Earnings Call: Q1 2022

Aug 5, 2021

Thank you very much for taking time out of your busy schedule to participate in today's earnings results briefing session. I am Hiroyuki Osawa, Director and CFO. Today, I'd like to explain the financial and business status for the Q1 of fiscal year 2022. Please turn to Page 3. This is the executive summary. 1st quarter results are progressing in line with full year forecast. I will explain the status of each segment later. First of all, I'd like to explain the financial status. Please turn to Page 5. This is a quarterly consolidated income statement. Net sales were 28,300,000,000 yen EBITDA was 6,900,000,000 yen and operating income was 6,000,000,000 yen These results are in line with our full year forecast. Please turn to Page 6. This is a quarterly performance trend. I will explain the segment sales later. Please turn to Page 7 for the quarterly sales costs. Outsourcing decreased year on year. This is because in the same period of the previous fiscal year, The development cost of Pipstar and the production cost of Monster Strike, the movie were posted. Please turn to Page 8. This shows quarterly SG and A expenses. Advertising expenses increased year on year. This was due to the planned year round advertising spending for Monster Strike to enhance recognition and also the addition of marketing expense for Tipstar. Next, I will explain the status of each business. Please turn to Page 10. This is a review of the Sports segment. Net sales totaled 4,000,000,000 yen an increase of 69.7% year on year. This was mainly due to the sales growth of Charilotto and the addition of sales from Tipstar, which was launched on June 30, 2020. Please turn to Page 11. GMV of Shariloto and Tipstar are shown. The total GMV increased by 160% compared to the same period last year. Teriloto's GMV increased CFO, significantly due to the growth of Internet sales and as a result of marketing activities. On the other hand, Tipstar GMV remained almost flat compared to the previous quarter as we held back marketing activities. Please turn to Page 12. I'd like to explain the details of the Tipstar update that was implemented in July. In this update, we have added multiplayer features that realizes the socialization strategy, making it more fun when played with friends. From the situation at hand, we are growing more confident that the multiplayer feature will be a success, but we will make further improvements to the feature and begin proactive marketing going forward. Please turn to Page 13. I would like to explain the status of Sharidoto. We implemented aggressive marketing measures and started airing our first TV commercial in April. As a result of these efforts, the number of users has been steadily increasing, contributing to the performance of the Sports segment. While steadily increasing the sales of Terilotto in line with the growth of the overall market, we will aim for further growth by cultivating new customer segments with Tipstar. Please turn to Page 14. I'd like to explain the situation of the Chiba Jets. In the 2020, 2021 season, the club won its 1st B League Championship. We'd like to express our sincere gratitude to all the boosters, partners and everyone involved who provided Flaming Hot support to the Chiba Jets. In July, the jets underwent a rebranding. With the new logo and slogan, we will work together with our boosters, partners and the local community to create a club that thrives beyond the foreseeable future. Next, I'd like to explain the Lifestyle segment. Please turn to Page 16. This is a review of the Lifestyle segment. Net sales increased 76.1% year on year to 1,700,000,000 yen This was mainly due to strong sales of Mother's Day and Father's Day gifts from family album as well as a large increase in sales of MINIMO, which had suffered from COVID-nineteen the year before. In the current quarter, there is a one off sales of approximately 200,000,000 yen recorded for the SNS, NiXI. Even after excluding these nonrecurring gains, sales were approximately 1.5x higher year on year. Please turn to Page 17. This is a situation of Family Album and Momi. Sales of Family Album rose dramatically year on year as Mother's Day and Father's Day gifts became a stable products. We focus on the photo based gifts utilizing family albums assets and offered many original gift choices, which were well received. For Romy, we opened the 1st pop up Storer, for a limited time creating an opportunity for customers to actually interact with ROMI. ROMI has also been featured in multiple media and is gaining name recognition. And the retention rate of users is high, so we are feeling positive about this. Next, I will explain the Digital Entertainment segment. Please turn to Page 19. This is a review of the Digital Entertainment segment. Net sales were 22,500,000,000 yen a 13.1% decrease from the same period last year. Sales of Monster Strike was generally in line with the plan Due to the implementation of collaborations with Popular IP, sales of Kotodaman increased year on year due to IP collaborations and updates. Please turn to Page 20. This is the situation of Monster Strike and Kotodaman. Monster Strike sales remained strong due to collaboration with popular IPs. In addition, X Club Park, was held online in July. And with maximum simultaneous connections by 340,000, many people enjoyed the event. Sales of Kotodamon increased due to collaborations with various popular IPs and the implementation of updates. Please turn to Page 21. This is the progress of the full year earnings forecast. We are generally in line with the plan, although for stage profits, we have made more than 40% progress. Going forward, expenses are expected to increase due to the planned aggressive marketing for Tipstar, and we are going to aim for continued sales growth. This concludes my presentation. Thank you very much for your attention.