Q1 2020 CyberAgent Inc Earnings Presentation
Tokyo Jan 31, 2020 (Thomson StreetEvents) -- Edited Transcript of CyberAgent Inc earnings conference call or presentation Wednesday, January 29, 2020 at 7:00:00am GMT
TEXT version of Transcript
* Susumu Fujita
CyberAgent, Inc. - Co-Founder, CEO, President & Representative Director
Unidentified Company Representative, 
It is now time to start the live webcast of the earnings results briefing session of CyberAgent for the first quarter of FY '20 ending in September. Please refer to the disclaimer as described for what will be explained during the earnings results briefing.
Now our President, Mr. Fujita, will walk you through the earnings results.
Susumu Fujita, CyberAgent, Inc. - Co-Founder, CEO, President & Representative Director 
Hello. This is Fujita, the President of CyberAgent. As I had explained before, every 6 months for the first half and the full year results, we offer the briefing session where we invite participants over. And then for the first and the third quarter, we would have live webcast. And today, I would like to explain to you the first quarter first -- first quarter earnings results. So this is from October to December for us.
Overall, 3 months ago, in October, we had the briefing session. And since then, the entire company and the market environment have changed for better.
For the first quarter, the year-on-year results, we grew our sales by 4.4% year-on-year. And for OP, it was up 44.6%. Last fiscal year, we made a downward revision, so it was quite bad. But I believe that we were able to have a good start for this fiscal year, nevertheless.
And AbemaTV is growing quite strongly for a media business, and our revenue is experiencing growth. And for Ad Business, the sentiment was not so great, but it bottom out, and it's showing recovery. And for this quarter, I believe that the sentiment is rather positive.
For the Game business, we had new titles, namely WORLD FLIPPER and BLADE XLORD. So sequentially, they became hits, and they contributed to the revenue.
For the consolidated sales results, this is the changes that we have seen. For OP, compared to the first quarter of the last fiscal year, we're showing a significant growth.
And in terms of SG&A expenses, in the first quarter of last year, we were seeing some inflation of the cost. And then we ran so-called downward revision campaign internally, and we have tightened the expenses, and it is now stabilized. When we ran that downward revision campaign internally, at that time, we were recruiting quite a lot of midcareers, but we have stopped that, and it has stabilized.
And here is the P&L. This is how it looks like. Here's the balance sheet, not much change to the balance sheet.
For this fiscal year, we're still just in the first quarter. We've just kicked it off. And in terms of the forecast, last year, there was some uncertainty we were feeling in terms of the prospects. So we have given a forecast in that environment. And in terms of the progress, we have achieved about 1/4 of it against the JPY 465 billion sales forecast. So we were off to -- we're off to a good start. And for the net profit, there was some extraordinary loss that we have generated. So it's slightly lower for the net profit.
Let's go into the Internet Advertisement, Game and Media. So I would like to break down my explanation into those areas.
So about the advertising business, we were able to have the highest sales to date. So we're experiencing increase in the previous quarter and the quarter before that. And this goes for us, but not only us, it seems like the entire advertising industry was experiencing uncertainty of the outlook, but it seems like it has started to pick up.
And in terms of the OP, it was 8.4% for OPM, so it's showing a recovery. Within the Internet ad, we have made significant up-front investment so that we can internalize many of the operations, and they're starting to pay off now.
Next, this is the Game business. For the Game business, I said this in the summary already. So we had 2 major hits of our new titles, so they contributed positively. On the other hand, for the sales of the existing titles, it may look a little bit sluggish, but that is because we experienced some negativity in October, but it seems as though we'll be able to make some recovery for the existing titles as well. And this is how the OP looks like. So we have optimized our advertising expenses. And on year-on-year basis, we have been able to make solid growth. So for the existing businesses, existing services, it seems as though we are able to make recovery, as I said.
So from Jan to March, we have a lot of anniversary titles, and we are planning a lot of events around them, so we hope to raise our sales based on those anniversary titles. So we're hopeful for those titles.
So for what will be released in the future, so we have the kickoff -- Kick-Flight and also Konosuba: God's Blessing on this Wonderful World! Fantastic Days, and there's going to be Granblue Fantasy: Versus, which is going to be launched next month.
Going on to the Media Business. For the Media Business, Pigg Abema (sic) [Ameba Pigg] has discontinued, and that had some impact, but AbemaTV has grown, and it had driven the sales. And this is the number of downloads. As you can see, we're -- it's showing a really nice upward trend into the right, and we have exceeded 48 million downloads.
WAU, I have said that once you hit 10 million, it would be meaningful in terms of size. And we have hit that last fiscal year, and I believe that we have been making solid progress. So the characteristic of AbemaTV now is that when an incident occurs, people will turn on AbemaTV. We're really strong in breaking news. And we've had quite a lot of hits in the dating reality shows, so the viewership among junior high school students and high school students has become quite high. And we're also focusing on drama series. So strong in animation, strong in sports, Mahjong, HIPHOP. So I believe that we have already gained some strength in specific genres. So rather than just to be comprehensive, we are also gaining our strength in specific genres.
From October to December period, we have what's called Abema time that starts on 12:30 at night, and we have received that time slot on the terrestrial broadcasting, so that we can communicate about AbemaTV. And by using this time slot, we are able to raise awareness and also raise awareness of viewership. And so that collaboration with TV Asahi is progressing.
So now we have the linear broadcasting and on-demand. So it's now the hybrid that we have for AbemaTV.
So currently, we're producing a lot of TV programs. And once they're broadcasted once, they would come and be shifted to on-demand. So now we have about 8,000 original episodes. So it's such a strong on-demand service that we're able to offer now. And then the more we do this, the bigger this platform will get.
As I have been saying, AbemaTV can be viewed free of charge. But when you become a premium user, you will be able to see limited or exclusive programs as well. So we have what's called a freemium business model, which is quite unique, and that is the source of our growth and expansion. So we're going to grow it with Ad Business as well as subscription.
For ads, we're now enhancing our offers. And there's going to be a new ad product that we're going to release. It's called Abema full reach plan. So it's going to be the biggest product so far. So if you are a user of AbemaTV, you will be in contact of this ad.
And for on-demand, most of the programs are not free of charge. But our sponsors will be able to sponsor those programs and offer programs free of charge. So this is a new product that we are planning on launching.
So this is the type of hybrid business that we're going to -- we're formulating right now. And our on-demand business share is about -- was about 32%, and it has grown to 38%. And I believe that this direction would not change. What I mean by that is that the ratio of on-demand will continue to grow, we believe. Although this is going to be hybrid, our policy and our strategy is to grow both the linear and on-demand.
If you are a premium subscriber to Abema, and as you can see, it is growing quite significantly, so it's a little bit short of 600,000, but I think we will be able to hit 1 million within this fiscal year. So the more subscribers we get -- correction, the more users we get, the more of them that can shift to subscribers.
So for the new contents, You can't fool me Mr. Wolf, that's already started. And for this season, again, we are growing at a record-high pace, so this is the #1 content for us. And as you can see here, we have dating reality show, and we also have TV dramas targeting young generation. So those are the ones that we're producing mainly.
And we also have peripheral businesses that we are focusing on. We have launched Keirin or bike race channel this April, and we have kicked off our WinTicket, which is where people can come and buy tickets, and that is growing twice as much. So we're off to a good start on that one. So what we're doing here is to generate result that is away from subscription or ad. So this is the peripheral business that we're really nurturing now.
So we focus on medium and long term sales. We always talk about that. So we want to gain our sales with advertising and subscription, but we also want to focus on related businesses like the one that I have just explained to you. And there's going to be retail business as well. And they're starting to bear fruit now, so we want to monetize different business models.
Lastly, for FY 2020, this is the strategy that we have, and I always say this every year. So for our mid- to long-term vision, we want to grow AbemaTV, so no change to that. And for media, we want to start the monetization of AbemaTV. So we have accepted the fact that we were generating about JPY 20 billion loss. But starting from this fiscal year, we want to reduce that amount. And for ad business, we have spent some time to expand the sales that we do with national clients. So after we conquest the national clients, we want to generate more sales with them. So that's what we would like to do to increase advertising billings. And for Game business, we want to make successful games and enhance the operational capability to run long-term games.
And with that, I would like to close my explanation about the first quarter. Thank you very much.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]