Q&A: Regarding the increase in commerce revenue in the second quarter earnings forecast
Tsurui : “Regarding the second quarter earnings forecast, could you please provide a little more information on the details of the increase in sales, especially in commerce? For example, the increase in sales compared to the first quarter is due to the implementation of measures to increase sales per SKU rather than the number of SKUs. Is this what you have in mind? Also, based on the current situation, how are you feeling toward achieving your plan?
Regarding SKUs and sales per SKU, I have an image of increasing sales per SKU.
As we have been working on commerce initiatives, we have noticed that the products that sell are changing as the coronavirus pandemic subsides, especially around the beginning of the year.
Currently, sales of stuffed animal products are extremely high, while sales of products such as acrylic stands, which have long been our standard products, have slowed down somewhat. Because of these changes, we are taking measures to expand our lineup of trend-setting products in order to respond to changes in merchandise.
This is reflected in the period from September to October. Considering the manufacturing and ordering time, there is a lag of about six months from the time a decision is made until the product actually appears in stores, so the measures will only become effective from the second quarter onwards.
Therefore, by changing the contents to SKUs of products that sell well, we will increase sales per SKU, and from the third quarter onwards, we will steadily implement additional measures related to commerce and media based on the current situation. and achieve the plan.
Takuno: As Tsurii just explained, puppets and stuffed animal products are also initiatives that are making good progress, and even taking into account the current situation, I believe we can make sufficient efforts to achieve our plans.
Q&A: Reasons for the rise in direct variable costs and trends from the second quarter onwards
Tsurui : ``In terms of direct variable costs, please tell us why the actual figures for the first quarter rose slightly compared to the previous year.In addition, what kind of trends should we see from the second quarter onwards compared to the first quarter? Is that a good idea?” is the question.
Direct variable costs for the first quarter increased by just under 1% compared to the same period last year. This in itself is not considered a bad result.
In terms of commerce, sales per SKU can increase due to large sales of the same product, allowing companies to enjoy relative volume and scale benefits.
In that sense, the composition is the first quarter of last year, when sales were extremely high, and the first quarter of this year, where sales were slightly down.However, variable costs remained almost flat. I believe this is the result of successful cost control.
I think the trend from the second quarter onwards will remain at the same level as the first quarter. Naturally, there are slight differences in the cost rate depending on the product, and there is a possibility that it may increase or decrease slightly depending on the mix, but we believe that it can be stably maintained at a generally constant level.
Q&A: Regarding the timing of shareholder return measures and standards for dividend payout ratio
Tsuri : My question is, "What criteria did you use to decide on the timing of announcing shareholder returns and the dividend payout ratio?"
At the timing of the previous financial results announcement, we announced the company's shareholder return plan for the next three years, the balance between growth investment and returns, and its scale.
Among them, we announced that we plan to return approximately 30 billion yen in total over three years. As for the method of return, we were mainly considering the acquisition of company stock.
However, if we consider comprehensively the current shareholder structure of our company and the status of outstanding shares, we believe that share buybacks will continue to be the main method of return, rather than all of the returns being through share buybacks. We have determined that it is appropriate to maintain a balance with dividends while positioning this as such.
Although there is a certain degree of volatility in sales, our business performance has remained stable in terms of profit margins. Furthermore, we are not in a situation where large amounts of capital or other investments will be required.
In light of this situation, I began to think about dividend policy, thinking that there might be a more predictable and stable form of return. Regarding the dividend payout ratio, we mainly consider whether the dividend level is realistically sustainable and stable.
Therefore, this change in dividend policy is positioned as a slight change to the assumptions of the return method while following the previously disclosed return policy.
Q&A: Regarding the specific effects of studio expansion
Tsuri : My question is, ``Please tell me the specific effects of the studio expansion.''
Takuno : Regarding the expansion of the studio, as I explained in the previous article, we are currently making preparations for the start of operation of the new studio in the fall. The plan is to triple the current size.
I believe that the studio is a fundamental part that is necessary when creating various types of content. We hope that by expanding our studio space, we will be able to create more appealing content and take measures that will further fascinate our customers.
Q&A: About the characteristics of trending goods and illustrations
Tsuri : The question is, "Please tell us about the characteristics of trending goods and illustrations."
Takuno : As for the trending goods, the stuffed animal products that I mentioned earlier are really trending right now.
Regarding illustrations, it's difficult to say specifically what the characteristics are, as they vary depending on the target user, but it's important to use illustrations and reactions that are easy to reach customers on SNS and YouTube. I believe that the characteristics of a good illustration are those that make it easy to receive feedback.
Q&A: Why promotional sales did not increase in the second quarter
Tsuri : My question is, "With the number of employees increasing and the number of VTubers increasing, why aren't sales from promotions increasing in the second quarter? Is it just a timing issue?"
Regarding sales in the promotion field, large projects account for a certain percentage. Particularly in recent years, large-scale projects exceeding 100 million yen have appeared, and trends in these large-scale projects are one point to consider.
Another issue is the balance with the studio relocation. While we are planning to relocate our studio from late September to early October, there will be a period during the second quarter where studio operations will be partially restricted, although this will not be a very long period.
Taking all of this into account, we currently expect our results for the second quarter to be slightly lower than the first quarter.
Q&A: Reasons for canceling/postponing events and incorporating risks in the second quarter
Tsuri : "The results for the first quarter were below the lower limit of the guidance range. Were the event cancellations and postponements that occurred this time not factored into the risks? Event cancellations and postponements that were below the lower limit Please tell us more about the reason for this.Also, what kind of risks are you considering in determining the lower limit in your second quarter guidance?
Takuno : Regarding event cancellations, this time two events have been canceled and postponed. Regarding one event, as announced, we are prioritizing the talent's recovery and have postponed it until later in the current fiscal year. Regarding the other case, we have issued a release stating that we are no longer able to provide attractive content.
The event that was canceled was an overseas event, but considering the background that led to the cancellation, I believe that by being a little more cautious, we could have recognized the risk of cancellation sooner. I think it's something we should continue to approach with some caution.
Tsurii will explain the risks at the lower end of the second quarter guidance.
Tsurii : The focus of our second quarter results will be on commerce, so when we think about commerce, first of all, there aren't many sales that we planned to sell at the time of planning, but we had to cancel or postpone sales, so things are generally going as planned. We believe that we will be able to sell it, so we are not aware of the risks in that respect.
The other important thing is whether the sales trend is as planned, whether the VTubers used in the goods are popular, whether the illustrations are appealing to fans, and whether the products are of good quality. I think this will be judged by the fans overall and will lead to sales for the company.
I think there is naturally a certain degree of volatility. There are risks, both above and below.
Also, looking at the downside, we have recently seen within the company the issue of shipping delays as a cause of discrepancies, especially in terms of commerce sales. This topic has been coming up more and more in recent months. We are unable to ship goods at the time we had originally planned, and as our business has grown larger, inventory management has become more difficult.
I think it's true that there are some parts of goods-related operations that we can control in advance and some that we can't, so there are some uncertainties. We believe that this could be a risk factor in achieving solid sales, especially in commerce, which will be our main focus in the second quarter.
Q&A: About the growth potential of the domestic and overseas VTuber business
Tsuri : My question is, "Could you tell me how you see the current growth potential of the VTuber business both domestically and internationally?"
Takuno : First, let's talk about Japan. VTubers have both the characteristics of a talent and the characteristics of a character, but I think there is still a lot of potential for them to be enjoyed by a wider range of people. I am.
In that sense, in addition to promotions and music unit activities as explained earlier, we also approach content to more casual customers through musical activities, program-like activities, etc. We would like to work on expanding the VTuber market by doing what we can.
In addition to the content development we are currently preparing overseas, we will also work to establish a strong presence by implementing measures that are more specific to specific countries and regions. This is true from the perspective of using overseas VTubers, but we also use domestic VTubers and domestic units.
Overseas as well, by implementing measures targeting specific regions, we will work to increase the number of VTuber customers in those regions. Through these initiatives, we aim to expand our presence in overseas markets.
Q&A: About measures to boost overseas business
Tsuri : My question is, ``When will the decline in overseas sales stop and what measures will you take to boost overseas sales?''
Takuno : This may overlap with what I explained earlier, but from the perspective of overseas VTubers, I think it's time to work hard on restoring trust and preparing content and support systems again. .
As a way to strengthen the company, we are working on program-like and musical activities, music content for Nijisanji, and event distribution content.
Through such measures, I believe it is important to first take steps to firmly rebuild relationships of trust with overseas customers.
Q&A: Regarding evaluation of competitors
Tsuri : My question is, ``Please tell me your evaluation of competitors that are currently actively expanding their business.''
Takuno : We won't reveal the specific company name, but of course we check the status of our competitors. Based on that, I think it is extremely important to work on new areas and areas where the VTuber market can expand.
This is an audition call for a training school called "Virtual Talent Academy." Last time, we were recruiting for mascot auditions, and now we are conducting initiatives similar to male idol auditions and female gamer auditions. I'm currently working on being able to produce it.
Q&A: Background to changes in merchandise trends
Tsuri : My question is, "What was the background behind the change in merchandise trends to stuffed animal products?"
Takuno : I think it's a change in fashion, but with the spread of SNS and the culture of taking pictures with stuffed animals and taking pictures of places we go, stuffed animal products are becoming more popular. It's starting to come into the spotlight. I believe that such a trend has changed.
Q&A: Regarding the impact of the suspension of past video releases
Tsuri : “Recently, an act of infringing on the rights of our VTuber by an external creator occurred, and I believe that the publication of past videos has been suspended in connection with this.In the future, when acquiring new fans, we will not be able to upload past videos. Please let us know if you have any thoughts on the impact of reduced grip strength due to fans not being able to see it, or the impact on business results."
Takuno : Our company takes measures to keep the information private. I think this will have some impact as such videos have had a lot of demand to begin with, but I don't think it will have a small impact on the business in terms of profits. *
On the other hand, we are considering future measures regarding private videos.
*(Original text is: "当社としては、非公開対応等を行っています。そのような動画がもともと多くの需要をいただけるものでしたので少なからず影響があると思っていますが、収益面での事業への影響は少ないと思っています。" My google translation on this one is different from what has already been posted in thread, so the original text is here. This is very likely a google translate problem.)
Q&A: About long-term new business
Tsuri : My question is, ``It seems like other companies are aiming to build a metaverse, but what kind of long-term new business is President Tagaku considering?''
Takuno : It is difficult to answer the specific details here. As I may have previously explained in the medium- to long-term growth strategy, the VTuber field has two axes: as a talent and as a character. From the perspective of business potential as a talent, I think this is a business field where I can expand into music activities, program activities, entertainer activities, and development of media mix with games and animation as a character. .
In that sense, I think business areas that are easy to collaborate with VTubers, easy to work on as characters and talents, and derivative business areas are also attractive for the company.
Q&A: About AI VTuber
Tsurii : My question is, "Please tell me about the threats and evaluations against AI VTubers."
Takuno : Regarding generative AI technology, although I think it is an attractive technology from the perspective of improving productivity and task efficiency, I also feel that reputational risk and legal risk are not well developed. I recognize that this is a situation.
Also, not only character but also talent is very important for VTubers. Talent really comes down to humanity, and I believe that a VTuber's humanity is one of the keys to their fans' support. It's not that I don't recognize the existence of AI VTubers, I think that they are a different entity.
