Ateam Inc

TSE:3662

Earnings Call Transcript 2019-Q1

[Takao Hayashi, executive]

Thank you for joining us at Ateam Inc.'s earnings briefing for the first quarter despite your busy schedule. First, I'd like to invite our new director Fumio Mase to say a few words.

[Fumio Mase, executive]

Good afternoon. My name is Fumio Mase. Allow me to briefly introduce myself. I joined Ateam in 2008 and was initially in charge of sales and marketing of Hikkoshi Samurai and other comparison sites. In 2010, I was appointed manager of present day [navy crew ] business, mostly in charge of sales and marketing. In 2013, I was charged with responsibility of launching Ateam Lifestyle Inc. and appointed President and have been responsible for running that business, particularly in the area of financial media and have been involved in the launch of about 7 services. Within Ateam Inc., I've mainly been involved in hiring new college graduates. Now that I'm appointed director for Lifestyle Support, I'm committed to creating various media providing convenient and useful information to many users so as to contribute to improving and enriching their lifestyle. Thank you.

[Takao Hayashi, executive]

Without further ado, the financial results. Page 2. As I stated at the last briefing, Ateam was conventionally regarded as a game-centered company, but now we position ourselves as an IT company that develops business around the Internet by linking various markets shown on the left and various technologies and services shown on the right to provide many different services. Page 3. Here, you can see the logos of our various services. On the top row, second from the left, is the logo of our new game title, Revue Starlight: Re LIVE. Page 6. The first quarter financial summary. For Ateam overall, revenue was up and profit was down year-on-year. Both revenue and profit was down quarter-on-quarter. Revenue was JPY 8.927 billion, operating income was JPY 484 million and net income attributable to shareholders of the parent company was JPY 257 million. For Lifestyle Support, big year-on-year increase in revenue and profit, while quarter-on-quarter, revenue was up, but profit was down. As it says here, all 4 subsegments grew year-on-year, but upfront investment in new services pushed down profit quarter-on-quarter. The segment revenue accounted for 58% of the total. For Entertainment, revenue and profit were down both year-on-year and quarter-on-quarter with revenue of JPY 3.243 billion and profit of JPY 274 million. Revenue from existing titles trended downward and contribution from the new title, Revue Starlight, was limited as it only had a little over a week after the release on October 21. The segment revenue contribution was 36.3%. For E-Commerce, revenue was down both year-on-year and quarter-on-quarter with revenue of JPY 510 million and segment loss of JPY 63 million. Percentage of revenue was 5.7%. I will elaborate on this segment later. Page 7. First quarter financial results versus the forecasts. Revenue 22.3% and operating income 12.1%, rather low because our profit is oriented to the second half of the year. Net income 9.9%. Page 8. Nothing special, so I will skip this page. Page 9. Quarterly trends. First quarter revenue JPY 8.927 billion, declining for the third quarter in a row. But in the Entertainment, the new title, Revue Starlight: Re LIVE, made a very good start. So we believe we have hit the bottom, and we expect a growth from here onward. Page 10. Nothing special, so I will skip this page. Page 11. Quarterly promotional expense trend by segment. Lifestyle Support in blue. As I said, an increase in promotional expenses in relation to new services as well as in preparation for the upcoming busy season for some services. Entertainment almost flat. Page 12. Number of employees by segment increased in all businesses except E-Commerce. Soon the number shall exceed 1,000, and we anticipate challenges associated with such big organization and so we will be taking actions to address them. Page 13. Balance sheet. Nothing particular to note except for the footnote, which indicates that deferred tax assets have been moved from current assets to noncurrent assets. The amount is a little less than JPY 200 million. Page 15. Business performance for Lifestyle Support. Year-on-year 30.8% growth in revenue, a large increase. But as I said, due to upfront investment in new services, profit margin declined. Page 16. Business trend of subsegments of Lifestyle Support. Here you can see the breakdown. Bridal related is growing. In fact, each subsegment, other than moving related, increased year-on-year and quarter-on-quarter. Page 17. Quarterly trend of major key performance indicators. User count is growing steadily. ARPU is growing with an increase in user count of high ARPU services, such as bridal related. Gross profit increased significantly with higher ARPU. Gross profit margin remained stable at around 40%. Page 18. Entertainment business performance trends. The graph shows a downward trend, but as I mentioned earlier, the new title made a very good start, and we believe the trend has hit the bottom. Page 19. Overseas revenue ratio trends. In line with the decline in Entertainment revenue, overseas revenue has been declining. Page 20. E-Commerce. To achieve a full year profit, we have prioritized the restructuring of the organization by improving logistic systems and optimization of operations. Initially, we were barely selling 1 or 2 units per day, but now we're selling over 3,000 per month. So the warehouses, systems and other capacities have not been able to catch up with that growth, and operation has not been catching up either. So we have decided to pause here, and rather than increasing the volume, focus on restructuring the organization and the structure, and thus, a decline in revenue. But after revamping the structure, we will embark on new promotions and others to grow the business again. Page 22. Second quarter progress. Ateam Lifestyle Inc. has been providing services in such business areas as automobile, health care, others and financial media, as you can see there. But we have decided to establish a new wholly-owned subsidiary, Ateam Finergy Inc. and transfer financial media business to that entity. Finergy is a term we coined combining finance, synergy and technology, the 3 keywords. This new subsidiary is to be established on February 22, 2019 with paid-in capital of JPY 1,000 to succeed all the business of Ateam Financial Media. The new company is scheduled to be effective in May. Representative is Kazuki Hayashi, who is currently in charge of Financial Media. Same family name as mine, but we are not related. In fact, he is too smart and talented to come from my family. So we're very hopeful and excited. Page 23. Lifestyle Support. In bridal related, over the years, we have increased the number of wedding consultation desks at physical locations and expanded capacity. We opened a new larger consultation desk in Yokohama. And we will release a new nutritional supplement, Minorie Folic Acid, and a new automobile related service, which started as the TOYOTA NEXT project, which enables users to purchase secondhand cars via smartphones. With the successful completion of the trial operation, we are preparing for a full-scale operation. Increments Inc., which we acquired last December, is to start a new Qiita service, which is a reemployment support service for engineers by engineers. Page 24. Entertainment. Revue Starlight: Re LIVE has been released, and you can see the details there. And in Entertainment, we have organized special events as shown here for Unison League, Derby Impact, Three Kingdom Smash! and Valkyrie Connect, respectively. Page 27. Consolidated financial forecast. No change here, with revenue of JPY 40 billion and operating income of JPY 4 billion. And the rest of the slides are the same. So that concludes my presentation. Thank you for your kind attention.