Kakaku.com Inc

TSE:2371

Earnings Call Transcript 2020-Q1

[Shonosuke Hata, executive]

Good afternoon. I'm Shonosuke Hata. Thank you very much for attending today's briefing despite the sweltering heat. Today, I will provide a summary of Kakaku.com, Inc.'s operating results for the first quarter of the fiscal year ending March 2020. Please take a look at the materials on your desk or in the projected screen in the middle of the room.

Okay. Let's get started. Page 3 shows our results for the first quarter. We posted revenue of JPY 14,224 million, a 13.7% year-on-year increase. This is 22.9% of our forecast revenue for the full fiscal year. Operating profit was JPY 6,448 million, a 16% year-on-year increase and 24.2% of our forecast operating profit for the full fiscal year.

Also, our operating margin in the first quarter was 45.3%. Profit before income taxes increased 14.5% year-on-year and the achievement ratio versus our full year forecast was 23.9%. Profit attributable to owners of the parent company was JPY 4,325 million, which was 22.4% higher than the same quarter of the previous year and 24% of our forecast for the full fiscal year. This 22.4% year-on-year increase seems quite large but this is due to the fact that we booked one-time taxes in the first quarter of last year. If you exclude this, progress was basically the same as the other items.

Moving to Page 5. I will discuss the breakdown of these results. First of all, Kakaku.com posted quarterly revenue of JPY 5,597 million while Tabelog earned a quarterly revenue of JPY 6,313 million. New media and Solution and Finance posted quarterly revenue of JPY 2,313 million. The new media and Solution and Finance segment accounted for 16.3% of total revenue as the segment is making progress as planned. I will discuss each business segment later.

Page 6 shows the breakdown of quarterly operating costs. Operating costs were roughly the same as in the third quarter of the previous fiscal year and if you compare the 2, you will see this. Advertising costs and commissions were on a declining trend in the first quarter but the cost structure was basically the same as before.

From Page 8 onward, I will discuss the results of each business segment. First, please look at Page 8, which provides an overall summary. Kakaku.com earned revenue of JPY 5,597 million This marked an 8% year-on-year increase. Revenue from the Shopping business increased 0.4%, while Service business revenue jumped 14.2%, and Advertising revenue grew by 13% year-on-year.

For Tabelog, overall revenue was JPY 6,313 million, a 10.7% year-on-year increase. Revenue from the Restaurant Promotion business grew 18.5% year-on-year while revenue from the Premium Memberships business declined 18.9% and Advertising business revenue fell 9.7%.

Total revenue in the New Media and Solution and Finance segments was JPY 2,313 million, an increase of 41.8% year-on-year. Of this, New Media and Solutions revenue grew 48.7% while revenue from the Finance business of Kakaku.com Insurance increased 19.4% year-on-year.

Page 9 shows Kakaku.com's operational progress. In the shopping Business, revenue in the consumer goods category declined while revenue in Durable Goods and other categories increased. As price cuts for PC parts spurred interest from shoppers, customer referrals for our PC parts increased significantly. Sales of PCs themselves were also extremely strong in the first quarter.

Page 10 covers the Service business and the Advertising business. The Service business performed extremely well as revenue in the Personal Finance category increased to 25.9% year-on-year.

In the Telecommunications category, revenue increased by 10.9%, while there was an 8.1% increase in the Automobile category and a 14.6% increase in Moving Companies and other. The advertising business also performed well overall as revenue in the overall advertising business increased 13% year-on-year.

Starting from Page 11, I will discuss Tabelog's operational progress. In terms of Tabelog's KPI, the number of fee-paying restaurants stands at 57,900 as of the end of June. Of these, 38,700 restaurants are on new fee plans.

Page 12 illustrates how the number of seat reservations in the first quarter increased 35.3% year-on-year and shows that the average monthly revenue per restaurant was JPY 29,900. This figure was just about what we had internally forecast.

Moving along. Page 13 shows the operational progress of the New Media and Solution and Finance segment. First of all, revenue of the New Media and Solutions segments businesses were almost all at or above our forecast. Of those businesses, Sumaity grew its revenue by 40.6% while LCL increased its revenue by 27.8%, meaning progress was generally in line with our forecasts.

Page 13 also shows the number of monthly users and the quarterly revenue for Kyujin Box. Kyujin Box made very solid progress with a number of monthly users exceeding 4 million in June, which was a 209.1% year-on-year increase. Kyujin Box's revenue in the first quarter was extremely strong at 33.1% higher than in the fourth quarter of last year, despite it not being such a busy quarter for recruiting.

Page 14 shows the progress on KPI for Kakaku.com Insurance and Time Design. For Kakaku.com Insurance, pet insurance results in particular were extremely good. Pet insurance saw a sharp year-on-year increases in both monthly users and revenue.

Time Design added more contracted lodging facilities, largely as planned. Contracts with overseas hotels increased, in particular, with the number of facilities more than quadrupling. This concludes my discussion of the business results for the first quarter.

From Page 16 onward, I will discuss some of our initiatives going forward. On Page 16, we once again show our goal of increasing the combined sales contribution of the New Media and Solutions segment and the Finance segment while we also grow overall revenue. Our goal of increasing the ratio to 20% as a mid- to long-range target has not changed and it is already at 16.3%. So we think we will be able to reach our target of 20% quickly. The pages thereafter show some future initiatives in each business segment. Up until now, we have presented information in the order of Kakaku.com, then Tabelog, then New Media. But today, I would like to start with New Media and Solution, which is the segment we are focusing the most on.

Page 17 first shows the key areas in which we will work to further strengthen Kyujin Box. The first key area is information on job listings and the second key area is additional job search support for registered members, including the auto filling of job application forms, providing job opening recommendations and saving submitted job applications. There are many extremely technical aspects but these efforts are squarely aimed at enhancing the content and increasing the number of users.

In addition, concerning direct postings of job openings on the Saiyo Board, we will not only include information that is on job posting sites but we will increase the job posting information that companies can post directly so that we can stay a step ahead of our competitors.

Next, almost all of Sumaity's revenue comes from the rental housing domain. Revenue is up significantly this year and we think this pace will continue going forward. Sumaity's number of unique users is growing rapidly and there are already 3 million to 4 million monthly users. We will expand content and domains other than rental housing and pursue revenue growth with specific plans.

Page 18 covers some future initiatives relating to Kakaku.com Insurance and Time Design. For Kakaku.com Insurance, we will first have customers look at a variety of insurance-related information on the website and then sell insurance products based on consultations, as necessary.

One example of further enhancing the content of both consultations in the site is the addition of insurance assessments.

In addition, we will grow media and sales force to be supported by users.

Meanwhile with Time Design, we will look to provide the system to hotels around the world, to enable us to provide services to all types of users around the world. We are making significant progress on our initiative to provide a system compatible with a wide range of languages and currencies to all hotels, thereby allowing more people to use the service.

Page 19 shows some future initiatives for Kakaku.com. For consumer goods over the past few years, we have talked about bolstering our initiatives and have made efforts toward this but consumer goods revenue performance was poor last year and in this latest first quarter. Whether or not we spend money on advertising also had an impact in certain areas. For consumer goods, we will offer appropriate content in all categories. One such example is making content more detailed and easier to view by showing optimal rankings that are in alignment with users' motivations for buying merchandise. The smartphone category used to be a very difficult category to organize, partially due to the fact that smartphone handsets and communication lines were sold as a set. But with the changes in the smartphone industry, in conjunction with the complete separation of handset costs and data costs, it has become easy to create content. We will make the category easier to understand with respect to purchases of smartphones themselves, contracts with carriers and SIM card contracts and we will prepare for significantly increased demand going forward.

Page 20 shows Tabelog's initiatives going forward. The page shows the KPIs we will use as we work toward achieving our major target of increasing online reservations. Our targets for this fiscal year are to increase the number of fee-paying restaurants to 60,000 and the monthly revenue per restaurant to JPY 31,000 by March 2020.

Our medium- to long-term goal is to have 80,000 to 100,000 fee-paying restaurants and monthly revenue per restaurant of JPY 40,000 to JPY 50,000.

Currently, the online share of reservations is believed to be approximately 30%. Our aim is to expand Tabelog's restaurant promotion business by increasing the number of users, the number of restaurants and boosting the percentage of reservations made online.

This concludes my presentation summarizing the first quarter operating results. Thank you very much.