FY6/2024 Q3 Financial Results: Summary of Q&A (1)

May 17, 2024 Macromill, Inc.

(Q1)

  • In your latest financial results presentation, you said that you have succeeded in controlling Total Employee & Outsourcing Expenses.
  • I understand that Total Employee & Outsourcing Expenses are a set and you leverage outsourcing to deal with any work that you cannot cover with your in-house operational capacity, and if Total Employee Expenses go up, Outsourcing Expenses will go down and vice versa. Is it not possible to reduce both Outsourcing Expenses and Total Employee Expenses?
  • Furthermore, if it is the case that you increased recruitment to cover a shortfall in your in-house operational capacity and your Outsourcing Expenses fell as a result, am I right in thinking that this is evidence that investment made to date paid off and there is no possibility of Outsourcing Expenses going up again?
    (A1)
    • Before the second half of last fiscal year, we did not have enough operational capacity to meet demand and we drew on outsourcing resources to meet robust demand from client companies. At the same time, we stepped up recruitment to bridge the gap between supply and demand, anticipating further demand growth in the future.
    • From the second half of last fiscal year through this fiscal year, such recruitment has been paused; what is more, our productivity has improved, reflecting an increase in the proficiency of recruited personnel. As a result, our operational capacity has expanded, and we have succeeded in reducing our Outsourcing Expenses.
    • We are still making good progress with various measures, and I believe we can improve productivity further over the coming fiscal years by, for example, strengthening the operational structure and reviewing our business processes.
    • Also, from a medium-to-long-term perspective, I believe that, in our Focus Business and Foundation Business, the investment currently being made in the renewal of our core research system will pay off, enabling further improvement in productivity.
    • As regards Outsourcing Expenses, in our Focus Business and Foundation Business, the current trend can be maintained to some extent; however, our Future Business has a high Outsourcing Expenses ratio and so as Revenue growth in this business accelerates sharply in the future, there will be increasing upward pressure on Outsourcing Expenses.
    • Our policy is to exercise firm cost control and reliably generate profit on a consolidated basis.

(Q2)

    • You have upwardly revised your dividend forecast in your latest financial results. What is your shareholder return policy for the future?
      (A2)
      • Under our new Mid-term Business Plan starting this fiscal year (ending June 30, 2024), we set out a goal of returning to profit growth after hitting bottom last fiscal year.
      • We are now at the end of the third quarter of the first fiscal year and I definitely feel that we are on our way to achieving this goal.
      • Our profit/loss has been impacted by an equity method loss from Toluna; however, this is ultimately a loss for accounting purposes and our distributable cash has steadily increased. In
  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.
  2. Toluna is currently a company majority-owned by an investment fund and, after a certain period has elapsed, an exit

event whereby the fund will exit its ownership position through an IPO or M&A is expected.

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addition, we can expect a significant inflow of cash on the realization of a return on our investment in Toluna and on the collection of vender-loan to Toluna.

  • We also believe that preparations for an exit event(2) for Toluna are progressing smoothly.
  • This latest upward revision to our dividend forecast is something we decided to do against this situation and since the creation of further future cash inflows can be expected through the steady growth of businesses in the future, we decided to further strengthen shareholder returns from next fiscal year onward.
  • We plan to tell you about the policy in more detail at the time of the full-year financial results briefing, which will be held in August. We intend to raise our target dividend payout ratio and significantly increase the momentum for dividend increases.

(Q3)

  • What is your full-year forecast for the equity method of loss from Toluna and your forecast for next fiscal year?
    (A3)
    • In our first-quarter financial results briefing in November last year, we said that, in the worst case scenario, the maximum equity method loss from Toluna we could incur on a full-year basis was just under 1 billion yen, but at the moment, we expect the loss possibly exceed our worst case scenario.
    • Furthermore, we said that we assumed Toluna's profit would turn positive next fiscal year. However, although Toluna is likely to perform better next fiscal year than this fiscal year, in light of recent conditions, we believe that we might also need to anticipate a loss of less than 500 million yen as a conservative scenario.

(Q4)

  • What are your thoughts on the guidance forecast for next fiscal year?
    (A4)
    • Since the process of formulating the budget is currently underway, we cannot provide any details at the present time. However, we do not recognize any major risks to our businesses, and conditions remain very favorable.
    • Accordingly, our guidance forecast for next fiscal year also sets out our intention to continue achieving steady Revenue growth and to maintain profit growth momentum.
    • Next fiscal year corresponds to the second year under the Mid-term Business Plan ("MTBP") covering the three years from the fiscal year ending June 30, 2024 to the fiscal year ending June 30, 2026, and so we intend to make it a year in which we achieve steady growth aiming for achievement of the targets under the three-year plan.

(Q5)

  • The business results of the Japan Business Segment look strong compared with your competitors. Why is this, do you think?
    (A5)
    • We believe that our Japan Business Segment's strong performance can be attributed to an increase in the added value provided both in terms of "quantity" and "quality".
    • Firstly, from a "quantity" perspective, we succeeded in steadily rebuilding a broad client group by strengthening outbound sales from the first half.
    • Additionally, through Monitas, Inc., which became a subsidiary in July last year, we have managed to significantly strengthen the Group's panel infrastructure, which has led to improvement in "quality", including enhancement of our proposal capabilities.
    • We believe that our relationships with clients have been strengthened as a result, ultimately enabling us to win orders for larger-scale projects and helping increase our share of business within client companies.

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  • We have said that recent conditions are very good, and we believe that by steadily doing what needs to be done as we have so far, we can still achieve further growth.

(Q6)

  • What is the latest changes in the domestic demand environment due to the Cookieless trend?
    (A6)
    • In view of the first-half business results, we do not think there will be any major adverse impact on the digital research services we provide. However, we cannot claim there has been a change for the better.
    • We are currently steadily pushing ahead with the development of technologies for a Cookieless future, aiming for further growth. The other day, Google announced that it was pushing back the schedule for Cookies deprecation but the industry is generally moving in the direction of searching for alternatives to third-party Cookies and we plan to continue making preparations.
    • In December last year, we signed a partnership agreement with Google (Press release), and we are currently in consultations over initiatives further down the line, aiming to achieve further growth in the digital domain from next fiscal year and beyond.

(Q7)

  • Give an outline of the M&A transaction in the advertising business conducted by your Korean subsidiary Embrain, including the scale of the transaction, the business model of the target company and the approximate size of the business.
    (A7)
    • Embrain acquired a company that is engaged in the advertising business but details of the acquisition price, etc. have not been disclosed. The scale of the Revenue involved is small.
    • In the marketing research industry, restructuring engulfing surrounding domains is underway and we, too, must expand our business into the upstream and downstream processes of client companies' marketing cycles.
    • Accordingly, we have pushed ahead with business model transformation in our Japan Business Segment and pursued business expansion in areas such as consulting. However, we recognized that in Korea as well, there is a need to expand our business into surrounding areas.
    • The latest M&A is a first step towards this and the latest M&A transaction was implemented based on the judgment that the growth of both companies could be accelerated by seeking to utilize Embrain's research business and the QPR data provision service launched two years ago in the analysis of ad effectiveness and ad placement proposals.

Ends,

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Macromill Inc. published this content on 03 June 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 03 June 2024 09:41:04 UTC.