NAVER Corporation (A035420) Earnings Call Transcript & Summary

[Interpreted] Good morning, and good evening. Now we will begin the conference of the fiscal year 2020 fourth quarter earnings results by NAVER. Today's conference call will be consecutively interpreted for the convenience of domestic and international investors. The conference call will include a summary of fourth quarter earnings, followed by a Q&A session.

[Interpreted] Good morning. I am Kim Min, Director of IR at NAVER. Thank you for joining our fourth quarter 2020 earnings presentation. With us today are CEO, Han Seong-Sook; COO, Choi In-Hyuk; and CFO, Park Sang-Jin. The earnings results are K-IFRS based provided for the purpose of timely communications and are yet to be audited by an independent auditor and are subject to change after the review. Now let me invite CEO han to present on the business highlights.

[Interpreted] Good morning. I'm Han Seong-Sook, CEO of NAVER. Would like to first thank the investors for joining today's earnings presentation. With the COVID-19 pandemic, 2020 was a year NAVER used technology and services to offer solutions to users, experiencing difficulties from their daily lives, and we were able to bring meaningful growth for creators and SMEs under the philosophy of connectivity and coexistence which were our key focus over the years. To better support creators' activities, we further advanced our blogs and knowledge in services, i.e., the influencer and the expert. And the compensation system built for creators based on technology and data is showing tangible results, and there are creators who are making more than KRW 10 million a month from NAVER alone. We also brought V LIVE technology, which is a global standard technology to Smart Store, allowing individuals and SMEs to sell their products from faraway cities like London and [ remote ] island, where communication infrastructure is poor by simply using smartphones to do a live show. And this is bringing rapid growth to Smart Store. Also NAVER grocery shopping helps to promote online sales of vendors from 80 different neighborhood marketplaces and have received positive feedback for promoting local commerce. And to support SMEs on their online conversion, startup and operations of their businesses, we launched fast payment service, offering show disk payment cycle in the world and Smart Store business loans, helping SMEs to ride out the hardship as we enable uninterrupted flow of funds, which is considered essential to SMEs. We also lowered cloud server prices by 50% for SME customers, provided free workplace, which is a solution fit for use in a remote working setting. Through these efforts, we sought to bring vitality to SME ecosystem across all of NAVER's businesses and bring growth for everyone. I will walk you through the outcome of such efforts in terms of building a healthy ecosystem for SMEs and creators and our commitment to grow together. NAVER will continue to support 4.8 million SMEs and 1.6 million creators based on technology and our service capabilities, bringing connectivity and creating new synergies so that we may grow hand-in-hand. First is Q4 update on commerce. Driven by online conversion and growth of SMEs, Q4 Smart Store GMV was up 76% on year while with the seasonality impact in December, year-over-year growth was 91%. Number of Smart Stores in December 2020 was 410,000, and there are more than 4,000 stores with monthly GMV of above KRW 100 million, which is more than 2x the previous year. Smart Store is now considered most favored way to start up a business and is setting itself apart as a solution with high rate of success. SME's growth is also leading to user expansion through synergies with Plus Membership helping live and NAVER grocery shopping. Number of people making payments surpassed 20 million for Smart Store in 2020 with payment frequency per person and sales per basket up 43% and 47%, respectively, bringing growth both in terms of size and loyalty. For Shopping LIVE!, we are seeing not only incumbent brands, but also more SMEs joining the program. In December, there was a total of 5,600 LIVE sessions with 24 million views, which are 50% and 30% rise month-on-month, breaking 100 million views on a cumulative basis. SMEs account for 80% of the total live vendors and are growing rapidly on year. Since we opened the door to Shopping LIVE! to SMEs last March, we lowered the entry barrier by providing easy connection to Smart Store and improved many tools such as impact analysis and frequent buyer management tools, which all led to good results. We will strengthen curriculum and mentoring programs to help SMEs strengthen live streaming capabilities and provide studios and streaming infrastructure free of charge as we continue to expand on SME support and encourage their participation. Plus Membership continues to grow as according to plan in terms of number of subscribers and GMV per member. The membership ecosystem is growing quickly around NAVER point, and the Plus Membership ecosystem has become more vibrant as we are expanding partnerships, one of which is engaging in talks with TVING. We expect that annual membership and unique benefits that we offer will have a positive impact on subscriber retention and growth. As of December, customers who used to spend less than KRW 200,000 after signing up for membership, their GMV increased by more than 5x, and we were able to confirm that GMV growth has been steep since the launch last June. GMV growth following membership sign-up drives revenue. So by offering stronger benefits, we can drive further growth. So we plan to strengthen partnerships with outside partners, so as to expand the subscription-based ecosystem. Q4 NAVER paid GMV was up 68% on year to KRW 7.8 trillion, driven by the growth of Smart Store and outside partners. In Q4, KTX, KT, Lotte DFS and Nike have all onboarded NAVER pay, and there are many more brands who would do so in 2021. In November, we opened NAVER Pay services against 70,000 offline merchants. And afterwards, spread on how SMEs are attracting more customers, off-line payment also very quickly took off. We are seeing rise in payment volume and additional features to better support SMEs. Since the introduction of beta version of the SaaS payment service last December, we have managed to reduce the payment cycle by one additional day by enhancing the fault detection system, allowing SMEs to benefit from the shortest payment cycle in the world. There are more than 70,000 businesses who can benefit from this service, and it's helping SMEs in terms of continuous flow of funds, which is considered essential in fulfilling online orders. Since the launch of Smart Store business loan, in a single month, 40% of loan applications were approved, and thin filers, and these are people who lack credit track record, their approval rate posted 52%. By combining NAVER data with rating agencies' data, we developed alternative credit scoring system, which lowered the hurdle for SMEs who were previously underserved by existing loan products. The alternative credit scoring system will form a competitive advantage for NAVER's fintech business, which we will further advance to offer distinctive fintech services for the financially underserved population. NAVER Cloud platform in Q4 posted a revenue growth of 163% year-on-year, driven by execution of substantial contracts. Following Taichung Smart City project in October, we were selected as the main cloud provider for a smart city project in Busan in December. By utilizing data and solution for digital payments, mobility and robotics, we will attempt to bring innovation to infrastructure and administrative services for cities across the nation. And NAVER, by winning this project, is well positioned to respond to such trends preemptively. We also renewed cloud contract with KERIS, Korea Education and Research Information Services, who adopted remote education solution in the midst of the COVID-19 pandemic, and we entered a supply contract with EBS as well. I think it's meaningful that we were once again able to prove our competitiveness in cloud against global providers. In Q4, we had a big win, proving that our IP can really work in the global market. Sweet Home is a title that was serviced in 9 languages, including English, Japanese and French, posting cumulative views of 120 million, and it was featured through Netflix and 22 million households around the world watched the program. Once IP becomes a global hit on the screen, there is increased desire to consume the original content, and this creates a virtual cycle of attracting more users back to Webtoon. Since the showing of Sweet Home on Netflix, number of global visitors to NAVER Webtoon increased, and we were able to identify consumption of various other content once they were on platform. This drove 2020 Webtoon GMV of KRW 820 billion, outperforming our original target. MAU reported KRW 72 million, achieving a historical high. As these web products are first validated on the global platform of NAVER Webtoon, when they are brought to screen, they become a global hit. And this has once again highlighted the global value of NAVER's IP. The announcement we made on January 20th regarding the acquisition of Wattpad and Webnovel platform, hence, was a strategic decision to gain an upper hand in the global IP market. By combining global #1 Webtoon and #1 Webnovel platform together, we will become the biggest global storytelling platform and expect they will be able to accelerate our global IP business. I am convinced that the meeting of NAVER Webtoon, which is global #1 and Wattpad will bring synergies above and beyond a simple union. If we can take Webnovel from Wattpad, well recognized by Global Gen G, Generation Z and make a naval Webtoon as a derivative work product, it will help expand NAVER Webtoon's global user base. And if that becomes popular, the original piece will once again receive interest. Webtoon and Webnovel can therefore share such synergies, and a model of a virtuous loop will be made and grow both global user base and the creators. We will expand such synergies from North America to Korea, Japan, Southeast Asia and to the broader global market so that we can make global storytelling IPs off of NAVER's platform, and we seek out new business opportunities based on quality IPs. On top of the Wattpad acquisition, we will strengthen cooperation with big hit entertainment following YG and SM entertainment to speed up expansion into global entertainment market. We will work with entertainment companies who have the know-how in the K-pop business and by using NAVER's live streaming technology will identify opportunities across the entire entertainment value chain, starting from live concerts, fan community and commerce. We expect to quickly expand out into not just Korea but also U.S., Europe and South America, where K-pop is popular. Lastly, we are making sustainable growth strategy for NAVER's ecosystems more concrete. We set up an ESG committee under the BOD last quarter, defining our ESG way forward and 2040 carbon-negative target. We also published sustainability report end of last year, which talks of key ESG-related issues and status, and the report will be updated every year. To that end, we have set up a dedicated organization directly under the CFO, and they will implement key tasks relating to the environment and other factors and lead the ESG management. Last year, NAVER was able to grow together with SMEs and creators who are faced with great challenges and expanded partnerships with competitive partners to take on a new business in global challenge. In this process, we have been very steadfast in making R&D investment. NAVER's R&D accounts for more than 25% of the total operating revenue, and we plan to increase that ratio going forward. Our R&D is focused on advanced techs like AI, robotics, cloud and turning them into a smart tool that will help enhance digital competitiveness of SMEs and creators. AI engine that enable voice recognition, conversation analysis, natural language analysis and demand forecast make up the foundation for AI call, which is an auto response system to customers' inbound calls and is also helping with easy capture of receipts and business registrations. We have specialized AI engines for content, location and product, connecting more businesses and creators to meet more people. We will be proactive in R&D, investment and acquisitions, partnerships so as to broaden NAVER's ecosystem and will never stop to challenge ourselves so that we may offer better value to users, SMEs and creators and to bring growth to all. We look forward to the support from investors, shareholders and our partners. Now our CFO, Park Sang-Jin, will present on the financials.

[Interpreted] Good morning. This is Park Sang-Jin, the CFO. Q4 consolidated operating revenue for NAVER was up 28.3% on year and 11.2% on quarter, reporting KRW 1,512.6 billion, and consolidated operating profit was up 17.6% on year and 11% on quarter to KRW 323.8 billion. Adjusted EBITDA was up 22.8% on year and 7.5% on quarter to KRW 419.2 billion, sustaining a steady quarterly growth. Net profit was up 91.3% on year and 59.4% on quarter to KRW 375.3 billion on higher valuation gains from financial assets that we hold. Operating revenue for FY 2020 was up 21.8% on year, reporting KRW 5,304.1 billion. Operating profit was up 5.2% on year, coming in at KRW 1,215.3 billion. Adjusted EBITDA for the year was KRW 1,567.2 billion, accounting for 29.5% of revenue, while net profit was up 111% on year, reporting KRW 836.2 billion. The net profit impact came from the profit from the discontinued operations and also with relation to the invested assets for NAVER and starting -- going forward, there would be an addition of the impact from Z Holdings going forward. Breakdown of Q4 operating revenue is as follows. Despite new wave of COVID-19, search platform was up 11.3% on year and 8.5% on quarter to KRW 770.2 billion. We saw growth from both performance and impression ads as display ad revenue posted a 35% year-on-year growth under the search platform. Membership scheme created a synergy for Smart Store GMV growth, which led to commerce revenue to rise 44.6% on year and 11% on quarter to KRW 316.8 billion. On continued pay GMV growth, fintech was up 67.8% on year and 15.6% on quarter to KRW 201.1 billion. And even growth from different services, i.e., Webtoon, SNOW, V LIVE and others, content revenue was up 48.8% on year and 20.9% on quarter to KRW 138.9 billion. Cloud revenue was up 56.3% on year and 12.2% on quarter to KRW 85.6 billion on the back of increase in the orders for NAVER Cloud and a new Clova device launch. Next is on expense items. On decline in stock-based compensation, development and operational expense was up 7.3% on year and 0.2% on quarter to KRW 312.4 billion. Partner expense was up 36.4% on year and 17.1% on quarter to KRW 534.9 billion, driven by increases in revenue-linked expense, such as payments and sales commissions and pace basic points. Infrastructure expense was up 34.6% on year and 9.1% on quarter to KRW 157.9 billion on the back of higher outsourcing and licensing costs following the expansion of the NAVER cloud business as well as higher depreciation costs from infrastructure investment. Marketing expense was up 78.3% on year and 18% on quarter to KRW 183.7 billion and NAVER Pay's point promotion and global marketing execution for Webtoon. Next is on shareholder return policy for 2020. Last year, we announced a new shareholder return policy, which will stay unchanged for 3 years to come. Accordingly, KRW 110.7 billion, which is 30% of consolidated basis cash flow surplus of the previous 2 years will be used as resources, of which KRW 59.3 billion or 5% of net profit will be paid out as dividend, and remaining KRW 51.4 billion will be set as a cap for a share buyback and immediate cancellation. Also to maintain the signs of shareholder return compared to previous years, we will cancel KRW 35.5 billion worth of treasury shares, which we own, separate from what I have just mentioned. On top of newly purchased treasury shares to be bought with funds after the payout, a total of 86.9 billion of treasury shares will be subject to cancellation. However, as we will be using treasury shares in the acquisition of Wattpad, there will be a 3-month lockup period after the disposition and buying treasury shares in the first half is, therefore, subject to restriction. So share buyback with the available funds and cancellation of the treasury shares, including what we already hold, will be put to the BOD for approval. Lastly, to secure resources for investment to speed up growth, such as the acquisition of Wattpad and equity investment into BNX, we plan to issue a corporate bond in the domestic and the global market. In terms of the size and schedule, we will communicate once further decisions are made. Through funding, we will explore various investment opportunities and really speed up global expansion. This ends financial highlights for Q4, and we will now begin the Q&A.

[Interpreted] [Operator Instructions] The first question will be presented by Kim Sung Eun from Macquarie.

[Interpreted] I would like to ask two questions. Despite very high level of GMV growth for commerce, you are still able to post high level of growth. What is your projection for commerce GMV growth this year? And secondly, in terms of your membership program, can you also provide some other indicators, such as number of subscribers as well as other major -- measures that you're currently tracking?

[Interpreted] So responding to your first question on whether we would be able to continue on with the high rate of commerce GMV. As you have mentioned, in 2020, the growth rate has been elevated, and that is thanks to various efforts, including our membership program and LIVE commerce and other brand store, we've been able to expand our reach into these different areas. And also due to the backdrop of COVID-19 pandemic, the growth rate was quite high. And we expect this high rate of growth to continue for this year as well. And the reason is because we are really developing structure and framework to provide support and help to the SMEs who are starting up their business on the platform so that they could do their business well. So we have all these support programs for each of the phases and growth stages of the SMEs. And to a certain extent, we believe that this type of a framework is working well for the SMEs businesses. So as the SMEs grow in their business, we expect, at the same time, for us to grow as well. Responding to your question on our membership program. Basically, we did achieve the 2 million new subscriber target that we've set for 2020. And in terms of other specific targets, please understand that it will be difficult for us to share with you the specifics. But having said that, since a subscriber user takes up a membership, we've seen an increase in the GMV and also their frequency in purchasing via the NAVER Shopping has also increased as well. So we will continue to start to provide stronger benefits under the membership program, and we'll very closely check and monitor how the retention of these subscribers play out going forward. And appropriately and accordingly, we will bring about appropriate update as well -- upgrades as well.

[Interpreted] The following question will be presented by Ahn Jae-min from NH Investment Securities.

[Interpreted] I'm from NH Securities. I'm Ahn Jae-min. It seems your advertisement performance was quite good, and that was probably driven by your performance ad. Could you provide some color on what the current trend is and also the future outlook? And also for the Smart Store vendors, I understand that you launched a loan product for the store vendors. Can you also provide some update as well as outlook for this as well?

[Interpreted] This is COO, Choi In-Hyuk. I will respond to your question on the Q4 performance ad related results. If you look at the performance ad revenue for Q4, despite the new wave of COVID, so it's been an impact on the ad related high seasonality impact, the year-end impact, that is, and we were able to continue to expand on our performance ads. And as a result, we were able to post a 35% growth on a year-over-year basis. That was actually driven by us expanding the loading pages where we could actually hold those performance ads as well as attracting of new advertisers and also through upgrading and enhancing our platform to improve on ad efficiencies. In terms of the outlook for this year, first half of the year, we have to be mindful of the previous year's base -- the base effect. And also we -- through more expansion of the spaces for performance ad as well as through new product launches, we do expect that the growth rate will continue. However, if you think of the second half of the year, we are going to further upgrade our performance ad, targeting approaches, and we will make sure and plan so that we can continue on with a high growth. So in November regarding the Smart Store loans, together with the Mirae Asset Capital, we launched a loan product for Small Store vendors. And some of the numbers that I could share with you is that the approval rate within filers have been posting above 50%. And average loan amount is around KRW 25 million with interest rate per annum at 5.5%. So for this year, we will want to continue on with such tangible results, and we want to further expand on the scope of this loan product. Initially, the criteria for loan origination was for vendors who posted a revenue of KRW 1 million -- above KRW 1 million for 3 consecutive months. They were qualified for loan underwriting -- loan origination, but we have lowered that level to KRW 500,000. Going forward, we will continue to further partner up with the banks so that we can provide a much lower interest rate to these borrowers. Through this support, if the SMEs grow, we think that this will have a positive impact on further solidifying the commerce ecosystem of NAVER. Our objective this year is to make sure that these borrowers, the businesses that require such funds, will be able to think of NAVER Financial as their first resort to receive loans when they are in need.

[Interpreted] The following question will be provided by Kim Jingu from KTB Investment Securities.

[Interpreted] I would like to also ask two questions. Can you provide us with a bigger -- big picture on what your mid- to long-term content-related strategy is in terms of users, in terms of sourcing original content and delivering original -- offering original content? And also with regards to any secondary derivative work product and any monetization opportunities that you see arise out of that? Second question has to do with business integration. Soon, Z Holdings is going to be -- G Holdings is going to be launched. What will be the model that you are currently envisioning in terms of commerce and tech fin as well as ways to collaborate with SoftBank?

[Interpreted] This is CFO, Park Sang-Jin. I will respond to your question about the overall mid- to long-term content business strategy. As you've mentioned, this is a quite broad scope. It will include many different agendas and many factors, so will be difficult to just provide a simple answer. But still, I will focus on the original content, the user, the IP aspect in answering your question. In terms of the content of the user, as we've mentioned during the presentation, with the decision to acquire Wattpad, we now have 2 very strong pillars. One is global #1 Webtoon platform and the other global #1 Webnovel platform. Underpinned by these 2 platforms, we will have the basis to generate and create original content. So at the first level, this will be used and consumed by the user base. Well, as you know, in today's world, the global [ PT ] market competition is extremely fierce, so there is a heightened need on a very good story IP. So it's become very important to source that high-quality IP in the market. Compared to other content on screens, Webnovel -- and when it comes to creating the workpieces, the hurdle itself is relatively low. So it is easier for us to gain access to creators. And through the acquisition, NAVER will be able to use the Webnovel content and the Webtoon content, which have already been proven to be quite successful against the global generation Z. As we bring that on to the screen, we will be able to further strengthen the content, and we'll be able to expand on the global market when it comes to the derivative IT business. And also based on the business know-how that we have gained from NAVER Webtoon, we think that we will be able to further upgrade and grow Wattpad platform as well. The IP business as of -- at this point in time, we are in talks with a lot of global content providers, and we are expanding our talks with them. When it comes to the current filming scene, there are a lot of restrictions because of the COVID situation. So some of the contracts that we were going to actually film have been a bit delayed due to the circumstances. But as we have mentioned in the fourth quarter, we very successfully featured Sweet Home as a Netflix original, and that really had an impact for us as well. So this year, we also have plans to film and introduce different types of content that we had on our Webtoon platform, and we hope that we will be able to gain quite a bit of competitiveness in terms of content IP.

[Interpreted] Relating to your question on Z Holdings, please understand we won't be able to share with you any specifics up until the time that integration process comes to a good close. We are currently thinking of many ways to collaborate. One set of initiative or one set of process completes, we will come back to you and communicate to you.

[Interpreted] The following question will be presented by Eric Cha from Goldman Sachs.

[Interpreted] I would like to ask two questions. First, on the trend for the operating profit margin. It seems for this quarter, it was quite flat on the Q-on-Q. What is your projection in terms of the trend going forward? And in terms of the operating leverage, do you think that you will be able to actually drive -- gain that operating leverage? And how far do you think that, that could actually go up? My second question has to do with the results that you are currently seeing from the partnership that you have with CJ Express. Can you share with us what the road map is, and vis-à-vis the Small Store sellers, what is the speed at which you are actually expanding this? And what will actually drive and determine the expansion of this collaboration?

[Interpreted] This is the CFO. Responding to your op margin, we have been communicating on a quarterly basis, there's a trend. As you know, we are currently expanding into new business areas like commerce, fintech and cloud from our existing original businesses such as search and display ad. For us, what's most important is to secure long-term growth basis. That is why we're currently very much focused on bringing off the topline revenue from these late entrants entering revenue sources, the so-called new businesses. Now for growth, as I've mentioned, on top of our search platform, there's commerce, fintech and cloud that we're expanding into. So we're very much focused on expanding -- focusing our investment in two such business expansion. And also, hence, we are very aggressive in terms of marketing execution. So in terms of -- we are making these investments for long-term growth. So it is, at this point, quite difficult to actually pinpoint as to how much the op margin improvement we can expect going forward. However, having said that, we -- in accordance with the speed at which our business is expanding, this is going to a company investment as well. And so from a long-term perspective, depending on the level of market share, we expect that across all of the business areas, we will be able to drive up operating profit. Just to elaborate on that, compared to the past, our business platform has become much more diversified, which, of course, entailed higher level of cost. But if you look at the comparison between fixed and variable cost, variable cost increases is actually higher than that of the fixed cost. So we think that depending on the stage of the business development, we will be able to control the cost structure.

[Interpreted] Responding to your question on the fulfillment service that's provided through CJ Express. Since we opened the brand store of LG, Life and Health, and they started to receive fulfillment services with DJ Express. As of end of December, currently, there are a total of 8 branded companies that's utilizing this fulfillment services. And in terms of the very fast delivery of the product to the buyers, we are receiving positive feedback in terms of the scores -- satisfaction scores. And so the level of satisfaction from the services are quite high and positive. So CJ Express brand companies and NAVER, we are working together to -- how to really connect, provide that fluid connection in terms of the logistical flow. And we believe, therefore, this year, many brand companies will select CJ Express so that the products that they deliver could arrive at the customers very quickly. And also on the NAVER platform, we have something called a special price warehouse. We're using that tab or that segment to really test this quick delivery model. And so we do -- we have been able to gain certain level of understandings. And so we think that we will be able to further speed up the process. And also on top of that, for the Smart Store vendors, we wanted to make sure that we provide a fluid logistical services. So we made investment into a 4 PL fulfillment company and connected them to the Smart Stores. We want to make sure that these Smart Store sellers don't have to think about the whole logistics. We want them to only think about selling their products. That's why we also have entered in -- we also connected with fintels, the API, in September so that we may be able to provide a differentiated services to the shopping users. As I've mentioned, when it comes to logistics, basically, we're making investments so that we can link these fulfillment companies as well as to the Smart Store vendors. The reason why we want to do this is because as I said, we don't want the SMEs to have concerns about the logistics and the delivery aspect. We want them to focus their time on making and selling good products. That's why we are providing that connection between the store vendors and the full PL fulfillment companies. And the result of this is that the user satisfaction is quite favorable. And that's why store vendors are more and more selecting these fulfillment companies. And therefore, we think going forward, the whole linking up and connection speed, 2 PL -- 4 PL fulfillment companies will only speed up as we go forward.

[Interpreted] The following question will be presented by Stanley Yang from JPMorgan.

[Interpreted] So the company has decided to issue corporate bonds. And as such, we are expecting quite aggressive investment for the company. And the global investment that you've made has, up to date, been quite well received by the market. In terms of the e-commerce value chain, if you could provide the future direction for investment relating to this business. How far would you go looking at NAVER Shopping GMV growth? If you believe -- and if we all believe that the growth rate has high upside potential than even at sacrificing margin to a certain extent, market will prepare actually more investment going forward. And how do you think or what form would the economy of scale look like? And we think that the investment focus would be on membership and logistics investment, just to confirm whether that would be the case. And my second question is, what's more store GMV growth as well as the outside of NAVER platform, shopping model GMV trend, what -- how does that look like?

[Interpreted] This is CFO, Park Sang-Jin. You asked questions relating to the bond issuance and that building up an expectation for investment and our strategic direction for commerce investments and the smart store and our outsized model GMV growth. Yes, we have planned for bond issuance, and basically, this will be for both domestic purposes and also for global expansion. The whole purpose is to secure funds for that -- for not just domestic, but it could also include the global e-commerce expansion as well. When it comes to that global expansion, it's not something that we could do by ourselves. We need cooperation with partners. So the size of that investment will be determined once that partnership structure is decided. So coming back to the domestic side, the NAVER Shopping GMV, as you know, is comprised of our Smart Store GMV as well as the outsized model GMV on the price comparison side. In 2020, the growth rate has been very high. And in 2021, because the e-commerce market itself is going to grow by more than 20%, we think that there is a high possibility for our growth as well. So as you have mentioned, I agree that where there is high upside potential for growth, even if the margin is relatively lower, we do feel that investment is necessary and is required. Now if you look at NAVER Shopping, there is that interconnection between the search platform, the commerce as well as NAVER Financials fintech services. So all of these come together organically and they complement one another. So within the NAVER ecosystem, when the GMV actually -- can be driven up, we believe that we will be able to, in that process, create significant amount of business opportunities as well as upside growth potential. Also in terms of the -- in terms of looking at the entire commerce value chain, there will be certain areas where we don't have our own in-house capabilities. And if we think that certain business is not appropriate for us to do directly, and that, of course, the area endpoint will be logistics. That would be an area where we would require cooperation with an outside party or where we would need to source that capabilities. That's why we've decided to cooperate with CJ Express, and we've decided to invest into 3 PL and 4 PL logistics companies. This will be an important area for us to focus in 2021 as well. And from the user's perspective, it's important that by providing this search platform or ecosystem that we create traffic that is triggered by the users. And in order to drive that, what's also important is to strengthen benefits that we provide through our membership program. So that membership could be -- is also an area where we would be able to make additional investments. Now coming back to global business expansion. As I said before, we are going to be quite aggressive in making this global investment so that we can further upgrade and enhance our technology and really bring the technologies that have been tested domestically and bring that to expand into the global stage. We've mentioned that we've -- we were able to grow together with the SMEs by providing them the tools that they need for the Smart Stores that they require inside this ecosystem. What we want is to be able to grow this ecosystem so that the SMEs can use us as a tool, use us as a platform to make inroads into the global stage. And so in that sense, this will also be an area where a significant amount of investment will be focused. Your last question was on the GMV trend for Smart Stores and the outsized models. Yes, there was impact from COVID-19, but also the online demand has really significantly gone up. So our internal GMV had posted a year-on-year growth of more than 40%. And Smart Store accounts for the bigger portion of this entire picture, and the growth rate was much higher compared to the outsized models. But having said that, there has been an across-the-board growth in terms of these shopping GMVs. In 2021, we expect such trends to continue.

[Interpreted] The following question will be presented by [indiscernible] from Merrill Lynch.

[Interpreted] So I have a couple of questions. We know that Coupang is going to soon go IPO, and some are saying that they will be able to raise even more than KRW 3 trillion in the equity raising. And so that obviously brings me to the very interesting point, which is the e-commerce. So I would have to come back and ask also about this, so I ask for your understanding. First, I agree that you would need to outsource the logistics services. But these days in Korea, there's all these social issues caused by the labor unions of the delivery companies. And there's been a social issue of them being overworked and overly fatigued. So it seems like if a company doesn't have an in-house delivery or logistical capabilities that could pose as a quite big problem for that company. So what is your view on this? Compared to the competitors, your current positioning on logistics, do you think that, that is still valid, that will be effective going forward? And also, second is on LIVE commerce. I personally love watching your LIVE commerce. They give out a lot of coupons. And it seems right now, it's the brand companies that's actually sourcing the show host of these programs. But since you're making investment into the entertainment companies, do you plan to come up with a model where you would be able to organically also include the show host, the influencers, all these aspects into -- under your umbrella? And then do you also have plans to make improvements or focus on the UX or UI improvement? Basically, if you look at Netflix, they support dual screen. So with your smartphone screen -- with a single screen, you can have two -- you can have that split into two sides. Do you also have plans regarding the new access as well?

[Interpreted] So responding to your question on logistics. I do not believe that having that capability in-house will solve the problems that you've mentioned, like the labor union issues as well as the level of the overall work issue of that individual delivery service people. So that is why we decided not to do this directly but to find a partner to collaborate with. And one of the reasons is because e-commerce, in terms of the scope and breadth of e-commerce, it's expanding very quickly. So it's not just about fast delivery. You could -- there could be different types of delivery requirements. So people would want to designate a delivery date. Others would want a different type of a box and you could also think of premium delivery for gift items. So there are various different quality-related requirements that currently exist in the market. And also from the ESG perspective, we could think of making that delivery box more ecofriendly, for instance. So all of these elements need to be reviewed. So we think that us doing this directly on -- the company doing it directly will not be able to solve all the problems that I have listed. Korean logistical companies are already quite competitive. So at this point -- and that is why we are collaborating with them. And it's with their know-how and expertise, we will be able to review all of these factors. Another thing to add on to that is that the reason why we are continuously investing into logistical startup companies is also explained by what I have previously mentioned. So from users' perspective, I mean the quick delivery may be one of the requirements, but we also have to think about the vendors, the sellers. We want to alleviate the burden that they're feeling. We don't want them to worry about the whole logistical process. We want to be able to provide them with a simplified process and one that is more convenient. And that is why we're continuously focused in making investments into this field because the vendors on our Smart Store, they're not large companies. They are SME companies. We want them to put in less work on the logistical and the delivery side. That's why the logistical framework is quite important, and we think that we will be able to further grow and develop this. This is a model that is different from that one that the Coupang is using. Second question on Shopping LIVE!, we also understand the importance of the host who runs that live program. Some -- so it's important that we source good host. They could be an influencer with many subscribers. And so if you look at Shopping LIVE!, however, it really requires an expertise, subject matter knowledge, because you have to sell the product and explain the product. And so of course, there are celebrities who have high level of interest in certain product category, and they have also a lot of interest in Shopping LIVE!. But yes, so we are reviewing different celebrities and also influencers on the social network. And the companies that we've invested in also have a lot of interest in this area. And so I think we can continue to look forward to more synergies going forward. Regarding your last question on the dual screen, the UIs and UXs. Yes, we run a live show. Host is important product, important, and technology is also important. So in terms of the UX, how the viewer actually perceives and sees that screen is also quite important in terms of delivering and communicating what the product is and also in terms of facilitating the interaction with the users. So it's quite important during this program that users' feedback gets delivered to the host very quickly and gets answered in a rapid manner. So there's a lot of improvement points that we would have to work on this year. But we have experience in running V LIVE program between fans and their stores. And in the process of communication between the fan and the star, there has been a lot of technology that's been developed to facilitate that communication process. And we think that we would be able to bring that technology and apply that to Shopping LIVE!, and that would be another focus area for us this year.

[Interpreted] Due to the time limit, we will now take the final question if there's any. And if you have additional questions, you can contact us later through the IR team.

[Interpreted] The last question will be provided by Park Seyon from Morgan Stanley.

[Interpreted] So I have two very simple questions. First, you shared with us your share cancellation plan. You have 11% of treasury shares. Would there be additional shares that will be canceled in the future. You're using your treasury shares to make Wattpad acquisition. So can we assume that, that 11%, whatever is remaining will be a source for such activities going forward? And also, the Smart Store GMV, is that fully grossed under NAVER Pay GMV?

[Interpreted] In terms of the use for the treasury shares, the treasury shares that we hold, it will be solely used for the purpose of improving on the shareholder return value. We have shared with you actually the formula of how we calculate our shareholder return levels, and the treasury shares will be used for the purpose of cancellation. And also on top of that, we're using the treasury shares as a fund to respond to fast-changing internet industry transformation and as a fund for growth. So this -- it will be used as a resources for investment as we've done so in the past when it came to the exchange or the swap with CJ and also for the investment and acquisition of Wattpad. And also in 2019, we developed the new stock compensation plan. We believe that the core of our competitiveness is the talent that we have. So it's important that we appropriately align the compensation with the corporate value, and that is why we have increased that stock compensation level. And treasury shares could -- would also be used as a resources for that. So these are 3 different use cases that we have for our treasury shares. So responding to the second question, yes, simply put, yes. All the Smart Store GMV is grossed under NAVER Pay GMV. So on the Smart Store when that NAVER Pay is used as a payment mode and also for the outsized model, there are pay solutions for payment, for ordering and for offline payers. All of that gets grossed under NAVER Pay GMV.

[Interpreted] Thank you. That ends NAVER's Q4 2020 earnings presentation. We look forward to your continued support. Thank you. Add a disclaimer at the end of the transcript: [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]