Ateam Holdings Co.,ltd. Stock

Thank you for watching Ateam Holdings Fiscal Year 2026 Second Quarter Earnings Call. Second quarter highlights are shown on the slide. I will explain these figures later. The sequence will be reporting of the financial results, performance review and topics.

This is the second quarter consolidated financial summary. Adjusted EBITDA performed generally as forecasted. Due to increased costs associated with shareholder benefit program, profit decreased year-on-year. Due to the impact of crypto asset price fluctuations, both ordinary income and net income decreased. Revenue was JPY 5.789 billion. Adjusted EBITDA was JPY 228 million. Ordinary income was minus JPY 19 million. Quarterly net income was minus JPY 65 million.

This is the progress of revenue and profits. Revenue is at 46% and adjusted EBITDA is at 34.4%. Third quarter is our busiest period, so we expect to see progress at that stage. We've included again the information about how the fluctuations of crypto assets, which we discussed at the beginning, will have an impact.

Currently, the price of crypto assets has dropped compared to before. As shown in the red box to the right, when crypto assets fall, the provision for sales promotion decreases. Therefore, operating income increases. However, the valuation of these assets decreases, resulting in a valuation loss and a decrease in ordinary income.

As shown in this graph, Bitcoin and other crypto assets fell from JPY 17 million to JPY 12 million. Operating income was JPY 319 million, but the valuation loss on crypto assets was JPY 321 million. Consequently, ordinary income was minus JPY 19 million. This page shows the revenue and adjusted EBITDA for the Digital Marketing segment and the Entertainment segment.

Digital Marketing revenue was JPY 4.778 billion; adjusted EBITDA, JPY 464 million, and operating income was JPY 572 million. Meanwhile, entertainment revenue was JPY 1.011 billion; adjusted EBITDA, JPY 158 million; and operating income was JPY 158 million.

This is the quarterly performance trend of Digital Marketing business. Both year-on-year and quarter-on-quarter, revenue increased slightly. Our D2C businesses, such as cosmetics and pet food performed well, but some media businesses struggled, resulting in only a slight increase in revenue. Regarding revenue, there was a deconsolidation due to the transfer of shares in Ateam Finergy, but overall, it remained flat.

As shown here, adjusted EBITDA was flat year-on-year, but the increase in profit due to increased revenue in the D2C business supported the segment profit. Also, compared to last year, 3 companies have been consolidated through M&As. As written in small print on the bottom right, WCA, Strainer and Signity have been added.

Next is the quarterly performance trend of the Entertainment business. Existing titles are trending down, resulting in a year-on-year decrease in revenue. Revenue increased quarter-on-quarter due to the busy year-end and New Year holiday period.

Regarding adjusted EBITDA, the efficient operation of existing titles and collaborative projects compensated for the downtrend. Some projects have been terminated due to external factors, but overall, profitability was maintained.

The graph on the left shows the ratio of collaborative projects against revenue, and on the right is the overseas revenue ratio. It is currently 39%. This is the consolidated quarterly trend. Since around last fiscal year, we have been conscious of quarterly profit. And as a result, we were profitable again this quarter.

Once again, these are the topics for the second quarter of 2026. First, in terms of finance, there has been a change in the capital structure due to the bank borrowings. Previously, we set this as a target or policy for our future financial structure. Currently, as shown on the left, DER is 0.3x and the cost of capital is 6.5%, but we want to shift to the target state on the far right.

To achieve this, we will increase borrowings and invest in M&As to increase EBITDA. Then we will reinvest that into M&A and continue this cycle of increasing EBITDA. This is the capital structure on the balance sheet we expect to have if the medium-term management plan makes a progress as planned. The borrowings on the right is JPY 10 billion and on the left, JPY 11 billion.

Net asset will decrease and will be compressed. On the left is the balance sheet from the previous fiscal year. Currently, since we have borrowed approximately JPY 1 billion related to the M&A of Signity, this is what our capital structure looks like. We will proceed based on the capital plan mentioned earlier.

Now let's look at business topics. This is about micro CMS and paddle, which have recently joined the group through M&As. This is so-called a headless CMS. It is a service based on SaaS model that mainly offers a management screen for websites. Ever since it joined the group, MMR has increased by 67%, demonstrating remarkable growth. The number of companies using the service has now exceeded 13,000.

Secondly, partner marketing. We have expanded our network of partnership, and now have over 100 partner companies that we work with. Thirdly, we have been strengthening our corporate sales. We believe that these efforts have led to this growth.

Next is Paddle, which develops an app that allows users to earn crypto assets by walking. It is ranked third in Japan for crypto asset apps. After joining the group, they expanded globally, releasing the U.S. version in July 2025. Furthermore, as a result of various collaborative projects, its sales increased by 54%. These 2 companies have grown remarkably well since the acquisitions.

Now let's move on to the topics in the digital marketing segment. In our D2C business, sales of our skin care brand, lujo is growing significantly, exceeded 1.8 million units sold. Sales channel is not limited to our own e-commerce site. They are also available on e-commerce marketplaces, such as Rakuten and Amazon and recently at physical stores such as Matsumoto Kiyoshi and Sugi Pharmacy.

Thirdly, we released a new hair care brand called Rechispa. This is a non-foaming shampoo, a so-called cream shampoo. It leaves hair very moisturized. It has become a very popular product. This is another product in the D2C domain, the dog food Obremo. Obremo's main product is what's commonly called kibble.

However, this product is a soft, slowly cooked vegetable stew, primarily made with vegetables. Therefore, the service concept is soft and skewed in contrast to kibble and crunchy. The types of vegetable change seasonally. It is sold alongside our existing kibble.

Looking at the past year, we've had products like sunny potatoes in spring, colorful bell peppers in summer, sweet potatoes in autumn and pumpkins in winter, allowing many dog owners to enjoy seasonal ingredients.

And then there's the engineer-focused information site, GitTap. Currently, it has around 1.2 million members nationwide, making it the largest engineer site in Japan. Every year, leading up to Christmas, we hold a competition or a contest where members post various articles. It's called Advent calendar. This time of the year, users post a lot of different articles. And this past year, we had a record number of submissions.

As stated here, 23,260 submissions with a total of 10,645 unique participants, a significant number of people contributed. The prevailing trends included AI, machine learning and data science. Compared to the previous year, the number of participants increased by approximately 2.5x, and the number of calendar entries doubled, demonstrating considerable growth.

Next, we have a new TV commercial for Hikkoshi Samurai. Hikkoshi Samurai has always been promoted by an idol, called Yoyakun. Until now, both the first and second generations were just one Yoyakun, but with the third generation, Yoyakuns, an idol group has been formed. They are a Reiwa era idle group and their new song is now available on Karaoke.

There are 9 hearts lined up, which is the same number as the number of members. It's a lot of fun to sing at Karaoke. So please check it out on YouTube and memorize the song, if you'd like.

Now this is the 2026 performance and dividend forecasts. Revenue is JPY 24.5 billion, adjusted EBITDA JPY 1.5 billion, and EBITDA is JPY 1.3 billion. So the forecasts remain unchanged. This is the profit distribution or dividends, and we will be paying dividends twice a year. The interim and year-end dividends are JPY 14 each for a total of JPY 28. The dividend has been increased from JPY 22 in the previous period to JPY 28.

As we have explained before, this is our shareholder return policy during our midterm management plan. Shareholder returns will amount to JPY 4 billion to JPY 5 billion in total, and we have introduced a progressive dividend to achieve total return ratio of 100%. As shown on the right, we will continue to consider flexibly, including share buybacks.

Another form of shareholder return is shareholder benefit program. Shareholders who hold 5 units or 500 shares or more, will receive a QUO-card worth JPY 10,000 twice a year for a total of JPY 20,000 as a benefit. This concludes my explanation.

Thank you for attending Ateam Holdings Fiscal Year 2026 First Quarter Financial Results Briefing. These are the highlights, which I will explain in a while. Today's presentation will focus on these 3 points.

First, regarding the summary of our first quarter consolidated financial results. Revenue and adjusted EBITDA decreased slightly both year-on-year and quarter-on-quarter. Against our forecast, we are making solid progress in terms of profit, and we were able to start this fiscal year more or less in line with our expectation.

Revenue, JPY 5.529 billion; adjusted EBITDA, JPY 287 million; ordinary income, JPY 234 million and quarterly net income was JPY 295 million. This shows the progress of each figure. The strong progress in net income was due to the gain from the sale of Ateam Finergy. I will come back to this later.

Revenue decreased slightly. Despite a slight drop in revenue, we secured profit, thanks to the impact of cost reduction efforts, which have been underway since last fiscal year. The results by segment are as follows: First, the Digital Marketing business in blue. Revenue was JPY 4.640 billion. Adjusted EBITDA was JPY 492 million and operating income was JPY 493 million.

The Entertainment business is in orange. Revenue was JPY 888 million, adjusted EBITDA, JPY 36 million and operating income was JPY 36 million. This is the quarterly performance trend for the Digital Marketing business. Both year-on-year and quarter-on-quarter, revenue decreased, but profit increased. We have prioritized profitability in managing the business.

In terms of revenue, we have consolidated 4 companies acquired through M&A due to the exclusion of Ateam Finergy following the transfer of shares and lower revenue from some existing media. Overall revenue decreased slightly. In terms of adjusted EBITDA, our automotive-related media business generating traffic of potential car owners for appraisals saw a decrease in profit due to increased advertising expense resulting from intensified competition to attract customers.

In other businesses, we cut back advertising investment and prioritized profit management, resulting in increased profit both Y-o-Y and Q-on-Q basis. In the Entertainment business, we maintained profit through efficient operation of existing titles and collaborative projects. While existing titles continue to experience a downward trend, the decline itself is quite small.

We will continue to efficiently manage existing titles and reduce costs while strengthening collaborative projects to offset the downward trend, thereby ensuring profit. Some collaboration agreements were terminated due to external factors, resulting in a year-on-year decrease in profit. But overall, we maintained to be positive.

The graph on the left shows the percentage of revenue from collaborations. The ratio has decreased, but as I mentioned earlier, this is due to the termination of some collaboration projects. This is the trend of consolidated quarterly performance.

Next, I'll cover the topics in the first quarter. These are the 3 points. Completion of the M&A of Signity Inc., transfer of shares of our subsidiary, Ateam Finergy and announcement of a new game title currently being developed jointly with Sanrio. Each of these topics has a relevant strategy written on top of it. We made strategic investment as a part of growth strategy focusing on M&A.

Second point is the result of optimizing our business portfolio. And third, we implemented a business policy aimed at reducing volatility in the entertainment business. First, let's talk about Signity. This is the profile of the company. 13 employees, the acquisition price was JPY 1.050 billion. For the funding, bank loan was used.

We borrowed with the aim of optimizing our capital structure. With Signity, we have identified the costs that can potentially be reduced after the M&A. We added profits, taking business growth into account and the price relative to the potential profit is deemed reasonable. This graph in gray, these figures represent the planned reductions for this fiscal year 2026 and onwards. These figures represent advisory fees and adjustments.

In comparison, the EBITDA multiple is approximately 6x, which we believe is within a reasonable range. This is Push One, a service provided by Signity. It is a B2B SaaS model, service for businesses. This service is used by various website operators. They provide a service that allows operators to send push notifications directly to website users via their sites.

This is a push notification from the website without using an app. For example, an e-commerce client. If a consumer forgets about an item in their shopping cart, a notification saying there's still an item in your cart can be sent, potentially leading to a conversion. This service can improve website operations. This service is provided to the clients on a monthly fee basis.

These are the synergies with us, bottom left, as we move toward becoming a sales supporting company to acquire and develop new customers, we believe these products will be extremely easy to sell. These products can serve as a gateway to expanding our various services to our clients.

On the right, shows introduction to existing businesses. We believe this service will become a tool that our clients can use to strengthen their customer acquisition efforts. These 2 points represent the synergies between Signity and Ateam Group.

Next, the second topic. On August 1, 2025, we completed the transfer of shares in Ateam Finergy. The company's business is an insurance agency service called NaviNavi Insurance. And we transferred the shares to Sasuke Financial Lab at the price you see on the slide. The background to this share transfer was outlined in our midterm management plan.

It is a part of our efforts to reduce risk volatility to optimize our business portfolio. This was the result of restructuring our business to maximize our business value. And third, our entertainment business. This is Fragaria Memories. We have publicly announced the production of this title. This is a media mix of the chivalry fantasy Fragaria Memories currently being developed by Sanrio. As the first smartphone game, it's a title that many fans and users are looking forward to.

Finally, here are our 2026 earnings and dividend forecast. As was announced last fiscal year, our forecasts are as follows: revenue, JPY 24.5 billion; adjusted EBITDA, JPY 1.5 billion; EBITDA, JPY 1.3 billion; operating income, JPY 900 million; ordinary profit, JPY 900 million; and net income, JPY 600 million.

With the aim of enhancing shareholder returns, we will pay out dividends in 2 installments, an interim dividend and a year-end dividend. The full year dividend will be increased from JPY 22 per share last fiscal year to JPY 28. And interim dividend and year-end dividend, 2x, JPY 14 each on January 31 and July 31. Total amount is JPY 28. As a result, our dividend payout ratio will be 86.6%.

Next, I would like to touch upon our shareholder return policy announced last fiscal year. To achieve this, we have decided to introduce a progressive dividend. We have established a shareholder benefit program to increase the attractiveness of our shares as an investment destination and to increase liquidity.

Shareholders who hold at least 5 units of our stock will be eligible to receive a JPY 20,000 QUO card. Twice a year, at the end of January and July, we will offer JPY 10,000 QUO card each. This has been very well received by many shareholders. On that note, this will conclude my explanation.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Thank you very much for joining us today for the fiscal 2025 full year business results briefing. Let me begin my presentation.

These are the highlights. First of all, for the full year of fiscal 2025, we achieved a significant year-on-year increase in profit. Results also generally landed strongly against our forecast. Revenue was JPY 23.917 billion, which was 100% year-on-year and 95.7% against forecast. Adjusted EBITDA for the full year was JPY 1.719 billion, 232.2% year-on-year and 114.6% against forecast. For the fourth quarter, revenue increased, but profit decreased year-on-year, while both revenue and profit decreased on a quarter-on-quarter basis. I will explain this in more details later.

Today, I will mainly cover 4 points. First, compliance with the prime market listing maintenance criteria. On October 27, 2022, we submitted a plan to meet the continued listing criteria. I'd like to report that we have now received notice from the Tokyo Stock Exchange confirming that we are in full compliance. The part where we have not met the criteria was the market capitalization of tradable shares. The requirement was JPY 10 billion. As of 2023, it was JPY 8.1 billion, but it has now reached JPY 13.9 billion, so we have successfully met the requirement.

The 5 key initiatives we undertook were execution of growth strategy, increase of market capitalization of tradable shares, active shareholder returns, enhancement of corporate governance and extensive IR activities.

First, execution of growth strategy. As we have stated before, we are actively promoting M&A as a new growth driver, and we have been advancing this in partnership with advantaged partners with whom we have formed a capital and business alliance. Next, stock market-centric management. We have focused a capital cost and share price-centric management.

To enhance liquidity, we established a new shareholder benefit program. We also announced a target average total return ratio of 100% and total shareholder return of JPY 4 billion to JPY 5 billion, and we have already executed share buybacks. As for enhancement of corporate governance, our corporate strategy division has led efforts to ensure company-wide optimization and rigorous budget management. As a result, we have been able to meet the listing maintenance criteria.

Toward achieving our medium-term business plan, we will continue to promote these 4 strategies. First, whereas we previously were centered around B2B2C or B2C areas, we are now going to penetrate into the B2B market by providing our expertise, especially to customers in the digital marketing field, we hope to support their digital customer acquisition and business efficiency. Also, we'd like to continue to pursue inorganic growth driven by M&A, which I talked about earlier. These 2 points are expected to lead to PER growth as indicated on the right.

Until now, we had no particular insistence on being debt-free, but because we had no major policy of how to invest our cash, we ended up being debt-free. Going forward, we will actively invest in M&A and other opportunities. For that, we plan to take on borrowings and lower our capital cost. In terms of organizational strategy by strengthening monitoring under the holding company structure, we plan to further promote M&A. We believe that advancing M&A and borrowing money will also help to reduce WACC.

Here is the consolidated financial results summary, as I have already mentioned. Ordinary income was JPY 1.585 billion, 260.3% year-on-year and 122% against forecast. Net income was JPY 1.036 billion, 108.7% year-on-year and 103.6% against forecast. As written at the top, we achieved a significant year-on-year increase in profit. Through enhanced business management and optimized business portfolio, we successfully generated profit. Specifically, we sold unprofitable or noncore businesses and acquired new businesses.

Here are the results compared with our forecast and also the results compared with the previous fiscal year. Revenue remained flat at 100% year-on-year, while all profit indicators increased. We'd like to continue to disclose adjusted EBITDA as an indicator that appropriately measure our core business profitability.

As explained previously, our adjusted EBITDA starts with operating income as amortization of goodwill and depreciation to obtain EBITDA and further adjust for M&A-related expenses and provision for sales promotion allowances. The newly consolidated paddle has a business model where users earn points by walking and those points can be exchanged for Bitcoin. For points that will be traded to Bitcoin and provided to users, we need to provide an allowance.

Now fluctuations in Bitcoin prices affect the allowance, which in turn impacts operating income. Accordingly, we add this back when calculating adjusted EBITDA. We also add sales promotion expenses and subtract the actual cost of points granted. So the biggest part is expenses related to M&A and then the impact of crypto asset price fluctuations. We deduct such impacts and derive the adjusted EBITDA to measure our core business profitability.

As mentioned earlier, when crypto asset prices rise, the allowance increases, which lowers operating income, but because the asset value increases, ordinary income rises. The diagram on the right illustrates the reverse when crypto asset prices fall. On the left is the Digital Marketing segment. Revenue was 101% year-on-year and adjusted EBITDA was 159.5%. The main drivers were the inclusion of the newly consolidated revenue of companies that joined our group through M&A as well as strong performance in car service business, which is the used car purchase comparison site and the moving business and moving cost comparison site.

On the right is the Entertainment segment. Revenue was 95.4% year-on-year. Although there was a decline in sales of existing titles, thanks to entrusted development revenue from the collaborative projects we are focusing on with companies possessing strong IP, the decline in revenue was minimal. As a result, adjusted EBITDA turned positive.

In the fourth quarter, adjusted EBITDA declined both year-on-year and quarter-on-quarter. The main reason is that we made strategic investments in Q4 toward the current fiscal year 2026. This included human resource investments such as bonuses and issuance of paid stock options as well as investments aimed at business growth for the current fiscal year, which resulted in a decline in profit.

This is illustrated in this chart, showing human resource investments and business investments and the difference in amortization from the provisional PPA calculation. These items were the primary additional costs and investments recorded in this Q4. Here are the segment results.

This is a quarterly trend for the Digital Marketing segment. Revenue grew 105.3% year-on-year. Quarter-on-quarter, there is the usual seasonal pattern in which Q3 is a busy season for the moving-related business. So Q4 typically dips slightly compared to Q3. The Entertainment segment's quarterly performance is shown here.

We will continue to manage existing titles and reduce costs. And by steadily handling collaborative projects, we aim to avoid major fluctuations and secure profit as we move forward. Although the timing is not yet certain, we expect that when titles are released in the future, there will be significant contributions to revenue and profit.

This figure shows the ratio of collaborative projects in the entertainment business. From fiscal '24 to fiscal '25, about 20% of projects have become collaboration based. The graph on the right shows the overseas ratio. Here is the consolidated quarterly performance trend. This is a medium-term management plan for fiscal '25 to '28 and within it, the shareholder return policy.

We have announced that we will introduce progressive dividends to achieve a total shareholder return of JPY 4 billion to JPY 5 billion and an average total return ratio of 100%. First, in fiscal 2025, we executed share buybacks totaling about JPY 3.2 billion. We plan to continue flexible share buybacks over the next 3 years. The gray figures in the table are still provisional and therefore, expressed as such. Below that, the figure of JPY 112 million represents the dividend. We will first fix this amount and then in line with business performance, consider dividend increases. In these ways, we have decided to strengthen shareholder returns.

Second, to increase the opportunity for profit returns, we will pay semiannual dividends, an interim dividend and a year-end dividend. In addition to moving to twice a year dividends, we have decided to increase the annual dividend per share from JPY 22 to JPY 28, which means JPY 14 each at the interim and year-end stages.

So we decided on the 3 initiatives of progressive dividends, interim dividends and the increase in dividends with the objective of strengthening shareholder returns. This is the forecast that we have announced for the new fiscal year fiscal 2026. Revenue, JPY 24.5 billion, adjusted EBITDA, JPY 1.5 billion; ordinary income, JPY 900 million and net income JPY 600 million.

You may notice that compared with fiscal '25, adjusted EBITDA and profit are projected to decline. The main reason is the closure of one of the Entertainment segment's collaborative projects. So we subtracted that from the core business figures. Despite this, as written, we are implementing measures to increase our profit level through new M&A and improved functions in our existing businesses. We, therefore, are announcing these figures as a conservative forecast as of now.

As noted, we do not expect any major disruptions in the near term. And given our sound financial position, we have decided to shift to a progressive dividend policy. Starting in fiscal '24 and continuing into fiscal '25, we face the challenge of maintaining our prime market listing. Together with advantaged partners and with the newly established corporate strategy division taking the lead, we work to make the company more attractive to the stock market, foster new business growth and promote initiatives aimed at enhancing corporate value.

We will continue to execute the strategies I mentioned earlier to achieve the medium-term target of JPY 4 billion in adjusted EBITDA. In fiscal 2025, we gained strong confidence in these initiatives. We see fiscal 2026 as a year to lay the groundwork toward achieving that goal. Within the company, we have set the goal of new growth for the year, meaning this will be a year we aim for new growth and all employees will unite in working toward this target. We ask for your continued support in our endeavors.

That concludes my presentation.