Earnings Presentation
Second Quarter, FYE December 2020
September 2, 2020
AOI TYO Holdings Inc.

Contents
1.
2.
3.
4.

Summary of Consolidated Financial Results
Consolidated Earnings Forecast
Medium-Term Plan
Appendix - Stock Information, etc1

1.

Summary of Consolidated Financial Results2

Response to COVID-19
Since February

Much of our film production and editing processes for commercial

production fall under the Three C's (closed, crowded, close-contact

spaces to be avoided); we have taken measures in a stepwise fashion
to prevent the spread of infection

Under the Japanese

government's state of

emergency declaration

We took measures such as temporarily suspending operations atfilming/editing studios and requesting postponements from advertising
companies/advertisers involved in filming projects(Apr 7 - May 25)

After state of

emergency lifted(May 25)

We entered into an advisory contract with a medical coordinationcompany, drafted our own guidelines for production work, and thenrestarted filming and editing operations, taking a number of measures
to prevent the spread of infection

3

Financial Highlights
 Significant decrease in net sales due to impact from spread of COVID-19.
 Sales declines also had a significant impact on profits, recording losses at eachstage of profit.
(million yen)

Q2 FY2018

Q2 FY2019

Q2 FY2020

YoY Change

Net Sales

30,86430,63624,367-6,269Operating Income

1,746

816

-881

-1,697

Ordinary Income

1,680

637

-1,047-1,685

Profit Attributable to
Owners of Parent

1,170

257

-956

-1,213

EBITDA

2,357

1,531

-313

-1,845
4

Trend of Net Sales by Quarter and Order Backlog
 The negative impact on sales of postponements or cancellations of projects due to
COVID-19 amounted to ¥5,400 million (70% delayed until Q3 or later).
 Order volumes also fell sharply due to future uncertainty and suspension of
economic activity during the state of emergency; the balance of order volumes atthe end of Q2 was ¥14,029 million (down 7.2% year-on-year).
19,42420,00015,521 15,470
15,00015,343

14,504FY2018

11,318FY2019FY202010,000Order backlog FY2018

16,9105,000

0(million yen)

16,16815,166

13,04918,425

14,985

Order backlog FY2019

14,02914,331
15,912

15,119Q1

Q2

13,466

14,469Q3

13,191

Order backlog FY2020
14,606
Q4

Trends of Operating Income by Quarter Operating losses were recorded for Q2 due to a decline in net sales, despite
elimination of costs related to restructuring at poorly performing subsidiaries
and software recorded as impairment loss in the prior year.
1,500
1,000

1,092

1,068

500
0
-500
-1,000-1,500

654

633

116

Q1

965

(million yen)

619
337

183

FY2018Q2Q3Q4FY2019FY2020-997

6

Net Sales by Business Segment
 In the Solutions Business, though net sales were nearly unchanged year-on-year,
impact from COVID-19 caused net sales to fall dramatically in the Video Advertising
Business, with decreases also in Advertisement-Related Business due to thesuspension and postponement of various events.
(million yen)

21,435
16,882Q2 FY2019

4,322
2,875

3,385

Q2 FY2020

3,391
1,494

Video Advertising

Advertisement-Related

Solutions

1,219

Overseas7

Overview of Business Segments
Business
Video Advertising

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

Advertisement-Related

Planning and production of movies, TV dramas, and events; production of digitalcontent, 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 from overseas

8Net Sales by Customer(million yen)

22.6%
Q2 FY2019

29.6%

6,920

9,066

20.0%

27.8%
8,517

6,132

* Net sales from Dentsu Inc. (non-consolidated) were 6,224 million yen, and net sales from Hakuhodo Inc.
(non-consolidated) were 7,108 million yen.

25.7%

21.7%
Q2 FY2020

5,298

6,270

32.3%
7,868

20.2%

Dentsu Group
Hakuhodo Group
Direct transactions
Other

4,929

* Net sales from Dentsu Inc. (non-consolidated) were 4,890 million yen, and net sales from Hakuhodo Inc.
(non-consolidated) were 4,931 million yen.

9Net Sales by Medium(million yen)

Q2 FY2019

Component
Ratio

Q2 FY2020

Component
Ratio

YoY
Change18,16958.6%

14,106

57.3%-4,06317,36756.0%

13,59655.2%-3,771

803

2.6%

511

2.1%

-292

Entertainment contents

1,046

3.4%

1,128

4.6%

+81

Digital contents

6,402

20.6%

5,782

23.5%

-620

Overseas

1,491

4.8%

1,082

4.4%

-409

Other

3,908

12.6%

2,541

10.3%

-1,367

Total

31,017100.0%

24,639100.0%-6,378TV commercial production
TV commercial
Printed commercial materials* The results are simple totals of the consolidated financial results of AOI Pro. Inc. and TYO Inc.
10

Summary of Consolidated Balance Sheet Cash and cash equivalents amounted to ¥13,307 million, as we maintained a high 277.2% liquidity ratio.
 We closed commitment lines with a number of financial institutions for a combined ¥12 billion,
securing sufficient liquidity. (¥0.0 billion outstanding as of June 2020)(million yen)

FY2019Q2 FY2020

Major Components
Cash and deposits (+4,196); notes and accounts receivable(-8,846); electronically recorded monetary claims (+1,628)

Current Assets

36,00332,572

Non-current Assets

17,34817,00053,352

49,573Current Liabilities

18,343

11,751

Accounts payable (-4,637); short-term loans payable (-3,200)

Non-current Liabilities

11,645

15,871Long-term loans payable (+4,281)

Total Liabilities

29,98827,622

Total Net Assets

23,363

21,951

Total Liabilities and Net Assets

53,352

49,573

Total Assets(percentage of total assets)(43.8%)(44.3%)

Retained earnings(-1,242)

11

2.

Consolidated Earnings Forecast

12Future Outlook
Premises

We assume that the spread of COVID-19 and the accompanying state of economic
activities will continue at least through the year
*We do not assume a similar postponement/suspension of orders due to re-declaration of a state of emergency by the Japanese government triggeredby greater spread of the virus

Immediate Situation
Efforts to prevent the spread of infection will suppress economic activity and lead todeterioration of the economy both in Japan and overseas, resulting in reductions incorporate demand for advertising

OutlookThough order volumes will be lowest in Q2 it would be difficult to expect a broad recovery
in order volumes in Q3/Q4
13

Revised Consolidated Earnings Forecast
 Though net sales in the second half of the year will increase compared to the first
half, we forecast that operating profit levels will not reach profitability.

(million yen)

1H FY2020
Results

2H FY2020
Forecast

YoY
ChangeFY2020
Forecast

YoY
ChangeNet Sales

24,36725,633-8,96050,000-15,229

Operating Income

-881

-519

-1,821-1,400-3,518

Ordinary Income-1,047-453-1,579-1,500-3,263

Profit Attributable to
Owners of Parent

-956

-544

-543

-1,500-220

EBITDA-313

83-1,992-230-3,837*this results forecast has significant potential to fluctuate upward or downward depending on the state of the spread of COVID-19 going forward.

14

Revised Net Sales Plan by Business Segment
 Net sales for the Video Advertising Business and Advertisement-Related Business in thesecond half are forecast to increase versus the first half due to a restart of economic activities
after the lifting of the state of emergency.
 Net sales for the Solutions Business in the second half are forecast to decrease versus the first
half; this is because despite remaining flat year-on-year, demand for advertising in the second
half is to fall.
43,86022,425(million yen)

35,30018,418

9,846
5,524

21,435

2019

16,882

2020

Video Advertising

8,145
6,500

4,760

3,625
4,322

2019

2,875
2020

Advertisement-Related

5,900■ Results: 1H FY2019■ Results: 2H FY2019■ Results: 1H FY2020■ Planned: 2H FY2020

2,509

3,378

3,385

3,391

1,884
1,494

2019

2020

2019

Solutions

2,300
1,081
1,219
2020

Overseas15Video Advertising Business Though net sales will be lowest in Q2 and increase in the second half, broad recovery is
difficult to expect at present.
 Effective profit margin in the first half declined due to factors such as impact from costbillings due to suspended/postponed projects, with levels falling slightly below initial plansin the second half.
30,000

33.5%

32.1%

35.0%

(million yen)

31.4%

20,00030.0%

Production sales (left axis)
Print sales (left axis)

10,000020,35921,941

16,48417,300

789

705

474

300

1H FY2019

2H FY2019

1H FY2020

2H FY2020

Results

Results

Results

Planned25.0%

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

20.0%* Calculations for the TV commercial
production department only

16

Solutions Business (1) - TYO Offering Management Business Unit Net sales in the first half were flat year-on-year with increasing orders from Internetrelated companies and others.
 In the second half, with suspensions/postponements in existing projects, it is currently
difficult to expect new orders, and net sales are forecast to fall below first half levels.
Sales at the TYO Offering Management
Business Unit

(million yen)

*Excluding media placement purchases

5,000

3,717

4,000
3,000
2,000

4,723

1,819

3,400
2,073

1,950

1,450

■■ Q2
■
（

Full-year

2H portion ）

1,000
0

FY2018FY2019FY202017

Solutions Business (2) - Quark tokyo + Mediator We cannot currently expect increased sales in the second half due to impact frombudget cuts among existing clients caused by the suspension of Olympics-related
projects and reduction in advertising demand, as well as voluntary restraint in
face-to-face sales in Q2.
Sales at Quark tokyo + Mediator(million yen)

3,000

2,227

2,087

■■ Q2

2,000

1,096
1,000

0

FY20181,032

FY2019

1,400
802

598

■
（

Full-year

2H portion ）FY202018

Advertisement-Related Business Event-related net sales are expected to increase in the second half due torelaxation of restrictions and acquisition of online services projects.

sales in Advertisement-Related Businesses
12,000(million yen)

9,846

9,644

■■ Q2

9,000
6,000

6,500
3,943

4,322

3,000
0

FY2018FY20192,875■（

Full-year

2H portion ）3,625

FY202019

Overseas Business Compared to the first half, which was affected by lockdowns and other elements,
operations have resumed in the second half in countries/regions where economic
activity restrictions were lifted, with a gradual recovery expected.
Scale of sales in Overseas Businesses
5,825

6,000
4,000

* Including equity-method affiliates

4,200
2,607

2,489

2,000
0

(million yen)

5,680

FY2018FY2019

1,882

2,318

■■ Q2
■
（

Full-year

2H portion ）FY202020

On Reduction of Directors' Compensations and Dividends
 We expect results to be at the lowest level this year, and for the year-end dividend for the fiscal
year ended December 2020, we have decided to maintain the ¥12 level from the previous year
from a perspective of maintaining a stable dividend level as much as possible.
End of Q2

End of FY

Total

8 yen

12 yen20 yenFY2020 Forecast-

12 yen12 yenFY2020 Results

0 yen

-

-

Results: Fiscal Year Ended 2019/12(Reference) We will reduce directors' compensations given consideration to reducing fixed expenses andtaking very seriously the business environment, business performance trends, revisions todividend forecasts, and other factors.
Scope

Directors (excluding External Directors)

Reduction Details

10% reduction in monthly compensation

Applicable Period

The six months from September 2020 to February 2021
21

3.

Medium-Term Plan

22

Medium-Term Policies (Created March 2019) Basic policy- Be a powerful corporate group capable of responding to any era
 Business development policy- Dig Deeper- Expand Wider
ExpandWider

Promotions

Video
Production
Branding

ExpandWider

PR

Dig Deeper

23

Business Environment
 Despite a shrinking TV commercial market at a pace of up to 2% annually, with theaccelerated shift to digital, the online video advertising market is expected to grow at apace of around 20% per year.
 Of this growth, though some will be in high-priced brand videos, an area we are involved
in, there is also to be significant growth in low to medium-priced videos.
300
200

Market Size Estimation/Forecast: TV Commercial Production & Online Video Production Market(2019-2025)
32.6

45.8

53.6

62.7

73.6

86.3

101.3

(billion yen)

118.9
Online Video

100
0

213.8

207.8

202.8

197.9

193.1

188.4

183.9

179.4

2018

2019

2020

2021

2022

2023

2024

2025

TV Commercial* Sources: Dentsu - Advertising Expenses in Japan, Mizuho Bank Industry Research Division, CyberAgent Online Video Research Institute/digitalInfact,
AOI TYO Holdings analysis* Impact from COVID-19 is not included in these estimations/forecasts

24Advertiser Needs
Media mixoriented

Companies and venture companies
with annual advertising costs of¥100 million to 1 billion

Needs for directtransaction withproduction
companies

Understandingof in-houseproducts andservices

Total
communication
designand operation
support25

Corporate Slogan
Produce the future. Produce emotion. Produce people.
Producing the future is tackling growth areas;

producing emotion is digging deeper into our strengths;

producing people is creating a place where our people - our assets - can grow.
These are the goals that
our employees will take on together as we aim for corporate growth.

*"Produce" refers to creating the tangible and the intangible, as well as creating value.

26

Theme and Priority Measures
Theme：Group-wide update of production functions
Key Measures : Restructuring Business Segments(1) Reforming business/organizational structures(2) Clarifying initiatives in each business(3) Deepening and strengthening Group management

27

Segments and Initiatives for Focus
Content Production BusinessCommunication Design Business

Engaged in advertising video production andEngaged in providing solutions and in PR,

as core clients

direct transactions with advertisers

post-production with advertising companies

events, and similar services primarily in

Shoring up production business withadvertising companies

Capturing low to medium-priced digitalprojects

Diversifying post-production business
Planning, producing XR content (VR/AR)

Expanding repeat customer pool
Contracting for total execution
Providing integrated marketing/planning28

Current Organizational Structure
AOI TYO Holdings

Consolidated subsidiaries: 33
Domestic: 19
Overseas: 14

29

New Organizational Structure after January 2021 (Tentative)
Consolidated subsidiaries: 23
Domestic: 10 (-9)
Overseas: 13 (-1)

AOI TYO Holdings
Content Production BusinessCommunication Design Business

xpd(Tentative name)President：Kazuyoshi Hayakawa
President：Hajime Ushioda
No.Employees : Approx.500

President：Hiroshi Hayafune
No.Employees : Approx.310

TREE : Digital Studio
C3Filmtko+9 overseas firms(Tentative name)President：Shinichi Adachi

No.Employees : Approx.360

Quark tokyo

TCA HQZEO

Pep Planning

Jigowatt

TYO Digital WorksTYO Public Relations

dwarf

Mediator

K&L

MAZRI

No.Employees : Approx.300

Digital Garden

Media Garden

TTR

Ludens+4 overseas firms, 1 investment partnership30

Content Production Business Leverage industry-leading share and cultivated expertise as strengths to pursue
high quality and productivity to shore up business. Simultaneously, expand thescope of work to the low to medium-priced digital video market, where market
growth is expected.
Shoring up production businesses with advertising
companies: 33%+ effective profit margin

Capturing low to medium-priced digital projects:
Net sales +¥600 million or more

Net sales+¥5 billion
or more• Unification of production for low to medium-priced projects
from clients other than major advertising companies• Gradually raise the effective profit margin to 50%• Discovery of human resources at academy facilities (AOI Film
Craft Lab) and expansion of videographer network

Boosting orders for new/digital projects:• Review of sales management methods• Cultivating young producers• Acquiring orders from platform owners

Reduction of external production costs:¥250 million
reduction• Consolidation into a specialized purchasing department

Diversification of post-production:
Net sales +¥500 million or more••••

Expanding audio editing, color grading, CG
Editing low to medium-priced video projects
Virtual studios
XR business development centered on the events domain
31Communication Design Business Engages in corporate communication from overall design to specific formation.
 We will work to strengthen our customer base and provide higher value-added
services.

Strength (1)• In the advertising/marketing solutions domain, we can

independently provide omnidirectional execution from video,

to digital solutions, PR, events, spatial design, and more

Strength (2)Net sales+¥9 billion• Can ensure efficiency and speed within budget

32

Human Resources Strategy
 Human Resource Management Policy
Basic policy: To produce talent who create emotions that will be remembered and passed down

for generations
Keywords: (1) Together (2) Morality (3) Challenge Group human resources strategy- Standardization of forming candidate groups/managing candidate screening in
new graduate recruitment- Review of evaluation system/compensation structure- Building an environment of cultivation and career development
33

Cost Reductions
 Reduce office costs, transportation costs, and more by altering work styles,
including shifting to remote work.
 Optimize corporate costs by increasing productivity.

Reduction ofMax ¥2.0 billion(Reference)
FY2019 costs:¥20.4 billion

Office-related
costs:-¥550
millionCorporate costs:-¥1.0
billion• Land rent: -¥480 million• Personnel, outsourcing costs

Consolidating offices, reducing leased

Performance-linked portion, etc.

area 30%(reductions peak in FY2022)• Consumables cost: -¥30 million
Recommending remote work

• Business consignment
expenses/commission fees

• Utilities costs: -¥30 million

integration

Consolidating offices, remote work

Efficiency from office/system

Other across-theboard reductions
in costs:-¥450
million• Entertainment/travel/meeting
expenses: -¥300 million
Flat 30% reduction• Advertising expenses: -¥40
million• Other expenses: -¥100 million
Flat 10% reduction

34

Results Plan
■Net Sales¥68 billion ■Operating Income ¥4.4 billion

80(billion yen)
60

17.5

0

Communication Design
Business

47.0

Content Production
Business

12.0

40

20

21.0

47.7

FY2019 Results

38.0

FY2020 Forcast

FY2025 Plan
35

Composition of Net Sales＜FY2019 Results(Reference)＞
Communication
DesignBusiness＜FY2025 Plan＞
0%

Communication
DesignBusiness

3%
13%

Print
TV commercials

14%
30%

14%

42%

20%

Post-production

6%
8%

14%

5%

Digital7%24%Entertainment content,
etc.
Solutions Business(former)
Events/PR, etc.

Content Production
Business

Content Production
Business
36

EBITDA(million yen)

9,000

+2,000

8,000
7,000

+2,200

6,000
5,000

+4,300

4,000
3,000

Content
Production

2,000
1,000
0
-1,000

FY2020-550Communication Print effective
profitDesign effective
profitCost
reductions-1,000-1,000
FY2025

Cost increase
due tobusiness
recovery

Consolidationplan

adjustment

5,700

effective profit

forecast-230

37

FY2025 KPIs
Financial

EBITDA ¥5.7 billion *FY2020 forecast: -¥230 million
ROE

Non-

financial

10％+

Employee engagement improvement
Contribution to of the SDGs
38

Shareholder Return Basic policy- consolidated dividend payout ratio of

30% or more

Constantly aim to improve corporate value and appropriately distributeprofits based on our performance and in consideration of ongoing, stable
distribution.

39

4.

Appendix - Stock Information, etc

40

AOI TYO Group*As of Jun. 30, 2020.

Consolidated subsidiaries: 33 total
Consolidated employees: 1,758

Date of establishment: Oct. 25, 1963

Consolidated subsidiaries: 17 (including AOI Pro.)

Osaki

Consolidated employees: 794

Date of establishment: Apr. 2, 1982

Consolidated subsidiaries: 16 (including TYO)

Consolidated employees: 806

41

Status of Stock and Shareholders (as of Jun. 30, 2020)
Number of Shares and Shareholders

Status of Large Shareholders

Total number of shares issued

24,566,447

Total number of shareholders

16,170Shareholder Composition byType of Shareholder

2.8%

Individuals, etc.

3.6%
13.6%

Financial institutions
Financial instruments
business operator

1.7%
17.4%

60.9%

Other corporations
Foreign corporations,etc.
Treasury shares

Shareholder Name

Number of
Shares Held

Shareholding
Ratio

1

Cosmo Channel

1,153,740

4.83%

2

IMAGICA GROUP Inc.

1,018,000

4.26%

3

The Master Trust Bank of Japan, Ltd. (Trust Account)

807,400

3.38%

4Japan Trustee Services Bank, Ltd. (Trust Account)

669,900

2.81%

5

Fields Corporation

479,660

2.01%

6

Yoshihiro Takebayashi

478,100

2.00%

7Japan Trustee Services Bank, Ltd. (Trust Account 5)

417,500

1.75%

8

Trust & Custody Services Bank, Ltd. (Trust Account E)

411,200

1.72%

9

Hitoshi Hara

400,000

1.68%

10

Credit Suisse Securities (Japan) Limited

340,500

1.43%* The shareholding ratios are calculated by subtracting treasury shares (691,252).
* The number of shares held by Cosmo Channel Co., Ltd. includes 320,900 shares under a stock loan
agreement with Japan Securities Finance Co., Ltd.

42

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:Contact (http://aoityo.com/en/contact.html)
43