DeNA Co., Ltd. (2432) Earnings Call Transcript & Summary

Hello, everyone. I would now like to present our Earnings Results for the First Quarter of Fiscal Year 2023. First, I will start with our financial results summary. In our financial results summary, revenue for Q1 was JPY 36.1 billion, IFRS operating profit was JPY 1.7 billion, and non-GAAP operating profit was JPY 1.6 billion. Here are the financial results by segment. Aside from the Games business, we saw revenue increases in Live Streaming, Sports and Healthcare & Medical. For Games, the major factor was that our performance centered on existing titles. And here is the cost and expense breakdown. I have no particular comments to make. But as you can see, we brought to DATA HORIZON and Allm into the DNA group last fiscal year, and now have more than 3,000 people in our consolidated employee headcount. Since fiscal year 2021 or in other words, starting from April 2021, we have had these focus points in our 3-year plan. We have covered these several times now. There is no change to our view for fiscal year 2023 that was previously announced. We are currently working to achieve the structural shift for Serve to contribute about the same level of profit as Entertain. We are continuing our efforts to further grow our business portfolio, strengthened last fiscal year and enhanced the earnings base to achieve this. So no change here. With Entertain, we aim to secure a good level of profit despite volatility. For Serve, we are currently in the process of securing a similar level of profit contribution. Now I would like to go into more detail about each of the businesses under our Entertain approach. I'll start with our Games results. In Q1, as I mentioned before, our performance centered on existing title operations. We had some costs related to marketing, et cetera, around a new title launch at the end of June. For the business overall, we are continuing streamlined operations. Of course, we need to build up new titles. On June 28, we launched Takt Opus (sic) [ Takt Op ] in over 130 countries and regions, including Japan, and we have a future launch planned for China. We ran advanced marketing and other initiatives, and we're able to reach 1 million downloads in Japan shortly after launch. Going forward, we will leverage our live operations, core competency and run future events, new content and updates to ensure that this title will be enjoyed over the long-term. Next is the Live Streaming business. We are continuing to prioritize revenue growth, while aiming to secure profitability for the segment in fiscal year 2023. We have a few businesses here. The largest of the businesses is Pococha Japan, and it drives the Live Streaming business overall. We are aiming for sufficient revenue growth for growth investment in the segments and to secure profitability. We are enhancing our efforts to bolster activity among existing users and to acquire new users and engage them in the platform. We had 5.12 million downloads in Japan as of June 30, 2023. With the foundation of our revenue from Pococha Japan, we also have new initiatives in the Live Streaming business. The first is Global Pococha. For Global Pococha, we are continuing to verify the appropriate investment size and optimal operations for each region, while enhancing the service balance. We had over 1.3 million downloads in the U.S. as of June 30, 2023. In our view, the U.S. is starting to appreciate what's great about Pococha. Now we are carefully polishing the various aspects of the service and exploring and verifying the appropriate investment size. Next is a new area within Live Streaming, IRIAM. In fiscal year 2023, we are focusing on revenue growth and profit loss improvement. As you can see, the DAU and revenue are growing steadily. IRIAM achieved 1.97 million downloads as of June 30, 2023, and in the same month, achieved the highest ever DAU for the service. We will continue our efforts on achieving growth here, including focusing on profit loss improvement. And in so doing, we will expand out the potential of the Live Streaming business. That concludes the section of the presentation concerning Entertain. Next, I will share about the various businesses in our Serve approach. First is our Sports Business. Our Sports segment performance for Q1 grew even compared to pre-COVID-19 levels. For both baseball and basketball, we saw record high attendance at home games. As you can see from the photo shown on the slide, before COVID-19, we had expanded Yokohama Stadium, specifically adding 5,000 seats to our capacity in the left and right wings, enabling us to welcome many more customers. The graph here shows our results through the end of June for 33 games held to that point, but we are already at a cumulative total of 1.03 million people. You can see we're on our way to exceeding the 2019 level. Next is the Healthcare & Medical Business results. I have mentioned before that for this business, it is best to look at the full year performance for better understanding. In Q1, we saw a decline compared to the seasonally strong Q4, but as we have mentioned, we are making steady progress towards our revenue and profit goals for fiscal year 2023 and fiscal year 2024. But to look at more specifics, we'll start with the Healthcare area. We have 2 pillars: the Data Health business and Data Use business. First, for the Data Health business, this year, 2023 is the formulation year for the Japanese government data health plan. So we are accelerating our sales outreach. And as a result, the number of acquired customers and received orders are at a higher level than the same time last year. For the Data Use business, we saw good growth from 2 years ago into last fiscal year. The cumulative number of clients in the Data Use business has now reached 50. Here, we expect to see results towards the end of the fiscal year, but we are off to a good start with our sales pitches, et cetera. The other area is our Medical area. Examples of deployment to medical institutions through local municipality subsidies, et cetera, have expanded into 8 prefectures, including Hokkaido. To go into more detail, we consider joint to be a central business around which we can build other businesses in the medical area. We are working on expanding the number of facilities using Join in Japan with the support of the local municipalities. Our graph here shows the number of facilities using Join in Japan. To make this figure more meaningful as a KPI, we changed the definition to only include normal paying institutions. We have reached 350 as of June 2023, which is good growth. We are also looking to evolve as a platform for our future business. We have initiatives leveraging IoT and others involving medical services, data use and platform business. There are a variety of possibilities. In our view, the expected market size is several hundred billion yen, which is significant. Of course, in the medical area, we do not just look at Join the pillar for our digital transformation initiative. We also have joined Triage for Emergency Medical Care, the Nursing Care platform team, and the app for individuals, MySOS through synergy between these services, we will be able to expand our products and expand our business area or in other words, our monetization. We have examples showing expansion centered on Join, including under linkage with devices and more use settings. Specifically, we have the example of Join being deployed to the ECMO vehicles at the Center for Advanced Emergency and Critical Care at the Nippon Medical School Hospital. Other examples include our business alliance agreement concluded with the pharmaceutical company, Shionogi & Co Limited to establish total care for infectious diseases. We also concluded a strategic partnership with Moderna Japan to establish digital transformation for infectious disease control. These are some examples of the initiatives born centered on Join. We will need to grow these initiatives and produce results over the full fiscal year. That concludes my brief presentation today for Q1. As we did last year, we intend to provide a more detailed explanation for each of the areas in our portfolio and specifically our strategy for growth. I believe this is a good thing to do every year. So in November 2023, we plan to hold the DNA IR Day 2023. More information about the exact schedule and event itself shall be posted on the DNA homepage when available. We hope you will join us there. This concludes our presentation. Thank you for your attention.