COMPANY RESEARCH AND ANALYSIS REPORT

Aeria Inc.
3758
TSE JASDAQ

13-Jun-2018
FISCO Ltd. Analyst

Kimiteru Miyata

FISCO Ltd.
http://www.fisco.co.jp

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Aeria Inc.
3758 TSE JASDAQ

13-Jun-2018https://www.aeria.jp/ir/release■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01■Company profile---------------------------------------------------------------------------------------------------------------------------------------------------------- 03
1. Company profile.. ................................... ......................................................................................................

03

2. History................................................... ......................................................................................................

03■Business overview---------------------------------------------------------------------------------------------------------------------------------------------------- 05
1. Business description. . ..................................................................................................................................

05

2. IT Services...................................................................................................................................................

05

3. Contents segment.. ......................................................................................................................................

09

4. Asset management segment.......................................................................................................................

13■Medium-term business plan---------------------------------------------------------------------------------------------------------------------------- 14
1. Business plan and M&A strategy........... ......................................................................................................

14

2. Strategic goal of M&A............................ ......................................................................................................

15■Results trends--------------------------------------------------------------------------------------------------------------------------------------------------------------- 16
1. Historical trends in sales and earnings. . . ......................................................................................................

16

2. FY12/17 result trends. . .................................................................................................................................

17

3. FY12/18 outlook.. ................................... ......................................................................................................

19■Shareholder return policy---------------------------------------------------------------------------------------------------------------------------------- 20• Dividend policy............................................................................................................................................

20■Information security ----------------------------------------------------------------------------------------------------------------------------------------------- 21

We encourage readers to review our complete legal statement on “Disclaimer” page.

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Aeria Inc.
3758 TSE JASDAQ

13-Jun-2018https://www.aeria.jp/ir/release██Summary
Hit game A3! and entry into minpaku business put Aeria
on growth track
Aeria <3758> is developing businesses through subsidiaries operating under its IT services segment, contentssegment, and asset management segment. The IT services segment provides a stable source of revenues andearnings with businesses including data services, an affiliate platform business, and AIRSIM mobile, an inexpensive
MVNO SIM service. At the contents segment, businesses include developing, distributing, and operating smartphonegames and online games, and sales of related character goods, drama CDs, voice CDs, and other goods. The asset
management segment, established in 2017, is engaged in real estate leasing and sales, and is also developing a
minpaku business (short-term rentals of private residences).
At the IT services segment, the data service business operated by subsidiary AIR Internet Service Co., Ltd. hasprovided a stable source of revenues and earnings for many years. Aeria added another steady earner in 2015
with its acquisition of First Penguin Inc., which operates an affiliate platform business whose primary focus is its
shopping website Infotop, which offers a wide range of informational products. Infotop has a high-profit earnings
structure and is similar to Rakuten Market, though differs greatly when it comes to its approach to distribution andits use of introducing agents.
At the Contents segment, a representative subsidiary is Liber Entertainment Inc., which develops social games
and also runs social game operating services. Liber Entertainment is known for I★Chu, a major hit game in 2015
and still popular today, but scored another big hit in 2017 with the rollout of A3!, a handsome young actor training
game that easily surpassed I★Chu in downloads not long after service was started. With A3! still very popular, LiberEntertainment is looking at broadening sales of related real goods, adapting it for a live theatrical performance, andexpanding into the Chinese market.
In 2017 Aeria acquired four companies in the real estate business in quick succession. One of these was Twist
Incorporated. Primarily an operations agent for Airbnb, Twist is a one-stop shop for minpaku-related services, fromthe selection of properties promising good returns, to interior makeovers by professional designers to create a property suitable for short-term rentals, to 24-hour multi-lingual support services, to property cleaning and management.
Twist has also started listing its minpaku properties on Agoda, Asia’s largest online lodging reservation website.
Going forward, Aeria is looking to grow the minpaku business of Twist and generate synergies by coordinating theefforts of Twist and the other three real estate companies in real estate development and other areas.
For FY12/17, Aeria reported extremely strong growth in sales and earnings, with sales rising 168.7% YoY to¥15,871mn and operating profit jumping to ¥2,691mn, up ¥4,296mn from losses the previous year. The IT services
segment saw continued steady growth in earnings at AIR Internet Service and First Penguin. The contents segment
served as the main growth driver as Liber Entertainment scored a major hit with A3!, sparking a sharp jump in sales
and earnings at not only the contents segment but at consolidated group level as well. The asset management
segment just got started in FY12/17 but is already contributing to sales.

We encourage readers to review our complete legal statement on “Disclaimer” page.

01 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Aeria Inc.
3758 TSE JASDAQ

13-Jun-2018https://www.aeria.jp/ir/release

Summary

For FY12/18, Aeria is forecasting sales of ¥23,000mn (+44.9% YoY) and an operating profit of ¥4,000mn (+48.6%),
with growth expected to driven by the ongoing popularity of A3! and growing contributions to sales and earnings
from asset management. These projections look a bit conservative, in our view, as they do not appear to fully reflect
the earnings likely to be generated by A3! during its second year on the market or from its extension into the Chinese
market. Looking ahead over the medium term, we expect to see Aeria remain on the growth track with the helpof continued strong growth in revenues from A3!, moves into new technologies and new services areas and the
expansion of its minpaku businesses.
Key Points
Backed by stable revenue stream from IT services, Aeria developing promising growth businesses in contents
and asset management• Moves into the black in FY12/17 as earnings rising sharply on popularity of new game A3!, a handsome young
actor training game
• Company outlook for double-digit growth in FY12/18 earnings looks a bit conservative. A3! and minpaku
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Source: Prepared by FISCO from the Company’s financial results

We encourage readers to review our complete legal statement on “Disclaimer” page.

02 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Aeria Inc.
3758 TSE JASDAQ

13-Jun-2018https://www.aeria.jp/ir/release██Company profile
Backed by stable revenue stream from IT services,
Aeria developing promising growth businesses
in contents and asset management
1. Company profile
Aeria is holding company with a total of 13 consolidated subsidiaries and two equity-method affiliates. Backed by
the stable earnings stream coming from IT services, Aeria is developing a contents business and asset managementbusiness. IT service businesses include an affiliate platform business whose primary business is the operation of an
online shopping website that handles informational products, and a data service business that includes managed
hosting services, systems development and management, and website operation. At the contents segment, businesslines include developing, distributing, and operating smartphone games, online games for tablet computers and otherdevices, and sales of related character goods, drama CDs, voice CDs, and other goods. The asset management
segment is engaged in real estate leasing and sales, invests in domestic and overseas companies, and also operates
a minpaku business.

Starting from foundation in IT services,
but trying its hand in other businesses
2. History
Takayuki Nagashima, the current Chairman of the Board, and Yusuke Kobayashi, the President and CEO, joined
together in back in 1998 to form Communications Online Limited (the predecessor to Aeria). Located in Chiba
Prefecture, Communications Online provided internet-related information services. In 2001, Communications Online
entered the online game business with the addition of subsidiary Gamepot Inc. (now the GMO Group). This wasfollowed in 2002 by the establishment of Aeria, which went on to a 2004 listing on the Osaka Stock Exchange’s
Hercules Market (now the Jasdaq Market on the Tokyo Stock Exchange). Following its stock exchange listing, in2005 Aeria acquired AIR Internet Service Co., Ltd. and its IT services business and, with this as the foundation,
expanded into other areas including smartphone games and online shopping websites. Seeing growing demand in
the minpaku market, Areia started up an asset management business in 2017.

We encourage readers to review our complete legal statement on “Disclaimer” page.

03 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Aeria Inc.
3758 TSE JASDAQ

13-Jun-2018https://www.aeria.jp/ir/release

Company profile

History
Date
May 1998
September 1999
May 2001

Event
Established Communication Online Ltd.
Established internetcom K.K. (merged with US-based Jupitermedia, capitalized at ¥20mn)
Established Gamepot Inc. (merged with Gagamel.com (Korea); capitalized at ¥20mn)

October 2002

Established Aeria Inc. (through spin-off)December 2004

Listed on Osaka Stock Exchange’s Hercules Market (stock code: 3758)

November 2005

Acquired 100% of shares in AIR Internet Service Co., Ltd., making it a wholly owned subsidiary

December 2005

Listed Gamepot Inc. on Sapporo Stock Exchange’s Ambitious Market

December 2005

Established Aeria Finance Inc. as wholly owned subsidiary to run investment business

April 2006

Acquired 20% stake in Yutaka Shoji Co., Ltd., making it an equity-method affiliate

August 2006

Acquired 50.1% stake in ACQUIRE Corp., making it a subsidiary

August 2006

Established Aeria Games & Entertainment, Inc.

October 2006

Established Aeria IPM, Inc. as wholly owned subsidiary to oversee copyrights

June 2007

Acquired 100% of shares in Kurezo Co., Ltd., making it a wholly owned subsidiary

June 2007

Acquired 41.3% stake in Taiko Holding Co., Ltd. (owner Akatsuki Securities), making it a subsidiary

January 2008

Began offering email delivery ASP services through AIR Internet Service

March 2008

Added vulnerability detection tool (Retina) as part of standard service through AIR Internet Service

April 2008

Transferred all shares in consolidated subsidiary Gamepot Inc. to So-net Entertainment Corp.

July 2008

Acquired Daito Me Co., Ltd. through share exchange, making it a wholly owned subsidiary

July 2008

Began offering carbon offset support program through AIR Internet Service

August 2008

Established European subsidiary as subsidiary of US-based Aeria Games & Entertainment, Inc.

September 2008

Began business partnership with aprecio Corporation

March 2009

Began offering groupware ASP for Cybozu Office 8 through AIR Internet Service

July 2010

Began offering cloud-based service to help prevent misdirected email through AIR Internet Service

December 2012

Removed Aeria Games & Entertainment, Inc. from subsidiaries by establishing AGGP Holdings, Inc.
as an intermediary holding company

December 2014

Acquired Gamania Digital Entertainment Inc. through share exchange, making it a wholly owned subsidiary

April 2015

Acquired Infotop Capital Corp. through share exchange, making it a wholly owned subsidiary and making Infotop Corp.
a second-tier subsidiary

June 2015

Acquired Liber Entertainment Inc. through share exchange, making it a wholly owned subsidiary

October 2015

Acquired ASGARD Co., Ltd. through share exchange, making it a wholly owned subsidiary

December 2015

Acquired GESI Co., Ltd. through share exchange, making it a wholly owned subsidiary

June 2017

Acquired GESI Co., Ltd. through simple share exchange, making it a wholly owned subsidiary

July 2017

Acquired GOODVISION CORPORATION through simple share exchange, making it a wholly owned subsidiary

July 2017

Acquired Twist Inc., making it a subsidiary

August 2017

Acquired Impression inc. through simple share exchange, making it a wholly owned subsidiary

August 2017

Acquired Sakuragate Inc. as wholly owned subsidiary through simple share exchange

September 2017

Acquire Xenoverse Inc. through simple share exchange, making it a wholly owned subsidiary

October 2017

Acquired GG7 Inc. through simple share exchange, making it a wholly owned subsidiary

October 2017

Acquired eitarosoft, inc. through simple share exchange, making it a wholly owned subsidiary

October 2017

Established joint venture with Edia Co., Ltd.

November 2017

Acquired Total Management Corporation, making it a subsidiary

January 2018

Entered into agreement to establish joint venture company with Wanin International Co., Ltd.

February 2018

Acquired shares of Seisyou Co., Ltd., making it a subsidiary

Source: Prepared by FISCO from the Company’s website

We encourage readers to review our complete legal statement on “Disclaimer” page.

04 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Aeria Inc.
3758 TSE JASDAQ

13-Jun-2018https://www.aeria.jp/ir/release██Business overview
IT Services provides stable revenue stream
while contents segment contributes to top-line
1. Business description
In FY12/17, the IT segment accounted for 29% of sales, the contents segment 56%, and the asset management
segment 15%. At the IT services segment, First Penguin and AIR Internet Service both continued to see steady
growth in sales and earnings. The contents segment had a very good year, enjoying strong sales from games by
Liber Entertainment and ASGARD aimed at young women, with A3! for smartphones becoming a big hit. The asset
management segment just got underway in 2017 but still made progress at its minpaku business, most of which
is run by Twist.

SALES BREAKDOWN BY SEGMENT (FY12/17)
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Source: Prepared by FISCO from the Company’s financial results

IT Services segment provides stable revenue stream
2. IT Services(1) AIR Internet Service
AIR Internet Service provides various internet services for businesses, including its cloud-based email solutions
service (All in One Mail) and a cloud-based reservations management system (Reserve Keeper) for restaurants.
With the bulk of its business stemming from its data center operations, AIR Internet Service generates a steadystream of revenues and earnings. It divides its services lines broadly into three areas: business cloud services,managed hosting services, ISP services.

We encourage readers to review our complete legal statement on “Disclaimer” page.

05 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Aeria Inc.
3758 TSE JASDAQ

13-Jun-2018https://www.aeria.jp/ir/release

Business overview

AIR Internet Service: sales and earnings trends (for reference)
(¥mn)
2013

2014

2015

2016

Sales

659

709

692

681

Recurring profit

42

83

69

67

Net profit

25

52

43

44

Net assets

491

544

587

610

Total assets

614

684

716

741

Source: Prepared by FISCO from the Company’s securities report, etc.

a) Business cloud services
Under business cloud services, in addition to All in One Mail and Reserve Keeper, AIR Internet Service offers
Cybozu ASP Service, an ASP service that eliminates the need for server management when using the popular
Cybozu Office (said to be the number one groupware product in Japan). It also offers Garoon Operator Service,
which provides a dedicated server environment that is ideal when there are 300 or more users, and Mail Delivery
ASP Service which, depending user settings can deliver email only to individual users that have opted-in toreceive emails.
b) Managed hosting services
A managed dedicated server is a service that provides superior performance and stability by providing a server
environment from a single provider, covering everything from design and construction to ongoing operation,
management and recovery. WEBooth is AIR Internet Service’s hosting service; WEBooth comes with its own
self-developed online storage service and thus is an ideal hosting service for business concerned about security.
AIR Internet Service also operates a domain registration service that handle new registration for the "jp" and otherdomains as well as website management services.
c) Other services
As an internet service provider (ISP), AIR Internet Service provides fixed IP connection services and other internet
connection services, mainly to individuals. Through one of its subsidiaries (AIR Communication), it also offers
AIRSIM mobile, an inexpensive MVNO SIM service. As of the end of February 2018, AIRSIM mobile was running a
campaign to allow users to play games with no monthly charge, which could probably be regarded as a campaign
typical of the Company’s subsidiary.
(2) First Penguin
First Penguin operates a number of different businesses, including the affiliate platform business, advertising,content creation/sales, media management, overseas trading, and overseas and domestic employment assistantbusinesses. The largest of these its affiliate platform business, which operates Infotop, a web portal for sellinginformational products (educational materials, etc.). Earnings from this area are both high and stable.
First Penguin: sales and earnings trends (for reference)
(¥mn)
2013

2014

2015

2016

1,830

1,992

2,323

3,227

Recurring profit

493

532

299

396

Net profit

292

323

195

240

Net assets

815

1,120

59

291

Total assets

2,722

3,410

2,626

2,657

Sales

Source: Prepared by FISCO from the Company’s securities report, etc.

We encourage readers to review our complete legal statement on “Disclaimer” page.

06 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Aeria Inc.
3758 TSE JASDAQ

13-Jun-2018https://www.aeria.jp/ir/release

Business overviewa) Affiliate platform business
The affiliate platform business operated by First Penguin has a business model that is similar to that of Rakuten
Market. Rakuten Market has an extremely large number of categories in its ecommerce mall but it captures
only the information exchanged between the seller and the buyer while leaving the distribution and accountsettlement up to the individual merchants. In contrast, Infotop’s ecommerce mall has a single category, called
informational products*, but it encompasses every aspect of the dealings between buyers and sellers, not only thedigit information but the distribution and account settlement as well. In other words, First Penguin serves as anintermediary for the seller, the buyer, and the introducing agent, managing the payments for sales and commissions
between the seller and the introducing agent, and also managing the account settlement and the product delivery
between the seller and the buyer. There is a big difference between Infotop and Rakuten Market when it comesto how distribution as handled, but the biggest different between the two is there is the presence of introducing
agents (affiliates, affiliate partners**) at Infotop whereas Rakuten Market has none. By putting introducing agentsin the picture, First Penguin has increased the searchability of Infotop for even long-tail informational products. [Inthis respect, Infotop provides the same kind of chaotic enjoyment that people previously obtained from looking
for long-tail products on Rakuten Market.
* Informational products: Information that is primarily bought and sold over the internet. The information itself is the product, such as
study guides for foreign language, guides on asset management, and self-improvement guides. While on rare occasions such guidebooks are said to be pyramid schemes or make fraudulent claims, Infotop’s careful examination of the materials sold through its
website leaves very little room for disreputable operators to sell their wares.
** Affiliate: An advertising technique wherein a blogger or magazine receives compensation from the seller if the write-up of the
product leads to a sale. Unlike the average affiliate, affiliate partners are involved in the business.

Infotop website (left) and business model (right)

Source: The Company’s website

Infotop does not care whether the informational products and other digital contents and other products soldthrough its website are from private individuals or from companies. For the seller, Infotop offers an easy andinexpensive way to try to sell his idea or expertise. For the buyer (website visitor), Infotop provides a ready meansof acquiring high-quality, up-to-date information about a topic of interest. And for the introducing agent, Infotop
provides a way to be highly compensated for promoting the product. In short, Infotop is a portal site that createsa win-win-win proposition for the parties involved. Particularly from the perspective of the seller, Infotop is a highly
cost-effective sales channel since there are no upfront costs and all remuneration to other parties is paid basedon performance, and the seller is able to directly provide the information to potential buyers whose interest has
been piqued by an introducing agent (such as an email magazine or blogger).

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Aeria Inc.
3758 TSE JASDAQ

13-Jun-2018https://www.aeria.jp/ir/release

Business overview

Amid a growing market for informational products, Infotop is the leading player thanks to a combination ofcustomer service, security, seller/product inspections, and ease of use. Infotop has a cumulative total of morethan 2.0mn sellers, buyers, and introducing agents, and has more than 60,000 different offerings of informational
products for sale that cover a wide range of subjects that are useful in everyday life, from languages, to romance,
to beauty advice. Infotop also accepts a variety of payment methods, including bank transfers, credit cards,
Bitcash (digital currency), and the various money transfer systems available at convenience stores. And, because
as an ecommerce mall Infotop handles a large amount of personal data, it has created an impenetrable security
framework using Verisign SSL that has received the PrivacyMark certification from Japan Information Processing
Development Corporation.
Perhaps most important is Infotop’s strict inspection process that helps buyers avoid the risks associated withdigital contents (i.e., the inability to see ahead of time what is there) and the anonymity of internet transactions.
Infotop carefully inspects not only the informational products being offered for sales, it also has dedicated staff
that conduct thorough background checks on the sellers, including verification of any claims they may makeabout themselves and checking whether they have ever violated the Specified Commercial Transactions Law. In
the case of sellers who are listing products for the first time, Infotop always verifies the contact number provided
and also verifies the physical address through written correspondence. For buyers, Infotop’s ease of use makes it
different from competing websites. Infotop scrutinizes the opinions expressed by users and the nature of customer
support provided in the past and makes almost daily updates to its manual and FAQ list; it also operates a callcenter to field inquiries about membership registration, purchasing options, and other subjects. And, for thosebuyers that are not particularly adept at using a computer, it also has a telephone order service and customer
support structure that includes remote operations services.
Infotop: members (left) and transaction volume processed (right)

Source: The Company’s websiteb) Other businesses
Other businesses include advertising. First Penguin’s advertising business is not just involved in internet advertising, it is also makes proposal for affiliate promotions and digital marketing, and provides solutions that will help
clients meet the rapidly changing online marketplace. First Penguin also has a content production/sales business,where it finds a topic that has value (like language learning, asset management, self development) then works
together with an expert in that field to create original online classes or seminars. First Penguin also has an overseas
trading business that imports and exports distinctive goods, trading mainly with Asia and North America. First
Penguin also has an employment assistance business, which in Japan provides referrals for new grads to small
and medium-sized companies.

We encourage readers to review our complete legal statement on “Disclaimer” page.

08 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Aeria Inc.
3758 TSE JASDAQ

13-Jun-2018https://www.aeria.jp/ir/release

Business overview

First Penguin’s overseas employment assistance services business, which goes under the name CoCoCarat, hasgrown rapidly in recent years. CoCoCarat specializes in employment assistance services for people looking to workin Southeast Asia. It currently has partnerships with personnel placement agencies in the seven major countries
in Southeast Asia and serves as the registration agent for the job application with the local placement agency. In
December 2017, CoCoCarat entered into a business alliance with Forval Corporation <8275> that will allow it towork with Forval’s personnel placement businesses in Southeast Asia (primarily in Cambodia, Myanmar, Vietnam,
and Indonesia ), and is looking to further expand its business in this area going forward.
(3) Other IT service businesses
Other IT service businesses include Grey Cells Inc., which provides system solution services that cover everythingfrom website and application planning, designing, and development, to operational support and maintenance;
Grey Cells also provides consulting services to support website and application development teams. Anotherbusiness is CyberZero Ltd., whose services include social app development, support services for companies
utilizing social media, Android and iPhone app development, production and development work using Flash Lite
for mobile phones, web app development, and smartphone-optimized website design.

Liber Entertainment scores big hit with A3!
3. Contents segment(1) ASGARD
ASGARD manufactures and sells CD/PC software for young women, doing studio recording and manufacturing
and selling consumer game software under two labels (where there have been releases) using a single studio. At its
mainstay honeybee label, ASGARD produces CDs aimed at women, such as the DYNAMIC CHORD series, doessome collaborative CD featuring well-known artists from other companies targeting for women; in this manner, it
has managed to release two to three CDs a month. Other series include Starry☆Sky, Hitsuji de Oyasumi (Go to
Sleep with Sheep), and Mitsubachi Shuppan (Honey Bee Publishing) series. These and other products are soldthrough an online shopping website (honey shop) that ASGARD operates. The ASGARD studio has two rooms forrecording, one large and one small; this setup allows it to do a wide variety of recording, from games, narration,and dramas, and to music. It has also turned DYNAMIC CHORD into an animated TV series.
Asgard hit series: DYNAMIC CHORD (left) and "Honeybee" brand site (right)

Source: The Company’s results briefing materials

We encourage readers to review our complete legal statement on “Disclaimer” page.

09 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Aeria Inc.
3758 TSE JASDAQ

13-Jun-2018https://www.aeria.jp/ir/release

Business overview(2) Liber Entertainment
Liber Entertainment is involved in social game development and operation, consumer game development, andalso has a consulting business that provides consulting services for other companies in the game business. It
has had two big hits in quick succession, I★Chu and A3!. As the impact of major hits is said to last about three
years, it is likely that Liber Entertainment will see continued growth in sales and earnings this year.
Liber Entertainment: sales and earnings trends (for reference)
(¥mn)
2013

2014

2015

2016

Sales

250

824

277

837

Recurring profit

-74

158

-90

51

Net profit

-74

130

-92

31

Net assets

-69

60

-32

25

Total assets

129

261

206

300

Note: Sharp increase in earnings expected in 2017 owing to popularity of A3!
Source: Prepared by FISCO from the Company’s securities report, etc.

a) I★Chu
I★Chu is a romance rhythm adventure in which the player is a teacher-cum-producer and must train an idol
wannabe to be a fully-fledged entertainer (I Chu) into a full-fledged star. Service for I★Chu officially started in June
2015; free-to-play and charging for in-game items. In January 2017 I★Chu recorded more than 1.0mn downloads,
making it a major hit. The popularity of I★Chu spurred sales of related real products, leading to the release of a
total of nine music CDs (five singles, four albums), two comic anthologies, three novels, as well as fan books andother character goods. In addition to these spin-off products, I★Chu was also made into a live theater production(I★Chu The Stage) that ran a total of 12 performances between August and September 2017.
b) A3!
A3! is a handsome young actor training game in which the player assumes the role of the general manager ofrun-down, collapsing theatrical company that has to train a new group of young, would-be actors to be successfulstage performers. Because all episodes are done in "full voice," mini-games have also been available to earn moremoney for the theatrical company. Service for the game was started in January 2017; free-to-play and charging
for in-game items. Leveraging its experience with I★Chu, Liber Entertainment turned A3! into an even bigger hit
with some 4.5mn downloads in the month of November 2017. Sales of related real products include nine CDs(one single, eight mini albums), two comic anthologies, and a large number of other goods. With the game having
just introduced a second group of would-be actors in February 2018, plans call for taking A3! to the live stage
with a show titled "MANKAI STAGE A3! — SPRING & SUMMER 2018" that will run between June and November
2018. As Liber Entertainment is also working with Bilibili with plans to start distribution service in China this coming
August, it is unlikely that the popularity of A3! will fade anytime soon.
Image cards for A3! (left) and I★Chu (right)

Source: The Company’s results briefing materials

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10 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Aeria Inc.
3758 TSE JASDAQ

13-Jun-2018https://www.aeria.jp/ir/release

Business overviewc) Other products from Liber Entertainment
Another game from Liber Entertainment is Soen No Kantai, a realistic naval battle game in which the player isthe commander of a naval battle group that must fight a mysterious opponent. Service for the game was started
in September 2017; there is no basic charge to play the game but players must pay to acquire certain extras.
Pre-registration for Soen No Kantai is said to have come around 100,000. Other titles that Liber Entertainment haseither developed under contract or development cooperated include Kai-ri-sei Million Arthur, Dairansoh Dasshu
or Dasshu, One Piece ROMANCE DAWN Dawn of Adventure.
(3) Contents segment: other subsidiaries
Aeria has a large number of other subsidiaries that are also involved in developing social games. Aeria Games& Entertainment, Inc. plans, develops, and operates games for smartphones. Most of the titles are for STARLYGIRLS – Hoshi musu -, a next-generation training simulation game. Developed by Kadokawa Games, STARLYGIRLS began service in December 2016; there is no basic charge to play the game but players must pay to acquire
certain extras. Plans calls for rolling out service in Taiwan, Hong Kong, Macau, and China. Subsidiary AGE Inc.
is in the process of moving from online games for PCs to games for smartphones, and has been able to makeprogress towards stabilizing its revenue and earnings stream by increasing its contract development work. Major
titles from AGE include Astral Stairways, a classical role playing game, and two pet rearing simulation games,
Tenohira Puppy and Tenohira Kitty. Subsidiary Arithmetic Inc. develops and operates social games, develops
and operates game engines and platforms. Arithmetic titles include 90 Days to Fall In Love with You (a romance
simulation game with a YouTuber); it also attracted a lot of attention after releasing a game using 10 count andother intellectual properties that are popular among young women. Subsidiary Team Zero inc. distributes two VR
rhythm game series, FuluBearVR and Symphony Line VR.
Aeria also acquired many new subsidiaries involved in game development during 2017. These include Sakuragate
Inc., which designs and develops slot games for online/ land-based casinos, provides gaming-related consulting
services, and designs, developments, and operates social games. It also acquired GOODVISION CORPORATION,
which designs, develops, and operates social games. GOODVISION has a long track record in game development,
including joint development of Hot-Dog PALACE with Kodansha. Another acquisition was eitarosoft, inc., which is
distributing Time Bokan 24 Bokan Meka Battle! under a licensing agreement with Tatsunoko Production; eitarosoft
is also known for Dance Trips, which it co-developed with Idea Factory (which own Otomate, a romance gamefor women). In 2017 Aeria also acquired Xenoverse Inc., the game division of the MAJOR LTD. Group (primarily
distributes mobile games in North America), as well as GG7 Inc., which has expertise in the creation and marketingof character contents. It was announced that the game Secret Inn, which GESI Co., Ltd. started service for in
May 2017 (with free-to-play and charging for in-game items) would terminate service no earlier than March 2018.
Since in most cases the service for a title is ended early when it fails to become a hit, the extension of the service
this long might be considered as something that sets GESI apart from other companies.

We encourage readers to review our complete legal statement on “Disclaimer” page.

11 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Aeria Inc.
3758 TSE JASDAQ

13-Jun-2018https://www.aeria.jp/ir/release

Business overview

Past major titles and future pipeline
Date

Producer/
Distributor

May 2003

Gamepot

Began distributing game contents thru BREW mobile phone handset from KDDI

August 2004

Gamepot

Began distributing online golf game, Sukatto Golf Pang Ya

PC

March 2006

Gamepot

Began distributing Kunshu MMORPG (Massively Multiplayer Online Role-Playing Game)PC

December 2006

Gamepot

Began distributing Fantasy Earth Zero MMORPG

PC

February 2007

Aeria Games

Began distributing Last Chaos MMORPG in US and Canada

PC

April 2008

ACQUIRE

Public website opened for "Sword, Magic, and School Story"

PS/PSP/3DS

Description

Platform<Japan debut on iPhone (SoftBank Mobile)>

July 2008
January 2009

Aeria Games

Began distributing "Shin Megami Tensei IMAGINE" MMORPGPC

May 2009

Aeria Games

Officially started service for "Shin Megami Tensei IMAGINE" MMORPG in GermanyPC

May 2009

Aeria Games

Officially started service for "Grand Fantasia: Spirit Legend" MMORPG

PC

June 2009

Aeria Games

Officially started service for "Shin Megami Tensei IMAGINE" MMORPG

PC<Japan debut on Android OS smartphones (NTT DoCoMo)>

July 2009
September 2009

Aeria Games

Officially started service for "Mystic Stone: Runes of Magic" MMORPG

PC

November 2009

Aeria Games

Officially started service for "Grand Fantasia: Spirit Legend" MMORPG on Hangame

PC

January 2010

Aeria Games

Officially started service for "Grand Fantasia: Spirit Legend" MMORPG on GungHo games

PC

January 2010

Aeria Games

Officially started service for "Mystic Stone: Runes of Magic" MMORPG on hangame

PC

February 2010

Aeria Games

Started of sales of "Grand Fantasia: Spirit Legend" as packaged software product by CyberFront Corp.

PC

February 2010

Aeria Games

Started of sales of "Mystic Stone: Runes of Magic" as packaged software product by CyberFront Corp.

PC

February 2010

Aeria Games

Started channeling service for "Mystic Stone: Runes of Magic" on Hangame

PC

Aeria Games

Officially started service for "Shin Megami Tensei IMAGINE" MMORPG by Ningbo Success Multimedia
Communication Co., Ltd.

PC

April 2010
June 2010

Aeria Games

Officially started service for "Rappelz" MMORPG by China’s Ningbo Success Multimedia
Communication Co., Ltd.

September 2010

Aeria Games

Officially started service for self-developed title "Guillotine House"

October 2010

Aeria Games

Officially started service for "Nine Tail Online: Spirit Legend Side-story"

October 2010

Aeria Games

Began offering "Let’s Build Kitty Town II" on GREE platform

June 2013

Aeria Games

Officially started service for "Dragon’s Prophet" MMORPG

July 2013

Aeria Games

Officially started service for realistic war fighting game, "Battle Rush!"

iPhone/Android

November 2013

Aeria Games

Officially started service for "Blacksmith and Dragons" RPG

iPhone/Android

December 2013

Aeria Games

Officially started service for "Various Monsters," an exciting new rhythm RPG

iPhone/Android

April 2014

Aeria Games

Officially started service for "Klee: From the Town of Dancing Moon Drops," a classic online RPG

iPhone/Android

June 2015

Liber
Entertainment

Officially started service for "I★Chu" love rhythm and adventure game

iPhone/Android

December 2016

Aeria Games

Officially started service for "STARLY GIRLS: -Hoshimusu-" next-generation training simulation game

iPhone/Android

January 2017

Liber

Officially started service for A3!, handsome actor training game

iPhone/Android

May 2017

GESI

Began distributing "Secret Inn," a heart-warming RPG where players live with the hero

iPhone/Android

July 2017

Team-0

Released first game in "Fulu Beat VR" VR rhythm game series

iPhone/Android

September 2017

Liber

Officially started service for "Soen No Kantai" realistic navel battle game

iPhone/Android

December 2017

AGE

Officially started service for "Everyone’s Casino" social casino game for everyone

iPhone/Android

January 2018

Team-0

Officially released second game in "Symphony Line VR" VR rhythm game series

iPhone/Android

Undecided

eitarosoft“Dance Trips” had a booth at the Tokyo Game Show 2017 to accept advance registrations

Undecided

eitarosoft

Exhibited "Magical Days" magic puzzle and adventure game at Tokyo Game Show 2017

Undecided

Arithmetic

Started pre-release registration for "10 count" BL game

Undecided

ASGARD

Started pre-release registration and promotional gift campaign for new title "DYNAMIC CHORD
JAM&JOIN!!!!"

Undecided

eitarosoft

Notification of postponement of start of service for "Dance Trips"

Undecided

ASGARDRun second promotional gift campaign for new title "DYNAMIC CHORD JAM&JOIN!!!!"

Undecided

Arithmetic

Start pre-release registration campaign for "Etokare: Why the Cat Was Left Out of the Chinese Zodiac
Calendar"Undecided

eitarosoft

Working together with Mobcast, co-develop new game based on characters from popular television
anime series "Yu•Yu•Hakusho"

Undecided

Liber

PC
browserPC
PC

Beautiful girl training program (name undecided) under development, A3! for men

Source: Prepared by FISCO from the Company’s website* As of the end of February 2018

We encourage readers to review our complete legal statement on “Disclaimer” page.

12 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Aeria Inc.
3758 TSE JASDAQ

13-Jun-2018https://www.aeria.jp/ir/release

Business overview

Expanding business rapidly in pursuit of minpaku market
4. Asset management segment
In 2017 Japan saw inbound tourist traffic jump 19.3% YoY to 28.69mn visitors. With help from government policies
aimed at making Japan more tourist friendly, inbound tourism is expected to continue rising in the years ahead
as we approach the 2020 Tokyo Olympics. At the same time, Japan still finds itself desperately short of lodging
accommodations to handle all these tourists, leading to the rise of minpaku arrangements to fill the gap. The term
minpaku implies that visitors will stay at the residences of ordinary people and, in the past, it was hoped that travelers
could be accommodated in this manner by people acting out of a sense of goodwill rather than for money. However,after seeing how much money was to be made by intermediaries like Airbnb that runs a dedicated website where
people can find and book short-term accommodations in private residences overseas, the goal of minpaku shifted torenting out private residences (including vacant houses, condominiums bought as investment properties) to overseas
tourists and other looking for short-term accommodations. There are still many legal aspects of the minpaku businessthat have yet to be determined, but expectations are running high that the action will be taken on the part of both
the government and the private sector that will allow the minpaku market to expand enough to accommodate the
sharp increase in the number of overseas tourists that are expected to visit Japan in the years ahead.
Attracted by prospects in the minpaku business, Aeria acquired four real estate-related companies in quick succession starting around the middle of 2017, acquiring Twist Inc. and July 2017, Impression inc. in August, Total
Management Corporation in November, and Seisyou Co., Ltd in February 2018. Of these, Twist is already engaged
in the minpaku business, overseeing minpaku property operations in the capacity of an agent. Twist primary serves
as operations agent on behalf of Airbnb, but has established itself as a one-stop shop for all minpaku-related
services, from the selection of properties promising good returns, to interior makeovers by professional designers
to create a property suitable for short-term rentals, to 24-hour multi-lingual support services, to property cleaning
and management. Twist has also started listing its minpaku properties on Agoda, Asia’s largest online reservation
website for lodging.
In contrast, Impression’s strength lies in its investment property sales capabilities, based on which it has branchedout into investment property development (condominiums), residential real estate sales, and home renovation.
Total Management’s strength lies in real estate development (single-family homes and income properties), but it
also involved in renovation of pre-owned condominiums, real estate sales, and consulting. Total Management isdistinguished by its focus of low-risk properties, many of which people have inherited. Seisyou Co., Ltd. started
out in the cleaning business, specializing in cleaning pachinko parlors. It still has its cleaning business, but has
also branched out into facilities maintenance and inspection (including electrical systems and fire extinguishingsystems), environmental hygiene management, and building security services. One of Seisyou’s most rapidly growing
businesses at this time is contract cleaning services for printing equipment; it also sees promising growth prospects
in the manufacture and sale of custom-order cleaning equipment. By combining the strengths of Impression in
investment property sales, Total Management in real estate development (single-family homes and income properties), and Seisyou in cleaning, maintenance, and security, Aeria has all the makings to create a comprehensive
asset management business. by combining this with the minpaku business of Twist, it will also be possible for Aeria
to utilize some of the properties it owns as minpaku facilities. Also, by combining its asset management businesswith its expertise in IT technology, Aeria aims to boost growth even further by enhancing the convenience of its realestate services through the application of technology.

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13 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Aeria Inc.
3758 TSE JASDAQ

13-Jun-2018https://www.aeria.jp/ir/release

Business overview

Synergies within asset management segment,PSUHVVLRQLQYHVWPHQWUHDO
HVWDWH

7ZLVWPLQSDNXDJHQF\VHUYLFH

7RWDO0DQDJHPHQWLQFRPHSURSHUW\GHYHORSPHQW

Synergies withminpaku

6HLV\RXFOHDQLQJ
・inspection・security$HULD,7H[SHUWLVH・ resources

Source: Prepared by FISCO from the Company’s website██Medium-term business plan
Make active use of M&A in pursuit of growth
1. Business plan and M&A strategy
Going back to its inception, Aeria has a long history of using M&A not only to keep in step with the development of
networking companies but also as of way of trying its hand in many other businesses. With new technology such as
IoT and VR/AR developing rapidly, Aeria has recently stepped up its M&A activity in order to better position itself todevelop businesses in rapidly growing fields. Driving all its acquisitions is Aeria’s goal of 1) creating a solid revenue
base that benefits from the reduction in risk that comes from diversification and the synergies realized when groupcompanies work together, and 2) further expanding its businesses both in Japan and overseas over the medium
term. In IT services, Aeria is looking to build stronger relationships with client companies while at the same timeacquiring new clients and further stabilizing its revenue and earnings stream. At its contents business, Aeria is
looking to become a bigger player in the market for games and other contents aimed at women while at the sametime branching out into new markets, including overseas market and online casino games. In asset management,
Aeria is looking to take advantage of the growing demand for minpaku services that will come as inbound tourist
traffic increases in the years ahead, and also find ways to make use of the group’s technological expertise and thecontents IP of other group companies.

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14 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Aeria Inc.
3758 TSE JASDAQ

13-Jun-2018https://www.aeria.jp/ir/release

Medium-term business plan㻹㼑㼐㼕㼡㼙㻙㼠㼑㼞㼙㻌㼜㼘㼍㼚㻦㻌㻿㼍㼘㼑㼟㻌㼠㼍㼞㼓㼑㼠㼟㻌㼎㼥㻌㼟㼑㼓㼙㼑㼚㼠㻵㼀㻌㼟㼑㼞㼢㼕㼏㼑㼟㻔¥㼙㼚㻕㻯㼛㼚㼠㼑㼚㼠㼟

㻭㼟㼟㼑㼠㻌㼙㼍㼚㼍㼓㼑㼙㼑㼚㼠㻟㻜㻘㻜㻜㻜
㻞㻡㻘㻜㻜㻜
㻞㻜㻘㻜㻜㻜
㻝㻡㻘㻜㻜㻜
㻝㻜㻘㻜㻜㻜

㻡㻘㻜㻜㻜㻜㻲㼅㻝㻞㻛㻝㻣㻌㼠㼍㼞㼓㼑㼠㻲㼅㻝㻞㻛㻝㻤㻌㼠㼍㼞㼓㼑㼠㻲㼅㻝㻞㻛㻝㻥㻌㼠㼍㼞㼓㼑㼠※ Based on Company forecast as of November 2017
Source: FISCO, based on Company presentation materials, "Business Plan & M&A Strategy"

Looking to generate synergies with M&A
2. Strategic goal of M&A
Aeria’s M&A activity has two strategic goals, the first is to increase the size and motivation of its management team.
The second is to acquire the business assets that will lead to the creation of synergies among group companies. To
achieve both of these goals simultaneously, Aeria makes a point of doing acquisitions not through cash transaction
but through share exchanges. In this manner, it assures that the management teams of every company that joins
the group is committed to growing not only the sales and earnings of their own business but growing the sales
and earnings of the group as a whole. When Aeria is able to acquire business assets where synergies are likely to
be generated, it can lead to the expansion of the revenue base of all segments and can also open up the door forthe group to enter new growth markets. At the asset management business, for example, Aeria is planning to use
its expertise in IT to enhance its minpaku services, and also draw on its contents business to create new tourism
experiences such as theater performances and live events and lead to the sale of special event goods.

We encourage readers to review our complete legal statement on “Disclaimer” page.

15 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Aeria Inc.
3758 TSE JASDAQ

13-Jun-2018https://www.aeria.jp/ir/release

Medium-term business planInter-segment synergies created by M&A

Source: Image from Company presentation materials, "Business Plan & M&A Strategy"██Results trends
After many years of ups and downs,
earnings break out to record high in 2017
1. Historical trends in sales and earnings
Aeria consistently turned a profit in the years after its inception but fell deeply into the red in FY12/08 as the Lehman
Shock rocked the financial industry, hurting its main client base. By FY12/10 Aeria was back in black as earnings
recovered quickly following the shift in its orientation from the financial sector to online games for PCs. Unfortunately,in FY12/12 it slipped back into the red again as competition intensified in the smartphone game market and, with
development costs hard to recoup, stayed in the red as operating losses became the norm through FY12/16. The
turnaround in earnings came last year as A3! became a major hit. In FY12/17 operating profit not only moved out of
the red and into the black, it surpassed the previous high mark to set a new record high, and is forecast to continue
rising in FY12/18.
Although overall sales and earnings have seen many ups and downs over the years, we believe it is fair to say that the
IT services business has been a steady earner while the contents business has experienced most of the volatility. Early
on, AIR Internet Service gave the IT services business stability in relative terms while the online PC games businessmade most of the money. However, 2008 brought more than just the Lehman Shock, it also saw the launch of theiPhone. With the iPhone being followed in 2009 by the debut of Android smartphones, the operating environment in
the online game market underwent a dramatic change as more and more online games began shifting platforms fromconsoles and PCs to smartphones. With the dawning of the new market for smartphone games, startup companies
took center stage, at least for a while. However, by 2012 large game makers saw that the smartphone game market
had enough growth potential to make it worthwhile and one after another starting putting their financial resources
and their also very substantial IP resources (i.e., well-established characters) into the smartphone game market.
As competition in smartphone game market intensified as the big boys came in, more than a few of the small andmedium-sized companies that otherwise had superior game development capabilities were forced to downsize.

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16 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Aeria Inc.
3758 TSE JASDAQ

13-Jun-2018https://www.aeria.jp/ir/release

Results trends

Aeria sold its first smartphone game in 2013 but, as mentioned previously, was still not earning enough to cover thecosts of game development (it continued developing online games for PCs until 2015). Even while game industry
experienced these many ups and downs during the first decade of the 21st century and on into the second, Aeria
was able to continue bringing first-rate, quality games to the market thanks to the steady stream of revenues andearnings from its IT service businesses. The Company’s patience finally paid off last year when it brought A3! to themarket and it became a big hit soon after its debut in January 2017. Although the momentum of A3! is expected tocontinue for a while longer, Aeria also took a big step towards reducing risk during 2017 by diversifying into asset
management, which stands to benefit from growing demand in the minpaku lodging market.

㻸㼛㼚㼓㻙㼠㼑㼞㼙㻌㼠㼞㼑㼚㼐㼟㻌㼕㼚㻌㼟㼍㼘㼑㼟㻌㼍㼚㼐㻌㼑㼍㼞㼚㼕㼚㼓㼟 㻹㼛㼢㼑㼐㻌㼕㼚㼠㼛㻌㼍㼟㼟㼑㼠㻌
㻿㼍㼘㼑㼟

㻔¥㼙㼚㻕

㻻㼜㼑㼞㼍㼠㼕㼚㼓㻌㼜㼞㼛㼒㼕㼠㻞㻡㻘㻜㻜㻜
㻞㻜㻘㻜㻜㻜
㻝㻡㻘㻜㻜㻜

㻭㼏㼝㼡㼕㼞㼑㼐㻌㻭㻵㻾㻌㻵㼚㼠㼑㼞㼚㼑㼠㻌㻿㼑㼞㼢㼕㼏㼑
↓597

㼙㼍㼚㼍㼓㼑㼙㼑㼚㼠㻹㼍㼗㼑㼟㻌㼘㼍㼞㼓㼑㻌㼚㼡㼙㼎㼑㼞㻌㼛㼒㻌㼍㼏㼝㼡㼕㼟㼕㼠㼕㼛㼚㼟↓㻱㼤㼕㼟㼠㼑㼐㻌
㼒㼕㼚㼍㼚㼏㼕㼍㼘㻌㻭㼑㼞㼕㼍㻌㻳㼍㼙㼑㼟㻌 㻲㼕㼞㼟㼠㻌㻼㼑㼚㼓㼡㼕㼚㻌㼎㼡㼟㼕㼚㼑㼟㼟 㼐㼑㼏㼛㼚㼟㼛㼘㼕㼐㼍㼠 㼏㼛㼚㼟㼛㼘㼕㼐㼍㼠㼑㼐↓↓㼑㼐㻝㻜㻘㻜㻜㻜

↓

㻡㻘㻜㻜㻜

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㻠㻘㻡㻜㻜
㻟㻘㻜㻜㻜
㻝㻘㻡㻜㻜
㻜
㻙㻝㻘㻡㻜㻜

-2,455㻜㻙㻟㻘㻜㻜㻜

Source: Prepared by FISCO from the Company’s securities report

A3! reaches No. 2 spot in iOS sales rankings for 2017
2. FY12/17 results trends
For FY12/17, Aeria reported sales of ¥15,871mn (+168.7% YoY), an operating profit of ¥2,691mn (+¥4,296mn
versus loss the previous year), recurring profit of ¥2,760mn (+¥4,189mn versus loss the previous year), and net
profit attributable to parent company shareholders of ¥2,080mn (+¥4,228mn versus loss the previous year). EBITDA,
another important metric used by Aeria, rose 584.0% YoY to ¥3,431mn. During 2017 the internet market showed
continued strong growth and the mobile contents market continued growing as well. However, as the competition
between companies to attract users became more and more intense, development, personnel, and other costs
began to rise as companies put more money into developing distinctive contents and applications that would attract
users, as well as into upgrades and expanded service plans.

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17 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Aeria Inc.

13-Jun-2018

3758 TSE JASDAQ

https://www.aeria.jp/ir/release

Results trends

FY12/17 results
FY12/16(¥mn)

Ratio to net
sales
（%）

FY12/1(¥mn)

Ratio to net
sales
（%）

Change
（%）

Sales

5,906

100.0

15,871

100.0

168.7

Gross profit

2,254

38.2

8,155

51.4

261.7

SG&A expenses

3,859

65.3

5,463

34.4

41.2

Operating profit-1,605

-27.2

2,691

17.0

Moved into
black

Recurring profit-1,428

-24.2

2,760

17.4

Moved intoblack

Net profit attributable to parent
company shareholders-2,147

-36.4

2,080

13.1

Moved into
black

Source: Prepared by FISCO from the Company’s financial results

The IT services segment reported sales of ¥4,616mn (+19.1% YoY) and an operating profit of ¥440mn (+39.2%).
In addition to an steady, ongoing stream of revenues and earnings, most of which came from First Penguin andInfotop, the segment continued working to diversify into new business lines with the aim of boosting top-line growth.
AIR Internet Services also saw continued steady growth in revenues and earnings, most of which were derived fromits data center operations. At the MVNO business’s AIRSIM mobile, the launch of its inexpensive SIM appears tohave been well received.
The contents segment reported sales of ¥8,874mn (+336.8% YoY) and an operating profit of ¥2,420 (+¥4,321mn
versus losses the previous year). The sharp jump in earnings is attributable in large part to the launch of A3!, ahandsome young actor training game that quickly became a major hit, breaking through 4.0mn download mark as
early as August, hitting the No.2 spot in the iOS game sales rankings and also named in Google Play’s Best of 2017
list (of top games and applications). The theme song CD for A3!, MANKAI★Kaika Sengen, made it to the top of thesales rankings for "original content" albums, sales of related character goods have been running strong, and salesof real peripheral goods are already gaining ground. Sales and earnings also benefited from the ongoing popularityof I★Chu, first released back in 2015, and contributions from an early live stage adaption of “A3!” in 2017.
The asset management segment, having just been established in FY12/17, reported sales of ¥2,380mn and an
operating loss of ¥94mn.
Compared with the forecast issued by the Company at the time of its interim results announcement, full-yearsales finished ¥1,871mn above while operating profit came in ¥808mn below plan. The above-plan sales reflected
strong-than-expected sales from A3! and additions from consolidated subsidiaries that were acquired during thecourse of the year. Operating profit came in short of expectations as the jump in sales at the contents segment led
to larger-than-expected increases in spending on advertising and commissions paid to fee collection agents. With
regard to the additional spending on advertising, one could make the case that the added spending during 2017
represents a front-loaded expenditure whose benefits will be realized in 2018 and subsequent years. The decline in
the gross profit margin is attributable to the acquisitions made during the year, as the new consolidated subsidiaries
had different earnings structures. The SG&A expense ratio came down, however, as the top-line gains more thanoffset the rise in costs at the contents segment. At the extraordinary loss level, the Company reported an asset
impairment loss of ¥32mn, ¥12mn in special retirement payments, and ¥50mn in losses from writing off bad debt.

We encourage readers to review our complete legal statement on “Disclaimer” page.

18 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Aeria Inc.

13-Jun-2018

3758 TSE JASDAQ

https://www.aeria.jp/ir/release

Results trends

FY12/17 results by segment
FY12/16(¥mn)

Ratio to net
sales
（%）

FY12/17(¥mn)

Ratio to net
sales
（%）

IT services

3,874

65.6

4,616

29.1

19.1

Contents

2,031

34.4

8,874

55.9

336.8

-

-

2,380

15.0

-

FY12/16(¥mn)

Margin（%）

FY12/17(¥mn)

Margin（%）

Change
（%）

316

8.1

440

9.5

39.2
Moved into
black

Segment sales

Asset management

Segment Operating profit
IT services-1,900

-91.4

2,420

27.1

Asset management

-13

-

-94

-4.0

Adjustments-6

Contents

Change
（%）

-

-74

-

Source: Prepared by FISCO from the Company’s financial results

Company forecast for FY12/18 looking conservative in light ofprospects for second good year of sales for A3!
3. FY12/18 outlook
For FY12/18, the Company is forecasting sales of ¥23,000mn (+44.9% YoY), an operating profit of ¥4,000mn(+48.6%), recurring profit of ¥4,000mn (+44.9%), and net profit attributable to parent company shareholders of¥3,000mn (+44.2%). At the IT service segment, the Company is looking to expand dealings with existing clients andadd new clients. At the contents segment, the Company is looking to adapt games so they can played on different
platforms, upgrade existing titles, and also develop new titles and content. At the asset management business, theCompany plans to make a full-scale push into real estate leasing, sales, and minpaku services.
FY12/18 outlook
FY12/17(¥mn)

Ratio to net
sales
（%）

FY12/18 E(¥mn)

Ratio to net
sales
（%）

Sales

15,871

100.0

23,000

100.0

44.9

Gross profit

8,155

51.4

-

-

-

SG&A expenses

5,463

34.4

-

-

-

Operating profit

2,691

17.0

4,000

17.4

48.6

Recurring profit

2,760

17.4

4,000

17.4

44.9

Net profit

2,080

13.1

3,000

13.0

44.2

Change（%）

Source: Prepared by FISCO from the Company’s financial results

We see the contents segment serving as the main growth driver in FY12/18. With both Liber Entertainment and
ASGARD turning out titles that are popular with women, the Group is looking increase its presence in this nichemarket and become the top game maker in this niche market in Japan and overseas with the help of Arithmetic’s
platform and overseas expansion expertise. At the contents segment, the Company sees sales of A3! related
products and revenues from other sources (such as live stage productions) gaining momentum and accelerating
earnings growth. In addition, we note that bilibili, which is scheduled to begin distributing A3! in China this year, iswell-versed in the operation of games from Japan as it is already operating the Chinese version of a large number ofother hit titles from Japanese game makers (including I★Chu). This, together with the fact that romance simulation
games are also growing in popularity in China, makes it likely that A3! will be a hit in the Chinese market as well.

We encourage readers to review our complete legal statement on “Disclaimer” page.

19 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Aeria Inc.
3758 TSE JASDAQ

13-Jun-2018https://www.aeria.jp/ir/release

Results trends

There are also a number of new titles that are expected to be released by companies that Aeria acquired in 2017.
However, of greater interest is the preparations that are underway to adopt new technologies in the near future.
Smartphone game developer eitarosoft, which is currently distributing Time Bokan 24 Bokan Meka Battle!, is focusing
its R&D efforts on 3D technology for online games. GOODVISION has plans to grow its business by investing morein virtual reality-related businesses. Sakuragate, which develops slot games for both for online/ land-based casinos,
is rolling out titles like Evangelion Slots in Europe. Having entered into a domestic PR contract with PokerStars(the world’s largest live poker brand), Sakuragate is also undertaking poker branding activity in anticipation of the
opening Japanese casinos in the future.
Aeria has also made a lot of moves whose real payoff can be expected in the medium term, like its move into
the minpaku business. However, even before that we would note that its forecast for FY12/18 appears overly
conservative, especially considering the fact that most hit games for smartphones tends to remain popular foras much as three years, and revenues from sales of related real goods and from live theatrical performances andother events does not usually kick in until the second year. Also, in the case of A3!, the game is set to be launchedin China. In this relation, we would also note that the Company’s past results presentation materials (from its Q2
FY12/17 results presentation meeting) indicated that its FY12/18 forecast incorporated contributions to higher sales
and earnings from the asset management business but said nothing about additional contributions from A3!. In any
case, we believe FY12/18 results are likely to exceed the Company’s forecast.

██Shareholder return policy
Company maintains stable annual dividend of ¥10 per share• Dividend policy
The Company recognizes that returning profits to shareholders is an important management concern but is also
looking to build up internal capital reserves to help fund future growth initiatives and further strengthen its businessposition. The Company also plans to draw on internal reserves to help fund M&A and other capital alliances,
R&D spending, and investment spending (especially on new businesses). With regard to dividends paid out ofretained earnings, based on its policy of maintaining a stable dividend, in FY12/18 the Company plans to pay anannual dividend of ¥10 per share (with no interim dividend), unchanged from FY12/17. As an additional reward toshareholders, the Company plans to send QUO Cards (gift cards) for the popular ASGARD title DYNAMIC CHORD
JAM&JOIN!!!! based on the size of individual shareholdings.

We encourage readers to review our complete legal statement on “Disclaimer” page.

20 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Aeria Inc.
3758 TSE JASDAQ

13-Jun-2018https://www.aeria.jp/ir/release

Shareholder return policy㻰㼕㼢㼕㼐㼑㼚㼐㻌㼜㼑㼞㻌㼟㼔㼍㼞㼑㻌㼍㼚㼐㻌㼐㼕㼢㼕㼐㼑㼚㼐㻌㼜㼍㼥㼛㼡㼠㻌㼞㼍㼠㼕㼛(¥)

㻰㼕㼢㼕㼐㼑㼚㼐㻌㼜㼑㼞㻌㼟㼔㼍㼞㼑（％）

㻰㼕㼢㼕㼐㼑㼚㼐㻌㼜㼍㼥㼛㼡㼠㻌㼞㼍㼠㼕㼛
㻤㻚㻝㻌

㻝㻞㻚㻜

㻝㻜㻚㻜
㻡㻚㻢㻌

㻝㻜㻚㻜

㻡㻚㻜
㻝㻜㻚㻜㻌

㻝㻜㻚㻜㻌

㻝㻜㻚㻜㻌

㻝㻜㻚㻜㻌

㻤㻚㻜

㻝㻜㻚㻜㻌

㻝㻜㻚㻜㻌

㻜㻚㻜

㻙㻟㻚㻡㻌

㻙㻠㻚㻠㻌
㻢㻚㻜

㻙㻡㻚㻜

㻙㻤㻚㻜㻌

㻠㻚㻜

㻙㻝㻜㻚㻜
㻙㻝㻡㻚㻢㻌

㻞㻚㻜

㻙㻝㻡㻚㻜

㻜㻚㻜

㻙㻞㻜㻚㻜
㻲㼅㻝㻞㻛㻝㻟

㻲㼅㻝㻞㻛㻝㻠

㻲㼅㻝㻞㻛㻝㻡

㻲㼅㻝㻞㻛㻝㻢

㻲㼅㻝㻞㻛㻝㻣

㻲㼅㻝㻞㻛㻝㻤㻌㻱

Source: Prepared by FISCO from the Company’s financial results██Information security
In the course of business, some Aeria Group companies require that individual users registering for online services
provide personal information, including their name, address, telephone number, and email address. Personal
information may also be collected and held temporally by client companies with the consent of the provider of that
personnel information. Such personal data is treated as confidential by the Group, with internal access subject torestrictions and additional measures in place to prevent unauthorized external access. Aeria does not store any
personal information stemming from sales made through App Store or Google Play.

We encourage readers to review our complete legal statement on “Disclaimer” page.

21 21

Disclaimer
FISCO Ltd. (the terms “FISCO”, “we”, mean FISCO Ltd.) has legal agreements with theTokyo Stock Exchange, the Osaka Exchange,and Nikkei Inc. as to the usage of stock priceand index information. The trademark and value of the “JASDAQ INDEX” are the intellectual
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This report is based on information that we believe to be reliable, but we do not confirm or
guarantee its accuracy, timeliness,or completeness, or the value of the securities issued bycompanies cited in this report. Regardless of purpose,investors should decide how to use
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This report was prepared at the request of its subject company using information provided
by the company in interviews, but the entire content of the report, including suppositions andconclusions, is the result of our analysis. The content of this report is based on informationthat was current at the time the report was produced, but this information and the content of
this report are subject to change without prior notice.
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FISCO Ltd.