FY2020/5 Financial Results for Q1

Gunosy Inc.
First Section of The Tokyo Stock Exchange(Stock Code: 6047)
October 15, 2019

INDEX

1

Financial Results for FY2020 Q1

p. 3

2

FY2020 Outlook

p. 10

3

Business Overview by Division

p. 12

R&D and Implementation of
4

Research Results（C） Gunosy Inc. All Rights Reserved.

p. 23

1

Section 1

Financial Results for FY2020 Q1（C） Gunosy Inc. All Rights Reserved.

Financial Highlights (1/2)
Overall summary
Consolidated net sales were 3.87 billion yen and operating income was 230 million yen.

1

Growth of net sales achieved despite income decline. (QonQ comparison)
Advertising expenses (non-consolidated) were 850 million yen,2

the highest investment level ever. (650 million yen in the previous quarter)
The number of MAU of the three major media and the impressions of ADNW

3

achieved record highs.

News Pass downloads exceeded 10 million.

4

Summary by media
Despite unstable business growth of subsidiaries (“digwell” and “VIDPOOL”),“Gunosy” and “News Pass” recorded solid growth.

Gunosy (nonconsolidated)
Subsidiaries

Subsidiaries

GunosyNews Pass

LUCRA

ADNW

(digwell & VIDPOOL)

Regrowth

GrowthHold

GrowthDeclineStrategic investment
under way

Section 1

Hold down
investment（C） Gunosy Inc. All Rights Reserved.

PAGE |

4

Financial Highlights (2/2)
As a result of continued aggressive investment, non-consolidated net sales and gross profit ofGunosy marked steady growth as planned.

While Operating income declined 40.8% QonQ to 208 million yen, when making comparison based on
operating profit before strategic investment with advertising expenses added back, +4.8% growth
was achieved.
(Million yen)

Summary of P/L(Gunosy: non-consolidated)

4,500
QonQ: +6.4%

3,000Operating income

QonQ: -40.8%

1,500

3,274

3,485

QonQ: +3.3%
Operating income +Advertising expenses

QonQ: +4.8%

1,534

1,585

Advertisingexpenses

659
352

0
FY2019/5
Q4

FY2020/5
Q1

Net sales

FY2019/5
Q4

FY2020/5
Q1

Gross profit

FY2019/5
Q4

Advertisingexpenses

851
208
FY2020/5
Q1

Operating income + Advertisingexpenses

Section 1（C） Gunosy Inc. All Rights Reserved.

PAGE |

5

FY2020/5 Consolidated Results for Q1
While the impact of changes in the advertising market environment since Q3 of FY2019/5
remains, sales growth achieved QonQ in the current period, despite income decline,
supported by steady growth of active users.
(Million yen)

QonQ comparison
FY2020/5
Q1

FY2019/5 Q4

QonQ

YonY comparison
FY2019/5 Q1YonY

Net sales

3,879

3,835

101.2%

3,700

104.8%

Operating income

232

446

52.1%

792

29.3%

Operating margin

6.0%

11.6%

Ordinary income

218

445

49.0%

792

27.5%

195

292

67.0%

544

35.9%

Net income
attributable to ownersof parent
Section 1-（C） Gunosy Inc. All Rights Reserved.

21.4%

-

PAGE |

6

Total Number of Active Users (MAU)*1

Total MAU in the current quarter increased by 33% YonY, achieving a record high (“Gunosy”
increased by 30%). MAU of “Gunosy” continued to grow due to successful injection of advertisingexpenses focusing on cost effectiveness. “News Pass” and “LUCRA” also continued to grow steadily.
YonY
+33%
POINT

MAU of “Gunosy” recorded continued
rise and marked a record high!

LUCRA
NewsPass
GunosyQ1Q2Q3

FY2016/5

POINT

Q4

Q1

Q2

Q3

Q4

FY2017/5

Q1

Q2

Q3

FY2018/5

Q4

Q1

Q2

Q3

FY2019/5

Q4Q1
FY2020/5*1 Average for each quarter of MAUs (monthly active users) of “Gunosy”, “NewsPass” and “LUCRA”.

Section 1（C） Gunosy Inc. All Rights Reserved.

PAGE |

7

Breakdown of Net Sales*1

Gunosy Ads contributed to sales growth by improving the algorithms and aggressive
advertising activities, which led to steady user acquisition. (+4% QonQ)ADNW is recovering from the sales decline recorded in FY2019/5 Q3. (+10% QonQ)FY2020 Q1(Million yen)

4,500

Gunosy Ads marked a record high
Others
Game8
ADNW
*2
Gunosy Ads

54

2

39

280

16

12

49

62

610

606

5
75

148

158

256

980

234

1,236

1,357

1,422

1,459

1,871

1,935

1,894

1,960

2,030

2,119

Q4

Q1

Q2

Q3

Q4

Q1

1,205

90

223

232

190

3,000

1,500

206

178

334

254

136

1,143

1,097

815

625

466

1,300

1,411

1,505

1,175

1,283

1,585

△7

△38

Q1

Q2

Q3

Q4

Q1

Q2

Q3

1,541

0

FY2017/5

FY2018/5

FY2019/5

FY2020/5*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”.

Section 1（C） Gunosy Inc. All Rights Reserved.

PAGE |

8

Cost Structure
Active injection of “advertising expenses” to promote coupon since FY2019/5 Q3.
Along with sales growth of ADNW, “Ad network costs” also increased QonQ.
In “Other expenses”, despite increased costs for revenue sharing with KDDI, media expenses for
digwell declined.
POINT

Active injection of advertising expenses since
FY2019/5 Q3

3,646
3,307

Consolidated basis(Million yen)

3,000

FY2019Q1

FY2020Q1

490 million yen

820 million yen

3,388

3,109
2,908

1,092

Other expenses

19

Live video production expenses

822

Advertising expenses

51

Rents

526

Personnel expenses

157

Server expenses

Ad network costs

2,753
1,160
911

2,198

2,313

678

1,997
1,582
1,500

1,435
314
278

471
80

251
44

494

1,686
1,517

489
447

389
336

390

562

56

55

55

315

262

274

293

55

43

47

48

308

411

413

439

574

Q1

Q2

Q3

Q4

Q1

336

55

60

352
70

806

40

493
55

504
54

55

55

104

588

547
460

547

396

1,055

420
103

41

39

539

777

54
55

456

92

693

782

838

Q2

Q3

Q4

109

988

1,047

Q1

Q2

POINT

637
51

414
102

16

507
131

814

884

977

Q3

Q4

Q1

0

FY2017/5

Section 1

FY2018/5

FY2019/5（C） Gunosy Inc. All Rights Reserved.

FY2020/5

PAGE |

9

2

Section 2

FY2020 Outlook（C） Gunosy Inc. All Rights Reserved.

FY2020/5 Results Forecast
Progression rate against H1 sales forecast is steady at 51.2%.
While aggressive injection of advertising expenses is expected in Q2, upward revision was made to H1
forecast of operating income considering the fact that H1 forecast (60 million yen) was already exceededby 170 million yen as of the end of Q1. No revision made to the full-year forecast as progress is
expected as in the initial forecast.

(Million yen)

H1 forecast

FY2020/5 Q1

FY2020/5 Q1 Progressi
Initial forecast on rate

Full-year forecast

2019/10/15
Corrected
forecast

Progressi
on rateFY2020/5
Full-year
forecast

7,579

51.2%

17,05422.7%

160 145.0%

1,000

23.2%

2.1%

5.9%

-

Progressi
on rateNet sales

3,879

Operating income

232

Operating margin

6.0%

Ordinary income

218

39 559.9%117 185.5%

960

22.7%

195

-12

110 177.2%

565

34.6%

Net income
attributable to ownersof parent
Section 2

7,579

51.2%

60 387.4%
0.8%

-

-

（C） Gunosy Inc. All Rights Reserved.

-

PAGE |

11

3

Section 3

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

Business Overview by Division• In the “Gunosy” and “News Pass” businesses, MAU
continued to build up steadily while maintaining profitability.

Media
P14 - P18

• In "LUCRA", preparations are under way to improve
profitability.
• ADNW is on a recovery track from the impact due to changes
in the market environment.

Advertising
P19 - P21

• The investment destination was selected smoothly and theinvestment was executed.

Investment
P22

Section 3• Businesses of two of our subsidiaries (“digwell” and“VIDPOOL”) still remain unstable. We will try to rebuild themwith new services.

• Invested in Faircent, an online financing brokerage service
platform in India.

（C） Gunosy Inc. All Rights Reserved.

PAGE |

13

MediaGunosyWe have been continuously implementing various campaign plans, including the coupon program thatstarted in FY2019/5 Q3. As a result, MAU steadily increased in the current quarter in the current period while
maintaining profitability, hitting a record high.
“Gunosy Research” was released as new content.

"McDonald's free coupon" campaign

Released “Gunosy Research”, a product useful for
conducting questionnaires

Campaign with “News Pass” “LUCRA” and “Otokul”[1st phase]
August 14, 2019 10: 30 - September 10, 2019 23:50[2nd phase]
September 20, 2019 10:30 - October 17, 2019 23:50

Section 3“Gunosy Research” is a new product that enables users
to conduct research easily using our own questionnaire
tool. Its applications range from polls, corporate
marketing research, and brand lift survey for effective
advertising.

（C） Gunosy Inc. All Rights Reserved.

PAGE |

14

GunosyMedia

We will further enhance our in-house production video contents. As consumption of content other than
news articles increases, we will steadily accumulate know-how for operating video content for the 5G era.
Changes in the scale of users
who have completed viewing video

Video contents broadcast

Each content (sports, news, entertainment)
contributes to the increase of number of video views

Distribution of new program by collaboration of"Gunosy Q" and "QuizKnock“ started

In-house production

Q3

Q4

FY2018/5

Section 3

Q1

Q2

Q3

FY2019/5

Q4Q1
FY2020/5（C） Gunosy Inc. All Rights Reserved.

Held a soccer quiz event involving majorsoccer clubs"3LDK“"Love & romance reality show" x "Money
Game"
Totally new type of variety show program
Over 10 million views in 3 weeks(‘19 Sept. ~)PAGE |

15

News PassMedia

Since the release on June 1, 2016, the user base has been steadily expanding anddownloads have exceeded 10 million.
MAU is also steadily increasing supported by day-to-day improvements in algorithms and content.
enhancements.

MAU and DL

User Attribute

NewsPass downloads

16%

Exceeded 10 million

4,500,000

9%

1%

Male

59%

12,000,000

45%
29%

4,000,000

Strong support
from the 40s and 50s

teens

20s

40s

50s

30s

10,000,000

1%

Female3,500,000

3,000,000

38%

41%

8,000,000

12%
19%

30%

Strong support
from the 40s and 50s

teens

20s

40s

50s

30s

2,500,000

6,000,000

MAU

2,000,000

Content EnhancementDL1,500,000

4,000,000

Commemorating the release of
the video tab,

1,000,000

2,000,000

500,000

campaign held, giving away
0

10 million wallet points

0

Q1

Q2

Q3

FY2017/5

Q4

Q1

Q2

Q3

FY2018/5

Q4

Q1

Q2

Q3

FY2019/5

Q4Q1
FY2020/5•

Section 3

Note: Please refer to the press release for details of the campaign (https://gunosy.co.jp/news/180)（C） Gunosy Inc. All Rights Reserved.

PAGE |

16

LUCRAMedia

Although LUCRA has been growing steadily until Q1 of FY2020, with over 7 million downloads,
enhancing the client base of advertisers is an issue to be addressed. Currently, we are
restraining investment for user acquisition, and are considering various measures to enhance
profitability as a media.

MAU and DL

2,000,000

1,800,000

Summary of FY2020/5 Q1

LUCRA downloads

8,000,000

Exceeded 7 million

Although we are currently refraining from
active investment, steady progress being
made in both MAU and DL.

7,000,000

1,600,000

6,000,000

Recent prospects

1,400,000

5,000,000

1,200,000

MAU
DL

1,000,000

4,000,000

800,000

3,000,000

600,000

2,000,000

Recognizing “enhancement of advertisersbase” as a priority issue,
various measures are being considered.

400,000

1,000,000

200,000

0

0

Q1

Q2

Q3

FY2018/5

Section 3

Q4

Q1

Q2

Q3

FY2019/5

Q4Q1
FY2020/5

Increasesales peruser（C） Gunosy Inc. All Rights Reserved.

Increaseadvertiser
retention rate

Improveinvestment
effectPAGE |

17

Game8Media

Continuing from the previous quarter, sales in FY2020/3 Q1 were affected by sluggish growth of advertisingrate per unit due to market conditions. The Performance recovery, however, is expected in game walkthrough, because of release of big game titles concentrating in Q2 - Q3. FY2020/3 positioned as a period of
preparation for sustained growth. In order to achieve medium- and long-term growth, we will actively
expand content other than game walkthrough.

Results *Measures for sustainable growth
QonQ

Net sales¥223 million-11 million (95.3%)

Operatingincome¥54 million-0.3 million (94.3%)

Stagnation
phase

Growth phase

Recoveryphase

Create new business teams andinvest in recruiting

Consider undertaking overseas
business, M&As, investments,
alliances and other initiatives
proactively

Regrowth
phase

300,000,000

Net sales
250,000,000

Operating income

232(Million yen)

190

256

Release of big titles

234

223

206

Big
title

200,000,000

148 158
150,000,000

90
100,000,000

50,000,000

71

80

91

95

Planned content enhancement of
non-game domain media “CLABEL”

Big
title

111 116

Regrowth

57

Big
title

54

Measures for recovery of business performance

17
In FY2020/3
Q2 and after

0

Q1

Q2

Q3

FY2018/3

Q4

Q1

Q2

Q3

FY2019/3

Q4Q1
FY2020/3

Preparation for release of big
game titles scheduled this fall

* Non-consolidated results (before consolidated adjustment)

Section 3（C） Gunosy Inc. All Rights Reserved.

PAGE |

18

Ad Network (ADNW)

Advertising

The impact of the environmental change in the advertising market has settled down, and CPM (Cost
Per Mile) is on the recovery track. Advertising inventory (impressions) recovered from seasonal
decline in Q3 and hit a new record high.

(million imp)

FY2 0 2 0 Q 1
No. of I m pr e s s i ons
m a r k e d r e c or d hi gh

Numbe r of I mpre s s i ons
a nd CP M

60,000imp¥36.84CPM¥40¥35.75¥29.71¥29.98¥31.3345,000¥30.70¥30.70¥25.1030,000¥20¥19.50¥19.80¥16.9015,00027,34830,78830,142

Q2

Q3¥21.10¥18.4038,61039,585Q1

Q2

33,68036,33039,52938,87240,900Q4Q1Q238,39041,13843,325

Q4

Q1

0

¥0

Q1

Q4

FY2017/5

Q3

FY2018/5

Q3

FY2018/5

FY2020/5* CPM: Cost Per Mille; unit price per 1,000 views of advertisements

Section 3（C） Gunosy Inc. All Rights Reserved.

PAGE |

19

Advertising

Launched “GRID Platform for docomo Ads”

This is an ad network we launched in collaboration with D2C R and D2C, that uses data including
member information owned by NTT DoCoMo. Distribution available on Gunosy Ads / Gunosy
Network Ads. It enables proper advertising to users by accumulation of acquired data on GRID
DMP and utilization of analysis results in a form that does not identify individuals.

Clients’ data

Segment data

User

User

Data
User

Press release: https://gunosy.co.jp/news/184

Section 3（C） Gunosy Inc. All Rights Reserved.

PAGE |

20

Subsidiaries (digwell and VIDPOOL)

Advertising-digwell's business marked sales and profits declines, which was affected by the suddenchanges in the market environment. The advertising business for the WEB was particularly
difficult. Currently focusing on the advertising business for APPs expecting recovery-

VIDPOOL will focus on the media rep business for CyberAgent, aiming to expand sales ofGunosy advertising products through VIDPOOL.

Pay-for-performance advertising service

Video ad network service

Tr e nds i n ne t s a l e s

Q1

Q2

Q3

FY2018/3
Section 3

Q4

Q1

Tre nds i n ne t s a l e s

Q2

Q3

FY2019/3

Q4

Q1

Q1

FY2020/3（C） Gunosy Inc. All Rights Reserved.

Q2

Q3

FY2019/3

Q4Q1
FY2020/3
PAGE |

21

Investment

Gunosy Capital

We invested in Faircent which provides peer-to-peer (P2P) lending platform which enables small,short-term, and high-frequency loans between individuals. (Investment made in August 2019)

Company
nameFairassets Technologies India Pvt. Ltd.

Head office Gurugram, Haryana, India
Representati
Rajat GandhiveEstablished March 2013
Image of press release published on
August 16, 2019

Business

Online loan brokerage service

Press release: https://gunosy.co.jp/news/187

Section 3（C） Gunosy Inc. All Rights Reserved.

PAGE |

22

4

Section 4

R&D and Implementation of Research Results（C） Gunosy Inc. All Rights Reserved.

Outline of Gunosy Tech Lab
Gunosy Tech Lab was established as a specialized organization to study further data utilization and information
recommendation in accordance with the mid- and long-term vision presented in January 2019. Through its establishment,
we aim to break away from the framework of being merely a smartphone media company, to focus on the near future where
IoT and 5G will be the center of development. We output research results in the form of our apps provided to users,
provision to external companies, and publication of papers.

Our own service

Application andimplementation ofresearch results

Presentations ofresearch results

T e c hL a b

Academy/International
Conference

Fujio Toriumi, Associate
Professor

A specialized organization that
researches the promotion ofdata utilization and information
recommendation
Services
provided incooperation withexternal
partners

Application andimplementation ofresearch results

Application andimplementation ofresearch results

NewsPass is the firstcase of provision ofservices for an
external company(KDDI)

Graduate School ofEngineering, The
University of Tokyo

Toyohashi Universityof Technology
Mitsuo Yoshida, AssistantProfessor

Promotion ofresearch

Joint researchwith universities

R&D
Servitization oftechnologies

Publication of
papersFostering throughsharing

Provision of services

External companies(ToB)

Lecture atuniversities

Press release: https://gunosy.co.jp/news/161

Section 4（C） Gunosy Inc. All Rights Reserved.

*1：東京大学大学院 工学系研究科システム創成学専攻 鳥海不二夫准教授*2：豊橋技術科学大学 情報・知能工学系 計算社会学 吉田光男助教

PAGE |

24

Background to the Establishment of “Gunosy Tech Lab”
Our biggest strength is our “engineering ability” based on algorithms using machine learning and natural
language processing technology. Gunosy Tech Lab was established to further enhance these strengths.
Gunosy’s growth cycle
Our “engineering ability” enables us to quickly implement and verify various measures suchas improvement of algorithms and coupon programs, which ensures the improvement in"service quality".

Implement in service

The sourceof Gunosy'svalue

Engineering
ability

Service Quality

Data / result

R&D

Implementation in services

Established in
March 2019T e c hSection 4

L a b（C） Gunosy Inc. All Rights Reserved.

PAGE |

25

Recent Theme of “Gunosy Tech Lab”
We will enhance research and problem solving that can be utilized in fields other than the smartphone,utilizing technology centered on machine learning. To this end, we are promoting the use of data for O2O
measures as well as the use of data acquired and accumulated so far through various apps that we haveprovided for different target customers.

1

Enhancement of recommendation algorithm using deep learning / machine learningtechnology in various content formats

2

Research and development on data utilization for O2O business3

Research and development of comfortable user experience on devices other thansmartphones

4

Providing algorithms to external companies

5

Effective data linkage method between multiple companies

Section 4（C） Gunosy Inc. All Rights Reserved.

PAGE |

26

“UOP”, a Bidding Function Using Machine Learning
We released “UOP”, a bidding function using machine learning, in “Gunosy Ads”. “UOP” is afunction that maximizes the efficiency of advertisement delivery by calling for optimal bid for eachuser by way of machine learning. (Announced on September 30, 2019.)
An automatic bidding function that
determines an effective bid priceconsidering various data including userspecific behavior and advertisingcharacteristics, and clicks and conversions(1)
Outline ofservice(2) Benefits of introducing UOP
Improvement ofadvertising
effectiveness

Reduction ofoperational cost

Improvement ofminimum bid
price for apps

(3) Example of improvement (Category: beauty)

News: https://gunosy.co.jp/news/190

Section 4

Amountspent“News” released by Gunosy
on September 30, 2019

Beforeintroduction

After introduction

170,000 yen

330,000 yen＋49%（C） Gunosy Inc. All Rights Reserved.

C
P
A

Beforeintroduction

After introduction

7,400 yen

6,600 yen
- 12%
PAGE |

27

Continuously Publish the Research Results
Obtained in the Course of Product Development
Following “KDD2019”, our paper that presented the research results of “Greedy Optimized Multileaving for
Personalization” was accepted at “RecSys 2019” which is recognized as the most prestigious
international conference in the area of recommendation system.

Accepted for the second time at an international
conference, since the establishment ofGunosy Tech Lab

RecSys 2019
Our paper
accepted at an int’lconference

Tech Lab

Other recent major research achievements• WI’19 [Peer reviewed] Oct. 2019
：IEEE/WIC/ACM International Conference on Web Intelligence

Algorithms and System Architecture for Immediate Personalized News
Recommendations)• ABCSS2019 @ WI2019[Peer reviewed] Oct. 2019

：The 4th International Workshop on Application of Big Data for Computational Social Science

Paper (abstract)
Press Release：https://gunosy.co.jp/news/185
Paper：https://arxiv.org/pdf/1907.08346.pdf

Section 4

Atom Sonoda, Yoshifumi Seki, and Fujio Toriumi Analysis of Factors that
affect Users’ Behavioral Changes in News Service)
Press release: https://gunosy.co.jp/news/185（C） Gunosy Inc. All Rights Reserved.

PAGE |

28

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.
These materials contain financial data that have not been audited by anindependent 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 andassumptions 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