Avex Inc. (7860) Earnings Call Transcript & Summary

Let me talk about our financial results for the first half of the fiscal year ending March 31, 2025. First, an overview of the consolidated business results. In the first half, net sales totaled JPY 56.1 billion. Operating profit was negative JPY 2.1 billion and profit attributable to owners of parent was JPY 1.6 billion. Factors behind the decrease in net sales included fewer live concerts at large venues and fewer releases of major music package titles compared to the previous year as well as the termination of services performed under contract in the digital video distribution business recorded in the previous year. We also continue to make investments for the creation of hit IPs as stated in the medium-term management plan and general expenses increased. We posted an operating loss compared to an operating profit for the same period in the previous year. Although overall profit attributable to owners of parent was positive due to factors, including recording a gain on the sale of a subsidiary, it was down from the previous fiscal year, reflecting the decrease in operating profit. The full year performance forecast has been left unchanged as major live concerts and releases of major titles are scheduled in the second half. Next, let's move on to consolidated net sales. As I said in the overview of consolidated results, sales decreased from last year with net sales just slightly above the level of 2 years ago. Now details of the consolidated statements of income. Looking at the gross profit margin, there were fewer live concerts at large venues, which have relatively high margins and fewer releases of major titles compared to the previous year. These factors, along with the termination of services performed under contract in the digital video distribution business led to a decrease in the gross profit margin. In SG&A expenses, we recorded a provision for doubtful accounts and general expenses increased. As a result, we posted an operating loss compared to an operating profit for the same period in the previous year. Next, results by segment. In the Anime & Visual Content business, sales and profit increased on the strong box office performance of an animated film title. However, in the Music business, sales and profit both decreased mainly for the reasons I just outlined. I will now explain the status of each segment. First, the Music business. Net sales and operating profit declined due to fewer live concerts. Decreases in merchandising and package title releases and a decrease in other, which included services performed under contract in the digital video distribution business in the previous year. Regarding KPIs related to live concerts, although the number of arena performances increased, the number of large venue stadium concerts declined from the previous year, resulting in a decrease in total audience numbers. On the other hand, despite the decline in the number of live concerts at large venues, which have high ticket prices, average ticket prices increased overall as the increased number of premium seats at Arena and other performances helped boost the average price. In music package KPIs, the number of units sold in all formats declined due to a decrease in major titles. Net sales in the Music business mirrored consolidated results as a whole. Sales declined from last year and were near the same level as 2 years ago. In the Anime & Visual Content business, net sales and operating profit both increased strongly, driven by growth in box office revenues from a hit animated film title. In other businesses, net sales and operating profit declined because the anime event held in Saudi Arabia last year did not take place this year. That concludes the overview of financial results for the first half of the fiscal year ending March 31, 2025. Next, our business progress and future outlook. The financial forecast for the fiscal year ending March 31, 2025, that we announced in June is unchanged. As I mentioned, results through the end of the second quarter diverged from the full year forecast figures, but live concerts at large venues and the release of major music package titles are scheduled in the second half. Because of that, we anticipate that results will recover in the second half. So we have not changed our forecast for operating profit of JPY 2.0 billion and profit attributable to owners of parent of JPY 4.5 billion. Here, you can see the relatively large concerts and title releases that have already taken place or are scheduled in the Music business and the Anime and Visual Content business. Compared with the first half, more live concerts and title releases are scheduled in the second half. So for that reason, we are not changing our guidance. Regarding the status of our businesses, first, we will look at one of our artists, XG. XG kicked off their world tour in Osaka and Yokohama in May this year and finished the Asia and North America legs of the tour on a strong note. They will continue to Europe with additional shows scheduled in Japan later this fiscal year. Next is ONE OR EIGHT, a boy band that is aiming to release global hits. They debuted in August and the number of streaming plays, including viewers from outside Japan, is climbing steadily. ONE OR EIGHT consists of members selected through the Avex Youth audition program, which scouts talent and nurtures IP for the Avex Group. We brought in creative talent using the network of Avex USA in Los Angeles and are actively carrying out promotion overseas. Moving on, we have the animated film, Look Back. It has been a hit in Japan with an audience of over 1 million and grossing more than JPY 2 billion in box office revenue. The film has also been very well received by overseas audiences. It has now begun playing in theaters overseas and the number of people who have gone to see it is steadily growing. It will also begin streaming on Amazon Prime worldwide and is a title that can be expected to bring further revenues. Pages 17 to 19 show some of our major artists, live concert IPs and the activities of actors and talent. I encourage you to check this information out for yourself. That concludes my explanation of results for the first half of the current fiscal year.