目次

OPT Holding, Inc.
Consolidated results for the 2019 Q2
Aug 8, 2019

Disclaimer
This English translation is only for reference. When there are any
discrepancies between the original Japanese and English translation, theoriginal Japanese always prevails.
The information contained in this material is carefully scrutinized before presentation as it
is intended to facilitate your understanding of the Company’s business, management
policies and plans, financial position, etc. However, we do not guarantee its accuracy,completeness, effectiveness, or security.
None of the information herein is prepared to solicit investment. The final decision on
investing should be made by you, under your own responsibility. We will not be responsible
or liable for any consequences resulting from investments made by you in reference to, or
by use of, the information.
Any information herein other than past or present facts represents our future outlook
developed based on the input currently available, and includes various risks anduncertainties. Thus, please note that actual business results released at a later date may
differ due to such factors.

1

Table of Contents

1. 2019 Q2 Results
2. 2019 Full-year Earning Forecasts
3. 4 Turning Points
4. References2

1. 2019 Q2 Results

1-1. Key Management KPIs: Non-GAAP Indicators
OPT Holding, Inc., and its subsidiaries and affiliates (hereinafter, the Group) adopt Japanese generally accepted accounting principles(J-GAAP) and disclose its financial statements in accordance with J-GAAP reporting format; however, the Group uses following nonGAAP indicators in order to more accurately evaluate its results of operations and financial position. Please refer to the definition ofeach Non-GAAP indicator as stated below. Also reconciliation of GAAP to Non-GAAP indicators of EBIT, EBITDA and Free cash flow
are stipulated in this material.

【Definition and formula of Non-GAAP metrics】
１．EBIT(Earnings before Interest and Taxes)=Net income before taxes + interest payment – interest income
２．EBITDA(Earnings before Interest, Taxes, Depreciation and Amortization)=EBIT+Other financial gain/loss+depreciation of noncurrent tangible assets+amortization of
intangible assets+depreciation of long-term prepaid expense+non-cash gain/loss
３．FCF(Free cash flow)=Operating cash flow＋ investment cash flow± one-off cash flow items
４．FMV(Fair Market Value)=an estimated market value of a property or a liability, based on third-party transaction between aknowledgeable and willing buyer and a knowledgeable and willing seller
５．IRR(Internal Rate of Return)= Investment return computed assuming the securities (including securities of subsidiaries) held in our
portfolio have been sold at the end of the reporting period.
６．AUM(Assets Under Management)= aggregate amount of (1) book value of subsidiaries’ and affiliates’ stocks and (2) FMV of operational
investment securities and invested securities
Note; The Group discloses those Non-GAAP metrics as important management KPIs from 2018.
4

1-2. Key Management KPIs: Supplementary Notes【Adjustments for past financial results】
Consolidated results for 2018 include earnings from the video streaming business of relaido, Inc. (former SkillUp Video Technologies, Inc.), belongs to Large Corporations Segment of Marketing Business, and also includes
costs and gains incurred by its company-split and business transfer.

In this material, consolidated results and Marketing Business segment results are compared to the adjusted
previous year’s results in which the earnings and other related costs and gains related to the transferredbusiness of the former Skill-Up Video Technologies, Inc. were excluded.



Results for 2019 Q2 are not adjusted, as the business was already transferred in 2018.
2019 Q2

Unit: JPY million

Actual2018 Q2

Adjusted YoY（%）

aAdjusted

YoY（%）

a-b
Adjusted
amountb
ActualRevenue

20,141(1.4)%(4.0)%

20,421

20,982(561)

Gross profit

3,484(13.8)%(16.3)%

4,040

4,160

(120)

Operating income

(528)

-

-

134

81

53

EBIT

(724)

-

-

1,181

1,127

54

EBITDA

(247)

-

-

1,355

1,395

(40)

Quarterly net
income attributableto owners of theparent

(596)

-

-

724

663

61

5

Executive Summary

Large
Corporations

MarketingBusiness

Synergy
Investment
Business New business wins from national clients and brand advertisers is increasing; keeping
the profit margin and quality of services is critical Investment into human resources is critical as we anticipate increased business winsfrom national clients and brand advertisers in 2019 Q3/Q4

Local SMEs

 The growth rate of sales revenue is recovering to 20% plus, and keep theoverwhelming No.1 position in local SMEs business

Financial
Investment

 Created OPT Ventures #2 Fund, and started investments

Overseas
Marketing Restructuring/liquidation of non-profitable subsidiaries has mostly completed, andresources are being concentrated into the domestic business.

China
Business

 General trading model will start from Q3, slightly behind the initial schedule Recognized impairment loss for some of past investments, thereby promoted therestructuring of the investment portfolio and the cleaning of the B/S

Digital Shift

Creating a new business model mixing digital advertising with digital shift: Digital Sift Academy and Digital Shift Times started well
 Investment into digital shift support/innovation/creation being prepared Closely monitoring Chinese tech business model6

2019 Q2 Results Highlights

MarketingBusiness（Adj)• Large Corporations: Some existing clients continued to reduce ad budgets, gross profit margin lowered
and personnel costs increased as new hires increased.
• Local SMEs: New business wins and increase in ad budgets of existing clients offset by increase of
personnel costs due to new hires.

Revenue
EBITDAJPY 19,269 million YoY 0.2% down
JPY
396 million YoY 53.9% down

・AUM: Decreased from the previous quarter mostly due to the decline in market value of Raksul Inc.
Synergy
Investment
Business

Consolidated
Results(Adj)

・IRR: Decreased from the previous quarter mostly due to the decline in market value of SoldOut Inc.

AUM
IRR

JPY 27,004 million JPY 3,031 million decrease from 2019 Q1
13.0 %
2.7 ptdown from 2019 Q1

Revenue and EBITDA decreased due to decreased revenue/margin in the Marketing Business anddeconsolidation of Writeup Inc.

Revenue JPY 20,141 million YoY
1.4 % down
EBITDA JPY(247) million YoY JPY 1,602 million down
EBITDA Year-on-Year excluding extraordinary gains (approximately JPY 1.2 billion) from the IPO and sale of Writeup shares: JPY (314) million yen

Notes)EBITDA by business segment is shown before allocation of Corporate Function costs

7

2019 Q2 Key Consolidated Financials(Unit: JPY million)

2019 Q2

2018 Q2
Adjusted

ChangeAmountYoY（%）

2018 Q2
w/o adjChangeAmount YoY（%）

Revenue

20,141

20,421(280)(1.4)%

20,982(841)(4.0)%

Gross profit

3,484

4,040

(555)

(13.8)%

4,160

(676)

(16.3)%

Operating income

(528)

134

(663)

-

81

(609)

-

EBIT

(724)

1,181

(1,905)-

1,127(1,851)-

EBITDA

(247)

1,355

(1,602)-

1,395(1,643)-

Quarterly net income
attributable to owners ofparent(596)

724(1,321)-663(1,260)-

ROE(LTM)※1※2

1.5%

7.3%

(5.8)pts-

Free cash flow

(472)

715

(1,187)-

Earnings per share
EPS (in yen)

(26.06)29.35(55.41)-

Diluted earnings per share(in yen)(26.07)29.07(55.14)-※1 ROE=Net income attributable to owners of parent (LTM) ÷ (Average equity amount as of June 30, 2018 and 2019)
2 LTM=Last Twelve Months

8

2019 Q2 Breakdown by Segments (Adjusted)

Reporting segment(Unit: JPY million)

MarketingBusiness

Synergy
Investment
Business

OthersCorporate
Function
Cost

Total

Consolidated

Others

Revenue

19,269877

20,147-(5)

20,141Gross profit

3,141

368

3,510

-

(26)

3,484

SG&A

(2,837)(645)(3,483)(538)

9(4,012)

Operating income

303

(276)

27

(538)

(16)

(528)

EBIT

238

(382)

(144)

(572)

(7)

(724)

EBITDA

396

(140)

255

(483)

(20)

(247)

Note: Operating income/EBIT/EBITDA:Before Corporate Function cost allocation

9

Non-GAAP KPI: Free Cash Flow/EBITDA[Free cash flow](Unit: JPY million)

2019 Q2

2018 Q2

AmountYoY（%）

Operating cash flow

(405)

854

(1,259)-Investing cash flow

(67)

(139)

71

-

Free cash flow

(472)

715

(1,187)-

Adjustments*

-

-

-

-

(472)

715

(1,187)-

Adjusted Free cash flow
None: Adjustments: One off cash flow item

(Unit: JPY million)[EBITDA]

2019 Q2

2018 Q2

AmountYoY（%）

(728)

1,120

(1,849)-Interest paid (+)

5

8

(2)

(29.0)%

Interest received (－)

(1)

(1)

-

16.8%

(724)

1,127

(1,851)-

Depreciation (+)

25

44

(18)

(41.8)%

Amortization of intangible
assets(＋)
Depreciation of long-term prepaid expense (＋)

111

242

(131)

(54.1)%-

1-(35.7)%

Non-cash profit/loss (＋)

338

(19)

358

-

EBITDA

(247)

1,395

(1,642)-

Income before Taxes

EBIT

10

2019 Q2 Results of Marketing Business (Adj)
LargeCorporations

Local SMEs

•
•
•
•
•

Some existing clients continued to reduce ad budgets, gross profit margin lowered and personnel costs increased as newhires increased.
Reduction of overall SG&A somewhat offset by investment into human resources (hiring, training, pay increase)
Sales revenue recovered due to increase in ad budget of existing clients and new business wins in spite of decrease intransaction with some large-size clients.
Gross profit pressured by decrease in incentives from some media
As same with Large Corporations Segment, SG&A increased due to continued investment into human resources (hiring,training, pay increase), EBIT/EBITDA reduced.

Large Corporations(Unit: JPY million)
2019 Q2

2018 Q2

Amount% of changeofchangeLocal SMEs

Segment Total

2019 Q2

2018 Q2

Amount ofchange% ofchange2019 Q2

2018 Q2※

Amount% ofofchangechangeRevenue

14,573

15,473 (899)(5.8)%

4,836

4,021

814

20.3%

19,26919,301Gross profit

2,261

2,557 (296)(11.6)%

888

821

66

8.2%

3,141

3,353 (211) (6.3)%

SG&A(2,080)(90)(4.6)%

(764)

(679)

(85) (12.5)%(2,837)(2,644) (193) (7.3)%(1,989)(32) (0.2)%

Operating income

180

567 (386)(68.2)%

123141(18) (12.9)%303

708 (405) (57.1)%

EBIT

119

568 (448)(79.0)%

126145(19) (13.4)%

238

714 (476) (66.6)%

EBITDA250

688 (438)(63.6)%

145

170(24) (14.5)%396

859 (463) (53.9)%

Note: 1. Operating income/EBIT/EBITDA:Before Corporate Function cost allocation
2. Segment total: figures include inter-segment reconciliation between Large Corporations and Local SMEs sub-segment

11

2019 Q2 Results of Synergy investment Business
Revenue decreased due to the deconsolidation of Writeup Inc., (a subsidiary until 2018 2Q), andthe restructuring of overseas subsidiaries.

Revenue

Although EBITDA improves by JPY 242M vs EBIT through reversing impairment loss, on YoY basis, decreaseas previous year recorded gain from selling Writeup in the amount of JPY 1,173M.

EBIT/EBITDA(Unit: JPY million)

2019 Q2

Amount ofchange2018 Q2% of change

Revenue

877

1,152

(274)

(23.8)%

Gross profit

368

699

(330)

(47.2)%

SG&A

(645)

(817)

171

21.0%

Operating income

(276)

(118)

(158)

-

EBIT

(382)

941

(1,324)-

EBITDA(140)

944(1,085)-

Note: Operating income/EBIT/EBITDA:Before Corporate Function cost allocation

12

AUM (FMV) and IRR[AUM*1 (FMV*2)]
AUM at the end of 2019 Q2 : JPY 27,004 million(JPY 17,088 million increase from acquisition cost; up 172.3%)

・Decrease of JPY 3,031M from 2019 Q1 mainly due to change
in market value of Raksul Inc. and impairment losses ofoverseas investments.

[IRR (Internal Rate of Return)]
Decreased from 2019 Q1 mainly due to the decline in themarket value of SoldOut Inc.

(Unit: JPY million)

35,000Share of subsidiaries
子会社株式
Share of affiliates
関連会社株式30,03530,000(Reference)
2019 Q1

13.0%

15.7%

27,004

投資有価証券
Investment securities

25,0002019 Q2

From 2nd quarter of 2018, IRR of invested
assets is disclosed for improving transparency
of return on investments

Operational

営業投資有価証券
investment

securities

20,00026,30515,00010,00024,126

9,915
6,476

5,000

0

2,273

2,701

1,165

1,027

Acquisition
cost

2019Q1
Fair market value

2,134
743
2019Q2
Fair market value

Note; 1. AUM:Aggregate amount of (1) book value of subsidiaries and affiliates’ stock and(2) fair market value (FMV) of operational investment securities and invested securities

2. FMV : an estimated market value of a property or a liability, based on third-party transaction
13
between a knowledgeable and willing buyer and a knowledgeable and willing seller2019 Q2 Corporate Function cost
SG&A costs increased due to investments for mid-to-long term growth on human resources(hiring and training), group-wide management systems, and granting of restricted stocks to
selected employees.

(Unit: JPY million)

2019 Q2

2018 Q2

Change amount

SG&A

(538)

(460)

(77)

Operating income

(538)

(460)

(78)

EBIT

(572)

(480)

(92)

EBITDA

(483)

(450)

(32)

Definition of Corporate Function cost
The definition of this Corporate Function cost has changed since 2018 as
follows.

✓Personnel cost at administrative division at OPT Holding* Reasons for the discrepancy between SG&A costs and EBIT include non-Operating
income and losses.
* Reasons for the discrepancy between EBIT and EBITDA include costs of stockcompensation plan (since 2018 Q3).

✓Overhead cost to manage OPT Holding’s administrative division except
personnel cost.
Expense for several services provided to Group companies by OPT Holding
is included.

14

2. Updated 2019 Earnings GuidanceUpdated 2019 Earning Guidance for Marketing Segment(Unit: JPY million)

UpdatedGuidance

Original
Guidance

Variance vsoriginalguidance

Variance vsoriginalguidance(%)

UpdatedYoY Growth

Original
YOY Growth

Revenue

86,50093,500(7,000)(7.5)%

7.3%

16.0%

EBIT

2,900

5,000

(2,100)(42.0)%(24.0)%

31.1%

EBITDA

3,450

5,550

(2,100)(37.8)%(27.8)%

16.1%

Synergy Investment Segment and Corporate Function Cost: no changes from the previous guidance asof today16

Background for Updated Marketing Guidance[Updated Guidance]
Although revenue growth is recovering in 2H, EBIT/EBITDA are decreased by approx.. JPY 2B from original forecast
Reduction of Gross Margin (JPY 2.95B) from reduced revenue (JPY 1.35B) and margin ratio (JPY 1.6B)(Unit: JPY million)
Improvement of SG&A (JPY 0.9B)
2019 1H
Actual2019 2H
YoY

Forecasts

2019 Full Year
YoY

Forecasts

Vs theoriginalguidance

YoY

Revenue

39,567(1.1)%

46,93315.7%

86,500

7.4%(7,000)

EBIT

1,097

(48.4)%

1,853

11.3%

2,950

(22.7)%(2,050)EBITDA

1,366(44.6)%

2,084(9.8)%

3,450(27.8)%(2,100)2018 Figures are in adjusted basis; Excluding earnings from video streaming business operated by our consolidated subsidiary relaido, Inc (previously SkillUp Video Technologies Corporation)and gain from sales the business. The video streaming business was sold at the end of September 2018.

The reasons for the difference of original guidance

Vs the original guidance

Large Corporation: Decrease in gross profit is expected due to decrease in revenue

approx. JPY (850) million

Local SMEs: Decrease in gross profit is expected due to decrease in revenue

approx. JPY (500) million

Large Corporation: Decrease in gross profit margin on new business wins from national clients and brandadvertisers and decrease in incentives
Containment of SG&A given the current weak business, offset by continued investment into human resources(hiring, training, and pay raise)
Total

approx. JPY (1,600) million
approx. JPY 900 million
approx. JPY (2,050) million

17Marketing Business: Challenges and Planned Actions

Challenges

Planned Actions

Marketenvironment• Competitive environment for digitalagencies due to accelerated
digitalization of sales promotion (massad to internet ad)• Focus on strategic client targets in ourstrong business segments andimplementation of integrated marketing

Improvementoforganizational
capability• Training of junior staff into
digitalization specialists• Productivity per person• Staff development leveraging HR
Development Center*• Reorganization and business process
improvement• Aggressive utilization of AI (creative)

New businessdevelopment• Access to national clients and brandsponsors and time/cost for new
business wins
• Costs to service new clients anddevelopment of solutions• Pooling and sharing of knowledge andknowhow for digitalization support obtained
through new business development• Group reorganization/optimization tostrengthen client relationship and proposal
quality＊HR Development center: R&D institute for digital human resources18

3. Turning Points

Four turning points: Why now?

１．Management

Transformation to “Digital Shift Company”

２．Marketing business for large corporations

Profitability improvement and supporting thetransformation of client business model
３．Marketing business for local/SME clients

Positioned at dominating No.1 market share
４．Synergy investment business

Growth investments for future20

3. Turning Points(1) Management(2) Marketing business for large corporations(3) Marketing business for local/SME clients(4) Growth Investments for future(1) Management:Transformation to Digital Shift Company

Ad Agency plus Digital Shift Company
expanding our business domain
Digital Shift is essential for survival for any companies

Inquiries/support requests pouring in from clients for the most updated
digital technology information, new business models, connect withstartup companies, talent development/assignment of staff and AI
system developments in addition to Internet ad.

22

Why OPT group leads Digital Shift (DS)?

OPT group’s capabilities


Extensive DS experience through clients’ DS supports



Digital human resources of 1,600 employees (outstanding resources)

Development programs of DS human resource

No.1 AI human resource platform in Japan

Our strong client base who are facing challenges for DSLeverage of the latest digital information

Strong connections with and investment into venture companies, and trust fromentreprenuersTrack record of business turnaround

Network and knowledge with Chinese Internet companies and venture companies

With all these advantages, transform into DS company
23

(1) Management:Focus on Core Business thru Selection and Concentration

Reviewed business portfolios andconcentrating management resources on core businesses
Marketing business:
Reorganization in the large corporations segment• Group optimization from subsidiary optimization• Optimization through integrating services, realizing
synergies, and improving operational efficiency

Overseas marketing business:review and restructuring
Liquidation and restructuring of Overseas ad agency
businesses on track[Continuing]China:
Expansion of general
trading businessNew organization structure for the large corporation
segment

OPT

Hertlass

relaidoConnect
OM

Absorption split
Absorption
mergerCrossfinity Inc.
Cunsumer first[Continuing]USA
R&D andinvestment vehicle

brainy[Under liquidation]
OPTSEA
Pte.,Ltd.(Singapore)[Sold]GRASIA Bangkok
CO.,Ltd.(Thailand）[Sold]
eMFORCE Inc.(Korea)[Planned for sale]
OPTOK
Co.,Ltd(Thailand）[Under liquidation]
GRASIA Pte.,Ltd.
（ Singapore ）[Planned for sale]
Chai Communication
CO.,LTd..(Korea)

24

3. Turning Points(1) Management(2) Marketing business for large corporations(3) Marketing business for local/SME clients(4) Growth Investments for future(2) Marketing for Large Corporations: Strengths and UniquenessBusiness partner in digitalization covering advertising to businessmodel transformations
STP

Brand
Recognition

Interests andconcerns

Promoteunderstanding(visit)Engagement

LTV/loyal

Strategic Planning

Account

Selling Points
Development

Brand

Management
Consulting
Operation /ReportData Analysis
General Control
Non-advertising area
※ STP:Segmentation, Targeting, Positioning※ LTV:Life Time Value（Life time value of customers）

Creative

Technology・ Operation ・Contents
Marketing26

(2) Marketing for Large Corporations: Expansion of Client Base

Steadily winning new businesses of new large clientsthru competition[Examples of wins by industry]

Leading auto
manufacturer

Leading cosmetic
manufacturer

Leading
telecommunications
manufacturer

Leading retail store

Leading pharmaceuticalmanufacturer

Leading consumer goods
manufacturer

27

3. Turning Points(1) Management(2) Marketing business for large corporations(3) Marketing business for local/SME clients(4) Growth Investments for future(3) Marketing Business for SMEs: KPIs

KPIs on track; aiming for continued higher growth[Duration of contracts (continuity)][# of companies ×Unit Price]
・The number of clients: steadily increasing (YoY +4.8% )・Average price: increased in revenue from medium-sized clients. (YoY+3.3%)(The unit prices steadily increasing for medium-priced transactions.)“Long-term duration” transactions are increasing.
(YoY +15.5pts)

Long-term
⾧期300

Trend of total sales, # of company, and price(2016=100)# of
社数

Average
総単価

clients

Existing
既存

Newly acquired
新規

Distribution by duration of contracted period

100%

Sales*
総売上

price

255.4

250

200
178.9
50%
142.8

150

100

50
Q1

Q2

Q3

2016年
FY16

Q4

Q1

Q2

Q3

2017年
FY17

Q4

Q1

Q2

Q3

FY18
2018年

Note: Sales of ad operating support service, one of pillar digital business

Q4

Q1

Q2

FY19
2019年

0%
Q3

Q4

2017年
FY17
2017

Q1

Q2

Q3
2018年
FY18
2018

Q4

Q1

Q2

2019年
FY19
2019

29

(3) Marketing business SMEs: Case Studies

Marketing and promotional support for SME retail clients bypartnering with platformers
This is a service to help register, update, and improve the effects of Google My Businessfor individual store owners, providing a function to easily operate Google My Business on
the LINE Talk screen.
In addition, provide a service for managers with multiple stores who can update
information of multiple stores at one time on the management screen.
In adopted stores, the viewing
number of the store informationand the route information, etc. isincreased compared with lastyear.

Google My Business Case Study

Chawawa @Arashiyama
The viewing number of thestore information comparedwith last same period ofquarter

6.8xKawabata taki saburō shōten
The searched times of
the route informationcompared with last same
period of quarter

2.1x
30

3. Turning Points(1) Management(2) Marketing business for large corporations(3) Marketing business for local/SME clients(4) Growth Investments for future

(4) Growth Investments for Future: Investment into Ventures
Create new services and industries to realize future prosperity leveraging our expertise andnetworks obtained in the investment into startups since OPT was born.
Portfolio of Group’s own investments and※1
investments thru own funds

Group’s IPO track record in own investment
and LP investment to funds

Portfolio include many startups with high growth potential

Actual Performance after 2013 Full-scale Launch

Sharing Economy

Listed on TSE
Mothers in May
2015

Listedon TSE株式会社
Mothers in April
マーケットエンタープライズ
2015

Listed on New York
Stock Exchange inNovember 2015

Gunosy Inc.

Square, Inc.

Listed on TSE Mothersin May 2018

Listed on TSE Mothers
in June 2018

MarketEnterpriseCo., Ltd.

Direct Trading

Listed on TSE Mothers
in December 2017

DisruptiveTechnology

Geniee, Inc.

Raksul Inc.

Writeup Co., Ltd.

※ Listed after transfer of holdings※1: OPT Ventures #1 Investment Limited Partnership※Market capitalization: As of August 7, 201932

(4) Growth Investments for Future:
Accelerate Growth Investments to Transform to Digital Shift Company

Start growth investment aggressively in about three years
About JPY20 billion forbusiness investment

MarketingBusiness

Synergy
Investment
Business(AI, etc)

DS Supportand Innovation

J-GAAP Earnings
Expect deterioration mainly due toamortization of goodwill; however, aiming to
improve corporate value

Management KPI・EBITDA・Free cash flow
・ROCE（Return on Capital Employed）
・ROE (Return on Equity)

Additional budget for
M&A

M&As related to＋ Digital
Shift creation
Target Return on Investment

・IRR 10%Return to shareholders
Expand return to shareholders by accelerating
mid-to-long term growth of EPS throughallocating retained earnings to investment on
digital related business33

(4) Growth Investments for Future: AI Business, SIGNATE

No.1 data scientist platform in Japan
Number of registrants are drastically increasing
Membership on our AI platform

Over 20,000
registrants

25,000(Increased approximately 16% from theend of March 2019)

SIGNATE: Reasons to be chosen①Want to know who is excellent AI
service provider or competent engineer

20,000SIGNATE’s AI platform provide
transparency by its scoring system

15,000②AI talent shortage in Japan

10,000Support through SIGNATE AI platform
which has the largest registration numberof data scientists

5,000# of engineers

0
2015年

2016年

2017年

＊As of the end of June 2019

2018年

2019年

34

(4) Growth Investments for Future: AI Business, SIGNATEEntered into AI business; the company established in April 2018
Worked on multiple projects
Cases
Japan Tobacco Inc.

West Japan Railway Company

35

Transformation to Ad Agency + Digital Shift Company“Digital Shift (DS)”: How we envision?
①Support “digital shift”

For clients

Provide DS support for overall corporate activities
covering people, resources, financing, knowledge andinformation in addition to ad business②Innovate “digital shift”

With clients

Commit ourselves to clients’ digital shift; support
digital companies created with/by clients with ourown group resources③Create “digital shift”

By ourselves

Implement digitalization of existing companies
Create digital business from zero to one

36

Our Strategic Map of Digital Shift

Extend coverage ofservices and products

Digital Ad Agency plus Digital Shift Company①DS Support
For clients
Expand to 7P*2③DS Creation
By ourselves
Digital shift existing
companies by ourselves

１

２

1P

②DS Innovation
With clients（Current position）

Marketing Business
Synergy Investment
Business

１

Lead clients’ new digitalcompanies

Diversify business model
OPT Group’s Core Asset Strong client base/Approx. 1,600 digital talents
 Strong connection to China/Established network with startups/No.1 in AI talent pool inJapan and advanced technologies
Note; Definition of 7P:Promotion, Product, Price, Place, Personnel, Process, and Physical Evidence

37

Digital Shift: progress
OPT Group’s new owned media

Be a compass for DS transformation and create new values
through “Digital Shift Times”“Contribute to successful digital shift and give courage and hope to the management of Japanese corporations”
Media that guides users through "digital shift in the way it should be" by collecting by far the largest examples and knowledge ofdigital shift

URL: https://digital-shift.jp/
38

4．References

2019 Q2 Consolidated Revenue Analysis (Adjusted）(Unit: JPY million)

25,000

(280)

(32)

20,000(274)

26

15,00010,00020,421

20,1415,000

02018 Q2

Marketing Business

Synergy Investment

Other/Internal transaction2019 Q240

2019 Q2 Consolidated Gross profit Analysis (Adjusted）(Unit: JPY million)
4,500

(555)

4,000

(211)
(330)

3,500

(13)

3,000

2,500

2,000

4,040
3,484

1,500

1,000

500

0
2018 Q2

Marketing BusinessBusiness
Marketing

SynergyInvestment
Investment
Synergy

Other/Internal transaction
transaction
Other/Internal

2019 Q241

2019 Q2 Consolidated EBIT Analysis (Adjusted）• Decrease in Synergy Investment.
Impairment on overseas investment and funds by JPY 400M
IPO gain from selling Writeup stocks in 2018 and deconsolidation of the company from group(Unit: JPY million)
1,500(1,905)

1,000

500

(476)

1,181

(1,324)
0

(724)
(500)

(105)

(1,000)2018 Q2

Marketing Business

Synergy Investment

Other/Internal transaction2019 Q242

2019 Q2 Consolidated EBITDA Analysis（Adjusted）• Decrease in Synergy Investment.
Impairment on overseas investment and funds by JPY 400M
IPO gain from selling Writeup stocks in 2018 and deconsolidation of the company from group(Unit: JPY million)
1,600(1,602)

1,400

1,200

(463)
1,000

800

600

1,355

400

(1,085)

200

0

(54)
(200)

(247)

(400)
2018 Q2

Marketing Business* EBITDA: Before allocation of Corporate Function costs

Synergy Investment

Other/Internal transaction2019 Q2

43

Quarterly Consolidated SG&A Movement
Continued investment on human resources (hiring/training) for mid-to-long term growth and enhancing
group-wide management system increasing SG&A.
(Unit: JPY million)
in million yen
5,000

17.1%

17.6%

4,000

3,791

15.6%

3,262

3,000

426

2,500

204
106
154
38
258

17.0%

3,557

3,569

423

422

183
117
158
62
261

209
118
156
42
271

4,079
16.0%

3,632

562

505

301

263
134
157
43
261

256
114
154
47
252

3,897
463

493

280

140
155
89
260

126
145
46
242

4,012

3,969
3,771
463
283
146
75
102
239

18.0%

17.5%

512
279
159
69
30
234

306
151
76
44
240

14.0%

12.0%

10.0%

8.0%

1,500
2,077

2,353

2,350

2,441

2,306

2,595

2,572

2,661

2,490

2,723

6.0%

4.0%

500

2.0%

0

0.0%
Q1

Q2

Q3

Q4

Q1

Q2

FY2017# of Employees
Consolidated

16.0%

472

2,000

1,000

20.0%

19.2%

18.6%

4,500

3,500

19.9%

19.4%

1,513

1,639

Q3

Q4

FY2018
1,641

1,573

Note; Employee include regular employees and contractors.

1,652

1,667

Q1

Q2

20219年 FY201920219年
1,616

1,631

1,645

1,778

44

2019 Q2 Breakdown of Marketing Business
Breakdown of Revenue (Adjusted）(Unit: JPY million)

25,000

(32)

(899)

20,000814

53

15,00010,00019,301

19,2695,000

02018 Q2

Large Corporations

Local SMEs

Other/Internal transaction2019 Q245

2019 Q2 Marketing Business EBITDA Analysis (Adjusted)(Unit: JPY million)

1,000

(463)

900

800

700

(438)
600

500

400

859

(24)

300

396

200

100

0
調整後 2018年Q22018 Q2 (Adj)* EBITDA: Before allocation of Corporate Function costs

マーケ大手領域
Large Corporations

マーケ中小領域
Local SMEs

2019年Q2
2019 Q246

2019 Q2 Marketing Business EBITDA Breakdown (Adjusted)• Gross profit decreased due to a decline in revenue and lower gross profit margin in the Large Corporations segment• SG&A cost increased due to advance investment for HR cost (recruiting, training)(Unit: JPY million)

(463)
1,000
900
800

(211)

700
600

(193)

500
400

859

(61)

(49)

51

300

396

200
100
0
2018 Q2 (Adj)

Gross profit* EBITDA: Before allocation of Corporate Function costs

SG&A

Other

Depreciation

Intangible fixed
asset impairment

2019 Q2

47

OPT Inc. Quarterly Revenue Movement by Client Segment
18,000Long-termclients*1
16,000

2,280

96
94
83

12,000
1,537

3,372

1,899

110
1,286
46

1,950

1,729

3,206

2,463
2,095

2,381
1,757

(Unit: JPY million)

1,537

1,795

1,271

1,350

10,000

1,902

44
2,034

1,650

Non-long term contracted clients(spot billing, etc)*4
96

68
103

14,000

Newly acquiredclients*3

Switched to long-termfrom newly acquiredclients*2[New clients]■ Brand advertisers,
retail and fashion

2,016

8,000

6,000

11,582
10,724

10,64910,434
9,416

9,121

9,157

Q2

Q3

Q4

11,175
10,168

9,753

4,000

[Royal clients]■Finance, HR, Real Estate,
Cosmetics

2,000

Q1

2017

Q1

Q2

Q3
2018

Q4

Q1

Q2
2019

The category above is defined based on service period; *1: More than 24 months *2: 12 months ~ 24 months,*3: 1 month~12 months, *4: Less than 1 month48

OPT Inc., Revenue Growth Rate by Products[Listing Ad]

YoY:(1.0)%

Decreased due to a decline in transaction volume of apart of existing clients[Ad-network Ad]

Decreased due to a decline in transaction volume of a part ofexisting clients

4,500

4,500

4,000

4,000

3,500

3,500

3,000

3,000

2,500

2,500

2,000

2,000

1,500

1,500

1,000

1,000

500

500

0

YoY:(1.4)%(Unit: JPY million)0
2014Q2 2015Q2 2016Q2 2017Q2 2018Q2 2019Q2

2014Q2 2015Q2 2016Q2 2017Q2 2018Q2 2019Q2

49

OPT Inc., Revenue Growth Rate by Products[Video Ad][SNS Ad][LINE Ad]

YoY:(36.0)%

YoY:+5.1%

YoY:+0.9%

Decreased due to a decline in transaction
volume of a part of existing clients

800

700

An increase in social advertising with newclients, but a slow down in growth due to a
decline in transaction volume of a part ofexisting clients
2,000
1,800

(Unit: JPY million)

An increase in LINE advertising with newclients, a slow down in growth due to a
decline in transaction volume of a part ofexisting clients
800

700

1,600
600

600
1,400
500

400

300

1,200
1,000
800

500

400

300

600
200

200
400
100

200

0

0

Note: All figures are results of OPT Ind., belongs to Marketing Business, large Corporation segment

100

0

50

2019 Q2 Synergy Investment Business:
Breakdown of Revenue（Adjusted）
Business
Development

SIGNATE business is steady but othersubsidiaries’ revenue decreased

Financial
Investments

Decreased due to deconsolidation of Writeup, Inc.

China/crossboarder EC

Increased from acquisition of new clients

Overseas
MarketingDecreased by restructuring/liquidation of non-profitablebusinesses

(274)

1,400

1,200

(44)

(Unit: JPY million)

168
(332)

1,000

(66)
800

600

1,152
877

400

200

0
2018 Q2

Business Development

China/cross-boarder EC

Financial Investment

Overseas Marketing2019 Q2

51

2019 Q2 Synergy Investment Business EBITDA Breakdown（Adjusted）
Business
Development

SIGNATE business is steady but othersubsidiaries’ revenue decreased

Financial
Investments

China/crossboarder EC

Decreased due to lower gross profit margin

Overseas
Marketing

Gains in overseas funds but decrease in profits becauseof last year’s extraordinary gains from IPO of Writeup,
Inc.
Reduction in losses due to restructuring/liquidation of
unprofitable businesses(1,085)(Unit: JPY million)

1,200

1,000

(64)
800

(72)

600

400

944
(983)

200

0

31
(200)
2018 Q2

Businessdevelopment* EBITDA: Before allocation of Corporate Function costs

China Crossboarder EC

Financial
Investment

Overseas
Marketing3
Other/Internaltransaction(140)2019 Q252

2019 Q2 Synergy Investment: from EBIT to EBITDA

EBIT YoY 382 down、EBITDA 140 down
・Reversal of impairment losses from operational investment securities and investments in China and other overseas
subsidiaries in DA(Unit: JPY million)
2019Q2 EBIT
0

Impairment from Financial
Investment Business
Depreciation & Amortization

Impairment in Overseas
Impairment in China
Impairment in Business
Depreciation & Amortization Depreciation & Amortization Depreciation & Amortization 2019Q2 EBITDA

(50)

(140)
(100)

209

(150)
(200)

6

(382)

(250)

43

(300)
(350)

24

(400)
(450)
(500)

* EBITDA: Before allocation of Corporate Function costs

53Computation of Fair Market Value for AUM
1) Shares of consolidated Subsidiaries and affiliates: book value.
2) Operational investment securities and other investment securities; calculated depending on theclassification
Classification

Valuation method① Notes and securities of whichinvestment amount is small

Acquisition cost

② Listed companies’ shares

Closing price at the end of June 2019③ Securities (except ① or ②) with therecent financing

Based on value on the recent financing④ Securities except above

CMV*1, DCF*2, or net asset method*3 depending on eachcompany’s status.

*1: CMV (comparable multiple valuation) method
Applied to issues for which competitors are set in SPEEDA, an information analysis tool.
*2: DCF (discounted cash flow) method
Applied to issues for which competitors are not set in SPEEDA and with reasonable business plans using KPIs or any other basis
for calculation are available. If there are any discrepancies between the actual performance and the business plan, it will be
adjusted by the plan achievement ratio.
*3: Net asset method
Applies to issues for which: (I) no specific business plan is available, (ii) a company with going concern, or (iii) the FMV
estimate by the CMV or DCF method falls below shareholders’ equity attributed to us.

KPMG AZSA LLC has provided us with guidance and advice in calculating FMV for theinvestment business.
54

IRR (Internal Rate of Return) Calculation
item

Investment

contents

Those invested in or after 2003 (including securities of operational
investment securities, investment securities, shares of subsidiaries
and shares of affiliates)

Reference date for calculation End of reporting period

MethodImpairedinvestment

Calculated as if they were sold at the net asset value after impairment.

Investment withrecent financing

Calculated as if they were sold at the refinance valuation if refinancehappens within last one year.

IPOed investment

Calculated as if they were sold at the market value as of the reference
date.

Fund

Calculated with the amount collected until the end of the reporting
period and the book value as of the end of reporting period.

OthersAny other investment with no change in their acquisition cost due tosale, impairment, financing, IPO or the like are calculated as if they
were sold on the reference date at the acquisition cost.

Income taxes

Income taxes are included.

55

～Support, Innovate, and Create Digital Revolution～

56