CyberAgent, Inc. (4751) Earnings Call Transcript & Summary

We would like to begin CyberAgent's FY 2025 Second Quarter Earnings Briefing. This session is being streamed. With respect to the content we will share with you today, please refer to the disclaimer included in the presentation material. President and CEO, Fujita, will take you through the earnings results.

I'm the President, Fujita. We would like to first start by apologizing for the inappropriate accounting practices we discovered at the consolidated subsidiary. So we have corrected the past annual securities report. We apologize for the inconvenience caused. We would like to now take you through the financial earnings results from January to March 2025. The recent results have been overall quite healthy. It's doing well compared to the previous fiscal year. In the previous fiscal year, we released the console game, and we made an upward revision last year in the second quarter, but it's a console game. So immediately after release, we saw concentration of sales, and we knew that it was going to be a tough quarter this fiscal year. But overall, we've achieved our targets. So in terms of the content, we've done better than last fiscal year. The Media & IP Business, OP was 6.5x of the last fiscal year. So it's grown significantly. And in terms of the Ad Business, sales and OP both increased. And with respect to the Game Business, I mentioned the console game that we released last year. So bearing that in mind, the sales and OP have decreased. But Q-on-Q, we've seen significant improvement, increases. And we have also released big titles since. So overall, we're in a very good position. This is the consolidated sales. The consolidated sales for this fiscal -- this quarter reached JPY 217 billion. So the revenue has gone up. And we -- it has increased slightly higher, about JPY 100 million since last year. This is not something that we aimed at, but we saw that the console game last year was a very big hit. We had to make upward revisions, but we were -- we have overcome that, and we were able to increase our profits during this period. SG&A, there are no major changes. It's as usual. The number of employees as well. We've seen the same trends in April. We do welcome many new graduates. So next fiscal year, we will see a significant increase in the number of employees. PL is, as you can see here, as well as the balance sheet, no major changes here either. This is the fiscal year forecast. So sales, JPY 820 billion, OP JPY 42 billion. So this includes the response from the console game we released last fiscal year. But as of the end of the second quarter, sales and operating profit both, we have achieved our first half target. So first quarter, we thought we were on track. But after the second quarter, we've seen that we will be able to achieve. We have overachieved slightly. And we would like to go into the individual segments. First, starting with Media & IP. So we have continued to increase sales. Sales increase by building a multilayer revenue stream. And we believe that we will be able to continue to increase profits. ABEMA's WAU, we streamed MLB this fiscal year as well. So we hope that this will be in that platform. We have been focusing on improving our quality of content, drama and variety programs, and we're seeing our efforts bear fruit. So Dead or Love is actually offered on Netflix at the same time, but it's been in top 10 for a very long time. And also Love Power Kingdom is a new dating reality show, but it is a big hit, even though it's new, so we would like to nurture this as a new IP. Of course, the one that you see below, the half of the junior and high school students are watching this. It's very popular amongst the younger audience. So we believe that we have been able to produce high-quality content. With respect to the IP business, we haven't really mentioned this, and you might think that we're suddenly investing in anime. But from 2018, we've actually invested in small amounts creating relationships with production firms. And now we are taking a more leading role, and we hope to accelerate our efforts in this area going forward. So since ABEMA's launch, we have been expanding our IP business. So Uma Musume Anime and Game became a good, huge hit during this time. So Anime Manga, we want to fortify our capabilities in this area in merchandising. So we would like to take on a wide range of businesses involving IP. And recently, we established a CA America, a subsidiary in the U.S., and we will conduct marketing activities there. And MANGA APARTMENT, we have also opened the doors to the MANGA APARTMENT, and we welcome many talented young MANGA artists. So we hope that these efforts will bear fruit. And CA Soa is anime production company led by Ogawa-san, and this has also launched as well. We want to start upstream and stream on ABEMA, do marketing and events and merchandising and take this global and create games as well. So we have been successfully developing our IP ecosystem, and we want to continue to expand this. Moving on to the Internet Ad Business. With respect to the Internet Ad Business, we have continued to see nearly double-digit growth in sales. And OP as well, it's not near double digit, but it's close. So it's continued to grow at a very high rate. our strength in Internet Ad Business is that we have great operational know-how and technological progress, so we can produce the desired impact. But recently, what is new is that we have created a graphs and analyzed the performance of advertising. And so we have provided AI agents that can help with analysis and improve operational efficiency. And it's come -- it's become such a quality that now we can start offering it to external clients. So we have started to sell the AI agents as AI workers from March of this year. Moving on to the Game Business. Last year, the graph jumped quite significantly. This is due to the console game we launched February 1 of last year. But of course, this year, we didn't see benefits from that. But still Q-on-Q, we have been able to increase our sales. This is for January to March. So we haven't -- this hasn't been reflected in the second quarter results yet, but Gundam is doing very well already, and the user feedback has been great. And we're very much looking forward to its performance in the future. In 2025 -- FY 2025, we will be launching 6 titles, and we've already started providing 4. Gundam is one, but we also have Chiikawa, SAKAMOTO DAYS. So these have been performing as we had expected. And under the Act on Promotion of Competition for Specified Smartphone Software, external payment method has been introduced. So until now, the Game division was paying huge platform commission fees. But by using external payment options, the profitability of the games will significantly increase. So we have high hopes that this will increase our profitability for games. Lastly, mid- to long-term strategy. So Game and Internet Ads was contributing to profit, and we were investing in the Media business going forward, but the Media & IP business is now driving profitability. So we hope that the media will become a weapon for the Internet Ad Business. And we also want to create IPs that will become the concept or seeds for games. So we want to use our collective strength to further increase sales and profitability. That's it from me. Thank you very much.

This concludes CyberAgent's FY 2025 Second Quarter Earnings Briefing. Should you have any questions, please reach out to the IR team. Thank you for watching today.