Trend Micro Incorporated (4704) Earnings Call Transcript & Summary

[Interpreted] Thank you very much. My name is Negi. And I would like to share my screen with everybody. Can everybody see the screen? This is the outline of the Q4 consolidated results. And we have increased net sales by 6%, 40% increase in operating income. And towards the bottom, you can see in pre-GAAP basis it's plus 3%; excluding foreign exchange impact, plus 4%. This is according to our outlook, but as for the profits, we have increased by 40%. This is considerably higher than our initial outlook. The reason is because the fact that -- we in fact mentioned this in the previous quarter but, within the pandemic, sales activities that cannot be carried out. And we did not have any customer events. So on the corporate side, we had savings because of the impact of the pandemic, and so that is why the margin and the high profit amounts have increased. And there had been revision made in -- of JPY 37 billion in third quarter, but we have seen these results reflected in Q4. And in regard to the progress, each quarter's numbers are cited here, and the blue line is the actual results. And then the forecast is shown here. And as mentioned in terms of revenues, it's not that great a difference. We have achieved 100% of our goals. And if you look on the right-hand side, then you can see for the operating income, at one point in the third quarter, there was a decrease, but then this has increased in the fourth quarter so that ultimately we are 105% of our initial outlook. And so we have exceeded our outlook. And this was not because of any special steps taken by the company but rather because of the various savings that were carried out as a result of the pandemic. And this is the sales by region. And without the impact of the foreign currency, we've seen a similar trend. In Japan and AMEA, we have increased. And we're weak in North America. The factors remained the same. In Japan, the consumer sales are doing well. And in all areas, looking at the enterprise market: For North America, there is the decrease in TippingPoint sales. And there's also -- as SaaS is more widely adopted, then there is a difference in how the deals are recognized, and so therefore we have seen these negative results in the fourth quarter. No particular comments here. And as for the constant currency revenue growth, we see that it's about a pace of 5% to 6%. And this year's outlook will be mentioned later, but we believe that this will be the rate that will continue this year as well. When we look at this by segment. And in the case of Japan, as already mentioned, for the consumer market we are doing well. And this has grown by 12% -- or rather 15% in Japan. And we are seeing that in the consumer market. We are seeing [ much ] activity, and there are people buying new PCs and there is also more wireless usage. And so this has been reflected. As for the enterprise market, in all markets we are seeing growth, except for North America. And if we look at the breakdown of the sales. On the left-hand side, you can see for the hybrid infrastructure protection. And in the previous quarter, it was flat, but we've seen recovery here and it's a 6% increase. And there's user protection on the terminal side on the right-hand side, and you can see an increase here. For enterprise sales, the numbers may seem low. However, we're seeing a recovery in the growth in this area. Next is an important point for the SaaS deployed instances. In regard to the extent of SaaS usage, we continued to see growth here. You can see the numbers, and there was a 66% increase in December. And it was 32 million agents. And in regard to the usage of the cloud, this is increasing as well. And more and more Trend Micro services acquired by the customers, and this has been reflected in our sales results. And this is the share by region, not much change here. And for the pre-GAAP sales, without the impact of foreign currency, there is not that great a difference. We're doing well in Japan and AMEA. And there's a negative 6% in North America. Consumer and enterprise pre-GAAP numbers, 5% increase in consumer and 4% increase in enterprise. Enterprise weight will increase according to this year's forecast. So in 2020, consumer was quite strong. In 2021, we expect the enterprise sales will grow faster. That's our expectation. This is the balance of deferred revenue. There are some seasonal factors, and in the third quarter and to end of fourth quarter, there is an increase. That happened last year. It's happening now again. And compared to the previous year, we can see the balance is higher, showing the soundness, the health, of this balance. I will skip the slide and go to the cost structure. Third quarter. At the top, you can see the revision of JPY 3.7 billion. And then there is a higher number usually in third quarter compared to the fourth quarter; and this is the same thing that's happening once again, a seasonal factor. And yellow is then salary and benefits. This is increasing. Within the company, pre-GAAP operating income is linked to some of the performances. And in the second quarter, pre GAAP profit did increase, and this is why the salary level is increasing accordingly. Other than that, green highlight shows cloud-related expenses that we disclosed, fast agent growth. And in line with that growth, we are seeing the high level of growth in this expense. Trend Micro's expenses is employees; and infrastructure used by the employees; and infrastructure used by our customers, which is this cloud portion. So growth is fast, but this means that Trend Micro services have been actively, widely used by our customers, so this growth is not necessarily a bad thing for us. And of course, we have to keep an eye on it, but as far as transparency is concerned, we have also included cloud costs here. Administration, in dark blue. If we look at FY '19 -- or first quarter of 2020, this was JPY 3.7 billion, but now it's lower to 1-point-something billion JPY, lower than JPY 2 billion, because we could not hold many of the events and business trips. And this was the saving that occurred. This is a pre-GAAP number. Bonus for the employees, which is explained by this green part. And in the fourth quarter, you can see a big jump in this number. This is pre-GAAP related bonuses. Looking at cash flow, 19% up, more than JPY 13 billion. I believe that it's trending quite healthily. Looking at the head count, not a big change from before. It's not that we are freezing hires, but since people are working from home, sometimes it's difficult to hire new people. And the managers are not very proactive about that. About 120 people per year, that's the increase, which is approximately 1% of growth. Nonoperating items, a gain on sales of marketable securities and exchange losses. This is more or less offsetting each other. And in terms of interest income, there were several, maybe JPY 600 million or JPY 700 million worth of, losses on sales of marketable securities last time, but we don't have that today. And this is the summary of highlights and lowlights. Highlights include the fact that in the fourth quarter, in terms of revenue and operating income, we reached the highest record. And also, we are seeing a recovery in the growth of enterprise business. And SaaS deployed instances is showing a very healthy growth. Lowlights include weak growth in the North American region, still remains to be weak. And also there is a fast increase in the cloud utilization costs. We want our customers to use our services. In the beginning, that's a focus, and in the future, we want to increase the efficiency, so cloud usage efficiency will improve in FY '21. In North America, many customers are shifting to SaaS, and also the renewals are shifting from multiple use to single use. And monthly payment is also happening, which means that the deal size is smaller than before. Having said that, looking at the SaaS data, the renewal rate is very high for some of the applications, so if everything is switched to SaaS in the future, this would mean that we can have even stronger connections with our customers. And that was all about the fourth quarter. Looking at the full year, this is the summary of all the quarters, so I would like to skip these slides and go to this one. In the end -- this is a focus from February last year. Operating income was going to be flat, but in the end, after correcting the mistake in the software assets, in -- we saw an increase in profit, 14% increase. The expectation was flat, but now we have 14% increase because of the COVID-19 impact mostly. Compared to this fiscal year's forecast, please take this factor into account. This is something we would like to ask the analysts to do. It would not be easy for us to add more [ on top of this ] because things will go back to normal this year, meaning that we'll spend more money on business trips. So it would be difficult to make a great improvement for this fiscal year in terms of profits. I will skip some of these slides and go to the dividends slide. The payout ratio is the same because it's based on the same logic. And JPY 153, minus 4%. Earnings per share -- well, the tax rate is higher and earnings per share is lower than before, and this is in line with that. That is why the dividend level is lower than before at JPY 153 per share. In March, at the General Shareholders' Meeting, this has to be approved, so it's conditional on the approval. Shareholders' return. Well, last year, we did some share buyback as well, so approximately JPY 25 billion -- or JPY 26 billion worth of returns are going back to shareholders. This is 98% for 2020. So 98% is returned to our shareholders. For the full year, these are the assumptions for the forecast: in terms of net sales, approximately 5% growth expected in Japan and Europe and flat growth in North America. Pre-GAAP growth is expected, but after the deferred revenue calculation, it will be more or less flat. And a 10% growth expected in Asia and Central and South America. TippingPoint goodwill depreciation will be completed in March, but we will be focusing on cloud. Cloud cost is going to increase. And mobile shop sales is increasing in Japan, which will incur some additional outsourcing costs as well as salaries increase, approximately 6% increase all in all. And these other forecasts: 5% growth in net sales; 4% growth in operating income; and 6% growth in net sales, if we exclude the exchange impacts. Finally, software asset calculation, JPY 3.7 billion. This mistake had to be corrected. And the TippingPoint goodwill will be reduced, so what would happen now? Well, we thought that maybe both sales and profit would increase, but excluding these 2 factors, actually, adjusted operate income growth is negative, minus 13%. Because of the special situation in FY '20, we cannot really expect a further growth in profit in FY '21 because we will see a recovery or comeback of business trips and events. So things will go back more to normal, and if you do an apple-to-apple comparison, we cannot really avoid this situation. It's going to be a negative growth in terms of operating income. That's all for me, and I would like to provide some explanation during the Q&A. Thank you.

Eva Chen, Trend Micro [indiscernible]. I think, after this pandemic and preceding year of 2020, we especially welcome this 2021, the new year's, although the pandemic and the lockdown really hurt the human society and a lot unfortunate thing happened. But one thing that actually accelerated for human beings society is digital transformation. I think the accelerated digital transformation actually helped human being to connect without travel, without flying but were more productive in some ways [ to -- in communication ]. Trend Micro -- take Trend Micro for example. Our customer engagement has increased to 58% are all conducted through digital communication compared with 2029 (sic) [ 2019 ]. It was 36%. And therefore, we were able to achieve our original goal, our financial goal, for 2020 even with all the sellers around the world are working from home. So I think this type of digital transformation acceleration will be continuing on. And a lot of industry, a lot of our customers, we've seen, is they are progressing in their digital transformation even faster. According to the survey, 60% of the organization applications spend will be on the SaaS, on the cloud by 2024. That's [ acceleration ], but along with this type of transformation, digital transformation, means that our customer are facing even more heterogeneous, diversed digital platform. They still have part of the infrastructure on prem, but almost all their worker are working from home. And they have to accelerate the transformation in their factory, in their transportation to make sure that they are all connected to digital infrastructure. That means that their [ tax service ] are actually more than for their overall infrastructure because in OT, for instance, the smart factory, the OT devices are connected through Internet, to Internet; and that, it hosts OT devices for mobility. And we can see that there is more cloud application, but because of the third-party software integration nature, there is more vulnerability in -- each of our customer need to take care of for this type of software integration [indiscernible]. And that's why we say in this connected world, in this new digital platform, cybersecurity then need to take a platform strategies, platform mentality to serve our customer. So what is the difference between platform; and say, connected per event, like what Trend Micro did before, which is [ from product works method ]. I think probably the best way for me to explain what is -- this platform means is through that customers buying center and their experience of using a cybersecurity platform versus a lot of different products. Trend Micro, currently, we have 2 type of customer buying center. The first one is the cloud builder. These are the companies that they build their [ restaurant ] to serve their customers. And this type of cloud buying center, their biggest pain point for the cybersecurity is security cannot slow down [ their environment ] because this is a DevOps environment. They continue to updating their content, their application to serve their customer through the cloud infrastructure. And therefore, they need to have a security that's well integrated into their DevOps environment and process and don't slow down their whole [ partnership ] and content ability. So for that, Trend Micro entered this, our cloud-wide security platform. This is a specially built cybersecurity platform for cloud builder which include, [ no matter, this ] cloud workload or the cloud storage, cloud application or even the network [ on the security ] of that cloud platform. This is a cloud-native cybersecurity platform. Last year, we talked about this vision about Cloud One, but I'm most proud is that during 2020, even though we are all locked down and worked from home, we were able to deliver and launch all of these services. Now all the Cloud One security services are available. Even the hardest one, the network security of the cloud, is already launched in Q4 2020. So in 2021, we were able to launch -- and customer be able to go to our Cloud One platform. And they can choose very easily, one click, and they can [ call on ] what is the cybersecurity they need to integrate and they need to implement on their platform. And easily, they can achieve the security without slowing them down. I think the best way to explain this is through our customer's work, this customer of -- Blackbaud. They are a cloud computing provider. And they provide these type of services, especially for social good. And during 2020, they implemented Cloud One security. And this is the exact quote that their cybersecurity architecture and engineer was talking about. They say, "With Trend Micro's SaaS-based cloud solution, PCI compliances have moved from hours of work to click of a button. So we not only get complete protection but also time saving." This is very, very important element for providing cloud security. Trend Micro already has the highest market share in workload security, but now with our complete Cloud One security platform, we will enable our customer not only [ daily-use ] workload security; but also network security in the cloud; the compliances; and the configuration, misconfiguration; or even some cost saving for their cloud environment. So mission complete for Cloud One. And we are very excited about this full service that Cloud One provide to cloud builders. The second buying center is called security operations center. They are dealing with the user, the servers, the applications. And therefore, this security operations center, what biggest problem they are facing is now they are facing a lot of alert, everything. They're dealing with multiple different tools and a lot of alerts. They need to go through everything. It's almost impossible for the security operations center [ encode this alert peak ]. So Trend Micro, for this security operations center, we entered with a platform we called Vision One platform. Vision One, this platform is a security operations center. They can oversee from e-mail, server, network, end point, IoT, IoT OT devices. All of these devices, their security will be seen in one central places. And it's well integrated with the original security operations center's tool sets such as SIEM. Hey can use [ strong ]. They can use [indiscernible] and all of these different tools and deal with all these different alerts in a much more efficient way. So an easy way to see this, again, is our Vision One platform, how we look. You can see that in one screen they can [ be a page who's managing XDR ]. They have end point inventory. They can see the overall security posture of the whole company. They can manage and see what is their e-mail security; and all of these, to get it in one click. Plus, personally I feel even more important is we were able to [ fill ] and launch our new services. [ So all this ] happened, and again customer insight and customer feedback very quickly, just last week. We don't deploy any new agents. We were able to launch a passive solution, [ increasing the mode ]. So customer can use this security posture to see where is the sanctioned app. What -- is the user are using the sanctioned app and the sanctioned app on the network or off the network. And they can see what is the most risky, high-risky account or high-risky devices that they need to take care of. This type of solution, we've launched. Before, we probably need to take a whole quarter to launch a service, but now within 1 week we already have several customer around the world give us feedback using the application. And we can help them starting to tune their application and their security risk posture. So I feel this type of platform approach really help Trend Micro and help our customer security operations center to be much more efficient in dealing with threats. So Vision One, we already launched but only 6 months. Only 6 months, we already gained more than 2,000 customer, enterprise customer, with security operation centers that really interact with Trend Micro using Vision One to manage their security posture. Also our customer are saying that -- this is from Panasonic North America, the security -- cybersecurity and risk manager. He say the Vision One platform connects data from multiple applications together, enabling the cybersecurity team to take action and respond quickly to events without having to jump internal operational and technology borders. Remember, security operations center, they oversee the whole company security, and therefore these organization and different tools have been [ helping them ] for seeing the overall security posture. Now with Vision One, our customer tell us that they're now able to do that in a much more efficient way. So those are the 2 very important what we call platform approach for our customer. So for Trend Micro, engaging our new customer is very important for our business growth. And we do see that with this type of SaaS platform approach we were able to gain a lot more new customer much quicker because it's easier to land on the platform. It's almost like you go to Google and do a search. It's so easy, a click, that they were able to very easily quick launch the new services. And therefore, the win rate for Trend Micro, we find that whenever we offer the SaaS solution, our win rate in competitive deals is much higher. And time to close is much shorter because customers can quickly see how it works in their environment. So in overall, a summary I want to say is that this platform approach is what -- Trend Micro going to become a cybersecurity platform provider; and become much easier for customer to get to Trend Micro, partner with Trend Micro and do their overall cybersecurity. For customer, it's better because it's a single platform. A single platform is very easy for them to add new services and new application to deal with a new type of threat. And through the platform, we offer a simplified and flexible license. For instance, if they have 100 points they need to deploy on end point and deploy on e-mail and suddenly they find that they need to deploy it on the server, all of these points are the same points. They don't need to worry about [ why is a new product in store ] and all of this. They just really put the points on different security points. So I think this simplified, flexible license will enable our customer to get quicker better security posture that they need. And of course, their request for the feature is much easier, faster to deliver -- or for Trend Micro to deliver the new feature for them. And overall, it's just better ROI, return on investment, for our customer. For Trend Micro as a cybersecurity company, this platform approach will enable us to have the [ full hard-driven ] customer insight. Before, it's very hard for us to understand what is the real challenge that our customer faces through a very long support process, but now we were able to [ gain all this, be fast ]. And it's [ very hard-driven ], and we can respond to our customer much quicker. And the rapid SaaS peaks -- during last year, we also transformed the Trend Micro into the full DevOps operation. And we find that our innovation, from all of this feedback and understanding from customer insight, is much quicker. Innovation is much faster and easier to deploy to our customer, also for the sales process because customer -- it's much easier to do POC, proof of concept, so the pace is much faster for our customer. And that, it means that it's easier for Trend Micro to land new a customer, to expand old customer and to retain. We do find that our, SaaS-enabled customer, their stickiness, their renewal, retention rate is much higher than the on-prem customers. So overall, that's what -- Trend Micro 2021 strategy. We believe -- like last year, we already have the SaaS deployed instance grow 70% Y-o-Y. We believe, in 2021, we will continue to grow this SaaS protective instance. And we use this platform approach to better serve our customer. Throughout this pandemic, I think every one of us all experience and understand more this whole world is really connected. There is impossible for any country, any organization to isolate. And through this digital transformation, we can make the world a better place for all the human being. Trend Micro remains committed and passionate to be our customers' partner in their digital transformation journey. Thank you.

[Foreign Language] [Interpreted] And this is Omikawa speaking. And let me explain about the business situation of the fourth quarter of fiscal 2020. And this is the business strategy of our Japanese market. I will skip the details of this. First, I'd like to explain about the commercial market. For the enterprise market, for the fourth quarter, we have seen hybrid infrastructure protection has the following highlights. On a year-over-year basis, it's plus 7% in gross sales. So overall we have seen growth. As already mentioned, for Cloud One workload security, revenues are very good here. And we have seen increased sales in gross sales, and also in new gross sales there has been growth as well. And we have used our case as an example and we're seeing steady growth here. On a year-over-year basis for the hybrid infrastructure protection area, for the new area, we have 3% growth. And on a year-over-year basis, we have a 21% growth. And as for lowlights, there is the situation of TippingPoint,, which is lower than last year because of a major deal that took place last year. Furthermore, there is stagnation in deals because of the pandemic. And to repeat: In terms of the hybrid infrastructure protection, we have a plus 21% growth over the year. And in the user protection area, these are the highlights. New gross sales has increased. And also, for the SME market cloud security services, Cloud Edge has grown, 28% year-over-year growth. And in terms of the number of customers, we have an increase about 39%. The SMB market is growing for this area. And for the Virus Buster business security, gross sales has gone up year-over-year 26% and have also increased the number of customers. And so therefore, we have been seeing constant growth here. Under the circumstances, for the existing customers, because of the SaaS deals we have seen that, in terms of the number of customers utilizing SaaS, among our customers, already 70% are taking advantage of SaaS. So the shift to SaaS is moving forward very rapidly; and so we have a very good, continuing business. The fourth point is in regard to a survey by IDC Japan. And for 13 years consecutively, we continue to maintain the #1 share in the domestic market. And so according to IDC Japan, we have a share of 42%. McAfee at #2 is 18%, so there is a major gap. We are by far #1 here. As for the lowlight, there is a lot of competition here. And so, well, compared to the previous growth rates in the enterprise market, we are seeing some stagnation, but in the SMB area we are seeing growth. And so therefore, overall, we continue to see growth. As for the consumer market. As for the highlights, as in the domestic market, through the mobile phone sales channel and from our own Trend Micro's online channel, we are seeing steady progress here. And on a year-over-year basis, just in Q4, there has been considerable growth. And on a year-over-year basis for the mobile carriers channel, we have a 56% growth. So year-over-year there is a growth in online of 24%. This is a growth in the new channel, and so the consumer business is doing quite well. As for the lowlight: The competition is becoming very aggressive and they have been attacking our market. And furthermore, because of the pandemic, in the mobile phone retail, because of reduced business hours, the opportunities to get new users are more limited. This was a lowlight, but under the pandemic there is more utilization of e-commerce. And so in regard to the mobile sales agents, there is more cooperation, and we have seen more sophisticated awareness among users. And so by providing them with the appropriate solutions, we are waiting for the results. [ And so over ] IoT, in OT security or IoT device security, 5G security and connected car security. In Q4, for this area in OT security, we have been able to achieve tremendous growth here. Especially when it comes to the TXOne Networks EdgeIPS; EdgeFire; and EdgeIPS Pro, which is the newest, we have been getting the first orders here in Japan. Immediately after the announcement was made, we were able to get the first order. And so this indicates that in the OT security area, well, because of the pandemic, there is a lot of activity. There are global incidents that have been observed, and so therefore the OT security market is solidly growing. And for IoT device security, from January this year, we started sales. And this was announced last year, but for [ adbuild ]in building systems, the Trend Micro IoT device security is implemented so that for existing buildings or for new buildings, when this is installed, for air conditioning, lightning (sic) [ lighting ] or various types of facilities, it acts as a gateway. And there are vulnerabilities here. It could be manipulated, but in order to prevent manipulation, it's necessary to have good monitoring. And so for new building security management system, we have started to launch a new offering from January. Next, for the connected cars. In this area, it took a lot of time. And we made a considerable effort in this area, but there is a wide variety of different regulations. And there is WP.29, which is an international standard. And there was the approval given and this became -- in EU so that for new cars, when there is going to be new cars that will be registered from 2022, the [ WCP ] will be mandatory to apply. And so therefore, it's necessary to get certification here. It includes ISO 21434, and in the beginning -- in the middle of this year, it will become a new standard. And with this new standard, manufacturing, shipment and everything about connected car will have to have security somehow ingrained. And we have been working on this for several years. POC is being done for Japan and also for Europe, and we're now beginning to see a more realistic picture of security in connected cars. To the right, you can see various events, including local 5G and various connections. For FY '20, this is just a quick look-back of commercial and consumer businesses. You can find on the slide that we saw steady growth. Information technology, financial services, manufacturing and government, we had major deals. And including work from home, we had the PC shipment increase in consumer, and security awareness has increased. We have captured new channels. And as a result, we saw solid growth in FY '20. For the consumer business, outside of Japan, for example, in Taiwan, for LINE and also in Japan for LINE, and for the U.S., for Chrome, Facebook and messenger, WhatsApp messenger, we are deploying new services. In other words, we are entering new areas, and once these starts -- start, we should be able to capture more unique users. And for IoT, this is a quick look-back of FY '20. I have already covered the contents earlier. Now finally, about FY '21. As Eva mentioned, we want to become a platform company for cybersecurity. And as we can see on this slide, we want to really understand the IT challenges of our customers. What are the challenges in terms of their digital transformation? We want to deal with them in timely manner. And we want to become a security vendor they can rely on. And then security -- for the security center of excellence, this was announced in January. Now we have this formal name. This was decided today, and we will be promoting the various initiatives under this name. Transparency center for certifying security. We already have threat intelligence. We want to further utilize this. And security knowledge and education center will work not just with experts but also people in the management of our companies because they need to understand the necessity of cybersecurity. People who are doing business should not just go out and use SaaS without security. They need to understand the necessity of security. Why is security needed? That has to be fully understood. And then security personnels need to be educated and developed. So all of these aspects are included in order to accelerate digital transformation at our customers' sites. There are trust initiatives [ as well ]. Real time -- on a real-time basis, we need to understand whether the device is safe and secure, so it's very important for us to work on zero trust. And for cloud shift, we will be promoting Cloud One and will be continuously focused on OT. These are the focuses for FY '21. That's all for me. Thank you.

[Interpreted] This Kikuchi of SMBC Nikko Securities. There are 2 questions. First, in the materials. On Page 13 of Mr. Negi's presentation, there's the instance growth, and I would like to understand how to interpret this. There is -- it says 30 million users are taking advantage of this. Is that correct?

[Interpreted] If I may answer. This is the number of agents, not users. So it depends on the number of agents used. And there are cases where it's one user per one agent, but it's the number of agents, not the number of users, indicated here. And this hasn't been calculated in terms of sales, but the more agents, this means then we can see what is taking place. And the more number of agents, then this increases the value for Trend Micro.

[Interpreted] Is this basically linked to sales?

[Interpreted] Yes, ultimately. Yes, that is the case, but it's not linear. It's not a price per agent, no. The greater the utilization, then -- at first, what we try to do is to make it easy to use. And as they use it, then we will be getting results later.

[Interpreted] As for SaaS revenues, when it comes to the money amounts and also the percentages, what would that be?

[Interpreted] In enterprise sales, it's about over 10%, and we're talking about pure SaaS. And when it comes to subscription and license formats, we have the 2 different aspects. And when making disclosures -- and we're thinking about how to go about with the disclosure, but when it's just pure-SaaS products, then it's 10-some percent of enterprise sales.

[Interpreted] So that 10-some percent may grow at the 60% or 70% pace. That would be the ideal situation, although that's not the case yet.

[Interpreted] Well, at 60%, 70%, I think the growth rate is going to be quite high.

[Interpreted] I see. I think existing customers are probably shifting to this as well to some extent. What is the percentage of that?

[Interpreted] What kind of percentage are we talking about?

[Interpreted] Well, you said that...

[Interpreted] How many existing customers are switching to this? Is that your question?

[Interpreted] Yes.

[Interpreted] I don't know. I think that it's a quite high percentage. As was explained before, new customers don't start with a large amount from the beginning. They start small when they start, so if the absolute amount of sales is at 100%, 80%, I would say, is existing customers, but I don't have a good number on hand.

[Interpreted] So it's difficult to see a direct linkage to sales in the short term, but then assets more broadly used, then this will be reflected in sales.

[Interpreted] Yes, that is correct.

[Interpreted] A second question is that, in regard to the guidance, it seems a bit small. In terms of the profits, you seem to be holding back. Now before the pandemic, there was the guidance. Also, looking at the results of 2 years ago, it seems like that there is a lack of growth in the profits in your guidance. And so I'd like to confirm about the expenses. In the third quarter, I mean, looking at the expenses as well as the accounting, there was over JPY 3 billion. And there was also the goodwill of around JPY 3 billion or so. And so you will see an impact of that. Meanwhile, for SaaS expenses, for cloud expenses, what kind of increase are you anticipating?

[Interpreted] It should be quite high. There are the quarterly disclosures, but in the last quarter, it was over JPY 3 billion. And if we multiply that, then it goes well beyond JPY 10 billion, so it should be a considerable amount.

[Interpreted] I see. For the fourth quarter then, is it mainly fixed expenses?

[Interpreted] It's linked to the number of agents used, so it will not fluctuate that greatly. As agents increase, then the expenses there will increase as well. So it'd be higher than times 4, but on -- we are going to be emphasizing our efforts here, so we're thinking of amounts way beyond JPY 10 billion.

[Interpreted] I see...