Kddi Corp. ((KDDIY)) has held its Q1 earnings call. Read on for the main highlights of the call.
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The recent earnings call for KDDI Corporation painted a mixed picture, with the company experiencing both notable successes and significant challenges. While there was commendable revenue growth and achievements in the financial services sector, the company faced hurdles with declining profits and slower smartphone subscription growth. The sentiment expressed during the call was balanced, reflecting both positive developments and areas needing improvement.
Revenue Growth
KDDI Corporation reported a solid increase in operating revenue, reaching JPY 1.4363 trillion, marking a 3.4% rise year-on-year. The combined mobile revenues for the Personal and Business Services segments also saw an uptick, totaling JPY 550.6 billion, which is an increase of JPY 7.6 billion from the previous year.
Financial Services Success
The financial services arm of KDDI, au Financial Holdings, demonstrated impressive performance with a 33% year-on-year increase in operating income, amounting to JPY 11.7 billion. Additionally, the au Money Activity Plan surpassed 1.6 million subscriptions, highlighting the success of KDDI’s financial initiatives.
Business Services Segment Performance
The Business Services segment showed robust growth, with consolidated operating revenue climbing to JPY 349.7 billion, a 4.5% increase year-on-year. Operating income in this segment also rose by 5.4%, reaching JPY 57.5 billion, indicating strong performance in business services.
New Plans and Connected Experience
KDDI’s new plans, including the au 5G Fast Lane and Starlink Direct, have been well received by customers. Notably, 80% of customers opted for the au value-linked plan, showcasing the appeal of KDDI’s connected experience offerings.
Profit Decline
Despite revenue growth, KDDI faced a decline in operating income, which fell by 1.6% to JPY 272.5 billion. The profit attributable to owners of the parent also decreased by 3.3%, totaling JPY 171.1 billion, highlighting challenges in maintaining profitability.
Impact of Promotional Expenses
Promotional expenses from the previous year, including a significant JPY 7.3 billion onetime expense, negatively impacted KDDI’s operating income by JPY 21.4 billion, underscoring the financial strain from past marketing efforts.
Challenges in Digital BPO
The digital BPO sector is underperforming, with both revenue and profit declining year-on-year. KDDI recognizes the need for a turnaround in this area during the second half of the fiscal year to improve its digital business operations.
Slow Smartphone Subscription Growth
KDDI experienced slower than expected growth in smartphone subscriptions, facing challenges in customer acquisition and increased competition in the low-volume market segment.
Forward-Looking Guidance
Looking ahead, KDDI Corporation aims for a year-on-year profit increase in its Personal Services segment and anticipates a full-year profit growth of over JPY 30 billion. The company plans to expand in security and IoT sectors and strengthen its alliance with SBI Securities to enhance its financial services. Despite the challenges, KDDI remains optimistic about its strategic initiatives and future growth prospects.
In summary, KDDI Corporation’s earnings call highlighted a balanced sentiment with both achievements and challenges. While the company saw revenue growth and success in financial services, it also faced profit declines and slower smartphone subscription growth. The forward-looking guidance suggests strategic expansions and alliances to bolster future performance.