Earnings Results for the Interim Period Ended September 30, 2007
November 6, 2007 SOFTBANK CORP.
March 12, 2010 Version Due to protection of rights, some of the photos and images included at the time of publication have been modified or revised.
1. Consolidated earnings results: H1 operating income increased by 49% (YoY) H1 net income: 3.2 times (YoY)
2. Success in mobile operations: 1.14 million of net subscriber additions in H1
3. Becoming No.1 Internet company in Asia: IPO of Alibaba + Yahoo! JAPAN
2 H1/FY2007 Summary of Consolidated Earnings Results
Net Sales 1,364.7 1,120.1 +244.5 EBITDA 314.2 228.4 +85.8 Operating income 167.7 112.5 +55.1 Ordinary income 111.1 62.6 +48.4 Income before income taxes and 122.9 118.8 +4.0 minority interests Net income 46.4 14.4 +32.0
Note: Operating results of SOFTBANK MOBILE Corp. (formerly Vodafone K.K.) are included beginning in May 2006 3 H1/FY2007 Highlights
97
0 FY06 FY07 FY06 FY07FY06 FY07 H1 H1 H1 SBM NTT DoCoMo KDDI 4 H1/FY2007 Highlights
180 167.7 160
140 112.5 120 Increased by 100 49% YoY 80
60
40
20
0 H1/FY06 H1/FY07 5 H1/FY2007 Highlights <%> Interim Operating Income YoY Movement
50% 49% SOFTBANK Increased by
9% KDDI 49%YoY 0%
-21% NTT DoCoMo
-50% H1/FY06 H1/FY07 6 Consolidated Net Sales (interim) 1,364.7
1,120.1
1,000 H1/FY2007 1,364.7bn JPY
522.7 500 IncreasedIncreased byby 2222％％ YoYYoY
0 H1/FY05 H1/FY06 H1/FY07 Note: Operating results of SOFTBANK MOBILE Corp. (formerly Vodafone K.K.) are included beginning in May 2006 7 Net Sales by Segment (interim) 1,364.7
1,120.1
1,000 808.9 Mobile Communications 581.8 (SBM)
522.7 Others 500 e-Commerce 123.6 117.0 118.5
71.2 89.6 108.8 Internet Culture (Yahoo Japan)
168.9 166.2 157.8 Fixed-line Telecommunications (SBTM) 124.9 127.4 126.7 Broadband Infrastructure 0 H1/FY05 H1/FY06 H1/FY07 Note: Operating results of SOFTBANK MOBILE Corp. (formerly Vodafone K.K.) are included beginning in May 2006 SBM: SOFTBANK MOBILE Corp. SBTM: SOFTBANK TELECOM Corp. 8 Consolidated EBITDA (interim)
350
250 228.4 H1/FY2007 314.2bn JPY 200
150 IncreasedIncreased byby 100 3838％％ YoYYoY 50.2 50
0 H1/FY05 H1/FY06 H1/FY07
-50 Note: Operating results of SOFTBANK MOBILE Corp. (formerly Vodafone K.K.) are included beginning in May 2006 9 EBITDA by Segment (interim)
350
250 228.4 Mobile Communications (SBM) 200 Broadband Infrastructure 150 Fixed-line 100 Telecommunications (SBTM) 50.2 Internet Culture (Yahoo Japan) 50 e-Commerce 0 H1/FY05 H1/FY06 H1/FY07 Others
-50 Note: Operating results of SOFTBANK MOBILE Corp. (formerly Vodafone K.K.) are included beginning in May 2006 10 Consolidated Operating Income (interim)
150
112.5
100 H1/FY2007 167.7bn JPY
50 IncreasedIncreased byby 4.4 49%49% YoYYoY 0 H1/FY05 H1/FY06 H1/FY07
-50 Note: Operating results of SOFTBANK MOBILE Corp. (formerly Vodafone K.K.) are included beginning in May 2006 11 Operating Income by Segment (interim) 167.7
100 (SBM) Broadband Infrastructure Fixed-line 50 Telecommunications (SBTM) Internet Culture 4.4 (Yahoo Japan) e-Commerce 0 Others
H1/FY05 H1/FY06 H1/FY07 -50 Note: Operating results of SOFTBANK MOBILE Corp. (formerly Vodafone K.K.) are included beginning in May 2006 12 Consolidated Ordinary Income (interim)
100
80 H1/FY2007 62.6 60 111.1bn JPY
40 IncreasedIncreased byby 20 77%77% YoYYoY
0 H1/FY05 H1/FY06 H1/FY07
-20 -13.4 Note: Operating results of SOFTBANK MOBILE Corp. (formerly Vodafone K.K.) are included beginning in May 2006 13 Consolidated Net Income (interim)
40
30 H1/FY2007 46.4bn JPY
20 14.4 x3.2x3.2 YoYYoY 10
0 H1/FY05 H1/FY06 H1/FY07 -4.1 -10 Note: Operating results of SOFTBANK MOBILE Corp. (formerly Vodafone K.K.) are included beginning in May 2006 14 Consolidated Net Income (interim)
Income taxes paid (28.6) Decrease in A/P handset payments (46.8) Operating cashflow +0.4+0.4 Interest paid (49.6) Increase in installment receivables (174.3)
Purchase of property and equipment, and Investing cashflow ((22227.2)7.2) intangibles (204.4)
Proceeds from exercise of warrants +44.8 Proceeds from securitizing installment Financing cashflow +303.5+303.5 receivables +153.0 Proceeds from sale and lease back of equipment newly acquired +220.8
400
300 30.0 481.9
200 280.9
100
0 End Sep 06 End Sep 07 17 Net Interest-bearing Debt
2,500
2,000 1,676.5 1,672.5
1,500 Investment by SOFTBANK CORP. and Yahoo Japan in 1,000 SBM: 320.0bn JPY Mobile net interest- 615.6 bearing debt (non- 500 CB 432.5 recourse) 321.7 (including SBM loan 465.6 balance of: 1,311.4bn 282.5 171.7 JPY) 0 End Sep 05 End Sep 06 End Sep 07
Balance of lease obligations are not included in the net interest-bearing debt Mobile: SOFTBANK MOBILE Corp. and BB MOBILE Corp. 18 Pro-forma Equity Ratio (after impact of unrealized capital gain)
Alibaba.com Limited unrealized gain Pro-forma adjusted equity ratio 26.2% (after consideration of unrealized 23.5% capital gain*) 20%
Equity ratio 7.9% 6.6%
0% End Mar 07 End Sep 07 * Calculated by offsetting the tax liability to the unrealized capital gain on investments in listed securities held by SOFTBANK CORP. domestic and overseas fully owned subsidiaries. Closing stock price of November 5 is used. The unrealized gain of Alibaba.com Limited is estimated based on the value of indirect economic ownership ratio. 19 Mobile Communications
20 No.1 in Net addition Share for 5 Consecutive Months (May 07 - Sep) Net Addition Share in Sep 2007 100% Net Addition Share (monthly) NTT DoCoMo 9.5%
80% KDDI 40.1% 50.4%50.4% 60% SOFTBANK
40% KDDI
20% NTT DoCoMo
0% Apr Oct Apr Oct Apr Vodafone Source: Telecommunications carriers 2005 2006 2007 association (excl. EMOBILE) -20% 21 No.1 in Net Addition Share in H1 (Apr 07 - Sep) 70% Net Addition Share (interim)
50% SOFTBANK
KDDI
30%
10% NTT DoCoMo
H1/FY5 H1/FY06 H1/FY07 Source: Telecommunications carriers association (excl. EMOBILE) -10% 22 Significant Increase in 3G Subscribers (million) 18 Cumulative Subscribers 17.05
16
14
12 10.92 10 2G2G End of Sep 2007 8 3G subscribers: 10.9210.92 millionmillion 6 3G ratio: 64%64% 4
2 3G3G
0 Mar Sep Mar Sep Mar Sep Mar Sep 2004 2005 2006 2007 23 Continue to Expand Base Stations Number of (BS) 3G Base Stations 47,439 46,000 PlanPlan toto enhanceenhance coveragecoverage furtherfurther toto improveimprove ‘‘connectivityconnectivity’’
Q1 Q2 Q3 Q4 Q1 Q2 FY2006 FY2007 24 Market Penetration of Installment Sales: Acquire Long- Number of tenure Subscribers (million) ‘New Super Bonus’ Subscribers 8
7
6
5
4 ExceedExceedss
3 88 millionmillion 2 subscribersubscriberss** 1
0 *As of Nov 1, 2007 Oct Jan Apr Jul Oct 2006 2007 25 Experienced Outstanding Response to Price Plans
(million) Number of Subscriptions 9
8 White Plan 7 exceedsexceeds 6 99 millionmillion** 5 4 White Plan Double White 3
2 exceedsexceeds
1 2.72.7 millionmillion** Double White *As of Oct 29, 2007, including 0 applications to which rates are 2007/Jan Mar Oct not yet applied 26 Overtook Competitors in Terms of Customer Satisfaction Related to Pricing Satisfaction in Pricing
White Plan Family Discount 24 49%49%
au 30%
NTT DoCoMo 21%
Source: research by an external institution 27 Triple Winner in CM Preference for 3 Consecutive Months
(2007) Aug Sep Oct
Among 1,217 companies Among 1,196 companies Among 1,219 companies 1 SOFTBANK MOBILE SOFTBANK MOBILE SOFTBANK MOBILE First-ever! 2 SUNTORY NTT DoCoMo Shiseido 3 NTT DoCoMo SUNTORY NTT DoCoMo 4 Coca-Cola (Japan) Meiji Seika SUNTORY By Comp 5 Kao SHARP KDDI
Among 4,520 commercials Among 4,559 commercials Among 4,541 commercials
1 SOFTBANK MOBILE SOFTBANK MOBILE SOFTBANK MOBILE 2 Coca-Cola (Japan) NTT DoCoMo Shiseido 3 Shiseido Meiji Seika KDDI By CM 4 NTT DoCoMo NTT DoCoMo NTT DoCoMo 5 SOFTBANK MOBILE Shiseido Credit Saison
Among 3,184 brands Among 3,167 brands Among 3,185 brands Source: CM Data Bank/CM 1 SOFTBANK MOBILE SOFTBANK MOBILE SOFTBANK MOBILE Research Center, monthly survey on 2 NTT DoCoMo NTT DoCoMo Shiseido 3,000 consumers’ 3 Coca-Cola (Japan) Meiji Seika NTT DoCoMo preference in CM 4 Shiseido SHARP KDDI By Brand 28 5 SUNTORY RECRUIT TOKYO GAS More Shops Number of 2,500 2,417 SoftBank Shops IncreasedIncreased byby
2,000 30%!30%! (Against April last year)
1,500 Display prevented due to protection of rights. 1,000
500 Display prevented due to protection of rights.
0 End End 29 Apr 06 Sep 07 More Counters
(counters) Number of Counters at exceeds SoftBank Shops 10,000 IncreasedIncreased byby 10,000 63%!63%! 8,000 (Against April last year)
6,000
4,000
2,000 Display prevented due to protection of rights.
0 End End 30 Apr 06 Sep 07 Significant Growth in Net Corporate Customer Additions
Number of Corporate (k) Customer Net Additions 400 330330 300 XX5.55.5 !! (YoY)
200
Display prevented due to protection of rights. 100 60
0 H1 H1 FY2006 FY2007 31 High Family Plan Subscription Level Among Acquisitions White Plan Family Discount 24 80% Subscription Ratio (among acquisitions)
70% 70%70% ofof newnew customerscustomers
60% subscribedsubscribed
50%
40%
30%
20%
10% Announced ‘White Plan Family Discount 24’ on May 10, 2007 0% *White Plan Family Discount 24 subscription ratio Jan Feb Mar Apr May Jun Jul Aug Sep ＝White Plan Family Discount 24 subscriptions / White Plan subscriptions excluding corporate 2007 customers (2 wk moving average) 32 Rapid Recovery of User Evaluation Results
(%) Intend to Continue Use
MNP 82%82% 80 Launch
75
70 Source: research by an external institution Jun Sep Dec Mar Jun Sep 2006 2007 33 4.0% 3G Churn Rate
3.0%
2.0%
Q2/FY2007Q2/FY2007 1.0% 1.05%1.05%
0.0% Q4/FY05Q4/FY06 Q2/FY07 34 ARPU (JPY)
5,870 5,930 5,840 5,700 6,000 5,600 5,580 5,560 5,210 5,000 4,800 5,000
4,000 4,540 4,540 4,510 Voice 4,260 4,230 4,320 4,230 3,830 3,590 3,340 3,000 Data
2,000
1,000 1,330 1,390 1,330 1,340 1,350 1,380 1,330 1,380 1,410 1,470
0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 FY2005 FY2006 FY2007 35 Reference: ARPU + Installment Payments (JPY)
5,870 5,930 5,840 6,000 5,600 5,580 5,700 5,580 5,430 5,480 5,530
5,000
Installment 4,000 4,540 4,540 4,510 Voice 4,260 4,230 4,320 4,230 3,830 3,590 3,340 3,000 Data
2,000
1,000 1,330 1,390 1,330 1,340 1,350 1,380 1,330 1,380 1,410 1,470
0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 FY2005 FY2006 FY2007 36 Mobile will become an “Internet Machine”
Composition of ARPU
Voice
Voice Voice
Data
Data Data
2G2G 3G3G 4G4G
37 Winter 2007, SOFTBANK’s Next Mobile Evolution
38 No.1 Internet Company in Asia
39 IPO of Alibaba.com Limited
Alibaba.com Limited (listed company) ¾Market capitalization: approx. 1 trillion JPY (based on initial offering price*) ¾P/L impact due to this IPO: Record equity in earnings of affiliated companies (planned for Q3) ¾Discuss business cooperation in Japan
*Initial offering price:13.5HK$/share 40 Alibaba.com Limited Listing Management/employees of Alibaba Group and other minority shareholders Yahoo! Inc. 33%*1
Alibaba Group Holding Limited*2
Nov 6, 2007 *1 100% listed on Hong Kong stock exchange
(Yahoo China) (Alisoft) (Alipay) (Taobao) Alibaba.com Limited Search/portal Online software Payment service C2C auction (public company) B2B service
*1 The ownership percentage as recognized in SOFTBANK CORP’s interim closing (ratio is calculated as of Jun 30, 2007) *2 Company name was changed from Alibaba.com Corporation. 41 Affiliated company accounted for under the equity method. Alibaba.com
Market Share of Annual Overwhelmingly the No.1 B2B Sales in 2006 e-commerce service in China
Others Display prevented 51%51% due to protection of rights.
Source: Alibaba.com Limited prospectus issued on Oct 23, 2007 42 Alibaba.com
Turnover share Overwhelmingly the No.1 B2B from Apr to Jun 2007 e-commerce service in China
Others emedChina HC360
Made-in- China.com
Global Sources Display prevented 69%69% due to protection of rights.
Source: Analysys International Press Release Sep 5, 2007 43 Taobao.com
Turnover share from Apr to Jun 2007 Other Overwhelmingly the No.1 each Overwhelmingly the No.1 net. com C2CC2C auctionauction serviceservice PaiPai inin ChinaChina
83%83% Display prevented due to protection of rights.
Source: Analysys International Press Release Aug 13, 2007 44 Taobao.com
Number of Listed Products Approx.Approx.7575 millionmillion NumberNumber ofof listedlisted productsproducts doubleddoubled inin 11 yearyear
Display prevented due to protection of rights.
Jun 2006 Jun 2007 Source: Alibaba Group Press Release Jul 18, 2007 45 Alipay
Transaction Share*1 from Apr to Jun 2007 No.1No.1 onlineonline paymentpayment Others serviceservice inin ChinaChina Tenpay
99NumberNumber ofof users:users: 4747 millionmillion 75%75% (increases(increases 80k/day)80k/day) 99Avg.Avg. transactions:transactions: 78780k/day0k/day Source: Alibaba Group press release on Aug 28, 2007
*1 In the non-independent third party online payment market Source: Analysys International Press Release Jul 2, 2007 46 Alipay: No.1 Online Payment Service in China
UsedUsed byby moremore thanthan 300300 thousandthousand e-commercee-commerce businessesbusinesses
UsedUsed byby roughlyroughly 80%80% ofof TaoBaoTaoBao users users Display prevented due to protection of rights.
47 Alipay: No.1 Online Payment Service in China
Aligned with major banks in China including 4 mega banks
4 mega banks in China
Display prevented due to protection of rights.
48 Alipay: Provide Online Software to SME’s
Provide self-developed online software to SME’s in China to support e-commerce, sales, internal management, instant messaging, etc.
e-Commerce Support
・Mail distribution Sales Support ・Shop management ・Customer support ・Client management ・Sales management Internal Management ・Inventory ・Distribution ・Finance ・Payment 49 No.1 Internet Company
Mobile
50 No.1 B2B No.1 Portal No.1 Mobile net adds No.1 C2C No.1 C2C No.1 ADSL No.1 Online payment No.1 Search
No.1No.1 InternetInternet CompanyCompany inin AsiaAsia
51 SOFTBANK Group Investment IPO’s
China Japan USA
Display prevented due to protection of rights.
52 Leverage the Group’s Competitive Strength in the Internet
Display prevented Display prevented due to protection due to protection of rights. of rights.
Content & Services
Portal
Display prevented Display prevented due to protection of rights. due to protection of rights.
PC Mobile 53 SOFTBANK’s Goal No.1 in Infrastructure, platform/portal, and content commerce business education game broadcast sports publish music
Platform/Portal
Infrastructure 54 Mobile will become an “Internet Machine”
Hello…
Display prevented due to protection of rights.
Voice Internet 55 Mobile will become an “Internet Machine”
Hello…
Display prevented due to protection of rights.
Voice Internet 56 Mobile will become an “Internet Machine”
Hello…
Display prevented due to protection of rights.
Voice Internet 57 Make Mobile an “Internet Machine”
58 Lifestyle Company in the 21st Century
Broadband available to everyone everywhere
59 SOFTBANK’s Fundamental Management Policy
EndeavoringEndeavoring toto benefitbenefit societysociety andand thethe economyeconomy andand maximizemaximize enterpriseenterprise valuevalue byby fosteringfostering thethe sharingsharing ofof wisdomwisdom andand knowledgeknowledge gainedgained throughthrough thethe ITIT revolutionrevolution
60 http://www.softbank.co.jp
This presentation contains forward-looking statements including statements regarding future events, future strategies or future performance of SOFTBANK CORP. that involves risks or uncertainties. In evaluating these statements, a recipient thereof should specifically consider various factors that could cause actual events or results to differ materially from those indicated, including without limitation; continuing decline in the general economic conditions, general market conditions, customer demand for products and services, increased competition, inherent risk in international operations and other important factors.
61 FY2008/Q2 Appendix to the Earnings Results (Amounts less than one billion yen are omitted. / Net Sales to external customers ） FY2006 Business segment unit FY2007 FY2008 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Net sales bn JPY 231.5 350.3 426.6 422.2 389.0 419.8 Operating income bn JPY 27.2 29.3 56.9 42.2 43.5 50.6 EBITDA margin Mobile Communications（*1） EBITDA bn JPY 55.8 73.6 104.0 87.9 92.4 104.0 (Core company : SOFTBANK MOBILE Corp.） Operating margin ％ 11.7% 8.3% 13.2% 9.9% 11.1% 12.0% ％ 24.0% 20.9% 24.2% 20.6% 23.6% 24.6% Total number of subscribers thousand 15,240 15,307 15,497 15,909 16,441 17,053 Net sales bn JPY 61.0 63.9 71.3 70.9 62.7 64.6 65.3 65.9 64.3 62.4 （*2） Operating (loss) income bn JPY (4.4) 3.4 9.3 12.3 5.4 6.1 7.7 7.3 8.6 10.3 （*2） Impact of the sale of the ADSL modem rental business bn JPY ＋7.6＋＋ 7.0 (0.8) (0.1) (0.4) 0.3 (0.9) (0.3)
Operating income excluding the impact of the sale of the ADSL bn JPY 1.7 5.3 6.3 6.3 8.1 7.0 9.5 10.6 modem rental business Broadband Infrastructure EBITDA (Core company : SOFTBANK BB Corp.) bn JPY 3.0 11.4 16.3 18.1 11.8 12.6 15.4 15.7 15.9 17.5 Operating margin ％ 5.4% 13.1%- 17.3% 8.7% 9.4% 11.5% 10.9% 13.2% 16.1%
Operating margin excluding the impact of the sale of the EBITDA margin 2.6% 7.8% 9.4% 9.2% 11.5% 10.0% 13.8% 15.9% （*2） ADSL modem rental business ％ 4.9% 17.7% 22.8% 25.4% 18.7% 19.2% 22.9% 23.2% 24.3% 27.3% Number of Yahoo! BB ADSL lines installed thousand 4,889 4,972 5,007 5,049 5,089 5,146 5,161 5,164 5,134 5,042 Net sales bn JPY 87.3 81.5 88.6 89.7 81.8 84.3 81.4 84.4 77.8 80.0 Operating (loss) income bn JPY (14.0) (12.2) (1.7) 2.9 1.2 (0.9) (2.6) (0.6) (0.1) 0.4 EBITDA bn JPY (1.8) 0.0 9.1 14.2 12.6 10.2 8.9 10.7 11.1 11.3 Fixed-line Telecommunications（*3） ％ （Core company : SOFTBANK TELECOM Corp.） Operating margin ％ 3.2% 1.4% - - - EBITDA margin ％ 0.0% 10.2%- 15.4% 14.3% 11.0% 9.5% 10.9% 12.3% 12.5% number of lines installed for direct connection voice services（*3） thousand 540 683 764 848 1,020 1,077 1,136 1,221 1,257 1,315 Net sales bn JPY 34.4 36.7 42.0 42.2 44.4 45.2 49.4 52.3 51.8 56.9 Operating income bn JPY 16.4 17.1 19.2 21.2 21.6 22.7 25.0 27.1 27.1 27.7 Internet Culture EBITDA bn JPY 17.9 18.8 21.2 23.5 23.9 25.2 27.6 29.4 29.6 30.5 （Core company : Yahoo Japan Corporation） Operating margin ％ 47.6% 46.5% 45.6% 50.3% 48.5% 48.7% 50.0% 51.5% 51.4% 48.2% ---- EBITDA margin ％ 51.9% 51.0% 50.4% 55.6% 53.6% 54.1% 55.2% 55.7% 56.1% 53.1% Net sales bn JPY 58.5 65.1 68.4 80.6 55.8 61.1 61.2 78.5 58.2 60.2 （*4） e-Commerce Operating income bn JPY 0.7 0.8 1.4 1.8 1.4 1.3 2.0 1.8 1.1 0.9 Net sales bn JPY 17.2 16.8 16.8 14.8 17.6 20.1 18.0 18.1 21.7 22.1 Others Operating (loss) income bn JPY (0.6) (0.3) (3.7) 0.0 (0.7) 0.5 (4.0) (0.5) (0.6) 0.5%0.0 Elimination or corporate bn JPY (1.2) (1.2) (1.0) (4.0) (2.0) (1.0) (0.3) (3.5) (0.9) (1.2) Net sales bn JPY 258.6 264.1 287.4 298.4 494.2 625.9 702.1 721.8 663.0 701.6 Operating (loss) income bn JPY (3.1) 7.5 23.5 34.3 54.3 58.1 84.7 73.7 78.7 89.0 Total EBITDA bn JPY 19.5 30.7 44.7 54.9 104.3 124.0 154.0 143.0 149.7 164.4 Operating margin ％ 2.9% 8.2%- 11.5% 11.0% 9.3% 12.1% 10.2% 11.9% 12.7% EBITDA margin ％ 7.5% 11.6% 15.6% 18.4% 21.1% 19.8% 21.9% 19.8% 22.6% 23.4% *1 : SOFTBANK CORP. ("SOFTBANK") acquired SOFTBANK MOBILE Corp.. (former Vodafone K.K., "SOFTBANK MOBILE") in April 2006, and the Mobile Communications business segment was established at this time. The financial results of SOFTBANK MOBILE were consolidated from May 2006 on. *2 : SOFTBANK sold the ADSL modem rental business in December 2005, therefore the modem rental fee revenue has decreased. However, through the subcontract with BB Modem Rental Inc., commission fee revenue occurs. The "Impact of the sale of the ADSL modem rental business" is based on management accounting, not on financial accounting. *3 : SOFTBANK TELECOM started the "Otoku-line" direct fixed-line voice service. In June 2006, SOFTBANK TELECOM acquired the direct connection voice services of HEISEI DENDEN CO., LTD. *4: SOFTBANK applied the “Practical solution on accounting for revenue recognition of software” from FY2007/Q1.