Financial Results for the Fiscal Year Ended March 2022
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KDDI Corporation reported financial results for the fiscal year ending March 2022, showcasing a growth in operating revenue and income driven by their multi-brand strategy and integration of telecommunications with life design. The company aims to enhance shareholder returns and promote sustainable profit growth, with initiatives focused on expanding their 5G capabilities and entering new business areas. Looking ahead, KDDI is set to leverage new technologies and partnerships to achieve its mid-term management strategy while addressing societal challenges and promoting innovation.
Financial Results for the Fiscal Year Ended March 2022
- 1. Financial Results for the Fiscal Year Ending March 2022 May 13, 2022 KDDI Corporation President Makoto Takahashi
- 2. ¥5,446.7 billion ¥1,060.6 billion 41.7％ ¥300.03 ¥1,422.0 billion ¥1,042.6 billion 1 Promoted “the integration of telecommunications and life design,” with growth fields leading profit growth Promoted a multi-brand strategy and built a robust ID base Operating Revenue Operating Income +2.3% +1.5％ Cost reduction, etc. 3 yearstotal ¥100billion(approx.) FY22.3 CAGR FY19.3-FY22.3 （Reference） FY19.3-FY22.3 Target Payout ratio EPS ― +5.0% Over 40% FY19.3→FY25.3 1.5 times Life Design Domain Revenue Business Services segment Revenue +14.6％ +5.6% FY22.3 ¥1.44 trillion* FY22.3 ¥1 trillion * The expected approximately ¥60.0 billion deduction due to a change in accounting procedures in the energy business against mid-term target of 1.5 trillion yen. Highlights of Consolidated Financial Results for FY22.3 Achieving sustainable profit growth and enhancing shareholder returns
- 3. Group IDs (Unit：Million) 3/'21 3/'22 31.51 Note） Personal Services segment 31.84 Communications ARPU (Unit：Yen) FY21.3 FY22.3 4,400 4,200 Value-added ARPU （Including Handset Compensation and Denki) FY21.3 FY22.3 1,540 1,740 (Unit：Yen) Cumulative 5G unit sales steadily increasing over 8 million Multi-Brand Strategy Built a robust ID base. Growing Value-added ARPU against the decrease of Communications ARPU YOY +¥200 YOY (¥200) 2
- 4. FY19.3 FY20.3 FY21.3 FY22.3 147.0 178.0 198.0 254.0 Operating Income (Unit：Billions of yen) Transaction Volume of Settlement/Loan 3.38Million (YOY +0.5M) au Denki, etc. Subscribers 37.0 Million（YOY +4.2M） au PAY members + au PAY Card members Of these, au PAY Card members 7.6 Million（YOY +1.1M） Main indicators ¥11.7 Trillion (YOY +29%) CAGR +20.0% Life Design Domain Double-digit growth in operating income CAGR due to steady growth of core services 3
- 5. Operating Income (単位：億円) FY19.3 FY20.3 FY21.3 FY22.3 122.2 149.0 167.5 186.0 * KDDI non-consolidated base FY22.3 Over 24.5 Million （YOY+6.5 Million） IoT Connections* FY22.3 31.9% Main indicators NEXT Core Business ratio in total revenue of Business Services segment CAGR +15.1% (Unit：Billions of yen) Business Services segment NEXT Core Business drove operating income with double digits CAGR growth 4
- 6. The first to end 3G and move on to the next era Thank you 3G We appreciate you for using our 3G Services Third-generation mobile phone services begins 2002 CDMA 1X WIN service commences Industry’s first flat-rate packet service introduced 2003 Sales of the world's first 1seg-compatible mobile phone “W33SA” 2005 Comprehensive music service "LISMO" launched Google search engine was introduced into EZ Web 2006 KDDI launches its first iPhone 2011 5
- 7. Appendix
- 8. 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 4,360 4,410 4,440 4,380 4,280 4,270 4,200 4,050 1,370 1,550 1,560 1,690 1,480 1,690 1,750 2,020 Communications ARPU Value-added ARPU 6,070 Group IDs (Unit：Million) 6/'20 9/'20 12/'20 3/'21 6/'21 9/'21 12/'21 3/'22 31.47 31.50 31.51 31.51 31.39 31.37 31.56 31.84 Multi-Brand Total ARPU (Unit：Yen) FY21.3 FY22.3 Note） Personal Services segment 5,730 5,970 5,990 6,070 5,760 5,960 5,950 Group IDs / Total ARPU 7
- 9. 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 11.08 trillion yen Interest-bearing debt Trade and other payables Deposits for financial business Other liabilities Equity au Financial Holdings (Consolidated) Total Assets 3.24 trillion yen Others Cash and cash equivalents Securities Loans Deposits Others Consolidated/Financial Business Balance sheet（as of the end of March 2022） 8
- 10. New Mid-Term Management Strategy (FY23.3-FY25.3) May 13, 2022 KDDI Corporation President Makoto Takahashi
- 11. Major Environmental Changes Diversification of values and work styles Creating new business through DX Increasing importance of sustainability Progress in Beyond 5G/6G research as well as next-generation technologies 1
- 12. Toward KDDI VISION 2030 Integration of Telecommunications and life design Promoting business Transformation Centered on 5G A platformer supporting society Previous Mid-Term Management Strategy New Mid-Term Management Strategy KDDI VISION 2030 2019-2021 2022-2024 2030 2
- 13. New Materiality Mid-Term Management Strategy Realization of safe, secure, and prosperous society Promotion of innovation centered on telecommunications Carbon neutral Advancing stakeholder engagement Human resources first Strengthening the group management base through progressing governance Defining new materiality and promoting the mid-term management strategy Philosophy Brand Message Company Vision The KDDI Group Mission Statement Mid-Term Management Strategy - Sustainability Management – Business Strategy Strengthening of Management (Non-financial) 3
- 14. 4
- 16. The creation of a society in which anyone can make their dreams a reality, by enhancing the power to connect.
- 17. Working with partners to achieve sustainable growth and enhance corporate value Sustainability Management Social value Environmental value Economic value Strengthening of Management Business Strategy Sustainable growth in society Partnering Corporate value improvement 7
- 18. Satellite Growth Strategy 5G-driven evolution of the telecommunications business and expansion of focus areas with telecommunications at the core Mobility Health care Education DX LX 5G Communications Regional co-creation -CATV, etc.- Space Finance Energy 8
- 19. Strengths (5G + Operational know-how cultivated over many years + Partnering) Focus Areas DX Finance Energy LX* Regional Co-Creation -CATV, etc.- In the era of blending telecommunications, evolve businesses in each area by leveraging our strengths Using KDDI assets to accelerate DX centering on 5G Providing platform services to expand B-to-B-to-X businesses Leveraging data to expand businesses, including the VPP business Revamping people’s life experience and behaviors through the prevalence of 5G and technological evolution Pursuing regional co-creation and eliminating the digital divide *LX: Life Transformation (a business model that transforms diversifying consumption, life experience and behaviors with an eye to the future) 9
- 20. With 5G penetration, telecommunications will "blend in" with every scene. Era of New Value Creation 5G High speed high capacity low latency and guaranteed bandwidth Medical diagnoses Automobile Management Smoothplay Immersive, realistic experience 10
- 21. 5G Area Construction Reinforcing customers' lifeline and nationwide coverage also contributes to government targets Areas along the customer's life line Areas with high data traffic: analyze, predict and build efficiently Nationwide coverage Contributing to the 5G population coverage target (95% by FY2024.3) under the Vision for a Digital Garden City Nation 5G Communi- cations Nationwide coverage Commercial districts Railroads Shinkansen Expressways Mountainous regions Isolated island areas Partnering with SpaceX Promoting measures to prevent blind spots Connecting more and always with au 11
- 22. Evolution of 5G Technology New value opportunities expand with full-scale 5G SA NSA: Non-Standalone, SA: Standalone 5G SA Application Examples FY20.3~ FY22.3~ 5G NSA 5G SA Beyond 5G Openness and Virtualization Network slicing “Entertainment experiences everywhere“ Co-creating through network slicing Participate in events from satellite sites Video streaming anywhere Event VR viewing at home Game streaming on the go ©CAPCOM CO., LTD. 2016, 2020 ALL RIGHTS RESERVED. 5G Communi- cations 12
- 23. 5G Penetration / Communications ARPU Revenues FY22.3 FY23.3 FY24.3 FY25.3 Goal: 80% by FY25.3 5G Penetration Multi-Brand Communications ARPU Revenues Plan to increase by FY25.3 versus FY22.3 Moreover, aiming faster rebound 31.6％ 80％ 5G FY22.3 FY23.3 FY24.3 FY25.3 Note） Personal Services segment Note） After that, mid-term target is stated for FY25.3 notation 5G Communi- cations 13
- 24. Maximize ARPU High-definition video experience Expand services to provide unique 5G experiences through partnering 5G Communi- cations Real-time service experience 14
- 25. Aim for double-digit operating income CAGR through growth in NEXT Core businesses Corporate Business Operating Income Operating Revenue FY22.3 FY25.3 Aiming for about 20% over KDDI Group Consolidated Operating Profit Overall Business Services segment Double-digit CAGR growth FY22.3 FY25.3 NEXT Core DX Promotion NEXT Core business drives business growth Aim for double-digit CAGR growth DX 15
- 26. Further evolution of operational management know-how optimized for era of blended communications Outlook of DX leveraging our strengths New Value Creation IoT Connections Reliable operation and maintenance system cultivated with global partners FY19.3 FY20.3 FY21.3 FY22.3 FY25.3 8.0 24.5 44.0 (Unit：Million) DX With Partners New Value Creation Communication Infrastructure and IoT operational know-how Business Development & Cloud Co-creating new value through DX in addition to the sense of security provided by constant connection 5G 16
- 27. Aiming to provide industry-specific platforms that support business creation Accelerate DX of Customer Companies DX Construction and Real Estate industry Energy industry Automotive industry Railroad industry Media industry Self-driving cars Network slicing Image transmission Drone inspection Viewing analysis Simulation of human flow Examples 5G Platform Telecommunications ID and authentication Charging and billing Settlement Location data Data analysis, etc. Partners 17
- 28. Business Co-Creation Case Studies DX Promote business development with partners and co-create through DX Decentralize urban development to create work and lifestyles not restricted by location or time Predicting the future through analyzing data on people and cities with proprietary algorithms Equipment inspection automation of wind power facility inspections with autoflight and AI analysis Spatial Integration 4K video projection Emotion Recognition Facial Analysis Space Freedom Project Drone inspection, etc. Simulation of human flow,etc. Image transmission, etc. Space Freedom Work Place 18
- 29. Strengthening systems and expanding resources to create new value DX Development System DX DX Solution Engineering Division System development Business Development/Consulting DX Service Planning vertical integration Newly organized KDDI Digital Divergence Holdings iret KDDI Agile Development Center Corporation (Spin-out) Scrum Inc. Japan KDDI Web Communications Other Group Companies New M&A ... Newly Established Strengthening With Partners - New Value Creation Communication Infrastructure & IoT operational know-how Business Development & Cloud 19
- 30. Global Expansion of DX Promoting global DX on strength of our worldwide IoT infrastructure DX *More than 200 roaming partners have been agreed in principle, and services are scheduled to be launched by September 2022 Global expansion through domestic/overseas integrated sales structure IoT World Architecture Industry-specific DX Success Model Product development tailored to each locality Available in over 60 countries and regions (One of the world’s widest coverage, scheduled to expand over 200 regions* in FY23.3) 20
- 31. Financial Business Aim for double-digit operating revenue and income CAGR growth along with expansion of key indicators Results from previous mid-term (FY20.3-FY22.3) FY20.3 FY21.3 FY22.3 FY20.3 FY21.3 FY22.3 177.8 billion yen 19.4 billion yen Operating Revenue Operating Income Note）au Financial Holdings, IFRS basis Finance New mid-term targets (FY23.3-FY25.3) Mortgage loans as a growth driver and expansion mainly in credit card membership Mortgage Loan Balance Number of credit card members Double-digit CAGR growth Bank accounts Operating Revenue & Operating Income Over 3 trillion yen Mid-term FY25.3 21
- 32. Increase customer engagement Growth of financial companies and promotion of cross-use Customers using telecom services Financial Cross-Use Accelerate collaboration across wide range of financial functions within financial group Finance Examples of Cross-Use au Collective Interest Rates 0.05% per year 0.05% per year 0.099% per year With au PAY Account Linkage With au PAY Card By direct debit au Money Connect In the settings Normal 0.001% per annum Max. 0.2% per year Yen Savings Deposit Preferential interest rate au Jibun Bank au Jibun Bank au Asset Management au Kabucom Securities au Insurance Company LIFENET INSURANCE COMPANY credit card 22
- 33. Providing Platform Services Expand business domain by developing B-to-B-to-X services in the future BaaS Service Delivery Platform Product Service For non-financial businesses B-to-B-to-C B-to-B-to-E (Employee) Store owners Contribute to improving customer & employee satisfaction/engagement at client companies Improved convenience of settlement and financing ,etc. Loans, asset building, and other benefits Support for opening new stores through settlement and financing ,etc. Financing and transfers Yen savings Mortgage Settlement Card loans Apps Asset management Sports betting Foreign currency savings Finance 23
- 34. FY22.3 FY25.3 Energy Business Ensure stable power supply Price spikes in wholesale power trading market Aim for steady business growth by stabilizing earnings and expanding customer base Electricity retail business customer base Business growth Operating Revenue Stabilization of earnings Collaboration with telecommunications, financial businesses, etc. and expansion of alliances Energy customer contact Expand collaboration with group's commercial products Increased Penetration Expansion of partners White label ... customer base 24
- 35. Carbon Neutral-Related Business Contributing to society’s carbon neutrality through business Renewable Energy Generation Solar panels installed on base stations, etc. Further expansion with partners Supply and Demand Adjustment to Support the Expansion of Renewable Energy *VPP（Virtual Power Plant）：Using IT and other technologies to control decentralized solar power, storage batteries and other energy sources like they are one power plant Energy Growing instability in the supply and demand balance due to the expansion of renewable energy Enhancing our ability to adjust supply and demand by promoting the VPP* business Solar power Storage batteries EVs Home generators Lighting Air conditioning Renewable energy Optimal control VPP Promoting initiatives to expand the VPP business, such as installing storage batteries 25
- 36. Life Transformation（LX） Promoting research of technological areas centered on consumer perspectives to create future-oriented business models Life Transformation（LX） Advanced technologies of the Beyond-5G/6G era LX Technologies A technological area that offers new life styles geared toward 2030 LX Network Security Spatial recognition and visual analysis AI Ultra high-speed, ultra multi-connection, ultra low-latency telecommunications environment Safety and security through robust and ultra high-speed encrypted technologies Ultra realistic experiences Trust through ultra sophisticated AI technologies Offering diverse value Promoting digitalization Using the latest technologies 26
- 37. Value Creation by LX (1) LX Web3.0／NFT Accelerating initiatives aimed at the autonomous and decentralized Web 3.0 era Web 2.0 (Centralized) Web3.0 (autonomous and decentralized) Technological evolution such as Blockchain and NFTs Platform type Community C2C Enabling direct content ownership and sharing through users (creator economy and fan communities, etc.) New interactive communication with avatars A new digital economy comparable to the real economy Open environment for creation led by creators Creating spaces where anyone can express themselves Metaverse Develop platform services to provide new value of Web 3.0 era 27
- 38. Value Creation by LX (2) LX Drones Satellite telecommunications Expanding services that vitalize regions and enrich lives Offering an urban level of telecommunications quality to every corner of the country Helping create new experiences Helping enhance the sophistication of distribution by realizing unmanned delivery anywhere Realizing new experiences by expanding spaces where videos can be taken Unmanned delivery Expanding video experiences Partnering with SpaceX to offer high-speed satellite telecommunications Mountains Camps Isolated islands 28
- 39. Regional Co-Creation Addressing the challenges faced by local communities and realizing regional co-creation Local business and venture support mechanisms Realization of regional co-creation Mid-term cumulative total of 15 million people eliminated disparity Funding Hands-on management support DX Human Resource Education Smartphone Classes On-demand transportation Creating a foundation for regional DX “Digitizing the Entire Village” Co-creating optimal mobility with local residents Case Study Hidaka Village Kochi Prefecture Assistance in returning driver's license Elimination of mobility anxiety Childcare Support Regional Co-Creation -CATV, etc.- Smartphone classes Municipality DX On-demand transportation CATV Supporting regional education Smart agriculture Eliminating financial divides 29
- 40. Summary of Efforts in Focus Areas Business Services segment to become second largest business after domestic telecommunications, aiming for about 20% of consolidated operating income Aim for double-digit mid-term CAGR growth in sales in DX Accelerate business growth through expansion of customer base and new initiatives aim for double-digit mid-term CAGR growth in sales Creating new businesses that transform the living experience with an eye on the future Contribute to solving social issues facing local communities Regional Co-Creation -CATV, etc.- LX Finance Energy DX 30
- 41. Transforming into a Company that Puts Human Resources First Evolving our unified three-part reform initiatives into Phase 2 New personnel system Internal DX Workstyle reforms １ ２ ３ Introducing the KDDI Version Job Style Personnel System Diverse human resource vitalization and D&I through HR system Full-scale start of DX personnel training (establishing DX University) Improvement of DX skills of all employees and development of professional human resource Upgrading the foundation for the new normal New work styles to enhance engagement Phase.1 Phase.2 Mid-Term Management Strategy (FY23.3-FY25.3) １ 2 3 31
- 42. Human Resource Development Maximizing organizational strengths to drive business strategy centered on DX Professional Human Resources DX Human Resources Shifting essential personnel into focus areas Penetration of KDDI Version Job Style Personnel System In all specialized fields Professional human resources ratio 30% Expand to KDDI Group *In-house human resources development organization launched in 2020 * DX basic skill acquisition All employees over 11,000 32
- 43. Aim to achieve carbon neutrality in FY2030* Energy Conservation Efforts Carbon Neutral Goal Energy Conservation Efforts Switching to renewable energy FY2026 FY2030 FY2050 // Data centers carbon neutral KDDI carbon neutral KDDI Group carbon neutral Carbon-Neutral 3G suspension → 5G transition Base station AI control Submerged liquid cooling for data centers Equipment sharing Efficient 5G area construction AI-based Power Consumption Control Promotion of infrastructure sharing Reduced power consumption by technology Obtained SBT certification by KDDI Group (February 2022) Acceleration *KDDI non-consolidated basis 33
- 44. Thoroughly engraining respect for human rights in KDDI Group business activities Audit & Improvement Risk Identification/ Plan for improvement Effectiveness verification Observing the KDDI Group Human Rights Policy Global Human Rights Due Diligence Respect for Human Rights Respect for human rights in all business activities Avoid or reduce any negative impacts on human rights Avoid involvement in infringement of human rights Promote human rights enlightenment activities for all KDDI Group officers and employees ,etc. 34
- 45. Cost Efficiency Promotion of infrastructure sharing Efficiency through advanced technology Sales system transformation Sales channels improving efficiency Goal: achieve cost efficiencies of 100 billion yen in mid-term Sales Technology Appropriate control of investment Marketing efficiency 35
- 46. Group Governance Strengthened risk management and information security systems Strengthening the training and support systems for CFO human resources Utilizing shared services Establishment of a monitoring system Upgrading systems for inter-Group data connections Upgrading the privacy governance system Strengthen risk management system Strengthening information security Increase in the number of group companies and diversification of business in line with the promotion of the satellite growth strategy 36
- 47. Cash Allocation Policy Continue to strengthen investment in growth and shareholder returns for sustainable growth Capex 5G and Focused areas Strategic Business Investment Business growth 700 billion yen in mid-term Shareholder returns, etc. Dividend payout ratio over 40% Conduct share repurchases in a flexible manner in consideration of status of investment for growth 1.5 trillion yen in mid-term Operating CF (Excluding Financial Business) 5 trillion yen in mid-term Business growth 1.3 trillion yen in mid-term (Equivalent to approximately 70% of total consolidated Capex) 37
- 48. Consolidated Financial Forecast for FY23.3 Business Services segment and Financial Business to drive profit growth FY23.3 YOY Operating Revenue 5,560.0 ＋2.1% Business Services segment 1,130.0 ＋8.4% Financial Business 210.0 +18.1% Operating Income 1,100.0 ＋3.7% Business Services segment 206.0 +10.7% Financial Business 38.0 +95.9% Business Services segment Operating Income (Unit：Billions of yen) Financial Business*1 Operating Income FY22.3 FY23.3 FY22.3 FY23.3 38.0 *2 206.0 Excluding one-time effects Aiming for double-digit CAGR growth *1 au Financial Holdings, IFRS basis *2 Includes temporary accounting effects (E) (E) 【Shareholder Return】 Aiming for 21st consecutive DPS growth Resolved to repurchase its own shares – Up to ¥200 billion (Unit：Billions of yen) 38
- 49. DPS Aiming for 21st consecutive DPS growth FY03.3 FY05.3 FY07.3 FY09.3 FY11.3 FY13.3 FY15.3 FY17.3 FY19.3 FY21.3 FY23.3 2.98 3.49 6.00 11.50 13.33 15.83 17.50 18.33 21.67 23.33 26.67 30.00 43.33 56.67 70 85 90 105 115 120 125 Note) DPS for FY22.3 and FY23.3 are expected figures (Unit：yen) 135 39
- 50. Mid-Term Management Strategy Summary Sustainability Aiming for sustainable growth of society and enhancement of corporate value with partners through promoting satellite growth strategy and strengthening management base to support it Business Growth ARPU revenue increase due to 5G promotion (FY22.3 vs. FY25.3) Profit growth in focus areas 100 billion yen or more Cost efficiency 100 billion yen target Financial Policy Prioritize capital expenditures and strategic business investments in 5G and focus areas Dividend payout ratio over 40% Flexible share repurchases EPS Growth Continue to aim for 1.5x growth versus FY19.3 40
- 51. Appendix
- 52. Multi-Brand IDs (Unit：Million) Multi-Brand Communications ARPU (Unit：Yen) Note） Personal Services segment. au, UQ mobile and povo 3/'21 3/'22 3/'23（E） 30.72 30.97 31.10 FY21.3 FY22.3 FY23.3（E） 4,200 4,000 Multi-Brand IDs / Communications ARPU 4,400 42
- 53. 1,037.4 (Unit：Billions of yen) +49.9 +75.7 Others 1,060.6 FY21.3 FY22.3 +23.2 (87.2) (15.1) Of which, Business Services segment +18.6 Financial Business+7.7 Approx. (50.0) FY23.3(E) (70.0)～ (80.0) Others Multi-Brand communications ARPU revenues +39.4 Operating Income :Factors for Change YoY Multi-Brand communications ARPU revenues 1,100.0 Focus Areas*1 Approx. +50.0 *1 Business Services segment , Financial Business（au Financial Holdings, IFRS basis) and Energy Business ,etc. *2 Includes temporary accounting effects Of which, Business Services segment +20.0 Financial Business +18.6 *2 +30.0～ 40.0 Focus Areas*1 Group MVNO revenues + Roaming revenues 3G closure related costs Approx. +80.0 Group MVNO revenues + Roaming revenues 43
- 54. Others (48.6) 778.0 558.9 +27.3 CAPEX EBITDA (162.1) (35.7) FY22.3 FY21.3 Payment of corporate tax, etc. Including transient factors such as accounts payable 600.0 +2.6 EBITDA CAPEX (Unit : Billions of Yen ) Note) Financial business is au Financial Holdings Corporation (219.1) FY23.3(E) +41.1 Others (3.5) +42.1 Consolidated FCF(Excluding Financial Business) Factors for Change 44
- 55. 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