COMPANY RESEARCH AND ANALYSIS REPORTAOI TYO Holdings Inc.
3975
Tokyo Stock Exchange First Section

20-Oct.-2020
FISCO Ltd. Analyst

Ikuo Shibata

FISCO Ltd.
http://www.fisco.co.jp

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

AOI TYO Holdings Inc.
3975 Tokyo Stock Exchange First Section

20-Oct.-2020
http://aoityo.com/en■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Company overview and history since establishment....................................................................................

01

2. 1H FY12/20 results overview................. ......................................................................................................

01

3. FY12/20 forecasts.................................. ......................................................................................................

02

4. Growth strategy...........................................................................................................................................

02■Company profile---------------------------------------------------------------------------------------------------------------------------------------------------------- 02
1. Business overview................................. ......................................................................................................

02

2. History................................................... ......................................................................................................

05■Financial highlights-------------------------------------------------------------------------------------------------------------------------------------------------- 06
1. 1H FY12/20 results................................ ......................................................................................................

06

2. Segment performance and activity results. ..................................................................................................

08■Business performance outlook-------------------------------------------------------------------------------------------------------------------- 09
1. FY12/20 forecasts.................................. ......................................................................................................

09

2. FY12/20 results outlook for each business. .................................................................................................

10

3. Opinion of FISCO’s analyst..........................................................................................................................

10■Growth strategy----------------------------------------------------------------------------------------------------------------------------------------------------------- 11
1. Announcement of a new medium-term management plan...........................................................................

11

2. Environmental awareness that forms the assumptions. ...............................................................................

11

3. Priority measures.........................................................................................................................................

11

4. Key performance indicators (KPI) and results targets...................................................................................

12

5. Points to focus on in the future according to FISCO’s analyst. ....................................................................

12■Shareholder returns------------------------------------------------------------------------------------------------------------------------------------------------- 13

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

AOI TYO Holdings Inc.
3975 Tokyo Stock Exchange First Section

20-Oct.-2020
http://aoityo.com/en█ SummaryIn the 1H FY12/20, sales and profits declined significantly (recordeda loss) due to the impact of the coronavirus.Announced a new
five-year medium-term management plan and intends to implement
measures to respond to environmental changes and improve
profitability
1. Company overview and history since establishment
AOI TYO Holdings Inc. <3975> is a joint holding company established in January 2017 through the management
integration of AOI Pro. Inc. and TYO Inc. The AOI TYO Group mainly plans and creates TV commercials and also
focuses on its Solutions Business that includes direct business with advertisers and video content marketing. It holds
a top share in TV commercial production through the management integration of the two leading industry firms.
The decision to proceed with management integration took into account the lack of prospects for major growthin conventional TV commercial production as well as likely expansion of business scope related to advertising,including methodology and structural changes. It comes against a backdrop of diversification of media (primarily
through the internet) and devices (smartphones, tablets, and others) and major shifts in the industry landscape withadvances in technology, such as communications speed, data analysis, VR* 1, and AR*2. This integration aims torealize economies of scale, create synergies and accelerate the pace of new value creation and business expansion
through consolidation and effective utilization of business resources.
*1	VR (virtual reality) refers to the technologies and methods to realize various types of experiences, including in virtualworlds, portraying something like the real world that goes beyond time and space.
*2	AR (augmented reality) refers to the technologies and methods to realize an augmented reality by adding some othercontent to the information that people can perceive in the real world.

2. 1H FY12/20 results overview
In the 1H FY12/20 results, net sales decreased 20.5% year on year (YoY) to ¥24,367mn and the operating loss
was ¥881mn (compared to operating income of ¥816mn in the same period in the previous fiscal year). Due tothe spread of the novel coronavirus pandemic (hereafter, the coronavirus), sales and profits decreased significantly(recorded a loss for each profit item). In particular, results in the Video Advertising Business declined greatly, mainly
due to postponements of TV commercial production following the restriction on activities because of the coronavirus.
Sales also declined in the Advertisement-Related Business, including due to the cancellations and postponementsof various events. In profits as well, although the Company worked to keep costs down on the whole, it recorded
an operating loss as profits were pushed down by the decline in sales.

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

AOI TYO Holdings Inc.
3975 Tokyo Stock Exchange First Section

20-Oct.-2020
http://aoityo.com/en

Summary

3. FY12/20 forecasts
For the FY12/20 results, the Company once again announced revised forecasts on August 24 based on factors
including the impact of the coronavirus and the 1H results conditions. The forecasts are for net sales to decrease
23.3% YoY to ¥50,000mn and an operating loss of ¥1,400mn (operating income of ¥2,118mn in the previous fiscal
year), and while a recovery to a certain extent is expected in the 2H FY12/20, the outlook is that the Company willcontinue to record a loss. Based on the assumption that the impact of the coronavirus will continue at least for the
rest of the year, although orders received bottomed out in the 1H FY12/20, the situation is that a major recovery will
be difficult in the 3Q and 4Q. Therefore, the outlook for the full fiscal year is for sales and profits to decline and thateach profit item will not reach profitability.
4. Growth strategy
In March 2019, the Company formulated its medium-term management policies and it has progressed changing tomanagement that emphasizes “quality over quantity.” However, due to the impact of the coronavirus, major changes
to lifestyles have caused the speed of environmental changes to further accelerate and responding to advertisers’
new needs has become an urgent task. Therefore, the Company has announced a new five-year medium-term
management plan in order to accelerate its medium-term management policies. Nevertheless, there has been no
major change in direction going forward. Under the theme of “Group-wide update of production functions,” thepolicy is to implement a major reorganization of the Group in order to respond to an era of reforms. The targets forthe plan’s final fiscal year (FY2025) are consolidated net sales of ¥68bn, consolidated operating income of ¥4.4bn,
EBITDA of ¥5.7bn, and ROE of at least 10%. In particular, the results targets are premised on emphasizing an
improvement in profitability, including through cost reductions.
Key Points
In the 1H FY12/20, sales and profits decreased significantly (recorded a loss for each profit item) due to theimpact of the coronavirus• For the full-year FY12/20 results, although recovery to a certain extent is expected in the 2H, the outlook is thateach of the profit items will not reach profitability• The newly announced five-year medium-term management plan has set the theme of “Group-wide update ofproduction functions” and a policy to implement a major reorganization of the Group in order to respond to an
era of reforms• The targets for the plan’s final fiscal year (FY2025) are consolidated net sales of ¥68bn and consolidated
operating income of ¥4.4bn, and the Company will work to improve profitability through cost reductions•█ Company profile
Joint holding company established for the integration of AOI Pro.
and TYO. Holds a top industry share for TV commercial production
1. Business overview
AOI TYO Holdings is a joint holding company that owns AOI Pro. and TYO. The AOI TYO Group plans and creates
TV commercials and is engaged in its Solutions Business that includes direct business with advertisers and video
content marketing. It was founded in January 2017 through management integration of two leading industry firms
and holds a top share in TV commercial production.

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

AOI TYO Holdings Inc.
3975 Tokyo Stock Exchange First Section

20-Oct.-2020
http://aoityo.com/enCompany profile

The AOI TYO Group consists of a single Advertising Business segment and four sub-segments (Video Advertising,Advertisement-Related, Solutions, Overseas). While the mainstay Video Advertising Business generates about 70%
of overall sales, the Solutions Business is attracting attention as a growth driver.
Sales mix by customer was well balanced with 21.7% to the Dentsu Group <4324>, 25.7% to the HakuhodoGroup (Hakuhodo DY Holdings Inc.) <2433>, 32.3% in direct transactions, and 20.2% to others. Additionally, sales
composition by media type is TV commercial production at 57.3%, entertainment content at 4.6%, digital content
at 23.5%, overseas at 4.4%, and other at 10.3%. “Digital content” is growing rapidly along with expansion in online
video advertising demand as a trend.

Sales composition by business (1H FY12/20 result)

Overseas Business
5.0%

AdvertisementRelated Business
11.8%

Solutions Business
13.9%
Video Advertising
Business
69.3%

Source: Prepared by FISCO from the Company’s results briefing materials

Sales composition ratios by customer (1H FY12/20 result)

Dentsu Group
21.7%

Other
20.2%

Hakuhodo Group
25.7%

Direct transactions
32.3%

Source: Prepared by FISCO from the Company’s results briefing materials

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

AOI TYO Holdings Inc.
3975 Tokyo Stock Exchange First Section

20-Oct.-2020
http://aoityo.com/enCompany profile

Sales composition ratios by medium (1H FY12/20 result)
Overseas
4.4%

Other
10.3%

TV commercial
57.3%

Digital contents
23.5%

Entertainment contentｓ
4.6%

Source: Prepared by FISCO from the Company’s results briefing materials

Below, we review each of these business areas.
(1) Video Advertising Business
The Company plans and produces TV commercials, online video and other advertising video. As for TV commercials, this was the main business for AOI Pro. and TYO, and integration of these two major industry firms
established a top market share. Both firms produce numerous excellent works amid continuation of a healthyorders environment. While the Company faces concerns about profitability decline because of changes in advertising media related to the growing internet presence and the printless shift as well as the need for income structurereforms and better work efficiency, it aims to establish a dominant position in high-quality video advertising, its
strength, including in the expanding online video market.
(2) Solutions BusinessThis business provides measures for problem-solving for customers. Its results currently roughly equate to the
combined results of the TYO Offering Management Business Unit*1 and AOI Pro.’s subsidiary Quark tokyo Inc.*2(including its subsidiary Mediator, Inc.*3).
*1	Supplies one-stop solutions mainly through multifaceted media activities via direct business with advertisers.
*2	Provides services that range from marketing strategy formulation mainly for videos to all PDCA solutions required bycommunications in the digital era.
*3	A joint venture between Quark tokyo and Cyber Communications Inc. of the Dentsu Group (established August 20, 2019).

(3) Advertisement-Related BusinessThis business includes planning and production of movies, TV dramas, and events and production of digitalcontent, promotional content, and music videos. The Company’s strategy is to enclose the market by building
up its track record by entering areas that have an affinity with the mainstay business and bolstering peripheral
solutions (promotions and content).

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

AOI TYO Holdings Inc.
3975 Tokyo Stock Exchange First Section

20-Oct.-2020
http://aoityo.com/enCompany profile(4) Overseas Business
The Overseas Business operates sites centered on Southeast Asia (Thailand, Vietnam, Singapore, Indonesia,
Malaysia, and India), engaging in business with both Japanese-affiliates and local companies. This businessincludes video production orders received from overseas. Both AOI Pro. and TYO have been actively engaged inmany regions. The Company has also worked on restructuring the business portfolio to better respond to future
developments. This included the reorganization of a poorly performing local subsidiary in Beijing.
2. History(1) AOI Pro.
AOI Pro. goes back to Aoi Advertising Promotion Inc., which was established in 1963 to produce TV commercials,
in Tokyo’s Minato Ward. It solidified a business base as a video production company focused on TV commercials.
In 1990, it listed shares on JASDAQ, taking the lead in this industry, with the aim of making further advances andstrengthening social credibility.
It subsequently created numerous videos that attracted substantial interest, fueling healthy growth and listed on
the Second Section of the Tokyo Stock Exchange in 1998 and on the First Section in 2000. It established a firm
position as one of the major TV commercial production companies.
In September 2011, meanwhile, it launched an overseas site to handle TV commercial production in Indonesia.
In October 2014, it added nakamino Co., Ltd.*, which specializes in measurement and operation of online video
platform effects, to the group (equity-method affiliate) through a capital alliance with the aim of full-fledged ramp-up
of video content marketing, a new growth area. These initiatives gave it an edge versus peers in building operations
to address diversifying media, growing demand for online videos and other digital content, and entry by Japanesecompanies into the fast-growing Asian region.
*	It turned this entity into a consolidated subsidiary at the end of December 2015 through an injection of additional capitaland changed the company name to Quark tokyo Inc. in April 2016.

(2) TYO
TYO was established as a TV commercial production company in April 1982 in Roppongi, Minato Ward, Tokyo. It
was established after other major commercial production companies had been formed. Hiroaki Yoshida (honorary
chairman of AOI TYO Holdings), together with five other commercial creators, including Kazuyoshi Hayakawa(representative director, president and CEO of TYO Inc.), established the company with the dream of “Creating
an Ideal Company of Creators, by Creators, for Creators.”
The company listed on JASDAQ in 2002. It expanded business by leveraging its creative capabilities of having
been involved in the production of numerous TV commercials that left an impression with consumers, notably
one promoting travel to Kyoto for Central Japan Railway Company (JR Central) <9022>. Upon the market beingchanged to the Second Section of the Tokyo Stock Exchange in October 2013, the Company’s listing was
reassigned to the First Section in January 2014.
TYO has been involved in various types of content production, including TV commercials, online videos, digitalcontent and events. Its strength is providing optimal, one-stop solutions for advertisers’ advertising promotions
and promotional activities. It led the industry with a sales structure and accumulation of knowledge in dealing
directly with advertisers* and has focused on building long-term relationships with advertisers, expanding projectsizes and capturing sales promotion expenses. Furthermore, it has been actively engaged in overseas expansion.
*	Since starting direct business with advertisers in July 2003, the current TYO Offering Management Business Unit has taken
charge of the entire group’s direct business with advertisers.

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

AOI TYO Holdings Inc.
3975 Tokyo Stock Exchange First Section

20-Oct.-2020
http://aoityo.com/enCompany profile(3) Background to the management integration (January 2017)
In the background to the management integration is the diversification of media and devices (such as smartphones
and tablets) focused on the internet, in addition to dramatic changes to the advertising industry environment,
including communications speed and data analysis, and the progress being made in technological innovations,such as VR and AR. In this environment, major growth in TV commercial production, which had been the
Company’s mainstay up to the present time, is unlikely, but advertising-related business areas will expand, withaccompanying changes to their methods and structures.
Based on this sort of awareness of the business environment, the companies judged that integration was necessary to grow in the medium to long term to expand market share, strengthen negotiation power, and maintainrobust capital strength. They also wanted to build a competitive and advanced business model by newly forminga group to lead the industry and concentrating and effectively utilizing management resources.

█ Financial highlights
In the 1H FY12/20, sales and profits decreased significantly(recorded a loss for each profit item) due to the impact of thecoronavirus
1. 1H FY12/20 results
In the 1H FY12/20 results, net sales decreased 20.5% YoY to ¥24,367mn, operating loss was ¥881mn (operating
income of ¥816mn in the same period in the previous fiscal year), ordinary loss was ¥1,047mn (ordinary income of¥637mn), and loss attributable to owners of parent was ¥956mn (profit attributable to owners of parent of ¥257mn).
Results declined significantly due to the impact of the coronavirus and losses were recorded for every profit item.
Net sales declined significantly in every business except the Solutions Business. In particular, results in the Video
Advertising Business declined greatly, mainly due to postponements to TV commercial production following the
restriction on activities because of the coronavirus. Sales also declined in the Advertisement-Related Business,
including due to the cancellations and postponements of various events. It seems that of the approximately ¥6.2bn
decline in sales, the impact of the coronavirus was responsible for around ¥5.4bn, and of this amount, 70%, orapproximately ¥3.6bn, was due to postponements from the 3Q FY12/20 onwards. Orders received also trended
at a low level due to the suspension of economic activities and the sense of uncertainty about the future due to thecoronavirus. As a result, at the end of the 1H, the backlog of orders had declined 7.2% compared to the end of theprevious fiscal year to ¥14bn.
Looking at net sales by customer, they declined for every channel, but the decreases were particularly large formajor advertising agencies like the Dentsu Group and Hakuhodo Group.
In profits, in addition to the reductions in depreciation and development costs following the impairment treatment ofsoftware in FY12/19, there were reductions in other costs, including costs to reorganize unprofitable subsidiaries, etc.
and transportation and entertainment costs, and the Company worked to keep costs down on the whole. However,it still recorded a significant operating loss as profits were pushed down by the decline in sales.

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

AOI TYO Holdings Inc.
3975 Tokyo Stock Exchange First Section

20-Oct.-2020
http://aoityo.com/en

Financial highlights

Regarding financial condition, total assets decreased 7.1% compared to the end of the previous fiscal period to¥49,573mn, mainly due to the decline in trades receivable following the fall in sales. However, shareholders’ equity
decreased 6.0% to ¥21,560mn because of the recording of a net loss, and therefore the equity ratio was basicallyunchanged at 43.5% (43.0% at the end of previous fiscal period). Conversely, the Company secured funds on handof ¥13,307mn, up 46.1% compared to the end of the previous fiscal period, while it also established a commitmentline (a borrowing framework) of ¥12bn with multiple financial institutions, so there are no financial concerns, including
about liquidity.
1H FY12/20 results overview(¥mn)
1H FY12/19
Results

1H FY12/20

Ratio

30,636

Net sales

Results

ChangeRatio

24,367

AmountChange rate

-6,269-20.5%-21.2%

Video Advertising Business

21,43570.0%

16,882

69.3%-4,553

Solutions Business

3,385

11.0%

3,391

13.9%

6

0.2%

Advertisement-Related Business

4,322

14.1%

2,875

11.8%

-1,447-33.5%

1,494

4.9%

1,219

5.0%

-275

-18.4%

Cost of sales

24,90081.3%

21,16386.9%-3,736-15.0%

Selling, general and administrative
expenses

4,919

16.1%

4,084

16.8%

-834

-17.0%

Operating income

816

2.7%

-881

-3.6%

-1,697-

Ordinary income

637

2.1%

-1,047-4.3%-1,685-

Profit attributable to owners of parent

257

0.8%

-956

-3.9%

-1,213-

Overseas Business

EBITDA

1,531

-313

-1,844-

Order backlog

15,11914,029-1,090-7.2%

Sales ratio by customer
Dentsu Group

6,920

22.6%

5,298

21.7%

-1,622-23.4%

Hakuhodo Group

9,066

29.6%

6,270

25.7%

-2,796-30.8%

Direct transactions

8,517

27.8%

7,868

32.3%

-649

-7.6%

Other

6,132

20.0%

4,929

20.2%

-1,203-19.6%

Source: Prepared by FISCO from the Company’s financial results and results briefing materials

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

AOI TYO Holdings Inc.
3975 Tokyo Stock Exchange First Section

20-Oct.-2020
http://aoityo.com/en

Financial highlights

Financial position as of the end of June 2020(¥mn)
ChangeAs of the end of
December 2019

As of the end ofJune 2020

Amount36,00332,572-3,431-9.5%

Cash and deposits

9,111

13,307

4,196

46.1%

Notes and accounts receivable - trade16,873

8,027-8,846-52.4%

Work in process

4,510

4,344

-165

-3.7%

Non-current assets

17,34817,000

-347

-2.0%

Property, plant and equipment

7,084

6,837

-247

-3.5%

Intangible assets

4,275

3,932

-342

-8.0%

Investments and other assets

5,988

6,231

243

4.1%

Total assets

53,352

49,573-3,778-7.1%

Current liabilities

Current assets

Change rate

18,343

11,751-6,591-35.9%

Accounts payable - trade

8,697

4,059

-4,637-53.3%

Short-term loans payable

6,273

4,444

-1,829-29.2%

Advances received

899

1,704

804

89.4%

Non-current liabilities

11,645

15,871

4,226

36.3%

Long-term loans payable

6,672

10,953

4,281

64.2%

Long-term deposits received

3,501

3,501

-

-

Total liabilities

29,98827,622-2,365-7.9%

Net assets

23,363

21,951-1,412-6.0%

22,935

21,560-1,374

6.0%

43.0%

43.5%

Shareholders’ equity
Equity ratio
Current ratio
D/E ratio

196.3%

277.2%

0.56 times

0.71 times

Source: Prepared by FISCO from the Company’s financial results

2. Segment performance and activity results(1) Video Advertising BusinessNet sales fell significantly, declining 21.2% YoY to ¥16,882mn. In particular, following the declaration of a state of
emergency (April 7 to May 25), sales were affected by various measures, including that filming was almost entirely
stopped and requests to postpone TV commercial production. But the extent of the decline in sales of digitalcontent, including for online videos, was small, which can be seen to indicate a structural change. In profits, anexternal factor of the decline in highly profitable print sales overlapped with effects including actual-costs claims
from the cancellations and postponements of projects, and the effective profit margin fell to 31.4% (33.5% in thesame period in the previous fiscal year). However, net sales bottomed out in the 1H, and the outlook is that theeffective profit margin will recover in the 2H.
(2) Solutions BusinessNet sales were basically unchanged, increasing 0.2% YoY to ¥3,391mn. Of this amount, the TYO Offering
Management Business Unit’s sales (excluding media purchase placements) were supported by the increase inorders from online-related companies and others, and sales were secured at the same level as in the previous
fiscal year. Conversely, sales in Quark tokyo (and Mediator) were sluggish, including due to cancellations of projects
related to the Olympics and Paralympics and reductions in the budgets of existing companies, mainly due to theslump in advertising demand.
(3) Advertisement-Related BusinessNet sales declined significantly, decreasing 33.5% YoY to ¥2,875mn. This decline was mainly caused by thecancellations and postponements of various events due to the coronavirus.

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
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AOI TYO Holdings Inc.
3975 Tokyo Stock Exchange First Section

20-Oct.-2020
http://aoityo.com/en

Financial highlights(4) Overseas BusinessNet sales decreased, falling 18.4% YoY to ¥1,219mn, as they were greatly affected by the coronavirus, including
by the lockdowns in various countries.

█ Business performance outlook
In FY12/20, although a recovery to a certain extent is expected in the
2H, the outlook is that the severe earnings environment will continue
1. FY12/20 forecasts
For the FY12/20 results, the Company once again announced revised forecasts on August 24 based on factors
including the impact of the coronavirus and the 1H FY12/20 results conditions. It is forecasting that net sales will
decrease 23.3% YoY to ¥50,000mn, operating loss of ¥1,400mn (operating income of ¥2,118mn in the previous
fiscal year), ordinary loss of ¥1,500mn (ordinary income of ¥1,763mn), and loss attributable to owners of parent of¥1,500mn (loss of ¥1,280mn). Compared to the 1H FY12/20, a recovery to a certain extent is expected in the 2H,
but the outlook is that each of the profit items will not reach profitability.
Assuming that the impact of the coronavirus will continue for at least the rest of the year, there are concerns abouta cooldown in companies’ advertising demand. In this situation, sales in the Video Advertising Business and in theAdvertisement-Related Business are expected to recover to a certain extent in the 2H FY12/20 due to the restartof economic activities after the declaration of a state of emergency. However, although orders received bottomed
out in the 1H, the situation is that a major recovery will be difficult in the 3Q and 4Q, so the full fiscal year outlook
is that sales will decline YoY.
In profits also, although the loss can be expected to improve in the 2H FY12/20, including from sales bottoming
out and the improvement in the effective profit margin (in the Video Advertising Business), the outlook is that all of
the profit items will not reach profitability and that the extent of the loss for the full fiscal year will increase further.
FY12/20 forecasts(¥mn)
FY12/19
Results

FY12/20
Ratio

65,229Net sales

Forecasts

ChangeRatio

50,000

AmountChange rate

-15,229-23.3%

Video Advertising Business

43,86067.2%

35,30070.6%-8,560-19.5%

Solutions Business

8,145

12.5%

5,900

11.8%

-2,245-27.6%

Advertisement-Related Business

9,846

15.1%

6,500

13.0%

-3,346-34.0%

Overseas Business

3,378

5.2%

2,300

4.6%

-1,078-31.9%

Operating income

2,118

3.2%

-1,400-2.8%-3,518-

Ordinary income

1,763

2.7%

-1,500-3.0%-3,263-

Profit attributable to owners of parent-1,280-2.0%-1,500

-3.0%

-219

-

Source: Prepared by FISCO from the Company’s results briefing materials

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
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AOI TYO Holdings Inc.
3975 Tokyo Stock Exchange First Section

20-Oct.-2020
http://aoityo.com/en

Business performance outlook

2. FY12/20 results outlook for each business(1) Video Advertising BusinessNet sales are forecast to decrease 19.5% to ¥35,300mn. However, the outlook is that sales will increase in the
2H FY12/20 compared to in the 1H, because following the restart of economic activities, progress is being made,including in restarting operations through creating proprietary guidelines* (measures to prevent the infection fromspreading) and for introducing video production methods in remote work. In profits, the effective profit margin is
expected to improve.
*	It refers to concluding an advisory contract with a medical coordination company and creating proprietary guidelines for
production operations. The aim is to thoroughly implement measures to prevent the infection from spreading, such as
taking a team when filming to manage hygiene measures, including medical practitioners, and conducting health checks
and regularly implementing and confirming disinfection and ventilation.

(2) Solutions BusinessNet sales are forecast to decrease 27.6% to ¥5,900mn. In the 1H FY12/20, sales of about the same level YoY
were secured, but there have been cancellations and postponements of existing projects. The outlook is that sales
will decrease in the 2H more than in the 1H, due to the effects of self-restraint on face-to-face sales activities in
the 1H. However, the Company has currently restarted full-fledged sales activities and from the 4Q, it intends toaccumulate projects for growth from the next period onwards.
(3) Advertisement-Related BusinessNet sales are forecast to decrease 34.0% YoY to ¥6,500mn. However, as anticipated in the Video Advertising
Business, event-related sales are expected to recover to a certain extent in the 2H FY12/20, mainly due to therelaxing of restrictions on activities and acquisitions of projects in online services.
(4) Overseas BusinessNet sales are forecast to decline 31.9% YoY to ¥2,300mn. Sales are expected to decrease more in the 2H FY12/20
than in the 1H, but operations are restarting in countries and regions that have lifted the restrictions on economic
activities, so the outlook is for a gradual recovery.
3. Opinion of FISCO’s analyst
In order to achieve the FY12/20 results forecasts for the full year, the Company must secure net sales of at least¥25,633mn in the 2H and maintain operating loss under ¥519mn. Although there are concerns about a temporary
slowdown in advertising demand due to the coronavirus, the Company’s results forecasts are at levels that rationallyincorporate the anticipated risk factors, so at the very least, we consider the risk of results further decreasing to below. The points to focus on related to a recovery and growth from FY12/21 onwards are how will it uncover slumping
demand and how will it increase orders. In particular, we regard an important theme to be that it shows specificresponses to structural changes, including to the environmental changes caused by the coronavirus.

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

AOI TYO Holdings Inc.
3975 Tokyo Stock Exchange First Section

20-Oct.-2020
http://aoityo.com/en█ Growth strategy
Has announced a new five-year medium-term management plan
based on the theme of “Group-wide update of production functions”
and measures include business and organizational structuralreforms
1. Announcement of a new medium-term management plan
In order to respond to rapid environmental changes, the Company formulated medium-term management policies
in March 2019. Setting its basic policy to “be a powerful corporate group capable of responding to any era,” it haschanged to management that emphasizes “quality over quantity.” In particular, in addition to further deepening its
production of high-quality video and movies for branding, which is one of the Company’s strengths, it has indicated a
direction of strengthening peripheral solutions and widening the business scope. But upon entering this year, results
are currently declining significantly due to the impact of the coronavirus, while major changes to ways of living are
causing the speed of environmental changes to further accelerate and responding to advertisers’ new needs has
become an urgent task. Based on this situation, in order to accelerate the medium-term management policies, theCompany announced a new five-year medium-term management plan on August 24, 2020. However, there will
be no major change of direction going forward. The key points are that to further accelerate the realization of themedium-term management policies, it has set “Group-wide update of production functions” as the theme and it will
implement a major reorganization of the Group in order to respond to an age of reforms.
2. Environmental awareness that forms the assumptions
It is forecast that the TV commercial market will shrink at a maximum pace of around 2% a year, but that the online
video advertising market will grow by around 20% a year due to the acceleration of the shift to digital. In this sort ofenvironment, brand videos with high unit prices, which are one of the Company’s strengths, will continue to grow, but
this growth will be limited and it seems that low- to medium-priced videos will grow significantly. On the other hand,in terms of developments among advertisers, for SMEs and venture companies with annual advertising budgets
in a range of ¥100mn to ¥1bn, it will be necessary to have in place a structure to provide a one-stop service, frommarketing-orientated communication design through to planning, production, and management. In particular, whowill be responsible for the actual execution (production) is being viewed as important, and needs are rising for directtransactions with production companies like the Company.
3. Priority measures(1) Business and organizational structural reforms
The Company’s business structure has focused on advertisement video production so far, but it will change to a
two-business structure. The Content Production Business will be responsible for the advertising video production
noted above and center on consignment work from advertising agencies, and the Communication Design Businesswill be responsible for work from communication design through to execution centered on direct transactions withadvertisers. Also, it will reduce the number of consolidated subsidiaries from 33 companies to 23 companies.

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

AOI TYO Holdings Inc.
3975 Tokyo Stock Exchange First Section

20-Oct.-2020
http://aoityo.com/en

Growth strategy(2) Measures for each business
1) Content Production BusinessThis business will consolidate the work of the production subsidiaries in the former Video Advertising Businessand the former Overseas Business and part of the work of the former Advertisement-Related Business. Leveraging
its top share in the industry and the expertise it has cultivated so far, it will aim to support the pursuit of highquality and high productivity. Moreover, it will expand its scope to include the low- to medium-priced digital video
market that is expected to grow. Also, the Company’s policy is to focus on content planning and production thatutilizes diversified post production (including sound editing and CG operations) and virtual space technologies
like VR and AR.
2) Communication Design Business
The business will consolidate the operations of the former Solutions Business, Advertisement-Related Business,
and Overseas Business, excluding production subsidiaries. In addition to aiming to strengthen the customer base,it will provide higher value-added integrated marketing and communication services, and expand the range ofservices to omnidirectional execution for promotion.
(3) Deeping and strengthening Group management and reducing costs
Based on the newly formulated human resources management policy, the Company is strengthening recruitment of
new graduates (including unifying selection management), reviewing the evaluation and remuneration systems andworking on measures to bring together all the human resources in the Group, including by constructing a humanresource development environment. It is also aiming for cost reductions of a maximum amount of ¥2bn, suchas by consolidating offices, encouraging remote work, and improving productivity through digital transformation.
4. Key performance indicators (KPI) and results targets
The Company’s targets for the medium-term management plan’s final fiscal year (FY12/25) are consolidated net
sales of ¥68bn, consolidated operating income of ¥4.4bn, EBITDA of ¥5.7bn, and ROE of at least 10%. However,results in FY12/20 are expected to greatly decline temporarily due to the impact of the coronavirus, but it is still
aiming for sustainable growth from FY12/21 onwards. In particular, the targets are premised on emphasizing an
improvement to profitability through cost reductions. Also, breaking down the net sales target of ¥68bn, the plan
is to increase sales from the Content Production Business to ¥47bn (up ¥9bn from the FY12/20 forecast) and fromthe Communication Design Business to ¥21bn (up ¥9bn). Moreover, its policy is to work to improve employee
engagement and to contribute to the SDGs.
5. Points to focus on in the future according to FISCO’s analyst
At FISCO, we consider that although results at the current time have temporarily regressed due to the impact of thecoronavirus, if looking from a medium- to long-term perspective at the structural changes that have been underway
since the past, major opportunities can be seen and the issues going forward will be how the Company will respondquickly to changes due to the coronavirus and how it will utilize them positively. In this sense, the current businessand organizational structural reforms are on the perfect timing, and we expect them to be the start of its return to a
growth trajectory. In the medium-term management plan as well, the cost reductions and other tasks are at levels
that are fully achievable. Rather, what we should focus on is whether and how the Company can improve by adding
value. In particular, starting from the axis of the new strategy, or in other words, the provision of a full line of services
through direct transactions with SMEs and venture companies, we shall be closely following how the Company will
increase its competitive advantage through the provision of new value, including the planning and production ofcontent that utilizes the latest digital technologies and the provision of integrated marketing planning, and also what
effects this will have on results (particularly on profitability).

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

AOI TYO Holdings Inc.
3975 Tokyo Stock Exchange First Section

20-Oct.-2020
http://aoityo.com/en█ Shareholder returns
The newly announced medium-term management plan is aiming fora consolidated dividend payout ratio of at least 30%
Going forward, the Company’s basic dividend policy is to continue with a “consolidated dividend payout ratio of atleast 30%.” Based on this and the viewpoint of continuing to stably pay dividends, it has indicated that its policy is
to return profits to shareholders appropriately according to results.
In FY12/20, although the forecast is for an overall loss, from the viewpoint of maintaining stable dividend payments
to the greatest possible extent, the Company plans to pay a period-end dividend of ¥12 per share, continuing on
from FY12/19.
Also, with the aim of promoting medium- to long-term shareholding, the Company has introduced a shareholder
benefits program. Specifically, it plans to provide shareholders listed or recorded in the shareholders’ register onJune 30 of each year that have held at least 5 units (500 shares) of the Company’s shares continuously for at least
1 year with gifts depending on the number of shares held, including original QUO cards and perks from its original
benefits program catalog.

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Disclaimer
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This report is provided solely for the purpose of offering information, and is not a solicitationof investment nor any other act or action.
FISCO prepared and published this report based on information which it considered reliable;
however, FISCO does not warrant the accuracy, completeness, fitness nor reliability of thecontents of this report or the said information.
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mentioned in this report may increase or decrease in value or lose their value due to influence
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not make any promises regarding any future outcomes. If you use this report or any information
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This report has been prepared at the request of the company subject hereto based on theprovision of information by such company through telephone interviews and the like. However,
the hypotheses, conclusions and all other contents contained herein are based on analysis
by FISCO. The contents of this report are as of the time of the preparation hereof, and are
subject to change without notice. FISCO is not obligated to update this report.
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◾ For inquiry, please contact: ◾

FISCO Ltd.
5-11-9 Minami Aoyama, Minato-ku, Tokyo, Japan 107-0062
Phone: 03-5774-2443 (Financial information Dept.)
Email: support@fisco.co.jp