DeNA Co Ltd

TSE:2432

Earnings Call Analysis

Strong growth in revenue and new game launch highlights investor optimism

In the second quarter of fiscal year 2024, revenue rose to JPY 36.3 billion with a non-GAAP operating profit of JPY 4.0 billion, marking growth year-over-year. The Pokémon Trading Card Game Pocket launched on October 30, 2024, quickly achieving 10 million downloads. The Sports segment thrived, highlighted by a record attendance of 2.36 million at home games. The Live Streaming business plans to shift focus toward profitability, while Healthcare aims for increased revenue in the second half. Overall, the company is optimistic about maintaining momentum across its segments, targeting continued growth despite challenging conditions in specific areas.

Financial Overview: Growth and Profitability

In the second quarter of fiscal year 2024, the company's revenue reached JPY 36.3 billion, marking a solid performance in light of current market conditions. The operating profit stood at JPY 3.6 billion based on IFRS standards, while a non-GAAP operating profit was reported at JPY 4.0 billion. Notably, the non-GAAP operating profit indicated growth both quarter-over-quarter and year-over-year, reflecting the company's strong fundamentals and cost management strategies.

Game Business Restructuring

The Game segment has seen substantial changes, particularly with a significant reduction in operations in China, following a strategic decision made in February 2024. This is part of a broader effort to streamline costs while maintaining profitability. A highlight in this division is the launch of the Pokémon Trading Card Game Pocket, which debuted on October 30, 2024, and has already achieved 10 million downloads in just a matter of days. Such rapid adoption highlights the potential for sustained revenue through gaming.

Live Streaming Initiatives: Balancing Marketing and Profit

In the Live Streaming business, particularly through Pococha Japan, the company focused heavily on marketing initiatives in the first half of the fiscal year, including enhanced TV campaigns. While this increased user downloads to 6.32 million by the end of September 2024, these efforts did not translate significantly into revenue, leading to a reassessment of the marketing expenditure. From the second half onward, the emphasis will shift more towards sustaining user engagement and achieving profitability.

Sports Business Performance: A Record-Setting Year

The Sports division has excelled, with the company successfully winning the Japan Series, contributing to a record stadium attendance of 2.36 million for the regular season. This figure represents a 96% utilization rate of stadium capacity, highlighting the strong fan engagement and the positive impact of successful team performance on revenue streams. Despite fewer games being played compared to the previous year, the financial outcomes were improved.

Healthcare & Medical: Forward-Looking Strategies

The Healthcare and Medical business appears poised for growth in the second half of the fiscal year. While the company anticipates a year-over-year increase in revenue and profit, it faces challenges due to the regularization of demand after a peak last fiscal year. The deployment of Join, a communication platform for medical practitioners, expanded to 523 facilities, showcasing effective outreach and support from government initiatives. The focus will soon be on ramping up projects that leverage mobile care solutions to address regional healthcare needs.

Outlook and Guidance for Growth

Overall, the company is gearing up for the second half of fiscal year 2024 with plans for continuous improvement across all business segments. Although specific revenue growth figures were not highlighted, the company’s strategic adjustments indicate a clear direction toward enhancing profitability and user engagement in various sectors. With ongoing developments in technology and careful cost management, investors can be optimistic about the company's trajectory moving forward.

Earnings Call Transcript 2025-Q2

[Shingo Okamura, executive]

Hello, everyone. Thank you for joining us for our presentation of the operating results briefing for the second quarter of fiscal year 2024.

First, I will start with our financial results summary. Revenue was JPY 36.3 billion. We had an IFRS operating profit of JPY 3.6 billion. We had a non-GAAP operating profit of JPY 4.0 billion. For non-GAAP operating profit, in particular, which is a key metric for us, we saw growth quarter-over-quarter as well as year-over-year. That's a positive takeaway.

Next are the financial results by segment. Sports in particular, has been going well. But rather than going into detail now, I'll explain further during the individual business sections later. And here is the cost and expense breakdown. I have no particular comments to share about this today.

Now I would like to discuss our progress for each of our businesses. First, in the Game business, our first half profit increased year-over-year. Please take a look at the graphs below. In the first half, we have been making sure to control our costs and secure profit. I want to mention that we are making steady progress in the significant downsizing of the game business in China that was announced in February 2024.

To give an example, we made our decision about Takt Ops. And in general, we review the operations of each title and are ensuring that we have good control in place.

One particular update I would like to share is about Pokémon Trading Card Game Pocket, a Pokémon card game for smartphones. This is an app that lets you casually collect globally beloved Pokémon cards. The service was launched on October 30, 2024, in 150 countries and regions, and we're off to a good start, having quickly achieved 10 million downloads globally, which was announced on November 1. We are planning various measures to ensure the game is enjoyed long term, including in-game events and various updates such as implementing the trading function.

Next is the Live Streaming business. In Pococha Japan, we enhanced marketing, including TV commercials in the first half of fiscal year 2024. Towards the second half, we are placing a greater focus on profitability and aim for a buildup of profit. A key takeaway here is that our first half performance was impacted by our marketing efforts.

I'll start with Pococha Japan. Again, we strengthened TV and other marketing with the aim to spread awareness of Pococha and downloads in Japan reached 6.32 million as of September 30, 2024. However, we have been carefully running analysis and revenue contribution was limited. So we are reviewing the cost of marketing initiatives, et cetera, from the second half and focusing on maintaining and enhancing user engagement and securing profitability.

Another important business here is IRIAM. IRIAM achieved 3.91 million downloads as of September 30, 2024, and continues to see active use. I've mentioned a few times how we are prioritizing sound community development, while also aiming to achieve revenue growth and early profitability. You can see for yourselves how well we are doing by looking at the graphs on this slide.

Next is the Sports business. We had solid performance for the first half, especially if you see the number of games per quarter at the bottom of the slide, we had fewer games this Q1 and Q2 than last fiscal year. But despite that, our performance reached higher levels. To mention a little about Q3, as you may know, we had some regular season games slide into October. And we were able to have some of the Japan series games in our home stadium.

For the Climax series, we did not have games in our home stadium since we were ranked third, but we had public viewing set up in Yokohama Stadium, where we welcomed many fans. Of course, we are cognizant of the need to be careful with costs. But the takeaway here is that we are improving our performance for the sports business year-over-year. More specifically, just in the past few days, we progressed all the way through the Climax series and on to win the Japan Series. Everyone in Yokohama is thrilled. Thanks to the support of our fans, our stadium attendance for the 2024 season home games reached a record high for the team at 2.36 million.

In terms of capacity for the stadium, we were running at about 96%. I should also mention that the record high of 2.36 million is for the regular season. This does not include the Japan Series. For the 3 games that were home games, total attendance was about 100,000 people. That's a plus. There was a lot of excitement at Yokohama Stadium.

Next is the Healthcare & Medical business. The first half is a time when we are working on preparations for the second half. In each area, we are making progress towards a year-over-year increase in full year revenue and profit. We aim to share good results in the second half. I'll start with the Healthcare area.

In the Data Use business, we are making progress in building pipeline towards the demand period in the second half. Achieving good growth here is important. If you look at the KPI on the bottom right, the number of transactions is steadily growing, showing the increasing needs for our data. Meanwhile, for Data Health, which is targeting local municipalities, it's important to point out that this year is not a Japanese government data health plan formulation year. Last fiscal year was.

So during that year, local municipalities had to set their data health plan, which drove demand. But this fiscal year is just a regular year. So we expect the number of orders to not be at the level of last fiscal year, but instead to decline to a level similar to fiscal year 2022. Of course, we are proceeding with cost efficiency efforts to achieve growth in the next fiscal year onward.

We also have the medical area. We expect acceleration in individual facility deployment in each region this fiscal year through various efforts, including support from the national government's medical digital transformation and working style reform initiatives. The number of facilities using Join in Japan grew to 523 as of September 30, 2024, and examples of deployment through local municipality subsidies, et cetera, expanded into 16 prefectures. This shows how well Join, which is a communication platform for medical practitioners, is spreading into medical facilities in Japan.

But beyond that, we are also making progress in detailed discussions for projects leveraging Join Mobile Care, which combines portable medical devices and Join, which I introduced last time, to address regional medical resource shortages with the aim to achieve contribution this fiscal year. We aim to share more updates on our progress in the second half.

This concludes my brief presentation for the second quarter of fiscal year 2024. Thank you for your attention.

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