Earnings Presentation
Second Quarter, FYE December 2019
September 3, 2019

AOI TYO Holdings Inc.

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

Business Environment
Summary of Consolidated Financial Results
Consolidated Earnings Forecast
Current Initiatives for Various Businesses
Next Fiscal Year and Beyond
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 make videos,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(Figures for and after 2018 are forecasts)

300.0
200.0
100.0
0.0

137.4
2017

184.3

2018

231.2

2019

362.9

418.7

462.0

495.7

(billion yen)

290.0

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 costs and TV commercial production costs have transitioned
from slight gains to level year-on-year performance.
 TV advertising spending amounted to 1,912 billion yen in 2018 (98.2% of the previous year);
TV commercial production spending were 213 billion yen (98.4% of the previous year).
 Despite growth in internet advertising spending, advertisers are reassessing the reach of TV.
Trends of TV advertising spending andTV commercial production spending

2,000TV advertising spending
TV commercial production spending(billion yen)

1,500
1,000
50002008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Source: “Advertising Expenditures in Japan 2018,” Dentsu Inc.

4

2. Summary of Consolidated Financial Results

5

Financial Highlights
 Net sales were essentially level year on year. However, sales at certain subsidiaries
underperformed plan. As a result, performance was 4% below earnings projections andoperating income results were also below plan.
 Although we recorded an extraordinary losses in connection with the business reorganizationof underperforming subsidiaries, we also posted extraordinary income due to the sales ofstrategic stock holdings that had unrealized gains.
(million yen)

Q2 FY2017

Q2 FY2018

Q2 FY2019

YoYChangeVs. Forecast(Beginning of Period)

Net Sales

33,72930,86430,636- 227- 1,364

Operating Income

2,358

1,746816

- 929

- 284

Ordinary Income

2,305

1,680637- 1,042- 363

Profit Attributable toOwners of Parent

1,189

1,170257

- 913

- 243

EBITDA

2,932

2,357

1,531

- 825

- 299
6

Trend of Net Sales by Quarter and Order Backlog
 Increases in orders/sales from major advertising agencies even under continued strict orderacceptance for the benefit of work-style reform were offset by advances in printless delivery
and media volume decreases in our Solutions Business, etc. As a result, Q1 and Q2 net sales
were level year on year.
 Order backlog as of the end of Q2 amounted to 15,119 million yen (5.4% increase year on year),signaling strong orders of late.
(million yen)

25,00020,00015,00021,134
19,424

18,472
15,521

15,47015,257 15,343 15,166

15,610FY2017

14,504FY2018FY2019
Order backlog FY2017

10,00015,9125,000
014,261 14,985
Q1

Order backlog FY2018

15,11914,016

14,331
Q2

17,322 13,466
Q3

13,631 13,191

Order backlog FY2019

Q47

Trends of Operating Income by Quarter Increased costs stemming from work-style reform and new enterprise systems
implementations at subsidiaries, as well as decreased sales of high-margin printsales, have resulted in lower Q1 and Q2 operating income year on year.
2,000

1,820

(million yen)

1,500
1,160

1,092

1,101 1,068

1,000633
5000539654

FY2017FY2018

619

FY2019
183

Q1

Q2

Q3

Q4
8

Net Sales by Business Segment
 Video Advertising Business recorded sales level year on year due to increased sales from major
advertising agencies, even though print sales decreased.
 Advertisement-Related Business recorded higher sales year on year, mainly due to thecontribution of event-related sales by newly consolidated subsidiaries.
 Solutions Business recorded lower year-on-year sales, mainly due to lower media placement
purchases; Overseas Business recorded lower sales due to the business reorganization of a local
entity in Beijing.
21,083(million yen)

21,435

3,944

4,322

4,072

Q2 FY2018

3,385

Q2 FY2019

1,766

Video Advertising

Advertisement-Related

Solutions

1,494

Overseas

9Overview of Business Segments
BusinessVideo 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

10Net Sales by Customer
 Net sales from major advertising agencies were higher year on year.
 Sales from direct transactions also rose, after excluding the decrease in media
placement purchases.
23.7%
2018/2Q

7,310

26.9%
8,311

28.2%
8,699

21.2%
6,542

Dentsu Group
Hakuhodo Group* Net sales from Dentsu Inc. (non-consolidated) were 6,545 million yen, and net sales from Hakuhodo Inc.
(non-consolidated) were 6,802 million yen.

22.6%
2019/2Q

6,920

29.6%
9,066

27.8%
8,517

(million yen)

20.0%

Direct transactions
Other6,132* Net sales from Dentsu Inc. (non-consolidated) were 6,225 million yen, and net sales from Hakuhodo Inc.
(non-consolidated) were 7,108 million yen.

11

Net Sales by Medium(million yen)

MediumQ2 FY2018

ComponentRatio

Q2 FY2019

Component
Ratio

YoY
Change18,56558.5%

18,169

58.6%

- 396

TV commercial

17,50655.2%

17,367

56.0%

- 139

Printed commercial materials

1,059

3.3%

803

2.6%

- 257

Entertainment contents

1,355

4.3%

1,046

3.4%

- 309

Digital contents

5,477

17.3%

6,402

20.6%

＋ 925

Overseas

1,751

5.5%

1,491

4.8%

- 259

Other4,583

14.4%

3,908

12.6%

- 675

Total

31,731100.0%

31,017100.0%- 713

TV commercial production* The results are simple totals of the consolidated financial results of AOI Pro. Inc. and TYO Inc.
12

Summary of Consolidated Balance Sheet(million yen)

FY2018Q2 FY2019

Major Components

Current Assets

35,93737,290Cash and deposits (+2,024); notes and accounts receivable(-2,696); electronically recorded monetary claims (+1,715);
work in process (+327)

Non-current Assets

19,693

19,427

Property, plant, and equipment (-29); intangible assets (-239)

55,631

56,717

20,114

18,250Accounts payable (-1,091); short-term loans payable (-1,277)

9,837

13,316Long-term loans payable (+3,670)

Total Liabilities

29,951

31,567

Total Net Assets

25,679(46.2%)

25,150(44.3%)

Total Liabilities and Net Assets

55,631

56,717

Total Assets
Current Liabilities
Non-current Liabilities(percentage of total assets)

Retained earnings(-269)* AOI TYO Holdings adopted Partial Amendment to Accounting Standard for Tax-Effect Accounting (ASBJ Statement No.28, February 16, 2018) as of the beginning of Q1 of the current
consolidated fiscal year.

133. Consolidated Earnings Forecast

14

Revised Consolidated Earnings Forecast As the recent order situation remains strong, we revised our full-year earnings
projections, reflecting only the underperformance of the first half.

(million yen)

FY2019Previous Forecast

FY2019Latest Revised Forecast

Net Sales

65,00063,600Operating Income

2,600

2,300

Ordinary Income

2,500

2,150

Profit Attributable to Owners ofParent

1,300

1,050

EBITDA

4,060

3,760

*Published February 19, 2019*Published August 9, 201915

Progress in Consolidated Earnings Forecast
FY2019(million yen)

Q2 Result

FY2019Fiscal YearYoYForecast
ChangeFY2019Amount Req’d
YoY
in Second Half
ChangeFirst Half
Change30,636

63,600- 1,192

32,964- 964+2,328Operating Income

816

2,300

- 1,133

1,484- 203+668

Operating margin

2.7%

3.6%

----Ordinary Income

637

2,150

- 1,175

1,513- 132+876

Profit Attributable toOwners of Parent

257

1,050

- 902

793

11+536

EBITDA

1,531

3,760

- 1,996---Net Sales

16

4. Current Initiatives for Various Businesses

17Initiatives in the Video Advertising Business Overall effective profit margin decreased, even as we continue to focus on cost
control over external expenditures. Negative factors included receiving orders for
major projects with low effective profit margins and a decrease in print sales.
25,00040.0%(million yen)

36.4%
20,000

33.8%

33.5%

35.0%

15,00022,562
10,0005,000

019,491

20,35930.0%

Q2 FY2017

1,018
Q2 FY2018789
Q2 FY2019

Print sales (left axis)
Effective profit margin (right axis)

25.0%

1,294

Production sales (left axis)

20.0%* Effective profit margin: (net sales external expenditures)/net sales* Calculations for the TV commercial
production department only18

Initiatives in the Solutions Business (1) Sales increased, mainly owing to an increase in orders for TV commercials,
events for new customers, etc.
Sales at the TYO Offering Management
Business Unit

(million yen)

*Excluding media placement purchases

4,000

3,717

3,478

3,000
2,000

1,638

1,8192,073

■■ Q2
■

Full-year

1,0000FY2017FY2018FY201919

Initiatives in the Solutions Business (2) Contraction in the size of existing major projects has resulted in lower net sales
year on year. However, online video production and promotion planning sales
increased.
Sales at Quark tokyo
3,000
2,000

2,416
1,286

1,0000(million yen)

FY2017

2,226
1,095

FY2018

■■ Q2

1,032

■

Full-year

FY201920

Initiatives in the Overseas Business Slight decrease in the scope of sales due to the business reorganization of a local
entity in Beijing.
Scale of sales in Overseas Businesses
6,000* Including equity-method affiliates(million yen)

5,824

4,439
■■ Q2

4,000
2,000
02,6072,489■Full-year

1,550

FY2017FY2018FY201921Case study
Equity Tie-Up With Design Incubation Team AnyProjects
TYO signed a capital and business alliance agreement with AnyProjects Inc., launching full-scale operations in August 2019.
AnyProjects is a design incubation team consisting of five partners. The company's members perform design consulting,new business development, architecture and urban design, communications media strategy, branding strategy, investments,
art event production, and more on a global basis, offering integrated consulting and new business support based on crossdiscipline expertise. TYO engaged in this alliance to create new business value that integrates ideal design consciousness
with TYO's long-held video creative capacity and the ability to anticipate latent issues and demand based on changes inpeople’s minds and behavior.
The entities are already working on several joint projects, building synergies through the skills and experience of bothcompanies. In the future, the companies will conduct joint development of design consulting and services supporting
business growth and innovation through new methods that extend beyond traditional frameworks and applications of visualcommunications.
《New Office There》
Co-creation space spanning across size and disciplines, gatheringmajor corporations, start-ups, creators, designers, artists, chefs,engineers, and other professionals and organizations.
The space will host a variety of programs intended to maximize
conceptual and creative abilities.
Location: Qiz Hiroo 2F, 5-1-11 Minami Azabu, Minato-ku, Tokyo*Logo DesignThis logo was designed through a collaboration of Theseus
Chan, a world-class creator known as a national treasureof Singapore. Chan has gained global attention through hiswork with a variety of brands and other artists.

22

Case study
Joint Venture Established With Cyber Communications
Quart tokyo established Mediator Inc. as a joint venture on August 20, 2019 with Cyber Communications Inc. (CCI)Mediator provides communications planning and content production for differing media attributes, advertising formats, andtargets, providing consulting services between clients and media.
CCI, which knows everything about digital media, and Quark tokyo, which boasts strengths in digital-age communications
planning and creative direction. Demonstrating to the maximum the strengths of both companies, Mediator aims to become
a media communications agency offering one-stop services in communications and creative, ad distribution plan design andimplementation for the benefit of both media and clients.
《Overview of Mediator Inc. 》
Name:
Mediator Inc.
Duo Omotesando 102, 3-32-6 Jingumae, Shibuya-ku, Tokyo
Location:
Representative:
Takaki Onoda, representative director¥50 million
Capital:Quark tokyo (66.6%); CCI (33.4%)
Ownership:
Business Lines:
1. Media-based communications and creative planning
2. Media consulting based on client needs and target insights
3. Creative (content production), media operations, and other execution
URL:

https://mediator.tokyo/23

5. Next Fiscal Year and Beyond

24Stepping Stones for Future Corporate Value Growth
Work-Style Reform• Completed implementation of measures• Accelerate hiring and enhance training based on medium-term
management policies
Printless• Impact will be minor on next-period earnings and beyond
Business reorganization, cost revisions, etc.
• Implement measures this fiscal year
• Focus on delving deeper and expanding wider in business fields defined
under our medium-term management policy25

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

26

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/27

Founding of AOI TYO Holdings*As of June 30, 2019.

Consolidated subsidiaries: 33 total
Consolidated employees: 1,691

Date of establishment: Oct. 25, 1963

Consolidated subsidiaries: 18 (including AOI Pro.)

Osaki

Consolidated employees: 779

Date of establishment: Apr. 2, 1982

Consolidated subsidiaries: 15 (including TYO)

Consolidated employees: 75528

Shareholder Return Dividends– Policy: 30%-plus consolidated payout ratio– FY2019: Forecast dividend of 20 yen per share
End of Q2

End of FY

Total

Dividend Payout Ratio

FY20188 yen

22 yen30 yen36.4%

FY2019 (forecast)

8 yen

12 yen20 yen44.8%

 Purchase of treasury shares
Period of Purchase

Type ofShares

PreviousPurchaseJun. 1, 2018 – Jun. 7, 2018

CommonStock400,000 shares

531 million yen(Plan) Current
Purchase

Mar. 1, 2019 – Feb. 29, 2020

CommonStock

Maximum: 500,000 shares
Completed: 105,000 shares

Maximum: 600 million yen
Completed: 79 million yen

Total Number of Shares
Purchased

Total Value of Sharespurchased29Shareholder Benefit Program The following shareholder benefits are provided to investors with 500 or more sharesof 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・TYO30

Status of Stock and Shareholders (as of June 30, 2019)
Number of Shares and Shareholders

Status of Large Shareholders

Total number of shares issued

24,566,447

Total number of shareholders

13,489

Shareholder Composition byType of Shareholder

6.6%
15.3%

24.6%

50.4%

Number ofShares Held

Shareholding
Ratio

1

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

1,629,900

6.83%

2

Cosmo Channel

1,153,740

4.83%

3

IMAGICA GROUP Inc.

1,018,000

4.26%810,800

3.40%

806,200

3.38%

479,660

2.01%

418,900

1.75%

418,000

1.75%

42.8%

0.3%

Shareholder NameJapan Trustee Services Bank, Ltd.
(Trust Account 9)
Japan Trustee Services Bank, Ltd.
(Trust Account)

Individuals, etc.

5

Financial institutions

6

Financial instruments
business operator

7

Other corporations

8

Foreign corporations,etc.

9Hitoshi Hara

400,000

1.68%

Treasury shares

10 Fumiko Hara

328,000

1.37%

Fields Corporation
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 (690,291).

31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 & Accounting Department (+81 3-3779-8415)
32