Mixi Inc

TSE:2121

Earnings Call Transcript 2020-Q3

[Koki Kimura, executive]

Thank you very much for coming to our earnings result briefing. I am Koki Kimura, President and Representative Director of mixi. I'll explain about the earnings result for the third quarter of FY 2020.

I will cover 2 parts in my presentation: financial status and business status. Let me start with financial status. Please turn to Page 4.

Today, we announced upward revision of the full year forecast for FY 2020. In this revised forecast, net sales are estimated as JPY 103 billion and operating income is JPY 9 billion. Regarding net sales, the revised forecast reflects sales of Kotodaman and Net Dreamers, our new consolidated subsidiary, which were not included in the forecast at the beginning of this fiscal year, and this includes JPY 98 billion for Entertainment business and JPY 5 billion for Lifestyle business.

As for expenses, we could reduce the cost for office relocation, which had been estimated as temporary expenses of JPY 4 billion at the beginning of this fiscal year as well as advertisement expenses due to streamlined promotion of Monster Strike. This resulted in an upward revision of operating income forecast by JPY 4 billion.

Please turn to Page 5 for consolidated income. For the third quarter, net sales were JPY 25.5 billion, down 26.9% year-on-year. Operating loss was JPY 900 million, and loss attributable to owners of parent was JPY 1.7 billion. If we deduct temporary expenses for office relocation of JPY 1.6 billion, operating income was JPY 700 million, down 88.4% year-on-year.

In this quarter, we changed fiscal period of our 2 subsidiaries for unification in the group, and this resulted in recording of 6-month income of Chariloto and 4-month income of SFIDANTE in this third quarter.

Please turn to Page 6. This page shows cumulative result up to the third quarter.

Please turn to Page 7 for changes in quarterly results by business domain. We recognized a sales of JPY 23.2 billion for Entertainment business and JPY 2.2 billion for Lifestyle business. Sales of Entertainment business declined by JPY 10.2 billion year-on-year, and this is mainly due to decreased sales of Monster Strike. About JPY 2.7 billion of game currencies purchased in December will be recognized as fourth quarter sales.

In Lifestyle business, sales grew JPY 800 million year-on-year. This growth was owing to the sales of SFIDANTE, which has become our consolidated subsidiary in this fiscal year, and the sales of Family Album New Year card developed jointly with SFIDANTE.

Please turn to Page 8. This page shows quarterly consolidated cost of sales. Some items increased year-on-year, such as personnel expenses for development and purchases, and this is mainly due to new consolidation of Chariloto and SFIDANTE as well as changes of their fiscal period.

Page 9 is about quarterly consolidated SG&A expenses. Some cost items increased year-on-year in the third quarter. While advertising expenses were decreased by streamlining, some cost items increased due to temporary cost of office relocation and the change of fiscal periods of consolidated subsidiaries.

Now let me move on to business status. I'll explain about revitalization of Monster Strike and growing sports-related businesses, which are our focus areas in this fiscal year.

Please turn to Page 11 about revitalization of Monster Strike. Aiming for a V-shaped recovery, we implemented measures such as anniversary campaign for increasing MAU and establishing its user base. And in the third quarter onward, we worked on the increase in ARPU.

Please turn to Page 12. In the third quarter, while we could see some positive results for increasing ARPU through collaboration with popular anime, the sales could not be better than our expectation and just increased as planned. The revitalization of Monster Strike is still ongoing, and we will continue to strive for ARPU improvement by changes of the game in itself, development of attractive characters as well as high-profile marketing activities. At the beginning of this year, we released new characters, which are linked to anime, and they received positive reviews.

Page 13 explains other game products. We implemented the large-scale marketing campaign for Kotodaman, such as collaboration with Monster Strike and the TV commercial. We will make it continue to contribute to the business expansion by capabilities in game operation and marketing. At the same time, we decided to close Fight League and Mainland Chinese version of Monster Strike. We will utilize knowledge gained from these experiences for new game development.

Next is about sports-related businesses. First, I will explain Unlim, a new service we decided to launch.

Please turn to Page 15. We announced a new service as a solution to funding for affiliate and sports teams. Simply put, Unlim is a donation service, so-called sports gifting. It makes easy for fans to financially support their favorite athlete or teams. What is unique about Unlim is high payout rates for athletes. Such high payout rates were achieved by saving advertising costs through many exposure opportunities created by various media, including sports news and sharing to a lot of many people by social power. We are already receiving inquiries from many athletes, and we feel high expectations among them. We believe Unlim can help sports develop to a sustainable industry by supporting their funding.

Please turn to Page 16. This page describes the overview of Net Dreamers, of which we acquired shares in November. Netkeiba.com, which is operated by Net Dreamers, is the #1 media for horse racing with over 10 million monthly users. Its CAGR of revenue is 24%, and we can expect further growth going forward. As we utilize the assets of Chariloto, Net Dreamers and mixi for creating a synergy, we will strive for further activation of government-managed betting sports.

Lastly, let me explain about the forecast and our policy for the future. Full year forecast was revised upward with operating income of JPY 9 billion. This is due to review on expenses of office relocation and streamlining of advertisement expenses of Monster Strike. We assume the revitalization of Monster Strike we have done so far in this fiscal year has not achieved satisfactory results yet.

In order to maintain Monster Strike as a popular game for its 10th and 20th anniversary, we will improve the game and continue its revitalization. Another theme we focus on is growing sports businesses. We will make active investment in growing market to establish a next business pillar through M&As and business development at mixi.

I appreciate your continued support. This concludes my presentation. Thank you for your attention.