Mixi Inc

TSE:2121

Earnings Call Transcript 2022-Q2

[Koki Kimura, executive]

Thank you for taking time out of your busy schedule to join us in the financial results briefing. This is Koki Kimura, President and Representative Director. Today, together with Director and CFO Hiroyuki Ohsawa, we will go over the financial status, business status, revision of earnings projections and policies going forward.

Please turn to Page 3, which shows executive summary. Some businesses performed better than others. In light of the situation of TIPSTAR and Monster Strike, we have decided to revise our earnings projections, which will be explained in detail later.

I now pass the microphone to CFO Ohsawa.

[Hiroyuki Ohsawa, executive]

This is Ohsawa, Director and CFO. I will first go over the financial status.

Page 5 shows quarterly consolidated income. Net sales were JPY 23.2 billion, EBITDA was JPY 2.3 billion, and operating income was JPY 1.3 billion, representing lower sales and profits year-on-year. Page 6 shows quarterly performance. As will be explained later, the decrease in sales comes mainly from Monster Strike.

Page 7 shows quarterly sales costs. Page 8 shows quarterly SG&A expenses. Reflecting lower sales, settlement fees decreased.

Next, status of each business. Please turn to Page 10, a review of Sports business. Net sales were JPY 3.9 billion, up 32.1% year-on-year owing to the sales growth in Chariloto and TIPSTAR. Quarter-on-quarter sales decreased by JPY 100 million because Chiba Jets entered off-season and sales were down by JPY 300 million.

Page 11 shows the GMV trends for Chariloto and TIPSTAR. Total GMV was up 67.1% year-over-year. This was because GMV of Chariloto increased due to growth in Internet ticket sales and GMV of TIPSTAR also made an approximately 2.5-fold growth. Quarter-on-quarter growth was 5.1%. TIPSTAR's GMV increased by 19.6% but fell short of the target.

Next is on Lifestyle business. Please turn to Page 13. Net sales increased 21.6% year-on-year to JPY 1.1 billion. This is mainly due to sales growth of the FamilyAlbum and minimo. Page 14 is about FamilyAlbum and Romi. We are continuing with the strengthened monetization of the FamilyAlbum. In the second quarter, we conducted the on-site photo shooting campaign for the Shichi-Go-San celebration season, which received very good response. Romi was awarded the Good Design Award in recognition of its design that easily fits into people's living space and the accuracy of natural voice recognition. We will continue to aim for better service so as to meet the expectations of the users.

Next is the Digital Entertainment business. Please turn to Page 16. Net sales were JPY 18.1 billion, down 28.8% year-on-year.

Page 17 is on Monster Strike and Kotodaman. Monster Strike sales decreased in the second quarter due to a decrease in MAU and ARPU from the previous year. However, during the eighth anniversary online event, MONSTER STRIKE FREAK 2021 in October, the peak viewership recorded 380,000, which was higher than the previous year.

We also are continuing to implement IP collaboration measures, creating excitement for the new Year holiday season. Sales of Kotodaman increased year-on-year due to measures such as collaborations. The collaboration measures leverage the development capabilities we have cultivated through the operation of Monster Strike that enable incorporation into games without hurting the worldview of IPs. We have decided to close Star Smash in December.

Next is on the revision of the earnings projections and policies going forward. Please turn to Page 19. Today, we disclosed a downward revision of our earnings projections, and we hereby express our great regret. For the full year, net sales have been revised to JPY 105 billion to JPY 110 billion, EBITDA to JPY 6 billion to JPY 9 billion, operating income to JPY 2 billion to JPY 5 billion and net income to JPY 2.5 billion to JPY 4 billion. The annual dividend forecast remains unchanged at JPY 110 per share.

Please turn to Page 20. I would like to explain the breakdown of the revisions. From the forecast announced on May 7, net sales have been revised downward to JPY 17.5 billion for Sports, downward to JPY 80 billion to JPY 85 billion for Digital Entertainment and revised upward to JPY 7.5 billion for Lifestyle. Operating income forecast has been revised downward by JPY 5 billion for Sports and by JPY 4 billion for Digital Entertainment. Reasons for revision for Sports are a lower sales forecast for TIPSTAR and cost increase and, for Digital Entertainment, mainly lower sales forecast for Monster Strike and increased costs.

Kimura will explain the details.

[Koki Kimura, executive]

This is Kimura speaking again. Please turn to Page 21. I will explain the factors behind the revisions and the policies for the second half onward. TIPSTAR failed to achieve the goal of acquiring new customers by TV commercials. In addition, while we expanded GMV by strengthening return measures to a wider range of people, costs increased more than expected. We are currently reviewing our marketing strategies and working on cost reductions by improving the efficiency of TV commercials and return measures. We will also work on improving profitability by continuing to improve our products to enhance customer experience.

Regarding Monster Strike, ARPU declined due to the impact of the competitive environment and others, and sales in the second quarter were short of the plan. However, the eighth anniversary event in October was well received, and the sales trend is recovering. For the New Year holiday season, we will proactively implement measures such as collaborations and social events to excite our users to boost sales increase.

Another factor behind the cost increase was the increase in investment costs due to the preparation of new games utilizing Monster Strike IPs. For the next fiscal year onward, we will work to further expand profits from new games.

Please turn to Page 22. We have announced a new title for the spin-off Monster Strike series based on Monster Strike IPs. The title is Monster Strike Ghost Scramble. A closed beta test is scheduled in November for the planned release around the spring of 2022. It is a game for up to 4 players, and it is to have a great affinity with the customer base of Monster Strike and be enjoyed by fans of Monster Strike IPs. We will continue to strengthen the brand power of Monster Strike and aim to expand the Monster Strike ecosystem.

Please turn to Page 23. Some comments on announcements on alliances for crypto asset and NFT businesses. In September, we announced a capital and business alliance with bitbank inc., which operates the largest crypto asset exchange in Japan. In addition, today, we announced a business alliance with Dapper Labs, Inc., operator of NBA Top Shot, which has generated over $800 million in cumulative sales and is considered the biggest success in the NFT market.

Please turn to Page 24. Some comments on the provision of NFT services. The cryptocurrency and NFT markets are growing rapidly and have the potential to significantly change the monetization mechanism in each digital domain. bitbank and Dapper Labs have the latest blockchain technology and operational expertise. We aim to expand our business in this fast-growing market by quickly developing NFT services that combine with our digital entertainment and sports content.

Please turn to Page 25. I will explain the medium-term management policy. There are no changes to the medium-term management policy set forth at the beginning of the fiscal year. We aim to achieve the upper end of the range of the revised forecast or better by balancing business promotion and cost reduction. Although the situation is difficult in the short term, we are investing in growth markets such as sports and NFTs. We will continue to provide attractive services and aim to increase corporate value over the medium to long term.

Thank you for your attention.