Macromill : FY6/2023 Q1 Financial Results Summary of Q&A

FY6/2023 Q1 Financial Results: Summary of Q&A(1)

November 10, 2022 Macromill, Inc.

(Q1)

• You mentioned that your expanded operational capacity is progressing well. What specific impacts have you seen?

(A1)

• As we explained during the previous full-year financial results, expanding operational capacity and boosting productivity have been given high priority by management.
• As a result of our initiatives, we have significantly reduced on-line research related employee turnover and improved the productivity of our existing employees.
• From the Q1 results I think you can also see how the in-house production rate has risen and Outsourcing Expenses have been controlled.
• As we head into the second half of the year, we aim to make further improvements to productivity to increase profit margins.

(Q2)

• You have seen solid Revenue in the Overseas Business (ex-Korea) Segment, but it appears that rising costs have significantly impacted profit.
• What is the reason for the results, and was the increase in costs in Q1 greater than you expected?

(A2)

• As you pointed out, overseas Revenue have performed strongly, and as with Japan, the challenge has been how to expand our operational capacity.
• To this end, recently we have increased recruitment and implemented employee retention measures. Employee Expenses have risen considerably as a result.
• Q2 is the busiest time of year for our Overseas Business Segment, and we are working to expand capacity ahead of that time.
• At this point, we have reached our desired size, and we expect an expansion in Revenue and improved profit in Q2 and beyond.

(Q3)

• The Q1 results were in line with your forecasts, but considering recent client demand, what is your outlook for Q2 and the second half of the year?

(A3)

• Strong client demand has continued, and we have not seen anything we regard to be a significant negative event.
• We believe that customer demand will continue its growth momentum in Q2 and beyond. In the second half of the year, we aim to improve our profit margins to meet our forecast for the full year.

(Q4)

• In the Q1 earnings presentation, you mentioned that in the Japan's research business client demand was outstripping your operational capacity and that some opportunity loss was occurring. Can you quantify the extent of this opportunity loss?

(A4)

• We have reduced turnover in the research business's operational team , which had been an issue. The mood

1 This material is not a transcript of questions and answers at the results briefing but a concise summary of them including additions and revisions made at our own discretion to facilitate reader understanding.

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in the team has improved and the organization is now in good operational shape.

• As a result, we boosted productivity and expanded capacity. However, the demand from clients is so strong that it exceeded our increased capacity, so opportunity losses continued in Q1.
• The size of those losses has increased compared with Q1 in the previous year, and we will continue to pursue the policy of steadily expanding capacity.

(Q5)

• It appears that the Revenue growth rate of Digital and Other New Business in Japan has dropped off slightly. What is behind this slowdown in terms of services and products?

(A5)

• Q1 Revenue from Digital and Other New Business increased 150 million yen year-on-year, driven by the Data Utilization Support (consulting) business in particular.
• Among other new businesses, we expect to see considerable growth in the Life Science Business for the full year. But for some major projects, there were divergences in the timing of Revenue recognition, resulting in negative Revenue growth for Q1 compared with the previous year.
• In addition, of our two major products in the digital field, the digital measurement service recorded steady Revenue, but the DMP Sync service decrease in Revenue.
• With the termination of third-party Cookies' support being postponed for one year, we are proceeding with the development of solutions that use alternative technologies. However, we believe the decrease in our existing service is mainly caused by the sparing of our service in our clients.
• We believe that it is highly probable that the sparing use of the DMP Sync service will continue for the rest of the fiscal year.
• However, in Digital and Other New Business overall, we believe the Data Utilization Support (consulting) business and Life Science Business will continue to drive Revenue growth. Therefore, at this point we believe our target Revenue growth rate of 20% for the full year can be achieved.

(Q6)

• Why did Revenue for Digital and Other New Business in Japan decline quarter-on-quarter from 1.7 billion yen in Q4 in the previous year to 1.6 billion yen in Q1 of this year?
• Will Revenue from the Data Utilization Support (consulting) business continue to increase?

(A6)

• A major factor in the quarter-on-quarter Revenue drop from Q4 last year was a decline in Revenue in the Life Science Business and digital field.
• However, the decrease in Revenue in the Life Science Business was due to a delay in Revenue recognition timing for major projects, and we expect a turnaround in growth from Q2 and beyond.
• Revenue from the Data Utilization Support (consulting) business has increased, even compared with Q4 last year.

(Q7)

• When do you expect to launch an alternative solution for the DMP Sync service?

(A7)

• We are currently developing a solution that uses new key information rather than Cookies in our data clean room environment. We are making progress together with major platform holders and advertising agencies.
• The specific timing of service launches will vary depending on the status of efforts with each company, but for the earliest project under way, we expect to launch services at some point from the end of Q2 to early Q3.

Ends,

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