Mixi Inc

TSE:2121

Earnings Call Transcript 2019-Q1

[Koki Kimura, executive]

Thank you for coming today despite your busy schedules. I am Kimura, Representative Director and President of mixi. We'd now like to start the earnings result briefing session for the first quarter of fiscal year 2019. This briefing session is comprised of 3 parts: management policy, financial condition and business condition. Before explaining about the earnings results, I'd like to briefly go over mixi's management policy. We believe that a very important issue for mixi is how to establish the next pillar of growth. So I would like to explain once again our investment policy going forward.

In the last briefing session for the full year earnings, we explained that concentrating our management resources into areas of strength was the most important issue for mixi's management. At that time, we also informed you that our business domain going forward will be communication services. Also at the same time, we communicated to you that we are going to focus on the 5 business areas shown here. And we also explained that in order to build new pillars of our business, we plan to make investments in business development and M&A in the next 3 to 5 years in the order of JPY 100 billion. Our approach to investment will be that in the short term, we will prioritize our investments into the digital entertainment business domain, currently our main business. And for new domains, we will open the throttle for extension where we have identified a winning strategy. That is the investment policy that we have conveyed to you previously. I'd like to once again remind you that today's earnings result presentation is being made with the underpinning of such management and investment policies.

First, about our financial condition. First quarter net sales was JPY 34.5 billion, and profit attributable to owners of parent was JPY 7.2 billion. Year-on-year, net sales fell by 28.3%, and net income fell by 46%. Next, we show earnings result history by business segments. From this term, we'd like to explain based on the categorization into 2 business segments, mainly Entertainment Business and Lifestyle Business. What used to be called the Media Platform business has changed its name from this term to become the Lifestyle Business. Sales for the Entertainment Business in the first quarter was JPY 32.7 billion and that for Lifestyle Business was JPY 1.8 billion. The major factors leading to lower sales were declining sales of Monster Strike for the Entertainment Business and the termination of the TicketCamp service for the Lifestyle Business. As for the cost of sales, it is declining in line with sales. Also, SG&A declined in line with sales, so they are declining across the board. The exception is advertising expenses, which grew on a onetime basis due to our holding the XFLAG PARK 2018 in the first quarter. Next, I explain about the business condition. First, about the Entertainment Business. This business is comprised of the business areas of digital entertainment, live experiences and sports. Our policies and measures are reprinted here from our full year earnings result presentation material. I'd like to explain once again each of these areas. For digital entertainment, our goal is first to make Monster Strike a national content and second to generate new IP. We are broadening the media mix area and expanding the fan base for Monster Strike. And we are also developing services with the aim of developing new game titles and generating IP. For live experiences, we are aiming to create spaces where people can physically meet and have fun together. And for that, we are opening new stores and creating and expanding real-world events. For sports, we are aiming to build relations with the sports industry and accelerate the growth of clubs that we support. For digital entertainment, we are trying to make Monster Strike a national content. Toward that goal, in the first quarter, we had a collaboration with Star Wars and also with the animation title Gintama. We have taken these measures to reach fans in a broad range of age groups. In July, we had a collaboration with Sword Art Online. And thus, we are continuing to take measures so that we can have even larger number of users enjoying this game. Concerning the Monster Strike animation. The global cumulative number of viewers for all the titles surpassed the 250 million mark in June. In July, we launched a new series. The first episode in the new series got more than 3.6 million views, so quite a large number of our customers are enjoying the content. In October, we are planning to premiere Monster Strike the Movie: Journey Beyond the Sky. So through our measures to couple the smartphone game with animation and movies, we aim to further increase the number of active users and enhance our profitability. As I mentioned earlier, we held the XFLAG PARK 2018 from June 29 to July 1. More than 100,000 submitted reservation applications, which was 1.4x the number from last year. As a result, the number of visitors exceeded 40,000, and viewers on YouTube Live was more than 4.5 million. These are record-high numbers. The excitement at the XFLAG PARK being a major contributor, the MAU for Monster Strike has seen an upward trend since July.

Now toward the creation of new IP, we have renewed the game Fight League in June. Also, we are diligently developing a new game that allows cross-play between Nintendo 3DS and a smartphone app, the Mobileball, slated for release in the winter of 2018. Also, we are working with Trigger, an animation studio famous for Gurren Lagann and Kill la Kill, and coproducing a new animation title called Promare. In the live experience area, with the aim of creating real-world spaces where people can meet and have fun together, we opened our second XFlag Store in Shinsaibashi, Osaka. Also, in July, we launched the second Monster Strike card game for children, and shipment has exceeded 5 million cards. So through various measures such as stores and card games, we'd like to create real-world spaces where more customers can get together and have a good time. In the sports area, toward the goal of accelerating growth of clubs that we support, we made an equity investment to Tokyo Football Club, the owner of the football team, FC Tokyo. In a match sponsored by our company, approximately 23,000 spectators came to see the game. This was held as J. League's Friday night game, a scheme that started this year where the game is played on a weekday, and amongst the Friday night games, our sponsored game recorded the highest number of spectators mobilized. Going forward, we plan to provide even stronger support to the FC Tokyo team so that the -- it may develop into the next sports business opportunity. Next, about the Lifestyle Business, which is comprised of the media and wellness business areas. In media, we are aiming to grow our existing business and develop new businesses. And in wellness, we are aiming to develop exercise program services for the elderly. In the media business area, the 2 services, minimo and Mitene, both surpassed 3 million users. We'd like to aggressively work to further increase the number of users. In the wellness business area, we are in the process of conducting research and development of an exercise program service. I ask you to wait a while longer until we release this service.

Lastly, I'd like to talk about our direction in the second quarter and beyond. For Monster Strike, we'd like to raise the level of excitement of our users toward the fifth anniversary in October. We will continue our multifaceted approach of synergistically promoting animation and movies to solidly increase active users. Then we'd like to take the cash flow from that business and make careful investments into new businesses that harness our strengths in communication so that they may grow to become new pillars of our business. That concludes the earnings result presentation. Thank you for your attention.