■ MicroAd <9553> Performance Trends

1. Overview of performance for the fiscal year ending September 2024

For the fiscal year ending September 2024, consolidated results showed revenue increased by 6.6% to 13,712 million yen, operating profit decreased by 63.1% to 307 million yen, ordinary profit decreased by 60.1% to 294 million yen, and net income attributable to the parent company's shareholders decreased by 50.0% to 282 million yen. In addition to the main product "UNIVERSE" achieving a 19.6% increase in revenue, consulting services for Broadcasting also grew by 13.7%, contributing to the overall revenue increase. Although the expected testing demand in the latter half of the year vanished due to the retraction of Google's Cookie ban, the steady expansion of industry-specific products increased the number of active accounts and offset the negative impact of the disappearance of testing demand. In terms of profits, while the gross profit of "UNIVERSE" increased by 8.9%, reduced profits due to upfront investment in "Digital Signage Services" and rising overall costs due to aggressive hiring affected profits negatively.

In August 2024, the company revised its consolidated financial estimates for the fiscal year ending September 2024, announcing a downward revision with new revenue estimates of 13,600 to 14,000 million yen, operating profit of 280 to 460 million yen, ordinary profit of 220 to 400 million yen, and net income attributable to the parent company's shareholders of 190 to 370 million yen. The reason for presenting a range in the estimates was the presence of multiple high-value large proposals in "UNIVERSE" and the uncertainty surrounding that situation. This downward revision was mainly due to delays in launching the new service "OCTAVE" for beauty salons in the digital signage sector and the disappearance of anticipated testing demand prior to regulations due to the postponement and retraction of the Cookie ban. However, the company remains committed to pushing forward with Google's privacy protections, and a new system allowing users to choose whether to allow Cookies is expected to be implemented. The company, which has actively invested in developing alternative technologies to Cookies, is already prepared for a situation where users restrict Cookie usage, and anticipates that its early investments in alternative measures will contribute to its performance when the user choice system is introduced in Google Chrome. On October 31, 2024, the company executed a share transfer of MADS and its subsequent deconsolidation for the purpose of early commercialization of "OCTAVE" and enhancing MADS's operational independence. In the future, it is expected to contribute to the MicroAd Group's profits within the scope of equity method application, while the cost burden from upfront investments will be limited.

(1) Data Products

For the fiscal year ending September 2024, revenue from data products was 6,831 million yen, an increase of 13.7% compared to the previous year, while gross profit was 2.4% lower at 2,249 million yen. Revenue from "UNIVERSE" increased by 19.6% to 5,966 million yen, with gross profit up by 8.9% to 2,083 million yen, performing well. Although testing demand anticipated for the latter half disappeared following the retraction of the Cookie ban, the focus on expanding industry-specific products, along with the consolidation of UNCOVER TRUTH as a subsidiary in the third quarter (profit and loss will be included from the fourth quarter), contributed to the revenue and profit increase. Revenue from "Digital Signage" decreased by 15.1% to 865 million yen, and gross profit saw a significant drop of 57.5% to 167 million yen. On the revenue front, the strong performance of "UNIVERSE" compensated for the decline in "Digital Signage", but reduced profits in "Digital Signage" negatively impacted overall profit. The delayed installation of tablets for beauty salons in "Digital Signage" resulted in a slower-than-expected path to profitability.

"UNIVERSE"'s KPI, the number of active accounts, steadily expanded, reaching a total of 1,720 active accounts in the cumulative fourth quarter, an increase of 8.4% compared to the same period last year. Under a sales structure optimized for customer attributes, the company focused on online seminars and marketing activities tailored to the client’s business formats, consistently enhancing the performance of industry-specific products in response to client needs, which contributed to the growth of active accounts. Furthermore, from the perspective of stabilizing performance and strengthening the customer base, the company prioritized direct sales to small and large customers, which, in line with its strategy, resulted in growth for both large direct sales and small clients, contributing to the expansion of performance. In the fourth quarter alone, sales categorized by customer attributes showed a 11% increase in revenue from large customer direct sales compared to the third quarter of the fiscal year ending September 2024, and an 8% increase from small customers. Various sales strategies progressed smoothly, and revenue from large customer direct sales grew, while the average customer unit price remained at a high level.

(2) Consulting Services

Consulting revenue increased by 0.3% compared to the previous period to 6,882 million yen, and gross profit also increased by 0.3% to 1,830 million yen. Revenue from 'Media Consulting' rose by 13.7% to 2,566 million yen, while gross profit decreased by 1.7% to 691 million yen. Revenue from 'Overseas Consulting Services' fell by 10.3% to 2,680 million yen, but gross profit increased by 5.1% to 722 million yen. Despite a decline in revenue for 'Overseas Consulting Services' due to the slower than expected recovery in inbound demand, the increase in revenue from media consulting offset the loss. On the profit side, the increase in profits from 'Overseas Consulting Services' contributed positively. It can be said that success was achieved in accumulating profits by focusing on providing high-profitability services. For the fiscal year ending September 2024, although the recovery of inbound tourism was weaker than expected, inbound demand is currently showing signs of revival, mainly driven by the recovery of Chinese tourists. Various new inbound-related services have been smoothly introduced to the market, and the plan is to capitalize on the growing inbound demand moving forward to enhance the pace of business expansion.

The proportion of the 'Data Product', which has a scale of increasing returns and high profitability, in total revenue rose from 32% in the fiscal year ending September 2021 to 49.8% in the fiscal year ending September 2024. The company is committed to focusing on 'Data Products' in the future, and we anticipate an increase in profitability.

2. Financial condition and performance indicators.

As of the end of September 2024, the financial situation showed total assets increased by 1,549 million yen compared to the previous fiscal year's end, totaling 8,394 million yen. Among these, current assets decreased by 94 million yen due to a decline in cash and deposits amounting to 506 million yen. Fixed assets increased by 1,644 million yen, driven by an increase in goodwill due to the consolidation of UNCOVER TRUTH Co., Ltd.

Total liabilities rose by 1,382 million yen compared to the end of the previous fiscal year, reaching 4,497 million yen. Current liabilities increased by 1,134 million yen due to increases in short-term borrowings of 1,000 million yen and long-term borrowings due within one year by 19 million yen. Fixed liabilities increased by 247 million yen due to an increase of 205 million yen in long-term borrowings and 35 million yen in lease obligations. Total net assets increased by 167 million yen to 3,897 million yen, mainly due to an increase of 282 million yen in retained earnings.

The management indicators revealed that the current ratio decreased by 47.3 points compared to the previous fiscal year's end to 118.2%, while the fixed ratio increased by 40.1 points to 89.0%. Both the current and fixed ratios remain at healthy levels, and there are no concerns regarding short and long-term payment capabilities. Additionally, the equity ratio stood at 39.0%, a decline of 6.4 points from the previous fiscal year's end. However, it is anticipated that the equity ratio will increase in the medium to long term, as focusing on high-margin data products will contribute to accumulating net income and thereby strengthening the equity base.

(Written by FISCO Guest Analyst Yoichiro Shimizu)