Financial Results Presentation
for the 2nd Quarter of the
Fiscal Year ending May 31, 2017
Gunosy Inc.
Jan 13, 2017

Disclaimer

Forward-looking statements contained in these materials are preparedfrom judgments and assumptions based on information available at thetime of preparing the materials, and do not guarantee their accuracy.
Please note that actual results may differ materially from the forecasts
due to various uncertainties included in these judgments and assumptions
and changes in risk factors and the economic environment.

©Gunosy Inc.

2

Table of Contents

1. Quarterly Results

2. First Half Results
3. Results Forecast
4. Overview of Business and Strategies
5. Supplementary Materials©Gunosy Inc.

3

1. Summary of Quarterly Results
Both sales and profits increased from the previous quarter for the fifth consecutive
quarter, with rises in sales to 1,950 million yen and operating income to 370 million
yen.

Continued to mark a record high and grew steadily.
Sales

Operatingexpenses

 Sales in Gunosy Ads: 1,283 million yen QoQ: Up 9%
 Sales in Ad Network: 610 million yen QoQ: Up 31%(Sales in ADNW)

Advertising expenses continued to exceed the plan, mainly
due to strong sales.
 Advertising expenses: 494 million yen QoQ: Up 23%

All major KPIs exceeded the plans.
 (Strong) Profitability per download (DL) remained as planned.

Major KPIs

 (Strong) Both the cumulative total number of DLs and the numberof active users grew steadily.
 (Strong) Cost per acquisition (CPA) per DL achieved the planby a large margin.

©Gunosy Inc.

4

1. Quarterly Results: Chronological Trends
 Both sales and operating income reached record highs, with sales at
1,950 million yen (up 17% QoQ) and operating income at 370 million yen (up 53％ QoQ).
(Million yen)
2,200

= Sales

2,000

1,959

= Operating income
1,800

1,680

= Operating income (excluding advertising expenses)
1,521

1,600
1,400
1,191
1,200
1,006

995

1,000

892

880

870

790
800

706
626

600
400
200

637

544

486

491

716

591

523

376

349
271
201

181

285
129

184

201

3Q

4Q

245

47
0
- 124

-200
-1,2004Q
FY2014/5©Gunosy Inc.

- 172

- 997
1Q

2Q

3Q

FY2015/5

4Q

1Q

2Q

FY2016/5

1Q

2Q
FY2017/5
5

1. Quarterly Results: Breakdown of Sales
 Sales in Gunosy Ads increased 9% quarter on quarter due to a steady increase in the numberof active users and the commencement of the monetization of News Pass.

 Sales in ADNW continued to record a high growth rate, up 31% quarter on quarter, reflecting
initiatives with external media partners.
(Million yen)
2,000

65

= Gunosy Ads*

1,800

39

= ADNW

1,600

52= Others

1,400

466

388

1,200

251

1,000
800

72

28

113

153
103

600

31

400
200

610

762

820

881

2Q

3Q

4Q

776

853

1Q

2Q

939

1,080

1,175

1,283

455
271

0
4Q
FY2014/5

1Q

FY2015/5

3Q

FY2016/5

4Q

1Q

2Q
FY2017/5* Sales in Gunosy Ads include sales in Gunosy and in News Pass.
©Gunosy Inc.

6

1. Quarterly Results: Consolidated Statement of Income Operating income rose significantly (up 191% year on year and 53% quarter on quarter)
due to an increase in marginal income as a result of the increase in sales.

 The operating margin stood at 19%, up 6 percentage points year on year and up 5
percentage points quarter on quarter.
(Unit: Million yen)
FY2016/5

Sales(Gunosy Ads)*

(ADNW)(Others)
Operating expenses
Operating income(Operating margin)

Non-operating income (expenses)
Ordinary income
Extraordinary income (losses)/ Income taxes
Net income
Cumulative total number of DLs at the period
end (10,000)***©Gunosy Inc.

FY2017/5

2Q**

1Q

2Q

YoY

QoQ

1,006
(853)
(153)
(–)
877
129
13%
0
130
-20
109
1,191

1,680
(1,175)
(466)
(39)
1,435
245
15%
-0
244
6
251
1,618

1,959
(1,283)
(610)
(65)
1,582
376
19%
-0
376
-82
293
1,841

+95%
(+50%)(+299%)
(–)
+80%
+191%
–
–
+189%
–
+167%
+55%

+17%
(+9%)
(+31%)(+67%)
+10%
+53%
–
–
+54%
–
+17%
+14%

Sales in Gunosy Ads include sales in Gunosy and in News Pass.
The figures for 2QFY2016/5 are non-consolidated financial values.
71. Quarterly Results: Cost Structure Advertising expenses increased by 90 million yen, taking into account the recent status ofsales, etc. and the cost-benefit performance.
 Rents were reduced due to the termination of the contract for the former office.
(Unit: Million yen)

FY2016/5

FY2017/5

2Q*

1Q

2Q

YoY

QoQ

Operating expenses

877

1,435

1,582

+80%

+10%

ADNW costs

90

308

411

+358%

+33%

Server expenses

53

44

43

-17%

-2%

Personnel expenses

176

251

262

+49%

+4%

Rents

22

80

56

+149%

-30%

Advertising expenses

394

471

494

+25%

+5%

Others

140

278

314

+123%

+13%

Number of employees atthe period end (persons)

79

102

107

+35%

+5%

* The figures for 2QFY2016/5 are non-consolidated financial values.
©Gunosy Inc.

8

1. Quarterly Results: Trends in the Number of Downloads(Cumulative total number in Japan; including News Pass downloads)

 The pace of increase in DLs accelerated with the release of News Pass. The number of
DLs increased 2.22 million quarter on quarter. CPA improved significantly.
(10,000 DLs)

(Yen)

2,000

Gunosy1,800

CPA* (right-hand scale)
1,618

Increase of

1,600

1.32 million DLs

1,400

600

500

1,436
1,302

Increase of

400

1,191

0.9 million DLs

1,200

1,084
977

1,000

300

866
746

800

200

600

515
352

400
200

列2

News Pass (left-hand scale)

1,841

100

91

144

185

0
1Q

2Q

3Q

FY2014/5

4Q

1Q

2Q

3Q

FY2015/5

4Q

1Q

2Q

3Q

4Q

FY2016/5

1Q

2Q

0

FY2017/5* CPA = Advertising expenses during quarter / Increase in number of DLs during quarter (including News Pass DLs)
©Gunosy Inc.

9

1. Quarterly Results: Attributes of Users (users of Gunosy)
 The percentage of women rose slightly. The distribution of users in their 20s, 30s, 40s, and
50s is well-balanced.

Women
Breakdown of women
50s or
older

10s

7% 4%

30%

26%

44.5% 55.5%

Breakdown of men
10s

50s or
older

10%
20s

40s

Men

7%
20s

40s

24

29%

%

30s

30s

33%

30%

Source: Estimates of Gunosy Inc.
©Gunosy Inc.

10

1. Quarterly Results: Status of Advertisers The number of active advertisers continued to increase as a result of the development of newagencies. The share of “Health” increased with the addition of advertisers associated with the
new agencies.
Share of advertisers displaying advertisements(in value terms)

Number of active advertisers (quarterly)(Companies)

Q2 of FY2017/5

1,388

1,400
1,211

1,200
1,098
1,000
843

Others
25.6%

782

800
688

724

Real estate
1.6%

636

600

400

34.3%

509
387

200

0
1Q

2Q

3Q

FY2015/5©Gunosy Inc.

Beauty care

4Q

1Q

2Q

3Q

FY2016/5

4Q

1Q

2Q

FY2017/5

Human
resources
1.7%
Finance
Games
8.2%
3.3%
Apps
(excluding games)
4.3%

Health21.2%

11

1. Quarterly Results: Active Affiliated Media in ADNW Affiliated media were added steadily, making a significant contribution to the growth of sales.

Structure of ADNW

Number of active affiliated media(Number of media)

Users
Advertiser
A

Displaying
ads

603
600

DeliveryMedia A

536
495

500

445

Advertiser
B

Media B

386

400
Advertiser
C

Advertiser
D

636

GunosyAd Network
Server334
Media CMedia D

300

261

200
101

Advertiser
E

100
Media E

35
0
1Q

2Q

3Q

FY2015/5©Gunosy Inc.

4Q

1Q

2Q

3Q

FY2016/5

4Q

1Q

2Q

FY2017/5
12

Table of Contents

1. Quarterly Results

2. First Half Results
3. Results Forecast
4. Overview of Business and Strategies
5. Supplementary Materials©Gunosy Inc.

13

2. First Half Results: Consolidated Statement of Income Operating income rose significantly (up 251% year on year and up 61% from the previous half)
given an increase in marginal income as a result of the increase in sales.

 The operating margin stood at 17%, up 8 percentage points year on year and up 3
percentage points from the second half of FY2016/5.
(Unit: Million yen)

FY2016/5

Sales(Gunosy Ads)*

(ADNW)(Others)
Operating expenses
Operating income(Operating margin)
Non-operating income (expenses)
Ordinary income
Extraordinary income (losses)/ Income taxes

Net income
Cumulative total number of DLs at the period
end (10,000)***©Gunosy Inc.

FY2017/5

First half**

Second halfFirst half

YoY

Change fromprevious half

1,887
(1,630)
(256)
(–)
1,710
177
9%
1
179
-23
155
1,191

2,712
(2,020)
(639)
(52)
2,326
385
14%
2
387
62
450
1,436

3,639
(2,458)(1,076)
(104)
3,018
621
17%
-0
620
-76
544
1,841

+93%
(+51%)(+319%)
(–)
+76%
+251%
–
–
+246%
–
+250%
+55%

+34%
(+22%)(+68%)(+102%)
+30%
+61%
–
–
+60%
–
+21%
+28%

Sales in Gunosy Ads include sales in Gunosy and in News Pass.
The figures for the first half of FY2016/5 are non-consolidated financial values.

14

2. First Half Results:
Comparison of Forecasts and Results in First Half In the first half, both sales and income far exceeded the initial forecasts.
Consolidated results
Initial forecasts for first half (published on July 14, 2016)

Forecast

Result+664 million yen

Sales2,974 million yen

Operating income

319 million yen+302 million yen

Ordinary income

319 million yen+301 million yen

Net income

276 million yen+268 million yen

Achievement rate 0%

50%

100%

150%

200%

Non-consolidated results
Initial forecasts for first half (published on July 14, 2016)

Forecast

ResultSales

2,876 million yen+658 million yen

Ordinary income

383 million yen+281 million yen

Net income

339 million yen+251 million yen

Achievement rate 0%

50%©Gunosy Inc.

100%

150%

200%
15

2. First Half Results: Comparative Analysis
 Operating income increased 230 million yen from the second half of the previous fiscal year,
attributable to a significant increase in sales, which was partially offset by increases inadvertising, personnel, and other expenses.
 Operating income increased 300 million yen compared to the initial forecast, attributable to anincrease in sales exceeding our forecast, which was partially offset by an increase inadvertising expenses of 160 million yen.
Key factors of changes from second half ofprevious year
(Million yen)

(Million yen)

+131

+437

-54

Increased
ADNW(net)* Increased
advertisingexpenses+51-78

Amortization of
goodwill

-162

+122

-34
Increased
personnel
expenses

Increased
GunosyAds

Key factors of changes compared to initial forecasts

Increased
ADNW(net)*-166

Decreased Increased
personnel advertisingexpenses expenses

+28

+302

+262

OthersOthers+235

Increased
operatingincomeIncreased
GunosyAds

Increased
operatingincome* Net amount after deducting ADNW’s costs of goods sold from ADNW sales©Gunosy Inc.

16

2. First Half Results: Consolidated Balance Sheet With the acquisition of a company to strengthen our Web service, intangible assets (goodwill)
increased.
(Unit: Million yen)Account item

End of first half
under review

ChangeInvestments and other assets

6,251
5,369
1,335
18
267
1,050

6,519
5,546
1,943
110
634
1,198

+268
+176
+607
+91
+367
+148

Total assets

7,587

8,463

+875

Total net assets

828
13
841
6,745

1,082
18
1,100
7,362

+254
+4
+258
+616

Total assets and liabilities

7,587

8,463

+875

Current assets
Cash and deposits
Non-current assets
Property, plant and equipment

Intangible assets

Current liabilities
Non-current liabilities
Total liabilities©Gunosy Inc.

End of previous
fiscal year

Major breakdown at end of firsthalf under review

Goodwill: 630
Investment securities: 909

17

Table of Contents

1. Quarterly Results

2. First Half Results
3. Results Forecast
4. Overview of Business and Strategies
5. Supplementary Materials©Gunosy Inc.

18

3. Results Forecast: Full-Year Results Forecast The initial full-year sales and income forecasts are revised significantly upward.
Consolidated results
Initial full-year forecasts (published on July 14, 2016)

Initial forecast

Revisedfull-year forecast
for FY2017/5

Revised forecast+1,236 million yen

7,742 million yen

Sales6,506 million yen

Operating income

864 million yen+557 million yen 1,422 million yen

Ordinary income

865 million yen+556 million yen 1,421 million yen

Net income

751 million yen

Achievement rate 0%50%+351 million yen
100%

150%

Non-consolidated results
Initial full-year forecasts (published on July 14, 2016)

Sales

6,244 million yen

Ordinary income

1,022 million yen

Net income

907 million yen

Achievement rate 0%

50%©Gunosy Inc.

Initial forecast

200%

Revisedfull-year forecast
for FY2017/5

Revised forecast+1,247 million yen+505 million yen+308 million yen
100%

1,103 million yen

150%

7,492 million yen
1,528 million yen
1,216 million yen
200%
19

3. Results Forecast: Description of Revision The number of DLs in the full year is expected to be 23.11 million, given an increase in thefirst half.
 Sales of Gunosy Ads and ADNW are expected to be strong, and operating income is forecast
to exceed the initial forecast by 557 million yen.
Expected number of DLs
in the full year

Breakdown of revision to initial operating income forecast(Million yen)

+102
Revised forecast+242

23.11 million DLs

Increased
GunosyAds

Initial forecast

Increased
ADNW(net)*+39
Withdrawal
fromcomicsbusiness-25+17

Addition to Increase in
R&D
earnings at
expenses subsidiaries

-121
Other

+557

Revisedoperatingincome+302

21.94 million DLs
Actualresult in
first half

* Net amount after deducting ADNW’s costs of goods soldfrom ADNW’s sales©Gunosy Inc.

First half

Second half20

Table of Contents

1. Quarterly Results

2. First Half Results
3. Results Forecast
4. Overview of Business and Strategies
5. Supplementary Materials©Gunosy Inc.

21

4. Overview of Business and Strategies: Overview
Up to nowKey
policies

Existing
businesses

From now on

 Increasing user numbers
 Establishing advertising business

Increasinguser numbers

 Accelerating the speed of increase in user numbers, using News Pass

Establishing andstrengthening
advertisingbusiness Cooperating with external partners in growth fields, including video advertising and in-feed advertising Using age estimation logic for advertising delivery and improving advertising effectiveness

Developing
algorithms

 Developing algorithms for the improvement in the quality of content to be distributed and finetuning personalization

Growth of Kurio
Overseasand newbusinesses©Gunosy Inc.

 Continuing to increase user numbers
 Strengthening advertising business Developing algorithms using accumulated data and applying them in other fields

 Continuing to support Kurio’s business management to make the No. 1 news application inIndonesia

Research anddevelopment of
new products Developing new products using data and algorithms

22

4. Overview of Business and Strategies:
News Pass Released News Pass DLs increased steadily. The number of DLs exceeded 1.46 million in six months
after it was released.
 TV commercials and tie-ups are planned from Q3 to accelerate the expansion of users.
Achievement up to now

DLs exceeded 1.46 million
in six months after it was released.

Initiatives from now on

Commencement of TV commercials
 TV commercials on probation in regional areas fromJanuary TV commercials nationwide from February (plan)Tie-ups with a major convenience store
chain and au⁃ Tie-ups with a major convenience store chain and auplanned when TV commercials start to be broadcast
nationwide in February (plan)©Gunosy Inc.

23

4. Overview of Business and Strategies:
Alliances with External Partners
 The alliances with external ads tech partners, CyberAgent, Inc. and Supership Inc., formed in
the previous fiscal year made steady progress.
 The alliances are making significant contributions to sales in Gunosy Ads and ADNW, in
growth fields such as video advertising and in-feed advertising.

Gunosy Ads

Advertiser

Advertisinginventories

ADNW

Advertiser

Advertisinginventories©Gunosy Inc.

Video
advertising

In-feedadvertising

SSP

24

4. Overview of Business and Strategies:
Use of Age Estimation Logic for Advertising Delivery
 Introduce user age estimation logic using deep learning; improve the accuracy of age
estimation significantly.
 Use age estimation logic for advertising delivery to improve advertising effectiveness andincrease revenue
Improving delivery logic

User data

Analysis

Behavior, browsing
history

Data analysis
Analysis by a team

Applying the logic to advertisement goods

Use for logic

Use for delivery logic

Gunosy Ads

Applying Latent Semantic Indexing andConvolutional Neural Network©Gunosy Inc.

20s

10s

40s

20s

30s

30s

30s

20s

40s

20s

30s

10s

40s

30s

AdvertisingdeliveryTargetingcustomers intheir 20s

Using artificial intelligence techniques

30s

AD

Gunosy Ads targeting function

OS, location, sex, interest + age

NEW

25

4. Overview of Business and Strategies:
Direction of the Development of Algorithms
 Work to strengthen algorithms in response to social changes and challenges for the
improvement of the quality of content to be distributed and fine-tuned personalization.

Social changes and challenges

 Increase in information provided insociety Increase in false articles and articles todraw in customers

Direction of development

Improvement of the quality ofcontent to be distributed
 Algorithm for dealing with false articles andarticles to draw in customers
 System for automatically gathering users’
opinions Algorithm for recommending videos, etc.

 Decline in exposure opportunities ofniche media

Fine-tuned personalization

 Diversification of information senders

 Increasing disaster information andregional information

 Diversification of means of expression

 Fine-tuned algorithm for content
distribution, etc.

©Gunosy Inc.

26

4. Overview of Business and Strategies:
Management Support to Kurio and Its Effects
 Product improvement has been making progress steadily. Major KPIs are favorable.
Marketing support has been strengthened. The cumulative total number of DLs has reached1.11 million.
 Promotions, including TV commercials, have started on probation. The Company aims to
make a No. 1 news application in Indonesia.

SupportEffectCost per(customer)
acquisition (CPA)

Use the Company’s
expertise

CPA has been
reduced to one-thirdor less.

User retention
rate

Reflect the Company’salgorithm

Has improved 10
percentage points.

Number of active
users

－

The number has
risen threefold.

－

Exceeded 1.11
million DLs

Cumulative total
number of DLs©Gunosy Inc.

(as of November 30)
27

4. Overview of Business and Strategies:
Research and Development
 Start research and development of new products in areas where there is asymmetry of
information and algorithms and data developed in Gunosy can be used, and in areas where
growth is expected.
 Create new major sources of revenue.
Research and development policy

Organization

 A New Business Development Office will beestablished. The office will be under the
direct control of the CEO and will be
independent of the business unit.

ExamplesMeta Commerce
An application that enables users to search easily
multiple smartphone shopping applications for thelowest priceBazzary

Subjects ofresearch Fields where artificial intelligence
techniques, which give the Company acompetitive edge, can be used
e.g. commerce, real estate Fields where high growth is expectedVideo
A curation application that delivers videos that users
are interested inVidereye.g. video, VR.

©Gunosy Inc.

28

4. Overview of Business and Strategies:
Medium- to Long-Term Image
 Aim to achieve high rates of growth in News Pass in addition to the existing businesses (Gunosy, ADNWand Game8).

 Allocate resources (human resources and funds) proactively to new businesses, including overseas
expansion, in order to build new pillars of revenues.

(Profits)
Overseas expansion andnew businesses
Growth inNews Pass and Game8
Continuing growth in the existing
businesses: Gunosy, ADNW andothers

FY2017/5©Gunosy Inc.

FY2018/5 and onward
29

Table of Contents

1. Quarterly Results

2. First Half Results
3. Results Forecast
4. Overview of Business and Strategies
5. Supplementary Materials©Gunosy Inc.

30

Company Profile
Company name:Gunosy Inc.

Business:

Development and operation of information circulation service and other media

Corporate philosophy: “Optimally deliver information to people around the world”
Established:

November 14, 2012

Head office:Roppongi Hills Mori Tower, 6-10-1 Roppongi, Minato-ku, Tokyo

Officers:

Representative Director and CEO, Yoshinori Fukushima
Representative Director and COO, Yuya Taketani
Director and CFO, Mitsushige Ito
Director, Tetsuya Nagashima
Director (Outside), Takashi Matsumoto
Director (Outside), Katsuya Yanagihara
Director (Outside), Toshifumi Tsukada
Corporate Auditor, Masakazu Ishibashi
Corporate Auditor (Outside), Tsutomu Arai
Corporate Auditor (Outside), Kenji Shimizu
Corporate Auditor (Outside), Noboru Kashiwagi

Capital:3,894 million yen (as of the end of November 2016)

Number of employees: 107 (as of the end of November 2016, on a consolidated basis)©Gunosy Inc.

Fiscal year:

May

Listing:Mothers of the Tokyo Stock Exchange April 28, 2015

Accounting auditor:

Ernst & Young ShinNihon LLC
31

Directors

Representative Director and CEO

Representative Director and COO

Director and CFO

Director

Yoshinori Fukushima

Yuya Taketani

Mitsushige Ito

Tetsuya Nagashima

Graduated from the Graduate School ofEngineering of Tokyo University. While inschool, developed the service of Gunosy.
Founded the Company in November 2012and become Representative Director. In
November 2013, became Representative
Director and CEO. In FY2012, was certified
as an IPA MITOH Super Creator.

Graduated from the Department ofIndustrial and Management Systems
Engineering of the School of Creative
Science and Engineering of Waseda
University. Joined GREE, Inc. and then
Gunosy Inc. In August 2013, became a
director of the Company. In August 2016,
became Representative Director and COO.

Graduated from the Graduate School of
Economics of Waseda University. Served as
the General Manager of Business
Administration Division of Dream Incubator
Inc. Joined the Management Planning Teamof Fast Retailing Co., Ltd. Served as theManager of the Accounting and Tax Affairs
Department of GREE, Inc. Joined Gunosy
Inc., and in April 2014, became Director and
CFO.

Graduated from the Faculty of Science andTechnology of Keio University. Served as
an Executive Officer at AUN Consulting,
Inc. Joined GREE, Inc. and then Gunosy
Inc. In August 2016, became a Director at
the Company.

©Gunosy Inc.

Director (Outside)

Director (Outside)

Director (Outside)

Takashi Matsumoto

Katsuya Yanagihara

Toshifumi Tsukada

Joined the Ministry of Finance in 1976. Served as
Deputy Director of the Budget Bureau of the Ministry of
Finance, Director General at the Cabinet Office, andAdministrative Vice Minister of the Cabinet Office. At
present, a Senior Advisor to Dai-ichi Life ResearchInstitute Inc., an Outside Director at Innotech
Corporation, and an Outside Director at Mitsubishi
Materials Corporation. Became an Outside Director at
Gunosy Inc. in August 2015.

Became a public prosecutor in 1995. Registered as
an attorney in 2006. Joined Daiichi Law Office,
P.C. in 2007 and has been a partner at the office.
In August 2015, became an Outside Director at
Gunosy Inc.

Joined DDI Corporation (present KDDI Corporation).
Served as President of Mediba, Inc. and President of
WebMoney Corp. At present, General Manager of
New Business Promotion division of Value Business
unit of KDDI Corporation. In August 2016, became an
Outside Director at Gunosy.

32

Business Model： ①Gunosy Ads

Revenue•

Targeting advertisement delivery by•interest cluster•

Charging method•

Click-guaranteed (CPC = Cost per Click)•

Impression-guaranteed (CPM = Cost per Mille)

Features

Ad on list page

©Gunosy Inc.

•

In-feed advertisements (ads inserted into•

articles) enhance visibility•

Highly frequent contact•

Ads delivered according to interests

Ad in an article

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Business Model： ②Ad Network

Users
Advertiser
A

Displayingads

Advertiser
B

Advertiser
C

DeliveryMedia AMedia B

GunosyAd Network
ServerMedia C

Advertiser
D

Media D

Advertiser
E

Media EIn addition to delivering advertisements inside Gunosy (① Gunosy Ads),
we release Gunosy Ad Network service, which delivers ads to external
partner media.
Currently, more than 600 media outlets have introduced this service.

©Gunosy Inc.

34