Mixi Inc

TSE:2121

Earnings Call Transcript 2023-Q3

[Hiroyuki Ohsawa, executive]

Thank you very much for taking time out of your busy schedule today to attend our financial results briefing. I am Osawa, Director and CFO. Today, I will be speaking in accordance with the agenda on Page 2. Please turn to Page 3. This is the executive summary.

In Q3, we continued to perform well. Sales and EBITDA grew with Monster Strike significantly exceeding the same period last year. On the other hand, as a result of losses from equity method investments, profit attributable to owners of parent decreased. In light of these developments, we have revised our full year forecast for sales, EBITDA and others upwards, while leaving profit attributable to owners of parent unchanged from the previous forecast. Details will now be explained. First, I'd like to explain our financial status. Please turn to Page 5. This is a quarterly consolidated income statement.

Net sales were JPY 39 billion, and EBITDA was JPY 8.9 billion, with both revenue and profit growing year-on-year. On the other hand, profit attributable to owners of parent decreased due to posting losses from equity method investments in Q3. Please turn to Page 6. This shows the quarterly consolidated performance report.

Due to seasonality, costs tend to precede revenue in Q3. This year, both sales and profits increased quarter-on-quarter. Next, I explain each business segment. Please look at Page 8.

This is a review of the Sports segment. Net sales increased by 50.5% year-on-year to JPY 7.2 billion. This increase in turnover was due to higher bidding ticket sales at TIPSTAR and Chariloto, as well as the impact of Tokyo Football Club, which became a consolidated subsidiary from this financial year. Even excluding the effect of the new consolidation, sales grew by 26.4% year-on-year.

EBITDA was positive. This was mainly due to cost efficiencies at TIPSTAR and the dissolution of a joint venture and the strong performance of other subsidiary businesses. Please turn to Page 9. This is a sales trend for Chariloto and TIPSTAR.

Keirin operation management contract business by Chariloto is making a stable contribution to net sales growth with an increase of 29.5% year-on-year. Please turn to Page 10. This is the status of the TIPSTAR renewal.

During and up to Q3, we have gone through trial and error of various measures such as the addition of entertainment value. As a result, we've created a compelling bidding experience while maintaining appropriate cost control. Toward significant business growth, we will continue to enhance the social bidding experience for our users. Please turn to Page 11. This is the status of the spectator sports business.

For 2 budgets, the billing season opened in September last year. With a new head coach and a new structure, the team has maintained its top position and is doing well. Preparations are progressing as planned for the completion of the new arena, which is scheduled for next year.

For FC Tokyo, the new season starts next week. We will strive to channel the nationwide excitement from the World Cup to continue to enhance the J.League. Next, I'd like to explain the Lifestyle segment. Please see Page 13.

Sales increased 44.8% year-on-year, thanks to favorable performance by FamilyAlbum, as well as recent consolidation activity. The FamilyAlbum saw its economic sphere expand with services other than New Year Cards also growing, contributing to increased earnings. Moving on to Page 14.

I will now explain the situation of the FamilyAlbum economic sphere. In Q3, in addition to the New Year's Card service, increase in premium subscribers and number of users ordering photo prints contributed to higher profits. On the other hand, New Year Card orders were temporarily suspended due to equipment failure. We are deeply sorry for the inconvenience caused to our users. We will work to prevent recurrence in the future.

Also, the FamilyAlbum GPS Guardian was ranked #1 overall in the 2023 Oricon Child Safety GPS Customer Satisfaction Survey. We will launch our third-generation device for the new school year season in spring and aim for further growth of our economic sphere. Next, I explain the Digital Entertainment segment. Please turn to Page 16.

Net sales were JPY 25.8 billion, and EBITDA was JPY 11.2 billion. Monster Strike continues to perform well with both sales and profits in Q3 significantly higher than in the same period of the previous year. Sales of Kotodaman declined year-on-year. We will strive to improve the user experience and improve profitability. Please look at Page 17. This is the situation for Monster Strike.

The main factors behind the strong performance in Q3 were the success of the ninth anniversary and New Year events. By combining various measures such as the ninth anniversary event and other collaboration events, MAU remained at a high level following Q2. As a result, we were able to enter the new year's event in good shape.

Q4 has started well with the original characters announced at the beginning of the year, receiving a very positive response. In 2023, which will mark our tenth anniversary, we will further improve our planning and operating capabilities and aim to provide services that will be loved by everyone for many years to come. Please turn to Page 18.

I explain our efforts to expand the Monster Strike economic sphere. We will continue to operate Monster Strike as a top brand in smartphone games as an exciting social activity, and we will operate services that can be enjoyed by many users. In addition, in the current fiscal year, we are focusing on the development of the Monster Strike series using the Monster Strike IP, and we plan to release several games during Q4. As the next fiscal year will mark the 10th anniversary of Monster Strike, we will promote the enhancement of IP value to further expand its economic sphere. Next, I'd like to explain our investment segment. Please turn to Page 20.

Net sales was about JPY 100 million and EBITDA was negative JPY 100 million. Next, I explain the revision of our full year results forecast. Please turn to Page 22. We have revised our forecast as of today. The full year forecast has been revised upwards with sales of JPY 142 billion, EBITDA of JPY 27 billion and operating income of JPY 23 billion. Ordinary income has been revised to JPY 16.5 billion. This was due to the impact of losses from equity method investments and other factors.

As an extraordinary loss was recorded in Q2, net income is unchanged from the forecast at the beginning of the year at JPY 5 billion. Dividend forecast for the full year remains unchanged at JPY 110 based on the guiding principle of 5% of DOE. Please turn to Page 23. This is a breakdown of the forecast revisions.

The main reasons for the upward revision to sales are favorable performance by Digital Entertainment from Q1 through Q3, as well as favorable current trends. EBITDA has been revised upwards, taking into account the strong performance of Digital Entertainment, as well as improved cost efficiency in sports and across the company.

In summary, Q3 saw a steady improvement in earnings in all segments with Monster Strike performing well, the expansion of the FamilyAlbum economic sphere and the Sports segment recording its first positive EBITDA. We will continue to invest in our business and strive to increase earnings in the next financial year and beyond.

This concludes my explanation. Thank you very much.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]