Mixi Inc

TSE:2121

Earnings Call Transcript 2021-Q2

[Koki Kimura, executive]

Thank you very much for taking time out of your busy schedule to attend our earnings results briefing session today. I am Koki Kimura, President and Representative Director. Today, I'd like to explain our second quarter earnings in 3 parts: financial status, business status and results forecast.

Please turn to Page 3. This is the executive summary. I will begin with a discussion of business topics. In the current fiscal term, we are focusing on further growth of government-managed betting sports businesses and the revival of Monster Strike. For the government-managed betting sports, Chariloto and TIPSTAR's gross merchandise volume, GMV, of keirin betting ticket sales has grown around 100% year-on-year. Monster Strike saw a substantial increase in profitability, thanks to cost-effective advertisement while maintaining a growth trend in sales.

We have revised upward our consolidated financial results forecast to JPY 120 billion net sales, JPY 23 billion EBITDA and JPY 19 billion operating income, mainly due to the strong performance of Monster Strike, I will explain in more detail later.

First, about our financial status. Please turn to Page 5. This is the consolidated income statement. Net sales was JPY 29.3 billion, up 12.8% year-on-year. EBITDA was JPY 7.6 billion and net income was JPY 4.4 billion, up 330% year-on-year.

Please turn to Page 6. This is a quarterly performance trend. The segment net sales will be explained later.

Please turn to Page 7 for sales cost trend. Outsourcing costs remained almost unchanged year-on-year. It declined significantly from Q1, but that is because there were onetime posting of production costs for the Monster Strike movie and the development costs for TIPSTAR in Q1.

Please take a look at Page 8. This is the SG&A expenses trend. Advertising expenses decreased year-on-year. The reason for this is that while we made sufficient upfront investment in our new service, TIPSTAR, we were also able to streamline advertising expenses for Monster Strike.

Next, I will explain the status of each business segment. Please turn to Page 10. This is a review of the Sports segment. Net sales were JPY 2.9 billion, an increase of 369% over the same period last year. This was mainly due to a significant increase in sales at Chariloto and the addition of Net Dreamers and TIPSTAR to our net sales.

Please look at Page 11. I'd like to explain the changes in GMV for Chariloto and TIPSTAR. The GMV for both Chariloto and TIPSTAR has been increasing steadily, recording a 98% increase year-on-year. TIPSTAR, which was launched at the end of June has grown to account for about 1/6 of the total GMV in Q2. TIPSTAR's service had been available on smartphone browsers until now. But in October, we also launched its app version. We aim to increase the number of users and further expand GMV.

Please turn to Page 12. This is the situation of Chiba Jets, the new season of B. League started in October. At present, games are being held after taking various measures against infections such as spaced seating to deal with the COVID-19 situation. We will revamp the management structure and further strengthen our support to the team.

Next, I will explain about the Lifestyle segment. Please turn to Page 14. This is a review of the Lifestyle segment. Net sales were JPY 900 billion, up 8% year-on-year. This is due to the increased sales of FamilyAlbum in minimo, though minimo's performance was negatively affected by the pandemic, it has begun to recover in Q2.

Please turn to Page 15 for an explanation on FamilyAlbum. We are working to strengthen monetization of FamilyAlbum. In Q2, we began offering the dispatch photographer service in collaboration with Lovegraph. In Q3, we will offer higher quality photo books, and also offer New Year's cards that was popular last year. Going forward, we will continue to strengthen our services by taking advantage of photo assets of FamilyAlbum and aim to achieve profitability of the segment.

Next, I will explain about the digital entertainment segment. Please turn to Page 17. This is a review of the digital entertainment segment. Net sales increased 3.7% year-on-year to JPY 25.4 billion. This was due to higher sales of Monster Strike and Kotodaman.

Please turn to Page 18. This is the status of Monster Strike. Through collaboration with popular IPs and by providing attractive characters, we were able to continue the ARPU recovery from Q1. As a result, net sales grew year-on-year. Although Monster Strike is celebrating its seventh anniversary, we were able to grow its net sales year-on-year for 2 consecutive quarters. We are growing more confident in our ability to raise the motivation of our users. We will do our best to keep Monster Strike a game that users will want to continue to play. Furthermore, in October, we conducted the Monster Strike seventh anniversary campaign, resulting in higher year-on-year net sales growth for the month. We will continue to strive to provide surprises to our customers in order to further expand our performance.

Please turn to Page 19. I would like to explain about our new smartphone game, Stars Smash, which will be released on November 16. The game is being planned, developed, operated and distributed by XFlag in cooperation with Walt Disney Japan. XFlag has had great success with cooperative multiplayer games like Monster Strike and Kotodaman, where players can enjoy the game with their friends.

Star Smash, our new release, is a co-op smash action game featuring Disney characters. We'd like many customers to enjoy it with their friends and family.

Next, I will explain the results forecast. Please look at Page 21. Today, we announced an upward revision of our full year financial results forecast. Net sales is revised upward by JPY 15 billion to JPY 120 billion. EBITDA will be JPY 23 billion. Operating income will be JPY 19 million and net income will be JPY 13 billion. Consequently, we are forecasting year-on-year increase for both sales and profits.

Please turn to Page 22. I will explain the major factors behind the upward revisions. First, judging that we can continue Monster Strike's recovery trend in ARPU in the second half, we added JPY 12 billion to net sales and JPY 7 billion to operating income. On the other hand, sales of new games and further upside to existing businesses are not reflected in the forecast.

For the government-managed betting sports businesses, we added JPY 3 billion in net sales and reduced JPY 2 billion in operating income. TIPSTAR, which we released this term was able to have a start better than we expected. We believe this is due to support from new user demographics like women and young people.

Instead of pursuing short-term profits, we decided to make additional investments in advertisement and the like and prioritize business expansion. We aim to grow the operation over the medium to long term to make it a future pillar in our business. That concludes my explanation. Thank you for your attention.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]