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Review of full-year financial results

The year ended September 2020

In the operation environment in 2020, the economic activity has been stagnant due to the globalpandemic of COVID-19, and the demand for advertisement decreased under the state of emergency announcedin April, as it restrained people from going out and depressed consumer activities. In mid-May, as the state of emergency was lifted and the economic activity slowly recovered, the advertising demand which was declining since late March hit the bottom in May and has continued to recover until September.

In 2019, the individual smartphone ownership rate in Japan grew up to 67.6% and exceeded more than 80% among young people in their 10’s to 30’s, showing that the quantitative expansion is progressing particularly among millennials and generation Z. In addition, the purpose of using smartphones diversifies as the rate of use of social media rises, and a change can be also seen on the side of quality (Source: “The result of survey of communication use trend in 2019” of the Ministry of Internal Affairs and Communications.) In the time that smartphones are becoming the main device when people use the Internet, in the service and application market, the content business such as videos, music and e-books is expanding. The way to utilize social media is not only to communicate with others but also to purchase stuff, and because the influence is the way stronger than before, the demand for supporting marketing rises to utilize each medium character, data and AI.

In such environment, in the main Digital Marketing Business, revenue and operating profit increased driven by expanding projects as consumption is shifting to online since COVID-19 and by promoting the alliance with Dentsu group. In the Media Platform Business, the increase in revenue was not enough to cover the expenses as the businesses expand, and the deficit increased.

For the expansion into new business segment, the Group made an equity participation in each company in a sport domain, a sharing-asset domain and an entertainment domain and started the business alliance.

As a result, revenue increased to ¥17,938 million (up 6.8% year on year), Non-GAAP operating profit increased to ¥2,452 million (up 18.8% year on year), operating profit increased to ¥2,274 million (¥183 million last year), profit before tax increased to ¥2,325 million (-¥81 million last year), profit for the period increased to ¥1,471 million (-¥542 million last year), and profit attributable to owners of parent totaled ¥1,464 million (-¥547 million last year).

Overview of consolidated full-year financial results

(units:\million)

  FY2016※ FY2017 FY2018 FY2019 FY2020
Revenue 13,862 14,702 15,272 16,796 17,938
Non-GAAP Operating profit 4,147 2,325 1,011 2,065 2,452
Operating profit 4,154 2,248 977 183 2,274
Profit attributable to owners of the parent 2,519 2,211 847 -547 1,464
【Reference】Net Sales 73,203 72,375 72,443 76,501 76,489

-For FY9/17, AXEL MARK INC. is excluded from the consolidated results.
Consolidated profits and losses for FY9/16 and before, with which comparisons are made, are corrected
retroactively and presented after being reclassified as those of discontinued businesses.

The trend of consolidated full-year financial results

Revenue
Non-GAAP Operating profit
Operating profit
Profit attributable to owners of the parent

Financial results by segment

(units:\million)

    FY2016※ FY2017※ FY2018※ FY2019※ FY2020※
Revenue
Digital Marketing Business 13,409 13,833 14,234 15,079 15,807
Media Platform Business 601 1,163 1,324 2,005 2,487
Adjustment -148 -294 -286 -289 -356
  13,862 14,702 15,272 16,796 17,938
Non-GAAP Operating profit
Digital Marketing Business 5,331 5,468 4,026 4,775 5,248
Media Platform Business -718 -1,324 -1,051 -901 -956
Adjustment -467 -1,820 -1,964 -1,809 -1,840
  4,147 2,325 1,011 2,065 2,452
【Reference】Net Sales
Digital Marketing Business 73,159 72,549 72,177 75,311 74,728
Media Platform Business 601 1,163 1,324 2,005 2,487
Adjustment -559 -1,336 -1,058 -815 -726
  73,203 72,375 72,443 76,501 76,489
Revenue
Non-GAAP Operating profit

※Further, we have changed our policy and decided not to allocate corporate expenses that had been allocated to each segment, effective from FY9/18 onward. As a result of the change, Non-GAAP operating profits by segment for FY2017 have been revised retroactively based on the understanding that corporate expenses are not allocated. Though earning results before FY2016 have not been revised retroactively, these are recorded for your information.

Review of Digital Marketing Business in Fiscal Year Ended September 2020

In this year, the number of clients in collaboration with Dentsu group steadily increased, and projects of clients in the area such as game, manga, video streaming and e-commerce expanded as meeting the demand of online consumption.

As a result, revenue is ¥15, 807 million (up 4.8% year on year) and Non-GAAP operating profit is ¥5,248 million (up 9.9% year on year).

Revenue
Non-GAAP Operating profit
【Reference】Net Sales
Transaction of Domestic Brand Ad
Volume of clients in collaboration with Dentsu

Review of Media Platform Business in Fiscal Year Ended September 2020

In this year, the advertising revenue of “GANMA!” decreased largely affected by the expansion of COVID-19. On the other hand, the accumulated application downloads totaled 14.6 million at the end of September in 2020, and the revenue from subscription steadily increased. The other businesses than GANMA! developed and increased the revenue, but COVID-19 restrained the progress, and deficit increased as the other expenses increased.

As a result, revenue is ¥2,487 million (up 24.0% year on year) and Non-GAAP operating loss is ¥956million (¥901 million last year).

Revenue
Non-GAAP Operating profit