Mixi Inc

TSE:2121

Earnings Call Analysis

Strong Growth in Sports and Betting Segments Despite Decline in Digital Entertainment

During the latest earnings call, the company reported net sales of JPY 30 billion with significant growth in the Sports and Betting segments. Sports saw a 13.8% increase in sales spurred by higher fan engagement and major events, while betting services like TIPSTAR experienced a 41.4% boost. However, Digital Entertainment faced a 3.8% decline in sales, despite a 13.5% increase in EBITDA. The Lifestyle segment also grew by 13%, buoyed by new features and user growth in FamilyAlbum. The company confirms progress in planned strategic initiatives and maintains a positive revenue outlook.

Strong Financial Performance in Q1

In the latest earnings call, the company reported promising financial results for the first quarter, with net sales reaching JPY 30 billion, marking a significant stride in profitability. EBITDA stood at JPY 3.9 billion, while operating income was reported at JPY 2.7 billion. Profit attributable to the owners was JPY 2.2 billion, suggesting healthy operations across the business despite slight challenges in one segment.

Diverse Segment Growth

The company's performance across its segments was varied yet predominantly positive. While the Digital Entertainment sector saw a minor decline of 3.8% year-on-year, other segments like Sports and Lifestyle thrived. The Sports sector noted a remarkable 13.8% year-on-year jump in net sales, reaching JPY 8.5 billion, driven largely by increases in TIPSTAR gross merchandise value (GMV) and successful merchandise sales from FC Tokyo.

TIPSTAR's Ascendancy

One outstanding performer is TIPSTAR, which experienced a striking sales boost of 41.4% year-on-year owing to product enhancements. Notably, the EBITDA profit margin for TIPSTAR has been expanding in tandem with sales growth, signaling efficient cost management alongside increasing revenues. This positive trajectory may continue as the company focuses on further product improvements.

Lifestyle Segment Innovation

The Lifestyle segment also saw promising growth, with sales up 13% year-on-year, totaling JPY 2.7 billion. The FamilyAlbum business played a pivotal role in this growth, bolstered by new features and pricing strategies aimed at enhancing user engagement. The company plans aggressive marketing towards non-premium users, which could open new revenue streams and improve profitability in the upcoming quarters.

Digital Entertainment Sector’s Resilience

While the Digital Entertainment segment faced challenges, particularly with Monster Strike, which saw fluctuations in Average Revenue Per User (ARPU), EBITDA increased by 13.5% to reach JPY 7.8 billion, attributed to reduced operational costs. The company remains optimistic about capitalizing on its large, engaged user base with several high-profile collaboration projects planned throughout the year.

Investment Activity Highlights

The Investment segment contributed JPY 600 million in sales with an EBITDA of JPY 200 million, largely driven by favorable fund valuations and strategic stock sales. Notably, the successful listing of Timee Inc., where the company holds 5.6% of shares, is expected to enhance liquidity and provide further opportunity for capital gains.

Future Guidelines and Strategic Outlook

Looking ahead, the company aims to surpass its internal forecasts, with growing optimism driven by the prospects of new product launches and continued expansion in global markets. The Q1 results encapsulate a solid foundation with a strategic focus on enhancing its betting services and digital gaming portfolio. Management is confident that these initiatives will foster further growth, with expected sales increases from both global markets and its betting services being launched in Australia.

Earnings Call Transcript 2025-Q1

[Kohei Shimamura, executive]

Thank you very much for coming to our financial results briefing despite your busy schedules. I am Shimamura, CFO and Senior Corporate Officer of the company. Today, I will follow the agenda on Page 2.

Please turn to Page 3, which is the executive summary. I will now go on to the details. From Page 4, let me explain the financial status. Page 5 is the consolidated income statement for Q1. Both sales and profits grew with net sales of JPY 30 billion, EBITDA of JPY 3.9 billion, operating income of JPY 2.7 billion and profit attributable to owners of parent of JPY 2.2 billion.

For net sales, the Digital Entertainment segment dropped slightly year-on-year, but the other segments posted growth. Profits increased in all segments.

Page 6 is the quarterly consolidated performance report. From Page 7, I will explain the segment by segment business status. Page 8 is the Sports segment. Net sales increased by 13.8% year-on-year to reach JPY 8.5 billion. The main factors behind the increase were growth in TIPSTAR GMV, gross merchandise value, and FC Tokyo merchandise sales increase. EBITDA loss decreased from last year. Although costs increased due to the opening of the arena, increase in sales had a larger impact.

Please turn to Page 9 for the spectator sports business. Lala arena TOKYO-BAY, the home arena of Chiba Jets was completed in April and an unveiling event was held in May. In the 2023 to '24 season, Chiba Jets won in 2 categories, and it also received a social media of the year award for the best social media performance. Proactive use of social media led to more than doubling of fan club members.

FC Tokyo recorded the largest number of spectators at the new National Stadium at a home game in July and renew the club's a record-high number of spectators.

Please turn to Page 10 for net sales trends for main services in the betting business. In addition to TIPSTAR and Chariloto, we now show the trend for Net Dreamers also because of its size of net sales. TIPSTAR sales grew significantly by 41.4% year-on-year due to product improvement. Chariloto and Net Dreamers are also growing steadily, leading to overall growth in net sales of 17%.

Page 11 shows the status of TIPSTAR and Chariloto businesses. TIPSTAR EBITDA profit margin is widening in line with sales growth. We will continue to improve the product for further growth of the business.

Chariloto started comprehensive management of Ito Onsen Velodrome in April in addition to ownership of the facility. Ito Onsen Velodrome redevelopment and project is underway as Chariloto's fourth redevelopment project after Tamano, Hiroshima and Takamatsu. We will continue to develop velodromes that can be enjoyed by many people and contribute to regional revitalization.

From Page 12, let me discuss the Lifestyle segment. Please turn to Page 13. Net sales increased 13% year-on-year and reached JPY 2.7 billion. Major family album products like Premium and GPS Guardian drove growth in net sales. Despite continued investments to acquire users overseas, EBITDA deficit decreased year-on-year, thanks to sales growth.

Please turn to Page 14 for the status of the FamilyAlbum business. As we explained at the briefing for the last fiscal year, we established business strategies to improve profitability and are implementing various actions. We added new features to FamilyAlbum Premium and revised price plans. We also released a new sticker subscription service. We are also planning to advertise to non-premium users starting fall of this year. Utilizing our rich active user base, we will continue to take actions to improve profitability.

From Page 15, we will discuss the Digital Entertainment business. Please turn to Page 16. Sales was JPY 18.1 billion, a decrease of 3.8% year-on-year.

Monster Strike MAU was higher than last year, but overall, Q1 sales was slightly lower because there was a period when ARPU was lower than last year. EBITDA increased 13.5% year-on-year to reach JPY 7.8 billion. Despite the impact of Monster Strike sales decrease, cost reduction due to business withdrawals contributed to this improvement. Kotodaman remained profitable with both sales and EBITDA at the same level as last year.

Please turn to Page 17 for the status of Monster Strike. Throughout Q1, we had attractive collaboration projects and took various actions resulting in higher MAU year-on-year for all months during the quarter. In July, we held a DREAMDAZE II at Lala arena TOKYO-BAY. Online streaming topped 360,000 concurrent viewers. We continue to enjoy a large Monster Strike user base. We aim at achieving the full year plan by capitalizing upon our high MAU.

From Page 18, we discuss the Investment segment. Please turn to Page 19. Sales was JPY 600 million, EBITDA was JPY 200 million. This was due to fund valuation gains and subsidiaries and sales of stocks.

Please turn to Page 20 on Investee Listing. Timee Inc. and Investee was listed on July 26. We have invested in phases since October 2019 and hold approximately 6 million shares or 5.6% as of end of June 2024. We sold a portion of our holdings as part of the global offering and plan to sell more in phases.

Please turn to Page 21 for the results forecast progress. Q1 consolidated sales were in line with the internal target, while profits were slightly above target. We will aim at upside beyond forecast by measures including sales of Timee shares.

Global Monster Strike and betting service in Australia, which we discussed at the end of fiscal year briefing are also progressing as planned so that they will contribute to sales from next year.

Thank you very much for your attention.