Kakaku.com Inc

TSE:2371

Earnings Call Transcript 2022-Q2

[Shonosuke Hata, executive]

Hello. This is Hata. Thank you very much for your time today. I am pleased to report our financial results for the second quarter of the fiscal year ending March 2022. In the first half of the fiscal year ending March 2022, sales were JPY 23.882 billion, up 9.8% year-on-year. Operating profit was JPY 8.121 billion, up 18.1%. Profit before income taxes were JPY 8.027 billion, up 22% year-on-year. Net income was JPY 5.774 billion, up 30%.

Although sales grew compared to the previous year, the first half of the fiscal year was affected by the declaration of the state of emergency, resulting in 42.8% in sales and 37.8% in operating profit as a percentage of the full year forecast.

Next, please refer to the quarterly consolidated operating expenses. While advertising expenses for Kakaku.com decreased, advertising expenses for New Media and Solutions and finance increased, in line with increasing sales revenue. In terms of commissions, agency commissions for Tabelog decreased due to the contract suspensions of restaurants. Outsourcing costs increased mainly due to development costs related to new businesses in Tabelog.

Please look at the graph for the first and second quarters on the right. There was no significant change in the cost structure between the first and second quarter. Moving on to the quarterly operating results by business, in the second quarter of the fiscal year ending March 2022, Kakaku.com accounted for 43.1% of total sales, Tabelog, 30.1% and New Media and Solutions and finance 26.8%. The Tabelog business was the most affected by the state-of-emergency declaration due to COVID-19. And as in the first quarter, it accounted for a little over 30% of total sales.

I will go into further detail on the following pages. Next, the operating results by business. This is a breakdown of sales for each of Kakaku.com, Tabelog and New Media and Solutions and finance for the second quarter and the first half of this year. For the first half of the fiscal year, Kakaku.com's sales in the shopping business were down 16.2% year-on-year.

The service business was down 4.1%, and the advertising business was up 6.9%. For Tabelog, the restaurant promotion business increased by 21.3%. The premium user memberships business decreased by 10.9%, and the advertising business increased by 1.1% year-on-year. For New Media and Solutions and finance, New Media and Solutions grew 61.2% year-on-year, and finance grew 14.2% year-on-year.

Next, I will talk about the operational progress of the Kakaku.com business. As for the shopping business, sales for the second quarter were down 10.7%. And as a result of delays in product launches and other supply disruptions caused by semiconductor shortage and stagnant distribution due to COVID-19, sales mainly from the comparison of durable goods decreased slightly. As for the service business, credit card and card loan sales slightly declined by 3.8%, reflecting the weakness in consumption involving going out.

In the advertising business, although the first half of the year as a whole saw an increase compared to the previous year, the second quarter alone saw a decrease of 2.5%, which was also slightly affected by the postponement of the launch of new PC and home appliance products due to the shortage of semiconductors.

Next are the details of the shopping business, although durable goods decreased by 16%, affected by the postponement of product launches and production adjustments of personal computers and large home appliances, consumer goods showed an increase of 7.6%, thanks also to growing e-commerce penetration. Here, you can see further details on Kakaku.com shopping. As shown in the graph on the left, titled Durables Comparison of Customer Referrals. Growth of customer referrals was affected by fewer products available for comparison and review on the site due to production cutbacks, particularly for large home appliances, such as LCD and OLED TVs, air conditioners, laptops and refrigerators and freezers.

On the right-hand side, I have included some examples of what we are focusing on in the consumables, which have continued to grow in the second quarter. Here, you can see the results for each category of the service business. Personal finance was down 4.3%. Telecommunications was up 7%. Automotive was down 15% and others was up 7.4%. The personal finance category declined slightly due to a slight negative impact on credit card issuance and card loan applications due to weak economic activity in terms of consumption involving going out and travel.

The automotive category declined 15%, which includes searches for used cars and new cars and the sale of used cars. Our analysis shows that we were affected strongly by the curb to production of new cars. On the left side of this page, trends related to the services business are described for each of the following areas: personal finance, telecommunications, automotive and others.

In telecommunications, the number of applications for overseas WiFi continues to be quite low and almost 0 due to the impact of COVID-19, but the number of applications for domestic optical fiber lines is increasing. Then please refer to the examples of our major initiatives on the right. As for credit cards, the number of issuances has been sluggish, decreasing slightly due to the impact of COVID-19, but we have increased the number of credit cards that can be compared, reviewed and applied for on the website by about 2.3x since last year.

As for the advertising business, sales in the second quarter saw a slight decline from the previous quarter, but the results were almost flat. We had originally set a higher target, but the results were slightly below our internal plan due to the postponement of the launch of new products and production adjustments, as you can see on the top of the page.

However, banner ads and tie-in ads, which are placed directly by clients through our own sales were the sales of our agencies increased slightly by 1.7%, despite this situation, network ads and listing ads decreased slightly, resulting in the figures shown here. Please refer to this graph titled Banner and Tie-in Ads Revenue By Industry. Home appliances manufacturers saw a 17.9% decrease year-on-year, and automobile manufacturers saw a 23.1% decrease year-on-year.

On the other hand, there was an increase in the placement of advertisements for other categories, excluding durable goods. And in the second quarter alone, the total amount of banner and tie-in ads increased slightly from last year. This concludes my explanation of the results for the Kakaku.com business. Next, I will explain some numbers that break down the progress in the Tabelog business. The number of online reservations has decreased due to the declaration of a state of emergency. Some fee-paying restaurants were unable to operate, and some of them suspended their contracts.

As a result, sales in the restaurant promotion business decreased compared to the second quarter of last year when the declaration of state of emergency had been lifted. Next is a graph showing the number of contracted restaurants. The number of contracted restaurants has increased considerably by about 2,700 since June, the end of the first quarter to 58,500 in September. As a breakdown of this figure, the number of restaurants paying only a performance-based fee, shown in dark Orange at the top of the graph, increased to 14,600, showing strong performance.

Next is a graph showing the number of online reservations. Under the state of emergency due to COVID-19, the trend for this second quarter is almost the same as in the first quarter with a cumulative total of 4.17 million people, which is almost the same as in the first quarter. As you can see in this graph, this number of online reservations is less than half of the fourth quarter of the year before last, when the COVID-19 pandemic just started.

Continuing on, I would like to report on the monthly fees we receive from each restaurant. On the left is the average monthly fee per restaurant for fixed fees. In this second quarter, a total of 43,900 restaurants had fixed fee contracts, and the average monthly fee was JPY 16,700. This is not the result of a change in the monthly fees themselves, but rather a decrease in the average monthly fee per contracted restaurant, including those that had suspended their contracts.

Next, on the right side, we have the average monthly rate per restaurant for the performance-based fee. The second quarter has 53,000 restaurants, the largest number to date for restaurants with performance-based fee. On the other hand, the average monthly fee is JPY 3,500 per restaurant, which is the same level as the number calculated by using the number of online reservations, as shown on Page 17. So the trend is similar to the first quarter.

However, there is a slight difference from the first quarter in that the average rate per restaurant was a little lower because the number of contracted restaurants has increased. Next, I will explain the current figures for Tabelog. Since the state of emergency has been lifted as of October. On the left side, we have the latest figures for online reservations for the week of October 25. The number of online reservations is 87.6% of that of the pre-COVID level, and it has been slowly increasing since the last week of September. If the number continues to rise steadily, it will exceed 100%. But compared to the beginning of February 2020, when the impact of COVID-19 had not yet been felt, we have not yet reached that level. The number of fee-paying restaurants is shown on the right.

In October, the number of restaurants grew even more than in September to 59,800. And at this rate, we are on track to exceed 60,000 restaurants. This concludes my explanation about the Tabelog business. Next, I will explain the results of New Media and Solutions and finance. First, the New Media and Solutions business is divided into 4 domains, recruitment, real estate, travel and transportation and entertainment and hobbies.

Sales for Kyujin box were quite strong in the second quarter as well, increasing 100% year-on-year, almost doubled from the last year. In real estate, the strong trend remains unchanged, with an increase of 22% from the previous year. As for travel and transportation, the result was an increase of 75.2% compared to last year, but this was due to the sharp decline in travel and transportation revenue in the first quarter of last year. The next category, entertainment and hobbies also showed a slight recovery, especially compared to last year when most movie theaters were closed, and there were no films released with an 11.2% increase compared to last year.

Then there is the finance business. This is Kakaku.com Insurance, an insurance agency, which continued to show a favorable trend with a 7.4% increase in the second quarter. Next is the operational progress of Kyujin box. Sales have almost doubled compared to last year, and the number of monthly users in the second quarter increased by 22.3% compared to last year, continuing the positive trend. The graph on the right shows the most frequently searched jobs in Kyujin box. The top graph is the composition ratio by employment type with from left to right, full-time employees of 32%, part-time employees of 31% and temporary employees of 12%.

The right side is 25% for others. The others category includes other types of employment, but there are also cases where a single job posting includes information on openings for full time, part-time and temporary employees. So the figure of 25% includes searches that could not be fully classified. The graph below shows the composition ratio by region. Although there is a slight concentration in inner city areas, I don't think there is a significant trend. We will keep you updated on these figures. Kyujin box lists all types of job postings for full time, part-time and temporary employees without discrimination.

So you might find information on changes year-over-year, useful. Sumaity has been strong as well. Sales increased by 22% year-on-year, and the number of monthly users also increased by 19.1%. Revenue from nonrental domains is shown on the right, we are now strengthening the areas, including buying, selling and renting out. Although the absolute number is still small, the nonrental domains have doubled compared to the previous year.

As for travel and transportation, revenue for LCL, which operates comparison sites for buses, increased 85.5% compared to last year. Although bus travel was much more active than under last year's state of emergency, sales were still less than half of what they would have been under normal circumstances in the second quarter.

On the other hand, Time Design was very strong in the second quarter with a 76.8% increase over the previous year. Even under the declaration of the state of emergency, there were few restrictions on domestic travel, and the recovery period was much faster than for the dining out. On the right side, you can see further details regarding Bus Hikaku Navi, LCL's comparison site for highway buses and bus tours and Time Design.

With Time Design, we used to offer a single hotel reservation for a single trip, but we have released a ramp trip function that allows you to book multiple hotels and flights at once. Next, we have the category of entertainment and hobbies. Movie-related sales are making a comeback with eiga.com sales up 70.4% in the second quarter. For gaie, the result was an increase of 29.1%. Sales of Kinarino were down 13.2% from the previous year. Revenue for Kinarino is comprised of e-commerce sales generated by Kinarino Mall and advertising sales. Since advertising sales are influenced by the budgets of individual advertisers, the result for the second quarter was a decline of 13.2%.

Our analysis shows, however, that the overall trend was almost flat for the 3 months. Finally, we have Kakaku.com Insurance. In this quarter, sales were up 7.4% compared to last year. So I think we continue to have a somewhat strong quarter. Kakaku.com Insurance is focusing on online insurance consultation, and the graph on the right shows the number of consultations. Although not as high as in the first quarter, the number of consultations continued to be strong, increasing by 160.5% year-on-year. This concludes my presentation of the operational progress and operating results for the first half and the second quarter, continuing on from Page 26 and onward, you will find information on future initiatives for each business.

Pages 27 and 28 show the policies of each business and the most recent initiatives, which I hope you have a look at later. Next, we have some examples of our major businesses. First, let's look at initiatives taken by the Kakaku.com. This shows our planned simulation function for smartphone fee plans. Smartphone fee plans are quite difficult to understand and search for. There is no media that offers solutions for this. So we're continuing to focus on the areas in which we are strongest, we will offer more convenient functions for searching for and comparing these fee plans to users.

There are a variety of plans available, including cell phone rates, and they are changing all the time. We are working on providing the latest information in real-time so that people can search for a plan that suits their needs. Here, we have examples of future initiatives for Tabelog, as I explained in previous financial results presentations. In addition to focusing on media, we are also working on solutions for restaurants to help revitalize the restaurant business. Next is our future business strategy.

Due to COVID 19, there were quite a few ups and downs in each business last year and in the first half of this fiscal year. As a result, it's difficult to evaluate the sales composition ratio but we will continue to increase sales from new businesses, including New Media and Solutions and creates a more optimal portfolio.

Finally, an overview of our ESG initiatives. This page shows our ESG initiatives undertaken within the Kakaku.com website. On Kakaku.com, we would like to further strengthen the function to support ESG-friendly shopping by providing easy-to-understand descriptions of Eco labels, such as the Eco Mark and the Energy Saving Label, mainly for durable goods. This concludes my brief presentation on our financial results for the second quarter.