MIXI, Inc. (MXN.F) Earnings Call Transcript

[Interpreted] Thank you very much for joining today's financial results briefing despite your busy schedules. I am Shimamura, the CFO. Today, I will go over our financial results following the agenda shown on Page 2. Please see Page 3. This page shows the executive summary. I will explain this summary in detail in this briefing. Please see Page 4. First, I will explain the financial status. Page 5, this page shows the quarterly consolidated income statement. For the first quarter, we had net sales of JPY 47.0 billion, EBITDA of JPY 8.6 billion, operating income of JPY 5.4 billion, ordinary income of JPY 5.6 billion and profit attributable to owners of parent of JPY 5.8 billion. Both sales and profit increased compared to the same period last year. The consolidation of PointsBet and strong performance in the Digital Entertainment segment resulted in a net sales increase of 50.3% compared to the same period last year. EBITDA increased by 125.0% year-over-year, driven by the Digital Entertainment segment. In addition, the recognition of deferred tax assets following the decision to transfer Bitibank shares resulted in a decrease in deferred income taxes and an increase in net income for the current fiscal year. The profit from the sale of BitBank shares is expected to be recognized in the third quarter. Please see Page 6. This page shows the quarterly trend of consolidated performance. Page 7, I will now explain the business status of each segment. Page 8, this page shows the Sports segment. Net sales increased 94.5% year-over-year to JPY 21.6 billion. The main factors behind this increase were the recent consolidation of PointsBet as well as growth in both the betting and Spectator Sports businesses. Please note that because FC Tokyo has changed its fiscal year-end, quarter 1 includes results for the 5-month period from February through June. Excluding this impact, net sales increased by 82.7% year-over-year. Driven by the domestic betting business, EBITDA rose 108% year-over-year to JPY 1.2 billion. Please see Page 9. This page shows the net sales trends for the main services in our betting businesses. Net sales increased significantly, rising 117.9% year-over-year, driven by the addition of PointsBet. Excluding the impact of the consolidation, net sales show an increase of 26.9% year-over-year. Thanks to the growth of Chariloto's comprehensive Keirin stadium management business and Net Dreamers Keirin ticket sales business, we continue to maintain a high growth rate. While the Keirin market from April to June saw growth of only about 3% year-over-year due to factors such as stricter regulations. TIPSTAR achieved 12.8% year-over-year sales growth and continues to expand its market share. Page 10. I will now explain the status of our betting businesses. Urban Sickle Parks Hiroshima for which Chariloto has been entrusted with comprehensive management celebrated its grand opening in April following a renovation. A G1 race has been scheduled for February 2027. The facility has attracted attention within the industry, serving as a model example of redevelopment and hosting study tours for many local governments. Net Dreamers, who launched the Keirin Media platform, netkeirin in 2020 after joining MIXI Group, added a betting feature to the platform in July last year. This service provides seamless coverage from predictions to bets while also driving mutual user referral with netkeirin user base of 14 million. As a result, we are attracting new Keirin fans and increasing the LTV of our betting business as a whole. Please see Page 11. I'll now explain the status of the Lifestyle segment. Page 12. Net sales increased by 24.5% year-over-year to JPY 4.3 billion. The main factors behind this increase were FamilyAlbum's highly profitable focus areas and the strong performance of minimo, EBITDA became positive, thanks to increased sales and profitability improvements. Page 13. I will now explain the status of FamilyAlbum. Net sales in FamilyAlbum's focus areas increased by 31% year-over-year. In addition, FamilyAlbum launched its family partner program in July. A partnership has been launched with Rakuten Travevelwell as the first initiative. FamilyAlbum supports all kinds of families in creating lasting memories together. By expanding opportunities for taking photos while on vacation, we hope to provide valuable experiences to even more families. Please see Page 14. I'll now explain the status of the Digital Entertainment segment. Page 15. Net sales increased by 21.5% year-over-year to JPY 19.5 billion. Although Monster Strike's MAU fell below that of the same period last year, net sales increased as collaborations with popular IPs contributed to higher ARPU. EBITDA increased by 39.5% year-over-year to JPY 10.8 billion. In addition to increased sales, profits increased as cost efficiency for the domestic version of Monster Strike continued to improve. Page 16. This page shows the status of Monster Strike. The monetization rate and ARPPU both increased due to collaborations with popular IPs and other factors, leading to higher ARPU compared to the same period last year. Although MAU continues to decline, collaborations with popular IPs and half anniversary promotions have been successful and the rate of decline narrowed compared to the previous period. Going forward, we aim to reach even higher levels through initiatives such as for new user acquisition. Page 17. The off-line event, Dream Days 4 was held in July. Admission tickets sold out on the first day of sale, prompting additional standing room tickets to be offered. Over 10,000 visitors attended the 2-day event. During the second day Monster Strike News broadcast, Monster Strike News trended to #1 on social media, generating a significant buzz both inside and outside the venue. Updates to the UI/UX were also announced during the event. These updates will help make the service more user-friendly for new users. We will continue to roll out updates gradually to increase our MAU. Please see Page 18. I'll now explain the status of the Investment segment. Page 19, we have acquired the investment fund management business from GRE Holdings and assumed a portion of the LP interest in the managed funds. The purpose of this succession is to bring on board individuals with advanced expertise and accomplishments in the investment business, thereby further enhancing our group's investment management framework. Page 20. This page shows the status of the Investment segment. Due to factors such as the recognition of gains and losses from investee funds and the sale of shareholdings, net sales were JPY 1.5 billion and EBITDA was JPY 800 million. To enhance transparency in the Investment segment, we have begun including explanations of net invested capital and net asset value, NAV. We will control net invested capital to remain within 10% of total assets. As of the end of the first quarter, net invested capital was 8.4% of total assets. In addition, NAV stood at JPY 59.7 billion, which is approximately 2.5x the net invested capital. In addition, along with the change in accounting standards, we have recognized an additional JPY 5.18 billion in operational investment securities starting in the first quarter as a result of valuing the shares held by minority funds at market value. Please see Page 21. I'll now explain the status of AI utilization. Page 22, we have entered into a strategic partnership with Runway, a global leader in video generation AI. We are already utilizing Runway's technology in our creative production. As a result, we were able to reduce the production time for video content related to a Monster strike event from approximately 21 days to 3 days. Additionally, the production period for MIXI's corporate branding movie was shortened from approximately 20 days to 7 days. In addition, our Director, Tatsuma Murase, has been appointed CAIO, and we are strengthening our framework for promoting AI utilization company-wide. Going forward, we will combine AI with the expertise we have cultivated in the social areas and our large user base to create new experiences. Through these initiatives, we will accelerate our transformation into an AI company at the application layer. Page 23, I will explain the revision to our results forecast. Page 24, for our fiscal year 2027 full year results forecast, we have left our initial forecast unchanged for net sales through ordinary income and have revised upward only our forecast for profit attributable to owners of parent from JPY 13.5 billion to JPY 25.0 billion. In connection with the sale of BitBank Inc. shares, we have reflected the extraordinary income we expect to record in the third quarter in our full year results forecast. Page 25. I will explain the revision to our dividend forecast. While focusing on investments for business growth, our policy is to target a consolidated dividend payout ratio of 40% or a dividend on equity DOE of 5% and continuously provide stable shareholder returns. In our initial forecast, we set the annual dividend at JPY 125 based on a DOE of 5%. As a result of the upward revision to our forecast for profit attributable to owners of parent, the annual dividend amount calculated using a 40% payout ratio is now expected to exceed the initial forecast. Accordingly, we will increase our annual dividend forecast by JPY 30 to JPY 155. Given that the sale of BitBank Inc. shares is scheduled for the third quarter, we plan to keep the interim dividend unchanged at JPY 60 and raise the year-end dividend to JPY 95. Page 26. This page shows the progress toward our results forecast. Each business, including PointsBet, is progressing as planned, and performance is in line with our full year results forecast. By continuing to build on the growth of each business, we're aiming for upside to this year's results forecast while also working to achieve our medium-term vision. Thank you for your time today.