Ateam Holdings Co., Ltd. (3662.T) Earnings Call Transcript & Summary

Thank you very much for watching the FY 2022 Q1 Earnings Results Briefing of Ateam Inc. First of all, I would like to inform you that we have modified the format of the presentation deck and are presenting the results under the new format starting this quarter. The way the information is presented is easier to look compared with the old format. And with the change in the format, some of the figures are available now in the appendix, so please refer to those if necessary. Okay. I will now begin. First, is an overview of our consolidated financial results for the first quarter of FY 2022. Revenue was JPY 7.334 billion; operating income, minus JPY 252 million; and net income, minus JPY 145 million. The slide shows the first quarter results by business segment. Lifestyle Support had a year-on-year increase in revenue and a decrease in profit and a quarter-on-quarter decrease in revenue and profit. The changes in the market environment for the financial media impacted the business resulting in a year-on-year decrease in profit. Segment revenue was JPY 5.021 billion. Segment profit was JPY 192 million. The Entertainment business had a year-on-year and quarter-on-quarter decrease in both revenue and profit. The existing titles remain on a downward trend. Seasonality was also unfavorable for the existing titles affecting the quarter-on-quarter performance. In addition, Final Fantasy VII: The First Soldier incurred its last portion of the development cost before the release of the title. In addition, prelaunch promotion expenses were incurred, which was another reason for the decline in profit. For Entertainment, segment revenue was JPY 1.479 billion and segment income was minus JPY 160 million, while the e-commerce business saw a year-on-year decrease in revenue and profit and quarter-on-quarter decrease in revenue and increase in profit. Negative profit for the quarter was caused by upfront investment. The end of the special demand for bicycles triggered by the COVID-19 pandemic brought down both revenue and profit segment revenue, JPY 833 million. Segment income was minus JPY 34 million. The breakdown of revenue in each business is shown on the right-hand side chart. This slide shows the trend of consolidated results. From here, the person in charge of each business will discuss the results.

This is Mase speaking. Let me explain about the Lifestyle Support business. First of all, revenue increased 5.8% year-on-year. In terms of revenue, bridal and other services continued to suffer from the impact of COVID-19. While other services performed well, resulting in an increase in the overall increase. As for profit, it was, as explained earlier in our briefing, financial media has undergone changes in the market environment and the bridal business continued to suffer the impact of COVID-19. Those are the factors behind the year-on-year decrease in profit. Lifestyle Support subsegment is shown here. This slide shows the trends on a quarterly basis. Digital marketing support was almost flat year-on-year as well as quarter-on-quarter. The platform business was up year-on-year and down quarter-on-quarter. The other segment was up both year-on-year and quarter-on-quarter. I will now explain the results by subsegment. As mentioned earlier, bridal business continued to be affected by the pandemic. During the first quarter, we were in the middle of a state of emergency, so the impact was particularly significant. Car and house moving related services remained strong, leading to a slight increase in the overall performance. The KPI trends for the digital marketing support business are as shown here on the slide. Originally, the number of users acquired for financial media was quite high, but it decreased due to the changes in the market environment. This has had a major impact on the acquisition volume, leading to a decline, especially on a year-on-year basis. The ARPU of financial media was originally higher than that of other services, such as car business and the house moving business. But unfortunately, it has also decreased. Here is the revenue trend of the platform business. Following the strong momentum from the past, Qiita and Qiita Jobs performed strongly resulting in a significant revenue growth of 22.9% compared with the same period of last year. As a key topic of the Lifestyle Support business, we will discuss some details about our house moving related web portal, Hikkoshi Samurai. So far, we focused on the strengthening of our marketing capabilities on the Internet, which has helped us grow the business to the current extent. From now on, we will not only do that, but also focus on products and services capabilities so that we are chosen by our customers. In other words, our new strength will be attractive offerings. This time, we have launched something called the Moving DX project. This is a new service, the first of its kind in the industry that allows customers to select a moving company and complete all the necessary processes for moving online. This service is a one-stop service that allows customers to complete the entire process, which has been consolidated; it was considered a cumbersome in the past, but it is consolidated online. Our goal is to provide an innovative moving experience to the customers. As the first step, we have released a beta version of our online quoting service. Up until now, similar services have been seen as not so convenient and it was not so good for customer experience. This is because customers ended up receiving many phone calls from moving companies. With this improvement, we have made it possible for customers to receive quotes online. We released the first such service in the industry on November 1. By continuing to improve the service, we hope to achieve the ultimate goal of Moving DX project. That's all from myself. Next is Mr. Nakauchi, on the Entertainment business.

Thank you. Let me start my presentation on the Entertainment business. Due to the down trend in the existing game titles and the seasonal factors, revenue decreased year-on-year. As for operating income, as explained earlier, it was minus JPY 1.06 billion due to development cost and pre-release promotion cost incurred for Final Fantasy VII: The First Soldier. This line chart shows the overseas revenue ratio. It is 34% now, almost unchanged from the last quarter when it was 35%. Next is the major topics for this business. On November 17, we were able to release Final Fantasy VII: The First Soldier, a new game title for the first time in a while. Currently, this title is not only released in Japan, but we are offering this globally. This new title has been very well received, especially among the large number of core customers. There are still some instabilities in this game app. We are fixing bugs and responding to customer requests as quickly as possible. We are planning to grow the app on a medium- to long-term basis. The current pipeline includes 2 new titles as discussed in the past. We are currently preparing for the launch. That's all from myself. Next is the presentation on the E-Commerce business by Mr. Mochizuki.

I would like to explain about the EC business. First of all, revenue decreased 13.5% year-on-year. As a result, profit was also negative. The reason for this is that the increase in demand triggered by pandemic has come to an end by the end of summer. And at the same time, our supply caught up with demand and then we had an oversupply situation. That's why we had a rather difficult August and September. On the other hand, we have already taken necessary action in those months and various marketing actions turned out to be successful. That's why from October, revenue started to grow again. Next is KPIs for the E-Commerce business. Gross profit is on a down trend and the biggest reason for this is the decrease in revenue. The same is true for the inventory turnover, which has also been affected by the decline in revenue. However, since revenue has already recovered in October, we expect it to recover accordingly. That's all from myself. Thank you.

Finally, I would like to talk about the FY 2022 guidance. As I told you last time, due to the impact of Final Fantasy VII: The First Soldier, our full year outlook is still unclear. We would like to wait until after we have assessed this impact and disclose the guidance around the time of the second quarter briefing. As for the dividend forecast, our plan is to pay JPY 16 per share. That is unchanged. This slide is a summary of our initiatives for FY 2022. Overall, our investments in the Lifestyle Support business and the Entertainment business over the last several years are finally showing financial return. I know that First Soldier has caused you some concern, but I believe that our investments in these businesses will flourish and will realize positive earnings this year. That's all I have for today. Thank you very much for your kind attention. [Statements in English on this transcript were spoken by an interpreter present on the live call.]