Translation
Notice: This document is an excerpt translation of the original Japanese document and is only for reference purposes. In the event of any discrepancy between this translated document and the original Japanese document, the latter shall prevail.
Summary of Non-Consolidated Financial Results
for the Nine Months Ended May 31, 2021
(Based on Japanese GAAP)
July 15, 2021 | ||
Company name: | and factory, ink | |
Stock exchange listing: | Tokyo | |
Stock code: | 7035 | URL https://andfactory.co.jp/ |
Representative: | Rinji Aoki, President and Representative Director | |
Contact: | Tomoki Hasumi, Director | Phone: +81-3-6712-7646 |
Scheduled date to file annual securities report: | July 15, 2021 | |
Scheduled date to commence dividend payments: | － | |
Preparation of supplementary material on quarterly financial results: | Yes | |
Holding of annual financial results meeting: | No | |
(Amounts less than one million yen are rounded down.) |
1. Non-Consolidated financial results for the nine months ended May 31, 2021(From September 1, 2020 to May 31, 2021)
(1) Non-consolidated operating results (cumulative) | Percentages indicate year-on-year changes. | ||||||||||||
Net sales | Operating income | Ordinary profit | Net income | ||||||||||
Millions of yen | % | Millions of yen | % | Millions of yen | % | Millions of yen | % | ||||||
Nine months ended May 31, 2021 | 2,247 | 1.4 | (136) | － | (247) | － | (268) | － | |||||
Nine months ended May 31, 2020 | 2,217 | 44.8 | (45) | － | (88) | － | (101) | － | |||||
Earnings per share | Diluted earnings per share | ||||||||||||
Yen | Yen | ||||||||||||
Nine months ended May 31, 2021 | (27.34) | － | |||||||||||
Nine months ended May 31, 2020 | (10.42) | － | |||||||||||
Notes: | Although dilutive shares exist, diluted earnings per share are not stated as earnings per share were negative. | ||||||||||||
(2) Non-consolidated financial position | |||||||||||||
Total assets | Net assets | Equity ratio | |||||||||||
Millions of yen | Millions of yen | % | |||||||||||
As of May 31, 2021 | 5,516 | 1,181 | 21.4 | ||||||||||
As of August 31, 2020 | 6,343 | 1,449 | 22.8 | ||||||||||
2. | Cash dividends | ||||||||||||
Annual dividends per share | |||||||||||||
1st | 2nd | 3rd | Fiscal year-end | Total | |||||||||
quarter-end | quarter-end | quarter-end | |||||||||||
Yen | Yen | Yen | Yen | Total | |||||||||
Year ended August 31, 2020 | － | 0.00 | － | 0.00 | 0.00 | ||||||||
Year ending August 31, 2021 | － | 0.00 | |||||||||||
Year ending August 31, 2021 (Forecast) | － | 0.00 | 0.00 | ||||||||||
3. Forecast of non-consolidated financial results for the year ending August 31, 2021 (From September 1, 2020 to August 31, 2021) Percentages indicate year-on-year changes.
Net sales | Operating income | Ordinary profit | Profit | Earnings per share | ||||||||
Millions of yen | % | Millions of yen | % | Millions of yen | % | Millions of yen | % | Yen | ||||
Full year | 3,050 | 3.5 | (90) | － | (253) | － | (540) | － | (55.21) | |||
4. Notes
-
Application of special accounting methods for preparing quarterly non-consolidated financial statements: Yes
Note: In calculating tax expenses for the current fiscal year, including the first quarter under review, income taxes were estimated rationally, using the effective tax rate after applying tax effect accounting multiplied by income before income taxes, to estimate the appropriate effective tax rate. However, if the tax expenses calculated using the estimated effective tax rate yield unreasonable results, the statutory effective tax rate may be used. - Changes in accounting policies, changes in accounting estimates, and restatement of prior period financial statements
Changes in accounting policies due to revisions to accounting standards and other regulations: No
Changes in accounting policies due to other reasons: No
Changes in accounting estimates: No
Restatement of prior period financial statements: No
(3) Number of issued shares (common stock)
Total number of issued shares at the end of the period (including treasury shares) Total number of issued shares at the end of the period (including treasury shares)
As of May 31, 2021 | 9,827,120 shares | As of August 31, 2020 | 9,827,120 shares |
Number of treasury shares at the end of the period | |||
As of May 31, 2021 | 257 shares | As of August 31, 2020 | 257 shares |
Average number of shares during the period (cumulative from the beginning of the fiscal year)
Nine months ended | 9,826,863shares | Nine months ended | 9,768,339 shares |
May 31, 2021 | May 31, 2020 | ||
Notes: This financial report is exempt from the review.
Explanation about appropriate usage of business forecasts and other special notes:
The forecasts above are based on the judgments made on the basis of currently available information. Forecasts therefore include risks and uncertainties. Actual figures may differ from these forecasts due to subsequent changes in circumstances.
Content of Attachments | ||
1. Qualitative Information on Quarterly Financial Results | 2 | |
(1) Analysis of Operating Performance | 2 | |
(2) Analysis of Financial Condition | 4 | |
(3) | Operating Performance Forecast | 4 |
2. Quarterly Non-Consolidated Financial Statements and Notes | 5 | |
(1) | Quarterly Non-Consolidated Balance Sheets | 5 |
(2) | Quarterly Non-Consolidated Statements of Income | 7 |
(3) | Notes to the Quarterly Consolidated Financial Statements | 8 |
(Notes Related to the Going Concern Assumption) | 8 | |
(Additional Information) | 8 | |
(Notes in the Events of Significant Changes in Shareholders' Equity) | 8 | |
(Application of Special Accounting Treatment for Quarterly Financial Reporting) | 8 | |
(Segment Information, etc.) | 9 | |
(Significant Subsequent Events) | 11 |
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1. Qualitative Information on Quarterly Financial Results
- Analysis of Operating Performance
The e-book market (the Company's main business category) continued to grow, according to the eBook Marketing Report 2020 by Impress Research Institute. According to this report, the e-book market had a value of ¥347.3 billion in fiscal 2019, up 22.9% from the previous year's figure of ¥282.6 billion. Comics accounted for 86.1% of the total, or ¥298.9 billion. The same institute's report for the previous year, the eBook Marketing Report 2019, had forecast that the e-book market would reach a value of ¥333.2 billion in fiscal 2019. The actual figure exceeded this forecast. By fiscal 2024, the institute forecasts that the e-publishing market (including e-books) will grow by approximately 50% from fiscal 2019, to ¥566.9 billion.
The IoT business, another area of focus for the Company, is also attracting attention. This field involves adding communication functionality to physical items around the world (not just to computers and other information and telecommunication equipment), enabling them to connect and communicate over the internet. Given the advances that are occurring in internet technologies, as well as various types of sensor technologies, the number of items connected over the internet (IoT devices) is projected to grow by around 50% from approximately 22.7 billion items in 2018 to some 34.8 billion items in 2022 (source: 2020 White Paper on Information and Communications in Japan, Ministry of Internal Affairs and Communications).
In this business environment, the Company pursues a mission to make people's lives more fulfilling by bringing a little "something extra" to their daily lives. In the Smartphone Apps business, the Company has focused mainly on expanding earnings from smartphone manga apps developed in collaboration with large publishers. In the IoT business, in line with the business policy of promoting technology in the lodging market, the Company has worked on the development and operation of &AND HOSTEL smart hostels, and the provision of other IoT solution services for lodging facilities such as a lodging management system (innto) and a guest room tablet service (tabii). Additionally, in the rental property market, the Company is developing and operating a communication app (totono) to connect management companies and residents.
In the Apps business, sales and operating profit increased year on year as a result of an upturn in ARPU (*1) for some manga apps, driven by the implementation of user acquisition measures to raise profitability and a resumption of the serialization of popular titles that had been temporarily suspended, and thanks to efficient spending on advertising.
At the same time, the business environment surrounding the primary target markets of the IoT business-namely, the lodging and rental property markets-underwent major changes due to the COVID-19 pandemic, and maintaining financial health and securing profit in the foreseeable future have become pressing issues. Having determined that it needs to focus its management resources on its strongest businesses and on the creation of new businesses to drive medium- to long-term business growth, the Company has announced it will implement structural reforms in the IoT business.
As a result of the above, in the nine months ended May 31, 2021, the Company reported net sales of ¥2,247,583 thousand (up 1.4% year on year), an operating loss of ¥136,238 thousand (operating loss of ¥45,949 thousand in the corresponding period of the previous fiscal year), an ordinary loss of ¥247,018 thousand (ordinary loss of ¥88,654 thousand in the corresponding period of the previous fiscal year), and a net loss of ¥268,660 thousand (net loss of ¥101,785 thousand in the corresponding period of the previous fiscal year). In addition, on June 25, 2021, the Company announced a revision to its earnings forecast for the fiscal year ending August 31, 2021, mainly to account for the booking of expenses associated with the structural reforms in the IoT business. It forecasts an improvement in profit levels and expects to generate steady operating profit from the fiscal year ending August 31, 2022.
(1) Apps business
In the nine months ended May 31, 2021, the existing manga apps, such as Manga UP!, Manga Park, and Manga Mee, have continued to enjoy favorable performances since their service launch, thanks to proactive advertising efforts, new series launches, offering of popular content in series, and new manga additions. Earnings contribution also came from the steady increases in monthly active users (MAUs*2) at Young Jump, a manga app jointly developed with SHUEISHA Inc. (released April 2020), and Mecha Comic's Mainichi Rensai, a manga app jointly developed with Amutus Corporation (released May 2020).
Meanwhile, ARPU temporarily declined for some apps on a change in user acquisition measures, but sales increased as overall
2
ARPU improved in the nine months ended May 31, 2021 supported by a review of the user acquisition policy and by growth in the user retention rate attributable to a resumption of the serialization of popular titles that had been temporarily suspended. In addition, the operating profit margin improved thanks to efficient spending on advertising.
As a result, in the nine months ended May 31, 2021, sales in the Apps business were ¥2,027,337 thousand (up 8.3% year on year). Segment profit came to ¥355,100 thousand (up 9.7% year on year).
*1 The average amount of revenue generated per person
*2 The number of people who use an app at least once in a month
Of the smartphone apps the Company operates in the Apps business, the following table outlines average MAUs by quarter for the manga apps.
(Thousands of people) | ||||
Average MAUs | Average MAUs | |||
Manga apps | Manga apps | |||
May 31, 2017 | 310 | August 31, 2019 | 5,320 | |
August 31, 2017 | 650 | November 30, 2019 | 6,410 | |
November 30, 2017 | 1,080 | February 29, 2020 | 7,200 | |
February 28, 2018 | 1,500 | May 31, 2020 | 9,060 | |
May 31, 2018 | 2,040 | August 31, 2020 | 9.940 | |
August 31, 2018 | 2,380 | November 30, 2020 | 10,260 | |
November 30, 2018 | 2,790 | February 28, 2021 | 10,540 | |
February 28, 2019 | 3,620 | May 31, 2021 | 10,560 | |
May 31, 2019 | 4,300 | |||
Note: the average MAUs shown above are quarterly averages.
(2) IoT business
In the nine months ended May 31, 2021, occupancy rates trended toward recovery for &AND HOSTEL, our mainstay brand of smart hostels (lodging facilities offering experiences made possible through IoT). The uptrend compared with the fiscal year ended August 31, 2020, when performance was substantially affected by the COVID-19 pandemic, was a result of our efforts to cultivate a new customer base by shifting to new targets and concepts at some hostel branches. However, spending per customer, although improving, remained low, and operating revenue at each location was flat year on year.
In the guest room tablet service (tabii), adoption expanded despite the impact of the COVID-19 pandemic as the Company stepped up sales activities, and sales generated from initial setup fees increased modestly. In the lodging management system (innto), sales and operating profit declined as the sales recorded in connection with the development of new functions in the corresponding period of the previous fiscal year dropped out of the picture.
Consequently, in the nine months ended May 31, 2021, sales in the IoT business came to ¥220,246 thousand (down 23.2% year on year), with segment losses of ¥204,923 thousand (loss of ¥112,279 thousand in the corresponding period of the previous year).
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