Full Year 2019 CyberAgent Inc Earnings Presentation
Tokyo Nov 4, 2019 (Thomson StreetEvents) -- Edited Transcript of CyberAgent Inc earnings conference call or presentation Wednesday, October 30, 2019 at 7:30:00am GMT
TEXT version of Transcript
* Susumu Fujita
CyberAgent, Inc. - Co-Founder, President & Representative Director
Unidentified Company Representative, 
It is now time to start CyberAgent Earnings Results briefing session for FY 2019 ending in September. First, I'd like to introduce the participants. President, Mr. Susumu Fujita; Managing Director, Mr. Go Nakayama; and Senior Manager of IR and SR Divisions, Ms. Sonoko Miyakawa.
Now Mr. Fujita will walk you through the earnings.
Susumu Fujita, CyberAgent, Inc. - Co-Founder, President & Representative Director 
Thank you for making the time to come to our briefing session today. We end our fiscal year in September, so this is for the full year results.
First of all, about the results for FY 2019 full year. For FY 2019 ending in September, our sales was JPY 453.6 billion, and we marked a record-high sales. In terms of OP, after the first quarter, we made a downward revision. And after that, we issued an upward revision. So it had been a pretty busy fiscal year for us, but we landed at JPY 30.8 billion of OP. So this is, once again, a record high level of OP. So thankfully, we have been able to reach to this level.
In terms of Media Business, ever since the launch, we have been aiming for the target of 10 million WAU weekly active users. And I believe that different members of the press have reported it in a different way, and sometimes it was interpreted in an unexpected way. But in order for us to make an investment of this size, if we cannot reach 10 million WAU, there's no meaning of monetization. So what it means is that we need to create a big user base, so that we can create a big business. And I have used 10 million WAU as a benchmark of that. And this is not something that's going to be one-off because we slowly and steadily grew the base. And I believe that we have reached to this level in a quite solid manner.
And for Ad Business, our top line was driven -- has been driven by Ad Business quite a lot, and we have been seeing an increase of 8.4% year-on-year.
And in terms of Game Business, we haven't had such major title release. But basically, we decided to operate existing titles in a solid manner. And year-on-year basis, we have been able to have 3.9% growth of sales. So it's quite solid.
So this is the chart that starts from 2000, and that's when we got listed. So this is the progress of sales since we were listed. We have been focusing on consistency and continuity of the businesses. As you can see, we have been growing consistently throughout the years.
And for OP. In the past 3 years, we have been -- as I have been saying for a long time, we've been making investment of about -- upfront investment of about JPY 20.3 billion, so that's generation of a loss. But we have been guaranteeing about JPY 30 billion OP. So we have been growing our top line as well as to make upfront investment. So this is the chart that indicates our OP.
And next, this is the number of employees for the consolidated corporation. So this is over JPY 5,000 (sic) [5,000]. To be more specific, we have 5,282 employees, this is the number of employees. And in terms of SG&A, we made a downward revision for this fiscal year. And then after the announcement, we ran downward revision campaign internally so that we can get rid of excess of cost. So I believe that we have been able to tighten the spending of the costs.
And if you look at the P&L, this is how it looks like.
Balance sheet. Now we have about roughly JPY 80 billion in cash deposits. Moving forward, this is the FY 2020 forecast. As I said, our sales forecast is JPY 465 billion. And for OP, this is for the first time, for a company, we are issuing the OP forecast in the form of range from JPY 28 billion to JPY 32 billion. This time, we have given it a range. And the reason for this is because in the last fiscal year, we issued the downward revision. So reflecting upon that, it's quite difficult to make a forecast, especially for gains that has high profitability. It's quite difficult to make a forecast, and I believe that the advertisers, our clients, seem a bit worry about the market sentiment -- the business sentiment. So maybe in the next quarter, the situation, the environment may change. But nevertheless, it's quite uncertain at the point. So we are also prudent in the way we issue our forecast as well.
Now moving on to Internet Advertisement Business. For Internet Advertising Business, especially for this fiscal year, we have been focusing on new customer acquisition. So we have been focusing on more Internet-centered advertisers, but we're shifting to what we call brand advertisers or national advertisers. So in the last fiscal year, that's what we concentrated on. And then we have explained this when we made a downward revision. So the numbers were quite good last fiscal year, and we created and updated a new structure for the creative and operation, and that has had a push down effect to the OP.
And this is sales on a quarterly basis. This is how it looks like.
If you go to the next page, you have the progress of OP. And if you look at it, I think you can tell that from the second quarter when we had the highest to date OP, the number has been -- have been looking quite great. And we have been quite aggressive, and we have made upfront investment. And then that had a negative effect to the profitability, but we wanted to retrieve that amount in the long run. And this is the slide that indicates the structure. So we have gone through some changes internally.
So for the front-part advertisement -- advertising, we have those organizations. But we also have set up a business unit for AI so that we can internalize the creative, and we can also do operation in-house. And this will bring up our profitability. And at the same time, we will be able to control the quality of our ads. And going forward, in the last fiscal year, we have been able to have quite a lot of new conquest. And what we want to do is to increase advertising billings with those new clients. And aside from that, we want to utilize AI technology to create new businesses. And we have always been quite good at operation capability, but we also want to maximize ad effectiveness through operation capability.
Moving on to Game Business. So we haven't had such major title releases. But I should say that the existing titles have been working very well. So we have seen steady progress. It's quite stable in terms of margin. And this is 1, 2, 3, 4, 5, 6, 7, 8. So these are the pillar titles that bring us margin. So we haven't had such major title releases. But last week, we have created BLADE. And then we have released that last week, and we really put our focus on that one. So we were -- are off to a good start. We had higher performance than what we had expected. So we are -- we have high hopes for this.
But usually, what happens is that we can have a good start, but it can slow down a little bit. So we cannot be too happy at this point. I think it's too early for us to make that decision. But it's a non-IP strictly original title. And if it becomes a hit, it'll be a great success for us. And I believe that we can have great learnings from that title, if it seems to be successful. And we have just released it last week. So I can't really talk about it much in detail during the financial result, and that hasn't been incorporated into the forecast either.
And this is the OP for Game Business. This is how it looks like in terms of progress. After the downward revision, we have adjusted the costs, and we have seen some improvement in the OP. And the titles that are supporting these positive numbers are titles such as GRANBLUE FANTASY, that's been doing quite well for a long time. And aside from the others, PRINCESS CONNECT! and BanG Dream!. So these are I should say long-term titles that have gained the popularity of the fans. So GRANBLUE FANTASY is an original IP, and we want to apply consistent approach across the series, and we also develop consoles in RPG, combat RPG as well. And these are what we have in the plan. So in total, we are planning to release 6 titles. I said that the BLADE XLORD has had a good start. So this is strictly our original IP, and we have others as well. But I believe that these are the titles that we have created with large scale investments and longer period of time, and they're going to be released in the near future.
So -- and we have gained experience in the game industry. So the market is becoming growingly more difficult, but I believe that we have been able to have higher chances, higher possibility of making a new hit in this industry. So we want to keep our releasing titles that we think will be successful.
Moving on to the Media Business that is growing, and the driver is AbemaTV. So this is the sales that we announce once every year and year-on-year. We have increased the sales of AbemaTV by 180% year-on-year. And this is the quarterly sales. We had Ameba Pigg that's been contributing to our sales, but that's going to be discontinued at the end of this calendar year. So that would have a push down effect on the sales. But I think that all in all, it's on a steady growth trend. And it's been 3.5 years since the launch of AbemaTV, and then we have exceeded 45 million downloads, and the number is counting.
And this is the weekly active user evolution. So we reached 10 million WAU when the press conference for the marriage of Yu Aoi was held, if I remember correctly. And then after that, there was a press conference held by Mr. Miyasako, and then there was Typhoon #19 news. So steadily and solidly, the base has been growing. And Internet service like this, it shows an instant growth, but it's quite difficult to sustain that growth after something big happens.
So we don't want this to be a temporary growth, and that's what we have been quite cautious of in the last 3.5 years. And I believe that we have been able to create a model in place that would allow us to have steady growth, and we expect to have further growth going forward. And 10 million WAU for us to achieve that, we had different factors, but I believe that the factor that worked the most was the news.
When we had the typhoon, we have the second biggest viewership, and the #1 viewership came from the press conference held by Mr. Miyasako, but we have those news. After the launch of AbemaTV, there was an earthquake that took place in Kumamoto Prefecture, and a lot of people watched AbemaTV news. And then now many people are going to AbemaTV. And then when we got a typhoon that was happening at midnight, that we continued to air flash news about it. So now I think we have established a viewing habit among the users to watch AbemaTV news when there -- something happens.
And AbemaTV has been strong in dating reality show. Maybe you don't really have an understanding of what kind of a show it is. But let's say that when we get advertisement, when we speak to the person in charge of advertisement, it's so easy when they have a high school student girl as their daughter because everyone watches that in that generation. So we have been able to create a boom, I should say, and they're watching floral programs. So for sure, it's starting to take roots. And dating reality shows, 84% of the users watch this on-demand. And then for drama, it's like 90% of the viewer -- viewing comes from on-demand. And there's Abema Premium subscribers and that is growing quite steadily as well, which is a paid service.
And in the next fiscal year, what we want to do is to offer services that can help us grow the number of premium subscribers. And in terms of linear versus on-demand, we have had 60% and 40%, roughly, split. But it seems like the subscription is growing.
And we have a new drama program called (foreign language) and it can be loosely translated as The End. If you're followed, that started this last weekend, and it's very interesting as a program, too. So we would like to keep on releasing programs like this, so that we can create a solid, even more solid fan base.
And when you have -- whether it be variety or TV or drama, if you have a package, I believe that there are some changes that we need to make from the beginning of the launch. So for AbemaTV, you can swipe the screen. It's like zapping through TV channels. And we have created a feature like that. So it's sort of like watching YouTube, and then you, at the same time, try to search for new program, new contents. So that's the kind of feature that we have here.
And going forward, in -- so sometime around the middle of 2019, we started to focus on business alliance, and we have had Dentsu and Hakuhodo to have capital alliance with us. And we also have plural partnerships so that AbemaTV can be brought and be offered to new segments through partnerships.
So this is the medium and long-term sales pipeline. As you can see, we have more subscription revenue than what we had expected initially. So we have a shopping channel, and we're also investing in anime. So we have plural peripheral businesses, and I believe that they will start to reflect on the number. So we want to accelerate monetization with related or peripheral businesses.
And lastly, for this fiscal year, AbemaTV has reached to a turning point. So before we have been posting loss because we have been making upfront investment. But starting from this fiscal year, we want to reduce the amount of loss. So we are looking at about JPY 18 billion loss. It doesn't mean that we're going to substantially reduce the loss in a short period of time, but we want to do that gradually.
And for advertisement, it looks as though we're going to have more new customer acquisition. But what I mean by this is that we want to increase advertising billings that we do with new clients. And for Game, we want to enhance the operational capability of the major long-term gains. But at the same time, we want to make new successful gains. That's it from my side. Thank you.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]