Mixi Inc

TSE:2121

Earnings Call Transcript 2023-Q1

[Hiroyuki Ohsawa, executive]

Thank you very much for taking time out of your busy schedule to attend today's financial results briefing. I am Osawa, Director and CFO.

Please turn to Page 3. This is the executive summary. Monster Strike outperformed our expectations and other segments continued to see year-on-year sales growth, so we believe that the first quarter of this fiscal year got off to a good start. I will explain the details later. Let me first explain our financial status.

Please turn to Page 5. This is a quarterly consolidated statement of income. Net sales increased year-on-year to JPY 31 billion. EBITDA decreased significantly to JPY 6.7 billion. I will explain the factors by each segment later.

Please look at Page 6. This is a quarterly consolidated performance trend. Next, I explain the status of each business.

Please turn to Page 8. This is a review of the Sports segment. From this fiscal year, sales are shown separately for the publicly managed betting sports and spectator sports. Sales increased 56.9% year-on-year to JPY 6.3 billion. This was due to an increase in sales of TIPSTAR and Chariloto's betting tickets as well as the recent consolidation of Tokyo Football Club Company Limited, which manages FC Tokyo.

The comprehensive management of keirin stadiums also generated stable profit. Excluding the sales of the newly consolidated Tokyo Football Club, net sales increased 28.5% year-on-year.

EBITDA remained almost flat compared to the same period last year. However, with TIPSTAR, the deficit amount has improved year-on-year due to cost efficiencies and other factors.

Please turn to Page 9. This is the GMV trend for Chariloto and TIPSTAR. GMV grew steadily, up 30.1% year-on-year. Although GMV was almost flat against the previous quarter, due in part to seasonal factors in the market, it is progressing as planned.

Please look at Page 10. This is the status of TIPSTAR renewal. We have conducted functional renovations continuing on from the previous quarter. In the first quarter, we promoted value transformation by introducing a new feed that shows the betting status of friends and acquaintances. We are working to further promote the use of mirror betting. In addition, by adding missions and other functions to make it more enjoyable for users, the number of races participated by player has increased. We will continue to brush up our communication design in the second quarter and beyond.

Please turn to Page 11. This is the status of professional sports teams. From this fiscal year, we have consolidated the P/L of Tokyo Football Club, which operates FC Tokyo. Since the company's fiscal year ends in January, the 3 months from February to April have been reflected in the first quarter. The J. League season usually runs from late February to early December and revenues consist of sponsor fees, tickets and merchandising. By taking advantage of the team's location in Tokyo, we aim to attract even more supporters and achieve further growth.

As for the Chiba Jets, the team was able to win the B1 East division championship in the 2021-'22 season. With the opening of a large arena with the capacity of 10,000 people scheduled for 2024, we will continue to aim to operate a strong team that will be supported by many people.

Next, I'd like to explain our Lifestyle segment. Please look at Page 13. Net sales increased 7.3% year-on-year to JPY 1.8 billion. This was due to steady growth in sales of FamilyAlbum and minimo. In the same period of the previous year, there was a onetime sales increase in SNS mixi due to the expiration of points. Excluding that impact, sales grew 26.6% year-on-year.

EBITDA decreased by approximately JPY 300 million. This was due to the previously mentioned onetime sales impact and a onetime increase in advertising and other costs for FamilyAlbum GPS Guardian, for which we strengthened our sales effort and saw strong sales. We expect FamilyAlbum GPS Guardian to generate stable revenues through monthly charges.

Please refer to Page 14. This is the status of FamilyAlbum GPS Guardian and Mother's Day and Father's Day gifts.

For FamilyAlbum GPS Guardian, which was launched last year, we conducted aggressive marketing activities, especially during the start of the school year, when sales tend to grow. Now in its second year, sales volume is increasing further while maintaining a high retention rate.

As for Mother's and Father's Day gifts, sales continued to grow steadily in the third year of the service.

Product development using 2 transphotos has been well received, and we are differentiating ourselves by selling photo books together with other products.

Please see Page 15. This is the status of FamilyAlbum in overseas markets. FamilyAlbum is currently available in 7 languages and in 150 countries. In addition to Japan, the number of overseas users continues to grow, especially in North America.

Next, I would like to explain the Digital Entertainment segment. Please turn to Page 17. Net sales were JPY 22.4 billion and EBITDA was JPY 10.7 billion. In our initial forecast, we expected a certain level of revenue decline, taking into account the past trends. But in the first quarter, both sales and profit were more or less unchanged from the previous year.

Please see Page 18. This is the situation for Monster Strike and Kotodaman.

In Monster Strike, we had collaborations with popular IPs and continuously added new experiential content. As a result, MAU declined only slightly and ARPU increased slightly year-on-year. Both are trending above the initial plan for the fiscal year.

Kotodaman achieved record sales in April, thanks to anniversary events and IP collaborations, with a year-on-year increase in sales.

Please see Page 19. This shows the latest news. In July, we held the XFLAG PARK offline for the first time in 3 years at Makuhari Messe. In the first quarter, we held mini parks in 5 cities, which built up user enthusiasm leading up to XFLAG PARK. That was held as a hybrid event that has online streaming of an offline event, as we used to do before COVID, and this resulted in a record number of views of over 4 million in about a week of streaming availability.

In addition, Ghost Scramble, the first in the Monster Strike series, was released on July 19. Ghost Scramble has a high multiplayer rate, and the feature that allows easy sharing of game highlights on SNS has been well received. We will continue to operate and verify for further growth.

Next, about the Investment segment. Please refer to Page 21. This is a trend of the Investment segment, which has been launched as a business this fiscal year. Net sales were JPY 300 million and EBITDA was JPY 100 million. As you can see, although there is some volatility in the P/L due to the timing of exits of portfolio companies and other factors, both sales and EBITDA were positive in the first quarter due to stock sales and other factors.

Please see Page 22. This is an overview of the investment business. As of June 30, 2022, total investments amounted to JPY 22.6 billion on a valuation basis, an increase of approximately JPY 500 million from the end of the previous fiscal year. While total funds in use increased by JPY 1.2 billion due to minority and VC funds investments, the book value of investment decreased by JPY 0.7 billion due to distributions from funds and revaluations. As shown in the table on the right, we have invested in promising companies, both in Japan and overseas.

I will now continue with an explanation of our results forecast progress. Please turn to Page 24. As you can see in the graph here, the progress toward the forecast is high for profits.

Regarding sales in the first quarter, Monster Strike is trending above the initial plan for the period.

Profits are also exceeding the plan. But in the second quarter onwards, we plan to book development expenses for the Monster Strike series, for which we plan to release multiple titles as well as expenses for holding offline events.

We have also announced a collaboration between Monster Strike and One Piece Film: Red movie. We will continue to provide such user surprises and aim for upside in our business performance.

In consideration of the progress of each business, if it becomes necessary to revise the profit forecast, we will announce it promptly.

This concludes my explanation. Thank you very much for your attention.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]