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Name | Symbol | Market | Type |
---|---|---|---|
LINE Corporation | NYSE:LN | NYSE | Depository Receipt |
Price Change | % Change | Price | High Price | Low Price | Open Price | Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 51.98 | 0 | 01:00:00 |
|
LINE Corporation
|
|
(Registrant)
|
May 12, 2017
|
By: /s/ In Joon Hwang
|
|
(Signature)
|
|
Name: In Joon Hwang
|
|
Title: Director and Chief Financial Officer
|
i. |
its ability to attract and retain users and increase the level of engagement of its users;
|
ii. |
its ability to improve user monetization;
|
iii. |
its ability to successfully enter new markets and manage its business expansion;
|
iv. |
its ability to compete in the global social network services market;
|
v. |
its ability to develop or acquire new products and services, improve its existing products and services and increase the value of its products and services in a timely and cost-effective manner;
|
vi. |
its ability to maintain good relationships with platform partners and attract new platform partners;
|
vii. |
its ability to attract advertisers to the LINE platform and increase the amount that advertisers spend with LINE;
|
viii. |
its expectations regarding its user growth rate and the usage of its mobile applications;
|
ix. |
its ability to increase revenues and its revenue growth rate;
|
x. |
its ability to timely and effectively scale and adapt its existing technology and network infrastructure;
|
xi. |
its ability to successfully acquire and integrate companies and assets;
|
xii. |
its future business development, results of operations and financial condition;
|
xiii. |
the regulatory environment in which it operates;
|
xiv. |
fluctuations in currency exchange rates and changes in the proportion of its revenues and expenses denominated in foreign currencies; and
|
xv. |
changes in business or macroeconomic conditions.
|
Cover
|
|
|
A. Corporate information
|
|
|
I. Corporate overview
|
|
|
1.
|
Selected consolidated financial data
|
1
|
2.
|
Business description
|
2
|
II. Business
|
|
|
1.
|
Risk factors
|
3
|
2.
|
Material contracts
|
3
|
3.
|
Analysis of financial position, operating results and cash flow position
|
3
|
III. Company information
|
|
|
1.
|
Share information
|
|
|
(1) Total number of shares
|
7
|
|
(2) Stock acquisition rights
|
7
|
|
(3) Exercises of bonds with stock acquisition rights with exercise price amendment clause
|
7
|
|
(4) Rights plans
|
7
|
|
(5) Total number of shares issued, share capital, etc.
|
8
|
|
(6) Principal shareholders
|
8
|
|
(7) Voting rights
|
8
|
2.
|
Directors and executive officers
|
8
|
IV. Accounting
|
|
|
1.
|
Interim condensed consolidated financial statements (Unaudited)
|
|
|
(1) Interim condensed consolidated statement of financial position (Unaudited)
|
10
|
|
(2) Interim condensed consolidated statement of profit or loss (Unaudited)
|
11
|
|
(3) Interim condensed consolidated statement of comprehensive income (Unaudited)
|
12
|
|
(4) Interim condensed consolidated statement of change in equity (Unaudited)
|
13
|
|
(5) Interim condensed consolidated statement of cash flows (Unaudited)
|
14
|
Term
|
17th term
Three months ended
March 31, 2016
|
18th term
Three months ended
March 31, 2017
|
17th term
|
|
Accounting period
|
From January 1,
2016 to
March 31, 2016
|
From January 1,
2017 to
March 31, 2017
|
From January 1, 2016 to
December 31, 2016
|
|
Revenues
|
(Millions of yen)
|
33,456
|
38,916
|
140,704
|
Profit before tax from continuing operations
|
(Millions of yen)
|
4,143
|
3,566
|
17,990
|
(Loss)/profit for the period
|
(Millions of yen)
|
(234)
|
1,632
|
7,104
|
(Loss)/profit for the period attributable to the shareholders of the Company
|
(Millions of yen)
|
(122)
|
1,437
|
6,763
|
Total comprehensive (loss)/income for the period, net of tax
|
(Millions of yen)
|
(713)
|
2,799
|
5,852
|
Equity attributable to the shareholders of the Company
|
(Millions of yen)
|
19,616
|
165,178
|
160,834
|
Total assets
|
(Millions of yen)
|
118,621
|
258,263
|
256,089
|
Basic (loss)/profit for the period
|
(Yen)
|
(0.70)
|
6.58
|
34.84
|
Diluted (loss)/profit for the period
|
(Yen)
|
(0.63)
|
6.07
|
31.48
|
Ratio of equity attributable to the shareholders of the Company to total assets
|
(%)
|
16.5
|
64.0
|
62.8
|
Net cash provided by/(used in) operating activities
|
(Millions of yen)
|
4,264
|
(5,031)
|
28,753
|
Net cash used in investing activities
|
(Millions of yen)
|
(1,929)
|
(2,055)
|
(34,086)
|
Net cash used in financing activities
|
(Millions of yen)
|
(683)
|
(53)
|
106,628
|
Cash and cash equivalents at the end of the period
|
(Millions of yen)
|
35,082
|
127,591
|
134,698
|
Notes:
|
1. |
Trends in these selected financial data for the Company on a stand-alone basis are not separately discussed as we prepare quarterly consolidated financial statements.
|
2. | Revenues do not include consumption taxes. | |
3. | The above financial data were prepared based on the unaudited interim condensed consolidated financial statements and the consolidated financial statements prepared in accordance with International Financial Reporting Standards (IFRS). | |
4. | As of March 31, 2017, there were 218,996,500 shares of common stock issued and outstanding. Equity and total assets held by the shareholders of the Company increased as a result of the issuance of common stock in the 17th term for the following reasons: |
● | Capital increase through the initial public offerings of the new shares on July 14, 2016 and July 15, 2016 | |
● | Capital increase through third-party allotment of new shares on August 16, 2016 | |
|
● |
Exercise of stock acquisition rights
|
5. | In 2017, the Company and its subsidiaries (collectively, the "Group") changed the rounding of its financial statements from thousands to millions. Prior periods have been revised to reflect this change in presentation. |
a. |
Total number of shares authorized
|
Total number of shares authorized | |
Class
|
(Share)
|
Common stock
|
690,000,000
|
Total
|
690,000,000
|
b. |
Number of shares issued
|
Class
|
Number of shares
issued as of end of period
(Shares; as of
March 31, 2017)
|
Number of shares
issued as of filing date
(Shares; as of
May 12, 2017)
|
Name of securities exchange
where the shares are traded or the
name of authorized financial
instruments firms association
where the shares are registered
|
Details
|
Common stock
|
218,996,500
|
219,071,000
|
Tokyo Stock Exchange
(First Section) and
New York Stock Exchange
|
100 shares constitute one "unit" of common stock. Common stock is stock with full voting rights and not restricted by any significant limitations in terms of shareholders' rights.
|
Total
|
218,996,500
|
219,071,000
|
—
|
—
|
(Note)
|
The amount stated in the "Number of shares issued as of filing date" does not include the number of shares issued upon the exercise of the stock options during the period from May 1, 2017 until the filing date of this Quarterly Securities Report.
|
Date
|
Change in the number
of shares issued
(Shares)
|
Balance of shares
issued
(Shares)
|
Change in share
capital
(Millions of yen)
|
Balance of
share capital
(Millions of yen)
|
Change in legal
capital reserve (Millions of yen) |
Balance of legal
capital reserve
(Millions of yen)
|
January 1, 2017
to March 31, 2017 |
Common stock
1,221,000
|
Common stock
218,996,500
|
1,497
|
79,353
|
1,497
|
69,418
|
a. |
Shares issued
|
Classification
|
Number of shares
(Shares)
|
Number of voting rights
(Units)
|
Details
|
Shares without voting rights
|
—
|
—
|
—
|
Shares with restricted voting rights (treasury stock, etc.)
|
—
|
—
|
—
|
Shares with restricted voting rights (others)
|
—
|
—
|
—
|
Shares with full voting rights (treasury stock, etc.)
|
—
|
—
|
—
|
Shares with full voting rights (others)
|
Common stock
218,982,000
|
2,189,820
|
—
|
Shares constituting less than one unit
|
Common stock
14,500
|
—
|
—
|
Total number of shares issued
|
Common stock
218,996,500
|
—
|
—
|
Total number of voting rights held by all shareholders
|
—
|
2,189,820
|
—
|
b. |
Treasury stock, etc.
|
(In millions of yen) | ||||||||||||
|
Notes
|
December 31,
2016 |
March 31,
2017 |
|||||||||
Assets
|
||||||||||||
Current assets
|
||||||||||||
Cash and cash equivalents
|
134,698
|
127,591
|
||||||||||
Trade and other receivables
|
7
|
28,167
|
31,873
|
|||||||||
Other financial assets, current
|
7
|
6,952
|
6,166
|
|||||||||
Inventories
|
961
|
1,400
|
||||||||||
Other current assets
|
3,929
|
4,685
|
||||||||||
Total current assets
|
174,707
|
171,715
|
||||||||||
Non-current assets
|
||||||||||||
Property and equipment
|
5
|
9,029
|
13,346
|
|||||||||
Goodwill
|
3,400
|
3,400
|
||||||||||
Other intangible assets
|
1,851
|
1,604
|
||||||||||
Investments in associates and joint ventures
|
16
|
12,712
|
12,720
|
|||||||||
Other financial assets, non-current
|
7
|
35,715
|
37,604
|
|||||||||
Deferred tax assets
|
6
|
18,385
|
17,526
|
|||||||||
Other non-current assets
|
290
|
348
|
||||||||||
Total non-current assets
|
81,382
|
86,548
|
||||||||||
Total assets
|
256,089
|
258,263
|
||||||||||
Liabilities
|
||||||||||||
Current liabilities
|
||||||||||||
Trade and other payables
|
7
|
21,532
|
23,322
|
|||||||||
Other financial liabilities, current
|
7
|
24,497
|
25,030
|
|||||||||
Accrued expenses
|
9,049
|
7,872
|
||||||||||
Income tax payables
|
5,699
|
1,059
|
||||||||||
Advances received
|
11,286
|
12,104
|
||||||||||
Deferred revenue
|
9,739
|
9,714
|
||||||||||
Provisions, current
|
964
|
589
|
||||||||||
Other current liabilities
|
3,670
|
1,556
|
||||||||||
Total current liabilities
|
86,436
|
81,246
|
||||||||||
Non-current liabilities
|
||||||||||||
Other financial liabilities, non-current
|
7
|
—
|
33
|
|||||||||
Deferred tax liabilities
|
6
|
1,161
|
1,217
|
|||||||||
Provisions, non-current
|
5
|
1,120
|
3,330
|
|||||||||
Post-employment benefits
|
6,204
|
6,806
|
||||||||||
Other non-current liabilities
|
145
|
54
|
||||||||||
Total non-current liabilities
|
8,630
|
11,440
|
||||||||||
Total liabilities
|
95,066
|
92,686
|
||||||||||
Shareholders' equity
|
||||||||||||
Share capital
|
8
|
77,856
|
79,353
|
|||||||||
Share premium
|
8
|
91,208
|
91,441
|
|||||||||
Accumulated deficit
|
(12,381
|
)
|
(10,936
|
)
|
||||||||
Accumulated other comprehensive income
|
4,151
|
5,320
|
||||||||||
Equity attributable to the shareholders of the Company
|
160,834
|
165,178
|
||||||||||
Non-controlling interests
|
189
|
399
|
||||||||||
Total shareholders' equity
|
161,023
|
165,577
|
||||||||||
Total liabilities and shareholders' equity
|
256,089
|
258,263
|
(In millions of yen) | ||||||||||||
For the three-month period ended March 31, | ||||||||||||
|
Notes
|
2016
|
2017
|
|||||||||
Revenues and other operating income:
|
||||||||||||
Revenues
|
4
|
33,456
|
38,916
|
|||||||||
Other operating income
|
660
|
330
|
||||||||||
Total revenues and other operating income
|
34,116
|
39,246
|
||||||||||
Operating expenses:
|
||||||||||||
Payment processing and licensing expenses
|
(7,750
|
)
|
(7,684
|
)
|
||||||||
Employee compensation expenses
|
12
|
(9,393
|
)
|
(9,718
|
)
|
|||||||
Marketing expenses
|
(2,307
|
)
|
(4,026
|
)
|
||||||||
Infrastructure and communication expenses
|
(1,782
|
)
|
(2,142
|
)
|
||||||||
Authentication and other service expenses
|
(2,897
|
)
|
(4,953
|
)
|
||||||||
Depreciation and amortization expenses
|
5
|
(968
|
)
|
(1,476
|
)
|
|||||||
Other operating expenses
|
17
|
(3,681
|
)
|
(5,222
|
)
|
|||||||
Total operating expenses
|
(28,778
|
)
|
(35,221
|
)
|
||||||||
Profit from operating activities
|
5,338
|
4,025
|
||||||||||
Finance income
|
27
|
25
|
||||||||||
Finance costs
|
(24
|
)
|
(6
|
)
|
||||||||
Share of loss of associates and joint ventures
|
(63
|
)
|
(794
|
)
|
||||||||
Loss on foreign currency transactions, net
|
(569
|
)
|
(362
|
)
|
||||||||
Other non-operating income
|
11
|
21
|
678
|
|||||||||
Other non-operating expenses
|
11
|
(587
|
)
|
—
|
||||||||
Profit before tax from continuing operations
|
4,143
|
3,566
|
||||||||||
Income tax expenses
|
6
|
(2,737
|
)
|
(1,931
|
)
|
|||||||
Profit for the period from continuing operations
|
1,406
|
1,635
|
||||||||||
Loss from discontinued operations, net of tax
|
9
|
(1,640
|
)
|
(3
|
)
|
|||||||
(Loss)/profit for the period
|
(234
|
)
|
1,632
|
|||||||||
Attributable to:
|
||||||||||||
The shareholders of the Company
|
10
|
(122
|
)
|
1,437
|
||||||||
Non-controlling interests
|
(112
|
)
|
195
|
|||||||||
(In yen)
|
||||||||||||
Earnings per share
|
||||||||||||
Basic (loss)/profit for the period attributable to the shareholders of the Company
|
10
|
(0.70
|
)
|
6.58
|
||||||||
Diluted (loss)/profit for the period attributable to the shareholders of the Company
|
10
|
(0.63
|
)
|
6.07
|
||||||||
Earnings per share from continuing operations
|
||||||||||||
Basic profit from continuing operations attributable to the shareholders of the Company
|
10
|
8.67
|
6.60
|
|||||||||
Diluted profit from continuing operations attributable to the shareholders of the Company
|
10
|
7.79
|
6.08
|
|||||||||
Earnings per share from discontinued operations
|
||||||||||||
Basic loss from discontinued operations attributable to the shareholders of the Company
|
10
|
(9.37
|
)
|
(0.02
|
)
|
|||||||
Diluted loss from discontinued operations attributable to the shareholders of the Company
|
10
|
(8.42
|
)
|
(0.01
|
)
|
(In millions of yen) | ||||||||||||
For the three-month period ended March 31,
|
||||||||||||
|
Notes
|
2016
|
2017
|
|||||||||
(Loss)/profit for the period
|
(234
|
)
|
1,632
|
|||||||||
Other comprehensive income
|
||||||||||||
Items that may be reclassified to profit or loss:
|
||||||||||||
Available-for-sale financial assets:
|
||||||||||||
Net changes in fair value
|
11
|
(329
|
)
|
1,241
|
||||||||
Reclassification to profit or loss
|
264
|
(544
|
)
|
|||||||||
Exchange differences on translation of foreign operations:
|
||||||||||||
(Loss)/gain arising during the period
|
(324
|
)
|
698
|
|||||||||
Proportionate share of other comprehensive income of associates and joint ventures
|
(10
|
)
|
(10
|
)
|
||||||||
Income tax relating to items that may be reclassified subsequently to profit or loss
|
(80
|
)
|
(218
|
)
|
||||||||
Total other comprehensive income for the period, net of tax
|
(479
|
)
|
1,167
|
|||||||||
Total comprehensive (loss)/income for the period, net of tax
|
(713
|
)
|
2,799
|
|||||||||
Attributable to:
|
||||||||||||
The shareholders of the Company
|
(620
|
)
|
2,604
|
|||||||||
Non-controlling interests
|
(93
|
)
|
195
|
(In millions of yen) | ||||||||||||||||||||||||||||||||||||||||
|
Equity attributable to the shareholder of the Company
|
|||||||||||||||||||||||||||||||||||||||
Accumulated other comprehensive income | ||||||||||||||||||||||||||||||||||||||||
|
Notes
|
Share
capital |
Share
premium |
Accumulated
deficit |
Foreign
currency translation reserve |
Available-for-
sale reserve |
Defined
benefit plan reserve |
Total
|
Non-
controlling interests |
Total
shareholder's equity |
||||||||||||||||||||||||||||||
Balance at January 1, 2016
|
12,596
|
18,983
|
(19,204
|
)
|
240
|
6,917
|
(1,789
|
)
|
17,743
|
(210
|
)
|
17,533
|
||||||||||||||||||||||||||||
Comprehensive (loss)/income
|
||||||||||||||||||||||||||||||||||||||||
Loss for the period
|
—
|
—
|
(122
|
)
|
—
|
—
|
—
|
(122
|
)
|
(112
|
)
|
(234
|
)
|
|||||||||||||||||||||||||||
Other comprehensive income
|
—
|
—
|
—
|
(528
|
)
|
30
|
—
|
(498
|
)
|
19
|
(479
|
)
|
||||||||||||||||||||||||||||
Total comprehensive (loss)/income for the period
|
—
|
—
|
(122
|
)
|
(528
|
)
|
30
|
—
|
(620
|
)
|
(93
|
)
|
(713
|
)
|
||||||||||||||||||||||||||
Recognition of share-based payments
|
8,12
|
—
|
2,493
|
—
|
—
|
—
|
—
|
2,493
|
—
|
2,493
|
||||||||||||||||||||||||||||||
Forfeiture of stock options
|
8,12
|
—
|
(25
|
)
|
25
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||||||||||||||||
Acquisition of subsidiary
|
14
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(89
|
)
|
(89
|
)
|
||||||||||||||||||||||||||||
Balance at March 31, 2016
|
12,596
|
21,451
|
(19,301
|
)
|
(288
|
)
|
6,947
|
(1,789
|
)
|
19,616
|
(392
|
)
|
19,224
|
|||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
(In millions of yen)
|
||||||||||||||||||||||||||||||||||||||||
|
Equity attributable to the shareholders of the Company
|
|||||||||||||||||||||||||||||||||||||||
Accumulated other comprehensive income | ||||||||||||||||||||||||||||||||||||||||
|
Notes
|
Share
capital |
Share
premium |
Accumulated
deficit |
Foreign
currency translation reserve |
Available-for-
sale reserve |
Defined
benefit plan reserve |
Total
|
Non-
controlling interests |
Total
shareholders' equity |
||||||||||||||||||||||||||||||
Balance at January 1, 2017
|
77,856
|
91,208
|
(12,381
|
)
|
(174
|
)
|
5,649
|
(1,324
|
)
|
160,834
|
189
|
161,023
|
||||||||||||||||||||||||||||
Comprehensive income
|
||||||||||||||||||||||||||||||||||||||||
Profit for the period
|
—
|
—
|
1, 437
|
—
|
—
|
—
|
1,437
|
195
|
1,632
|
|||||||||||||||||||||||||||||||
Other comprehensive income
|
—
|
—
|
—
|
699
|
468
|
—
|
1,167
|
0
|
1,167
|
|||||||||||||||||||||||||||||||
Total comprehensive income for the period
|
—
|
—
|
1,437
|
699
|
468
|
—
|
2,604
|
195
|
2,799
|
|||||||||||||||||||||||||||||||
Recognition of share-based payments
|
8,12
|
—
|
748
|
—
|
—
|
—
|
—
|
748
|
—
|
748
|
||||||||||||||||||||||||||||||
Forfeiture of stock options
|
8,12
|
—
|
(8
|
)
|
8
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||||||||||||||||
Exercise of stock options
|
8,12
|
1,497
|
(461
|
)
|
—
|
—
|
—
|
—
|
1,036
|
—
|
1,036
|
|||||||||||||||||||||||||||||
Acquisition of non-controlling interests
|
8,15
|
—
|
(46
|
)
|
—
|
2
|
—
|
—
|
(44
|
)
|
15
|
(29
|
)
|
|||||||||||||||||||||||||||
Balance at March 31, 2017
|
79,353
|
91,441
|
(10,936
|
)
|
527
|
6,117
|
(1,324
|
)
|
165,178
|
399
|
165,577
|
(5) |
Interim Condensed Consolidated Statement of Cash Flows - Unaudited
|
(In millions of yen) | ||||||||||||
For the three-month period ended March 31,
|
||||||||||||
|
Notes
|
2016
|
2017
|
|||||||||
Cash flows from operating activities
|
||||||||||||
Profit before tax from continuing operations
|
4,143
|
3,566
|
||||||||||
Loss before tax from discontinued operations
|
9
|
(2,497
|
)
|
(5
|
)
|
|||||||
Profit before tax
|
1,646
|
3,561
|
||||||||||
Adjustments for:
|
||||||||||||
Depreciation and amortization expenses
|
5
|
968
|
1,476
|
|||||||||
Finance income
|
(27
|
)
|
(25
|
)
|
||||||||
Finance costs
|
24
|
6
|
||||||||||
Share-based compensation expenses
|
8,12
|
2,493
|
748
|
|||||||||
Gain on divesture of subsidiary
|
(21
|
)
|
—
|
|||||||||
Loss/(gain) on financial assets at fair value through profit or loss
|
11
|
246
|
(99
|
)
|
||||||||
Gain on sales of equity instruments
|
7
|
—
|
(544
|
)
|
||||||||
Impairment loss of available-for-sale financial assets
|
7
|
264
|
—
|
|||||||||
Share of loss of associates and joint ventures
|
63
|
794
|
||||||||||
Loss/(gain) on foreign currency transactions, net
|
540
|
(7
|
)
|
|||||||||
Changes in:
|
||||||||||||
Trade and other receivables
|
3,645
|
(3,748
|
)
|
|||||||||
Inventories
|
314
|
(428
|
)
|
|||||||||
Trade and other payables
|
(932
|
)
|
382
|
|||||||||
Accrued expenses
|
(2,018
|
)
|
(1,343
|
)
|
||||||||
Deferred revenue
|
527
|
15
|
||||||||||
Advances received
|
(79
|
)
|
807
|
|||||||||
Provisions
|
28
|
(237
|
)
|
|||||||||
Post-employment benefits
|
136
|
544
|
||||||||||
Other current assets
|
(198
|
)
|
(630
|
)
|
||||||||
Other current liabilities
|
(75
|
)
|
(323
|
)
|
||||||||
Others
|
41
|
(451
|
)
|
|||||||||
Cash provided by operating activities
|
7,585
|
498
|
||||||||||
Interest received
|
26
|
28
|
||||||||||
Interest paid
|
(24
|
)
|
(6
|
)
|
||||||||
Income taxes paid
|
(3,323
|
)
|
(5,551
|
)
|
||||||||
Net cash provided by/(used in) operating activities
|
4,264
|
(5,031
|
)
|
|||||||||
Cash flows from investing activities
|
||||||||||||
Purchase of time deposits
|
(19
|
)
|
(199
|
)
|
||||||||
Proceeds from maturities of time deposits
|
100
|
—
|
||||||||||
Purchase of equity investments
|
11
|
(9
|
)
|
(1,309
|
)
|
|||||||
Proceeds from sales of equity investments
|
—
|
1,199
|
||||||||||
Proceeds from maturities of debt securities
|
—
|
1,009
|
||||||||||
Acquisition of property and equipment and intangible assets
|
(786
|
)
|
(2,299
|
)
|
||||||||
Investments in associates
|
16
|
—
|
(529
|
)
|
||||||||
Payments of office security deposits
|
(795
|
)
|
(21
|
)
|
||||||||
Refund of office securities deposits
|
1
|
27
|
||||||||||
Decrease in loan receivables
|
1
|
—
|
||||||||||
Increase in loan receivables
|
—
|
(2
|
)
|
|||||||||
Acquisition of subsidiaries, net of cash acquired
|
14
|
(423
|
)
|
—
|
||||||||
Others
|
1
|
69
|
||||||||||
Net cash used in investing activities
|
(1,929
|
)
|
(2,055
|
)
|
||||||||
Cash flows from financing activities
|
||||||||||||
Proceeds from/(repayment of) short-term borrowings, net
|
(434
|
)
|
(1,057
|
)
|
||||||||
Payments for redemption of bonds
|
(248
|
)
|
—
|
|||||||||
Payment of common shares issuance costs
|
—
|
(10
|
)
|
|||||||||
Proceeds from exercise of stock options
|
8
|
—
|
1,042
|
|||||||||
Payment for acquisition of interest in a subsidiary from non-controlling interests
|
15
|
—
|
(29
|
)
|
||||||||
Others
|
(1
|
)
|
1
|
|||||||||
Net cash used in financing activities
|
(683
|
)
|
(53
|
)
|
||||||||
Net increase in cash and cash equivalents
|
1,652
|
(7,139
|
)
|
|||||||||
Cash and cash equivalents at the beginning of the year
|
33,652
|
134,698
|
||||||||||
Effect of exchange rate fluctuations on cash and cash equivalents
|
(222
|
)
|
32
|
|||||||||
Cash and cash equivalents at the end of the interim reporting period
|
35,082
|
127,591
|
1. |
Reporting Entity
|
2. |
Basis of Preparation
|
3. |
Significant Accounting Policies
|
4. |
Segment Information
|
(1) |
Description of Reportable Segment
|
LINE business and portal segment
|
The Group mainly operates a cross-platform messenger application, LINE, and provides communication and content and advertising services. Communication and content are primarily provided to end users via various communication and content. Communication mainly includes LINE Stickers. Content includes LINE Games and LINE PLAY. Others within Communication and Contents include LINE Friends. Advertising services are provided via LINE advertising, livedoor blog and NAVER Matome. LINE advertising includes LINE Official Accounts, Sponsored Stickers, LINE Point Ads and performance ads, which are provided in Timeline and LINE NEWS.
|
5. |
Property and Equipment
|
6. |
Income Taxes
|
7. |
Financial Assets and Financial Liabilities
|
(In millions of yen) | ||||||||||||||||
|
December 31, 2016
|
March 31, 2017
|
||||||||||||||
Items
|
Book value
|
Fair value
|
Book value
|
Fair value
|
||||||||||||
Financial assets
|
||||||||||||||||
Trade and other receivables
|
||||||||||||||||
Loans and receivables
|
28,167
|
31,873
|
||||||||||||||
Other financial assets, current
|
||||||||||||||||
Loans and receivables
|
||||||||||||||||
Time deposits
|
764
|
974
|
||||||||||||||
Corporate bonds and other debt instruments
|
4,012
|
3,006
|
||||||||||||||
Available-for-sale financial assets
|
1,000
|
1,000
|
1,005
|
1,005
|
||||||||||||
Office security deposits
|
1,170
|
1,167
|
||||||||||||||
Other
|
6
|
14
|
||||||||||||||
Total
|
6,952
|
6,166
|
||||||||||||||
Other financial assets, non-current
|
||||||||||||||||
Held-to-maturity investments
(1)
|
280
|
294
|
280
|
294
|
||||||||||||
Loans and receivables
|
||||||||||||||||
Time deposits
|
10,000
|
10,000
|
10,000
|
10,000
|
||||||||||||
Corporate bonds and other debt instruments
|
2,632
|
2,632
|
2,630
|
2,615
|
||||||||||||
Guarantee deposits
(1)
|
3,447
|
3,493
|
||||||||||||||
Office security deposits
|
4,858
|
4,739
|
4,865
|
4,741
|
||||||||||||
Financial assets at fair value through profit or loss
|
||||||||||||||||
Conversion right and redemption right of preferred stock
|
325
|
325
|
438
|
438
|
||||||||||||
Available-for-sale financial assets
(2)
|
14,141
|
14,141
|
15,862
|
15,862
|
||||||||||||
Other
|
32
|
36
|
||||||||||||||
Total
|
35,715
|
37,604
|
||||||||||||||
Financial liabilities
|
||||||||||||||||
Trade and other payables
|
||||||||||||||||
Financial liabilities measured at amortized cost
|
21,532
|
23,322
|
||||||||||||||
Other financial liabilities, current
|
||||||||||||||||
Financial liabilities measured at amortized cost
|
||||||||||||||||
Deposits received
|
2,572
|
4,162
|
||||||||||||||
Short-term borrowings
(3)
|
21,925
|
20,868
|
||||||||||||||
Total
|
24,497
|
25,030
|
||||||||||||||
Other financial liabilities, non-current
|
||||||||||||||||
Financial liabilities measured at amortized cost
|
||||||||||||||||
Other
|
—
|
33
|
||||||||||||||
Total
|
—
|
33
|
7. |
Financial Assets and Financial Liabilities (continued)
|
(1) |
The Japanese Payment Services Act requires non-banking entities that engage in business activities involving advance payments from end users using virtual credits to secure a certain amount of money equal to or more than one half of the unused balance of virtual credits purchased by the end users as of the most recent base date set on March 31 and September 30 of each year, either by depositing or entrusting a cash reserve or government bonds with the Legal Affairs Bureau, or by concluding a guarantee contract with a financial institution. If deposits are made, they are recorded as guarantee deposits. If guarantee contracts are entered into, guarantee fees equal to the contractual amount times a guarantee fee rate are incurred. In accordance with the Japanese Payment Services Act, the Group had deposited cash of 3,445 million yen as of December 31, 2016 and 3,445 million yen as of March 31, 2017. The Group also had deposited investments in Japanese government bonds of 280 million yen as of December 31, 2016 and 280 million yen as of March 31, 2017, respectively, which the Group intends to hold until maturity for this purpose. In addition, the Group had credit guarantee contracts with banks for 10,100 million yen with a weighted average guarantee fee rate of 0.1% and for 13,100 million yen with a weighted average guarantee fee rate of 0.1% as of December 31, 2016 and as of March 31, 2017, to comply with the Japanese Payment Services Act.
|
(2) |
Impairment loss of 264 million yen was recognized for available-for-sale financial assets for the three-month period ended March 31, 2016, and gain on sales of 544 million yen was recognized for available-for-sale financial assets for the three-month period ended March 31, 2017.
|
(3) |
The weighted average interest rate of the remaining outstanding short-term borrowings was 0.1% as of December 31, 2016 and 0.1 % as of March 31, 2017.
|
8. |
Issued Capital and Reserves
|
(1) |
Shares issued
|
|
Common Shares issued
(Share capital with
no-par value)
|
Share capital
(In millions of yen) |
||||||
January 1, 2017
|
217,775,500
|
77,856
|
||||||
Exercise of stock options
(1)
|
1,221,000
|
1,497
|
||||||
March 31, 2017
|
218,996,500
|
79,353
|
(1) |
Refer to Note 12 Share-Based Payments for further details.
|
(2) |
Share premium
|
(In millions of yen)
|
||||||||||||||||
|
Share-based
payments (1) |
Common
control business combinations |
Others
(2)
|
Share
premium total |
||||||||||||
January 1, 2016
|
15,024
|
294
|
3,665
|
18,983
|
||||||||||||
Share-based payments
|
2,493
|
—
|
—
|
2,493
|
||||||||||||
Forfeiture of stock options
|
(25
|
)
|
—
|
—
|
(25
|
)
|
||||||||||
March 31, 2016
|
17,492
|
294
|
3,665
|
21,451
|
(In millions of yen)
|
||||||||||||||||
|
Share-based
payments (1) |
Common
control business combinations |
Others
(2)
|
Share
premium total |
||||||||||||
January 1, 2017
|
21,935
|
294
|
68,979
|
91,208
|
||||||||||||
Share-based payments
|
748
|
—
|
—
|
748
|
||||||||||||
Exercise of stock options
|
(2,248
|
)
|
—
|
1,793
|
(455
|
)
|
||||||||||
Forfeiture of stock options
|
(8
|
)
|
—
|
—
|
(8
|
)
|
||||||||||
Cost related to issuance of common shares
(3)
|
—
|
—
|
(6
|
)
|
(6
|
)
|
||||||||||
Acquisition of non-controlling interests
|
—
|
—
|
(46
|
)
|
(46
|
)
|
||||||||||
March 31, 2017
|
20,427
|
294
|
70,720
|
91,441
|
(1) |
Refer to Note 12 Share-Based Payments for further details.
|
(2) |
Resulted mainly from capital reserve requirements under the Companies Act of Japan.
|
(3) |
Incremental costs directly attributable to the issue of common shares are recognized as a deduction from equity, net of any tax effects.
|
9. |
Discontinued Operations
|
(In millions of yen)
|
||||||||
|
2016
|
2017
|
||||||
Revenues
|
443
|
—
|
||||||
Other income
|
—
|
—
|
||||||
Expenses
(1)
|
(2,940
|
)
|
(5
|
)
|
||||
Loss before tax from discontinued operations
|
(2,497
|
)
|
(5
|
)
|
||||
Income tax benefits on disposal
(2)
|
857
|
2
|
||||||
Loss for the period from discontinued operations (attributable to the shareholders of the Company)
|
(1,640
|
)
|
(3
|
)
|
(1) |
In connection with the abandonment of MixRadio on March 21, 2016, restructuring expenses related to employee termination benefits of 1,183 million yen and office lease termination fees of 127 million yen have been incurred.
|
(2) |
The income tax benefits for the three-month periods ended March 31, 2016 and 2017 are mainly due to the deductible temporary difference arising from the investment in MixRadio Limited, which incurred loss during the period.
|
(In millions of yen)
|
||||||||
|
2016
|
2017
|
||||||
Operating
|
(1,891
|
)
|
(93
|
)
|
||||
Investing
|
(2
|
)
|
—
|
|||||
Financing
|
—
|
—
|
||||||
Net cash outflow
|
(1,893
|
)
|
(93
|
)
|
10. |
Earnings per Share
|
(In millions of yen, except number of shares)
|
||||||||
|
2016
|
2017
|
||||||
Profit for the period attributable to the shareholders of the Company from continuing operations
|
1,518
|
1,440
|
||||||
Loss for the period attributable to the shareholders of the Company from discontinued operations
|
(1,640
|
)
|
(3
|
)
|
||||
Total (loss)/profit for the period attributable to the shareholders of the Company for basic and diluted earnings per share
|
(122
|
)
|
1,437
|
|||||
Weighted average number of total common shares and class A shares for basic earnings per share
(1)
|
174,992,000
|
218,411,890
|
||||||
Effect of dilution:
|
||||||||
Stock options
|
19,753,768
|
18,572,211
|
||||||
Weighted average number of total common shares and class A shares adjusted for the effect of dilution
(1)
|
194,745,768
|
236,984,101
|
11. |
Fair Value Measurements
|
(1) |
Fair value hierarchy
|
• |
Level 1 inputs are quoted prices in active markets for identical assets or liabilities.
|
• |
Level 2 inputs are quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
|
• |
Level 3 inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable, which reflect the reporting entity’s own assumptions that market participants would use in establishing a price.
|
(2) |
Fair value measurements by fair value hierarchy
|
December 31, 2016
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Financial asset at fair value through profit or loss
|
||||||||||||||||
Conversion right and redemption right of preferred stock
|
—
|
—
|
325
|
325
|
||||||||||||
Available-for-sale financial assets
|
||||||||||||||||
Listed equity securities
|
2,346
|
—
|
—
|
2,346
|
||||||||||||
Private equity and other financial instruments
|
—
|
—
|
12,795
|
12,795
|
||||||||||||
Total
|
2,346
|
—
|
13,120
|
15,466
|
||||||||||||
|
||||||||||||||||
(In millions of yen)
|
||||||||||||||||
March 31, 2017
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Financial asset at fair value through profit or loss
|
||||||||||||||||
Conversion right and redemption right of preferred stock
|
—
|
—
|
438
|
438
|
||||||||||||
Available-for-sale financial assets
|
||||||||||||||||
Listed equity securities
|
1,743
|
—
|
—
|
1,743
|
||||||||||||
Private equity and other financial instruments
|
—
|
—
|
15,124
|
15,124
|
||||||||||||
Total
|
1,743
|
—
|
15,562
|
17,305
|
(In millions of yen) | ||||||||||||||||
|
2016
|
2017
|
||||||||||||||
|
Private equity
investments |
Conversion right
and redemption right of preferred stock |
Private equity
investments and other financial instruments |
Conversion right
and redemption right of preferred stock |
||||||||||||
Fair value as of January 1
|
13,648
|
871
|
12,795
|
325
|
||||||||||||
Total (loss)/gain for the period:
|
||||||||||||||||
Included in profit or loss
(1)
|
—
|
(246
|
)
|
138
|
99
|
|||||||||||
Included in other comprehensive income
(2)
|
26
|
—
|
322
|
—
|
||||||||||||
Comprehensive income (loss)
|
26
|
(246
|
)
|
460
|
99
|
|||||||||||
Purchases
|
9
|
—
|
1,309
|
—
|
||||||||||||
Sales
|
—
|
—
|
(142
|
)
|
—
|
|||||||||||
Transfers in
(3)
|
—
|
—
|
326
|
—
|
||||||||||||
Effect of exchange rate changes
|
(657
|
)
|
(49
|
)
|
376
|
14
|
||||||||||
Fair value as of March 31
|
13,026
|
576
|
15,124
|
438
|
(1) |
This amount is included in “Other non-operating income” or “Other non-operating expenses” in the Group’s Interim Condensed Consolidated Statement of Profit or Loss.
|
(2) |
This amount is included in “Net changes in fair value” of available-for-sale financial assets in the Group’s Interim Condensed Consolidated Statement of Comprehensive Income.
|
(3) |
During the three-month period ended March 31, 2017, a company was delisted from a stock exchange in the US subsequent to our purchase of its equity securities. Accordingly, such equity investment was transferred from Level 1 to Level 3.
|
(4) |
Valuation techniques and inputs
|
Valuation technique
|
Significant
unobservable input |
December 31,
2016
|
March 31,
2017
|
|||
Binomial option pricing model
|
Comparable listed companies' average historical volatility
|
13.6% - 39.6%
|
46.0%
|
|||
|
Discount rate
|
1.6%
|
2.4%
|
11. |
Fair Value Measurements (continued)
|
(4) |
Valuation techniques and inputs (continued)
|
Valuation technique
|
Significant
unobservable input
|
December 31,
2016
|
March 31,
2017
|
|||
Market approach - market comparable companies
|
EBITDA multiple
|
10.4
|
11.0
|
|||
|
Revenue multiple
|
1.7-3.6
|
2.8-3.3
|
|||
|
Liquidity discount
|
30%
|
30%
|
|||
Option pricing model
|
Comparable listed companies' average historical volatility
|
39.6%-78.9%
|
46.0%-77.7%
|
|||
|
Discount rate
|
(0.1%)-1.6%
|
(0.1%)-2.4%
|
|||
Discount cash flow model
|
Discount rate
|
16.8%
|
15.3%
|
12. |
Share-Based Payments
|
(1) |
Movements during the three-month period ended March 31, 2017
|
|
Common Stock Options
|
|||||||
|
Number
(shares) |
WAEP
(yen per share) |
||||||
Outstanding at January 1, 2017
|
22,911,500
|
653
|
||||||
Granted during the period
|
—
|
—
|
||||||
Forfeited during the period
|
(6,000
|
)
|
1,320
|
|||||
Exercised during the period
(1)
|
(1,221,000
|
)
|
854
|
|||||
Expired during the period
|
—
|
—
|
||||||
Outstanding at March 31, 2017
|
21,684,500
|
642
|
||||||
Exercisable at March 31, 2017
|
21,684,500
|
642
|
(1) |
The weighted average share price at the date of exercise of these options was 3,724 yen.
|
(2) |
The Group has recognized 2,493 million yen and 748 million yen of share-based compensation expenses in the Interim Condensed Consolidated Statement of Profit or Loss for the three-month periods ended March 31, 2016 and 2017, respectively.
|
13. |
Related Party Transactions
|
(1) |
Significant related party transactions during the three-month period ended March 31, 2016, and outstanding balances with related parties as of December 31, 2016, are as follows:
|
(In millions of yen) | ||||||||||||
Relationship
|
Name
|
Transaction
|
Transaction
amount |
Outstanding
receivable/ (payable) balances (3) |
||||||||
Parent company
|
NAVER
|
Advertising service
(1)
|
79
|
67
|
||||||||
Subsidiary of parent company
|
NAVER Business Platform Corp.
(2)
|
Operating expenses
|
1,722
|
(902
|
)
|
(1) |
LINE Plus Corporation and NAVER entered into an agreement for exchange of services in which LINE Plus Corporation provides advertising services via the LINE platform and the right to use certain LINE characters in exchange for NAVER's advertising services for LINE Plus Corporation via NAVER's web portal. The Group generated advertising revenues of 79 million yen in connection with the advertising services provided by NAVER for the three-month period ended March 31, 2016.
|
(2) |
This subsidiary of NAVER provided IT infrastructure services and related development services to the Group.
|
(3) |
The receivable and payable amounts outstanding are unsecured and will be settled in cash.
|
(2) |
Significant related party transactions during the three-month period ended March 31, 2017 and outstanding balances with related parties as of March 31, 2017, are as follows:
|
|
|
(In millions of yen)
|
||||||||||
Relationship
|
Name
|
Transaction
|
Transaction
amount |
Outstanding
receivable/ (payable) balances (3) |
||||||||
Parent company
|
NAVER
|
Advertising service
(1)
|
143
|
142
|
||||||||
Subsidiary of parent company
|
NAVER Business Platform Corp.
(2)
|
Operating expenses
|
2,099
|
(914
|
)
|
(1) |
LINE Plus Corporation and NAVER entered into an agreement for exchange of services in which LINE Plus Corporation provides advertising services via the LINE platform and the right to use certain LINE characters in exchange for NAVER's advertising services for LINE Plus Corporation via NAVER's web portal. The Group generated advertising revenues of 143 million yen in connection with the advertising services provided to NAVER for the three-month period ended March 31, 2017.
|
(2) |
This subsidiary of NAVER provided IT infrastructure services and related development services to the Group.
|
(3) |
The receivable and payable amounts outstanding are unsecured and will be settled in cash.
|
(3) |
The total compensation of key management personnel for the three-month periods ended March 31, 2016 and 2017 are as follows:
|
|
(In millions of yen)
|
|||||||
|
2016
|
2017
|
||||||
Salaries (including bonuses)
|
142
|
128
|
||||||
Share-based payments
(1)
|
1,429
|
476
|
||||||
Total
|
1,571
|
604
|
(1) |
Refer to Note 12 Share-Based Payments for further details.
|
14. |
Business Combinations
|
|
(In millions of yen)
|
|||
|
Fair value
recognized on acquisition |
|||
Assets
|
||||
Cash and cash equivalents
|
87
|
|||
Trade receivables, net
|
83
|
|||
Intangible assets
|
||||
Customer relationships
|
401
|
|||
Software
|
26
|
|||
Deferred tax assets
|
88
|
|||
Other assets
|
1
|
|||
|
686
|
|||
Liabilities
|
||||
Trade and other payables
|
78
|
|||
Other financial liabilities, current
|
50
|
|||
Other financial liabilities, non-current
|
210
|
|||
Deferred tax liabilities
|
149
|
|||
Other liabilities
|
13
|
|||
|
500
|
|||
Total identifiable net assets at fair value
|
186
|
|||
Non-controlling interest
|
(92
|
)
|
||
Goodwill
|
416
|
|||
Total consideration
|
510
|
14. |
Business Combinations (continued)
|
|
(In millions of yen)
|
|||
Analysis of cash flows on acquisition:
|
||||
Total consideration related to the acquisition
|
(510
|
)
|
||
Net cash acquired with the subsidiary
|
87
|
|||
Net cash flows on acquisition (included in cash flows from investing activities)
|
(423
|
)
|
15. |
Principal Subsidiaries
|
(1) |
LINE Friends Corporation established LINE Friends America, LLC in February 2017.
|
(2) |
LINE Friends Corporation established LINE Friends (Shanghai) Commercial Trade Co., Ltd. in March 2017.
|
(3) |
LINE Plus Corporation acquired additional shares of LINE Vietnam Co., Ltd in March 2017 from a third party, resulting in LINE Vietnam Co., Ltd to become a wholly owned subsidiary of the Group.
|
16. |
Investments in Associates and Joint Ventures
|
17. |
Other Operating Expenses
|
18. |
Subsequent Events
|
1 Year LINE Chart |
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