FY2021 Third-Quarter Investor Meeting transcription

V-cube, Inc.

Q3 Financial Results Briefing for the Fiscal Year Ending December 2021

November 1, 2021

Event Summary

[Company Name]	V-cube, Inc.
[Company ID]	3681-QCODE
[Event Language]	JPN
[Event Type]	Earnings Announcement
[Event Name]	Q3 Financial Results Briefing for the Fiscal Year Ending December 2021
[Fiscal Period]	FY2021 Q3
[Date]	November 1, 2021
[Number of Pages]	35
[Time]	17:30 - 18:37
	(Total: 67 minutes, Presentation: 40 minutes, Q&A: 27 minutes)
[Venue]	Webcast
[Venue Size]
[Participants]
[Number of Speakers]	1
	Naoaki Mashita	Representative Director, President & CEO
		(Founder)

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Japan	03.4405.3160	North America	1.800.674.8375
Tollfree	0120.966.744	Email Support	[e-mail]

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Presentation

Mashita: Hello, everyone. I'm Mashita, Founder and CEO of V-cube, Inc. Thank you very much for taking time out of your busy schedule to participate in our financial results announcement for the third quarter.

I am back in Singapore after a long absence, and I am currently in quarantine. When I came back after a long absence, I found that my Internet connection had been cancelled, so I am now using my cell phone to connect to the Internet. If there are any problems along the way, we would like to adjust it well, and we hope you will forgive us for that. I think it should be okay.

I would like to start with the highlights.

We are continuing to make improvements by changing the format slightly to make it easier to understand. Looking at our overall consolidated results for the third quarter, we continue to see rapid growth due to the penetration of the remote culture, with Event DX and Telecube leading the way.

Sales are JPY8.5 billion. This is a 60% increase YoY. Marginal profit is JPY5.96 billion. This is a 48% increase YoY. Marginal profit is calculated by subtracting variable costs from sales, and since we are in a business with large, fixed costs, we use this as a guide.

As for EBITDA, we have started to report EBITDA since goodwill has come out due to acquisitions, etc. EBITDA is JPY1.95 billion, which is a 59% increase compared to last year.

Operating income was JPY1.11 billion, a 100% increase, which is a very significant growth. However, there are various issues, which I will explain later. We will further accelerate our growth while adapting to this environment where many changes are occurring. This is the phase where these things are necessary.

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The Company-wide MRR of JPY600 million is also 56% higher than last year. The number of employees is 492, up 27% from the same period last year, and we are making good progress in increasing the number of employees and colleagues to support this rapid growth.

As for each segment, the key to enterprise DX is that SDK is currently growing the most, and usage fees for this are JPY520 million, an increase of 103%.

In terms of Event DX, the ARR for Event DX is similar to the fixed annual sales. This is JPY3.71 billion, which is a 212% growth compared to the same period last year. In terms of the number of events held, we have held a total of 6,151 events, which is also a huge leap forward with a 151% increase.

In addition, the number of Third Place DX units installed in a single quarter reached 1,750, which is quite a new record. Compared to the same period last year, it is up 228%. Cumulative total is 5,957 units, reaching almost 6,000 units. Compared to the same period last year, the number has increased by 329%, which is a very significant growth.

In terms of MRR, if you look at the past trends, this is not limited to completely fixed sales.

Especially in the past, the only fixed revenue was from Enterprise DX web conferencing, but as events are used in each industry over and over again, this is becoming a fixed revenue stream. As for Third Place DX, Telecube, there has been growth in monthly maintenance fees for the Telecube for public use and Telecube subscriptions, so MRR is now steadily increasing.

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I would like to explain the highlights of each.

Third-Place DX is accelerating an expansion currently. On the other hand, in terms of Event DX, the structural shift in the pharmaceutical industry has been occurring rapidly since the third quarter, and we are currently working to respond to this.

Here is a brief explanation of each. In the Event DX business, the number of small-scale events in the pharmaceutical industry has been significantly lower than expected.

Small-scale events, especially in the pharmaceutical industry, are largely divided between regional and head office, and regional distribution is often small and relatively simple. The number of events has been much lower than expected.

The shift to medium and large scale is now starting to occur. In order to achieve this, we have made structural changes, or simply put, assuming a large number of small events, we have hired people and secured outside staff to meet the needs of a large number of small events. Rather than a large increase in this number, the difficulty per event will increase. The unit price per event will also go up. This is the direction we are shifting to, and we are working on structural reforms to achieve this.

As I mentioned earlier, the number of employees has increased by 27% and we have increased the number of members firmly. By making structural reform taking advantage of increased members, we need to shift to a structure that will allow us to increase our profit margin, under the situation in which the unit price is increasing rapidly while the growth in the number of events is slow.

Since we have not been able to catch up with the shifts in the third quarter, the weight of fixed costs is beginning to show in the figures, as I will explain later.

We are not doing business only in the pharmaceutical industry, so we are also expanding into other industries and growing in each industry, such as shareholders' meetings, human resources, finance, and B2B marketing. The growth and expansion in these areas are steadily progressing.

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