscribers.
Subscribers. So we are accelerating our <unk>.
Going after major companies and by area, we have put together team.
And gaining a.
Locked in travel and locked them each of our merchants are we are gaining a their support.
Uh huh.
To enhance acquisition and also through agencies and resellers are we hopefully like to increase acquisition and for our pool because of the increase in B to B is roughly 2000, you now and going forward.
We will enrich a services even more so that we will be able to achieve in the range of 2005 hundred to 3000, yet for cost reduction let me explain at this point and dramatic decrease has been achieved over the ear.
39 billion per month.
And Ah we promised that we will reduce this by 16 billion yen, but more than what we had committed.
It is now 23 billion so or in total.
That is the reduction by about 200 billion and in terms of investment our with our new roaming.
Agreement using K D. D is a network that included.
So.
The capex.
Has come down significantly.
So for the future the platinum band, Yes, Oh, we are virtualized.
No.
Oh dramatic a cheap feed.
<unk> can be achieved.
And finally about our mobile.
So this is an important point that I would like to make and there has been a discussion about NTT law Ah recently, and I would like to make a brief comment and ask them mobile.
Oh with introduction of there has been price competition. Meanwhile.
So unknowingly should I say.
NTT Docomo Oh with NTT group has become 100% subsidiary E. So are there has been a vertical consolidation very strong consolidation and a very broadly very cheap and with our freedom.
Being able to access to wireless in order to create such kind of environment. A N. T. T has of course succeeded B E. He national asset like buildings utility Poles and pipelines.
And the optical fiber.
You did I think these assets.
Should be accessible by everyone in a fair manner.
And of course this is governed by NTT law. So in other words. This is like a constitution of communication industry.
So to abolish the NTT law is very <unk>.
Dangerous so.
It may lead to our entity is coming back to there.
Original position and now the mobile phone charges have come down, but once again it may go up which means that this will lead to an increase.
In the burden of the users.
The general public so very prudent discussion is necessary.
A L V P and M I C.
Should not nonchalantly discuss but it should be discussed are within the public domain.
So now from here onwards, I like to shift gear, a little bit to talk about financial strategy is so I'd like to hand over to our CFO.
Regarding mobile.
Hi, I am he don't say in charge of CFO, Let me.
Talk about financial strategy. So as mixed on your son mentioned, we have addressed a.
Fiscal year 2024 bond risk.
And we raised $1 8 billion of USD denominated senior notes.
And last December there was 60 billion of locked them locked in securities.
So oh, we have secured unnecessary cash up to this point and also with the issuance of a bond the demand for new Oh senior bonds are what has exceeded a 10 U S. Dollars. So this showed that we have a stronger.
Investor base. So now you can see the three pillars of our disciplined financial policy. So we are seeking a financial soundness in the medium term, but our first profitability improvement and regarding this year our non-GAAP.
Operating income.
Annual consolidated profitability and also on a monthly EBITDA basis.
We should have.
Bring a rocketing mobile to profitable in this year and also 25 as well for and also efficiency improvement are we have.
Engaged in company wide cost reduction and SBU revision for this fiscal year, we are improving working capital and further.
Productivity improvement with AI for financial Soundness, a we will Oh, we have reduced our interest bearing debt and we also worked on proactively E to manage debt maturity and going forward credit reading improvement I'm the consolidated equity raise.
Of 10% and non FIC Tec net debt nonfood EBITDA five times with this target we will make sure to make our finance sound and you can see the track record of equity financing and divestiture. So O V E have.
In April Rocketcam banks, IPO, followed by a IPO a third party allotment are rocketing say Ya stake was sold and locker them back additional sales and a doctor in securities followed so going forward or we would like to also make sure that.
Redo monetization of capital portfolio and improve working capital and as you can see a before the necessary fund we will self fund that's our basic policy.
So our cash flow fintech and with the working capital.
Be well.
Self fund and accelerate our self funding going forward as well.
And for the bonds that will mature in 2025 as quickly as possible, we would like to proactively manage and the retail bond.
Refinancing there has been some concern raised however, our basic policy is is that as.
As much as possible for both reduce the debt. So we have been doing that as much as possible and part of retail bond will be refinanced we will consider that but as you know are the retail market or bond market in Japan has depth. So we believe that the <unk>.
She'll be able to refinance our bonds and as you can see there has been some a large financing by a company with the same rating as us.
And 2024 in terms of the final of course bottom line in terms of increase of expansion also reflective of interest rate.
And the bank on in terms of the concern that they have but based on that non-GAAP operating profit in terms of making sure that the operating income is going to be significantly improve so we're going to.
And make sure that in terms of the major improvement movie need disturbs, our profitability and I must say, but in terms of the dividend I'm feel really roadway regrettable to the fact that it is going to be zero. So most.
Priority is to establish a sound and robust foundation, our finances in terms of a return to investment grade rating and reduced cost of capital and enhance shareholder value might do so and so we'd like to further enhance the share holders of course asset in terms of the benefit plan for the shareholder we have.
Made an announcement to make change in this all of these shareholders more like their mobile service.
And in order to enhance understanding of our service offering all the shareholders are 30 gigabyte per month and voice data. We are also like to offer a Sim card.
And we like to provide them to our shelf holders and that will be our 40 financial strategy now I would like to move into the AI strategy Timson. Please.
Good afternoon, everyone.
Sure.
It's touching every aspect of our lives.
Sure.
Everything we do.
In an effort called.
Yeah.
Our vision is to augment human creativity.
Rakuten is uniquely positioned to fulfill this vision because of three core strengths.
Our unique data, which includes customer context from billions of interactions.
Knowledge.
And world knowledge.
Second is our ability to reach millions of people online and offline, including 6 million locations.
Eddie.
Point card can be used in Japan.
Lastly, execute.
Capability.
Flywheel.
It started with reviewed by professionals or validated by customers. This unit.
Combination of artificial intelligence and human intelligence helps to make our models faster and cheaper with every interaction.
These strategies.
Three waves of execution.
In wave one we built a deep learning platform.
Other key technologies.
Foundation is semantic search which uses AI to understand what you mean.
We launched this technology recently and Rakuten fashion and saw immediate impact.
We're building on that success by rolling out semantic search for Rakuten.
Here, we're able to reduce the zero hit ratio by 98, 5% and show more relevant results for our customers search result, clicks increased six 8%.
As a result users are searching more and purchasing more the most important metric on this slide is the smallest number 0.2% increase in sessions per user.
On search for many years. This metric is so hard to move this means users are happier with our search experience.
Coming back more often.
That translates to more sales for merchants and more revenue for Roxanne.
Great for everyone.
The ecosystem, we're looking forward to bringing this technology to all of our services.
As I said earlier.
Brought to life in three waves of execution, we completed wave one with the deployment of our deep learning Foundation.
Several successful launches, including semantic search for Rakuten fashion and Rakuten.
As well as deep learning based recommendation for Rakuten Rakuten.
Now we are ready to scale deep learning to all recruiting group services.
We unveiled the recruiting.
Platform in November of last year, and recently announced recruiting.
And Rakuten.
Health.
Come on this front.
Parallel.
For consumers with the latest advances.
And wave three.
Can lead the way.
We are committed to.
Our business partners.
And benefit our customers and improve.
Client productivity.
Good afternoon, everyone that wasn't necessary.
Last week.
Hi Tech team and I was concerned that I may not be able to make it back to Tokyo for this important meeting.
Thought about hiring a professional but it would have been very expensive and time consuming so I recorded a 32nd video submit their transcripts and AI generated this video for US. This is the only one of the example, how we leverage our dream improve productivity at Roc return on the journey of a organization.
Thank you for joining us I hope to be the future with you. Thank you.
Not at all.
So this was a true tucson or virtual teams on EBITA, we don't know.
But.
Japanese is in a way a little not fluent but I have my own version of AI. So I would like to run this video as well. Thank you.
Hello. This is Mickey Mickey timing from <unk> have you already started using racked in mobile with rapid mobile no matter how much data you use the price is a flat rate of 2000 under ADN and for the months you use less data it automatically becomes cheaper, making it a very simple and easy to understand plan also with rapidly.
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Network quality assessments by third party organizations also demonstrate the competitive quality of our network. Please try our service for yourself and experienced firsthand the high level of our network quality.
Starting February 21, we will also introduce this IQ family program.
It's a simple step to make the plan even more economical. So please recommend roxanne mobile to your family members as well.
By the way if you apply for a rack in mobile through the QR code shown now those switching from another company will receive 14000 direct employees and applicants are opening up a new line will receive 7000 right.
We're looking for thank you for that.
And this is real me and presenting them this being the last day to present unreal bases and we created this AI other top of mind. So that concludes I'm, sorry for a very lengthy presentation, but we'd like to conclude my part of the presentation. Thank you very much for your kind.
Okay.
I see.
Thank you very much for joining us our food the FY 2023 fourth quarter and full year consolidated naturally results meeting.
So for me I was we like to accept questions from the media.
So today, there would be seven people, who will be appearing to answer your questions.
And for Q&A today, this would be the proceedings so.
Ah the there will be simultaneous translation into Japanese to English English or Japanese so from your zoom screen. Please select your preferred language. So if you can also avoid muting the original audio.
At the same time, if there was any interpretation the interpretation.
Audio will be larger than the original at the same time from.
From the website. Please download the necessary information, which has been presented today. So those who are participating BCC and she can see please click raise your hand buttons and those of you but does it mean.
Smartphone there will be detailed and then there will be a hand race a button. After pressing this button. So if your name has been call. Please on mute yourself and ask the question.
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Because you want to stay at 30 months.
Thank you news fixed 90 some fees.
My dad sudden even musics.
Okay.
Thank you there are two questions one is that more like mobile RPM first.
At this time for the quarter to quarter basis. It was the decline from last quarter, the outbreak, but as making it on as I mentioned 2500 to bring two 3000, what are their own bag in order to bring this our booth. This is the first question. The second question. The overall of course, our revenue and it needs to be two digit percentage in Germany.
Those that had been enjoying some 0.8 <unk> compared to the past it seems as though the rose a little slow. So what is your explanation on this thank you.
Well first of all this is our b to B the corporate.
Institution has been the major deal and which are has been a major of course effect as you can see there that on the slide the others, it's still going very smoothly and family but too.
2500 yen and above bringing to that level then.
Additional services have to be offered and at the same time.
I will not be able to disclose all the strategy and tactics, but there are some of course are programs that we do are preparing to launch, especially the add of course revenue in the link is going to increase and we believe that is going to take place and already.
For iPhone.
Basically it's going to be open on Rcs. So.
There would be some revenue that we will be able to drive out of this so we have high expectation on this so in the future.
Per capita a 300 yen per month in terms of AD revenue is what we are trying to achieve and we would like to do it.
In terms of growth rate well basically as I had mentioned in my presentation. This.
Do you and also the quality of the services, we have various marketing programs and as a point of optimization program and are making significant improvement and.
In terms of hometown pets.
So.
In September.
The home town packs have completed its one phase and the effect of that.
There is a word sort of buying at the very last minute and that.
Has been a major impact.
So therefore.
Our Q3, the third quarter.
The home town tax.
The sales are in terms of the transaction and the card Commission those have been reflected on Q3 and brought forward in other words. So that is the biggest of course reason why thank you very much that's all for me.
Thank you.
Thank you.
So we have a hand Yomiuri shimbun unassigned please.
This is.
Oh no.
I have two questions.
First yesterday.
You.
Made an announcement about a family.
Program.
And minus 100 yen.
This will be negative on your RP.
So what is your target.
You are trying to increase the number of users.
And also B to B you are successful.
But.
Or b to C.
It seems like you have room to grow.
Hum.
What is your take and <unk>.
Number two regarding the finance reefer.
Refinancing.
And you have made an announcement the other day and for this year.
The financing equity financing.
So now you have concluded.
And will not do the similar financing for some time.
Well product with their mobile I had been approaching our various people all to sign up for a doctor in mobile.
And.
Well, we have a family plan of Softbank K D D I or docomo.
So there were quite a few people who responded in such a way. So I mentioned that our why don't you transfer as a family.
So perhaps younger people when it comes to data usage I think they use a more data they use Instagram games tick tock and so forth. So young people in order to attract these people.
So if they use its 28 80, and also unlimited call and voice and so forth. If you think about it than ARPA will not necessarily come down and I'm sure. There are people, who have signed up for family plan.
But.
Fee is a 100 yen, yes with four people are using before a program and then the first person I can get 13000 points and then it will be 20000 points for second third fourth family member and so that's in total 73000 points.
As a family you'll be able to get.
These many points, so which means that it is quite significant and once you start to use the service, maybe one or two people within the family.
Are you using our unlimited service and.
This 5000 yen will become a much cheaper. So oh this is quite impactful that's all.
And regarding the finance, let me respond.
For this fiscal year.
So asset monetization regarding asset monetization it used to be our considering our flexibly E, but those equity financing, which will entail a dilution. Yes. As you said are right. We do not have any plans at this point in time, that's all thank you very much.
Okay.
So.
Freedom's itchy nose on thank you for raising your hand please.
Thank you.
My name is just you know I'm a freelance.
So in terms of the cycle Kazuko program. The strongest family program you talked about approved effect on auto, but the churn rate I think is going down at the moment, but are you expecting to further reduce the churn rate do you have that expectation from this program.
It's the first question.
And the second question is again, I'm, sorry, again I'm going to argue.
So in terms of a target of 3000 yet.
If you exceed 3000 yen, meaning that everyone.
It's going to use utilize them to the maximum level at the same time I have them participate in the options.
So that's an option I.
I believe you saw this with the option offering isn't a little limited. So are you going to increase the option or do you have the plan to do so so make it a nissan.
You mentioned you have hinted that I alluded that so if you have any thoughts. Please oh, they didn't know that in detail.
Awesome.
The cycle because of the program the strongest family program the effect of that please well. Thank you very much for the question is Mr. Mcgee Danny mentioned, many people have the so called family discount.
Program and as you May know our company, Alex and mobile.
The most effective.
Oh of course, a path for acquisition of the users a referral campaign and there's very little campaign E is there are already 250000 under the referral program and this user.
Approximately 49% and has introduced their families and this strongest family program. So I get because of the program. This is going to further accelerate so as a result of that.
In terms of acquisition rate to go up and as we mentioned the lifetime value.
And he is going to be effective for reducing the churn rate and because of that as a result, the overall effect on the ecosystem could also be achieved so that is the nature of our program and the other options well I must say as you have pointed out there are several.
The options that we are considering as of now and then the other companies' program, but something that is unique to that good then we also like to offer additional programs or if you'd be kind of be patient with that thank you that'll be up.
Okay.
Okay.
It must be at all.
If I can add in terms of AD revenue.
It could be enlarged quite extensively so.
No.
Within the link there are a lot of different promotions utilizing AI.
And I think it's going to be quite a significant portion of that.
So thank you very much for the answer thank you.
I think as you watched it goes next yes from NHK, yes.
Got that.
She got her song.
Yes. This is me she got her from NHK I have one question mobile cost reduction is my question in twenty-three you December.
On a monthly basis, a 16 billion yen decrease so going forward our cost reduction piece.
So are you going to maintain this reduction rate.
Or the.
The current investment.
Will it be maintained so can I ask for your comment in this regard yes.
This a reduction of 15 billion this has become a standard.
So this level will be maintained and at the same time, a further cost improvement initiative.
It's already underway so per person, including a per user cost reduction we will maintain the level of December and this year, we would like to reduce a 10 or 15% and the initiatives are underway. Okay. Thank you very much.
The oldest anymore.
But really most of it.
We do have time limitation. So we will take final question from the media.
Yes, we see a hand.
She Carson a freelancer please.
This is ishikawa I'm a freelancer.
This time.
You have a.
Launched a family program and other companies with new NESA, a they have come up with a new.
Plan, including our financial product. So you have banks and securities. So are you considering any mobile plan, including those are financial services and also K D. D. I has invested a lawson and if you could comment.
About this case, although this is a irrelevant.
Today's announcement I am.
With OCA in charge of finance and yes, new Nissan is are gaining traction.
And therefore going forward are combining with our mobile.
Yes, we are thinking of are starting to consider about a potential offerings.
And one more thing.
Late last year.
It was quite successful, but card and mobile tie up.
So adding 30000 points.
Bleeding a TV commercial films are this was aired we promoted and this was quite successful in two fronts one was.
This is a new card members through mobile are they have signed up and also Lucky Teng card.
The current current our card members.
They have now.
Oh.
I've signed up for mobile so they can get 20000 points.
So this year throughout the year, we would like to carry this out so that we will be able to strongly support our mobile do you have anything to add.
Well for other.
Competitors.
<unk>, we're not in a position to make any comments.
So regarding the loss in this case I will refrain from making comments. Thank you.
Yeah.
How do you deal with anymore.
So that concludes our Q&A session from the media.
Thank you very much who are joining us.
Yeah.
Wonderful.
Despite your very busy schedule. Thank you for joining us or theyre not going lose 2023 full year and fourth quarter financial results. Thank you kindly for your participation.
I mean, I like to invite Q&A for analysts and investors.
Today's presenters are these three members on the screen.
Well it really well.
Ooh tweaks Q&A I would like to give you a housekeeping announcements.
Going to be conducted by simultaneous English and Japanese translation, so be select your preferred language from the zoom screen.
And they do.
Do not select mute original audio.
During the interpretation the interpreters speech will be the main audio at the same time the of course the posted a document will be in Japanese if you do need English version. Please download them from the web page at the same time you've had problem. Please click.
Do you raise your hand bought and button. If you are asking question and also for the mobile users be select detail and then select radio, but and so if you are being appointed make sure that you are on mute yourself to ask question. So now we'd like to offer a Q&A session for the analysts and also for the investors. So.
Would you be executing Mr. Callahan. Please ask your question.
I know because I have from UBS securities. Thank you very much for this opportunity today I'd like to ask two questions. The first question is that already there has been a question of media the ARPA of mobile and the number of subscribers today in the presentation today, it seems as though that 8 million too.
10000 million excuse me, a target or too low it seems as though theyre going to supersede. This number of eight to 10 million and the number of subscribers. If this is achieved.
The you talked about an a in terms of 1500 <unk> I think that is more realistic with the AD revenue. So for us in the future 8 million to 10 million. How fast are you going to exceed this number is the area that where we need to focus on so once again.
What would be your priority I would like to ask what the priorities would be so this is the first question. The second question is that this year non-GAAP operating profit is going to be on a surplus this year and next year, the mobile business our non-GAAP EBITDAR.
You're also going to achieve surplus so I mean that this year and the consolidated EBITDA or you need to exceed 300 billion and next FY EBITA basis, you would be able to earn more and with that being said our from just this year to next year, the power and competency to earn profit is going to.
To accelerate and in especially in mobile.
From here onwards.
It seems as though the grandchildren will pay back to the original vision I'm sorry for the lengthy question, but in terms of the competency to earn the fact that we can foresee in the next two three is to own more Yucatan Hassan from here onwards, what would be your interest how are you going to navigate this company forward I would like to.
You hear that from you. So this is my second question. Thank you.
The first question again in terms of the number of line and <unk> is really the balance of that obviously.
The effective.
Our pool increase not just increasing the price, but effective increase of RP with a set of value needs to be achieved so again seasonally for higher revenue and a major strategy moving forward is again its ad revenue.
So.
That's one thing and at the same time optical fiber.
Optical bundle them together.
And.
C B C D E.
The rocks and Todd tolerable.
Utilizing electric Turbo, one thing and we need to achieve upsell and add revenue. So 200 to 300, yeah, we're going to increase.
You and upsell 200 yen, we can increase them. So we believe that we will be able to achieve that goal and he turned up the number of the lines of course.
We have seen a snowball effect so to speak so they'll go down okay. It could have a high why coverage and.
In terms of the point.
You can accumulate good point.
So that is a not a widely reckoned still yet and that is a high probability. So we need to disseminate this information more widely so we need to in good balance strike a good balance for this.
At this time.
In 2023, FY2023 is simply.
Locked in mobile on a multi basis, reducing them to 16 billion, but all of the business.
The sound growth.
Trajectory and our revenue generation EBITDA Red generation I think it was a good opportunity for us to reflect back on our business model overall, and that's B U R zero after zero the.
Many users.
Their extensive users, but unfortunately for us.
There are many customers who are deeply in red deficit. So we need to take appropriate measure it towards that at the same time. The other users we need to bring a lot of benefit.
And that will lead to higher of course top and bottom line and in terms of the financials.
Besides from what I have said there are new initiatives that we are undertaking as of now and for instance that is.
In various ways and means cash flow.
The working capital has been improved.
And in the past.
We are cash rich company. So we didn't know it was too hard in this area, but now we are looking into this very closely.
And the other thing is AI.
Well there are two things in AI, one is that up.
Oh deep learning machine language like deep learning and machine language model L. M M. We need to develop our own large language model.
And the other is like utilizing leveraging this more specifically.
Laurie in the operational cost seeking high productivity and increasing the marketing cost.
Got you.
You said marketing costs and the corporate of course is increasing as from now but there are many corporate the parties, who reach transact with and those people are more e-commerce service or travel.
Oh that we have offered to them, but in the future outside of that.
Let's say offering more better connectivity offering AI.
And we believe we'd be able to do so.
And that is I believe so.
So last but not least.
Good day mobile the other of course ambition that we do have is that all of the software that we have nurtured we would like to sell them outside of Japan, because Japan software enterprises.
There are a lot of large companies of course, but they have not been able to achieve their objective. So like within the venture company is trying to achieve that goal.
So.
Back with their mobile.
Making sure that our business is going to turn into black in surplus. The next of course I couldn't symphony the software that we have developed in the true sense.
We would like to sell to the global mobile company and we like to put our effort in those areas.
Thank you.
So.
Yes, we have a hand HSBC securities New song. Please confirm that you are a mutant.
Thank you good afternoon.
Two questions. Please first relating to mobile the first one is on the subscriber acquisition cost for consumers.
A big change in strategy moving away from the dog store based approach and TV commercials I Wonder if you can compare what your subscriber cost say for this year compared to over the past two years, where you had a different approach.
And the second question or third is real.
It's about can you update us on the status of the one click sign up is that now fully operational as you thought about how you are.
On boarding most of your new customers. Thank you.
Oh.
What do you think that they can yes, I will not be able to disclose a specific numbers, but see a see acquisition cost compared to two or three years ago and compare to yet last year. It has come to roughly 50%.
We've been talking about <unk> and the number of subscribers.
And.
We as we launched the service it's close to four years and we have carried out various campaigns and initiatives try to acquire users and which campaign in which a layer of customers can be reduce the cost and also get high ARPA, we had been analyzed.
So going forward I'm sure we will see further improvements.
In reality I need a guess because we do not know exactly.
What is your gossamer gosh, Oh brother.
Well you know mobile companies are.
But I suppose probably it is.
50% are most likely either wondered over the course.
Especially for online sign up.
<unk>.
But I think all of our stores very very strategic.
So when they walk in they convert more close to over 70% over the people convert.
And sign up.
So I think now our stores are super stores.
They are very very efficient.
So we are selectively.
Deciding where we should have a store.
And make it more efficient.
The what was the second question I'm sorry.
It was on the one click Oh, yeah, yeah, yeah yeah.
It's.
Not the module.
Sure.
Uh huh.
All right.
It's.
10% to 20%.
The challenge is still we need to.
I see.
People, who have a rocketing card, okay and also do one quick so it's limited to bank.
And Oh sort of Ghana.
So we like to expand in card in there where you are in the negotiation.
Oh.
On top of that I used to be our UX for these sign up it's a little bit complicated to be very honest.
Oh I'm in the process of improving our conversion rate on the up as much as possible.
So we need to remove UX, Oh, sorry, nobody knew what you were going to do it was and Oh, one months or so so I'm, hoping that oh, our conversion rate.
Dramatically.
Understood. Thank you.
How do you think you've sort of been Microsoft's.
So she is L a securities.
Oliver Mr. Oliver Please make sure you're on mute yourself and please ask your question.
Thank you I have two questions first question on mobile I've been using the service receptions Burger didn't Tokyo. Thank you, but I'd like to check what you mean about the AD.
Revenue.
I don't really see odds so I'd like could you explain more about how it works or how you think it will work that's the first question.
Whatever you use iPhone right.
I no I'm actually using those xiaomi right.
So no we are introduced.
Communications service Gordon, so people, who call on them, who misses on zinc.
This is a mess and those who are the three boys.
And then you know exchange we have two things we can utilize their data.
And also are we will be able to display ads.
And now we are really personalising ads on the based on or she NDA database school.
We have a consumer database for everybody.
Uh huh.
Our displays are connected.
Our number one.
And we are spending so much traffic.
Through our.
Ecosystem.
And if you cut it agreed that neither.
Operator.
So if you could get it.
Our gross.
Maybe you are we are making from our ecosystem.
It is already through saga Sibanda 69 year.
Richard Riordan accounting also up.
Right. So maybe we can make this model.
Oh, and because we are sending are creating a lot of the body.
Or are the other services.
Richard.
Is it also periodically send an email to lock their mobile users.
In the future probably we will.
Great.
Good afternoon.
Okay, you do love them being up so that's going to be income will become super app for our ecosystem.
There are so many display opportunities because 40 million people.
They come to our website.
And we also can include.
The link Oh, let's just say I assume the lie.
<unk>.
Well, which most of the money is coming from ads.
Some of them, it's about 300 year plus up I think.
So I think it's kind of a reasonable.
Probably.
Close to what he's making using or did the engagement level.
Okay. So I got a I haven't been using the link.
Great.
On the call.
Okay.
Second question could we here you go.
Do you think you'll get a call noise for your words.
Alright, thank you.
For E Commerce could you talk about your thoughts trends in the market.
Sticks issues do you think they're going to have much impact on the general market or rock tenn, specifically thank you.
So during 2023, we had many many things coming in.
One other thing is the.
Post COVID-19 so the travel industry was up I don't get them.
Purchase.
Behavior is most of them go out the door during the coffee.
But we had a very good ecosystem to gobble everywhere. So I told those Jim is regarding e-commerce.
He is going up but on the other hand, there was a big unknown hometown tax difference would you change the regulation from September Japanese people are very keen about such kind of changes so they rather want to spin at the end of the year, but the spin.
On the end of September.
Also there are several other things.
So we have to cover the climate.
The round this year with.
Warm temperature, so the seasonal changes, which may have been doing.
To winter did not happen radically that means consumption for regarding the preparation for the cold weather like a Boston or home kind of alliance kind of thing and also well compared to the other.
And it also the big liquidity go you know if regime.
The warm.
Sciences did not sell well, but we did many things to cover it. So that's why we are ahead of others and we gave that's kind of a suitable but still moving forward and for the this year, we have similar challenges to go over.
Cause you to.
I have a big logistic a place that's crazy, but changes into the pool. So in order to adapt to that we have been already preparing susquehanna since wisdom civil margin to get a very high court the last one mile anybody.
And in order to do that most of the margin I already under the preparation and will start so that's kind of you know very well.
Finally, such as scheduled delivery or already do anybody or a door from anybody else, that's kind of the real options to enhance it.
Commerce.
And then he got into trouble or inbound is coming.
So we are now doing with hotels and many other.
It's always a durable industry people dude.
I've said most of the inbounds over with more high.
Hi average.
Right.
All these other things.
So that's great.
I think the fact that we have.
A very big strategic.
J P.
[laughter] is really meaningful.
And we can jointly.
Build.
More efficient.
Our approach of did anybody in the product like a re bundling.
Did anybody.
Uh huh.
Drop it.
The upfront.
And the fact that the marketplace makes sense.
Because we have so many different variety of the product.
We have a possibility.
Operation.
So I think that's gonna be.
And warehouse management, where you wanted to really make sure that we are proceeding automation.
As much as possible so that Oh, we do not need to ask.
Uh huh.
So that is going to be all.
But I think the fact that we made this investment for 60.
Six.
Our houses are.
Although a bunch of them.
Right.
One six.
Some of the water.
Two big ones are six but do we have more than that so it is very very important for us.
Thank you Kurt.
No one mentioned raising the bar for the kind of free delivery.
Costs.
Are you happy at the current level.
Minimum order for for the free delivery.
Where you do not have any plan to raise up the fees should be in line.
Which is not re enforced.
Through the margin, but highly recommended.
And for the new merchants that we made at the Monday.
That are in we accept a hokkaido.
Sure.
I'll be brief and people buy more than a series of in that area.
The Ah.
She'd been fee needs to be for you and me included.
Yeah.
Thank you.
Any other onetime off well.
Thank you Steve.
Due to time limitations.
From the institutional investors. The next question will be the last question B of a securities another awesome.
Please.
Hello. This is nuggar all thank you for pointing me I am from B of a securities I have two questions I'm, sorry to be a particular, but it's about ARPA.
The idea towards ARP, who seems to be changing at the rock Tenn data voice. So communication ARPA is being controlled at a little bit little level, but billing AD ecosystem ARPA I think there are what is of a disc.
Scribing, but other competitors cannot do perhaps are you will be putting together our <unk> strategy.
Ah we're only rakuten can do so I'd like to know about the way forward the idea towards ARPA and second is a carrier competition. Our competition was based on price the quality or internet.
Services, but now you have additional big piece, all finance and so.
You seem to have a stronger competitive advantage and so I was wondering how you are to combine finance the financial service and telecom the mobile yes, I think it's okay.
Where our pool comes from but.
Data heavy users and we're seeing more and more so we would like to have more our poo from data as well and the main difference one of the difference compared to other competitors is that oh, whether or not we can monetize the data that we capture so.
In a sense.
This $25 million or 20 million. These are royal users. If we can create the customer base and then the ecosystem of Rakuten, we will become a solid and.
Maybe he up.
Achieving a revenue of one trillion yen will be.
Possible in the future.
So.
In the midterm.
Okay are you going to gain profit from.
Mobile maybe maybe outside of mobile maybe that's one idea for now we are looking to making our mobile profitable standalone mobile profitable, so oh, including ads.
Based on the EBITDA, but within this year, yes, we would like to achieve.
This business.
To be positive and the finishing with a financial service.
Arm.
Why with a lack of 10, a mobile a why do people buy more than 60% after a rocketing EG Bob but.
I guess, one thing is a brain shower increases and with points.
You'll be able to pay the subscription fee.
Or more.
And that.
By becoming a subscriber are you become conscious that you are a rocker 10, a member so point magic and locker 10.
Magic, perhaps Ah is working even more strongly so now connectivity into financial services with points. They are already connected.
But.
How to go about utilizing data so that's one thing.
So if we think about synergy with a finance arm.
Well they are in different banks and.
Basically the service needs to be robust and that's important.
And if you come to Roxanne and if you did everything at a doctor in a using a locker 10 bank and Oh carry the card and sign up for a Doctor 10 insurance and also have account marketing Securities are then perhaps you'll be able to pay for all the.
And the communication fee. He so oh, we're too late arbitrage, that's one thing and our C. A strategy.
In the World I think Roxanne is the only player with successful strategy is all about the quality, yes, we've gone through this so many times and another major thing is for iPhone users.
They cannot receive.
The call or even if they want to make another car they were not able to C. In the history and but now we are improving our we are going to make a S. M. S open and we're negotiating.
That's for voice, we can make it open then we will be able to go after iPhone users as well. So the concept of communication this has to be changed.
And also the cash the point are they sending money the transfers are and being.
Being able to pay Dutch and also 30 million of Florida for than a bank.
Banker from 50 million to $30 million.
So various communication and.
Money transfers money payment combining these services.
And the key one of the keys are is this app called link.
Okay, I've understood very well thank you very much.
These are all which must be that.
That concludes the Q&A session for analysts and also the investors. Thank you very much so make eaton Nissan will be concluding the session.
Once again, thank you very much for joining us quite a long hours with us now and what's the one thing I would like to make the promise that like with the mobile and marketing group.
The significant operational optimization.
I believe that we were able to make this process promise at the same time.
Although in Germany that may cost with mobile we have been able to reduce extensively at the same time, the roaming had been utilized effectively as well so network improvement and also being realized.
And we need to of course, our work a bit harder of course, but.
That's the way we are and in the meantime, a very meticulous.
And analytics and action list.
To create this and compiled as.
And in terms of financial risks.
Is it close to zero as of now.
So.
This is our belief.
And in the future.
That based on this foundation a sound growth has to be achieved.
And this is what we are trying to pursue.
So.
Not a superficial G M S or superficial cell revenue or meaningful robust business have to be pursued.
In the future well I saw the acting group, we need to evolve and we are in the process of evolving so I hope that.
We'd like to seek your feedback and insight and we'd like to make further improvement. So thank you very much.
Thank you very much so that concludes that good thing groups 'twenty to 'twenty three.
Here in the fourth quarter.
Without.
Meeting.