First Quarter, Fiscal Year Ending March 2016

Consolidated Financial Results
July 30, 2015

United, Inc.
(TSE Mothers, Code 2497)

Contents

1. Financial HighlightP4

2. Correction of Financial Results Forecast
for the Year Ending in March 2016

P8

1. Status of Smartphone Application
Business and Future Direction

P11

1. Status of Ad-Tech Business and Future
Direction

P18

2. Summary

P22

3. Reference Material

P24

All of the opinions, predictions, forecasts and the like presented in this document arethose made by UNITED, Inc. based on information available at the time of preparation of
the document, but no guarantee is made as to the accuracy of this information. Actual
results may differ greatly from these forecasts due to changes in various factors.
Company names and product names presented in this document are trademarks orregistered trademarks of their respective owners.
Copyright © UNITED, Inc. All Rights Reserved.

1

Our vision & mission

VisionBecome the leading internet firm in Japan

MissionCreate new value through continued
challenges and contribute to society

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2

Our Core BusinessWe are putting effort into the RTB advertising business andsmartphone media business expecting to see market growth in the
future, actively investing in these two to achieve business growth.

Media segment

Smartphone Application businessCore Businesses

Other media businesses(*1)

Advertisingsegment

Advertising agency business

Investment segment

Venture capital business

Ad-Tech business*1 Email advertising, internet research, sports marketing

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3

1. Financial Highlights

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4

1Q (April-June) Results Highlights

Whole

Quarterly
Consolidated
Results• Positon1Q to enhance investment and transform the businessstructure of the Smartphone App business.
• Operating profit exceeded “-100 million to 0 yen,” the 1Q
forecast at the start of quarter
Sales
1,992 million yen (-2%)
Operating profit
11 million yen (-91%)
Net profit
8 million yen (-90%)(Growth rate compared to the same quarter a year ago)Core Businesses

Smartphone
App Business

Ad TechBusiness• Sales: -24% compared to the same quarter last year
(business structure transformation was promoted)• Proactive investment in idol cheering application “CHEERZ” and “Native social
games” toward a jump growth in the 2nd term onward• Sales: +10％ sales compared to the same quarter last year
• DSP “Bypass” led the growth

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5

Quarterly Consolidated P/L Statement
Both revenue and profit dropped compared to the same quarter last year andthe pervious quarter
Media segment: Both revenue and profit dropped due to the structural transformation of the smartphone app business.
Advertising segment: Revenue and profit grew against the same quarter last year but dropped against the pervious
quarter due to a seasonal factor of retroaction to the ad demand period.
(million yen)
Year ending inMarch 2016

Against the same Against the same
Against theAgainst thequarter last year quarter last year previous quarter previous quarter

1Q(1Q in year ending Increase/decrease (4Q in year ending Increase/decreasein March 2015)
rate
in March 2015)
rate

1,992

2,024

-2%

2,230

-11%

674

877

-23%

855

-21%

Advertising segment

1,210

1,108

+9%

1,358

-11%

Investment segment

130

76

+70%

43

+203%

Inter-segment elimination

-23

-38

-

-26

-

Total profit from sales

520

559

-7%

596

-13%

Media segment

123

267

-54%

246

-50%

Advertising segment

269

218

+24%

305

-12%

Investment segment

127

74

+72%

44

+184%

Sales
Media segment

0

0

-

0

-

Selling, general andadministrative expenses

508

430

18%

444

+14%

Operating profit

11

128

-91%

151

-92%

Media segment

-100

93

-

51

-

Advertising segment

133

107

+24%

196

-32%

Investment segment

111

62

+80%

37

+198%

Headquarter expense

-132

-134

-

-133

-

22
8

134
81

-83%
-90%

156
-157

-86%
-

Inter-segment elimination

Current profit
Quarterly net profit

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6

Changes in Quarterly Sales and Operating Profits
Sales of core businesses (Smartphone App Business + Ad Tech Business) compared tothe same quarter last year: -4%
We aim for a further growth with the business structure transformation of Smartphone App Business.
Changes in Quarterly Sales and Profits
Sales of core businesses

Sales of other businesses

Business structuretransformation of
Smartphone App
Business (See P.13)

Operating profit

Sales(million yen)

2,000

1,615

732

Operating profit(million yen)

822

812

720

665
1,159

1,992

1,937

1,817
1,565

2,230

2,139

2,024

756

833

782

1,000

200

741

1,152
783

418

782
70

132

44

1,291

1,217

128

1,326

1,407

1,235

151
28

62

100

11

0

0

△ 109
△100

1Q

2Q

3Q

4Q

Year ending in March 2014

1Q

2Q

3Q

Year ending in March 2015

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4Q

1Q
Year ending inMarch 20167

2. Correction of Financial Results
Forecast for the Year Ending inMarch 2016

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8

Correction of Consolidated Financial Results Forecast for theYear Ending in March 2016

Correction of Consolidated Financial Results Forecast for the Fiscal Year

Initial forecast(May 11, 2015)

Corrected forecast(July 30, 2015)

Sales

10,000 mil. yen
to 12,000 mil. yen

11,500 mil. yen
to 13,500 mil. yen

Operatingprofit

800 mil. yen
to 1,000 mil. yen

1,500 mil. yen
to 2,000 mil. yen

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9

Concept of Correction of Financial Results Forecast for theYear Ending in March 2016
Since the profit generated in the investment business in 2Q of the year endingin March 2016 is expected to become greater than we initially presumed, we
will invest in the core businesses to accelerate growth focusing on corebusiness

Positive

・Record the operating profit of 1,085 million yen by sellout of
the shares of Fujisan Magazine Service Co., Ltd.

・Profit is expected to be generated from fund management byreason of being listed of the portfolio companies (*)

Make a priorinvestment(positive in themedium term)

Enhance investment in Smartphone App Business and
Ad Tech BusinessAccelerate growth focusing on core business* See “Announcement of profit recording (forecast) associated with generation of profits from fund management”
announced on July 24, 2015.
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10

3. Status of Smartphone Application
Business and Future Direction

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11

Smartphone App Business: Changes in Sales-24% compared to the same quarter last year
-12% compared to the previous quarter
Sales of affiliate media decreased due to changes in market environment(million yen)

600

300

531
452

157

156

4Q

1Q

380

363

2Q

3Q

407

453

455

3Q

4Q

401

0

FY March 2013

FY March 2014

4Q

1Q

2Q

FY March 2015

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1Q
FY March 201612

Future Strategy
Reform business structure by primarily focusing on the following 4 services.
Invest in “CHEERZ” and “Social games” aiming for sales growth in second half
FY March 2016 and thereafter.

Services investing

Services generating stable profits

CHEERZ

Social games

CocoPPa-related
services

Carrier market apps

Idol cheering app

Started from 1Q of
FY March 2016

Group of apps relatedto ”CocoPPa” which exceeded
40 million downloads

App provided to NTT
Docomo “SugotokuContents®” and others

Transition fromupfront investment toprofit-generation
phase

Continuous
contribution bystable profits

Proactive investment throughpromotion and reinforced humanresource

Sales growth in second half FY March 2016
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13

Idol Cheering App “CHEERZ”
Now: Focus on service enhancement but realizing moderate sales growth
Future: Increase in users (core fans) × Horizontal deployment with spin-off
versions → Rapid sales growth in second half of FY March 2016

Sales growth

Enhancement of services

Sales growth pace exceeds thepace of CHEERs growth pace
＝ Increase in paid CHEER
749.2
ratio
# of
CHEERs472.1
millionCHEERs+59%

millionCHEERsEnhanced function

Horizontal expansion

In-app idol-related news andIdol videos views in CHEERZ.
Web app released.

Expansion to non-female
idols such as young actor
version CHEERZ

Sales

+90%

coming
soon

1Q of
4Q of
2015年3月期… 2016年3月期…

FY March 2015

FY March 2016

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14

Idol Cheering App “CHEERZ” / Horizontal expansion
Signed a partnership agreement with “Shufuto Seikatsu Sha Co., Ltd.” , apublisher of a female magazine “JUNON” in June 2015.
Plan to launch Young actor version “CHEERZ”.
First round of horizontal expansion of CHEERZ（Plan to be launched September 2015）
JUNON Superboy Contest

Idol Cheering App“CHEERZ”

・Hosted by Shufuto Seikatsu Sha Co., Ltd.
・A beauty contest for men to find a young malestar. It started in 1988, and the 28th contest will
be held this year.
・Many popular actors including Teppei Koike,
Yusuke Yamamoto, Junpei Mizobata, and Shohei
Miura came out from this contest
Example of the actual collaboration (Under planning)
The most supported idol in "CHEERZ for MEN" will appear as a finalist contender as a special
entry in the "28th annual Junon Superboy Contest" to be held in November, 2015.

Evolve to an app that Cheers young male actors comprehensively
by access to additional contents and functionality addition
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15

Social Game #1: “Crush Fever”
Released in July 2015 as a joint project with Wonderplanet, Inc., our portfolio company.
* Additional investment was decided in July 2015 to further reinforce business partnership(See “Announcement of additional investment in Wonderplanet” released on July 30, 2015 for moredetails)・ Large expectation for the app; 115,000
pre-registered users and 15,000
followers for the official Twitter accountat the time of app release
・Service released on July 8, 2015, theserver went down due to the heavy
access influx. Services resumed on July
28 after server reinforcement

We will consider further investment
as needed.
■ Partnership structure

Development
Promotion and operation
Revenue

Partly incur development cost

Responsible for entire
app development

Both companies provide manpower and cost
Revenue sharing

Accumulate operation know-how of social games
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16

Social Game #2: “Monster Beat”
Scheduled release in 2Q of FY 2016 March by hippos lab Co., Ltd., whichbecame our subsidiary in May 2015 (*).
* 76.0% ownership by investment of 112 million yen.

・The 1st social game developed fully
within United group.
・A simple RPG you can play just bytapping the screen. Up to 4 people
can play in cooperation.
・Theme song “Monster Beat noyouni!”(Like Monster Beat!) sung by an idolgroup “OS☆U” participating in
CHEERZ, and cartoon manga is toplanned to be released

Accumulate know-how of social game development and operation
within United group

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17

4. Status of RTB Ad-Tech Businessand Future Direction

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18

Ad Tech Business: Changes in Sales+10% compared to the same quarter last year: DSP led the growth-12% compared to the pervious quarter: Seasonal factor of retroaction inadvertisement demand period of Jan. to Mar.
(million
yen)

1,000

750

500

700

759

809

873

952
834

250

342

262

403

419

2Q

3Q

0

4Q
FY March 2013

1Q

FY March 2014

4Q

1Q

2Q

3Q

FY March 2015

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4Q

1Q
FY March 201619

Actions of DSP “Bypass”for app reinforcement
In June, DSP ”Bypass” started to provide ”Bypass App Promotion,” newservices specializing in apps
Enhance the performance of app advertisement through accuracy
improvement of app targeting
New Function of “Bypass App Promotion”
1. Expand audience targeting (Look-Alike
Targeting)by utilizing advertising ID(IDFA/AdvertisingID(*1))
Target audience with a similar behavior history based on
advertising ID
Ads serve to expanded
audience

2.App audience targeting
1

Categorize based on app installation
data accumulated in Bypass→ Example: Game, Business, etc

Data accumulation/Categorizing

Users for expansion
Users who downloadedappCategorysetting

・Game
・Business
・Life Styleetc.

Look-Alike
audience2

Serve ads to the audience
with high affinity with theapp via Bypass

Categorized
audienceSendads*1. IDFA is an identifier in iOS to identify device. Similarly to IDFA, Advertising ID is an identifier in Android.
Appendix : Smartphone users spent 1 hour and 48 minutes per day on smartphones on average, 72% of which isspent on apps (Source: October 2014 survey by Nielsen)
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20

Expansion of SSP Business into Southeast Asia
Plan to establish a subsidiary in Malaysia in August 2015 and enhance adinventory in Southeast Asia

Enhancement of ad inventory in Southeast Asia in “AdStir”

DSP
ADNW

Increased
inventory
supplyvolumeExisting inventory inSoutheast Asia

SSP

Promote theintroduction of
AdStir to local media

New inventory inSoutheast Asia

Expand the scale through acquiring new inventory by looking ahead
to a high growth of smartphone ad market in Southeast Asia
Appendix: Smartphone ad market scale in Southeast Asia: 28 billion yen in 2015 → 123.1 billion yen in 2018 (*)
Expected to grow approx. 4.4 times in the next 3 years(July 2015 survey by CyberZ/Seed Planning, Inc.9
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21

５. Summary

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22

Overall Summary

1Q in Year Ending in March 2016

Consolidated

Operating profit exceeded the initial
1Q forecast of “-100 million yen to 0yen”
Sales: 1,992 mil. yen (-2%)
Operating profit: 11 mil. yen (-91%)

2Q in Year Ending in March 2016
Upward revision of consolidated
financial results forecast
Sales: 11,500 to 13,500 mil. yen(Initial forecast: 10,000 to 12,000 mil.
yen)
Operating profit: 1,500 to 2,000
mil. yen(Initial forecast: 800 to 1,000 mil. yen)

Smartphone
App Business・Promoted business structuretransformation
・Proactively invested in“CHEERZ” and “Native social
games” toward a jump growth in
the 2nd term onward

・Proactively invest in “CHEERZ”
and “Native social game”
through promotion andmanpower increase

Ad TechBusiness・Achieved growth in thesmartphone segment led by ourown DSP/SSP・ Start of provision of newservices for app reinforcement“Bypass App Promotion” in
DSP ”Bypass”

・ Reinforce apps in thesmartphone segment andachieve growth led by our own
DSP/SSP・ Expand SSP business into
Southeast Asia

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23

６. Reference Material

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24

Consolidated Balance Sheet for this Quarter
Current Assets: -501 million yen due to decrease in account receivable and other factors
Cash on hand : -290 million yen due to payment of corporation tax and dividend andother factors
Current liabilities: -291 million yen due to increase in account payable and other factors(million yen)

End of This
Quarter(June 2015)

End of Previous
Quarter(March 2015)

Increase/decrease

Current assets

8,701

9,203

-501

(Cash on hand)

5,588

5,878

-290

Fixed assets

725

595

＋130

Current liabilities

1,346

1,638

-291

Fixed liabilities

－

－

－

8,080

8,160

-79

Net assets

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25

Overview of「CHEERZ」
Our subsidiary, Fogg, inc. (*1) released in December 3.
Charging method
How to use “CHEERZ”

Charging will be required to “CHEER” more than the specified number.
Users can play for free, as there is free limited allocation of “CHEER” andrecovery by time.

Photos and movies ofidols appear on timeline.

Choose your favorite idol
(photo or movie) and“CHEER” her.

Idols will be ranked basedon the number of“CHEERS” received.

After the payment to theplatform, the balance ofthe revenue will beallocated to Fogg and idols(agencies).

Motivation for CHEER (1)“Developing idols”
Idols who ranked high will be exposed to affiliated media and Monthly
CHEERZ (*2) for recognition expansion

Users will be ranked
based on the number of“CHEERS” to each idol.

Motivation for CHEER (2) “Incentive”
Campaign such as photo presented by idols to fans who ranked high.

*1 A new business company established by our unique personnel system “U-start” (See p.27).
*2 A visual book with photos of idols who received high numbers of cheers per month. It is planned to be sold atbookstores, convenience stores located nationwide and Amazon.
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26

Our Unique Personnel System “U-Start “As an organizational effort to continue to develop new promising businesses, in April 2013
we have introduced a system to give our employee with outstanding performance a right toinvest in a new company to be started.

Start-up Support System “U-Start”

An employee who wasrecognized for outstanding
performance in business
operation andplanning/development of a
new businessOur
employee

PartialOver 50%
investment/
investment
becomescompany
representative Establishment of a
new company（Our consolidated
subsidiary)
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27

Organizational Strengths of Our Smartphone Media BusinessWe have generated profits from various types of services backed by our various “strengths andsystems” as an organization.
We will continuously develop and introduce our new services.
Features of human resources and organization
・”People with strength in net business, internallytransferred from other section,“ “mid-hires withspecialized skills,”and “new graduates with highpotential” work integrally.
・Corporate culture enabling cooperation beyond thelines of work categories.

Internal development skills
・High capability to plan and develop applications
internally and business development ability
・Internally-developed potent applications (with stronguser base) suppresses the cost for attracting users

We can start various projects with rightpeople at right locations in harmony withmarket changes

Planning & development, businessestablishment, and promotion can be
efficiently made within our company

Empirical value

Internal system

・Entered the application market in June 2010 during its
dawn. Released over 100 applications to date.

・Our own unique personnel system “U-start” (See p.27)
Offer a unique business start-up support system forour employees with high entrepreneurship andexcellent results.
Fogg, inc., an operator of “CHEERZ,” is the firstcompany this system applied.

・Have developed from scratch a large-scale service“CocoPPa,” which achieved 40 million downloads.

We have general knowhow obtained
through our abundant experience

We turn entrepreneurship of our excellent
employees into business power of thegroup

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28

Organizational Strengths of Ad-Tech BusinessContinues to grow in the future based on the background of the strengths of organization supportingthe current high growth

Owns its own DSP, SSP,
ad agency

・ Able to speedily perform new actions within the company such as
RTB distribution of native ads, from testing to implementation
・ Able to provide feedback such as functional improvement from adifferent viewpoint

Highly-experienced
development members

・ Team mainly consists of members who have long engaged
in business since the time of ad network and are very
familiar with ad tech and our own system

Sales and operation
members from various
backgrounds

・ Collaboration among members with various net
advertisement backgrounds, such as ad agents, media
reps, and sales persons from media company sales

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29

Flow of RTB Advertisement
Flow of RTB Advertisement Transaction until Closing [(1) to (4) below take place within 0.05 second)(1) Impression occurs(2) Through SSP, device (browser) information such as frame size and user ID is sent to DSP as a bid request.
(3) Based on information of the bid request, an auction takes place at a preset price within DSP, selecting theadvertiser with the highest bidding price.
(4) The advertiser with the highest bidding price among DSPs wins the bidding and their ad is displayed.
Bidding price¥70

Advertiser

Media/User

(3)

¥80

SSP

DSP

¥60
¥50

(4)

(3)

¥70

(1)

(2)

¥80
¥60

SSP

DSP

¥90

(3)

SSP

DSP

¥60
Advantages for advertisers
Able to efficiently place ads for each impression
only to users they wish to display ads

Advantages for media
Able to offer ad space for bidding to multiple
advertisers and maximize profits

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30