Consolidated Financial Results for the First Quarterof the Fiscal Year Ending December 31, 2018
May 2018

AOI TYO Holdings Inc.

Contents
1. Summary of Consolidated Financial Results
2. Consolidated Earnings Forecast
3. Appendix- Company Profile, Business Environment, etc.

1

1. Summary of Consolidated Financial Results

2

Financial Highlights
 Both sales and income decreased year on year.
 Extraordinary income of 385 million yen recognized due to the sale of TYO head
office (Shinagawa-Ku, Meguro).
(million yen)

Q1 FY2016

Q1 FY2017

Q1 FY2018

YoYChangeNet Sales

18,023

18,472

15,521-16.0%

Operating Income

1,367

1,820

1,092-40.0%

Ordinary Income

1,169

1,776

1,031-41.9%

Profit Attributable toOwners of Parent

498

1,016

842-17.0%

EBITDA

1,635

2,094

1,406-32.8%* 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).

3

Net Sales by Business Segment
 Net sales in the Advertising Video Production Business decreased, largely as results ofthe close inspection and selection of orders based on a profitability-oriented operation,order controls for promoting work-style reforms, and a decline in printing of televisioncommercial materials.
 Net sales increased in the Solution Business and Overseas Business, both positioned as
strategic areas.
13,771(million yen)

10,472

1,554 1,358

2,217

2,488

Q1 FY2017563
Advertising Video
Production

Other Production

Solutions

884

Overseas

Q1 FY2018367 319
Video-related4Overview of Business Segments
BusinessOverview

Advertising VideoProduction

Planning and production of advertising videos such as televisioncommercials. 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, website
production and promotional materials.

Solutions

Delivery of measures to solve customer issues, which includes directbusiness with advertisers, marketing and communication focused onvideos, and experience design solutions using data. Positioned as a
strategic area and focusing efforts.

Overseas

Offices in China and Southeast Asia working to grow business withJapan-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.
5Trend of Net Sales by Quarter and Order Backlog
 The backlog of orders increased 5.1% year on year, to 14,985 million yen, duepartly to carryover of some of the orders to the following quarter. The ordersituation has been steady.
25,00021,13420,00015,00018,472

15,521

18,023

15,257

15,610FY2016

17,192FY2017

15,344

14,36910,000FY2018Order backlog FY2017

5,000
0(million yen)Order backlog FY2018

14,985
14,261

14,016

17,322

13,631

Q1

Q2

Q3

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).

6

Net Sales by Customer The Solution Business continued to show strong performance and direct transactions
with advertisers increased, while decrease in sales to advertising agencies, due
primarily to the selection of orders in the Advertising Video Production Business.

26.7%
Q1 FY2017

29.5%

4,930

23.6%

5,441

4,351

20.3%
3,749

* Net sales from Dentsu Inc. (non-consolidated) were 4,524 million yen, and net sales from Hakuhodo Inc.
(non-consolidated) were 4,247 million yen.

25.9%
Q1 FY2018

4,027

26.1%
4,050

29.7%
4,611

18.3%

(million yen)

Dentsu GroupHakuhodo Group
Direct transactions
Others2,833* Net sales from Dentsu Inc. (non-consolidated) were 3,710 million yen, and net sales from Hakuhodo Inc.
(non-consolidated) were 3,295 million yen.

7

Net Sales by Medium
MediumTV commercial production(million yen)

Q1 FY2017

Q1 FY2018

Component
Ratio

YoY
Change12,030

9,708

61.9%

-2,322

10,474

8,485

54.1%

-1,989Printed commercial materials

673

531

3.4%

-143

Other883

692

4.4%

-190

496

265

1.7%

-231

3,443

2,872

18.3%

-571

318

627

4.0%

310Other2,235

2,200

14.0%

-35

Total

18,524

15,673100.0%-2,850

Original work

Entertainment contents
Digital contents
Overseas* The results are simple totals of the consolidated financial results of AOI Pro. Inc. and TYO Inc.

8

Trends of Operating Income and Operating Margin Operating profit fell year on year owing chiefly to a decline in net sales andadvance expenses that arose in connection with actions such as theestablishment of a new subsidiary.

(million yen)

2,000

15.0%

9.9%
7.0%

7.6%

10.0%
Operating income (left axis)

1,000

0

1,367

1,8201,092

Q1 FY2016

Q1 FY2017

Q1 FY2018

5.0%

Operating margin (right axis)

0.0%* 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).

9

Summary of Consolidated Balance Sheet(million yen)

FY 2017Q1 FY2018

Current Assets

41,50339,728Non-current Assets

18,234

18,62359,73758,351

Total Assets

25,27523,833

8,756

8,394

Total Liabilities

34,03132,228

Total Net Assets

25,706

26,123

Total Liabilities and Net
Assets59,73758,351

Current Liabilities
Non-current Liabilities(percentage of total assets)(43.0%)(44.7%)

Major Components

Cash and deposits (12,044 million yen), notes and accounts
receivable (16,867 million yen), electronically recorded monetaryclaims (4,620 million yen), and work in process (4,849 million yen)
Property, plant, and equipment (7,167 million yen), intangible
assets (5,664 million yen), and investments and other assets(5,791 million yen)Accounts payable (6,774 million yen), short-term loans payable
including current portion of long-term loans payable (11,573
million yen), and income taxes payable (730 million yen)
Long-term loans payable (3,136 million yen) and long-term
deposits received (3,501 million yen)

Capital stock (5,000 million yen), capital surplus (12,077 millionyen), and retained earnings (8,135 million yen)10

Initiatives in the Advertising Video Production Business The profit margin continued to increase significantly, while net sales decreased
mainly as results of the close inspection and selection of orders focused on
profitability from the stage of order acceptance, as well as order controls forpromoting work-style reforms.
15,00010,000

36.5%
30.8%

12,583

32.8%

35.0%

12,80930.0%

5,0000

40.0%

9,511

705

657

525

Q1 FY2016

Q1 FY2017

Q1 FY2018(million yen)

Production sales (left axis)
Print sales (left axis)
Profit margin (right axis)

25.0%* Operating profit= Sales - External expenditures

20.0%* Calculations for the TV Commercial
Production Department only11

Initiatives in the Solutions Business (1) In direct transactions with advertisers, sales continued to increase steadily
through larger orders.
10,0008,000

Sales at the TYO Offering
Management Business Unit *

5,577

6,000
4,000
2,000
08,000(million yen)

2,674717
FY2016

■■ Q1

1,243
FY20171,770■■ Full-year* The full-year figures forFY ending Dec. 2018 areforecasts.

FY2018* Renamed from TYO General Business Division Headquarters
12

Initiatives in the Solutions Business (2) At Quark tokyo, net sales were in line with the forecast, despite of a decrease yearon year derived from large orders received in the previous year.
3,000

2,700

2,416

Sales at Quark tokyo(million yen)

2,000

722

1,000
097358FY2016FY2017625

FY2018■■ Q1■■ Full-year* The full-year figures forFY ending Dec. 2018 areforecasts.

The company has collected specialists in various fields and uses a one-stop framework to provide Plan-Do-Check-Act (PDCA) solutions for all stages of video materials,
with a special focus on online content, ranging from strategy drafting, planning, production, and data analysis, to media distribution.

13Initiatives in the Overseas Business Sales grew substantially due to the acquisition of VF MEDIA (Vietnam) as anequity method affiliate and DTT Group (Malaysia) as consolidated subsidiaries.
※ VF MEDIA：VIEWFINDER MEDIA
DTT：DIRECTORS THINK TANK

8,000

Scale of sales inOverseas Businesses

7,200* Including equity-method affiliates

6,000

4,402

■■ Q1

4,000
2,0000(million yen)■■ Full-year739
FY2017

1,329* The full-year figures for
FY ending Dec. 2018 areforecasts.

FY201814

2. Consolidated Earnings Forecast

15

Progress in Consolidated Earnings Forecast For this Q1, while net sales were below the forecast, profit was generally in line, thanks
partly to an increase in the profitability in Advertising Video Production Business.
FY 2018

FY 2018

FY 2018(Ref.)
Full-year
Forecast

Q1 Result

1H Forecast

YoY
ChangeAmount Requiredfor Q2

YoY
ChangeNet Sales

15,52135,0001,271

19,479

4,222

Operating Income

1,092

2,000-358

908

370

3,800

Operating margin

7.0%

5.7%

---

5.4%

Ordinary Income

1,031

1,900-405

869

340

3,700

Profit Attributable toOwners of Parent

842

1,300

111

458

285

2,300

EBITDA1,406

2,690-242

--

5,230

(million yen)

70,00016

Shareholder Return
 Dividend: AOI TYO Holdings plans to pay a dividend of 30 yen per share (ordinarydividends) for the fiscal year ending December 31, 2018.
End ofQ2

FY 2017

8 yen

FY 2018 (forecast)

8 yen

End of FY

22 yenTotal

30 yen(incl. commemorative
dividend of 10 yen)(incl. commemorative
dividend of 10 yen)

22 yen30 yenDividend
Payout Ratio

DOE

25.6%

2.9%

31.4%

2.8%

 Purchase of treasury shares: AOI TYO Holdings made the following decisions
concerning the purchase of treasury shares.
Period of Purchase

Type of Shares

PreviousPurchase

May 16, 2017 - Feb. 27, 2018

CommonStock261,400 shares

289,631,200 yen(Plan) Current
Purchase

Jun. 1, 2018 – May 31, 2019

CommonStock400,000 shares

680,000,000 yen

Total Number of Shares Purchased(maximum)

Total Value of Shares purchased(maximum)17

3. Appendix- Company Profile, Business Environment, etc.

18

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/* The head office was relocated on March 28, 2018.
19

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

*As of March 31, 2018.

Akasaka

Consolidated subsidiaries: 37 total
Consolidated employees: 1,623

Shinbashi
Shinbashi

Osaki
Date of establishment: Oct.
25, 1963

Date of establishment: Apr. 2, 1982

Consolidated employees: 910

Consolidated employees: 713

Consolidated subsidiaries: 23 (including AOI Pro.)

Consolidated subsidiaries: 14 (including TYO)

20

Handling Changes in the Business Environment
Print-less (*)
Improvement of profit margin

Work style reform- Building a management structure that stresses
profitability

Diversification of media anddevices
Internet advertisement
Expanding the business fields
surrounding advertisement

Expanding sales for our Solutions
Business- Providing a framework to allow one-stop
shopping for appropriate solutions for ourcustomers' problem-solving needs* To date, reproduction (printing) to TV commercial material storage media has been used for posting materials to each broadcast media, and this reproduction has generated bothsales and profits. From October 2017, however, the system began gradually shifting to online data delivery, and print sales are expected to decline as a result.

21Post Merger Integration
 The following initiatives are being pursued for quick realization of the management
integration effect.

March 2018

Relocation of the head offices, office merger- Head offices moved from Shirokane to Osaki as part of the Corporate
Department's function consolidation- TYO head offices (Meguro) sold to optimize assets

January 2018

Consolidation of the Corporate Department- Function consolidation of AOI Pro. and TYO in the Management Department

FromNovember 2017

Reorganization of group business- Divestment of subsidiaries (TYO Animations, REAL-T, Business Architects)- Consolidation of lighting equipment rental business
22Net Sales Composition Ratio by Business Segment

11.5%

4.0% 2.1%

Advertising Video
Production
Other Production

Advertising Business
Proposal, planning and production ofadvertisements, etc.

Solutions

12.4%
70.0%

Overseas
Video-related（FY2017）

Video-related Business
Planning and production of music videos, photostudio business, etc.

23

Overview of Business Segments
Business

Overview

Advertising Video
Production

Planning and production of advertising videos such as televisioncommercials. 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, website
production and promotional materials.

Solutions

Delivery of measures to solve customer issues, which includes directbusiness with advertisers, marketing and communication focused onvideos, and experience design solutions using data. Positioned as astrategic area and focusing efforts.

Overseas

Offices in China and Southeast Asia working to grow business withJapan-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.

24

TV Ad Production
 Flow of TV ad production
ClientNumber of JAC* members(official members)*Japan Ad Contents Association

Advertising Agency

2007: 115 companies
2017: 93 companies

Video Production Companies
Directors

Photographers

Edit

MusicCG25

Trends in TV Ad Market in Japan TV advertising spending in 2017 totaled 1,947 billion yen (99.1% of the previousyear).
 Of the above total, production costs for terrestrial TV commercials amounted to217 billion yen (99.3% of the previous year).

2,000

Trends of TV advertising spending andproduction costs for terrestrial TV commercials

TV advertising spending
Production costs for terrestrial TV commercials(billion yen)

1,500
1,000
5000

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

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

26

Trends in Online Video Ad Market in Japan The size of the online video Ad market was 137.4 billion yen in 2017 after growing 163%
from the previous year.
 An increase in demand for smartphone video advertising led the growth of the market,
which is expected to exceed 200 billion yen by 2019 and 348.5 billion yen by 2023.

300.0

Estimates and forecasts for the size ofthe online video advertising market(Figures for and after 2017 are forecasts)

200.0

232.2

270.0

299.1

326.9

348.5

(billion yen)

184.5
137.4

100.0
84.2
0.0

2016

2017

2018

2019

2020

2021

2022

2023

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

27

KPI Targeted in Fiscal Year 2021:
Maximization of Shareholder Value Maximize shareholder value, through striving to increase capital efficiency (ROE)and shareholder returns.
 Maximize EBITDA through active investment in projects whose rate of return canexceed the cost of shareholders’ equity.

ROEEBITDA(Earnings before interest, taxes,depreciation, and amortization)

12% or higher
8.0 billion yen28

Shareholder Dividend Policy
 The consolidated dividend payout ratio set to be 30% or higher, aiming to increase
dividends associated with actual profit growth.
 Use dividend on equity (DOE) as an indicator and work to increase the ratio, inview of providing continuous and stable dividends.

Consolidated Dividend
Payout Ratio

30% or higher

DOEApprox. 4%(FY 2021)

29

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 30of each year.
Gift of original Quo Cards
500 shares or more

3,000 yen card

1,000 shares or more

5,000 yen card

2,000 shares or more

10,000 yen card

Photography and production of original photo album
500 shares or more (40 shareholders: randomly selected from those who enter the draw)
Photos are taken at the Hollyhock Tokyo Midtown studio operated by Hollyhock Inc., acompany in the AOI TYO Group, and the album is given as a gift.
(Product name: GraphBook™)* GraphBook™ is a registered trademark of Hollyhock Inc.
30

Status of Stock and Shareholders (as of December 31, 2017)
Number of Shares and Shareholders

Status of Large Shareholders

Total number of shares issued

24,566,447

Total number of shareholders

12,534

11.5%
43.9%

16.7%
2.9%
23.1%

Number ofShares Held

Shareholding
Ratio

1

Japan Trustee Services Bank, Ltd. (Trust Account)

1,963,800

8.15%

2

Cosmo Channel

1,153,740

4.79%

3

Imagica Robot Holdings Inc.

1,018,0004.22%

4Fields Corporation

879,660

3.65%

Individuals, etc.

5

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

719,100

2.98%

Financial institutions

6

The Bank of New York Mellon (International)
Limited 131800

663,000

2.75%

Financial instruments
business operator

7

Trust & Custody Services Bank, Ltd.
(Securities Investment Trust Account)

415,600

1.72%

Other corporations

8

Hitoshi Hara

400,000

1.66%

Foreign corporations,etc.

9

Fumiko Hara

328,000

1.36%

Treasury shares

10

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

306,700

1.27%

Shareholder Composition byType of Shareholder1.9%

Shareholder Name

* The shareholding ratios are calculated by subtracting treasury shares (471,127).

31

Disclaimer
This document includes future forecasts that reflect the plans and outlook of AOI TYOHoldings.
The future forecasts and related descriptions are based on information available to thecompany at the time of the preparation of this document, and the forecasts are affectedby the economic environment of the company’s businesses, competition, the results of
new services provided, and other factors that involve uncertainties. Please acknowledge,
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)
32