Consolidated Financial Resultsfor Fiscal Year Ended December 31, 2017
March 2018

AOI TYO Holdings Inc.

Contents
1.
2.
3.
4.
5.

Business Environment
Summary of Consolidated Financial Results
Consolidated Earnings Forecast
Current Initiatives for Various Businesses
Stock Information

1

1. Business Environment2

Founding of AOI TYO Holdings
Comprehensive
company
a focuson TV commercial
 Foundedin January 2017, video
followingproduction
the management
integration ofwith
AOI Pro.
and TYO.
planning and development.
*As of December 31, 2017.

Consolidated subsidiaries: 31 total

Akasaka

Consolidated employees: 1,650

Shinbashi
Shinbashi

Osaki

Consolidated subsidiaries: 17 (including AOI Pro.)

Consolidated subsidiaries: 14 (including TYO)

Consolidated employees: 921

Consolidated employees: 729

3

Handling changes in the business environment
Print-less (*)
Work style reformDiversification of media anddevicesInternet advertisement
Expanding the business fields
surrounding advertisement

Improved profitability results- Building a management structure that stresses
profitability- Print-less operation has not progressed at therate expected, and the changes are expected toaccelerate from April of this year.

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 material storage media has been used for posting materials to each broadcast media, and this reproduction has generated both sales andprofits. From October 2017, however, the system began gradually shifting to online data delivery, and print sales are expected to decline as a result.

4

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

From
November 2017
Reorganization of group business- Divestment of subsidiaries (TYO Animations, REAL-T, Business Architects)- Consolidation of lighting equipment rental business5

2. Summary of Consolidated Financial Results

6

Financial Highlights
 Significantly exceeded the forecast, thanks primarily to increased sales in the Solutions Business, the higher profitabilityof the Advertising Video Production Business as the company’s core business, a slowdown in the shift to Print-less,online product delivery, and the reorganization of group businesses.

(million yen)

FY 2016

FY 2017

YoY Change

Ref. Initial
Forecasts

Net Sales

64,92870,473+8.5%

65,000Operating Income

3,422

4,619

+35.0%

3,500

Ordinary Income

2,963

4,394

+48.3%

3,200

Profit Attributable to
Owners of Parent

1,095

2,781

+154.0%1,400

EBITDA

4,389

5,755

+31.1%

4,630

ROE

6.1%

11.3%

+5.2%

-

* The results for the fiscal year ended December 2016 are simple totals of the consolidated financial results of AOI Pro. Inc. and TYO Inc. for the calendar year (based on pro forma
statements for the end of the fiscal year ending December 31).

7

Trend of Net Sales
 In addition to steady sales in the Advertising Video Production Business, sales in the Solutions Business, which is
positioned as a growth segment, increased and contributed to strong net sales of the entire group.

(million yen)

80,00060,00059,65364,92870,47340,00020,0000
2015/12月期
FY 2015

2016/12月期
FY 20162017/12月期
FY 2017* The results for 2015 and 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).

8

Trend of Net Sales by Quarter Net sales in the fourth quarter of the fiscal year under review increased substantially thanks to growth in orders
received.
(Order backlog in 4Q-end 13,631 million yen, down 614 million yen year on year)
25,000(million yen)

21,13420,00018,472

15,00015,61015,25718,023
15,772

14,36912,791

15,784
15,344

17,192
15,306

2015/12月期
FY
2015

10,0002016/12月期
FY
2016
5,000

2017/12月期
FY
2017

0
1Q

2Q

3Q

4Q

* The results for 2015 and 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

Overview of Business Segments
Business

Overview

Advertising Video
Production

Planning and production of advertising videos such as television commercials.
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, one-stop services from the planning andproduction of video ads and data analysis to media distribution, and VR
projects. Positioned as a growth segment and focusing efforts.

Overseas

Offices in China and Southeast Asia working to grow business with Japanbased and local companies. Promoting M&As in this segment.

Video-related

Projects other than advertising, including the operation of photo studios andthe production of music videos.

10Net Sales by Business Segment*1
 All segments generally remained strong, and net sales of the Solutions Business, which is positioned as a growth
segment, increased 123.6% year on year.

48,750 49,339(million yen)

2016/12月期
FY
2016

8,608 8,773

3,610

Advertising Video
Production

Other Production

2017/12月期
FY
2017

8,071

Solutions *2

2,558 2,842
Overseas1,401 1,446
Video-related*1: The Advertising Business Segment includes Advertising Video Production, Other Production, Solutions, and Overseas Business. The Video-related Business Segment includes
Video-related Businesses.
*2: Solution Business: provides measures to solve customer issues (total of Experience Design Dept. of AOI Pro, TYO General Business Division Headquarters, and Quark tokyo Inc.)

11

Net Sales by Customer Growth of sales in the Solutions Business contributed to a significant increase in direct transactions with advertisers.

(million yen)

28.6%
FY 2016

18,56629.0%
18,81422.9%
14,891

19.5%
12,658Dentsu Group* Net sales from Dentsu Inc. (non-consolidated) were 16,909 million yen, and net sales from Hakuhodo Inc.
(non-consolidated) were 15,468 million yen.

24.5%

27.2%

26.0%

Hakuhodo Group

22.2%

Direct transactions
Other

FY 2017

17,29919,182

18,357

15,635* Net sales from Dentsu Inc. (non-consolidated) were 15,390 million yen, and net sales from Hakuhodo Inc.
(non-consolidated) were 15,047 million yen.
* The results for the fiscal year ended December 2016 are simple totals of the consolidated financial results of AOI Pro. Inc. and TYO Inc. for the calendar year
(based on pro forma statements for the end of the fiscal year ending December 31).

12

Summary of Consolidated Balance Sheet(million yen)

FY 2017

Current Assets

41,503

Non-current Assets

18,234

Total Assets
Current Liabilities
Non-current Liabilities

Major Components
Cash and deposits (12,573 million yen), notes and accounts receivable (17,813
million yen), electronically recorded monetary claims (6,208 million yen), andwork in process (3,629 million yen)
Property, plant, and equipment (7,679 million yen), intangible assets (5,269
million yen), and investments and other assets (5,285 million yen)

59,73725,275
8,756

Total Liabilities

34,031

Total Net Assets(percentage of total assets)

25,706(43.0%)

Total Liabilities and Net Assets

59,737

Accounts payable (7,341 million yen), short-term loans payable including current
portion of long-term loans payable (12,772 million yen), and accounts payable(1,290 million yen)
Long-term loans payable (3,465 million yen) and long-term deposits received(3,501 million yen)

Capital stock (5,000 million yen), capital surplus (12,074 million yen), andretained earnings (7,823 million yen)13

Consolidated Statement of Cash Flow(million yen)

FY 2017

Major Components

1,393

Profit before income taxes (4,318 million yen),decrease (increase) in notes and accounts
receivable and inventories (-5,440 million yen), anddepreciation (845 million yen)

-2,632

Purchase of property, plant, and equipment andintangible assets (-1,628 million yen) and purchaseof investment securities (-1,121 million yen)

Net cash provided by (used in) financing activities

5,445

Net increase in short-term loans payable (6,336
million yen) and cash dividends paid (-467 million
yen)Cash and cash equivalents at beginning of period

3,155

Increase in cash and cash equivalents resulting fromshare transfer

4,975

Net cash provided by (used in) operating activities

Net cash provided by (used in) investing activities

Cash and cash equivalents at end of period

12,37214

3. Consolidated Earnings Forecast

15

Consolidated Earnings Forecast Temporary stagnation in financial results is expected, due chiefly to the increased profitability of Advertising Video
Production in FY2017 ahead of the shift to online product delivery that is expected to accelerate from 2018, the control
of orders received for work style reform, and prior investment in growth segments.

(million yen)

FY 2017

FY 2018 (Plans)

YoY
ChangeNet Sales

70,47370,000-473

Operating Income

4,619

3,800

-819

Ordinary Income

4,394

3,700

-694

Profit Attributable to
Owners of Parent

2,781

2,300

-481

EBITDA

5,755

4,974

-755

ROE

11.3%

8.8%

-2.5%
16

Net Sales Plan by Business Segment
 Advertising Video Production is likely to be affected by the shift to online product delivery and work style reform. The
Solutions Business, being a growth segment, and Overseas Business promoted through M&A are expected to expand.
 Other Production will decrease, mainly due to the reorganization of group businesses.

49,33945,300FY 2017

11,2008,773 7,900

FY 2018

8,071

4,500
2,842
Advertising Video
Production

Other Production

Solutions

Overseas

1,446 1,100
Video-related

17

Trends of Net Sales, Operating Income, and EBITDA(million yen)
80,00060,00040,00070,47365,00064,928
4,389
3,422

4,600

5,755

4,619

70,000
6000

3,800

3,500

売上高
Net Sales

5,000(left axis)
(左軸)
4000

営業利益
Operating Income(right axis)(右軸)

EBITDAEBITDA
2000

20,000(right axis)
(右軸)

0

0
FY 20162016/12月期(results)（実績）

FY 20172017/12月期(initial plans)（期初計画）FY 20172017/12月期(results)（実績）

FY 2018
2018/12月期(plans)（計画）* The results for 2016 are simple totals of consolidated financial results of AOI Pro. Inc. and TYO Inc. for the calendar year (based on pro forma
statements for the end of the fiscal year ending December 31).

18

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 can exceed the cost of shareholders’equity.

ROE
EBITDA(Earnings before interest, taxes,
depreciation, and amortization)

12% or higher
8.0 billion yen

19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, in view of providing continuous andstable dividends.

Consolidated Dividend
Payout Ratio

30% or higher

DOE

Approx. 4%(FY 2021)

20

Dividend Payment
 The dividend forecast has been raised from 28 yen at the beginning of the fiscal year to 30 yen a year in responseto the results for FY2017 that exceeded the initial forecasts.
 One of the contributors to the profit growth in FY2017 was a decrease in taxes paid, due primarily to thereorganization of group businesses.
 The dividend payout ratio (actual) after deducting this impact is 30.5%
 The company purchased a total of 289 million yen of treasury shares during FY2017.
 The total return ratio is 36.1%
 The company plans to pay a dividend of 30 yen per share (ordinary dividends) for the fiscal year ending December
31, 2018.
End of2nd Qtr.

End of FY

Total

Dividend
Payout Ratio

DOE

8 yen

22 yen30 yenFY 2017 (plan)(incl. commemorative
dividend of 10 yen)(incl. commemorative
dividend of 10 yen)

25.6%

2.9%

FY 2018 (forecast)

8 yen

22 yen30 yen

31.4%

2.8%

21

4. Current Initiatives for Various Businesses

22Initiatives for Advertising Video Production Business Improved profit margins due to the development of a management structure that stresses profitability
 In the fiscal year ending December 2018, the print-less movement is expected to accelerate, and although we willcontinue working to improve profitability, the overall profit margin is expected to decline slightly.

33.4%

50,00035.0%(million yen)

31.2%
40,00030.0%30,00044,464

制作売上(左軸)
Production sales (left axis)

44,998

プリント売上(左軸)
Print sales (left axis)

46,10020,00025.0%

利益率(右軸)Profit margin (right axis)

10,000FY 20162016/12月期

1,100 20.0%

2,654

2,935

0

FY 20172017/12月期

FY 2018
2018/12月期(計画)(plans)* Operating profit= Sales - External expenditures* Calculations for the TV Commercial
Production Department only

23

Initiatives in the Solutions Business (1) Sales have increased dramatically from a year earlier through large orders from new advertisers and expanded
scale for the projects of existing advertiser clients, in direct transactions with advertising sponsors.

10,000

Sales at the TYO General
Business Division Headquarters

8,000

8,000

5,577

6,000
4,000

(million yen)

2,674

2,000
0

FY 20162016年12月期

FY 20172017年12月期

FY 20182018年12月期（計画）(plans)24

Case study
Investment achievements for the "Ad Hack Ventures" fund targeting venture companies
TYO established the "Ad Hack Ventures" fund targeted to venture companies in August 2017as a joint project with FIELD MANAGEMENT.
This fund will be targeted to venture companies and is scheduled to have a total asset undermanagement of 1.8 billion yen (with several hundred million yen appropriated to each case).
■ Logbar Inc. (October 2017, 517 million yen invested)
Logbar is conducting development and sales for the world's first wearable audio translation device, "ili."
The company's business is expected to grow rapidly, by fulfilling the needs of people traveling overseas and the inbound tourist market
in Japan.
■ every, Inc. (January 2018, 100 million yen invested)
every's main business is providing four different types of video media sites, one of which is one of the largest video recipe sites inJapan, "DELISH KITCHEN."
It reaches over 44 million users per month, and has continued to grow rapidly ever since its founding in September 2015.
Further growth is expected due to their initiatives to improve video production quality, develop contents in a wide range of categories,and expand their business in other ways.
■ Sumally (January 2018, 100 million yen invested)
Sumally provides "Sumally Pocket," a cloud storage service which allows users to store things they aren't using right now into a
dedicated box, manage these items on their PC or using a smartphone app, and easily add or remove single items.
Business growth is expected due to the expansion of the storage market, which has more than doubled in size in the past 10 years.

25

Initiatives for our Solutions Business (2) At Quark tokyo, due to a favorable transition in project orders, sales increased to 334.6%, year on year.

3,000
Quark tokyo sales
2,500

2,416

2,700
(million yen)

2,000
1,500
1,000

722

500
0

FY 20162016年12月期

FY 20172017年12月期

FY 20182018年12月期（計画）(plans)

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.

26

Case study
Quark tokyo launches “QT by quark tokyo,” a specialized team dedicated to new marketing strategies.
Quark tokyo launched “QT by quark tokyo,” a specialized team within Quark tokyo that develops optimized marketing strategies for clientsneeding new marketing communication with a focus on millennials*, while providing creative direction and production. The team launched thevertical video media Q16GiRL in December 2017.
Based on insights into consumers derived from its consulting and analysis of media management as well asfrom diverse data on media targeting young demographics, the team provides the kind of marketing andcommunication that’s truly necessary for brands and companies.
The concept of Q16GiRL is “vertical video media for girls, by girls.” This media label provides vertical video
media targeting girls in their teens and 20s who don’t watch TV or read magazines. Our group is a leader in
TV commercial production, and our subsidiary Quark tokyo has greatest strengths at high-level creativity andoptimized cost-effectiveness, which goes beyond media posting by advertising professionals andcollaborations with the goal of designing and achieving communication design.
The 1st content project is a collaboration with Lotte Co., Ltd. for Fit’s chewing gum. Further collaborations areplanned with a variety of companies, artists and brands.
* Millennials: The generation born from 1980 to 2000. As a generation forwhich digital technology is native, communication through social media
and other methods is also well-established among millennials. There is astrong sense of valuing experiences, shared feelings and praise of others
over material possessions, and a high level of affinity for the sharing
economy in which places and possessions are shared among people.
This generation is attracting considerable attention for the influence they
will have on society and consumption.

27

Initiatives in the Solutions Business (3) SOOTH Inc. Founded in February 1, 2018
 This company is aiming for further development of the VR business and experience design consulting,etc. started by
the AOI Pro. Experience Design Department.

Planning and production ofcontent that incorporates
new technologies

Accumulating knowledge
including new dataand emotion data

Developing an integrated marketing business(providing comprehensive solutions for marketingstages from brand strategy development to effectmeasurement and analysis)

Creating a high valueadded businessthrough applicationsof data

New company overview
Name:
SOOTH Inc.
Address:
1-4-5 Roppongi, Minato-ku, Tokyo
Representatives: President Yasutoshi Nukada
President Yusuke Imaoka
Business content: Experience design consulting / planning and productionof content which includes data collection andapplications / provision of data platform services /development of services and solutions

28

Initiatives for Overseas Business Sales are expected to increase in 2018, through promotion and project expansion of mergers and acquisitions(M&A) in Southeast Asia,.

8,000

Overseas Business sales

7,200(million yen)

6,000
4,000

3,963

4,403

2,000
0

FY 20162016年12月期

FY 20172017年12月期

FY 20182018年12月期（計画）(plans)* The sales figures above include affiliated companies accounted for by the equity method.

29

Case study
Adding "VIEWFINDER MEDIA," Vietnam's largest video production company, to the group
In October 2017, AOI TYO Group acquired 36% of the stock of "VF INVESTMENT JOINT STOCK COMPANY (VFINVESTMENT)," the holding company of "VIEWFINDER MEDIA JOINT STOCK COMPANY (VF MEDIA)," andadded both companies to the group.
The advertising market in Vietnam has expanded by more than 10% per year on average since 2005, and whencalculating by media type, TV advertising accounts for more than 85% of the budget.
* According to data from Statista and Kantar Media.

VF MEDIA is the video production company with the highest sales in the industry in Vietnam and has a strong levelof trust among both clients and advertising companies within the country due to the scope of its
business and experience. With a close cooperation with the company through stock acquisition,
we aim to further expand our business projects in the Southeast Asia marketplace.
Overview of VF MEDIA
Name:
VIEWFINDER MEDIA JOINT STOCK COMPANY
Address:
Ho Chi Minh City, Vietnam
Representative:
Truong Minh Tuan
Business content: Video production and advertising business focused on planning and productionof TV commercials
Capital:4 billion Vietnamese dong (about 20 million yen)Founded:August 23, 2008
Holding ratio:
VF INVESTMENT JOINT STOCK COMPANY 99.995%(the remaining 0.005% is held by two individual investors)
Total assets:
32 billion Vietnamese dong (approximately 156 million yen) (as of the end of December 2016)30

Case study
Investment in the SPIRAL VENTURES "ASIA FUND I"
In January 2018, AOI TYO Group invested 5 million US dollars in the SPIRAL VENTURES ASIA FUND I.
This investment is considered a part of the growth strategy for both the solutions and the overseas businesses. By building relationships
with Asian venture companies with high growth potential in the early stages, and by developing cooperative business with the companies
in which we invest, we aim to further expand our presence in overseas markets. In addition, through this process, we anticipate businessexpansion opportunities that will leverage our group's knowledge and experience in the fields of advertising and video production.
Since its founding in February 2013, Spiral Ventures Pte. Ltd. (Head offices: Singapore), investment manager, has set mainly early to
growth stage developing companies in Southeast Asia and India, areas with high economic growth rate goals, as its investment targets. In
addition to management advice, it provides services such as business matching opportunities with Japanese companies support forbusiness development and project launches in Japan, with the goal of increasing the value of the companies in which it invests.

SPIRAL VENTURES ASIA FUND I overview
Fund name:
Spiral Ventures Asia Fund I
Fund format:
Cayman Islands fund denominated in US dollars
General partner:
Spiral Ventures Asia Ltd.
Investment manager:
Spiral Ventures Pte. Ltd.
Members:
Operating companies and institutional investors, etc. inJapan and Singapore.
Investment outlet:
Mainly IT companies in the early to growth stage inSoutheast Asia and India

31

5. Stock Information

32

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

1,963,800

8.15%

2

Cosmo Channel

1,153,740

4.79%

3

Imagica Robot Holdings Inc.

1,018,000

4.22%

4

Fields Corporation

879,660

3.65%

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
131800663,000

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%

Individuals, etc.

16.7%
2.9%
23.1%

Shareholding
Ratio

Japan Trustee Services Bank, Ltd. (Trust Account)

1.9%

43.9%

Number of
Shares Held1

Shareholder Composition byType of Shareholder

11.5%

Shareholder Name

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

33

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*Shirokane Takanawa Station Bldg. 7F, 1-27-6 Shirokane, Minato-ku,
Tokyo 108-0072, Japan+81 3-5475-7121 (main)

Securities Code3975 First Section of the Tokyo Stock Exchange

URL

http://aoityo.com/* The head office will be relocated on March 28, 2018. New location: 1-5-1 Osaki, Shinagawa-ku, Tokyo 141-8580, Japan

34

Disclaimer
This document includes future forecasts that reflect the plans and outlook of AOI TYO
Holdings.
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:
Finance/IR Department (+81 3-3779-8415)
35