MIXI, Inc. (MXN.F) Earnings Call Transcript & Summary

Thank you very much for joining our financial results briefing despite your busy schedule. My name is Shimamura, and I was appointed as CFO in this April. Today, I and President Kimura will explain the following agenda on Page 2. Please turn to Page 3 for the executive summary. I'll explain details with following slides. First, let me explain our financial status. Please turn to Page 5. This is the full year consolidated income. Net sales were JPY 146.8 billion. EBITDA was JPY 29.4 billion. Operating income was JPY 24.8 billion, and profit attributable to owners of parent was JPY 5.1 billion to exceed the forecast revised on February 10. Please turn to Page 6 for the quarterly consolidated income for Q4. Sales increased and profit decreased in Q4 as net sales were JPY 42 billion, EBITDA was JPY 7 billion and operating income was JPY 5.7 billion. The profit decrease was due to a temporary increase in expenses for the release of 3 new game titles. Please turn to Page 7. This is the quarterly consolidated performance report. In FY '23, each quarter recorded year-on-year increase in sales. Next, I will explain the status of each business segment. Please turn to Page 9. This is a recap of the Sports segment. Net sales increased 47.7% year-on-year to JPY 8.3 billion. This was due to the growth in TIPSTAR and Chariloto as well as the contribution from Tokyo Football Club Co. Ltd, which became a consolidated subsidiary in FY 2023. Excluding the effect of this new consolidation, sales increased 28.3% year-on-year. EBITDA remained positive, same as in Q3. Profit increased from Q3, thanks to the continued profitability of TIPSTAR and sales growth in Chariloto. Please turn to Page 10 for the net sales trends for Chariloto and TIPSTAR. Net sales increased 33% year-on-year. Q4 recorded a significant sales increase, but this is because Chariloto has changed the accounting procedure in some transactions and the revision was made for the entire FY '23 at one time in Q4. Excluding this impact, net sales increased by 9.9%. This increase was mainly due to the growth of the Keirin stadium operations management business at Chariloto Company Limited, and recognition of sales from the contract for the motorcycle racing system also at Chariloto, which continued from the previous year, resulting in higher sales compared to other quarters. Please turn to Page 11 for the Spectator Sports business. Chiba Jets won the Emperor’s Cup and also won the B.League B1 Eastern Conference Championship. The B.League Championship will start tomorrow, and they are determined to win the triple crown. For F.C. Tokyo, a new season started in February. They are scheduled to play a home game today at the National Stadium. Our special production using fireworks and drones is planned to provide a place of excitement for the fans and supporters coming to the game. Next, I will explain the Lifestyle segment. Please turn to Page 13. Net sales increased 59.3% year-on-year to JPY 2.3 billion. This is mainly due to the growth of FamilyAlbum. EBITDA was negative, mainly due to active sales promotion for FamilyAlbum GPS Guardian and regular costs recognized for the New Year greeting card service. Please turn to Page 14 for the status of FamilyAlbum and minimo. FamilyAlbum GPS Guardian is now in its third year of service and has been very popular among users. Sales volume was approximately 2.5x that of the previous year. Beauty salon reservation app minimo marks its 9th anniversary this year. Performance has also been strong with both sales and profit increased year-on-year. We will continue to strive for further business expansion in the future. Next, I will explain the Digital Entertainment segment. Please turn to Page 16. Net sales were JPY 30.9 billion and EBITDA was JPY 11.6 billion. Monster Strike maintained strong performance and achieved year-on-year increase in both sales and profit in Q4. EBITDA for the entire segment was down year-on-year. This was due to a onetime increase in expenses in Q4 for the release of 3 new titles in the Monster Strike series. Please turn to Page 17 for the status of Monster Strike. The strong performance was attributed to various measures, including original characters introduced at the beginning of the year and collaborations with popular IPs, which were successful in maintaining MAU levels and increasing ARPU. MAUs remained flat year-on-year throughout the fiscal year, and the increase in ARPU contributed to the full year sales growth. Please turn to Page 18 for the Monster Strike series and Kotodaman. In Q4, the Monster Strike series released 3 titles in addition to the renewal of Ghost Scramble. We will improve our services further based on user responses. As for Kotodaman, sales and profit declined year-on-year in Q4. On the other hand, MAU increased year-on-year, and we aim to make recovery with measures for its 5th anniversary. Next, I'll explain the investment segment. Please turn to Page 20. Net sales were JPY 300 million and EBITDA was a loss of JPY 400 million. In Q4, while the sale of shares was recognized, we recorded a loss due to factors such as valuation losses recognized at the end of the fiscal year. The full year EBITDA was positive. Next, President Kimura will explain the future policy.

I am Kimura, President of MIXI. Please turn to Page 22. The company has been redefining its management philosophy since FY '23. Our strength lies and our focus on communication for differentiation. We will ensure our growth by managing the business with a strong awareness of purpose. In this context, from FY '24, we will focus on 3 businesses: social betting, FamilyAlbum and Monster Strike economic sphere. In addition, we will accelerate growth by implementing synergetic investments and M&A to grow focused businesses. Furthermore, we will strengthen our globalization efforts in each segment. I will now explain the details. Please turn to Page 23 for the publicly-managed betting sports and the Sports segment. We will continue to focus on the publicly managed betting sports business to develop it into a pillar of our earnings. TIPSTAR has been profitable since Q3. Going forward, we will maintain profitability while aggressively investing in the business when we will be able to differentiate ourselves to grow the business significantly. Please turn to Page 24 for the Spectator Sports business in the Sports segment. Currently, home games of Chiba Jets are almost filled to capacity. With the opening of the arena next spring, the capacity will be approximately doubled and further growth of spectators is expected. F.C. Tokyo is also recovering the number of spectators, which had a decline due to the pandemic. We'll provide attractive entertainment for people to enjoy as a place of communication where they can get excited with their families and friends. Please turn to Page 25. In the Lifestyle segment, we'll invest in FamilyAlbum with a focus. The number of users of FamilyAlbum has continued to grow since its release in 2015. Recently, the growth of overseas users has made a significant contribution, and overall number of users has increased significantly by approximately 30% year-on-year. As for the future policy of the FamilyAlbum economic sphere, we will invest in the expansion of our product lineup to enhance monetization both in Japan and overseas. For overseas markets, we will continue to invest to acquire new users. In countries and regions where the number of births is larger than in Japan, we expect the business will grow to be a great source of earnings in the future. Please turn to Page 26. In the Digital Entertainment segment, we continue to see high potential in the Monster Strike based on the previous year results. We'll continue to invest sufficient resources to maintain and expand the scale of earnings. At the same time, we are strengthening our IP value. In addition to continuous development of derivative games, Monster Strike series, we'll also focus on nongame areas going forward. A serial comic titled Burst Fantasista, has been published in Saikyo Jump Cycle since May. Through these measures, we will increase the touch points of the Monster Strike IP. By implementing various measures, we will aim to expand the Monster Strike economic sphere in the medium to long term. Please turn to Page 27. Monster Strike, which has been supported by many users will celebrate its 10th anniversary this year. In this milestone year, we are planning to create great excitement through the development of new characters and quest collaborations, live events and various promotions. After the 10th anniversary, we will continue our efforts to make this IP to be loved by users for 20th and 30th anniversaries. Please turn to Page 28 for investment activity results and future plans. As announced at the beginning of FY '23, we plan to invest JPY 30 billion to JPY 50 billion in M&A and capital and business alliances over the 3-year period from FY '23 to '25. Going forward, we will also focus on investment overseas, including in emerging markets with the aim of creating businesses and strengthening synergies globally. Now Mr. Shimamura will be back to explain the FY '24 forecast.

Please turn to Page 30. For the forecast of FY '24, we estimate that net sales are JPY 138 billion, EBITDA is JPY 16 billion, operating income is JPY 12 billion and profit attributable to owners of parent is JPY 7.5 billion. I will explain details on the next page. Please turn to Page 31 for the details of the forecast. Net sales in the Sports segment are expected to be JPY 30 billion. In the publicly-managed betting sports, we expect sales increase considering the growth of the online betting ticket sales market. We expect profit increase by cost optimization in TIPSTAR. In the spectator sports, we estimate sales will increase to JPY 7 billion, mainly due to an expected increase in the number of spectators for F.C. Tokyo. On the other hand, we expect a decrease in profit due to decrease in distribution and other factors. Please turn to Page 32. Sales in the Lifestyle segment are expected to increase to JPY 14 billion. This is mainly due to the growth of the FamilyAlbum economic sphere. EBITDA Is expected to be the same level as in the previous fiscal year due to strengthening the business structure of FamilyAlbum and investing in overseas markets. Net sales in the Digital Entertainment segment are expected to decrease to JPY 93 billion. We have conservative estimation for the sales of Monster Strike. At the same time, we plan to make solid investments, including those related to the 10th anniversary to achieve more growth. In the Investment segment, we conservatively forecast sales of JPY 1 billion, considering the current market environment. Please turn to Page 33 for shareholder returns. We will continue to focus on investment for business growth while maintaining stable shareholder returns. The year-end dividend for FY '23 will be JPY 55, in line with the forecast. And together with the interim dividend, the annual dividend will be JPY 110. For FY '24, we plan to pay an annual dividend of JPY 110 per share, targeting DOE of 5%. In addition, the Board meeting was held today and resolved to repurchase treasury shares up to JPY 7.5 billion. Our policy is, Treasury stock holdings should be approximately 5% of the total outstanding shares, and in principle, any excess shares will be retired. Lastly, Mr. Kimura will be back to explain the future policy again.

Please turn to Page 34. Lastly, I'd like to share with you my thoughts on purpose. We reiterated in purpose that enriching communication and inspiring moments of joy. Our approach specialized in communication may be very unique, but that is our strength as we have achieved business growth not only in SNS, but also in different fields such as Monster Strike and FamilyAlbum. We believe that we can provide services that are chosen, supported and spread by our customers because we are focusing on communication in all fields. And we strongly believe that such activities are part of our challenge as a company to solve the social issues of loneliness and isolation. Thank you very much for your attention. [Statements in English on this transcript were spoken by an interpreter present on the live call.]