TV TOKYO : FY2023 Results Briefing Scripts 2.73MB

TV TOKYO Holdings Corporation

Financial Results Briefing for the Fiscal Year Ended March 2024

May 21, 2024

Event Summary

[Company Name]	TV TOKYO Holdings Corporation
[Company ID]	9413-QCODE
[Event Language]	JPN
[Event Type]	Earnings Announcement
[Event Name]	Financial Results Briefing for the Fiscal Year Ended March 2024
[Fiscal Period]	FY2024 Annual
[Date]	May 21, 2024
[Number of Pages]	20
[Time]	14:00 - 14:31
	(Total: 31 minutes, Presentation: 31 minutes)
[Venue]	Webcast
[Venue Size]
[Participants]
[Number of Speakers]	4
	Ichiro Ishikawa	CEO, President
	Yukio Kawasaki	Senior Managing Director
	Hiroshi Yoshitsugu	Managing Director
	Takeshi Kozawa	Managing Director

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Presentation

Kozawa: Thank you very much for joining us today at the TV TOKYO Holdings Corporation's presentation of financial results for the fiscal year ended March 2024. Please refer to today's material, which has just been uploaded as a news release on the TV TOKYO Holdings website.

Yoshitsugu: I will now give an overview of the financial results for the fiscal year ended March 2024.

Please open to page one. The table here is a summary of the full year results.

I will explain the details later, but this is just a brief explanation.

In FY2024, earnings in the broadcasting business declined due to sluggish growth in the advertising market and a decline in viewer ratings. It is the so-called "rights business," or animation and distribution, which is derived from the secondary use of TV TOKYO's content. Although revenue in the rights business remained strong, consolidated net sales declined 1.6% YoY to JPY148,587 million.

In response to the decline in sales, we continued to invest in necessary content and cut non-essential expenses, but the previous year's record performance and the somewhat larger-than-expected decline in broadcasting revenue this fiscal year resulted in a 4.3% YoY decrease in consolidated operating profit, to JPY8,836 million. Despite the decrease in profit, it was the second-highest level in our history, following the record high in FY2023.

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Ordinary profit was JPY9,599 million, up 2.4% from the previous year. Ordinary profit increased due to an increase in dividend income and an improvement in equity in earnings of affiliates, which led to an improvement in non-operating profit.

Net profit attributable to shareholders of the parent company, or final profit, was JPY6,736 million, up 0.2% from the previous year, mainly due to an extraordinary gain from the sale of policy shareholdings.

Ordinary profit and operating profit reached record highs.

The following is a breakdown by division of the factors behind the operating profit decline.

First of all, the left-most blue bar graph, this is the operating profit for the previous year. It shows operating profit of JPY9,229 million in the previous fiscal year, FY2023. From there, the arrows pointing downward and upward to the right indicate the contribution of sales to the increase and decrease in profit.

First, in the core division, TV TOKYO's non-consolidated business, the broadcasting business experienced a decline in revenue due to negative advertising revenue as a result of headwinds in the advertising business as a whole. In addition, although we have made efforts to reduce expenses, this has contributed to a JPY1,625 million decrease in profits.

On the other hand, the upward arrow, this is the rights sector, which is positioned as a growth engine. This refers to the business of selling royalty income other than advertising by utilizing the content owned by TV TOKYO. The business of distribution, commercialization, and gamification, mainly of anime, was strong, and the distribution business, the so-called drama distribution business, was also growing, resulting in a positive operating profit of JPY1,583 million, which was a factor that boosted profits.

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On the other hand, TV TOKYO's overhead costs have increased, increased labor costs, along with higher employee bonuses and other expenses due to the Company's highest profit in FY2023. Human investment is also increasing.

In addition, promotional expenses related to DX and the 60th anniversary of the station's opening were also large. This resulted in the contribution of overhead cost to the decline in profit.

Lastly, the total amount of revenue from TV TOKYO Holdings and TV TOKYO Group's subsidiaries was JPY263 million.

As a result, consolidated operating income was JPY392 million lower YoY, or JPY8,836 million.

Please refer to the next page, terrestrial broadcasting business, TV TOKYO non-consolidated, by business segment.

Net sales were down 2.8% from the previous year to JPY110,338 million, and operating profit was down 14% to JPY6,495 million.

By business segment, broadcasting revenues were down 4% from the previous year to JPY76,096 million, while time spots were down 4.8% from the previous year to just over JPY69.5 billion. Overall, we did not reach the FY2023 results.

Business income from broadcasting increased 4.5% to JPY16,443 million. In the fiscal year ended March 2024, broadcasting facilities were transferred from the ownership of TV TOKYO Holdings to the ownership of TV TOKYO on a non-consolidated basis. As a result, the cost equivalent to the amortization expense that had

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been recorded in the broadcasting business in the previous year was pushed out to overhead costs outside this business, resulting in an apparent increase in profits. However, I would like to note that the profit of the broadcasting business also decreased when compared on the same basis.

In the rights business, revenue increased 0.1% from the previous year to JPY34,241 million. The mainstay animation division, SPY x FAMILY, and the commercialization of Pokémon, increased domestic and overseas sales, while the distribution of Naruto in Europe and the game rights to Black Clover were also strong worldwide.

However, there was a special factor, in that a large contract with a Chinese company was booked in H1 of FY2023 due to a delay in the schedule, so in terms of sales comparison, the animation division was down 5.5% from the previous fiscal year. The total amount is JPY20,971 million, but on a profit basis, animation also contributes to the overall positive results. In other distribution business segments, such as SVOD and then AVOD, sales to each external platform grew, as original content, such as dramas and variety shows, were also strong.

The number of subscribers to TX-BIZ, an economic video service, is also increasing, and the rights business as a whole is up 11.5% from the previous year, with a business profit base of JPY15,386 million.

The next, segment of consolidation.

Disclosure by segment and the way segments are carved out have been changed from this previous fiscal year, but the terrestrial and BS broadcasting business refers to the entire broadcasting business conducted by the

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TV TOKYO Group. Sales declined 4.9% to JPY94,773 million. This means that the broadcasting business, especially the spot business, struggled. The same is true of BS TV TOKYO, where broadcasting revenues are down from the previous year, and this segment also saw a 20.8% decline in operating profit to JPY3,675 million.

The animation and distribution business includes TV TOKYO's rights business, music publishing, CS pay TV broadcasting, and video distribution management and advertising, et cetera. TV TOKYO's animation business is the core of this segment, and it continued to grow both in Japan and overseas. Sales increased 1% YoY to JPY44,534 million, and operating profit increased 12.1% to JPY5,962 million.

The shopping and others segment is centered on TV shopping and e-commerce, including TV TOKYO Direct and the other three companies. Sales increased 14.3% due to the addition of Real Max, a golf equipment mail-order company as a new consolidated subsidiary. However, the accounting treatment of Real Max's acquisition-related companies in FY2023 was recorded as an expense on a consolidated basis, so the operating profit for FY2024 compared to FY2023 was higher. However, I would like to add that the shopping business as a whole continues to face a difficult situation.

Next, we present our forecast for the fiscal year ending March 31, 2025.

Taking into account macroeconomic factors and other factors, we are planning to increase net sales by 4.3% to JPY155 billion, as shown here. However, this includes an Olympic component, which means that part of the growth in sales is due to Olympic revenues. Operating profit is expected to increase 1.8% YoY to JPY9 billion.

As you can see, the forecast for ordinary profit is as shown in the table below, and the forecast for final income is a decrease. This was due to an increase in net profit due to gains on the sale of cross-shareholdings in FY2024. However, we do not expect such a large gain in the current fiscal year, so we are forecasting a

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decrease in profit. However, our policy of reducing the sale of policy shareholdings as a whole remains unchanged, and we will report separately on this when the impact on earnings is determined.

That's all from me.

Kozawa: Next, President Ishikawa will explain the progress of the medium-term management plan.

Ishikawa: I am Ishikawa. I would like to give you a brief overview of our medium-term management plan for the period from 2024 to 2026.

The seven issues on this page, numbered 1 through 7, are the issues that we will be working on for the next three years. I will explain each of them. Anime Business, which is the basis of our strength, and economic reporting, we would like to expand and strengthen not only broadcasting, but also economic reporting, including Streaming Business and our own IP business, such as Synapusyu.

There is no doubt that the tri-brid strategy of Broadcasting Business, Streaming Busines, and Anime Business, which was started under the previous president, has strengthened TV TOKYO's revenue base. We would like to move to a new stage by further strengthening our unique IP business of animation, economic reporting, to solidify our revenue base. This will be the pillar of our medium-term management plan.

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First, let me start with the economic press.

As you all know, we have a daily morning and evening news program, aired from Monday to Friday, called WBS and News Morning Satellite. In addition, we have Gaia, Cambria, and starting this April, Breakthrough, as economic programs. TV TOKYO has always had a good reputation for its economic news and economic programs, and our idea is to further strengthen this reputation.

Starting this April, the news bureau has undergone considerable reorganization, shifting to a more news- centered structure. We are currently embarking on various initiatives. First of all, we have changed the MC of WBS and News Morning Satellite since April, and we are now focusing on news and its commentary, with a strong emphasis on news content. By doing so, we hope to establish TV TOKYO as a form of economic reporting.

At the same time, our emphasis this time is on strengthening the economic video distribution service called, TX-BIZ. The number of free subscribers to our YouTube channel has already reached 2 million, but we want to strengthen our fee-basedTX-BIZ service, and this year, we have begun to focus on strengthening this service. Currently, we are working on news-oriented video distribution by increasing the number of economic journalists covering various fields and strengthening our editorial system.

At the same time, we are now working on strengthening the distribution of these videos, and we have already begun work on various programs and we are looking forward to a major renewal of various programs for the fall of this year. We are already running a content program called "30 People Akira Ikegami Wants to Hear from Now," which is doing well, and the number of members is increasing.

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Also, we are in the process of revamping the user interface and other systems of TX-BIZ and hope to go on the offensive this fall. In addition to the news aspect, we are also enhancing our organization to sell TX-BIZ.

We have a bureau called the Streaming business bureau, and some of the staff in charge of this TX-BIZ have been transferred to the floor of the news bureau, where they have begun working together with news reporters to create the site. Also, until now, TX-BIZ was mostly purchased through BtoC, but from now on, we would like to explore the corporate business, so we have established a unit in the sales department of the sales bureau to strengthen corporate sales. We are planning to strengthen our corporate sales activities in the future. Through this, we hope to increase the number of members by 1.5 times and the revenue by 3 times, by 2026, for TX-BIZ, and we are now in the process of starting this project.

Continuing on, we have Anime Business.

As you know, animation is the driving force behind TV TOKYO's growth. Starting this April, TV TOKYO Holdings has established an animation/IP strategy office. They are organizations of TV TOKYO, BS TV TOKYO and our affiliated company called AT-X. The animation/IP strategy office will control the animation business of TV TOKYO as a whole, as well as handling international sales and development.

Currently, the overseas sales ratio of the TV TOKYO Group is about 13%, but we would like to expand this to 20% by the end of this midterm management period. This is not an unrealistic figure by any means, and I think it is well within the range of what is feasible.

In addition, we have already invested in various companies, such as POPS WORLDWIDE in Vietnam and YONKO, a mobile app developer in France, for overseas development. In addition to distribution of animation, we have

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