Financial Results Presentation
for the Fiscal Year ending May 31, 2017
Gunosy Inc.
July 14, 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. Full Year Results
3. Overview of Business and Strategies
4. Results Forecast
5. Supplementary Materials© Gunosy Inc.

3

1. Summary of Quarterly Resultsn Net sales increased from the previous quarter for the seventh consecutive quarter, to2,110 million yen. Operating income was 430 million yen, reflecting significant advertisingexpenses. Operating income excluding advertising expenses was 890 million yen, arecord high.
Net sales rose for the seventh consecutive quarter to a new record
high.

Net sales

Operatingexpensesn Net sales in Gunosy Ads:

1,411 million yen

QoQ: Up 8%

n Net sales in Ads Network:(Net sales in ADNW)

625 million yen

QoQ: Up 3%

An additional 40 million yen was allocated to advertising expenses
in consideration of sales, among other factors.
n Advertising expenses:

460 million yen QoQ: Up 18%

Major KPIs were roughly on a par with the plans.
n Profitability per download (DL) remained as planned.

Major KPIsn The number of active users was on a par with the plan thanks tothe contribution of News Pass.
n Cost per acquisition (CPA) per DL for Gunosy, which rose
temporarily, improved.

© Gunosy Inc.

4

1. Quarterly Results: Chronological Trends
n Net sales stood at 2,110 million yen (up 7% QoQ), another record high.
n Operating income was 430 million yen (down 7% QoQ), reflecting an addition to advertisingexpenses. Operating income excluding advertising expenses came to 890 million yen, arecord high.

(Million yen)

2,117

2,200

= Net sales

2,000

1,982

1,959

= Operating income

1,800

1,680

= Operating income (excluding advertising expenses)
1,521

1,600
1,400
1,191

1,200
892

600

200

880

790

800

400

1,006

995

1,000

544

486
271

626

706

637
491

349
201

181

870

855

891

716

591

523

464

431

3Q

4Q

376

285
47

129

184

201

3Q

4Q

245

0
-200
-1,200© Gunosy Inc.

-997
4Q
FY2014/5

-124

-172

1Q

2Q

3Q

FY2015/5

4Q

1Q

2Q

FY2016/5

1Q

2Q

FY2017/5

5

1. Quarterly Results: Breakdown of Salesn Net sales in Gunosy Ads rose 8% quarter on quarter, reflecting a steady increase in thenumber of active users.
n Net sales in ADNW increased 3% quarter on quarter, recovering from the previous quarter,
when sales declined temporarily due to the adoption of stricter advertising standards.
(Million yen)
2,200
2,000

= Gunosy Ads*

1,800

= ADNW

81
65
39= Others

1,600

52
1,400

610

466

251

1,000
28

800

72

113

153
103
1,080

600
31
400

0

625
606

388

1,200

200

74

762

820

881

776

853

939

3Q

4Q

1Q

2Q

3Q

1,175

1,283

1Q

2Q

1,300

1,411

3Q

4Q

455
271
4Q
FY2014/5

1Q

2Q

FY2015/5

FY2016/5

4Q

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

6

1. Quarterly Results: Cost Structuren Advertising expenses exceeded the plan by 40 million yen in consideration of therecent status of net sales and cost-benefit performance, etc.
n Others increased due to a rise in revenue share expense paid to KDDI associated with
Gunosy Ads (News Pass).
(Unit: Million yen)

FY2016/5© Gunosy Inc.

FY2017/5

4Q

3Q

4Q

YoY

QoQ

Operating expenses

1,319

1,517

1,686

+28%

+11%

ADNW costs

253

413

439

+73%

+6%

Server expenses

37

47

48

+30%

+2%

Personnel expenses

236

274

293

+24%

+7%

Rents

44

55

55

+24%

-0%

Advertising expenses

504

390

460

-9%

+18%

Others

243

336

389

+60%

+16%

Number of employees atthe period end (persons)

98

109

121

+23%

+11%

7

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

n CPA for Gunosy, which rose temporarily, improved from the previous quarter. The number of DLs
increased 1.4 million quarter on quarter, reflecting an addition to advertising expenses. The total
number of DLs, including News Pass DLs, increased 2.25 million quarter on quarter.
(Yen)(10,000 DLs)

2,500
GunosyNews Pass (left-hand scale)

2,268

CPA* (right-hand scale)

Increase of
2,000

2,043

1.40 million DLs

500

1,841

Increase of

1,618

0.85 million DLs

1,500

400

1,436
1,302

1,000

866

977

1,084

1,191

300

200

746
515

500

352
91

0

600

1Q

144
2Q

100

185
3Q

FY2014/5

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

0

FY2015/5

FY2016/5
FY2017/5* CPA = Advertising expenses during quarter / Increase in number of DLs during quarter (including News Pass DLs)Advertising expenses during quarter do not include advertising expenses of 15 million yen for research and development for new products.

© Gunosy Inc.

8

1. Quarterly Results: Active Users(Cumulative total in Japan; including News Pass users)

n The number of active users* has grown steadily since the founding. The number rose
50% year on year and 9% quarter on quarter.
n The percentage of users of both Gunosy and News Pass** was less than 5%.
Number of active users*

Attributes of users
Breakdown of female users

Up 50% year on year
Up 9% quarter on quarter

50s or older

10s

15%
17%
30s

20%

23%

20s

28%

19%

10s

50s or older

21%

40s

Breakdown of male users

40s

20s

15%

24%

30s

18%

Breakdown of female users Breakdown of male users
10s

50s or older

9%

30s

50s or older

19%

44%

40s

31%

1%

20s

13%

36%

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

10s

1%

20s

30s

16%
40s

30%

FY2015/5
FY2016/5
FY2017/5* The average of Gunosy DAUs (daily active users) and News Pass DAUs in each quarter.
** The percentage of MAUs (monthly active users) of both Gunosy and News Pass to Gunosy MAUs
Source: Estimates of Gunosy Inc.
© Gunosy Inc.

9

1. Quarterly Results: Status of Advertisers
n The total number of active advertisers declined, but the number of major advertisers*, which
account for approximately 90% of sales, continued to rise.
n The share of Beauty care continued to decline, while the share of Apps (excluding games) rose.
Share of advertisers displaying
advertisements

Number of active advertisers(Companies)

1,600
Major advertisers*
Other advertisers

1,400

1,388

1,396

12%

1,098

1,000
782

800

88%

400

221

246

261

260

332

345

346

207

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

FY2016/5© Gunosy Inc.

Others19.7%

Health
27.5%

907

600

0

Real estate
2.4%

843

636

200

Q4 of FY2017/5

Sales
composition

1,253

1,211

1,200

Number ofactiveadvertisers

Human
resources
2.8%

Games
4.9%

Finance
7.8%

Beauty care
22.6%

Apps
(excluding games)
12.4%

FY2017/5* The advertiser whose advertising budget is 1 million yen or more10

1. Quarterly Results
2. Full Year Results
3. Overview of Business and Strategies
4. Results Forecast
5. Supplementary Materials© Gunosy Inc.

11

2. Full Year Results: Comparison with Results Forecast
n Net sales stood at 7.73 billion yen, 100% of the forecast. Operating income came to 1.51
billion yen, 7% more than the forecast. Net income was 1.12 billion yen, 2% more than theforecast.
Percentage of forecast(announced on
January 14, 2017)

Consolidated results

Net sales

7,739 million yen

100%

Operating income

1,517 million yen

107%

Ordinary income

1,516 million yen

107%

Net income

1,126 million yen

102%

Achievement rate 0%

25%

50%

75%

100%

Non-consolidated results
Net sales

7,478 million yen

100%

Ordinary income

1,619 million yen

106%

Net income

1,236 million yen

102%

Achievement rate 0%© Gunosy Inc.

25%

50%

75%

100%
12

2. Full Year Results: Year on Yearn An increase in marginal profit due to a rise in sales far exceeded an increase in fixed cost.
Operating income stood at 1.51 billion yen, an increase of 0.95 billion yen (170%) year on
year.
n The operating margin improved to 20%, up 7 percentage points from the previous fiscal year.
Operating income(Million yen)

Key factors of changes(Million yen)

1,517

1,500

1,500

-67

+400

Increased Increased
ADNW** advertisingexpenses
(net)

1,200

800

20%

Increase of
954 million yen

1,200
*

800

12%

562

© Gunosy Inc.

-103
-149
Increased
amortization Othersof goodwill+954

Increased
operatingincome

400

400

0

Increased
Gunosy Ads*
(net)

-132

Increased Increased
personnel
rents
expenses+1,331

Operating margin-323

FY2016/5

FY2017/5

0* Net amount after deducting revenue share expense paid to KDDI associated with News Pass from the total amount of Gunosy and News Pass** Net amount after deducting ADNW’s costs of goods sold from ADNW’s net sales

13

1. Quarterly Results
2. Full Year Results
3. Overview of Business and Strategies
4. Results Forecast
5. Supplementary Materials© Gunosy Inc.

14

3. Overview of Business and Strategies: Summaryn Aim to achieve further growth by combining technology and media managementn Get back to basics: strengthening personalization and targeting logic. Change the strategy frommultiple functions and a single application to a single function and multiple applications.
Technology

Management of multiple media

n Strengthen personalization to expand users’
stay-time and improve the retention rate.

n From multiple functions and a single application
to a single function and multiple applicationsn Strengthen advertising targeting logic toimprove profitability.

n Expand into the non-news domain

Media

User experience, value to be provided-

Taking action against clickbait

Datan Strengthen advertising targeting logic© Gunosy Inc.

-

Estimating attributes-

Introducing an algorithm to estimate
effects-

Automatic operation system

Algorithml Aim for something close to contact
experience on televisionl Aim for something close to contact
experience on newspapers

Magazine

Promoting the personalization of articles

l Aim for something close to contact
experience on women’s magazines

EC-

News domain

n Evolve content distribution technologyl Aim to establish a position as a pricecomparison site on the smartphone15

3. Overview of Business and Strategies: Gunosy, Videon The video distribution algorithm that has been developed in the research and development ofViderey and Gunosy will be integrated. The integration is intended to expand the stay-time of
Gunosy and achieve a share in the video advertising market.

GunosyA curation application that delivers quick reporting and newsy
information of interest to users

Viderey (video)
A curation application that delivers videos ofinterest to users
l Users’ stay-time is longer than that ofGunosy.

© Gunosy Inc.

Integration

16

3. Overview of Business and Strategies: News Passn DLs exceeded 3 million in a year after it was released. The algorithm has been updated, and aquick reporting tab has been released. KPIs are improving.
n In collaboration with Weathernews Inc., Gunosy is preparing a scheme that will be able to provide
information closely related to everyday life, including information on disasters.

Strengthening collaboration with Weathernews Inc.
DLs exceeded 3 million
within one year of its released.

© Gunosy Inc.

l Both companies are developing a scheme that will be able toprovide information on disasters, including earthquakes andtyphoons, to users in a timely manner.

17

3. Overview of Business and Strategies: LUCRA
n An application in the field of general information for women using Gunosy’s strengths:
information analysis and distribution technologies and relationships with media
n Aim for the acceleration of the expansion of the number of users and early monetization incollaboration with KDDI, making the most of the best practice of News Pass.

A curation application that delivers information on
fashion and restaurants, etc. that is of interest to
users

Many points of contact with customers

×l More than 15 million members of au Smart Passl More than 38 million cellular phone contracts
l Approximately 2,500 au shops nationwide

A variety of content

Service icon

© Gunosy Inc.

A screen shot of the store

Providing a variety of smartphone content,
including Video Pass and Uta Pass18

3. Overview of Business and Strategies: Bazzary
n Leverage Gunosy’s information distribution technologies, including data analysis technology
and algorithms, in the field of e-commerce, which is growing remarkably.
n Aim to create a user experience where anyone can make good purchases easily using asmartphone and provide a service that will satisfy users across a broad range of age groups.

Bazzary (meta-commerce)
An application to make it easy to find theoffer with the lowest price from multiple
smartphone shopping applications

Data sources(flea market
application)

Gathering and evaluating products
using an algorithm

Generating themost suitablesearch results

Company A
Company B
Company C
Company D

Search engine

l Optimization of search
queriesl Evaluation of quality of
products

Company E
Company F
Data sources(EC sites)

Company aCompany b
Company c© Gunosy Inc.

Creating a screen tocompare productsl Gathering
information(crawling)
Detecting thesame products

Providingthe best
shopping
experience
to usersl Calculation ofsimilarity scores193. Overview of Business and Strategies: Game8n PMI (Post Merger Integration), including the establishment of an internal control system, theintroduction of KPI-based management, and the strengthening of sales capability, has been
completed. The business is moving into a growth phase.
n Major KPIs and sales have grown steadily, and the business has moved into the black.
After acquisition

Before acquisition
Company name: Game8 Inc.
Representative director: Kentaro Nishio

80

400

69% growth in PV*
77% growth in sales*

70

Address: 1-32-12 Higashi, Shibuya-ku, Tokyo
Business: Providing game strategy information

350

60

300

Sales

PVs

50

250

40

200

30

150

20

100
Internal
control systemstrengthened

10

KPI-based management
introduced
Sales strengthened

500© Grani, Inc* Results in the fiscal year ended March 2017 (full year, year on year)© Gunosy Inc.

0

1Q

2Q

3Q

FY2016/3

4Q

1Q

2Q

3Q

4Q

FY2017/3
20

3. Overview of Business and Strategies:
Medium- to Long-Term Imagen Aim to achieve continued growth in existing businesses by enhancing personalization andalgorithms and advertising delivery logic.
n Aim to achieve further growth by expanding business domains into the non-news domain.

(Profits)

New businesses /overseas expansion
Growth through the
expansion of businessdomains

Continuing growth in theexisting businesses

FY2018/5© Gunosy Inc.

FY2019/5 and onward21

1. Quarterly Results
2. Full Year Results
3. Overview of Business and Strategies
4. Results Forecast
5. Supplementary Materials© Gunosy Inc.

22

4. Results Forecast
n Full-year consolidated net sales, operating income, and net income are forecast to be
10.74 billion yen, 2.20 billion yen, and 1.47 billion yen. Both net sales and income are
expected to increase for the fourth consecutive year. Growth rates are forecast to be high.
n Advertising expenses are set to increase 430 million yen year on year to accelerate growth.
n The number of DLs in the full year is expected to be 32.22 million (aggregate of Gunosy, News
Pass, LUCRA, and Bazzary).
Consolidated results forecast(Million yen)

FY2017/5

Forecast for FY2018/5
YoY change

Net sales
Operating income
Ordinary income
Net income

Full year

Cumulative first half

Full year

7,739
1,517
1,516
1,126

4,812
843
843
558

10,746
2,206
2,206
1,475

(Reference) Non-consolidated results forecast
FY2017/5

+39%
+45%
+45%
+31%
(Million yen)

Forecast for FY2018/5
YoY change© Gunosy Inc.

Net sales
Ordinary income
Net income

Full year

Cumulative first half

Full year

7,478
1,619
1,236

4,606
880
607

10,219
2,218
1,531

+37%
+37%
+24%

23

1. Quarterly Results
2. Full Year Results
3. Overview of Business and Strategies
4. Results Forecast
5. Supplementary Materials© Gunosy Inc.

24

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:3,911 million yen（ as of the end of May 2017 ）Number of employees: 121 (as of the end of May 2017, 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
25

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.

26

Algorithm for Content Distribution

Thousands ofarticles per day

Choosing articles using an algorithm

Creating a list
To users

Media
companyMedia
companyMedia
company(Collaboration withover 600 media
companies)© Gunosy Inc.

lGathering articles(crawling)

lClassification
lDetermining the same
eventslConsidering user
attributes
lReal time articles
evaluation system

27

Business Model： Gunosy 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

28

Business Model： Ad 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 (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.

29