Financial Highlights Q2 Results of FY 2015 · Q1 Q2 Q3 Q4 FY 2015 Q1 5.17 5.35 ©2015 Avex Group...

1

November 5, 2015

7860：Avex Group Holdings Inc.

Financial Highlights

Q2 Results of FY 2015 (Fiscal year ending March 2016)

©2015 Avex Group Holdings Inc.

Consolidated Results

2 ©2015 Avex Group Holdings Inc.

©2015 Avex Group Holdings Inc. 3

FY2015 Q2 Highlights –Net Sales

(billions of yen)

FY2013

Q2

FY2014

Q2

FY2015

Q2

78.72 77.85 68.60

10.1 billion yen (-12.9%) decline YoY


(billions of yen) -3.06

-0.88 -5.71

-10.12

78.72

68.60

-0.46

Declined Stadium shows in Management & Live and

declined Album sales in Music were the main factors

FY2015 Q2 Highlights –Net Sales Change by Segments

Music Video Management

& Live

Others

Adjustment + FY 2014

Q2

FY 2015

Q2


FY2015 Q2 Highlights –Net Sales composition ratio by segments

Others

2%

1.8

Others

2%

1.4

Management

&

Live

39%

32.1

Music

34%

27.8

Video

25%

20.0

Management

&

Live

37%

26.4

Music

34%

24.8

Video

27%

19.1

FY 2014

Q2

FY 2015

Q2

(billions of yen)

6

5.28

1.77

FY2015

Q2

FY2014

Q2

FY2013

Q2

(billions of yen)

FY2015 Q2 Highlights –Operating Income

1.41

0.36 billion yen（-20.6%）decline YoY


7

(billions of yen)

Music Video Management

& Live

Others

Adjustment +

1.77 1.41

+0.45

+2.42

-0.64

-2.60

-0.36

０


Despite of reduced HQ building reconstruction costs,

increased costs in Video Business and

decreased Stadium shows in Management & Live Business

led to YoY decline

FY2015 Q2 Highlights –Operating Income Change by Segments

FY 2014

Q2

FY 2015

Q2

8

FY2015 Q2 Highlights –Net Income and Loss

-0.30

5.32

0.47

(billions of yen)


FY2015

Q2

FY2014

Q2

FY2013

Q2

In addition to declined Operating Income,

investment in new digital music distribution services

resulted in a net loss

9

Results by Segments


Music

PackageYoY

Digital Music

DistributionYoY

Net Sales 15.5 -14.8% 5.7 -11.1%

Gross Profit 5.8 -18.3% 3.0 +26.0%

Gross Profit Margin 37.7% -1.6pt 54.2% +16.0pt

10

Music Business Highlights


Sales and Profit for Music Package reduced

due to fewer album sales

Digital Music Distribution decreased Sales for the

same reason, but regained GPM due to increased

catalog sales ratio (billions of yen)

Video

DistributionYoY

Video

PackageYoY

Net Sales 16.0 +0.0% 5.1 +6.0%

Gross Profit 1.8 -45.6% 1.9 +21.5%

Gross Profit Margin 11.6% -9.7pt 38.5% +4.9pt

11

Video Business Highlights


(billions of yen)

Increased service betterment and content costs

decreased GPM in Video Distribution

Video Package recovered by increased licensing

royalty income from video distribution services

4.97

d-VIDEO was renamed as dTV in April, 2015

Q2

12

4.77

Video Business Highlights: Number of dTV & BeeTV Subs

5.02 (millions of people) 5.36

★

FY 2014

Q1 Q2 Q3 Q4

FY 2015

Q1

5.17 5.35


Marked highest subs as dTV by adding 220k in Q2

4.13 4.29

0.73

3.99 4.68

0.68

0.78 0.83

0.64 0.59

4.53

4.75

*31 days free trial campaign started from FY2014 Q3

★

13

Video Business Highlights: Number of UULA subs

1.08 1.14 1.24

1.41

(millions of people)

1.57 1.36

Q2 FY 2014

Q1 Q2 Q3 Q4

FY 2015

Q1


Subs decreased due to declined new sign ups

*31 days free trial campaign started from FY2014 Q3

Live Concerts YoY Management YoY

Net Sales 15.0 -30.2% 6.5 -7.7%

Gross Profit 1.7 -17.8% 2.2 -4.2%

Gross Profit Margin 11.5% +1.8pt 34.9% +1.3pt

Merchandising YoY Fan Club YoY

Net Sales 5.7 -5.9% 2.3 +19.6%

Gross Profit 2.2 -13.1% 0.7 +8.8%

Gross Profit Margin 39.2% -3.3pt 30.6% -3.0pt

14

Management & Live Business Highlights

(billions of yen)


Fewer Stadium shows in Live Concerts influenced

YoY Sales and Profit decline

15

Management & Live Business Highlights: Number of Concerts


Venue Size FY 2014 Q2 FY 2015 Q2 YoY

Stadium class 17 9 -8

Arena class 111 89 -22

Hall & Live

House class327 255 -72

Total 455 353 -102

Audience 1.92M People 1.13M People -0.79M People

Concert Ticket

Average Price8,721yen 8,769yen +48yen

Average Ticket Price slightly gained,

while number of total concerts impacted Audience numbers

FY2015 Earnings Forecast

Revision


Initial forecast Revised forecast Variance

Net Sales 163,000 151,000 -12,000

Operating Income 11,000 4,200 -6,800

Net Profit 4,300 600 -3,700

17

■Forecast Revision

In accordance with our Dividend Policy, our full year dividend

amount will be sustained to 50 yen per share

■Dividend Forecast

(millions of yen)


We revised down our full year target as below, mainly because

subscriber numbers for Video Distribution services are expected

to fall short of our initial expectations, while the content costs

are expected to hover

※

*

*Initial forecast refers to Forecast announced on May 14, 2015


Revised Forecast Changes by Segments

Despite of steady growth as the largest

VOD service in Japan by far, dTV expects

to fall short of its initial subs target.

UULA is also expected to miss the initial

target due to declined new sign ups.

An upside is the expected launch of a new

SVOD service “GEO CHANNEL” in Q4.

Net Sales

Initial

forecast

Revised

forecast

Music Video M & L Others +

Adjustment

163.0

151.0

1.4

6.8

2.4 1.1

Operating Income

11.0 0.8

6.6

0.4 0.2

4.2

Prospect for Video Distribution Subs

FY2014 Q4 FY2015 Q2 FY2015 Q4

（billions of yen）

（billions of yen）

UULA dTV + BeeTV

-12.0

-6.8

Initial

forecast

Revised

forecast

Music Video M & L Others +

Adjustment


Rebound for the next growth

Our approach to maximizing the value of contents

aimed for the achievement of “Mid-Term Strategy 2018”


Circulatory cycle of Contents & Platforms

Aiming for mid to long term growth by wheeling

a circulatory cycle among “Contents” and “Platforms”

・Amplifying the contents

・Expansion of usage opportunities

・Facilitate the collection and distribution

of content usage fees and royalties

Investment phase in progress

towards the future growth

for subscription music streaming services

& Video Distribution (SVOD) services

①Contents

Revenue and profit circulation generated by our owned contents


③Collection &

Distribution

Provide Copyrights (Music Publishing)

Master

Rights (music）

Artists, Talents,

Creators,

Actors,

etc.

Master

Rights

(video) Fees &

Royalty

②Usages

③Collection &

Distribution


Recent approaches to improve the value of owned contents

・Started offering Subscription music streaming services ・Adding further value to the packages ・Expanding Video Distribution service ・Broaden Music offering to various services and platforms

・Enhancing auditions & artist development ・Signing global songwriters ・Expanding business alliance with outside artist & talent productions

・Additional investment to e-License* ・Investment to JRC**

①Contents

②Usages

Amplifying “Quality”,

“Quantity”, and the “Depth”

of the contents we manage

Enhancing the usage

opportunities

Facilitate a smooth circulation for the benefit of both content owners and users

★Avex Group acquired shares of Asia Promotion Inc. and Asia Cross Inc. which became equity method affiliates as of October 1, 2015.

＊e-License Inc.: An equity method affiliate of the Group. Avex Music Publishing (AMP), the Group’s wholly owned subsidiary made additional investment and

increased its share from 16.8% to 34.4% as of September 30, 2015. ＊＊Japan Rights Clearance Inc.: AMP acquired 46.6% of JRC shares, and JRC became equity method affiliate as of September 30, 2015.

★

23

Reference Data


*Forecast FY 2014 Q2 FY 2015 Q2VS

ForecastYoY

Net Sales 77,809 78,729 68,606 -9,203 -10,122

Cost of Sales 54,822 56,686 48,425 -6,397 -8,260

Gross Profit 22,987 22,042 20,181 -2,806 -1,861

Gross Profit Margin 29.5% 28.0% 29.4% -0.1pt +1.4pt

Personnel Expenses 5,817 5,713 5,492 -325 -221

Sales Promotion &

Advertising Expenses6,750 4,914 5,941 -809 +1,026

General Expenses 6,857 9,635 7,335 +478 -2,299

Total SG&A Expenses 19,425 20,263 18,768 -656 -1,494

Operating Income 3,561 1,779 1,412 -2,149 -367

Operating Margin 4.6% 2.3% 2.1% -2.5pt -0.2pt

Ordinary Income 2,422 1,903 201 -2,220 -1,702

Net Income 737 476 -308 -1,046 -785

* “Forecast”refers to initial forecast announced on May 14, 2015

24

Consolidated Income Statement （millions of yen）

Consolidated Income Statement



ForecastYoY

Net Sales 30,160 27,862 24,802 -5,357 -3,060

Cost of Sales - 17,574 15,051 - -2,522

Gross Profit 11,195 10,288 9,751 -1,444 -537

Gross Profit Margin 37.1% 36.9% 39.3% +2.2pt +2.4pt

Personnel Expenses - 1,577 1,327 - -250

Sales Promotion &

Advertising Expenses- 3,764 3,214 - -550

General Expenses - 1,617 1,333 - -284

Group Management Fee - 2,198 2,291 - +92

Total SG&A Expenses 8,568 9,159 8,166 -402 -992

Operating Income 2,626 1,129 1,584 -1,041 +455

Operating Margin 8.7% 4.1% 6.4% -2.3pt +2.3pt


25

Music Business Income Statement

（millions of yen）

Music Business


26

Music Business: Results by Sub-Segment

Music Package

Digital Music Distribution

Music Publishing


FY 2014 Q2 FY 2015 Q2 YoY

Net Sales 18,300 15,587 -2,713

Gross Profit 7,186 5,869 -1,316

Gross Profit Margin 39.3% 37.7% -1.6pt

FY 2014 Q2 FY 2015 Q2 YoY

Net Sales 6,424 5,710 -713

Gross Profit 2,455 3,093 +638

Gross Profit Margin 38.2% 54.2% +16.0pt

FY 2014 Q2 FY 2015 Q2 YoY

Net Sales 1,506 1,583 +77

Gross Profit 538 560 +21



27

Music Business: Results by Sub-Segment


Other Businesses of Music

Music Market Data

（Reference: Recording Industry Association of Japan）

FY 2014 Q2 FY 2015 Q2 YoY

Net Sales 1,776 1,969 +193

Gross Profit 946 1,101 +155


2014 2015 YoY

Music Package

Market (Jan.- Sep.)185,896 185,419 -0.3%

Digital Music Distribution

Market (Jan.- Jun.)21,839 22,881 +4.8%


FY 2014 Q2 FY 2015 Q2

Average Price (￥) 2,509 2,915

Units (thousands) 2,865 2,170

Average Price (￥) 987 767

Units (thousands) 2,962 4,609


Units (thousands) 502 299


Downloads (thousands) 2,153 720


Downloads (thousands) 7,050 4,956





ARPU (￥) 348 342

Subscribers (thousands) 334 283*Music Package indicators consists of the titles released in FY2015 and does not include back catalog sales.

M

u

s

i

c

P

a

c

k

a

g

e

Albums

Singles

DVDs / Blu-ray Discs

D

i

g

i

t

a

l

D

i

s

t

r

i

b

u

t

i

o

n

Feature phone(Ringtones/Video Ringtones)

Smartphone(Ringtones/Video Ringtones)

Ring-back tones

PC downloads

mu-mo

*

28

Music Business: Indicators Music Business: Indicators


Artist Title Copies(thousands)＊

Kis-My-Ft2 KIS-MY-WORLD 391

Namie Amuro _genic 339

V6 SUPER Very best 237


J Soul Brothers Ⅲ from EXILE TRIBE starting over 650

SKE48 Maenomeri 539

EXILE AMAZING WORLD 391

J Soul Brothers Ⅲ from EXILE TRIBE Summer Madness 304


TOHOSHINKI TOHOSHINKI LIVE TOUR 2015 WITH 165

* Total Copies as of Sep. 30, 2015

29

Music Business: Key Titles Released in FY2015 Q2

CD Albums

CD Singles




ForecastYoY

Net Sales 21,233 20,079 19,195 -2,037 -884

Cost of Sales - 15,635 16,082 - +446

Gross Profit 4,896 4,444 3,113 -1,783 -1,331

Gross Profit Margin 23.1% 22.1% 16.2% -6.8pt -5.9pt

Personnel Expenses - 368 341 - -26

Sales Promotion &

Advertising Expenses- 1,116 2,338 - +1,222

General Expenses - 489 387 - -101


Total SG&A Expenses 4,431 3,040 4,310 -120 +1,270

Operating Income 464 1,403 -1,197 -1,662 -2,601

Operating Margin 2.2% 7.0% - - -


30

Video Business Income Statement


Video Business


31

Video Business: Results by Sub-Segment

Video Distribution

Video Package


FY 2014 Q2 FY 2015 Q2 YoY

Net Sales 16,088 16,091 +2

Gross Profit 3,432 1,868 -1,563


FY 2014 Q2 FY 2015 Q2 YoY

Net Sales 4,833 5,122 +289

Gross Profit 1,623 1,971 +348



FY 2014 Q2 FY 2015 Q2

ARPU (￥) 465 473

Subscribers(millions) 4.77 5.35

dTV 3.99 4.75

BeeTV 0.78 0.59

ARPU (￥) 467 467

Subscribers(millions) 1.14 1.24


Units (thousands) 421 227

dTV+BeeTV

UULA


* DVDs / Blu-ray Discs indicators consists of the titles released in FY2015 and does not include back catalog sales.

*

32

Video Business: Indicators

Video Business: Indicators

※

d-VIDEO was renamed as dTV in April, 2015.

31 days free trial campaign for d-TV and UULA started from FY2014 Q3.

less than 1 yen rounded up. ※



ForecastYoY

Net Sales 27,496 32,150 26,436 -1,059 -5,713

Cost of Sales - 24,438 19,449 - -4,988

Gross Profit 6,628 7,711 6,986 +358 -724

Gross Profit Margin 24.1% 24.0% 26.4% +2.3pt +2.4pt

Personnel Expenses - 1,369 1,394 - +24

Sales Promotion &

Advertising Expenses- 300 344 - +44

General Expenses - 1,984 1,695 - -288



Operating Income 1,021 2,128 1,479 +457 -649

Operating Margin 3.7% 6.6% 5.6% +1.9pt -1.0pt


33

Management & Live Business Income Statement


Management & Live Business


FY 2014 Q2 FY 2015 Q2 YoY

Net Sales 7,073 6,528 -544

Gross Profit 2,379 2,280 -99


34

Management & Live Business: Results by Sub-Segment

Live Concerts

Management

Merchandising


FY 2014 Q2 FY 2015 Q2 YoY

Net Sales 21,520 15,011 -6,508

Gross Profit 2,107 1,733 -374


FY 2014 Q2 FY 2015 Q2 YoY

Net Sales 6,124 5,762 -362

Gross Profit 2,600 2,259 -341



35

Management & Live Business: Results by Sub-Segments

Fan Club

Others


FY 2014 Q2 FY 2015 Q2 YoY

Net Sales 1,984 2,372 +388



FY 2014 Q2 FY 2015 Q2 YoY

Net Sales 129 335 +205




36

Management & Live Business Indicators

Management & Live Business Indicators

Live Market Data*

（*Reference: ACPC）



FY 2014 Q2 FY 2015 Q2

Concert Ticket Average Price(￥) 8,721 8,769

Fan Club Subscribers(thousands) 1,210 1,387

2014 2015 YoY

Live Market (Jan.- Jun.) 104,365 127,468 +22.1%


ForecastYoY

Net Sales 1,436 1,817 1,460 +24 -356

Cost of Sales - 774 751 - -22

Gross Profit 705 1,042 709 +4 -333

Gross Profit Margin 49.1% 57.4% 48.6% -0.5pt -8.8pt

Personnel Expenses - 282 257 - -24

Sales Promotion &

Advertising Expenses- 114 165 - +50

General Expenses - 602 386 - -215

Group Management Fee - 238 248 - +9


Operating Income -467 -195 -347 +119 -152

Operating Margin - - - - -


37

Other Businesses Income Statement

Other Businesses



Mar.31,2015 Sep.30,2015 Mar.31,2015 Sep.30,2015

Current Assets 69,160 50,666 Current Liabilities 59,460 45,561

Cash and Deposits 25,699 13,445 Notes & Accounts

Payable-trade1,601 1,538

Notes & Accounts

Receivable-trade21,209 17,669 Short-term Debt 9,110 8,860

Inventories 9,038 5,885 Accounts Payable-

Other26,990 19,149

Others 13,212 13,666 Allowance for

Returned Goods4,247 4,027

Others 17,511 11,986

Noncurrent Assets 48,404 47,645 Noncurrent Liabilities 4,709 3,846

Tangible & Intangible

Assets37,200 37,467 Long-term Debt 1,095 540

Total Investments &

Other Assets11,203 10,178 Others 3,614 3,306

Investment Securities 5,501 4,782 Total Liabilities 64,169 49,408

Others 5,702 5,396 Total Net Assets 53,394 48,904

Total Assets 117,564 98,312Total Liabilities &

Net Assets117,564 98,312

38

Balance Sheet

Balance Sheet



39

Cash Flow Statement

Cash Flow Statement



FY 2014 Q2 FY 2015 Q2

Cash Flow from Operating Activities 6,500 -4,493

Cash Flow from Investing Activities -3,169 -3,060

Cash Flow from Financing Activities -5,146 -4,675

Effect of exchange rate change

on cash and cash equivalents4 -25

Net increase (decrease) in cash and cash equivalents -1,811 -12,254

Cash and cash equivalents at beginning of period 18,757 25,699

Cash and cash equivalents at end of period 16,945 13,445

40

Revised Forecast for FY 2015


Initial

Forecast

Revised

ForecastVariance

Net Sales 163,000 151,000 -12,000

Cost of Sales 112,645 108,085 -4,560

Gross Profit 50,354 42,915 -7,439


Personnel Expenses 12,472 11,189 -1,283

Sales Promotion &

Advertising Expenses12,957 12,605 -352

General Expenses 13,924 14,921 +996

Total SG&A Expenses 39,354 38,715 -639

Operating Income 11,000 4,200 -6,800

Operating Margin 6.7% 2.8% -4.0pt

Ordinary Income 9,700 2,700 -7,000

Net Income 4,300 600 -3,700

41

Revised Forecast for FY 2015


Consolidated Financial Forecast


Initial

Forecast

Revised

ForecastVariance

Net Sales 62,076 60,600 -1,476

Gross Profit 23,399 23,213 -185


Total SG&A Expenses 17,163 17,812 +649

Operating Income 6,236 5,400 -835

Operating Margin 10.0% 8.9% -1.1pt

Initial

Forecast

Revised

ForecastVariance

Net Sales 48,173 41,300 -6,873

Gross Profit 14,284 6,645 -7,639



Operating Income 5,186 -1,500 -6,686

Operating Margin 10.8% - -42

Revised Forecast by Segments

Music Business

Video Business



Initial

Forecast

Revised

ForecastVariance

Net Sales 54,968 52,500 -2,467

Gross Profit 12,103 12,512 +409



Operating Income 743 1,200 +456

Operating Margin 1.4% 2.3% +0.9pt

Initial

Forecast

Revised

ForecastVariance

Net Sales 2,991 3,000 +8

Gross Profit 1,442 1,413 -29



Operating Income -999 -800 +198

Operating Margin - - -43

Revised Forecast by Segments

Management & Live Business

Other Businesses



44

Cautionary statement concerning forward-looking statements

The forecasts for operating results and others contained in this release

were prepared by management based on currently available data and

information. Therefore, the forecasts include potential risks and uncertain

elements. In particular, in the Group’s business domain there are factors

other than general economic conditions that may affect our performance.

Please note, therefore, that actual results may greatly differ from the

forecasts.

Inquiries

Avex Group Holdings Inc.

Stocks & IR

+81-3-5545-9332

[email protected]

*Except otherwise noticed, the figures in this material are cutoff from fractions, and percentages(%)

are being rounded.


Financial Highlights Q2 Results of FY 2015 · Q1 Q2 Q3 Q4 FY 2015 Q1 5.17 5.35 ©2015 Avex Group...

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