Mixi Inc

TSE:2121

Earnings Call Transcript 2023-Q2

[Hiroyuki Ohsawa, executive]

Thank you very much for joining our financial results briefing despite your busy schedule. I am Osawa, Director and CFO of mixi. Today, I will talk following this agenda.

Please turn to Page 3 for the executive summary. In the second quarter, each business segment achieved significant year-on-year growth, including a significant year-on-year increase in sales of Monster Strike. On the other hand, extraordinary loss was recorded as a result of reviewing our business portfolio. For the full year forecast, sales and EBITDA have been revised upward in consideration of the first half results and the current situation.

I will now explain the details. First, I will explain our financial status. Please turn to Page 5. This page shows the quarterly consolidated income. Net sales were JPY 34.7 billion, and EBITDA was JPY 6.7 billion, and we recorded a year-on-year increase in both sales and profit. On the other hand, we recognized a loss attributable to owners of parent of JPY 1.5 billion. This was due to extraordinary losses incurred as a result of reviewing our business portfolio. The extraordinary losses of JPY 6.4 billion include the cancellation of some game titles under development and the distribution of the joint venture with JPF for Chiba 250 bicycle race PIST6.

Please turn to Page 6. This is quarterly consolidated performance report. Both sales and profit increased from the previous quarter. Next, I will explain the status of each business segment. Please turn to Page 8. This is an overview of the sports segment. Net sales increased 68.1% year-on-year to JPY 6.6 billion. This was due to an increase in betting ticket sales of Tip Star and Cherry Lauder as well as the consolidation of Tokyo Football Club Co. Ltd. Even excluding the sales of Tokyo Football Club, sales grew 37.5% year-on-year. EBITDA improved year-on-year, and this was mainly due to improved cost efficiency at TIPSTAR.

Please turn to Page 9 for the net sales trend for Chariloto and TIPSTAR. Net sales of both operations recorded a significant growth of 46.3% year-on-year. Previously, we had disclosed the GMV of betting ticket sales, but with increasing non-betting ticket sales of Chariloto, we have decided to disclose net sales from this time.

Please turn to Page 10 for TIPSTAR renewal. In this first half, we promoted measures to adjust to this shift in user interest and to add user entertainment value such as introducing a news feed feature. Adding various ways to play led to sales growth. Currently, we are improving functions in pursuit of fun communication. We are using the news feed introduced in the first quarter to activate communication among users and improve user experience of enjoying betting together.

Please turn to Page 11 about the spectator sports. In DAZN MOMENTS, an NFT marketplace specified in sports, we lifted the ban on the secondary marketplace on October 5 and trading among users has started. FC Tokyo held a home game at the National Stadium on September 18, which was very well received with over 50,000 visitors. The number of spectators is expected to rise in the post-COVID era.

Next, I will explain the Lifestyle segment. Please turn to Page 13. Net sales were up 42.5% year-on-year to JPY 1.6 billion. This was due to steady growth in sales of FamilyAlbum and minimo. FamilyAlbum increased its sales as a result of consolidation of Lovegraph, renewal of FamilyAlbum photoprint and the buildup of the monthly subscription service revenue for FamilyAlbum GPS.

Please turn to Page 14. I will explain the expansion of the FamilyAlbum economic sphere. In October, our subsidiary, SFIDANTE, acquired 100% of the shares of CONNECTIT by joining forces of the 2 companies with a strong user base in the New Year greeting card application service, we expect to further increase in market share for smartphone New Year cards and improve cost efficiencies. In September, we formed a capital and business alliance with Decollte Holdings, a company engaged in the anniversary and wedding photography business and made it an equity method affiliate. We expect this alliance to generate synergies with photo services in the FamilyAlbum economic sphere and contribute to further expansion of economic sphere in the future.

Next, I will explain the Digital Entertainment segment. Please turn to Page 16. Net sales were JPY 25.1 billion, and EBITDA was JPY 9.7 billion. Monster Strike continues to perform well, and both sales and profit in the second quarter were significantly higher than in the same period over the previous year. Kotodaman saw a decline in sales compared to the strong performance result in the previous year. We will work to improve user experience and improve profitability.

Please turn to Page 17 for Monster Strike. The strong performance was attributable not only to successful collaborations but also to the success in raising user enthusiasm through a combination of various measures such as introducing new quests and gadgets in the game and marketing activities at the right timing. We will continue to improve our operational capabilities to maintain this strong performance.

Next, I will explain the investment segment. Please turn to Page 19. Net sales were JPY 1.2 billion, and EBITDA was JPY 900 million. In the second quarter, sales were generated from the sales of shares of [indiscernible].

Next, I will explain about the revision of results forecast. Please turn to Page 21. Today, we have revised our forecast. We have revised upward full year net sales to JPY 133 billion, EBITDA to JPY 19.5 billion and operating income to JPY 15.5 billion. Due to the impact of extraordinary losses and other factors, the forecast for profit attributable to owners of parent is JPY 5 billion, unchanged from the initial forecast. The annual dividend is JPY 110 per share based on DOE of 5% as forecasted at the beginning of the fiscal year.

Please turn to Page 22 for the breakdown of the forecast revision. The major reasons for the revision are favorable performance by Monster Strike in the first half and the recent favorable trend. In other segments, we have made upward revisions for full year sales and EBITDA forecast, reflecting the first half results.

Now Mr. Kimura is going to explain the next part.

[Koki Kimura, executive]

I am Kimura, President of mixi. Let me explain our business policies. Please turn to Page 24. I'll explain the selective focus on growing businesses. We have positioned the current fiscal year as a phase of nurturing, and we are moving forward with initiatives for the harvesting phase in the next fiscal year and beyond. In this context, we have reviewed our business portfolio and extraordinary losses were recorded as a result.

There are 2 major points. The first point is the cancellation of some game titles under development. The decision was made due to changes in the business environment and other factors as well as costs that were higher than initially expected. The second point is the dissolution of the joint venture with JPF and PIST6. After repeated discussions with all parties concerned, we have decided to discontinue the independent sale of betting ticket on TIPSTAR. We have agreed that expanding our sales outlets and increasing awareness is in the best interest of the development of PIST6 and the bicycle racing market.

Please turn to Page 25. There are no major changes to the medium-term management policy explained in the previous fiscal year, although there are some business withdrawals. Progress in each point is as described on the slide. In the first half, the Sports segment achieved year-on-year sales growth as the market is revitalized again for the post-COVID era. We will aim for further business growth. In the Lifestyle segment, FamilyAlbum is expanding its economic sphere in Japan. The number of users is increasing globally as well, and we see further potential for growth.

In the Digital Entertainment segment, Monster Strike continues to perform well, and we are gaining confidence that we are able to operate the game to the satisfaction of our users. We are preparing many things that will exceed users' expectations for the 10th anniversary to be celebrated in the next fiscal year. We will strive for further business growth by firmly nurturing such strong businesses. This concludes my explanation. Thank you.