DeNA Co Ltd

TSE:2432

Earnings Call Transcript 2020-Q1

[Isao Moriyasu, executive]

I would now like to start the DeNA Q1 fiscal year 2019 operating results briefing. First, I'd like to discuss the financial results summary. Revenue was JPY 31.4 billion for Q1, which is down on a year-on-year basis. As mentioned in the footnote, last fiscal year, in Q1, we had DeNA Travel and Paygent included in our consolidated results. But as of this fiscal year, they are not included in our consolidated financial performance. If we exclude them, revenue was slightly up year-on-year. IFRS operating profit was JPY 2.3 billion and non-GAAP operating profit was JPY 2.2 billion. Both of these were down year-on-year. The main factors behind this were the performance of the Game business, which was down year-on-year, and the increased investment in new businesses including automotive and health care.

Next is the financial results summary by segment. What I explained on the previous slide is clear here.

Looking at our revenue and operating profit by segment. We have reorganized our segments, and now e-commerce is included in New Businesses and Others. As I mentioned, now DeNA Travel and Paygent are not included in consolidated financial performance.

Looking at New Businesses and Others, excluding those businesses, social live streaming is the main business and its revenue grew year-on-year.

Next is the cost and expense breakdown. I would like to point out that the sale of Paygent was completed at the end of Q4, which led to a decrease in commission fees and cost of sales. This was a major change factor.

On the next slide, we have 2 charts showing the virtual currency consumption and Game business segment operating profit. One characteristic of our Game business is that Q4 generally has holiday season events and anniversary events in some key titles, so it usually has strong performance.

On the other hand, Q1 is usually weak. This is typical seasonality. Also a relatively large number of our existing titles are several years old now. So overall, we are seeing gradual declining trends in top line and bottom line.

This fiscal year, we have 2 exciting titles we have already mentioned that are scheduled to launch in summer. We're working hard on these titles to have them turn around the downward trends in top and bottom line from Q2 into Q3.

The first of the exciting new titles I mentioned is Mario Kart Tour, a Nintendo partnership title. We have already had a closed beta test in Japan and the U.S., and now based on the results of that beta test, we are working on improvements and updates for the game. We're making good progress towards our scheduled summer launch.

The second exciting new title is a partnership title with the Pokémon company called Pokémon Masters. Since the last operating results briefing, we have provided several updates. Pokémon Masters is now open for preregistration on both the App Store and Google Play. We also have a preview version available on Android in some areas, specifically, Singapore and Canada.

One unique characteristic of this game is that it features synced pairs of a trainer and partner Pokémon. These synced pairs work together in battle. As you can see in the image on the right of the slide, you can enjoy working together with other players in a 3-on-3 battle.

For this game, DeNA is handling both the front end and back-end development and live operations. DeNA is also the publisher.

The game business overall has been in a declining revenue trend, but we are looking to turn that around through Mario Kart Tour and Pokémon Masters.

Now I would like to talk about sports. On the right, we have our home game average stadium attendance. As you can see, for the last few years, we have essentially been at capacity, and recently, we added new seats as a part of our stadium expansion. And even with these additions, we are still almost at capacity every game. So this business is doing well.

The team itself is also doing great, and we're in a position to go after the championship. We're excited about the high likelihood of participating in post-season events.

On the next slide, we have some images to share how the stadium looks now. The right-hand stands and new VIP rooms behind the back net were the main areas of expansion. It is hard to see on the slide. But on the left-hand side, which we call the Star side, there are still some areas under construction. Next season, we expect to add about 2,000 to 3,000 seats.

We are also doing various events to drive excitement. We're using both the newly added stand space and various events to provide more enjoyment to fans, and this is going well.

Now I would like to touch on one of the main businesses in our automotive business called MOV, which is a focus for investment. We launched in April 2018 in Kanagawa and then expanded into Tokyo in December 2018. We are seeing good growth in daily dispatches.

From July this year, we launched in the Osaka and Kyoto areas. Tokyo, Osaka and Kyoto are all important areas of focus for us, and operator acquisition is going well. We aim to be the #1 in terms of both the share of vehicles on our platform and the number of users who are using this type of taxi dispatch app.

Next, I will discuss the Healthcare business, specifically, insurance integrated with wellness programs. We have finally launched our first product, which came out in June. This is a product jointly developed with MetLife Insurance and is a group insurance product.

We are making use of the evidence of how we can encourage users to change their behavior and how that results in fewer users getting sick and reduced costs for medical care in the formation of this insurance product. We hope that this service will help customers maintain and better their health. This product is the first one so far, and we are working with a variety of insurance companies to expand our lineup of similar products in the future. This concludes my presentation. Thank you.

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