Consolidated Financial Results
for the Fiscal Year Ended December 31, 2018
March 4, 2019

AOI TYO Holdings Inc.

Contents
1.
2.
3.
4.
5.
6.

Business Environment
Medium-Term Policies
Summary of Consolidated Financial Results
Consolidated Earnings Forecast
Current Initiatives for Various Businesses
Appendix - Company Profile, Stock Information, etc.
1

1. Business Environment2

Business Environment (1):Expanding Online Video Advertising Market
 The size of the online video Ad market was 184.3 billion yen in 2018 after growing 134%
from the previous year.
 Expected to exceed 290 billion yen by 2020 and 495.7 billion yen by 2024.
 Healthy demand for brand video advertising among major advertising sponsors.
 Despite being an “every-person-a-camera-person” era in which anyone can makevideos, very few videos are high-quality productions capable of generating profits.
500.0
400.0

Estimates and forecasts for the size ofthe online video advertising market
290.0

200.0

0.0

495.7 (billion yen)

362.9

300.0

100.0

418.7

462.0

137.4

2017

184.3

2018

231.2

2019

2020

2021

2022

2023

2024

Source: Online Video Research Institute, by CyberAgent, Inc., and Digital InFact, Inc.

3

Business Environment (2):
TV Commercial Production Spending Since 2009, TV advertising spending and TV commercial production spending have beenlevel (or slightly lower).
 TV advertising spending amounted to 1,947 billion yen in 2017; TV commercial production
spending were 217 billion yen.
 Despite growth in internet advertising spending, advertisers are reassessing the reach of TV.

2,000

1,998

Trends of TV advertising spending andTV commercial production spending
1,909

1,713

1,732

1,723

1,775

TV advertising spending
TV commercial production spending

1,791

1,834

1,932

1,965

1,947

214

218

217

2015

2016

2017

(billion yen)

1,500
1,000
500
0

202

195

178

187

189

199

214

217

2007

2008

2009

2010

2011

2012

2013

2014

Source: “Advertising Expenditures in Japan 2017,” Dentsu Inc.

4

Business Environment (3):Work-Style Reform Advertising industry groups have established forums for industry talks aimed atadvancing new work styles and reducing excessive labor hours.
Video Production
Companies
Industry Group: JAC(Japan Ad. Contents Association)

Clients
Industry Group: JAA(Japan Advertisers Association Inc.)

Advertising
Companies
Industry Group: JAAA

(Japan Advertising Agencies Association)5

2. Medium-Term Policies

6Assets

AOI TYO Group Strengths

 Unique Assets: Our People Of 1,650 group employees, 1,400 are engaged in creative work These creatives have produced notable results:
 No.1 share of the TV commercial production market
 More than 2,000 commercials annually More than 50 years of experience and expertise

Business Model High-quality video/image production leading to numerous awards *Palme dʼOr, ACC Grand Prix, andmany more

Make the most of the Strengths of Our People
Provide Video Content Solutions
Facilitate Communications Between Businesses and Consumers

This business model remains unchanged, now as ever7

Our Past

Toward Quality Over Quantity
The Goals We Pursued in the Past

Grow through higher quantityof TV commercials(= vertical/siloed growth)

Growth = Expansion in Scale

The Goals We Will Pursue in the Future

Our Future

Be a powerful corporate group capable of responding to any era
Make the most of the strengthsof our people
Build core strength through exponential
growth in quality and volume of people,
rather than technology

Develop businesses in response

Continue to deliver

to needs and change

appropriate profits

Dig deeper while expanding wider

Results-oriented, rather thangoal-oriented, stable profits

8Dig Deeper, Expand Wider
Video Production
Promotions

Capture/Coordinate
Branding
PeopleWiderContent

Wider
Extend Peripheral Solutions
Outward From Video Production

Establish an Overwhelming Position:

Video Advertising = AOI TYO

Deeper9

Environmental
Changes

Dig Deeper: Capture Video Advertising Demand
Online Video Increase in demand for highGrowing number of applications for video

5G Networks

Rapidly rising demand for video creators+

production value video

Expanding needs for video

Response

Establish an Overwhelming Position: Video Advertising = AOI TYO
Capture Demand for

1

Branded Video Production

2

Create + Deliver

3

Surround the Market@TV commercial production industry:
Capture benefits as the No.1 company among remaining players@Online video market:
Capture high production value video segment
Use data analysis tocreate and deliver (distribute) = Optimal results
Win all-inclusive orders through effectivefunctions and external collaborations

EventsPR

Video/Images
Influencer
MarketingVideo
Distribution

10

Environmental
Changes

Expand Wider: Provide More Peripheral Solutions
Main channel of communication between businesses and consumers
Past

Telecommunications
Environment

TV
Commercials
Papermedium, Etc.

Consumer
Behavior

ChannelDiversification

Present

TV
Commercials

Social MediaPR

Promotional
Marketing

Online Video

VerticallyIntegrated
Video

EventsInfluencer
MarketingContent
Marketing

MeasureEffectiveness

Ad Networks

E-commerceVideo and closely related fields are growing

Response

Extend Peripheral Solutions Outward From Video Production
1 Video as More Effective Content

Continue to improve video planning and production capabilities⇨ Stronger video content business

2

Capture External Resources

M&A and Equity Partnerships⇨Build stronger capabilities in events, PR, etc.

3

Diversify Business Model

Develop video-based solutions⇨Create high-value-added business models(beyond ad production on a contract basis)11

Our Future

Our People
EventsVideo
Production
Content
Marketing

TV Commercials

Promotional
Marketing1
OnlineVideo

Execution/Ideation

2

Hire People Grounded in the Industry
・Hire people with a general background in providing
integrated communications solutions

Training Via Secondments and Networking
・Adopt rotation/career path system
・Secondments to group companies with different
functions

PR

Many people who can propose and produce

integrated communications solutions

Professionals expert in many communications
methods

Form Teams of Experts
・Set up teams of integrated communications experts
・Set up teams of online video experts

Improved Training System
・Class work, as well as opportunities to learn OJT
through integrated communications projects
12Our Future

Overseas Growth1

Leverage stronger coordination among locations towork as an integrated whole, rather than individual
points of contact2

Solid profit structure based on uniqueproducts/services and a rational capital structure

Execution/Ideation*Studying whether expansion other than Asia is feasible

Working as an Integrated Business・New HD Overseas Strategy Div. launched July 2018
・Sponsored Asia Mtg.
・Adopted infrastructure/communications tools

Develop Unique Products/Services
・Create packaged solutions from IP and technology
developed/partnered in Japan

Revise Capital Structure
・Increase/decrease capital depending on location
profitability
13

Our Future
Toward Quality Over Quantity
Former FY2021 Goals

To avoid the pursuit of quantity as a management target andconsidering the rapid changes in the business environment,
we have decided against using sales/profit goals as KPIs in
the future

EBITDA

8.0 billion yen

ROE

12％ or higher

DOE

Approx. 4%

Results-Oriented, Stable Profits

However, we will continue to emphasize sustainability and profit returns toshareholders, aiming to keep ROE above cost of shareholders' equity
143. Summary of Consolidated Financial Results

15

Financial Highlights

 Net sales underperformed prior year due to (1) consistent profit management
emphasizing profitability, (2) strict order acceptance associated with work–stylereform, and (3) the trend toward printless delivery. At the same time, effective
profit margin improved, limiting the negative impact on operating profit.
(million yen)

FY2016FY2017FY2018YoY Change

Net Sales

64,92870,47364,792- 5,681

Operating Income

3,422

4,619

3,433

- 1,186

Ordinary Income

2,963

4,394

3,325

- 1,068

Profit Attributable to
Owners of Parent

1,095

2,781

1,952

- 829

EBITDA

4,389

5,755

4,777

- 978

* Effective profit margin: (net sales - external expenditures)/net sales* The results for 2016 are simple totals of the consolidated financial results of AOI Pro. Inc. and TYO Inc. for the calendar years (based on pro forma statements
for the end of the fiscal year ending December 31).

16

Trend of Net Sales by Quarter and Order Backlog
 Q4 in the prior year included sales from a major movie production. Eliminating thisfactor, sales in Q2 and later were nearly level.
 Order backlog as of the end of period amounted to 13,191 million yen (3.2% lower
year on year).
25,00020,00015,00018,472

15,521

18,023

15,257 15,343

15,61014,504

15,344

14,369FY2016

17,192FY2017FY201810,000Order backlog FY2017

5,000
0

(million yen)

21,134 19,424

14,985

13,191

13,466

14,331

14,261

14,016

17,322

13,631

Q1

Q2

Q3

Q4

Order backlog FY2018* The results for 2016 are simple totals of the consolidated financial results of AOI Pro. Inc. and TYO Inc. for the calendar years (based on pro forma statements
for the end of the fiscal year ending December 31).

17

Trends of Operating Income by Quarter Q4 operating income was nearly level with the prior year. Launch of new systems
resulted in rising costs, while lower performance in high-margin print sales served
as another negative factor. At the same time, effective profit margin improvements
and dividend revenue from movie investments and production offset thesenegative factors.
2,000
1,500

(million yen)

1,820
1,367
1,160

1,092
1,000

0

916
682

500

Q1

1,101 1,068

539

Q2

654

619

Q3

FY2016FY2017457

FY2018

Q4* The results for 2016 are simple totals of the consolidated financial results of AOI Pro. Inc. and TYO Inc. for the calendar years (based on pro forma statements
for the end of the fiscal year ending December 31).

18

Net Sales by Business Segment
 Advertising Video Production Business sales were lower due to strict control overorder acceptances and the shift toward printless delivery.
 Overseas Business sales rose, mainly due to the addition of a newly consolidated
advertising production subsidiary in Malaysia.
48,750 49,270(million yen)

43,331FY2016

8,608

8,774

8,463

8,072

3,610

Advertising Video
Production

Other Production

FY2017

7,585

2,558

Solutions

2,912

Overseas

FY20184,038
1,401 1,446 1,372
Video-related

19

Overview of Business Segments
Business

Overview

Advertising Video
Production

Planning and production of advertising videos such as television commercials.
The core business of AOI Pro. and TYO, whose merger resulted in the largest
share in the industry of the business.

Other Production

Production of materials other than advertising videos, which includes theplanning and production of movies, TV dramas, events, digital contents
production and promotional materials.

Solutions

Delivers solutions that solve customer issues. Services include direct
engagement with advertisers and one-stop online video advertising solutions(planning, production, media distribution, data analysis). Experience design andmarketing support based on vital sign data collected during VR experiences.

Overseas

Offices in China and Southeast Asia working to grow business with Japan-based
and local companies. Promoting M&As in this segment.

Video-related

Projects other than advertising, including the operation of photo studios and the
production of music videos.

* The Advertising Business Segment includes Advertising Video Production, Other Production, Solutions, and Overseas Business.
The Video-related Business Segment includes Video-related Businesses.
20

Net Sales by Customer
 Sales to advertising agencies declined.
 Sales from direct business with advertisers rose with video production, event, PR,
and other services.
24.5%
FY2017

17,29927.2%
19,18226.0%
18,35722.2%
15,633* Net sales from Dentsu Inc. (non-consolidated) were 15,390 million yen, and net sales from Hakuhodo Inc.
(non-consolidated) were 15,047 million yen.

23.2%
FY201815,05326.6%
17,22529.9%
19,36620.3%(million yen)

Dentsu Group
Hakuhodo Group
Direct transactions
Others13,146* Net sales from Dentsu Inc. (non-consolidated) were 13,445 million yen, and net sales from Hakuhodo Inc.
(non-consolidated) were 13,743 million yen.

21

Net Sales by Medium(million yen)

Medium

FY2017

Component
Ratio

FY2018Component
Ratio

YoY
Change44,11963.2%

38,632

58.9%- 5,487

Original work

38,36054.2%

32,45849.5%- 5,902

Printed commercial materials

2,745

3.9%

2.9%

- 831

Other

3,014

4.3%

4,260

6.5%

1,246

Entertainment contents

3,865

5.5%

3,083

4.7%

- 782

Digital contents

11,31216.0%

10,29315.7%- 1,019

Overseas

2,801

4.0%

4,242

6.5%

1,441

Other

8,727

12.3%

9,302

14.2%

575

Total

70,825100.0%

65,552100.0%- 5,273

TV commercial production

1,914* The results are simple totals of the consolidated financial results of AOI Pro. Inc. and TYO Inc.

22

Summary of Consolidated Balance Sheet(million yen)

FY2017FY2018Major Components

Current Assets

41,50336,307

Cash and deposits (-2,737); notes and accounts receivable (-1,082);
electronically recorded monetary claims (-1,934); work in process(+626)

Non-current Assets

18,234

19,327

Property, plant, and equipment (-444); intangible assets (+503);
investments and other assets (+1,033)

59,73755,63425,275

20,114

8,756

9,840

Total Liabilities

34,031

29,954

Total Net Assets

25,70625,679Total Assets
Current Liabilities
Non-current Liabilities(percentage of total assets)(43.0%)(46.2%)

Total Liabilities and Net
Assets59,73755,634

Accounts payable (+785); short-term loans payable (-4,666)
Long-term loans payable (+1,084)

Retained earnings (+1,231); treasury stock (-478)23

Consolidated Statement of Cash Flow(million yen)
Net cash provided by (used in) operating activities

FY2018

5,379

Major Components
Profit before income taxes (3,483);
depreciation and amortization (1,012); decrease(increase) in notes and accounts receivable (3,123)

Net cash provided by (used in) investing activities- 2,060

Acquisition of PPE (-1,354);
Sale of PPE (1,328);
Acquisition of intangible assets (-676);
Acquisition of investment securities (-681)

Net cash provided by (used in) financing activities- 5,862

Change in short-term loans payable (-4,701);
Proceeds from long-term loans payable (3,643)
Repayment of long-term loans payable (-2,708)

Cash and cash equivalents at beginning of period

12,372

Cash and cash equivalents at end of period

9,790
24

4. Consolidated Earnings Forecast

25Consolidated Earnings Forecast
 Stricter order acceptance for work-style reform, the ongoing shift to printlessdelivery, and up-front investments in training and hiring costs for future growth will
have a negative impact on operating income. In light of these and other factors, we
project operating income for FY2019 to be lower compared to FY2018.
(million yen)

FY2018FY2019 Forecast

YoY Change

Net Sales

64,79265,000＋207

Operating Income

3,433

2,600

- 833

Ordinary Income

3,325

2,500

- 825

Profit Attributable to Owners of Parent

1,952

1,300

- 652

EBITDA

4,777

4,060

- 717
26

Revised Business Classifications
 We have revised our business classifications in line with our new medium-term
policies.
Prior

New

Advertising Video
Production

Video Advertising

Planning and production of TV commercials,
online video, and other video advertising

Other Production

AdvertisementRelated

Planning and production of movies, TV dramas,and events; production of digital content,
promotional content, and music videos

Solutions

Solutions that answer customer issues(direct business with advertisers, video content
marketing, etc.)

Overseas

Business in Southeast Asia and other locations
overseas; video production orders received fromoverseas

Solutions
Overseas
Video-related

Overview

27

Net Sales Plan by Business Segment
 Strict order acceptance associated with work-style reform and other factors haveresulted in sales plans essentially level with prior year.
43,331 43,400(million yen)

FY2018 (result)
FY2019 (plan)

9,836 9,100

7,585

8,000
4,038

Video Advertising

Advertisement-Related

Solutions

4,500

Overseas28

Net Sales, Operating Income, and EBITDA Trends
80,00064,92860,00070,473
4,389

5,755

4,619

6,000
64,792

4,777

65,000
4,060

3,433

3,422

40,000(million yen)

4,000

2,600

(left axis)
Operating income

2,000

20,000Net sales(right axis)
EBITDA(right axis)

0

FY2016FY2017FY2018FY2019(results)(results)(results)(plans)0* The results for 2016 are simple totals of the consolidated financial results of AOI Pro. Inc. and TYO Inc. for the calendar years (based on pro forma statements
for the end of the fiscal year ending December 31).

29

Dividends
Policy: 30%-plus consolidated payout ratio FY2018- Scheduled at 30 yen per share, as forecast- Total of 531 million yen in share buybacks ⇒Total return ratio of 64.5%

 FY2019- Forecast dividend of 20 yen per share- Up to 600 million yen in share buybacks scheduled ⇒Total return ratio of 83.0％ (projected)
End of Q2

End of FY

Total

Dividend Payout Ratio

FY2018 (plan)

8 yen

22 yen30 yen36.4%

FY2019 (forecast)

8 yen

12 yen30 yen36.4%
30

Purchase of treasury shares
 AOI TYO Holdings made the following decisions concerning the purchase of treasury
shares.
Total Number of Shares
Purchased

Total Value of
Shares purchased

Period of Purchase

Type of Shares

FY2017

May 16, 2017 - Feb. 27, 2018

CommonStock261,400 shares

289 million yen

FY2018Jun. 1, 2018 – Jun. 7, 2018

CommonStock400,000 shares

531 million yen

FY2019(plan)

Mar. 1, 2019 – Feb. 29, 2020

CommonStock500,000 shares

600 million yen(maximum)(maximum)31

Shareholder Benefit Program The following shareholder benefits are provided to investors with 500 or moreshares of AOI TYO Holdings, who are listed on the share register as of June 30,
2019.

Shareholder Gifts

500 shares or more

Original Quo Card

3,000 yen

1,000 shares or more

Original Quo Card

5,000 yen

2,000 shares or more

Original Catalog

value of 10,000 yen*Original catalog allows shareholders tochoose from original products, Quo Cards,
or charitable donations

Animation Studio Tour
500 shares or more (randomly selected from those who enter the draw)
Studio tour of AOI TYO Group character development and stop-motion
animation division TYO/dwarf©NHK・TYO

32

5. Current Initiatives for Various Businesses

33

Initiatives in the Video Advertising Business Shift toward printless delivery resulted in lower print sales for FY2018; however,effective profit margin continued to improve, mainly due to careful and consistentexternal expenditure management.
50,000

40.0%

35.5%

40,00030,00033.4%

Production sales (left axis)

44,99820,00010,000
0

35.0%

31.2%
44,46440,412

41,50030.0%

FY20162,654
FY20171,924
FY20181,000
FY2019 (plans)

Print sales (left axis)
Effective profit margin

25.0%

2,935

(million yen)(right axis)* Effective profit margin: (net sales- external expenditures)/net sales

20.0%* Calculations for the TV commercial
production department only34

Initiatives in the Solutions Business (1) Beyond winning new TV commercial work from startup companies, we will expand
orders from national clients to include digital content, event production andmanagement, and PR, growing FY2019 orders.

6,000

Sales at the TYO Offering Management
Business Unit

4,000

3,478

*Excluding media placement purchases

5,000(million yen)

3,717

2,350
2,000
0

FY2016FY2017FY2018FY2019 (plan)
35

Initiatives in the Solutions Business (2) Quark tokyo recorded higher video advertising production revenues in FY2018. Sales
were lower overall, however, mainly due to a major planning and consulting project in
the prior fiscal year.
 In FY2019, we will work to grow packaged sales (content production and distribution)and cross-sales, mainly in marketing to the younger consumer segment.
(million yen)

Sales at Quark tokyo
3,000

2,416

2,226

2,500

2,000
1,000
0

722

FY2016FY2017FY2018FY2019 (plan)
36

Initiatives in the Overseas Business The scope of FY2018 sales increased due to the addition of DTT Group companies(Malaysia) as subsidiaries.
※ DTT ：DIRECTORS THINK TANK

8,000
6,000

Scale of sales inOverseas Businesses* Including equity-method affiliates

5,824

7,000

(million yen)

4,402

4,000
2,000
0

FY2017FY2018FY2019 (plan)37

6. Appendix - Company Profile, Stock Information, etc.

38

Company Profile
Company NameAOI TYO Holdings Inc.

Representatives

Hiroaki Yoshida, Representative Director, Chairman & CEO
Yasuhito Nakae, Representative Director, President & COO

Establishment

January 4, 2017

Capital

5.0 billion yen

Fiscal Year-end

December 31

Location of Head Office

1-5-1 Osaki, Shinagawa-ku, Tokyo 141-8580, Japan+81 3-6893-5005 (main)

Securities Code3975 First Section of the Tokyo Stock Exchange

URL

http://aoityo.com/en/

39

Founding of AOI TYO Holdings
Comprehensive
videofollowing
production
company witha focus on
TV Pro.
commercial
 Foundedin January 2017,
the management
integrationof AOIand TYO.
planning and development.

*As of Dec. 31, 2018.

Akasaka

Consolidated subsidiaries: 35 total
Consolidated employees: 1,657

Shinbashi
Shinbashi

Osaki
Date of establishment: Oct.
25, 1963

Date of establishment: Apr. 2, 1982

Consolidated employees: 862

Consolidated employees: 795

Consolidated subsidiaries: 21 (including AOI Pro.)

Consolidated subsidiaries: 14 (including TYO)

40

Status of Stock and Shareholders (as of Dec. 31, 2018)
Number of Shares and Shareholders

Status of Large Shareholders

Total number of shares issued

24,566,447

Total number of shareholders

11,011

9.0%
15.2%
1.7%
32.0%

39.7%

1
2

Shareholder Composition byType of Shareholder

2.4%

Shareholder Name
The Master Trust Bank of Japan, Ltd.
(Trust Account)
Japan Trustee Services Bank, Ltd.
(Trust Account)

Number of
Shares Held

Shareholding
Ratio

1,956,500

8.16%

1,890,200

7.88%

3

Cosmo Channel

1,153,740

4.81%

4

IMAGICA GROUP Inc.

1,018,000

4.25%

Individuals, etc.

5

Japan Trustee Services Bank, Ltd.
(Trust Account 9)558,200

2.33%

Financial institutions

6

Fields Corporation

479,660

2.00%

Financial instruments
business operator

7475,300

1.98%

Other corporations

8418,900

1.75%

Foreign corporations,etc.

9418,000

1.74%

Treasury shares

10 Hitoshi Hara

400,000

1.67%

The Nomura Trust and Banking Co., Ltd.
(Investment Trust Account)
Trust & Custody Services Bank, Ltd.
(Trust Account E)
Japan Trustee Services Bank, Ltd.
(Trust Account 5)* The shareholding ratios are calculated by subtracting treasury shares (594,257).

41

Disclaimer
This document includes future forecasts that reflect the plans and outlook of AOITYO Holdings.
The future forecasts and related descriptions are based on information available tothe company at the time of the preparation of this document, and the forecasts areaffected by the economic environment of the company’s businesses, competition, theresults of new services provided, and other factors that involve uncertainties. Pleaseacknowledge, therefore, that the actual business results may deviate significantly
from the forecasts and related information provided in this document.
In addition, the company does not have any obligation to update and publish theinformation concerning future forecasts in this document after its publication.
Please contact the following for any questions:
Financial Planning & IR Department (+81 3-3779-8415)
42