CyberAgent Inc

TSE:4751

Earnings Call Transcript 2021-Q3

[Unknown Executive]

It is time, so we would like to begin the FY 2021 Third Quarter Results Presentation for CyberAgent. This session is being live streamed. Our CEO -- please now note the disclaimer forward-looking statement, that describe about the forward-looking statements. And then our CEO, Fujita, will take you through the results.

[Susumu Fujita, executive]

This is Fujita, the CEO. So this is the third quarter, April to June. I would like to take you through the results for the third quarter. As earlier, we did announce a significant upward revision of our forecast. The Game and Ad Business, overall, was much -- performed much better than our expectations. So we have made an upward revision of the forecast. The Media Business year-on-year, the sales expanded by 1.5x. And the Ad Business usually is lower in the third quarter, but we did set a new record, record high. And with the Game Business, UMA MUSUME Pretty Derby became a huge hit, so this has contributed to the results for the full quarter. So these are some of the key reasons why we have made the upward revisions this quarter. And this is the quarterly results. We actually went public in the March of 2000. And of course, we have continued to increase our sales and profitability. But as you can see, we've actually significantly accelerated our growth. And in terms of the quarterly OP, so the JPY 25.8 billion was the record high, which was in the second quarter, and we did even better than that, JPY 44.5 billion this quarter. However, the SG&A actually remained around the same. So as an Internet Business, our performance has been quite ideal, and this has a -- this is why we have been able to improve our profitability significantly. Every year, in April, we do welcome many new graduates. So we do increase -- the headcount increases this quarter. And then for the following couple of quarters, it will be around the same level. And this is the P&L. And this is the balance sheet. And we did make an upward revision, 2021 September. So we are going to -- plan to do JPY 650 billion in sales, JPY 100 billion in OP. So this is the upward revision we have just announced. So as we started to get about JPY 30 billion in OP. Of course, Abema, we have been making upfront investment in Abema. And UMA MUSUME has significantly contributed to our favorable performance. So that is why we have made a significant revision in forecast. 3 months ago, we did an upward revision as well from -- about -- OP was around JPY 30 billion to around JPY 60 billion. And in 3 months' time, we have made another upward revision to JPY 100 billion in OP. And if we look at the achievement rates, up to the end of the third quarter, we're -- we've done more than 3 quarters, so we believe that the upward revision is within reach. Now going into the specific businesses. Starting with the Internet Ad Business. As I mentioned earlier, usually, January to March, especially in March when many of our customers' fiscal year ends, we tend to grow significantly during that period. And the second quarter is, usually, we see -- the third quarter, we usually see a drop in our sales. But the fact that we actually were able to do higher in the third quarter as -- proves that it was a very favorable quarter for us. And with COVID and the state of emergency announcement, many companies, clients decided not to advertise so much, but this is on a recovery path now. And the OP, however, has come down a little bit. And if you have covered us for a long time, you can -- you know that this doesn't really change. It hasn't changed over the years, so it's just temporary. So the reason why our Internet Ad Business is staying so well is that the KIWAMI Prediction AI as was other innovative technologies and products, and 80% of our advertisers have implemented these technologies, the KIWAMI Prediction AI and KIWAMI Prediction TD. They have -- they are using these technologies to improve their advertising effectiveness. And we have released new services as well. So in this field, we believe that other companies will find it quite difficult to catch up to us. Moving on to the Game Business. UMA MUSUME Pretty Derby was released previous quarter, and our growth has changed significantly since then. So we did JPY 92.3 billion in sales in the last quarter. And the OP also was nearly around half, JPY 44.24 billion. So with respect to UMA MUSUME Pretty Derby, I would like to have Mr. Chikaishi talk about the game in more detail. Thank you. Please, from Cygames.

[Aisaku Chikaishi, executive]

My name is Chikaishi, Director of Cygames, and let me tell you a little bit about the UMA MUSUME Pretty Derby. First of all, since we released the game in February 24, 2021, numerous keywords related to the game has been high and many people have shown great interest for the game. We have fans that we cultivate by promoting the content in various media as well as new users from among horse racing brands. And we recorded, in approximately 5 months, over 9 million downloads. We have continued to promote the game on various media platforms, including anime and manga. And in June and July, we have streamed the TV anime series for the UMA MUSUME Pretty Derby on Abema. And Blu-ray just saw the second series of the TV anime ranked in third in the Oricon rankings. And as of the end of June, we have sold 170,000 copies. And the manga UMA MUSUME Cinderella Grey has also sold more than 1 million copies. So the use of cross-media has produced a synergy effect and the wide range of content has been very well received. Also, on August 28 and 29, we will have an online live event using Abema's PV's -- pay per view function. So we will continue to focus on our efforts on cross-media promotions, taking advantage of our group synergy. On the game UMA MUSUME Pretty Derby, we have characters that are named after real racehorses. And we have Phase 3, we produced the characteristics and history of each racehorse. We started with 25 characters, but now we have 36 characters that fans can race and train. And we will continue to add new characters so the users can continue to enjoy the game. And we will continue to add new functions. In June, we added a new Room Match function, which allows players to go up against other players, and this has been well received by our users as well. We will continue to add new training scenarios and update the game so that it will become a long-run hit. We will continue to provide content that we hope will be loved for a long time to come. So we hope to have your continued support.

[Susumu Fujita, executive]

So we released -- UMA MUSUME and it became a big hit. Within our group, usually, we release about 1 or 2 new game titles that are -- that become very popular. And as you can see here, group overall, we are utilizing our group know-how and our resources, talent and as well our capital to invest sufficiently in their development. And we hope to continue to do so to create great titles going forward. And these are some of the titles that we are planning to release within the year, for this fiscal year, and some have already been announced. And this is a very popular global game. Final Fantasy smartphone game will also be released. Our group is going to be releasing that. And this will be available globally. So we have high expectations for this title. And after the Demon Slayer, there's another popular anime called Jujutsu Kaisen: Phantom Parade. So we are going to develop a new game for that. And we have high expectations for this new title as well. And we have some console games that we are developing at the moment. So we have a very -- we have great top class game creators, and so we hope to release very high-quality games in the near future. Moving on to the Media Business. It may seem like we haven't grown in the third quarter, but you will see the breakdown later. Last year, we had a -- pay per view grew over one quarter, and that didn't happen this quarter. But if you take that into consideration, we have grown considerably well. Now the number of Abema downloads has exceeded 68 million, and so we have continued to increase the number of downloads. And with respect to WAU, after we went over 10 million, it seemed like we didn't break through. But in July, we had a lot of programs, very good lineup. So for the recent period, we have seen very good WAU trends. And one of the reasons why we're seeing such great WAU is the MLB games, 166 games that we're broadcasting live, especially with Shohei Ohtani. So this is actually helping promote Abema. And we also exclusively live streamed Copa America as well as the open -- British Open with -- together with TV Asahi. And also, very important, Shogi games as well Japanese chess games. So we -- there's one more game left, I believe, but we basically live streamed all of the Japanese chess major competitions. And we're very good at a variety drama. And we also have more -- a very -- more drama. It depicts the dark side of modern society as well. So the lineup of our drama is expanding as well. We are working with TV Asahi, collaborating our great content with their great content as well and also working together with very popular news program as well. So we're working even more closely with TV Asahi. And I mentioned pay per view and how last year, many orders -- we aired their live events, and it was a trend. It was a boom. And it started to settle down. But in July, we have actually added more to the lineup. The state of emergency has been in place for a very long time so many of the artists have started to have online live events. So we're having many of the live events in July onwards. And as you can see from this graph, this week -- during last year, last fiscal year, because of pay per view -- and you can see how pay per view contribution has decreased. But in the fourth quarter, we should see contributing, once again, more significantly and growing in the fourth quarter. And WinTicket is also doing well as well. This is for skating, cycling. So this is a resale of WinTickets. And we're -- we actually the latest comer to this industry. And then we created our own service, acquired the rights and worked with Abema to try to grow this business. And it's only been 2 years since we released this service, but we're actually already catching up to the industry's top class, top players. And if we proceed at this pace, we'll probably take them over. So we have Abema's -- actually, this is a very good match with Abema as well, we've proven that. So this is the mid- to long-term sales pipeline or plan. So we have advertising current subscription and related business as well. And these are areas that we will be monetizing Abema's business, and we are actually having -- a lot of these things are becoming more transparent and visible now. So this hasn't changed our mid-term and long-term pillar. But we want to make sure that the Abema is not going to be volatile, and we want to make sure that it becomes larger and we can increase monetization. And the Ad Business has been our main business since we went public, since we were founded. So we will aim to increase sales and maximizing advertising effectiveness. And UMA MUSUME has been a very great hit, but we hope to stably develop these hit titles. We already have the structure in place to do so, so we hope to continue to release successful games. Now that's it from myself. Thank you very much for listening.

[Unknown Executive]

This concludes the FY 2021 third quarter results presentation. Should you have any questions, please contact our IR team. Thank you for joining us today. [Statements in English on this transcript were spoken by an interpreter present on the live call.]