Financial Results Presentation for FY2018 2Q

株式会社IMAGICA GROUP
Code︓6879

December 4, 2018

FY2018 2Q financial results and FY2018 forecast
Business strategy
TopicsFY2018 2Q financial results and FY2018 forecastQuarterly financial results trend
FY2016 Actual

100million

FY2017 Actual

FY2018 Forecast

Net sales

875

913

900

Operatingincome

172451Q

270（100 million）

206
189

209

211

2Q

3Q

4Q

268

210

222

65225
193

Quarterly
Net sales
10

Quarterly
Operatingincome

024471(8)FY2016FY2017FY20184Operating income: YoY Change
Imaging Systems & Solutions recorded 200 million yen in increased
income but other 3 segments recorded decreased income（100 million）

Media Localization

11△8Content Creation△6Production
Services△6Imaging
Systems &Solutions△7+2
FY2017 2Q

FY2018 2Q

5Forecast of operating income: YoY Change
Projecting 3 segments decreased income other than Imaging
Systems & Solutions（100 million）

Media Localization△9Content Creation

24△4Production
services△4Others△3FY2017 ActualImaging
Systems &Solutions+15
FY2018 Forecast

6FY2018 Forecast by business segment

Content Creation

Production Services

Media localization

 Favorable orders for TV CM and TV animation
production
 Animation production costs increased higher than
expected Favorable post-production for TV animation and digitalcinema Decrease in orders of post-production for TV program North America︓Decrease in localization of old titles for OTT Europe︓Both net sales and income firm
 Asia︓Decrease in distribution of Hollywood works to Asia

Imaging Systems &Solutions

 Firm demand for 4K/8K system integration for broadcaststations
 Favorable imaging and photo processing LSI sales to China7

Business strategy

Production Services

Improve TV program post-production revenues-1

 About IMAGICA Lab.

* Figures are FY2018 forecast

Net sales compositionby business
Post-production

Post-production forfor TV programs

movies, animation andCM, and ArchivingTVEntertainmentMediaNet sales YoY by business

IMAGICA Lab.
total

95.9%

Entertainment

102.7%

Media

101.5%

TV

87.2%

Packages, Digital cinema, Digital network
9Production Services

Improve TV program post-production revenues-2

 Implementing reforms to create uniform editing process withclients
 System of clients + 2 staff members working in the same room
Beforeuntil the end of editing work Many processes don’t require all members so there is a lot of
restraint time⇒Long restraint times, Inefficient assignments Create large room that allows centralized management ofmultiple projects, and enables multiple staff to conduct editingAfterwork simultaneously.
⇒

Reduce restraint times, efficient use of personnel, increase

editing capacity

Increase orders and Improve revenues by efficiency

10Performance of Media Localization segment（％）（Million）

Net sales

Operating loss

28,00023,000Operating income before amortization

Fixed ratio
45.0

24,00024,814
21,65840.0

18,00035.0
13,000
30.0
8,000
3,000

(1,161) (66)(674)

388

25.0

(1,600) (400)(2,000)20.0
FY2016

OTT market
MediaLocalization
segment

FY2017FY2018 (Forecast)

FY2016FY2017FY2018Start up period

Growth period

Turning period

Full-scale start of OTT
services

Increased personnel toresponse to rapid
increase in localization ofold titles

Decreased localizationof old titles
11

Improvement of Media Localization

１

More services for OTT providers

２

Focus on localization of cinema works to createhigh profits

３

Invest on IT system to improve work efficiency

４

Expand localize business about Japanese12Target of Production service segment
Film production workflow
PlanningProduction

Business field “Production service”
Postproduction
Editing & Sound services
Color grading

Localize

Distribution

Dubbing
Subtitling

Digital cinema
data production

Target: End to End service in Japan and overseas
Japan︓Localize business

Postproduction（Existing)Localize

Overseas︓Distribution
business

Postproduction(Existing)Localize（IMAGICA Lab.）（New）（Existing）

Distribution（Existing)Distribution（New）（SDI Media）

13

Topics

1. Research & Development
 Launch group R&D departments (October 2017)

To gather information and promote R&D about advanced technology for imageproduction

 Start some studies with universities and public institution

Joint research with some universities about new image technology using AI

 Present one research result among above some studies,“Pre-and Post-Process for Automatic Colorization using aFully Convolutional Network” at SIGGRAPH ASIA 2018

Succeeded in developing the world's first technique for automatic colorization ofJapanese anime production

Aim to put this research to practice use at 202015

2. New product of High-Speed Camera“FASTCAM NOVA” on 15, November 2017
Compact and versatile high performance camera system
 Maximum frame rate: 1,000,000fps
 Conventional ratio of over 8 times

 120×120×217.2mm・3.3kg
 Class leading light sensitivity
 ISO 64,000 monochrome, ISO 16,000 color

 Main sales target︓R&D department inside andoutside Japan
 Production volume︓200units per year
（forecast）

16

3. Venture capital business Completed creation of venture capital fund:Promised capital: approx. 1.4 billion yen – investment in venturecompanies involved in VR, AR, MR, and new video-related businesses in
the media content domain
Main shareholders

Adways Inc.

East Japan Marketing & Communications, Inc

Shogalukan

TOMY COMPANY,LTD

DENTSU INC.

BANDAI NAMCO Holdings Inc.

mixi, Inc.

 Fund investment example (currently investing in 3 companies)
Cover Corporation: Operates distribution services
for virtual YouTubers

https://www.hololive.tv/17

4. Content Creation segment-1
Children’s animation

Original TV animation“OTOPPE”“Space bug”

・Children’s TV program broadcast on NHK ETV・Focuses on familiar sounds to provide new experiencesthat stimulate children’s curiosity

・Japan-Korea collaborative work with screenwriting anddirecting by Hiroyuki Nakao (director signed with Pics)
・Simultaneous production of Japanese and Englishversions to expand foreign market
・KBS Korea to start broadcasting from October 2019*For copyright reasons,images are not posted.

*For copyright reasons,images are not posted.

NHK ETV Mon-Fri 8:40-8:45 on air

TOKYO MX etc. on air©NHK／オトッペ町役場©W.BABA&TMS

18

4. Content Creation segment-2
Full 3DCG animation for overseas「Tinpo」
First showing – 10th Decemner,2018 on CBeebies
CBeebies is a British free-to-air television channel owned and operated by
the British Broadcasting Corporation (BBC).

*For copyright reasons,images are not posted.

http://www.tinpo.com/Tinpo ©2018 Cloudco Entertainment Company

19Appendix.

2Q Financial results by segments（million yen）

Content Creation
Net sales (YoY)

10,697 （△0.1%)

Operatingincome(YoY）△329 (△606)

 TV commercial and TV animation resulted in positivesales.
 Cost of theatrical animation, TV animation and full-CG
works increased.

Production Services
Net sales (YoY)

13,266 （△2.8%)

Operatingincome(YoY）△28 (△639)

 Post-production service for TV animation, digital cinema,
digital network remained strong, but orders from TV
program decreased due to TV programming reshuffle.

Media Localization
Net sales (YoY)

12,143 （△0.8%)

Operatingincome(YoY）△828 (△803)

 Localization of old titles for OTT decreased.
 Americas and Asia were negative due to shifts inmarket

Imaging Systems &Solutions
Net sales (YoY)

Operatingincome(YoY）

6,704 （4.4%)

671 （230)

 4K broadcast system sales remained strong,maintenance increase.
 Sales in LSI for China was strong.

＊OTT＝”Over The Top” means the companies excluding telecommunications that provide contents such as video and audio.

21

Revision on consolidated forecast and dividend（Millions yen）

(million yen)

FY2017
ActualFY2018
Forecast
On July 31

Revised
Forecast

vs July 31

vs July 31
ratio△3,000△3.1%△1,351△1.5%△1,250△71.5%△1,924△79.3%△1,150 △30.37%△1,924△79.3%YoY

YoY ratio

91,35193,00090,000

2,424

1,750

500

2.7%

1.9%

0.9%

2,424

1,650

500

2.7%

1.8%

0.9%

Net income (loss)
attributable toowners of theparent

2,937

1,100

700

△400

△36.3%△2,237△76.2%

Earnings per shareof common

65.9

24.7

15.9

△8.8

△35.6%△50△75.9%

Dividend per share

10.0

10.0

5.0

△5.0

Net Sales
Operating income(Ratio)Ordinary income(Ratio)△5.022

Revision on forecast by segments
FY2017Full year
Actual(million yen)Content Creation

Consolidated

0

△8.３%

△2,089△400△49.9%△399

23,200Operating income

799

800

400

3.2%

3.4％

1.7%

Net sales

27,72529,30028,300△1,0002.1%

575

Operating income

1,209

1,100

800

4.4%

3.8％

2.8%

△300

△33.8%△409

Net sales

24,81426,00024,000△2,000

△3.3%

△814

Operating income△674△1,050△1,600－％－％－%

△550-

△926

Net sales

14,997

15,50015,50003.4%

503

Operating income

1,449

1,600

1,600

9.7%
△1,47410.3%△1,00010.3%△1,000010.4%

1510-

474

△359

△700

△7000-△341

91,35193,00090,000△3,000△1.5%△1,351

2,424

1,750

500

△1,250△79.3%△1,924（OP ratio）

Others (Consolidatedadaptation)

YoY

23,200（OP ratio）

Imaging Systems& Solutions

YoYratio

Vs July 31

25,289（OP ratio）

Media Localization

FY2018
RevisedForecast

Net sales（OP ratio）

ProductionServices

FY2018
Forecast
on July 31

Net sales
OperatingincomeNet sales
Operatingincome23