Mixi Inc

TSE:2121

Earnings Call Analysis

Company Raises Full-Year Forecasts

The company reported year-on-year net sales growth to JPY 41.2 billion, despite lower EBITDA and operating income, which stood at JPY 7.7 billion and JPY 6.6 billion respectively. These figures suffered due to significant promotion and operating costs within the MONSTER STRIKE series, although profitability still improved from the previous year. Spectator sports sales soared by 15.7% to JPY 8.4 billion. Digital entertainment revenue grew, particularly from MONSTER STRIKE, which also prompted the company to revise its full-year forecasts upwards to JPY 146 billion in net sales and JPY 22 billion in EBITDA. In light of this, an annual dividend of JPY 110 per share is declared, reflecting a 5% DOE.

Strong Sales Growth Despite Drop in Profits

The company witnessed a robust growth in net sales, reaching JPY 41.2 billion, an indication of positive market acceptance and revenue expansion. However, this growth did not translate to the bottom line as EBITDA and operating income declined year-on-year to JPY 7.7 billion and JPY 6.6 billion, respectively. The decreased profits are attributed to significant promotion costs linked to the 10th anniversary of MONSTER STRIKE, along with a set of nonoperating expenses including a JPY 2.2 billion goodwill impairment loss. Yet, due to a larger impairment the previous year, there was an increase in ordinary income and profit attributable to owners, which landed at JPY 4.4 billion and JPY 2.4 billion, respectively.

Segment Performance: Sports and Spectator Revenue Up, EBITDA Down

The Sports segment saw a hearty 15.7% increase in sales, amounting to JPY 8.4 billion, largely coming from ticket and merchandise revenues, with Spectator Sports and increases in TIPSTAR and Chariloto driving the surge. Despite a narrowing loss in Spectator Sports, the segment's EBITDA fell due to higher advertising expenditures in TIPSTAR and costs related to expanding overseas betting. The Spectator Sports business itself, with representative teams like the CHIBAJETS and FC TOKYO, drew more fans, contributing to sales growth.

Continued Expansion and Profitability in Betting

TIPSTAR and Chariloto maintained a collective 15.5% year-on-year sales boost—for reasons including effective year-end campaigns—and continued strong performance into the quarter. TIPSTAR, in particular, kept its profitability pace despite heightened campaign expenditures, showing resilience and adaptability in its business model.

Lifestyle Segment Grows Globally with Product Innovation

Lifestyle segment sales grew to JPY 6.1 billion, up 5.2%. This growth was not without its costs; aggressive investments in overseas user acquisition and organizational improvements led to a decline in EBITDA. The FamilyAlbum Economic Sphere introduced product releases and enhancements, demonstrating the company's commitment to global expansion and value creation through innovation.

Digital Entertainment Led by MONSTER STRIKE's Momentum

The Digital Entertainment segment's sales stood at JPY 26.6 billion with EBITDA of JPY 10.7 billion. Sales were fueled by MONSTER STRIKE's anniversary-led MAU growth, though EBITDA faced a slight decline due to significant anniversary investments. Meanwhile, Kotodaman exhibited a year-on-year increase, benefiting from its 5.5-year anniversary event.

Investment Segment Hurt by Valuation Losses

The Investment segment faced a setback with net sales turning negative due to the valuation losses sustained on some funds in the third quarter, indicating a need for reassessment of investment strategies or market contingencies.

Optimistic Upward Revision in Financial Forecast

The company has revised its full-year forecast upwards to JPY 146 billion in net sales, EBITDA of JPY 22 billion, operating income of JPY 18 billion, ordinary income of JPY 15 billion and a profit attributable to owners of JPY 9.5 billion. These revisions largely owe to robust ticket sales in the public betting sports business and impressive performance by MONSTER STRIKE. In tandem, the company announced an expected dividend of JPY 110 per share, signaling confidence in continued financial stability. It is noted, however, that the forecast does not incorporate potential future losses from affiliated companies—which the company committed to disclosing promptly if they materialize.

Commitment to Long-Term Growth and Investment

Highlighting the strategic moves throughout the fiscal year, the company detailed sustained growth in the sports segment, global user growth in Lifestyle, and the striking upside in MONSTER STRIKE's performance. The focus remains on creating long-term value and taking measures to enhance the business's scope and revenue streams—as evidenced by the continual investment in IP and user engagement strategies.

Earnings Call Transcript 2024-Q3

[Kohei Shimamura, executive]

Thank you very much for taking time out of your busy schedules today to attend this financial results briefing. My name is Shimamura, Senior Corporate Officer and CFO.

Today, I will be explaining based on the agenda shown on Page 2.

Please turn to Page 3. This is the executive summary. I will explain the details after this.

Please turn to Page 4. First, I will explain the financial status.

Please turn to Page 5. This is the quarterly consolidated income statement for Q3. Net sales grew year-on-year to JPY 41.2 billion. On the other hand, EBITDA and operating income were down year-on-year to JPY 7.7 billion and JPY 6.6 billion, respectively. The main reasons for lower income were MONSTER STRIKE 10th anniversary promotion costs and MONSTER STRIKE series operating costs due to nonoperating expenses of JPY 2.2 billion for goodwill impairment loss at an equity method affiliate and loss for ending 5 titles in the MONSTER STRIKE series. Ordinary income was JPY 4.4 billion. The profit attributable to owners of parent was JPY 2.4 billion. Since we had JPY 5.3 billion nonoperating expenses the year before for goodwill impairment, ordinary income and profit attributable to owners of parent increased.

Please turn to Page 6. This is a quarterly consolidated performance report.

Please turn to Page 7. From here, I will explain business status for each segment.

Please turn to Page 8. This is a review of the Sports segment. Sales increased 15.7% year-on-year to JPY 8.4 billion. The increase was mainly due to higher ticket and merchandise revenues in the Spectator Sports business and growth in ticket sales for TIPSTAR and Chariloto in the publicly managed betting sports. EBITDA was down year-on-year, although the loss in the Spectator Sports business, deficit narrowed. EBITDA for the publicly managed betting sports business deteriorated due to higher advertising expenses for TIPSTAR and cost for overseas betting market [indiscernible].

Please see Page 9. This is the situation of the Spectator Sports businesses. The CHIBAJETS represented the B League in the East Asian Super League. They won all the group stage matches and advanced to the final 4 event. FC TOKYO achieved record sales during the 2023 season, spectator count increased by about 30% from the previous year and was the second highest for the league. We will continue to apply our expertise to the operations of both teams to provide entertainment that will please even more fans.

Please turn to Page 10. This is a net sales trend for TIPSTAR and Chariloto. Sales increased 15.5% year-on-year. Excluding the impact of the accounting change that took effect from the end of the previous fiscal year, net sales increased 10.6% year-on-year. Both services were able to increase sales due to the success of year-end campaigns.

Please turn to Page 11. This is the status of TIPSTAR and Chariloto. TIPSTAR maintained profitability in Q3 despite campaign expenditures. We will continue to improve the product for further business expansion. For Chariloto, we were actively engaged in stadium operations and was selected as the preferred negotiation rights holder for Takamatsu Velodrome Redevelopment Project. We will continue to contribute to the creation of new value for the Keirin stadium and the revitalization of the local community.

Please turn to Page 12. I'd like to explain our Lifestyle segment.

Please look at Page 13. Sales increased 5.2% year-on-year to JPY 6.1 billion. In the FamilyAlbum Economic Sphere, sales of New Year cards declined slightly, but net sales increased due to growth in photo prints and others. EBITDA decreased year-on-year, mainly due to continued aggressive investment in overseas user acquisition and organizational improvements.

Please turn to Page 14. This is the state of the FamilyAlbum Economic Sphere. For FamilyAlbum, we continue to release new services in Japan and overseas. In Q3, new functions were added to FamilyAlbum Premium Pro launched in Q2 and FamilyAlbum calendars are now available overseas. Also, we started preorders of GPS Guardian with voice features, the latest model in the series. Last year, we were #1 in new users, and we aim to continue to increase revenue through increasing the number of users.

Please turn to Page 15. I will explain about the digital entertainment segment.

Please turn to Page 16. Net sales were JPY 26.6 billion, and EBITDA was JPY 10.7 billion. Sales of MONSTER STRIKE increased year-on-year due to higher MAU brought about by the 10th anniversary measures. EBITDA decreased slightly year-on-year. This was mainly due to larger than usual investments for the 10th anniversary to increase user enthusiasm and also due to an increase in operating costs for the MONSTER STRIKE series. Kotodaman sales and earnings increased year-on-year due mainly to the success of its 5.5-year anniversary event.

Please turn to Page 17. This is the status of MONSTER STRIKE. In Q3, we were able to continue to grow the MAU. In addition, sales exceeded both the previous year's level, [ our plan ], thanks to the success of various IP collaborations.

Please turn to Page 18. The performance of MONSTER STRIKE around New Year significantly exceeded the plan. We believe this is because we were able to increase MAU more than planned through our 10th anniversary measures and also because we were able to fully promote the appeal of new characters through streaming anime on YouTube. Although this title has reached its 10th anniversary, we gained confidence that we can maintain and improve its performance by investing in measures to increase user enthusiasm and in the development of attractive characters. We will continue to invest actively improve its IP and aim for its longevity.

Please turn to Page 19. I'd like to explain our Investment segment.

Please turn to Page 20. Net sales were negative due to valuation losses booked for some funds in Q3.

Please turn to Page 21. I explain about the revision of the results forecast.

Please turn to Page 22. We have revised our results forecast today. We have revised upward our full year forecast to net sales of JPY 146 billion, EBITDA of JPY 22 billion, operating income of JPY 18 billion, ordinary income of JPY 15 billion and profit attributable to owners of parent of JPY 9.5 billion. Although not reflected in the revised forecast, due to changes in the business environment, there is a possibility of losses in our affiliated companies going forward. We will promptly disclose the details as soon as they are confirmed. As for dividends, we have set the annual dividend of JPY 110 per share, which is based on a DOE of 5% as forecasted at the beginning of the fiscal year.

Please turn to Page 23. These are the major points for the segment performance forecast revisions. The upward revision of the net sales is mainly due to strong sales of tickets in the public betting sports business and strong performance of MONSTER STRIKE in digital entertainment. The upward revision of EBITDA is supported by strong performance of MONSTER STRIKE as well as lower operating cost due to ending the 5 titles in the MONSTER STRIKE series.

Please turn to Page 24. This shows our purpose presented at the beginning of the fiscal year. To date, the sports segment as a whole has achieved steady growth in sales, including strong performance at subsidiaries, and the Lifestyle segment has achieved global user growth and launched additional products in the FamilyAlbum Economic Sphere. In digital entertainment, we were able to generate a significant upside in MONSTER STRIKE. With 2 months left in the current fiscal year, we will continue our efforts to create upside in the business. That concludes my presentation. Thank you for your attention.

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