Earnings Call: Q4 2024

Sep 6, 2024

Summary

FY2024 net sales were ¥23.917bn, with net income boosted by the Lalune transfer. FY2025 guidance targets ¥25bn sales and ¥1bn operating income; the FY2028 plan targets ¥34bn sales and ¥2bn operating income, alongside substantial shareholder returns.

My name is Hayashi, Representative Director. Thank you for taking time out of your busy schedule today to watch the financial results briefing. We have been conducting earnings calls from inside the conference room, but it felt a bit closed off. We decided to make a fresh start, presenting from the company cafeteria, which has a nice view. These are the agenda items. Towards the end, I would like to explain about the medium-term business plan, which may take up more time. First off, this is the summary of the financial results for fiscal year 2024. Net sales was JPY 23,917,000,000, operating income was JPY 562 million, and net income was JPY 953,000,000. In terms of Q4 summary, these were the numbers. Fiscal year 2025. For this fiscal year, we are forecasting sales of JPY 25,000,000,000, EBITDA JPY 1.25 billion, operating income of JPY 1 billion, and net income of JPY 560 million. We plan to pay an ordinary dividend of JPY 22 per share. In terms of sales, as shown in the graph, net sales decreased in each segment. However, operating income is on target. As for net income, an extraordinary profit from the transfer of Lalune business, a health management tool for women, was recorded. This is the result and the progress achieved against the target. These figures are also against the forecasts. In the area of lifestyle in general, due to Google's algorithm update, the number of SEOs dropped significantly. However, through optimization, we were able to secure profits. In the entertainment business, due to a decline in existing titles and a divergence from the plan for hyper-casual games, it was below original target. Operating efficiencies did take place, but you can see the results here. E-commerce results were generally in line with the forecasts. As for the fourth quarter alone, as noted here, in both year-on-year and quarter-on-quarter terms, sales and income declined. Although sales did not increase, we were able to secure profits through strict cost control. As a result, profit increased significantly. This slide shows by segment breakdown. As I explained earlier, in the lifestyle segment, we were affected by Google's algorithm update. Towards the right, you can see more than 10% double circle, triangle, or an X. Car business enjoyed good sales and profit. Moving-related achieved high profit. Bridal business enjoyed good sales and profit. This was the overall performance. This slide summarizes the external environment and the status of our business by segment. This graph shows the sales-linked web advertisements and brand recognition advertisements with a color coding to make it easier to understand. The light gray is sales-linked advertising, such as listings, and dark gray is recognition advertising. As a result of cutting back on advertising expenses, we were able to secure profits. This is entertainment business. Because of the decline in existing titles, the sales came down. This is the trend of overseas ratio. As for the EC business, after the transfer of cyma, sales declined. But since then, it grew by +12% year on year. Cosmetics brand lujo and the dog food OBREMO are based on subscription, which is a recurring model. These businesses were in the investment phase up to now, but they are expected to enter a profitable phase going forward. This is an announcement regarding the change of business segments. Until now, we had three segments, lifestyle support business, e-commerce business, and entertainment business. But we decided to reshuffle them into two new segments, as shown here. The new business segments will be digital marketing business and the entertainment business. Within the digital marketing business, there are two sub-segments, media solutions and D2C. Media solutions will include comparison sites and information sites, which have been in this segment, and D2C will include lujo and OBREMO. The entertainment business is all about games. In terms of the positioning, the media solutions business will generate stable profit through Qiita, a website and blog site for engineers, and through companies such as microCMS, which was newly added through M&A. We expect sales from business clients. Demand generation business, which I will come back to later on in the presentation. Regarding D2C, as I mentioned earlier, it is a subscription-based service. We intend to achieve stable growth. In the entertainment business, we will continue to operate our own services, but we will also focus on collaboration projects where we can rely on partner companies for the development costs to avoid increasing losses. As a result, this is our forecast for fiscal year 2025. I will explain this in the medium-term business plan section. Let me turn to another set of documents. This is the newly formulated Ateam medium-term business plan, which will run for four years from 2025 to 2028. Ateam was founded in a leap year or Olympic year. That is why our mid-term business plan is a four-year plan. In terms of summary, in four years, we are aiming to increase sales from JPY 23.9 billion to JPY 34 billion and operating income from JPY 560 million to JPY 2 billion. Our commitment by 2028 is to achieve, as you can see, net sales of JPY 34 billion, EBITDA of JPY 4 billion, operating income of JPY 2 billion, and a total return ratio of more than 100% on average, which brings the total shareholder return to JPY 4 billion-JPY 5 billion. There are four themes for our initiatives, which I will discuss later. The first one is one of the themes. It is to transform the company into a business boost company. This was explained back in June that we have changed from being a comprehensive IT company to a business boost company. We are now shifting to a company that helps our clients increase their top line. I would like to give you a background as to why we are shifting in this direction. Here are some of the events that have happened to us during the period from 2018 to 2024. The blue bar shows the decline in our revenue due to withdrawals from businesses, the impact of COVID-19, and SEO. The orange bar is games, decrease in revenue from existing titles in entertainment. The green indicates EC, including cyma transfer. This summarizes what had happened over the past years. You can see the chart for operating income, which is proportionate. As a result of all of this is what it looks like in terms of the breakdown. From the explosiveness of entertainment and the ongoing stability of lifestyle, we are shifting to lifestyle with a focus on media comparison sites. I would like to highlight the bottom two. Under company-wide holding system, there was no perspective of overall optimization, which led to overinvestment in unprofitable businesses. The one below it, the company's cash-rich financial structure led to low appetite for financing for new investments, which ended up in not having any financial strategies. We deeply reflected ourselves on these two points in particular. We now have entered into a capital alliance with Advantage Advisors, and together we will move forward with this medium-term plan. Once again, we believe these four are the sources of our competitiveness. Digital marketing, speedy business development, technological capabilities, and planning capabilities. All of our media services up to now, such as Navikuru or Hikkoshi Samurai, were founded on these capabilities. In terms of the technological capabilities, especially in entertainment, we have been supporting various platforms, infrastructures, and devices while cultivating our technical capabilities. These are the four areas of capabilities that we have developed over the years. This is just a handful of past examples, but in the field of entertainment, we had a lot of firsts in Japan. In the area of digital marketing, it is about attracting customers, and the speed at which we have been able to roll out has been our strength. Our ability to attract customers is one of our strengths, and as you may have read somewhere, I, the founder of the company, used to be an engineer. Because of the expertise in engineering, I believe this culture was created. Looking back, since the very old days, I have been touching computers. Windows was introduced, the internet became popular, and then came mobile devices. Devices and environments have changed. However, we have overcome all these challenges with our technical strength. That is the culture of Ateam. Furthermore, attracting customers to the web is another strength of ours. We hope to expand our business from B2B to C or B2C to B2B domain. For example, here on the left, it says high risk and high return. Our new services up to now basically relied on our financial, physical, and human resources. Going forward, we hope to expand mainly through M&As. The bottom half is the area of digital marketing. The focus was on sending users, but now we will change the subject to our clients or customers and focus on their sales. This also has been explained before. Now we have established these three as our new initiatives to enhance our effectiveness. First, on the far left, media business. Leverage the touchpoints with our corporate clients and invest more than JPY 10 billion in M&A to expand into new areas. In the middle, reduce risk and volatilities. We revisited our management structure and prepare for risks. Last but not least, shareholder returns. A great deal of effort will also be put into this area. We will engage with the capital market and turn into a company that is well-recognized by the stock market. This is another slide that speaks to what I have been talking about, supporting sales growth or business boost company. As a concrete example, on the far left are the needs of the client. On the far right are the solutions we possess. In between are our value propositions. Let me give you an example. A client wants to attract customers through web advertisement, attract customers more efficiently through the internet in general. So we offer them with the expertise we have cultivated over the years. As a result, by sending highly potential customers to the site, the client can improve their conversion rate. This is starting to happen now as we speak. We have many non-IT clients. We have a track record of selecting internal information tools and various security tools. By providing such expertise, clients can focus more on their core businesses. That was about supporting our clients to attract customers. This is an example of business operation support. We would like to offer these services to an even wider range of clients. This is the size of the market, but let's put aside the JPY 6 trillion number for now. The business domains that we currently play in are shown as a pie chart on the right, moving used cars, bridal, card loans, and others. The size of these markets is about JPY 350 billion. Through our own proprietary media, we have built relationships with existing clients. Going forward, not only our own media, but we hope to extend support on the internet in general to attract even more customers and thereby capture a share of this market. As a result, we hope to achieve the growth in sales that I mentioned earlier. This is what we are envisioning. That was about the new direction of our business strategy. The previous discussion was about offense, but from here onwards, I would like to talk about defense. This is about how we can go about preventing downside risks before they emerge. First of all, in terms of business, we will expand into B2B market and also continue to operate our own media and thereby avoid risks. On the far left, stable growth through services for corporate clients. Policy number 2, I mentioned this earlier in our reflections of the past. New group management structure will be formed and company-wide common KPI will be introduced. It will be a management structure that can thoroughly monitor and allow us to make investment decisions. In fact, starting from August, Advantage Advisors has joined us. We have established a conference body and is well underway. Next, policy number 3. In our portfolio, we'll be selective in which business to invest. This will allow us to make better investment and exit decisions in a timely manner. These policies will be properly implemented, and we are committed in doing so. This is the new management structure that has just been established. On the far right is the introduction of key indicators, not by business segment, but by setting KPIs that are common and by monitoring them with a solid group of conference members. We will be able to quickly catch up on any shortfalls. This will enable us to make appropriate investment decisions. This is the business portfolio that we have decided on. In fact, what is our track record in terms of withdrawals in the past? Surprisingly, there have been quite many withdrawals and sales, 10 cases in the past 2 years. We are building a system that will enable us to make decisions more quickly. As mentioned at the beginning, I have expressed our commitment to the stock market and the capital market. We hope to achieve total return ratio of 100% and a total shareholder return of JPY 4 billion-JPY 5 billion by 2028. I would also like to reiterate our management structure. Until now, we have had a holding company structure. However, there were business divisions within that structure. In terms of governance, it was not sufficient. Now we will abolish business divisions and operate by subsidiaries. This structure will allow us to focus on the management and supervision of the businesses. Once again, we will also implement number 2, investment and resource allocation in a timely manner. Number 3, budget versus actual management. This will also be carried out thoroughly. Towards that end, this is what our board of directors will look like. I will continue to serve as the Representative Director. Next to myself is Mr. Kaneko. He is an Outside Director, a member from Advantage Advisors, with which we have a capital alliance. The three people on the right are like we always had as members, attorneys, and certified public accountant. I am pleased to announce that we have reformed our holdings structure with a fresh mindset and commitment. On April 4, 2012, Ateam was listed on Mothers section. On April 4, our anniversary of our listing on Mothers, we will change our name to Ateam Holdings Co., Ltd. With a renewed mindset, we hope to drive the business forward. This ends my presentation. Thank you very much.