Financial Results for the Second Quarter of the Fiscal ... · AdSense (YouTube revenues) Sales by Quarter. Q2 sales higher for all businesses; year-on-year growth of 118%. ... Seven

Financial Results for the Second Quarter of the Fiscal Year Ending May 2020

Copyright © UUUM Co., Ltd. All rights reserved. 22

UUUM is a content company that invents unprecedented forms of fun through Kodomogokoro (a child-like spirit of adventure), developing new culture and values.

Content is an extension of personal preference and fun, embraced by those who share the same values.

Today, we live in an era of personal media channels, where a single person can have influence regardless of platform or media format.

The boundaries between creator and viewer is fast disappearing as new cultures and markets are created through viral connections.

In this new age, UUUM is a company that delivers this type of entertainment experience to the people of the world.


1. Overview of Results for Q2, FYE May 2020

2. Progress Toward Earnings Forecast

3. Featured Highlights

4. The Future Industry Environment and the UUUM Long-Term Vision

INDEX

Overview of Results for Q2, FYE May 2020

4Copyright © UUUM Co., Ltd. All rights reserved.


Earnings Highlights

(million yen)

Q2, FYE May 2020(Sept.-Nov. 2019)

Q2, FYE May 2019(Sept.-Nov. 2018) Year on Year

Net Sales 5,411 4,569 118％

Gross Profit 1,536 1,272 121％

SG&A 1,185 877 137％

Operating Profit 351 395 89％

Net Income 120 256 47％


Earnings Highlights Through Q2, FYE May 2020

(million yen)

Q2, FYE May 2020(June-Nov. 2019)

Q2, FYE May 2019(June-Nov. 2018) Year-on-Year

Net Sales 10,919 8,746 125％

Gross Profit 3,163 2,474 128％

SG&A 2,389 1,753 136％

Operating Profit 774 721 107％

Net Income 459 451 102％

Note: Figures rounded to the nearest million.


735 829 1,110 1,358 1,290 1,381 1,755

2,254 2,382 2,803 3,020

3,484 3,070 2,975

480 423 549

749 781 718

957

1,202 1,133 1,156

1,107

1,474 1,603 1,459

98 71 177

104 212 294

292

225 548

432 427

796 588 748

73 62

84 82 106 91

90

86 114

178 194

479

247 229

Q1, FYEMay 2017

Q2, FYEMay 2017

Q3, FYEMay 2017

Q4, FYEMay 2017

Q1, FYEMay 2018

Q2, FYEMay 2018

Q3, FYEMay 2018

Q4, FYEMay 2018

Q1, FYEMay 2019

Q2, FYEMay 2019

Q3, FYEMay 2019

Q4, FYEMay 2019

Q1, FYEMay 2020

Q2, FYEMay 2020

UUUM services (UUUM owned channels, games, etc.)Creator Support, Other (merchandise, events, music, etc.)Advertising (sponsored video, etc.)AdSense (YouTube revenues)

Sales by Quarter

Q2 sales higher for all businesses; year-on-year growth of 118%.Q2 yoy growth in adsense business down to 106% due to one-off sales in last Q2.

(Units: million yen)

1,385 1,3851,921

2,293 2,388 2,4853,094

3,7684,177

4,569

6,233

4,7475,508 5,411


Gross Profit by Quarter

Q2 gross profit increased due to higher sales; year-on-year growth of 121%.

398 364

532617

727 744864

1,069 1,202

1,272 1,282

1,651 1,626 1,536

Q1, FYEMay 2017

Q2, FYEMay 2017

Q3, FYEMay 2017

Q4, FYEMay 2017

Q1, FYEMay 2018

Q2, FYEMay 2018

Q3, FYEMay 2018

Q4, FYEMay 2018

Q1, FYEMay 2019

Q2, FYEMay 2019

Q3, FYEMay 2019

Q4, FYEMay 2019

Q1, FYEMay 2020

Q2, FYEMay 2020



129 162 191 265 293 302 344 368 431 494 515617 708 664

16 29 3958 58 61 63 67

7277 77

8484 85

105 55 44 35 3931

14 39

10039 31

23

52 68 49 72 9895 79

93

23678 113

825

25

25 25

5880 97

194 137 146150

240246 204

255

339

268 268

Q1, FYEMay 2017

Q2, FYEMay 2017

Q3, FYEMay 2017

Q4, FYEMay 2017

Q1, FYEMay 2018

Q2, FYEMay 2018

Q3, FYEMay 2018

Q4, FYEMay 2018

Q1, FYEMay 2019

Q2, FYEMay 2019

Q3, FYEMay 2019

Q4, FYEMay 2019

Q1, FYEMay 2020

Q2, FYEMay 2020

Other expenseAmortization related to acquisitionContracting expenseAdvertising and promotion expenseRent expensePersonnel expense

224304 351

673610

(Including 57 in new business-

related expenses)

603(Including 31 in new business-

related expenses)


related expenses)


related expenses)


related expenses)


related expenses)

1,005(Including 61 in new business-

related expenses)

1,401(Including 115 in

new business-related expenses)


related expenses)


related expenses)

Increase in personnel expense accounts for main difference compared to Q2 SGA.

Selling, General, and Administrative Expenses by Quarter



Operating Profit by Quarter

Operating profit down 11% year on year.

17461

181

-57

117 142 200 257 326 395276 250

423351

Q1, FYEMay 2017

Q2, FYEMay 2017

Q3, FYEMay 2017

Q4, FYEMay 2017

Q1, FYEMay 2018

Q2, FYEMay 2018

Q3, FYEMay 2018

Q4, FYEMay 2018

Q1, FYEMay 2019

Q2, FYEMay 2019

Q3, FYEMay 2019

Q4, FYEMay 2019

Q1, FYEMay 2020

Q2, FYEMay 2020

Gross profit

SG&A



Employees and Temporary Employees, End of Quarter

104 127 143 152 175 195 214 249 276 297 318

385 415 439

3 5 6 9

16 22 17

26 28

37 31

24 33

30

107 132 149 161

191 217 231

275 304

334 349

409

Q1, FYEMay 2017

Q2, FYEMay 2017

Q3, FYEMay 2017

Q4, FYEMay 2017

Q1, FYEMay 2018

Q2, FYEMay 2018

Q3, FYEMay 2018

Q4, FYEMay 2018

Q1, FYEMay 2019

Q2, FYEMay 2019

Q3, FYEMay 2019

Q4, FYEMay 2019

Q1, FYEMay 2020

Q2, FYEMay 2020

Temorary employees

Employees (including directors)

(Units: employees)

448469


Trend in Number of Affiliated Channels at End of the Quarter and Three-month Total Number of Video Views


ランキングチャンネル名登録者数

1 はじめしゃちょー（hajime） 8,320,000

2 HikakinTV 7,900,000

3 Fischer's-フィッシャーズ- 5,910,000

4 Yuka Kinoshita木下ゆうか 5,410,000

5 avex 5,000,000

6 東海オンエア 4,870,000

7 Travel Thirsty 4,730,000

8 SUSHI RAMEN【Riku】 4,690,000

9 米津玄師 4,660,000

10 HikakinGames 4,430,000

ランキングチャンネル名登録者数

12 水溜りボンド 4,200,000

13 SeikinTV 3,750,000

22 圧倒的不審者の極み! 2,800,000

25 桐崎栄二.きりざきえいじ 2,730,000

27 ポッキー 2,700,000

31 ワタナベマホト 2,570,000

35 はじめしゃちょー2 (hajime) 2,450,000

36 はねまりチャンネルHane & Mari's World 2,440,000

37 おるたなChannel 2,410,000

38 HIKAKIN 2,400,000

39 東海オンエアの控え室 2,380,000

43 Fischer's-セカンダリ- 2,320,000

52 HIMAWARIちゃんねる 2,120,000

57 ボンボンTV 2,000,000

63 はじめしゃちょーの畑 1,900,000

70 カズチャンネル/Kazu Channel 1,760,000

73 MAHOTO 1,720,000

74 70cleam 1,680,000

75 TOMIKKU NET 1,670,000

78 アバンティーズ 1,610,000

81 瀬戸弘司 / Koji Seto 1,580,000

81 PDSKabushikiGaisha 1,580,000

90 はなお 1,530,000

97 カズゲームズ/Gaming Kazu 1,460,000

Channel Subscription Ranking

Source: YouTube rankings data as of December 2019, collated by UUUM

■ TOP 10 ranking ■ TOP 100 ranking

6/1030/100

Copyright © UUUM Co Ltd All rig 14

Progress Toward Earnings Forecast



Progress Toward Fiscal Year Earnings Forecast

(million yen)

Q2, FYE May 2020(June-Nov. 2019)

FYE May 20Plan

Progress TowardPlan

Net Sales 10,919 26,000 42％

Gross Profit 3,163 7,020 45％

Operating Profit 774 1,400 55％

Net Income 459 880 52％


Net Sales Progress by Business

¥15,361 million

¥5,807 million

¥3,475 million

¥1,357 million

¥6,046million

Progress

¥3,062million

¥1,335million

¥475million

Progress

Progress

AdSense

Advertising

Creator Support, Other

UUUM services

39%

53%

38%

35%Progress

¥6,046 million

¥3,062 million

¥1,335 million

¥475 million


Featured Highlights

17Copyright © UUUM Co.,Ltd. All rights reserved.


U-FES. FOOD PARADE Debuts in Shibuya PARCO!

Collaboration-based café opened in the newly opened Shibuya PARCO

For a limited time between Nov.22, 2019 and Jan. 20, 2020, UUUM is operating a collaboration-based café, U-FES. FOOD PARADE, in the TOKYO PARADE goods & café located on the 6th floor of Shibuya PARCO

See press release for more : https://www.uuum.co.jp/2019/11/07/42038

https://www.uuum.co.jp/2019/11/07/42038


Original U-FES. TOUR 2019 Collaboration Goods (Part II) Available at Lawson

Goods for sale/promotional giveaways at Lawson locations throughout Japan

See press release for more: https://www.uuum.co.jp/2019/10/23/41512

Limited-Edition U-FES.TOUR 2019 Collaboration Goods (Partial Selection)

Limited-Edition/First Customers Only Promotional Giveaways (Partial Selection)



UUUM sponsored a pro-am golf tournament with 35 of Japan’s top professionals at a high-end golf course. More than ¥10 million in prizes given away.

UUUM Pro-Am ~Celebration With 35 Top Japanese Pros~




Sale of Promotional Goods With the Popular Creators on “note” platform


UUUM sold original goods at MUUU designed by the popular creators on “note”, a media platform operated by piece of cake co., ltd.

Part of an equity and business tie-up between UUUM and piece of cake announced previously. See our July 12, 2019 press release, UUUM Signs Equity and Business Agreement With piece of cake co., ltd.



Seven Videos Ranked in YouTube 2019 Domestic Top Trending (Excluding Music Videos)UUUM creators and Gachapin Channel (official), operated in collaboration with Fuji Television Network, Inc., combined for seven videos ranked in the YouTube 2019 Domestic Top Trending category (excluding music videos)




Business Alliance Signed With Courage Co., Ltd.～Strengthened Support for TikTok Creators～


Courage performs production for models and celebrities across various media. The company also provides management services for Hinata and other TikTokcreators. Through this alliance, UUUM intends to provide support for Courage-affiliated talent in the influencer realm, secure corporate tie-ups, facilitate collaborations with UUUM-affiliated creators, and more.

Courage-Affiliated Creators

Hinata Kokone RionIshida

Mau



Business Alliance Signed With Line Corporation～Strengthened Support for Live Broadcasters～Aiming to foster live broadcasters (LIVERs) on the Line Corporation LINE LIVE service, UUUM launched a LIVER Support Program with Line Corporation. For live broadcasters aiming to raise their presence, UUUM will provide video platform services, SNS activities, merchandise sales, corporate tie-ups, and other support, spreading the circle of activity for these creators.


The Future Industry Environment and the UUUM Long-Term Vision



Diversification in Media Caused by the Rise of the Internet

The Individualization of Media

Changes in the Business Environment to Date

Copyright © UUUM Co., Ltd. All rights reserved.


Changes in Video Media

Online Entertainment of the Past

Online Entertainment Today

Devices Content

TV

Smartphones

PC

TV

Devices Content

TVPrograms

TVPrograms

OnlineContent

The industry has gone from having only several TV programs to one in which online content has extended beyond the number of devices due to the popularization of the Internet and smart phones.


(Minutes) TV Viewing Internet Use Newspaper Reading

Radio Listening

10-19

2013 120.4 99.1 0.6 0.1

2014 110.4 109.3 0.7 0.2

2015 112.9 112.2 0.2 2.6

2016 102.4 130.2 0.3 3.5

2017 83.9 128.8 0.3 1.5

20-29

2013 145.9 136.7 1.4 3.6

2014 132.7 151.3 2.4 9.4

2015 143.8 146.9 2.1 6.4

2016 130.7 155.9 1.4 16.8

2017 105.7 161.4 1.4 2.0

30-39

2013 175.9 87.8 5.8 17.7

2014 167.2 87.6 4.1 5.4

2015 162.7 105.3 3.5 15.3

2016 166.1 115.3 3.8 15.4

2017 136.9 120.4 3.5 4.3

The Steady Shift from TV to the Internet

(Minutes) TV Viewing Internet Use Newspaper Reading

Radio Listening

40-49

2013 156.7 70.0 8.6 22.6

2014 183.7 82.5 9.3 19.4

2015 168.1 93.5 8.8 13.7

2016 183.7 97.7 8.0 17.2

2017 170.1 108.3 6.3 12.0

50-59

2013 197.0 61.8 18.6 20.2

2014 198.6 68.0 16.3 13.5

2015 238.4 74.7 17.0 10.7

2016 197.6 85.5 14.4 19.8

2017 221.1 77.1 16.3 19.5

60-69

2013 276.8 36.7 28.0 20.5

2014 274.2 32.2 31.3 40.3

2015 280.2 35.7 29.6 30.6

2016 277.6 46.6 25.8 23.4

2017 272.9 38.1 25.9 17.3

Average Media Usage Time (Per Week Day) by Age group

Note: TV viewing is total of real-time and time-shifted viewing (source: White Paper Information and Communications in Japan)

Decreasing TV Viewing Time for 30s and Younger; Increasing Internet Usage


Shift in Japanese Advertising Market Budgets

Video Advertising MarketAdvertising Market Growth by Four Mass Media Categories

Budgets in Japan’s Advertising Market Have Started Shifting Away From Traditional Media

(bn yen)

-1%

2%

-1%-2%

-6%

-4%-5%

-7%

-2%

-9% -9% -9%

-1%

3%

0%

-1%

TV Newspaper Magazine Radio

2015 2016 2017 2018

Source: Japanese Advertising Revenues, Dentsu Inc. Source: CyberAgent, Inc. research

84137

184

259

329389

447507

0

100

200

300

400

500

600

2016 2017 2018 2019 2020 2021 2022 2023


Terrestrial TV Pay video distribution service Free video distribution service

Commercial broadcasting NHK Amazon

Prime Hulu Netflix YouTube niconico AbemaTV GYAO!

All 95% 67% 11% 3% 3% 70% 14% 12% 11%

10-20 years 92% 59% 15% 7% 5% 84% 23% 13% 8%

30s 94% 53% 12% 4% 4% 80% 14% 12% 10%

40s 96% 61% 8% 2% 1% 65% 11% 15% 12%

50s 96% 77% 10% 2% 2% 69% 13% 14% 13%

60s 97% 82% 10% 2% 2% 57% 11% 7% 13%

Regularly viewed content services

Research: Joint study by MACROMILL, INC. (HoNote) and ShoeishaCo., Ltd (MarkeZine)Population surveyed: Men and women across Japan aged 18 to 69 years. Number of valid respondents: Sample of 1,000

Survey method: Internet research. Period of survey: December 2017

YouTube becomes a popular video media platform comparable to TV


Individuals Dominate YouTube Ranking

Source: YouTube rankings data as of September 2019, collated by UUUM

Ranking Channel name Subscribers

1 はじめしゃちょー（hajime） 8,190,000

2 HikakinTV 7,710,000

3 Fischer's-フィッシャーズ- 5,800,000

4 Yuka Kinoshita木下ゆうか 5,340,000

5 avex 4,890,000

6 東海オンエア 4,740,000

7 米津玄師 4,400,000

8 HikakinGames 4,360,000

9 SUSHI RAMEN【Riku】 4,360,000

10 Travel Thirsty 4,310,000

Ranking Channel name Subscribers12 水溜りボンド 4,090,000

14 SeikinTV 3,670,000

23 桐崎栄三/きりざきえいじ 2,670,000

27 ポッキー / PockySweets 2,640,000

29 ワタナベマホト 2,610,000

31 圧倒的不審者の極み! 2,600,000

35 はじめしゃちょー2 (hajime) 2,430,000

36 HIKAKIN 2,400,000

38 東海オンエアの控え室 2,340,000

39 おるたなChannel 2,330,000

42 Fischer's-セカンダリ- 2,290,000

52 HIMAWARIちゃんねる 2,020,000

55 はねまりチャンネルHane & Mari's World 1,970,000

56 ボンボンTV 1,950,000

61 はじめしゃちょーの畑 1,820,000

64 MAHOTO 1,740,000

65 カズチャンネル/Kazu Channel 1,730,000

70 TOMIKKU NET 1,670,000

74 70cleam 1,640,000

77 アバンティーズ 1,610,000

78 PDSKabushikiGaisha 1,580,000

83 瀬戸弘司 / Koji Seto 1,550,000

90 カズゲームズ/Gaming Kazu 1,440,000

95 はなお 1,430,000

96 水溜りボンドの日常 1,420,000

■ TOP 10 ranking ■ TOP 100 ranking

6/10

31/100


Shift in Time Spent from Portal Sites to Individual Content

Individual(Friends, Influencers)

Comparatively, ratio of time spent consuming individual content is

IncreasingPortal SitesComparatively, ratio of time spent using portal content is

Decrease in top page viewing ratios; increase in inflow from

social media properties

DecreasingIncrease in view of individual

content through video and photo posting, social media


The Rise of the Internet Has Resulted in Unlimited Content

“Who” Has Posted is Becoming Much More Important Than “What” is Posted

Past Early Internet Today

Selecting content from a limited number of choices

Searching for content via portal sites

Follow favorite channels to view content

Content Channel

Searching for content is becoming impossible. Now, users give preference to content created by their favorite channels (content producers).

Portal Sites

TV Channels


Advantage for Individual Content

Easy to Follow Individual Channels

All content is self-madePersonality shines through in the content

Individual Content Tells a Story That is Easy to

Identify With

Why?


Increase of Individual Influence Leads to an Expansion of the Individualized Economy

Projected Changes in the Future Business Environment



Problems With Traditional Industry Structures (1)

Individuals Cannot Reach Their Goals Without Belonging to an Agency or Company

CD SalesSponsored EventsTV Appearances

Consumers(Fans)

Labels, Studios

Apparel Companies

ApparelSales

SpecificDesigns

Debut

Musicians

Designers(Potential Big-Name Designers)


16%

6%

33%

45%

Problems With Traditional Industry Structures (2)

Source: Digital Content White Paper 2017, Digital Content Association of Japan Source: Extract from Ongaku Shugi, Federation of Music Producers Japan

Content Creator Receives Only Small Revenue ShareEx. Animation

CreatorIllustrators, animators, script writers, authors, cartoonist, singer, song writer, choreographer, etc.

AggregatorAdvertising Agency, distributor, publisher, editor, record company, etc.

DistributorBroadcaster, theater, news, online distribution, bookstore, record store, etc.

Content Added Value (Contribution)

Profit Structure

Approx. ¥200 billion

Approx. ¥1.8 trillion

Master RoyaltiesEx. Music

12% to 16%

Artist

Master License

Copyright Fees

Music Publisher (3%) Lyricist (1.5%) Composer (1.5%)

Label

Production Cost Marketing and Promotions Management etc.

Distributor

Retailer25% to 27%

1%+

6%45%

33%


Main Factor: Limited Channels and Media

Music

Books

Lyricist

Composer

Singer

Label CD Store

AuthorCartoonist

Publisher Agency Bookstores

TV Magazines Radio Newspapers

Creator Aggregator Distributor Consumers(Fans)

Channel Limitations

Media Limitations


Consumers(Fans)

However, IT and Social Media Have Freed Creators From Limitations

Lyricist

Composer

Singer

AuthorCartoonist

Freedom from

Channel Limitations

Freedom from Media

Constraints

Online Music SalesCharge for Live Content Online

Book Sales Through EC SitesCharge for Content Online

Anyone can distribute content through social media to build a fan base without relying on mass media

Creator

Music

Books


When Media Changes, Consumption Behavior ChangesA Structural Shift From a Mass Consumption to Diversified Consumption

Social MediaYouTube, Instagram, etc.(Different Content for Each)

TVRanking Sites

Search via Ranking and Portal SitesMainly BtoC

Direct purchase via link on social media siteSpread of CtoC

(Same Content for All)

The Past The Future

Everyone Watches the Same Content and Buys the Same

Goods

Diversified Consumption

Information Sources

PurchaseProcess

Information Sources

PurchaseProcess


Media Individualization → Individuals Form Economies

Advertising Revenue as Media The Present

The Future

Individualized Media Creates Direct Business With Fans

Advertiser

Influencers

Fans

Content

Advertiser

Influencers

Fans

EC

Music

Events

Patron/Fan

Support

ContentDistribution

AdvertisingAdvertising


Significant Growth of Non-Advertising Economy Overseas

Market Size: ¥1.9 trillion

Market Size: ¥50 billion

China

Japan

Mostly Advertising

Advertising

EC, Goods

Social Tipping

Other

ChinaJapan

Platform Agreements

Source: May 2019 PWC Consulting LLC Research (Estimate)

Comparison of Japanese and Chinese Influencer Markets


The Past The Future

Summary: Individualized Economy Should Expand and Disrupt Traditional Corporate-Centric Economy

Companies

Individuals

• Limited number of companies owned distribution channels(New entry in some markets virtually impossible due to licensing and other regulations)

• Creating a user base required mass media coverage, advertising and promotions

• Can only achieve goals through a company/agency

• Even after joining, still subject to circumstances and decision-making of the company/agency

• Ultimately, only small percentage of revenue goes to the individual

• The decline of mass media influence has made it more difficult to generate reach and brand recognition, especially among the younger segment

• Individual creates their own fan base from which to conduct business

• In contrast to companies, the hurdle to success is relatively low; can compete in niche markets(Succeed with only a few hundred or a few thousand fans)


The UUUM Long-Term Vision



The UUUM Business Model

Provide expertiseProvide training opportunities

Partner Companies

PartnershipsInvestments

M&A

Videography and editing support

BackyardAsset Support

Content managementMaking it possible to do what people want to do

Providing profit-making opportunities

FansEngagement

Strengthen

Creators

UUUM aims to become far and away the No.1 infrastructure provider supporting creators as we enter an expanding era of individualized economies.


UUUM Strengths

Content Platforms

YouTube

Twitter

Instagram

TikTok

TV

Help Creators to Expand to Multi-Channel Platformsto Maximize Fan Engagement

Creators

Athletes

Artists

Idols

Culinary experts

IntellectualsMusicians

Photographers


UUUM Aims to Work With Individual Creators to Change Current Industry Structures

Traditional Revenue Allocationin the Corporate-Centric Economy

Future Revenue Allocation inIndividualized Economies

Creators

Aggregators

Distributors

Creators

UUUM


Advertising Market

Music Market

E-commerce market

Events Market

Education Market

・・・・・

Future Target Market Scale Overview

Shift to Individualized Economies

出所：「デジタルコンテンツ白書2017」（一般財団法人デジタルコンテンツ協会）、経済産業省「平成３０年度電子商取引に関する市場調査」、ライブ・エンタテインメント白書調査委員会「2017ライブ・エンタテインメント白書サマリー」

etc.

¥6 trillion

¥500 billion

¥500 billion

¥2 trillion

¥9 trillion Our TotalAddressable

Market


Strategy to Achieve Our Long-Term Vision

1. Expand Base of Creators

2. Expand Individualized

Economies

3. Original Content

The Future

YouTube Instagram note And OtherPlatforms

Sponsored ContentAdsense

MerchandisingEventMusic

New Business

The Present


Prioritizing Sales Growth (Market Growth) for the Time Being

Operating Profit Ratio

Sales

FYE May 17 FYE May 18 FYE May 19 Medium-Term Target Future

●Expanding base of creators●Expansion of individualized

economies●Original content

¥6.9 billion

¥11.7 billion

¥19.7 billion

5.1%6.1%

6.3%...and other initiatives to

expand and open new markets

15%

10%

Margin Expansion by Operating Leverage

Sales Growth Phase

Documents

Financial Results for the Second Quarter of the Fiscal ... · AdSense (YouTube revenues) Sales by Quarter. Q2 sales higher for all businesses; year-on-year growth of 118%. ... Seven