Earnings Call: Q2 2021

Apr 28, 2021

This time, we would like to begin Cyber Agent's FY 2021 Second Quarter Financial Results Briefing Session. This session is being live streamed. Please note that the disclaimer included in the presentation materials applies to our announcement today. Our CEO, Fujita, will take us through the financial results. This is Fujita, the President and CEO. Our financial year ends in at the end of September, so this is the Q2 from January to March. So we just announced a significant upward revision of our target. There is a lot of focus on the games performing well, but the advertising business is doing well. So overall, all of our businesses are doing well. So first of all, starting with a summary. The sales and OP were both record high, so we're doing well. And with respect to the media business, of course, this is an area we're still making upfront investments, but the sales went up 43.6% year on year, so significant increase. The app business with respect to both sales and OP, they were we hit a new record high for both. And with respect to the game business, we released 2 big titles, Umam Musume and Nya, and both are off to a rocket start. So sales and OP significantly increased as well. This is the quarterly consolidated sales. The game business and advertising business are both doing well. So these are and they we had record high sales. And this is the consolidated OP, so it was $25,800,000,000 This is also significantly higher than what we have achieved in the past. It's a record high as well. And SG and A is as usual. And the number of employees is doing well as well. It's the same as every year, but April, we welcome new graduates, 300 new graduates. And this is the P and L. And this is our balance sheet. Cash deposits are currently about CNY100 1,000,000,000. Now moving on to our forecast. This is the first time we're experiencing this as well since we went public, but the profits have already achieved our annual targets already, and it's only the Q2. That is why we have revised significantly the sales and OP upward. So sales is now JPY600 1,000,000,000 and OP is somewhere between JPY 57,500,000,000 to JPY 62,500,000,000 Games are becoming quite popular as an industry, so it's hard to say how that will progress going forward, but our management, as far as we know, we've made these revisions with the information that we currently have. And this is the achievement after revision. So as of the Q2, the operating profits or profits are around 53% to 57%. So we believe that this upward revision is achievable. Moving on to the individual segments. 1st, the Internet advertising business. This has been a key pillar of business for us over the years. We recorded record high sales in this quarter and OP as well is a new record high. Last year, Q3 Q4, we were hit by we were impacted by COVID, so we had a tough time, but we recovered in the Q1 and currently we've completely recovered and we are not being affected so much by the state of emergency. With this business, we are focusing on AI and ad technologies and Digital Transformation Support. So these are all about technology and of course this is our forte, what we excel at. So this is going to continue to be our growth driver. Moving on to the game business. In the Q1, the game sales dipped, but the existing titles recovered and also the new titles significantly grew. So we have achieved this target, this level of sales, especially in NamUsume and Nya. These two titles have significantly contributed, but Namaste, pretty dirty, is our original IP. So this becoming a great hit is quite significant for us. And that is why our OP, of course, the profitability of our own original IP is higher. So this has contributed significantly to the OP in the Q2. The existing titles also from January to March celebrated anniversary, so they are doing very well as well. Also with respect to NIA, this is going to be a title that's going to be popular globally, but we are going to be releasing an English version going forward. So we think that this is an area that we can have high expectations for. Today, we would like to invite Shikai Ship, Director of Cygames to explain about Umamusume today. Thank you. Please look at the video first. I'm Takai Shi, the director of SAI Games. I would like to give you more details about the Umami's Pretty Derby. First of all, Umamu's Pet Pretty Derby features Umamu's men who are named after real race heroes and it's a cross media content that has become a game, manga and anime. What's characteristic about this game is that we try to be as faithful as possible to the race forces, the drama they created, their history and their personalities as well. So the game players, in order to win in the races, they train the Umamu Sme as trainers and they're going to attempt to win at the Twinkle Series. It's a training simulation game. This project actually started in 2016 and it took us 5 years to develop this game. In the beginning, we planned to release this game in 2018, but we wanted to spend more time to improve quality and perfect the game. So we pushed back the release and we appreciate for being patient and waiting, but we believe we're quite confident in the game that we have created. Since the project began in 2016, in addition to developing the game, we've released manga, organized live events, and in 2018, we launched the first series of the TV anime series, and in the beginning of 2021, we released the 2nd season. So we have applied the U. M. M. E. P. R. D. We have introduced content to various people in different ways. And if we can go back one page. So these are the number of downloads as of on February 24. We have many people playing the game already, and we hit 1,000,000 downloads in 5 days, and it's doing well still. So as of April 8, we've had 5,000,000 downloads. The reason why we've been enjoying this situation is that before the game was released, we actually released manga, and we have many Umamusement fans as well, and we also have a lot of racing fans as well, horse racing fans as well, and they're playing the game. And not stopping there, we have more users playing this game. So we hope to continue to introduce the lore of the game so that more people will play the game going forward. We want this game to become a long run hit, but in the short term, we will improve, add new features to the game and also release Korean and simplified Chinese versions to introduce this game overseas and this is going to it's as part of our cross media efforts, we want to have live events, have streaming programs and also release merchandise and CDs as well. We hope that this will become a content of rewild for a long time. So, we hope to have your continued support. Thank you very much. Other than that, these are some of the games that have been or will be released this year. These four titles will be released within 2021. So The Promise Neverland, which is a very strong IP, we just released this recently. And last next year as well, we have a large title coming up and we announced this and it created quite a buzz, but Final Fantasy is another game that we will be co developing and releasing next year. Moving on to the media business. If you look at quarter on quarter, it seems like we're slowing down, but pay per view grew significantly amid COVID, but now it's bounced back. But if you look at the fiscal year, we're still progressing at a very high rate level. And at them, it's been 5 years since it's been launched and we've exceeded 65,000,000 downloads already. And with respect to the WAU, we're currently surpassed 10,000,000. We're at 12,000,000 now and we want to continue to add programs to breakthrough. I will introduce a couple of programs now. So we just released or launched the first episode and this is a title for young audience about Cinderella. Cinderella has been well made. So we think that it will resonate with not only the young audience, but with the older audience as well. And also, this Nizuru is actually very popular among the young audience as well. So we have a special program with them. This is actually and the next one is a new variety documentary program, but we want to this actually features the willingness of the young audience to create their desire to create their own content. And also the Momo's My Pretty Derby, we've air Season 1 and we aired that in Avima and we'll be airing Season 2 as well in Avima. With respect to Avima and related businesses, the second 2nd quarter sales was JPY 10,400,000,000. Pay per view was slightly lower, but overall, we've been expanding the business, especially wind surface. It's doing quite well. And quarter on quarter is growing significantly. And Abe Ma is celebrating its 5th anniversary this year and every year before or after the Golden Weeks, we have a celebration. But with COVID, we're going to actually extend this 5th anniversary period and introducing various programs over a longer duration of time and the user interface is going to be improved. We allow channels app in our TV when we first released Epima and then we also focus on on demand and we provided a UI which enabled users to switch between TV and video, but we will be updating the UI, so to integrate TV and video on the same crease on the same screen and we want to actually help the TV reach a new level. And this is I introduce this every time, but we want to continue to grow with advertising subscription and related businesses. Lastly, this is also a page that we share every time. The direction is still the same, but game is becoming popular once again. So this fiscal year, it's only been 1.5 months since we started, but we believe that we will have a lot of room for growth, but we want to continue to make investments so we can actually solidify our foothold. That's it from myself. Thank you very much. We would like to conclude Cyber Agent's FY 2021 Q2 financial results briefing session. If you have any questions, please contact the IR division. Thank you very much for joining us today.