KDDI (OTC:KDDIF) Corporation (9433.T), a leading telecommunications operator in Japan, has announced its financial results for the fiscal year ended March 2024, revealing a moderate increase in revenue and a robust strategy for future growth.
President Makoto Takahashi highlighted the company's progress, including a 1.5% rise in revenues to ¥5.754 billion and an operating income of ¥961.6 billion. The net income attributable to the owners of the parent stood at ¥637.9 billion.
Takahashi emphasized the company's rebound in communications ARPU revenues, the completion of 94,000 5G base stations, and plans for further digital infrastructure investments. KDDI's strategic focus on AI integration and expansion of convenience store operations, particularly Lawson stores, is aimed at maximizing synergies and accelerating growth.
The company also updated its satellite growth strategy and set ambitious targets for the number of main subscriptions and financial goals for FY 2025.
Key Takeaways
- KDDI Corporation's revenue increased by 1.5% to ¥5.754 billion for the fiscal year ended March 2024.
- The company completed 94,000 5G base stations and aims for 100,000 by FY 2030.
- KDDI plans to raise EPS and achieve sustainable growth through AI integration and expansion of convenience stores.
- A new satellite growth strategy aims to increase main subscriptions to over 82 million by March 2025.
- KDDI targets operating revenue of ¥5,770 billion, operating income of ¥1,510 billion, and profit for the year of ¥690 billion for FY 2025.
- The company intends to achieve carbon neutrality by FY 2040 and relocate their headquarters by FY 2025.
- KDDI aims for operating cash flow of ¥3 trillion over two years, with allocations for CapEx, strategic business investment, and shareholder returns.
Company Outlook
- KDDI Corporation envisions significant growth in revenue and operating income, targeting double-digit CAGR growth.
- The company aims to increase the number of main subscriptions and focus on telecommunications for the AI era and value-added services.
- Plans for achieving carbon neutrality and relocating the headquarters are set to enhance the company's sustainability and innovation culture.
Bearish Highlights
- The company faces the challenge of optimizing investment and cost levels to build digital infrastructure efficiently.
Bullish Highlights
- KDDI's collaboration with Takanawa Gateway City is expected to create various values and contribute to growth.
- The company's strategy includes increasing communications ARPU revenue and double-digit growth in focus areas.
Misses
- There were no specific misses mentioned in the earnings call summary provided.
Q&A Highlights
- KDDI discussed their carbon neutrality targets, including Scope 3, aiming for FY 2040.
- The relocation of their headquarters is planned for FY 2025, with a focus on creating a culture of innovation and prioritizing human resources.
- The company outlined their cash allocation strategy, aiming for operating cash flow of ¥3 trillion and increasing shareholder returns through dividends and share buybacks.
- KDDI plans to cancel treasury shares over 5% of the total and acquire treasury stocks up to ¥300 billion.
KDDI Corporation's financial results and forward-looking strategies indicate a company poised for continued growth and innovation. With investments in digital infrastructure and AI, expansion in convenience store operations, and a commitment to sustainability, KDDI aims to strengthen its market position and deliver value to shareholders and customers alike.
InvestingPro Insights
KDDI Corporation (KDDIY (OTC:KDDIY)) has shown a commitment to growth and innovation, as detailed in their latest financial results. To provide a deeper understanding of the company's financial health and investment potential, let's consider some key metrics and insights from InvestingPro.
InvestingPro Data:
- The company is currently valued at a market cap of $57.63 billion USD.
- KDDIY's Price-to-Earnings (P/E) ratio stands at 13.42, with a slightly adjusted P/E ratio for the last twelve months as of Q3 2024 at 12.94, indicating the company is trading at a reasonable valuation relative to its earnings.
- With a Price/Book ratio of 1.73 as of the last twelve months ending in Q3 2024, the company's stock is valued above its book value, which may reflect the market's confidence in KDDIY's assets and growth prospects.
InvestingPro Tips:
- KDDIY's stock has been trading with low price volatility, suggesting a stable investment for those looking to avoid significant market swings.
- The company has maintained dividend payments for 31 consecutive years, demonstrating a commitment to returning value to shareholders consistently.
For investors seeking a more comprehensive analysis, InvestingPro offers additional insights and tips for KDDI Corporation. With an InvestingPro subscription, users can access a total of 9 detailed InvestingPro Tips, including information on earnings growth, debt levels, and cash flow stability. To enrich your investment strategy with these insights, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at https://www.investing.com/pro/KDDIY.
Full transcript - KDDI Corp PK (KDDIY) Q4 2024:
Unidentified Company Representative: We are now going to start the KDDI Corporations Press Conference on Financial Results for the Fiscal Year ended of March 2024. And the facilitator today, my name is Nakoji [ph] from KDDI Public Relations Department. The press conference today, in addition to this hall, there are multiple deliveries such as for YouTube. As for the materials today, three documents related to financial results, and two documents of TSC disclosure are posted on the KDDI's website. Please take a look at them. Now let me introduce the members on the stage. President, Representative Director and CEO, Mr. Makoto Takahashi. Managing Executive Officer, CFO, Executive Director Corporate Sector, Ms. Nanae Saishoji, Executive Director Corporate Management Division Corporate Sector, Mr. Kenji Aketa, General Manager, Accounting Department, Mr. Shigeru Ezoe. These are the four members. Now, President, Mr. Takahashi, over to you.
Makoto Takahashi: Thank you. Let me share with you the business results for the fiscal year ended in March 2024. The presentation, the deck tends to be a little longer than usual. Now today, as you can see, I'd like to focus on these four points today. First on consolidated results. Highlights of the consolidated results for the fiscal year, March 2024, revenues increased while the income decreased in the consolidated results. There was a temporary impact from lease receivables, provision for Myanmar telecom business and impairment and provision for removal of low utilization telecom equipment. But other than this, the progress was on track. The left shows the revenues, ¥5.754 billion, up 1.5% a year only. The center shows the operating income, which was ¥961.6 billion, without the temporary impact, it was ¥1,080.6 billion. The right shows the net income attributable to the owners of the parent, which was ¥637.9 billion yen. Next, let me explain about the factors for change for the consolidated operating income. ARPU revenues for multi-brand communications rebounded and were up ¥5 billion. DX areas, grow areas, but DX areas, which were one of the three growth areas, so ¥20.4 billion. Financial result business was ¥14.2 billion. Energy business was ¥16 billion growing steadily. Including a decrease in Rakuten Roaming revenue and an impact from accounting treatment of financial business, the substantive operating income was ¥1,080.6 billion, and we were able to achieve the forecast made at the beginning of the term. With provisions for Myanmar telecom business and other temporary impact, which was minus ¥119 billion, the operating income was ¥961.6 billion for the fiscal year ended March 2024. Next concerns the topics for the FY March 2024. The left, communications ARPU revenues, as I said, rebounded, year-on-year, in focus areas, namely DX, finance and energy businesses, we achieved, as you have seen, we achieved double digit income growth year-on-year. Moving to the right, 5G base stations, we completed 5G rollout, opening 94,000 stations, the highest in the industry. Towards sustainable growth, we are making a steady progress, focusing on those major business lines. The review of the progress of the mid-term strategy announced in May 2022, the left shows the target, looking back the two-year progress until FY March 2024. While there were telecom price reductions and fuel market impact, key measures enjoyed steady progress. Moving to the bottom, for financial policy, the progress towards the target has been well for all the measures. Next on EPS progress, which is one of the important targets in the mid-term management strategy. In addition to the key measures already described, we've been promoting businesses to raise EPS towards the target of 1.5 times increase by the FY March 2025 versus FY March 2019. As shown on the right, we have been steadily working to achieve sustainable growth and return to shareholders. As the graph shows, however, we are behind in the progress due to unexpected factors. I'm pretty sure you are familiar with these unexpected factors, unfortunately. On our part, about 1.5 times increase of EPS, our initial target we were adhering to this target. By extending the period for the mid-term management strategy by one year, we will update the strategy and continue to aim achieving 1.5 times increase in EPS by FY March 2026. To help you understand our strategy, let me share with you our efforts looking at 2030. We crafted KDDI Vision 2030, refining our core business, telecommunications, evolving party connect. Now communicators are integrated in every scene of the society, they are simply indispensable. Going forward, AI will be integrated to create new values of the next year by evolving the power to connect by AI. We aim to create new values and solve these issues. Towards the era of integrated AI, we will promote digital twins with our partners creating new values. We can process our customers' physical activities as data and simulate them with digital and AI and can give feedback. And by so doing, we can make the physical society better. And that's related to our management policy. First, let me explain building infrastructure for AI era as our digital initiatives create added values by AI and data. First on generative AI platform development, you can see the large scale computing infrastructure necessary for AI development that requires enormous computation. And on the platform utilizing expert technology held by startups and others will build generative AI models. Moving to the right, the application platform for AI utilization that requires low latency by allocating computing resources in our 5G MEC will develop comfortable AI utilization environment. Next concerns computing infrastructure supporting AI, the left shows building of data centers that can support large volume computation for LLM development, while utilizing ¥10.2 billion grants from the mid-to with CapEx of about ¥100 billion in the mid to long term will integrate GPU and other computation resources. We'll invite startups and our partners to use them and accelerate co-creation of businesses and services using generative AI. Moving to the right by utilizing eight telecom centers we have nationwide, we contribute to comfortable AI services. Next is about DX expansion with AI. The computation infrastructure and environment we build will be fully utilized in-house refining networks, enhancing customer response and operational efficiency. Next, as physical initiatives, let me share with you our strategy of convenience stores and AI. Retail business, including Lawson are expected to respond to diversifying customers needs and labor shortage. And to accelerate the growth, the AI and DX utilization is essential. The right shows Lawson's performance, which has been really brisk as I had, and we believe that their growth can be accelerated further with AI and DX. Lawson envisions and they already made an announcement for short-term realization of real tech convenience stores, shown on the left, and for a mid-to-long-term Lawson Town initiatives, as shown on the right. In the centre of the new smart city, convenience stores requiring new DX is placed under great excellence, new Lawson town should be created. In addition to real tech, expanding to various values outside stores is consistent with the direction of digital trends. And in areas of real, digital and green, three companies cooperate to realize the world Lawson envisions, supporting the sustainable society, together with Mitsubishi Corporation and Lawson. Let me elaborate new value co-creation, together with Mitsubishi Corporation, we want to do these three things at risk of repeating real tech convenience utilizing AI and DX, left hand side, by utilizing DX, we want to accelerate the Lawson's growth even more. Secondly, creation of new added values with convenience stores as a starting point. I will come back to this later. Number three, further expansion of Ponta economic zone. We would like to keep working on this next page, please. First, to concerns realization of real tech convenience towards frictionless convenience stores utilizing AI and DX, look at the left, please, by speedily linking Lawson's small trade area data with location information and customer data KDDI have, we'll realize DX by utilizing AI. Moving to the right, for customers, we intend to offer frictionless payment and optimal recommendations and to store stuff by reducing their workload, we aim to realize more resources for customer responses and through these we will contribute to sell the expansion of profitability improvement by store. This is a major indicator and on these, we want to share the same vector together with Lawson and to make a contribution. Next, we will create new added values with real tech convenience stores as a starting point. The bottom shows physical contact points such as au shops and digital contact points like Smartpass and au PAY. And in addition, there are 14,600 Lawson stores nationwide and remote customer services, which is a wide expansion of new contact points. With these multi-contact points, we can enhance functions and values with our partners and as you can see on the top, left-hand side, communications, added value, value added services and 14,600 locations, remote customer services, if they are established, not just limited to smart phone contracts, receiving drugs, drug taking and advice for finance and quick commerce. Right-hand side, this is the utilizing platform service using the location, 14,600 as the base stations to edge or drone bases, they can be utilized to crime privation, the disaster privation and green energy bases, if you can utilize them as such, with the initiatives to defer that are away from the conventional convenience stores, we can offer new services using those store locations. Next, please. Number three, further expansion of the Ponta economic zone, with the equity contribution as an opportunity, we will strengthen our relations with loyalty marketing and strengthening relations, including the equity contribution, together with Mitsubishi Corporation and other partners, we will be working to expand the Ponta economic zone. Moving to the right, we will have AU Smart Pass Premium subscription-based membership. We will rebrand au Smart Pass Premium as Ponta Pass, enhancing services and aim to increase the members from current 15 million to 20 million members. I want to see this expansion, so far we were the only one who sold the Smart Pass at Lawson, if Lawson can sell them, then up to 20 million members will want to expand the services, so the further expansion of Ponta economic zone. So these are synergies from these three initiatives in addition to Lawson's organic growth by realizing real tech convenience, we will promote sales increase and higher efficiency, thus accelerating the further growth of Lawson. In addition, by utilizing stores as multi-contact points and expanding economic zone by Ponta Pass and others, KDDI will work on maximizing synergies by revenues from added values, DX growth and boosting retention and increasing cost efficiency. Maximizing synergies is what we intend to realize. We have a strong passion to do so. As a model to work on these initiatives, we're planning to open a Lawson store in a new office building as we will move to our new office in Takanawa Gateway next year. We have a plan to open two stores, in the stores to realize real tech convenience store where we will be collaborating with Takanawa Gateway City creating various values. The plan is ongoing. Co-creating the world Lawson envisions is very valuable and it is consistent with our satellite growth strategy and we believe we can realize sustainable growth which both of us aspire to achieve. To realize physical and digital initiatives described so far, we will promote optimization of balance between investment and cost levels with a mid to long term view as shown in the top so that we can make advanced technology investment actively to build digital infrastructure, we'll improve core technology efficiency such as infrastructure sharing and reviewing low utilization of equipment as shown in the middle, thus controlling CapEx and OpEx levels. Among those, one of the most effective initiatives is infrastructure sharing. These are already mentioned by SoftBank (TYO:9984). We established 5G Japan with SoftBank and have been working together to share antennas, radios and transmission lines that have been developed by each company. We will further survey these efforts aiming to build a cumulative total of 100,000 base stations by FY 2030 and reduce CapEx by ¥120 billion. Now, let me change the subject and let me explain the updated new satellite growth strategy. First is the telecommunications business for the AI era, the left, smartphones and IoT, which are the starting point of data will become the source of competitiveness in the AI era to further expand our base. We aim to increase the number of main subscriptions to over 82 million by the end of the fiscal year ending March 2025. On the right, we will provide value added via data driven, leveraging communications platform and customer contact points. So this is our new satellite growth strategy. To strengthen our communications and value added strategy, we have updated our previous strategy and formulated a new satellite growth strategy. Based on core value of adding data driven and generative AI to telecommunications, we have defined orbit 1 as a growth area that adds value when combined with telecommunications and orbit 2 as a growth pillar towards the future. First is our core initiative. It is a growth strategy for the core personal segment. Going forward, it will be important to create value for customers to increase revenues and retention. The vertical axis, AI and data driven, will provide communication customers with services that are more beneficial than ever before. Of course, convenience store is included. And our horizontal axis, we have also focused on expanding ideas by utilizing partner contacts such as Lawson. By promoting growth strategy, we will increase both communication and value added ARPU revenues. On the right, we will focus on value added creation to achieve sustainable growth in electricity and double digit CAGR growth in value added ARPU such as settlement loans, product supports and content while leveraging synergies with Lawson. Let me introduce our efforts to create value added products. On the left, is the au Money Activity Plan has been well received by many customers. There were over 700,000 contracts signed within seven months of launch. In addition, the churn rate improved by about 25%. And ARPU increased -- communications ARPU increased by about 10% when subscribers joined the au Money Activity Plan contributing to higher engagement and ARPU. So, by adding value added service to our service, we will aim at achieving such effects. And on the right, we will further strengthen the provision of such value added services in cooperation with Lawson in the future and enhance engagement in the future. Next is 5G. 5G communications will also utilize the new frequencies to increase the network competitiveness. On the left, Sub6. We have opened 39,000 base stations for largest in the industry. In addition, the Sub6 area will be approximately doubled in the Tokyo metropolitan area due to the relaxation of satellite interference conditions in April. There were such relaxations. So from April to the end of May, power of control will be concluded. So Sub6 area is expanding drastically and will be doubling. In such a short period of time, such a large expansion of area was never seen in the past. So this is one area that we are focusing. On the right, Sub6 data traffic is expected to increase by about 20% after the relaxation of satellite interference conditions. In addition, the slicing technology allows different networks to be used for different services leading to improved quality of experience. The full scale use of 5G will contribute to the improvement of communications and value added ARPU. Orbit 1 of a new satellite growth strategy is to focus on DX finance and energy businesses. Each of these businesses is targeting double digit CAGR growth. Orbit 2 LX has been redefined into five areas for future growth. This is the growth strategy for DX and corporate business. Like the personal business, we will build on our network infrastructure base to create AI and digital value added growth areas such as IoT and data centers. We also aim to expand IDs by strengthening our approach to the SME segment. In order to promote this growth strategy, we have redefined our business segments as you can see on the left. We will promote the telecommunications plus value added model in two areas. The basic communications revenues and growth areas consisting of value added revenues. We aim to achieve double digit CAGR growth in revenues and growth areas centering on IoT related services, data centers and digital BPO which are our strengths. On the right, the business segment operating income. We aim to achieve double digit CAGR growth and to achieve an operating income over 20% of KDDI groups consolidated operating income. There are three strengths in the growth area. On the left, the number of IoT connections including SORACOM. This is targeted to exceed 100 million by FY 2030. We have recently established a specialized company in North America to further expand our connected business. In the middle, the data center aims to capture demand in the AI era and achieve operating revenue of ¥200 billion by FY 2030. On the right, Altius Link has announced its new digital BPO platform service, Altius ONE. Based on Japan's largest dataset of 500 million calls per year, Altius Link will develop problem-solving businesses through the use of AI and data. We have also launched a new business platform which is Wakon-Cross to accelerate the creation of added value in the AI era for corporate customers. Based on the communications customer contact points we have developed so far, we will contribute to customer growth and problem-solving each industry by providing the networks, data analysis and industry-specific DX solutions required in the AI era. Next is the financial business. On the left, our performance has been strong, mainly due to our membership base in the bank and credit card businesses which are our strengths. We will continue to aim for double-digit CAGR growth in both revenue and operating income. On the right, this is the au Jibun Bank which enjoys the support of the customers. We will continue to expand our customer base while maintaining a balance between deposits and loans. In the energy business, operating income for fiscal year end of March 2034 was ¥11.7 billion as a result of efforts to stabilize the business and the number of au Denki contracts also is increasing. We aim to achieve double-digit growth in operating income by strengthening synergies with telecommunications and re-promoting the sales of au Denki. On the right-hand side, through our group companies, we will strive to both contribute to carbon neutrality and grow our business. Orbit 2, live transformation LX area. We aim to scale our business by combining our assets with those of our customers. On the left, partnering with SpaceX is now in its third year and the partnership has deepened. We will continue to expand the range of services we provide as an infrastructure that supports society. On the right, the LX sector also has synergies with Lawson. In the entertainment area, the electronic ticketing platform and Lawson's entertainment services will be joined to expand the number of events handled and create value through customer traffic. In addition, by combining KDDI's mobility-related services with Lawson's stores, we will contribute to improving the convenience of regional transportation and shopping. This is the summary of a business portfolio of a new satellite growth strategy. In order to achieve sustainable growth, we will further expand the growth of each business through synergies from partnering with Lawson in addition to the growth of core and each orbit. Next, our initiatives to strengthen the management base. On the left, a new net-zero target, including Scope 3, has been established to achieve carbon neutrality. We will move each initiative forward to achieve KDDI Group's net-zero target by FY 2040. On the right, our company will move its headquarters to a new office in Takanawa in FY 2025. We will create a culture of co-creating new ideas in a new environment and promote transformation into a human resources first company. Next is the cash allocation policy. We will strive to achieve both expansion of operating cash flow and shareholder returns through growth investments. At the top, operating cash flow excluding financial business is targeted at ¥$3 trillion over the two years from the period ending March 2025 to March 2026. In the middle, we will allocate the generated operating cash flow to CapEx of ¥1.3 trillion and strategic business investment of ¥200 billion. At the bottom, shareholder returns, we will aim for sustainable dividend increase and achieve a dividend payout ratio of over 40%. In addition, we will conduct share buybacks in a flexible manner. This is a consolidated financial forecast for the fiscal year ending March 2025. On the left, operating revenue ¥5,770 billion, up 0.3% year-on-year. In the middle, operating income ¥1,510 billion, up 15.4% year-on-year. On the right, profit for the year is targeted at ¥690 billion, 8.2% increase year-on-year. This is a consolidated financial highlights for FY March 2025, we aim to increase income through an increase in communications ARPU revenue and double-digit growth in focus areas. The communications ARPU revenue, organic growth is expected to increase year-on-year by ¥14 billion, and ARPU revenue is expected to decrease by ¥14 billion because of the impact of revision of access charge, but the impact on profits will be limited due to decrease the costs. So organic, ¥14 billion, and DX, ¥23 billion, finance energy, ¥10 billion in loss and consolidated impact. These are the basis for growth. For shareholder returns, DPS for FY March 2095 increases by ¥5 to ¥145, we aim to achieve increase for 23 consecutive years. In addition, the company approved to cancel treasury shares over 5% of a number of shares issued and outstanding. The company also resolved to acquire treasury stocks up to ¥300 billion in total by the end of October, and of this amount, a tender offer of up to ¥213.4 billion was also approved. Lastly, today's summary. Towards KDDI Vision 2030, promote digital twin and create a new value using AI and data. In addition, we will promote optimization balance between CapEx and OpEx levels through profit structure reform for technology. The company has now revised its midterm management strategy, extending the period by one year and announced a new satellite growth strategy. EPS is targeted to increase 1.5 times FY March 2096 compared to FY March 2019. In addition, we aim to achieve both increase in operating cash flows through growth investments and shareholder returns, as well as sustainable growth for ARPU revenue and double-digit growth of operating income in focus areas. For the fiscal year end of March 2025, we aim to increase consolidated operating income through increased communications ARPU revenues and double-digit growth in focus areas. For shareholder returns, the company resolved to achieve DPS growth for 23 consecutive years and to acquire up to ¥300 billion of treasury stock, of which up to ¥213.4 billion will be purchased through a tender offer. We will continue to promote our growth strategy.
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