Financial Results for the First Half of the Fiscal Year Ending March 2023
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KDDI Corporation reported financial results for the second quarter of fiscal year ending March 2023, highlighting a 50.8% increase in consolidated operating income amidst a focus on enhancing telecommunications infrastructure and customer experience. The company aims to invest 50 billion yen in virtualization technology to improve service reliability and operational efficiency, while also addressing communication failures and their impacts. Continued efforts are being made towards digital transformation and providing new value to society through partnerships and innovative solutions.
Financial Results for the First Half of the Fiscal Year Ending March 2023
- 1. Financial Results 2nd Quarter Fiscal Year Ending March 2023 November 2, 2022 KDDI Corporation President Makoto Takahashi The creation of a society in which anyone can make their dreams a reality, by enhancing the power to connect.
- 2. 2 Index 1. Progressing Towards a Resilient Telecommunications Infrastructure 2. Consolidated Financial Results 3. Progress on Mid-term Management Strategy Appendix
- 3. 1. Progressing Towards a Resilient Telecommunications Infrastructure
- 4. 4 Efforts to Prevent Recurrence of Communication Failure Company-wide verification and response as a top priority issue Okinawa Cellular Council for improvement of infrastructure and customer relations Improvement of customer relations WG Operation improvement WG Equipment improvement WG Promotion System for Quality and Service Improvement Improvement of work quality WG Sales Department （Corporate/ Individual） Customer services/ PR Department Engineering/ Construction Department Operation Department Company-wide training and safety conference
- 5. 5 Based on discussions at the Ministry of Internal Affairs and Communications’ Telecommunications Accident Verification Conference Submit a report on prevention of recurrence Public information and roaming support will continue to be discussed at the MIC WG (1) Review of work procedures and standards (2) Design review of congestion detection and control (3) Establish procedures for early recovery from congestion (4) Improvement of PR content and methods (5) Secure alternative means (6) Conduct training and strengthen quality control system Conduct thorough risk assessment, pre-confirmation and review work standards Developed congestion detection tools, and changed configuration to separate regions ➜ Developed and introduced VoLTE nodes congestion relief tool Establish an easy-to-understand information dissemination from the customer's perspective Consider measures to secure emergency calls and critical communications in the event of a disaster or service outage Sep. 23 Conducted company-wide large-scale accident drill Sep. 29 Conducted company-wide safety convention Establishment of Quality Control Office as of Oct. 1 Efforts to Prevent Recurrence of Communication Failure ➜ ➜ ➜ ➜ ➜
- 6. Meeting customer expectations 6 Additional investment of 50 billion yen in the medium term, mainly in virtualization technology, to improve quality Front-loading Investment Accelerated response using smart monitoring and AI Smart monitoring capabilities have been expanded to implement rapid restoration response Developed failure detection system using AI to speed up abnormality detection Accelerated implementation of virtualized infrastructure Core facilities early migration to virtualized infrastructure; improved fully automated operations and service reliability Fully automated congestion control functionality will implement network measures in the event of failures Operational sophistication
- 7. 2. Consolidated Financial Results
- 8. 2,740.8 558.5 354.4 113.8*2 26.3*2 185 Operating Revenue Operating Income Profit for the Period attributable to owners of the parent 2,625.2 573.1 361.5 FY23.3 1H FY22.3 1H Financial Business Revenue*1 Financial Business Operating Income*1 81.4 6.3 +39.8% +315.8% NEXT Core Business (DX) Operating Revenue 157 +17.8% 1H Financial Results Highlights 49.3% 50.8％ 51.5% Focus Areas 5,560 1,100 688 210 38 -- FY23.3(E) (Unit : yen billion) Progress of consolidated operating income is 50.8%. Aiming to continue to increase profit and expand Focus Areas Progress *1 au Financial Holdings, IFRS basis *2 Includes temporary accounting effects in FY23.3 1Q *3 au Energy Holdings is disclosed from FY23.3 2Q. Figures shown are actual results for 2Q. 8 FY23.3 1H FY22.3 1H FY23.3(E) YOY 139*3 au Energy HD Operating Revenue*3 -- -- -- Consolidated
- 9. 9 573.1 (Unit : yen billion) (53.9) +10.6 FY22.3 1H FY23.3 1H +0.3 1H Consolidated Operating Income: Factors for Change Multi-Brand Communications ARPU revenue Excl. (i) 558.5 Focus Areas*1*2 Excl. (1) and (2) *1 Business Services segment, Financial Business (au Financial Holdings, IFRS basis) and Energy Business, etc. *2 Includes temporary accounting effects in FY23.3 1Q Group MVNO Revenues + Roaming revenue Excl. (i) ＋38.2 (6.9) 1H: Decrease due to (1) response to communication failure and (2) impact of fuel price hikes Others Excl. (1) and (2) +12.2 573.3 Cost savings Related to 3G closure (14.8) (1) Impact of communication failure (i) Refunds (ii) Response expenses, etc. (2) Impact of fuel price hikes FY23.3 1H Excl. (1) and (2) (14.5)
- 10. FY21.3 FY22.3 FY23.3 1H 2H Multi-Brand ARPU Revenues Value-added ARPU revenues increased steadily while communications ARPU revenues declined 10 5G通信 (Unit：yen billion) FY21.3 FY22.3 FY23.3 1H 2H Multi-Brand value-added ARPU revenues Multi-Brand communication ARPU revenues YOY +¥60.8 billion YOY (¥53.9 billion) (Excl. refunds) Excl. impact of Refunds (¥5.9 billion) (Unit：yen billion) Note) Personal Services segment. au, UQ mobile, povo 827.2 770.4 797.2 827.6 743.2 352.6 305.1 276.1 295.4 356.2
- 11. 9/'20 9/'21 9/'22 30.79 30.54 30.93 (Unit : million) Multi-Brand IDs Multi-Brand IDs Although pace slowed in July, recovery trend centered on UQ mobile 11 5G通信 (Unit : million) Monthly Multi-Brand IDs Apr. May Jun. Jul. Aug. Sep. 30.93 30.93 Note) Personal Services segment. au, UQ mobile, povo
- 12. 3. Progress on Mid-term Management Strategy
- 13. 13 Pursuing social impact through our business Sustainability Management Sustainable industrial/ infrastructure environment Human capital Number of solving disparity in regions* 2.75millions (Mid-term goals 15 millions) FY19.3 FY20.3 FY21.3 FY22.3 FY25.3 8.0 24.5 44.0 (goal) DX Basic Skills Employee enrollment begins in earnest IoT Connections 28millions Social value Environmental value Economic value Strengthening of Management Business Strategy Sustainable growth in society Partnering Corporate value improvement Note) Each figure is as of September 30, 2022 * Cumulative number of users and providers through various efforts to solve disparity such as smartphone and mobile phone classes, customer supports and offering digitization support solutions in regions, etc.
- 14. 14 Strengthening of Management Sustainability Bonds Issuance A total of 100 billion yen KDDI Tsunagu Chikara Bonds Issued Working with partners to promote a virtuous circle between society and business Solving social issues and the global environment Promote projects that support conservation Investment in startups Revision of Human Rights Policy Through Partnerships Promoting Carbon Neutrality Further strengthen efforts to Respect for Human Rights in Mid-term Management Strategy Establish key human rights issues and conduct human rights due diligence for Group business and supply chain September 2022 October 2022 March 2022
- 15. 15 Leveraging Lessons Learned to Build a Strong Foundation for Creating New Value Resilience of telecommunication networks + Providing solutions to further improve society Toward Strengthening the Foundation as Social Infrastructure Satellite Growth Strategy Lessons learned from Communication failure Automobile Logistics Administrative services Banking Transportation Impacts on various industries and living infrastructures In addition to understanding the customer‘s business, even the impacts on customers beyond that. Shift in mindset to more in-depth analysis and deep investigation
- 16. 16 Strengths ( 5G + Operational know-how cultivated over many years + Partnering ) Focus Areas DX Finance Energy LX* Regional Co-Creation -CATV, etc.- Maximize corporate value by building a holdings structure Development, product, and BCPs enable us to establish a foundation for industry-specific DX Accelerate collaboration across wide range of financial functions Stabilize earnings and help to reach carbon-neutral goals New Value Offerings by Metaverse and Digital Twin Support for municipal and regional DX, resolving digital divide *LX: Life Transformation (a business model that transforms diversifying consumption, life experience and behaviors with an eye to the future) au Financial Holdings au Energy Holdings
- 17. Business Services Segment 157 185 FY22.3 1H FY23.3 1H (Unit : yen billion) Operating Income Factors for Change (YOY) (+) Increase in NEXT Core Business ① Corporate DX ② Business DX ③ Business Infrastructure Services (-) Impact of contract terminations due to 3G termination and communication failure response NEXT Core Business drives profit growth Business Services segment Operating Income NEXT Core Business Operating Revenue 17 NEXT Core Business (DX) led growth with increased revenue and profit DX Percentage of total segment sales over 30% all increased in profit
- 18. Development, product, and BCPs lay the groundwork for industry-specific DX Helping Customers Achieve DX 18 DX Enhancement of DX Products through partnering Space Freedom Work Place and more... KDDI Video Management Service Reinforcement of BCP response Further reinforcement of BCP in the future Backup line solutions, etc. BCP for IoT being offered auSIM and SORACOM SIM Combined redundancy Strengthen DX development system DX Promotion Division Cloud Construction Apps Development IoT
- 19. Integrated management of surveillance camera systems in the cloud and advanced operations through AI Business Co-Creation 19 DX With Partners New Value Creation Communication Infrastructure and IoT operational know-how Business Development & Cloud Logistics DX ・BCP reinforcement AI analysis using partnering led by DXGoGo* Secure environment with closed NW Integrated management and visualization of multiple locations Enhanced AI video analysis KDDI Video Management Service (scheduled to start in November 2022) Introduction of the system starts after demonstration simulations * DXGoGo Corporation is a joint venture between KDDI and OPTiM Corporation. Businesses include product planning and business development related to DX, AI and IoT A B C KDDI Wide Area Virtual Switch 5G plant warehouse plant Head Office 5G KDDI Cloud Data Storage at 3 domestic DC sites (Hitachi Transport System)
- 20. Business performance progress steadily. Each KPI also expanded Financial Business FY22.3 1H FY23.3 1H 6.3 26.3 (Unit : yen billion) Operating Income*1 *1 au Financial Holdings, IFRS basis. Operating income includes temporary accounting effects in FY23.3 1Q *2 Each figure is as of September 30, 2022 20 au Jibun Bank Loan product’s balance*2 1.9 trillion yen (YOY +0.2 trillion yen) Transaction volume of Settlement/ Loan (1H) 6.8 trillion yen (YOY +31.4%) Financial Business Performances Card Loan (Jibun Loan) Loan balance exceeds ¥200 billion exceeds ¥100 billion September 2022 exceeds ¥200 billion FY22.3 1H FY23.3 1H 81.4 113.8 Operating Revenue*1 Finance (Unit : yen billion)
- 21. 21 × *1 au PAY members and au PAY Card members *2 Each figure is as of September 30, 2022 Over 8 million*2 Over 38 million*2 au PAY members*1 au PAY Card members Save Use Service attractiveness centered on points Corporation with Financial Services Over 100 million point investment au Matomete preferred interest Satisfaction Survey 2022 Oricon Customer Satisfaction® Survey Home Loans No.1 Internet Bank Savings Selected by Women Interest Satisfaction 2022*3 No.1 Acquire support of customers through bargain and convenient services Aiming to provide attractive financial services centered on au customers and Ponta member base *3 Silmir Institute (March 2022) Survey on Internet banking Finance au Jibun Bank au Kabucom Securities
- 22. 22 Payment Services * au PAY members＋au PAY Card members Credit card business grows along with expansion of au PAY platform Merchants Customers Coupons are delivered to nearby customers through au PAY apps Expansion of au PAY base au PAY members* 9/'21 9/'22 34.6 38.9 YOY +4.3 million (Unit : million) Growth of credit card business au PAY Card members 9/'21 9/'22 7.0 8.1 (Unit :million) YOY +1.1 million Credit card transaction volume of settlement YOY +27％ (1H) Initiatives to Expand au PAY au PAY transaction volume of settlement YOY +53％ (1H) Finance Growth Pack
- 23. Metaverse / Digital Twin Expansion of real world that leverage strengths of partnering LX LX 23 Urban areas Digital Twin Metaverse Reconstruction of urban space in three dimensions Enables precise monitoring and simulation of urban activities Virtual Halloween festival in collaboration with government and startups New buying experiences through leveraging Google Cloud Technology high-definition real-time XR of garments Extension of one’s life Virtualization of human flow to KDDI HQ
- 24. In addition to supporting local government and regional DX, promote erasing the digital divide Regional Co-Creation 24 Cabinet Office Super City Project “Skyway” visualization PCR specimen transportation Web3.0 Education Program Automated delivery robot Regional Mobile Shops A total of 9,500+ people nationwide have experienced Promoting Regional DX with Tsukuba City More than 1,600 nationwide expanded to au stores (400 stores in the previous period) MIC Projects Digital Utilization Support Course Note) Each figure is as of September 30, 2022 Regional Co-Creation Mobile phone Reboot
- 25. Leveraging Satellite Telecommunications ”Starlink” Aiming society that can live in peace by erasing the digital divide LX 25 Offering to Enterprise and Civil Government Introduce to au base stations Towards more “connected” society Start within 2022 As the only ”authorized Starlink integrator” in Japan, contributing to communications in mountainous areas, maritime, and at the time of disaster * The starting date of maritime telecom services will be announced as soon as the details are decided. Introduced to backhaul lines of au base stations at over 1,200 locations Earth stations at multiple locations nationwide that supports 3,000+ satellites Start within 2022 LX
- 26. 26 Together with the community, Explore the extraordinary With “Suzume no Tojimari” directed by Makoto Shinkai Tie-up commercial arising（From Oct. 28）
- 27. Summary Promote operations with a view to the medium term Strengthening the Social Infrastructure Mid-term Management Strategy Consolidated Results for 1H 27 Strengthen "investment" and "customer service" to provide a strong foundation Aiming to create new value for the betterment of society Steady progress on KPIs in focus areas (DX and Financial Business) Continue to target telecom ARPU revenues to bottom out during FY23.3 Profit decreased in 1H due to communication failure and fuel price hikes Expect to promote operations and invest in costs, prioritizing mid-term growth
- 28. Appendix
- 29. Multi-Brand Total ARPU 29 5G通信 2Q 3Q 4Q 1Q 2Q 4,270 4,200 4,050 3,970 3,980 1,690 1,750 2,020 1,740 2,070 Communications ARPU Value-added ARPU 6,050 FY23.3 5,950 Factors for Change (YOY) +90 yen (＋) ・Value-added ARPU +380 yen of which, Electricity ARPU +320 yen Others, increase of settlement, compensation, and content (-) ・Communications ARPU (excl. refunds) -290 yen (Brand mix, discount impact, etc.) (Unit：yen) Factors for Change (QOQ) +340 yen (＋) ・Value-added ARPU +330 yen of which, Electricity ARPU +320 yen Others, increase of settlement, compensation, and content ・Communications ARPU (excl. refunds) +10 yen (Seasonal factors, decrease in discounts, etc.) 5,710 6,070 5,960 Excl. refunds -60 yen FY22.3 Note) Personal Services segment. au, UQ mobile, povo
- 30. 30 +30.0 234.0 +62.3 EBITDA (37.9) FY22.3 1H Payment of corporate tax, etc. 327.7 CAPEX (unit : yen billion) Note) Financial business is au Financial Holdings Corporation. FY23.3 1H +93.7 Others +39.3 1H Consolidated FCF(Excluding Financial Business) Factors for Change Incl. transient factors related to 3G closure Incl. transient factors such as accounts payable
- 31. Note) “KDDI (consolidated)” is prepared in accordance with IFRS and “au Financial Holdings (consolidated)” is prepared in accordance with J-GAAP. Property, Plant and equipment, Intangible assets and Right-of-use assets Goodwill Trade and other receivables Securities for financial business Loans for financial business Cash and cash equivalents Others KDDI(Consolidated) Total Assets 11.41 trillion yen Interest-bearing debt Trade and other payables Deposits for financial business Other liabilities Equity au Financial Holdings (Consolidated) Total Assets 3.56 trillion yen Others Cash and cash equivalents Securities Loans Deposits Others Consolidated/ Financial Business Balance sheet (as of the end of September 2022) 31
- 32. Statements made in these documents with respect to the KDDI Group‘s performance targets, projected subscriber numbers, future forecasts and strategies that are not historical facts are forward-looking statements about the future performance of the KDDI Group, based on company’s assumptions and beliefs in light of the information available at the time they were made. They therefore include certain risks and uncertainties. Actual results can differ from these statements due to reasons including, but not limited to, domestic and overseas situation, economic, trends, competitive position, formulation, revision or abolition of laws and ordinances, regulations or systems, government actions or intervention and the success or lack thereof of new services. Consequently, please understand that there is a possibility that actual performance, subscriber numbers, strategies and other information may differ significantly from the forecast information contained in these materials or other envisaged situations. Disclaimer