■Performance trends of NEXTONE (7094)

1. Summary of financial results for the interim period ending March 31, 2025

Consolidated financial results for the interim period ending 2025/3 were sales of 9415 million yen, up 112.2% from the same period last year; operating profit decreased 13.9% to 378 million yen; ordinary profit decreased 9.8% to 397 million yen; and interim net profit attributable to parent company shareholders decreased 2.2% to 293 million yen.

The company plan for the interim period ending March 31, 2025 was sales of 9.2 billion yen and operating profit of 0.27 billion yen. Compared to company plans, sales surpassed 0.21 billion yen (over 2.3%), and operating profit surpassed 0.1 billion yen (over 37.0%) and landed. Although the interim period was a profit reduction settlement, progress was steady against the company plan.

Sales rapidly expanded due to the newly consolidated effects of Recochoku and Eggs, which became subsidiaries in the previous fiscal year, and strong sales in the copyright management business and DD business due to an increase in the number of copyright management songs and original discs handled. Operating profit declined by 2 digits due to an increase in labor costs, systems, etc. associated with the same consolidation. The factors contributing to the increase in operating income were 0.33 billion yen due to the increase in sales in existing businesses, 0.03 billion yen increase in labor costs, 0.06 billion yen increase in system and other costs, and 0.29 billion yen due to the new consolidation of RecoChoku and Eggs.

The number of copyrighted songs and the number of original discs handled increased, and system investments by subsidiaries became important in terms of profit

2. Trends by business segment

(1) Copyright management business

Sales of the copyright management business increased 27.8% from the same period last year to 726 million yen, and operating profit increased 37.2% to 332 million yen. Both sales and profits expanded drastically due to growth in the streaming music distribution market/video distribution service market, an increase in the number of songs managed by the company, and an increase in performance rights collection results for concerts, etc. The operating profit margin improved to 45.7%, up 3.1 points from the same period due to increased sales. The company's number of copyright management songs as of the end of the second quarter of the fiscal year ending 2025/3 increased 16.2% from the end of the previous fiscal year to 0.611 million songs, and the same increase of 0.085 million songs.

(2) DD business

Sales of the DD business increased 30.3% from the same period last year to 4704 million yen, and operating profit decreased 6.8% from the same period last year to 436 million yen. Sales expanded due to an increase in handling of original boards, growth in the streaming music distribution market/video distribution service market, and an increase in anime/game-related and internet creator-related use such as vTubers (vTubers). The number of original discs handled by the company as of the end of the second quarter of the fiscal year ending 2025/3 increased 9.1% from the end of the previous fiscal year to 1.378 million original discs, and the same increase of 0.115 million originals. On the profit side, operating profit declined due to upfront investments such as system development related to RecoChoku's new service construction.

(3) Music distribution business

Sales of the music distribution business were 3713 million yen, and operating profit was 640 million yen. There was a net increase due to the effects of RecoChoku's new consolidation. Due to the fact that the flat-rate music distribution service “d hits,” which is the main service, remained stable, and the number of contracted stores for BGM distribution services for stores expanded, etc., it was a steady landing. Along with the addition of new features, the service fee for “D-Hits” was revised from 550 yen (tax included) per month to 690 yen (tax included) from 2024/12/1. From late 2024/11, a new recommendation playlist function that can automatically generate/create playlists of similar tunes and related songs based on songs selected by customers was added, and from 12/1 of the same year, a “music video (MV) playlist,” which allows songs to be enjoyed with images, was added.

(4) Others

Net sales were 722 million yen, up 44.2% from the same period last year, and operating losses were 237 million yen (profit of 36 million yen for the same period last year). Sales expanded drastically due to concerts by popular groups and live viewings of popular musicals. On the other hand, operating losses occurred due to upfront investments such as system development related to fan community site construction, which is a new Eggs' service. We are aiming to launch the same service in the second half of the year.

3. Financial Status and Management Indicators

As for the financial situation at the end of the interim period ending 2025/3, total assets were 13733 million yen, an increase of 498 million yen from the end of the previous fiscal year. Looking at the main factors of increase or decrease, cash and deposits increased by 715 million yen as current assets remained steady in the copyright management business, DD business, and music distribution business. Fixed assets increased by 19 million yen, and there was no major change since the end of the previous fiscal year.

The total debt was 8363 million yen, an increase of 282 million yen from the end of the previous fiscal year. As for current liabilities, unpaid amounts related to distribution to copyright holders increased by 485 million yen in line with the increase in handling volume of copyright management businesses. Fixed liabilities declined by 25 million yen from the same period, and there was no major change.

Total net assets were 5370 million yen, an increase of 215 million yen from the end of the previous fiscal year. Retained earnings increased by 293 million yen along with the recording of net income attributable to parent company shareholders. Non-controlling interests decreased by 93 million yen.

Regarding the capital adequacy ratio, the end of the 2024/3 fiscal year deteriorated 15.1 points compared to the end of the fiscal year ending 2023/3 due to an increase in liabilities associated with the new consolidation of Recochoku and Eggs, etc., but the end of the 2nd quarter of the fiscal year ending 2025/3 improved 1.2 points compared to the end of the previous fiscal year due to the accumulation of retained earnings. There is no interest-bearing debt, and net cash (cash and deposits - interest-bearing debt) is plentiful at 8762 million yen, and it is said that investments in personnel and systems and M&A etc. will be considered for continued profit growth in the future.

(Written by FISCO Visiting Analyst Takuma Jilin)