V cube : FY2023.Q2 Investor Meeting transcription

V-cube, Inc.

Q2 Financial Results Briefing for the Fiscal Year Ending December 2023

August 10, 2023

Event Summary

[Company Name]	V-cube, Inc.
[Company ID]	3681-QCODE
[Event Language]	JPN
[Event Type]	Earnings Announcement
[Event Name]	Q2 Financial Results Briefing for the Fiscal Year Ending December 2023
[Fiscal Period]	FY2023 Q2
[Date]	August 10, 2023
[Number of Pages]	24
[Time]	17:00 - 17:44
	(Total: 44 minutes, Presentation: 38 minutes, Q&A: 6 minutes)
[Venue]	Webcast
[Venue Size]
[Participants]
[Number of Speakers]	2
	Naoki Mashita	Representative Director, Chairman & Group
		CEO (Founder)
	Masaya Takada	Representative Director, President & CEO

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Presentation

Mashita: Hello, everyone. I'm Mashita, Representative Director Chairman & Group CEO (Founder) of V-cube, Inc. Thank you very much for taking time out of your busy schedule to participate in our financial results briefing today. Mr. Takada, Representative Director, President & CEO, is also present today.

Takada: I am Takada, Representative Director, President & CEO. Thank you for your participation today.

Mashita: I would now like to make a quick report on H1.

I would like to start with highlights.

Net sales for H1 totaled JPY5.75 billion, adjusted EBITDA JPY790 million, and adjusted operating profit JPY310 million. I will explain the details of each of these segments on the next page onward, but first I would like to give an overview of each segment.

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First, please see page five.

I would like to begin with the Event DX business. As I mentioned earlier, we take a high value-added policy in the domestic market, and the unit price per event has increased. As shown on the page four of last page, the unit price was JPY1.03 million, up about 14% YoY.

However, pharmaceuticals and human resources (one specific major company) remained below expectations. The figures were very weak. As COVID-19 pandemic ended at last, factors special to our industry bottomed out. And we are preparing for counteroffensives. And I would like to explain the details of the various preparations from this point onward later.

In the USA, we had a hard time, affected by reopening from last year. We, however, acquired large customers such as Citigroup Inc. and Light & Wonder, Inc. And we took cost control measures like layoffs in June of this year. We are now adjusting to achieve a large increase in sales in H2, and to turn the deficit in H1 back into the black.

In the Third place DX business, centering on the TELECUBE, its usage rate is expanding both in offices and in the public sector, following the end of COVID-19 pandemic. The needs of the people began to be understood gradually during the COVID-19 pandemic. Now as COVID-19 is over, people have started to move, and have returned to the office, and the usage rate has expanded significantly. I would like to explain this later by showing you graphs of actual usage. New ways of working are now firmly established, and we should show ourselves at our best.

Demand within offices continues to remain at a high level, although it is slightly lower than last year, when sales were very good. The trend over the past few years shows that there has been significant growth, but at the same time, the number of subscriptions, offered on a monthly basis, has been steadily increasing, with a net increase of about 93 units in H1. Models for rental was originally for small to mid-sized companies, but it is now expanding to include large companies as well.

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Moreover, we continue to install them in JR stations and various buildings for public use. Partly, it has taken some time to secure a place to install the equipment, and some delayed into H2 or next year. That is a little of problem.

The third is the Enterprise DX business. Here are three fields: business growth, hybrid work, and reskilling.

Business growth, mainly SDK, has experienced a large decrease in usage fee by large existing customers due to the end of COVID-19. This is what we had initially expected, but it advanced a little better than initially expected.

At the same time, as new customers mainly in entertainment increased, the usage fee remained flat. This decrease in usage by large customers is also due to the simple fact that most of them are in the entertainment area. And due to the full end of COVID-19 in May, they went out and this contributed to a decrease in some services, such as gaming, YouTubers, V Tubers, etc. This was, however, really factored in here.

Concerning hybrid work, this is the old general-purpose Web, which currently means a combination of V-CUBE Meeting and Zoom. As for the V-CUBE meeting, it was in withdrawal mode for a long time, but it fell to a certain point. And now it bottomed out as the extent of the decline decreased. At the same time, Zoom continued to perform well and grew, and we see this hybrid work itself now is beginning to return into growth mode again.

The third is reskilling. Here, in Singapore, there was a kind of government confiscation for schools, and the trend was downward here, but now that it is at zero, it will not go down any further. At the same time, our LMS for corporate customers is growing steadily now and we are now entering a growth phase with strong sales.

Moreover, I would like to mention operating profit on the whole. The result was due to the impact of the ongoing depreciation of the yen. We originally assumed JPY130 at the beginning of the period, but we have now changed our current full-year forecast to JY140. These factors contributed to an operating loss of JPY40 million in H1. We expect a foreign exchange loss of about JPY120 million for the full year.

I am very sorry for the downward revision of the full-year forecast, which we have just announced. Considering the current situation, we have revised our forecast to JPY11.5 billion in net sales, JPY480 million in adjusted operating profit, and JPY100 million in operating profit.

From the beginning of the fiscal year, we had said that this would be a year to adapt to the changes in the post-COVID-19 social environment and make investments in structural reforms and future growth. We are now preparing for solid growth in the coming year and beyond by cutting costs and concentrating investments in growth areas.

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