FY2021/5 Financial Results for Q1
Gunosy Inc.
First Section of The Tokyo Stock
Exchange(Stock Code: 6047)
October 15,2020

INDEX

1

Executive SummaryP3

2

Financial Results for FY2021/5 Q1

P83

FY2021/5 Outlook

P 13

4

Business Overview by Division

P 15

5

Ref er ence Mat er i al s:（C） Gunosy Inc. All Rights Reserved.

Overview of Gunosy Inc.

P 26

1

Executive Summary（C） Gunosy Inc. All Rights Reserved.

Business Policy of the Current Term (FY2021/5 Q1)
In the existing media area, we will focus on increasing media value through improvement of reliability
and improving profitability to achieve future re-growth.
We will proactively promote the development of new businesses and external investment in order tocreate a new source of revenue.

Existing Area

New Area

Gunosy, NewsPass, LUCRA, ADNW

Game8 (overseas business), Otokul, GTL, investment

Focus first on improving profitability byincreasing media value throughimprovement of reliability and improving
advertising algorithm

Aggressively invest in growth areas, bothinternally and externally

Aiming to expand the scale of users
and to achieve re-growth as a media

Creating new source of revenue
following our main business（C） Gunosy Inc. All Rights Reserved.

PAGE |

4

Summary of FY2021 Q1

1

Consolidated net sales remained at the lower end of the forecast due tothe poor performance of ADNW.
Consolidated operating profit reached near the upper end of
the forecast supported by the strong performance of Game8.

2

The deterioration of the advertising market due tothe spread of COVID-19 appears to have bottomed out.
However, it is expected that advertising budgets ofour existing clients will continue to be curtailed.

3

As to the existing media, progress was made in Q1 in
improving reliability for increased value.
From Q2, we will accelerate the improvement in profitability,
which will serve as the foundation for renewed media growth.

4

As the first project to enter e-commerce,
we started to evaluate the prospectiveness ofthe social commerce businesses using the user base of Otokul.

（C） Gunosy Inc. All Rights Reserved.

PAGE |

5Impact of COVID-19
Although advertisers continue to restrain budgets, this trend has recently bottomed out. From Q2
onward, we will continue to work on strict cost controls as well as strengthening our efforts toimprove profitability in order to achieve our earnings forecast.
Monthly sales of Gunosy Ads
Our observations(Million yen)800

1
Deterioration in business confidence due to
COVID-19 has bottomed out

The mar ket
det er i or at i on seems
t o have bot t omed out
i n Apr i l 2020.

In Gunosy Ads, the impact of COVID19 is showing signs of bottoming out.

400

2

677

429

487

424

434

408

424

Jun

Jul

Aug

Sep

0
Mar

Apr

May

FY2020/5 Q4FY2021/5 Q1Advertising budgets
continue to be
restrained.

Existing clients are expected tocontinue to curb their advertisingbudgets for the time being. Based on
this assumption, we will promotemeasures to improve our performance.

Q2

2020
（C） Gunosy Inc. All Rights Reserved.

PAGE |

6

Milestones in the re-growth of media
In Q1, we have nearly completed the groundwork for greater user acceptance of our media byimproving its reliability. From Q2 onwards we intend to strengthen the improvement of profitability.
Once we have achieved certain improvement in profitability, we plan to make growthPresent
investments for re-expansion.
FY2020

FY2021Q1Q4Q2FY2022 and after
Q3

Q4

Groundwork phase

Macroenvironment

1

Improve media
reliability

2 Launch new content

Q1-Q4
Reinvestment phase

Assuming that the deterioration of the advertising market due to COVID-19 will continue for the time being
Measures to regain reliability of the media are almost complete in Q1. Verification process
for the full-scale launch of audio content also making progress.
Strict advertising examination■
Reduce clickbait content (p. 17)■
Test audio content (p.18) ■Full-fledged launch■

From Q2 onwards, we will focus on measures to improve profitability and lay thegroundwork for reinvestment.
Renewal of content delivery logic■

3 Improve profitability

Renewal of ad delivery algorithm■

Media accepted bymore users
Improving reliability of
media and providing
content which matches thetimes

Renewal of UI to improve average time on page and frequency of app use (p.19)■

KPI

Number of active
users

KPI

Profitability ofmedia

Due to stay home

Restrain
investment

Curb advertising investment until a certain level of profitability isachieved

High Return on
Investment

Market deterioration &Strict examination

Market deterioration
continues

Expected to improve by measures (1) (2) and (3) even if market
conditions continue to deteriorate

A certain level of
improvement in
profitability achieved（C） Gunosy Inc. All Rights Reserved.

PAGE |

7

2

Financial Results for FY2021/5 Q1（C） Gunosy Inc. All Rights Reserved.

FY2021/5 Q1 Consolidated
In Q1, sales and profits declined due to the deterioration of advertising market conditions caused by COVID19 and the revision of advertising guidelines. While the advertising market trend needs to be evaluatedcarefully, the market downturn is currently showing signs of bottoming out. While the ADNW businessremains challenging, Gunosy Ads results are expected to return to a recovery track over the second
half of FY2021/5 as a result of measures to improve profitability.
(Million yen)
QoQ comparison

YonY comparison

FY2021/5 Q1
FY2020/5 Q4

QoQ

FY2020/5 Q1

YonY

2,208

2,696

81.9%

3,879

56.9%

Operating profit

160

359

44.6%

232

68.9%

Operating margin

7.3%

13.3%

Ordinary profit

156

354

44.2%

218

71.7%

Profit attributable toowners of parent

79

167

47.6%

195

40.7%

Net sales（C） Gunosy Inc. All Rights Reserved.

-

6.0%

-

PAGE |

9

Total Number of Active Users (MAU)*
Given the uncertainty in the advertising market, we will continue to significantly curb advertisingexpenses. As a result of focusing on acquisition of users to the extent that a sufficient return on
investment can be expected even under the current business conditions, MAU decreased by
5.5% YoY
YonY

-5.5%

LUCRA
NewsPass
Gunosy

Q1

Q2

Q3

Q4

FY2018/5

Q1

Q2

Q3

FY2019/5

Q4

Q1

Q2

Q3

FY2020/5

Q4Q1
FY2021/5* Average for each quarter of MAU (monthly active users) of “Gunosy”, “NewsPass” and “LUCRA”（C） Gunosy Inc. All Rights Reserved.

PAGE |

10

Breakdown of Net Sales*1

Business of Game8 remained strong. Sales of Gunosy Ads and ADNW declined QoQ, affected bybudget restraints by advertisers due to the spread of COVID-19 and by the revision of advertisingguidelines throughout the period. Please note that, in the previous quarter (FY2020/5 Q4), the impact of COVID-19
and the renewal of advertising guidelines was small, and also March was covered when advertising demand is usually high.
(Million yen)

4,500

Others
Game8
ADNW

54

Gunosy Ads*2

148

280

256

19
240

234

128

317

Impact of
COVID-19
bottomed out
in Q1

251
1,357

158

1,422

1,459

1,205

90

223

232

190

3,000
2

206

178

334

254

136

1,143

1,236

1,480

1,298

203
320

980

1,097

815

530

1,500

366
371

1,871

1,505

1,585

△7

△38

Q1

Q2

Q3

1,935

1,894

1,960

2,030

2,119

1,964

1,960
1,594

1,541

1,267

0
Q4

FY2018/5

Q1

Q2

Q3

Q4

FY2019/5

Q1

Q2

Q3

FY2020/5

Q4Q1
FY2021/5*1. Sales of Gunosy Ads, ADNW and Game8 are presented on a non-consolidated basis. Internal trade adjustments are included in Others*2. Sales of Gunosy Ads are the total of “Gunosy”, “NewsPass” and “LUCRA”（C） Gunosy Inc. All Rights Reserved.

PAGE |

11

Cost Structure
Following on from the previous Q4, we continued to carry out thorough cost reductions, including
significant reduction in advertising expenses. The QoQ increase in personnel expenses is attributed toirregular factors including payment of WFH allowances and the expansion of operations at Game8, which
remained strong.

3,646
3,307

3,388

1,092

2,753
911

2,313
2,198
1,997
489

547

1, 500

588
562

547

315

55

504
55
54

55
55

40

104

493

447

336
60

352
70

420

396

103

574

782

838

39

539

41

777

54

414
102

1,047

16

917
822

637

72

51
55

456

814

526
507

31

2,337
2,048

583

51

109

988

22
19

92

55

693

1,055

952

1,160

806

678

Increased due to irregularfactors, although we areholding off on recruitment

1,003

2,908

3, 000

Personnel
expenses

3,362

3,109

(Million yen)

3,781

526

157

541

7

134

86

560
884

977

2

Adjustment for settlement(stock compensation)

QoQ change of number of
employees (consolidated):
251→243

1,027

786

Others24

Live video production expenses
Advertising expenses
Rents

153
94

131

1,091

WFH allowances

950
90

193
146

1

583

Personnel expenses

128

Server expenses

278

Ad network costs

125

413

0

Q1

Q2

Q3

Q4

FY2018/5（C） Gunosy Inc. All Rights Reserved.

Q1

Q2

Q3

FY2019/5

Q4

Q1

Q2

Q3

FY2020/5

Q4Q1
FY2021/5

PAGE |

12

3

FY2021/5 Outlook（C） Gunosy Inc. All Rights Reserved.

FY2021/5 Results Forecast (Consolidated)
Although consolidated net sales were behind the 1H forecast due to the weak performance of ADNW,
consolidated operating profit made a steady progress relative to the 1H forecast. We willcontinue to focus on improving the profitability of Gunosy Ads to achieve our full-year forecast.
(Million yen)

FY2021/5 Q1

FY2021/5 H1
1H forecast

Progression
rate

FY2021/5
Full-year forecast

Progression
rate

Net sales

2,208

4,652~4,937

47.5%~44.7%

10,297~11,297

21.4%~19.6%

Operating profit

160

242~39466.2%~40.6%

1,030~1,414

15.5%~11.3%

Operating margin

7.3%

5.2~8.0%-

10.0%~12.5%-

Ordinary profit

156

232~38467.3%~40.7%

1,011~1,395

15.5%~11.2%

Profit attributable toowners of parent

79

123~22864.6%~34.8%

615~882

12.9%
~9.0%

（C） Gunosy Inc. All Rights Reserved.

PAGE |

14

4

Business Overview by Division（C） Gunosy Inc. All Rights Reserved.

Summary of Media Business in FY2021/5 Q1
Although MAU is showing signs of a slight decline as the investment for user acquisition was
curbed, steady progress has been made in building the foundation for future re-growth(Improving reliability of media and renewal of apps, etc.).
GunosyNewsPass

LUCRA

Focus

Focus on im pr oving algor ithm s to im pr ove r eliability ofm edia and to im pr ove pr ofitability

Summary

Q1

Investment• Achieved a significant
reduction in clickbait
content exposure (p.17)• Increased distribution ofcontent that matches
more personalizedinterests of users (p.17)• User levels maintained
regardless ofinvestment restraint• Continue to aim for
growth by strengthening
cooperation with KDDI

Retrain• Renewal (p.20)

Given the uncertainty in the advertising market, we willcontinue to significantly curb advertising expenses.

MAU
Profitability（C） Gunosy Inc. All Rights Reserved.

PAGE |

16

Existing Area

Progress in improving media reliability

Clickbait content has decreased significantly. Rather than delivering content that responds to thesuperficial interests of users, we shifted our focus to delivering more personalized content thatmatches their interests on a deeper level. We aim to improve user retention and profitability.
Decrease in clickbait content

Percent change in "above the fold" in September 2020
(compared to June 2020)*
Set our own quality standards.
Built an algorithm thatprevents articles that don't satisfy our standards fromappearing on the topics tab. By August, the number of
relevant articles had decreased significantly.

While the number of entertainment-oriented content
decreased, the exposure of more socially-oriented
content increased, including those on politics andtechnology, as a result of capturing more personalizedinterests and concerns of users at a deeper level.
Entertainmentoriented content
decreased

Funny-79%
ColumnDecreasedsignificantly-29%

International-16%

Gourmet-12%Entertainment-6%

Econo my-1%

Content that captures
more personalizedinterests and concernsof users at a deeper level
increased

Social13%

Technology

34%

Sports

June

July
2020

August* Defined based on our own standards as inflammatory language or excessive skin exposure in relation to thecontent.

（C） Gunosy Inc. All Rights Reserved.

74%

Politics
-100%

171%
-50%

0%

50%

100%

150%

200%

PAGE |

17

Existing Area

The Future of Audio Content

Since its release, we have been verifying the UI and content to provide an optimal experience forusers as we prepare for a full-scale rollout.
In promoting audio content business, we're taking a different approach from news domain andaiming to increase duration of session.
Project timeline for penetration of audio content

Audio content that creates new forms of media

Phase ①

Phase ②Phase ③Update UI

Enhancecontent

Add monetize
function- Add "radiko” tab- Above the fold

- Procure blockbuster content- Develop content that
becomes a habit.

- Points / Givemoney toperformers- Audio ads in theapp（C） Gunosy Inc. All Rights Reserved.

“Radio” icon will be
provided*: This image is an example of what is underdevelopment.

PAGE |

18

Existing Area

Renewal of the User Interface

By combining photos, video and audio and by reducing the cost of information imposed on users, we
aim to create media that is more user-friendly. We also aim to break away from being a mere newsapp.

Scheduled in Jan 2021

Major updateof app's UI
１Stress-free information retrieval

2

UI that enables the app to be morevisually-friendly with plenty of photos,
videos and audio

3

Optimal image size for users*: This image is an example of what is under development.

（C） Gunosy Inc. All Rights Reserved.

PAGE |

19

Existing Area

Renewal of LUCRA

Targeting women who are more interested in trend information, we renewed the app to make it
endearing to more users. It aims to be an app that delivers information to help users feel positive andget one step closer to their own "beauty".

Major revamp

Exceeds 9
milliondownloads（C）
GunosyInc. All Rights Reserved.
Section3

PAGE |

20

Existing Area

Ad Network (ADNW)

Although the sales decline is showing signs of bottoming out, it is expected that the situation willremain challenging due to the impact of reduced competitiveness caused by the renewal ofadvertising guidelines. To strengthen profitability, we will rebuild our advantage incompetitiveness and promote cost reduction.
Nu mb er o f
I mp ressi o n s an d CPM(million imp)
60,000imp\40\36.84 \35.75

CPM\30.70 \30.70\29.71 \29.98\31.33\29.0645,000\27.70\25.10\19.50 \19.80
30,000\16.90\21.10\18.40\15.14 \12.59
50,98815,00027,34830,78830,142Q2

Q333,68038,61039,58536,33039,52938,87240,90038,39041,13843,325\20

46,71834,54329,432

0

\0

Q1

Q4

Q1

FY2017/5

Q2Q3

FY2018/5

Q4

Q1

Q2

Q3

FY2019/5

Q4

Q1

Q2

Q3

FY2020/5

Q4Q1
FY2021/5* CPM (cost per mille): Price per 1,000 impressions of advertisements（C） Gunosy Inc. All Rights Reserved.

PAGE |

21

Existing Area

Composition of Advertisers

The percentages for "beauty" and "health" categories continue to decline. Aiming to make ourmedia more sound and more reliable for a wider range of advertisers, we will continue to revamp ouralgorithms.
Percentage change of major categories(YonY)FY2021/5 Q1

The percentages for "beauty" and "health"categories marked substantial decline YoY

Beauty

17%

70%

66%

60%

Others66%

Health

50%

17%

40%

44%
34%

30%

17%

20%
10%

15%

17%

22% 62%23%

0%

HealthBeautyHealth（C） Gunosy Inc. All Rights Reserved.

Others

FY2020 Q1

BeautyFY2020 Q4

Others
FY2021 Q1

PAGE |

22

Existing Area

Game8

New Business

Another record-high quarterly sales were posted supported by our hit titles which have continued
to gain PV share and "stay-home". (Q1 results are for the period from April to June 2020 due to a gap withthe parent company's consolidated accounting period.)

Results*

Recent situation (Jul-Sep 2020)

Sales and profit growth (YoY)
Sales and operating profit continued to be strong

Sales

-

¥ 360M-

4 0 ,0 0 ,0 0(Million yen)
3 5
0 ,0 0 ,0 0

317

320

3 0 ,0 0 ,0 0

256

Sal es

234

232

2 5
0 ,0 0 ,0 0

Operating profit

190

206

223

240

-

2 0 ,0 0 ,0 0

148

158

Trend of YoY increase in sales
and profits continues.
As to PV growth, the benefits of"stay home" have diminished,
but CPM is showing signs ofrecovery.
PV of overseas version has
been increasing steadily since
its release last year.

1 5
0 ,0 0 ,0 09071

1 0 ,0 0 ,0 0

80

91

111

95

116

113
57

54

113

108

FY2021/3 Q1

50

YoY

5 0
, 0 ,0 0

17

Sales

¥ 366 million

164.0%

Operatingprofit¥ 108 million

201.3%

0

Q1

Q2

Q3

FY2018/3

Q4

Q1

Q2

Q3

FY2019/3

Q4

Q1

Q2

Q3

FY2020/3

Q4Q1
FY2021/3* Non-consolidated results (before consolidated adjustment)（C） Gunosy Inc. All Rights Reserved.

PAGE |

23

New Business

Otokul: Entry into the e-commerce businessAs a first step to consider entry into the e-commerce business, we started evaluation of theprospectivity of social commerce based on group-buying. We will verify whether businessmodels that have been successful overseas can be adopted in Japan.
Social commerce based on group-buying (illustrative image)
A platform which allows shoppers to purchase goods at a lower price by purchasing them in groups.

Store owner
Put upfor sale

Purchase at a discount

Purchase at a discountDiscounted goods

Purchase

Discount

Discount

Group buying(Supporter)

Encouragegroup buying(via SNS etc.)

Group buying(Originator)

Encourage
group
buying(via LINE
etc.)

Discount

Group buying(Supporter)

Group-buying（C） Gunosy Inc. All Rights Reserved.

PAGE |

24

New Business

Our Paper Accepted at International Conference"RecSys" for the Second Year in a Row

Our paper was accepted at RecSys, which is an international conference in the recommendersystem field, for the second year in a row.

The world’s first study concerning
method to publish datasets（C） Gunosy Inc. All Rights Reserved.

The
world’s
first
study

-

Our paper, "A Method to Anonymize
Business Metrics to Publishing Implicit
Feedback Datasets", was accepted as theLong Paper at RecSys 2020, which isconsidered the most prestigious
international conference in therecommender system field. (Research
conducted jointly with RIKEN)-

There has been no research on a methodof how datasets should be published. This
time we studied the method and publisheda paper on it, which was the first time in
the world.

PAGE |

25

5

Ref er ence Mat er i al s:（C） Gunosy Inc. All Rights Reserved.

Overview of Gunosy Inc.

Overview of Gunosy Inc.
Basic Information
・Company name:Gunosy Inc.

・Representative:

Shinji Kimura

・Officers:

Yuya Taketani
・Established:

November 14, 2012

・Fiscal year end:May・Capital:

4,088 million yen (as of the end of
August 2020)
6047 (First Section of The Tokyo
Stock Exchange)
Ernst & Young ShinNihon LLC

・Stock Code:・Audit corporation:

・Number of employees: 243 (as of the end of August 2020,
on a consolidated basis)
・Head office:Ark Mori Building, 1-12-32 Akasaka,
Minato-ku, Tokyo
・Business:
Development and operation of
information curation service andother media（C） Gunosy Inc. All Rights Reserved.

Representative Director and Chairman,
Group Chief Executive Officer (CEO),
Shinji Kimura
Representative Director and President,
Yuya Taketani
Director and CFO, Yuki Maniwa
Director, Tetsuya Nagashima
Director, Kentaro Nishio
Director, Kazuhiro Gonsho
Director (Outside), Suguru Tomizuka
Director (Outside), Junichi Shiroshita
Director (Outside), Hirokazu Mashita
Corporate Auditor, Masakazu Ishibashi,
Corporate Auditor (Outside), Kenji
Shimizu
Corporate Auditor (Outside), Noboru
Kashiwagi
PAGE |

27

Assumptions for FY2021/5 Forecast

Impact of COVID-19• Both the lower and upper ranges of the forecast are based on theassumption that the advertising market will not recover in the current
fiscal year.
• It is assumed that the increased activation of users under "stay home"
due to new coronavirus will be gradually normalized as economic
activity resumes.

Upper range scenario• Forecast in case initiatives to improve profitability in the media andadvertising businesses and new measures in the ADNW area, etc.,
produce certain results in a short period of time

Lower range scenario• Forecast that incorporates highly probable results obtained from a
conservative point of view regarding initiatives to improve profitability inthe media and advertising businesses and new measures in the ADNW
area, etc.

（C） Gunosy Inc. All Rights Reserved.

PAGE |

28

Disclaimer

Forward-looking statements contained in these materials are prepared from judgments andassumptions based on information available at the time of preparing the materials, and do notguarantee their accuracy. These materials contain financial data that have not been audited byan independent certified public accountant or an auditing firm. 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.

（C） Gunosy Inc. All Rights Reserved.

PAGE |

29

Optimally deliver information to people around the world