CyberAgent Inc

TSE:4751

Earnings Call Transcript 2022-Q2

[Unknown Executive]

It is time. So we would like to begin CyberAgent's earnings briefing for FY 2022 second quarter. This session is being livestreamed. Please refer to the disclaimer indicated in the presentation material with respect to the content shared with you today. Our CEO, Fujita, will take you through the results.

[Susumu Fujita, executive]

This is the CEO, Fujita. So I would like to take you through the FY 2022 January to March second quarter earnings results.

First of all, overall, for the most part, our business has performed strongly, is doing well. So there's not really anything to say in particular. There's nothing really noteworthy for this quarter.

Overall, our sales increased by 16.9% year-on-year. We launched Uma Musume last year in the second quarter, but the OP is nearly the same as the previous year same quarter. And revenues from ABEMA-related businesses increased significantly and so the profitability has improved. And with respect to the Ad Business, sales and OP reached new record high this quarter. And with respect to games, we did have successful anniversaries. Therefore, sales and OP grew Q-on-Q.

This is the consolidated sales. After Uma Musume released -- was released, there was a boom following the release. And this quarter, there were some concern expressed about the impact from that, but we performed strongly. And the OP is not the highest, it's the second highest in the past. So it's nearly -- it's on the same level as the second highest OP.

And the SG&A is JPY 37.1 billion. We spent a little bit more on marketing expenses. There is nothing else in particular that should be mentioned with -- with respect to SG&A.

And the total headcount currently is 6,267 at the end of March. And as of April 1, we will be welcoming 349 new graduates. So the next quarter, you will see a jump in the number of employees.

And this is the profit loss statement.

And the balance sheet is here. So we have JPY 170 billion in terms of cash deposits as entire group.

We have also announced annual forecast. We haven't announced this in the past. Now that we're past the second half -- first half of the year, we know where our business is heading. So we have estimated the next half of the year, and the total for this year comes out to be JPY 700 billion, OP is JPY 70 billion.

Uma Musume was released last year and we want to overcome the impact from that and achieve a soft landing. But as you can see the top line, you can see that it's significantly jumped last fiscal year. Until then, we had a sudden increase. We went from JPY 480 billion to JPY 667 billion last year. But we would like to continue to grow all of our business and achieve a soft landing.

This is the detailed forecast, so we want to do a net profit of JPY 25 billion.

And this is the progress to date achievement rate. Sales is 51.7%, so we've done a little bit more than half.

And with respect to operation and ordinary profit, it's around 65%. So we are quite confident that we will be able to achieve the forecast that we have shared with you.

Now going forward, we would like to -- I would like to take you through the performance of each individual business. As I mentioned before in the beginning, Internet Ad business is doing very well. So we've achieved record sales. And likewise, the OP was also a record high. And not only have we achieved record high sales, but we have invested -- made upfront investments in AI and DX.

We are making upfront investments in DX especially in terms of collaborative DX. We are working together with strong big companies. We have alliances with large enterprises. And if these produce results, we believe that this will grow into another large revenue stream.

And this is something that I say each time, but we have the technology and also the operational capability that enables us to maximize advertising effectiveness. So this might seem normal, but we are able to grow stably because of this strength for many years.

Moving on to the Game Business. We released a huge hit last year, so -- of course, it's been quite difficult to handle the situation since. But for the last -- this quarter, we had an anniversary for Uma Musume, the first anniversary for Uma Musume, and also a Granblue Fantasy anniversary this year as well. So this also contributed to the growth quarter-on-quarter. And OP as well, we were able to achieve JPY 21 billion in OP.

With respect to Uma Musume, we've achieved more than 14 million downloads so far. So last year, it was very popular. But after 1 year, it's still -- we still have a very strong support from the audience. And from April 10, we started a new -- we launched the new TV commercial and you can still -- it's still on air, but it's generated a lot of buzz. So this is going to generate buzz and therefore we're seeing strong support for the property, the game.

And going forward, we will be releasing FINAL FANTASY and Jujutsu Kaisen. We have great expectations for these games. So we plan to release these games within the year.

Moving on to the Media business. Media Business, as well, doing well. And top line is growing, of course, steadily. And also the operating losses have improved. Likewise, we're not in the black yet. We're going to -- we're still making upfront investments. However, the situation is improving or it's growing steadily.

So ABEMA, we're investing -- making upfront investments and you can see that it's going very nicely. Especially, these are some of the popular titles. This fiscal year, we started airing the new series of Demon Slayer, so that's very popular. And We got married, this is our original title, and that became a huge hit as well. And also, we have different news programs as well. So that's also helping the viewership.

Having said that, we didn't have major events this quarter. But even after COVID, we have continued to grow very strongly. And recently, we have started airing MLB as well. It did support the growth last year -- last fiscal year and also started again. And compared to the last season, we're seeing viewership increased by 1.7x.

And in June, we will have Tenshin Nasukawa versus Takeru. This is a very high profile match or fight between these 2, and this will be aired -- offered as pay-per-view. So we will have that event happening in June.

And also, if you buy a new Amazon Fire TV series, you will see the ABEMA button on those devices' remote controls. So we will be available on even more devices as well. And if you buy a new TV, most of all new TVs will come with an ABEMA button on the remote control. So we believe that we are well equipped to expand viewership through TV as well.

And related to that, we announced this the other day, but November FIFA World Cup Qatar will be taking place and we will be airing all 64 matches live and for free on ABEMA. Of course, World Cup is the #1 content -- global content. So by airing this, we believe that this will contribute significantly to the recognition and awareness of ABEMA and its growth.

So ahead of the World Cup, we are using a lot of development resources for this -- to air this content. We want to actually offer very high-quality resolution, similar to the level offered through BS programs as well. But we have time-shifts as well as on-demand replay, various functionality as well to provide the one-of-a-kind viewing experience. And we believe that people who watch ABEMA, who watch these games in ABEMA will feel that they -- it is truly a unique experience, a truly great experience.

And in terms of sales, we've increased sales for ABEMA for all these different areas, advertising as well as the other properties, pay-per-view. And especially Keirin, online sports betting WINTICKET has grown at an accelerated pace.

So within the Keirin channel, we have original program MIDNIGHT KEIRIN which airs and this is helping to push this growth. But the Keirin market is actually growing recently by 1.3x. And even though the market is growing, we've also managed to grow our market share to 31%. So of course, we were latecomers and we started from 0, from scratch, this WINTICKET capability, but we -- our market growth is currently at 31%.

And so there's a strong affinity between ABEMA and WINTICKET. And we believe that we're able to compete with other players. We've shown -- proven that. And this is something I've said from the very -- for a long time, but we are going to have advertising and subscription business and also expand the related businesses as well. So we -- so we will accelerate our monetization efforts.

And this I also say quite -- have said many times as well. But with respect to media, we will continue to grow and invest in ABEMA and also continue to run the Advertising Business and Game Business and make sure that we can actually release -- generate a new revenue stream. So in the past, we've actually invested in the smartphone business or video content business and we want to make the new businesses more sustainable. But currently, we have Advertising Business and Game Business, and the profits that we receive from those businesses we are investing in the Media Business so it will become a stable revenue source in the future. And we are aiming to become a company with medium- to long-term supporters.

That's it for my presentation. Thank you very much.

[Unknown Executive]

This concludes CyberAgent's FY 2022 second quarter earning briefings. If you should have any questions, please contact the IR team. Thank you very much for joining us today.

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