Mixi Inc

TSE:2121

Earnings Call Transcript 2018-Q3

[Hiroki Morita, executive]

Thank you for attending the Fiscal 2018 Third Quarter Earnings Results Briefing Session of mixi Group. I will go over the financial conditions and then business conditions for the Entertainment Business and the Media Platform Business in that order.

First, the financial conditions. In December, we announced the decision to close the services of TicketCamp, which had an impact on the fiscal 2018 third quarter results.

Net sales were JPY 42.1 billion. Operating income was JPY 10.9 billion, and net income or loss attributable to owners of parent was minus JPY 17 million.

Next, progress of fiscal 2018 earnings estimates. When we announced the closure of TicketCamp services and the recording of impairment loss associated with it, we had made an amendment to the consolidated financial results forecast. While net sales and operating income forecast remain unchanged at JPY 200 billion and JPY 70 billion respectively, forecast for the profit attributable to owners of parent has been revised downward from JPY 48 billion to JPY 40.2 billion.

Progress to the full year forecast as of the third quarter was net sales, 67.7%; operating income, 68.4%; and net profit, 62.5%. The progress is similar to what it was in the previous year.

As will be explained later, we expect the fourth quarter sales and profit to be better than those in the third quarter. So we are generally progressing steadily towards achieving the full year forecast.

Here, you can see the segment, adjusted EBITDA, and here, quarterly consolidated sales. As the bar graph shows, the first and the second quarter sales for this fiscal year were much higher than those in the previous year, whereas for the third quarter, there was some rebound resulting in a significant decline year-on-year.

But we do not expect this trend to continue into the fourth quarter. Based on the results in the January and the trend observed in the February so far, we estimate the fourth quarter sales to be between JPY 57 billion and JPY 60 billion.

Here, you can see the quarterly consolidated cost of sales, and here, quarterly consolidated SG&A expenses. There were 2 major topics. First, on settlement fees.

In December, in the Entertainment Business, primarily Monster Strike, due to unused orbs or intra-game currency, the portion of settlement fees increased temporarily. Let me explain. When users purchase orbs or intra-game currency in Monster Strike, settlement fees we pay to Google and Apple is recognized as cost. But this cost is recorded when users purchase orbs, whereas sales are recorded only when the intra-game currency is used or consumed by the users.

Every year, the largest amount of Monster Strike sales is generated on January 1. Regarding the orbs purchased prior to January 1, the cost of settlement fees we pay is incurred but we do not record the sales and that results in a temporary surge in cost in December. Conversely, as for January, since the cost is already recorded in December, only the sales are expected to be posted.

As for advertising expenses, compared to the previous year, we enhanced advertisement on Monster Strike fourth anniversary campaigns and the year-end new year campaigns, which resulted in an increase year-on-year. That's it for the financial conditions.

Moving on to the business conditions, starting with the Entertainment Business. These are the major topics for the third quarter for October, November and December, respectively. As you can see, we continue to implement a series of measures centering on Monster Strike. I'm afraid we don't have time to go over each of them, so let me just highlight some programs in our focused area of returns to users.

This fiscal year, we are putting a lot of efforts in the returns to users area. During the third quarter, which includes the year-end season, we generally enhance our returns on users initiatives. In December, we held Monster Strike Christmas Lottery, which allowed the users to send the same products they won as prizes to someone else. And in collaboration with Gindaco, we held the Get Gindaco Campaign, in which users were awarded free takoyaki, or octopus balls, when completing a mission in the game. And on the New Year's Eve, we also organized the Monster Strike bingo game, in which JPY 400 million was split among the winners. The bingo game was held concurrently in Japan, Taiwan, Hong Kong and Macau. That's for the Entertainment Business.

Next, the Media Platform Business. As the lower graph indicates, the third quarter proved to be a very strong quarter. This was mainly owing to steady progress and growth in each service. In particular, for this quarter, nohana New Year's cards 2018 contributed to the increase in sales.

As I stated earlier, in December, we decided to close the services of TicketCamp. While the impact was limited in the third quarter, for the fourth quarter and beyond, with the decline in the associated sales, figures are projected to be lower than what's shown here.

That concludes my presentation. Thank you very much for your kind attention.