Macromill : FY6/2023 Q3 Financial Results Summary of Q&A

FY6/2023 Q3 Financial Results: Summary of Q&A (1)

May 15, 2023 Macromill, Inc.

(Q1)

• What are the effects of the macroeconomic situation on demand in Online Research and the Digital fields? What is the outlook for demand in these fields?

(A1)

• In Online Research, the Operational Capacity issue that arose last year has been solved. We resumed proactive outbound sales activities, which we had avoided, in Q3 and are striving to tap into client demand.
• We think that client demand can be classified into two types of needs: apparent needs and potential needs.
• Orders for budget consumption were slow compared to the past years due to deteriorating business sentiment, and growth in apparent clients' demand slowed in Q3.
• As for potential clients' demand, we believe that we can tap into more demand by boosting outbound sales activities and have got a response.
• We think that we can tap into more apparent and potential demand through consultative selling based on clients' business challenges, and thus expand orders. Specifically, we are taking the following two initiatives.
• First, we are reformulating account plans (sales strategies designed for individual clients). Amid the Covid-19 pandemic, contact points with clients declined, and client information for formulating effective plans has been lacking. We will increase the frequency of face-to-face meetings to develop more effective account plans, as we did in the past.
• Second, we will combine Online Research with other products, such as Data Consulting, and will offer solutions to clients' business challenges from upstream. To this end, we are taking steps to change the business model of the entire Japan Business. We wish to increase opportunities to continue increasing orders from the existing clients by proposing solutions to clients' challenges.
• In the Digital field, we understand that the digital ad market is continuing to expand. However, the expansion is primarily due to the growth of direct advertising, and the YouTube advertising and branding advertising markets, which are linked to our Digital Research, are slowing slightly. We expect that we will be affected by the slowdown for some time to come.
• Meanwhile, initiatives with major platform providers are making steady progress, which is unique to us. We plan to launch new solutions in the first half of the next fiscal year. We aim to achieve growth again in the Digital field, leveraging new initiatives using our proprietary consumer panel, which has a competitive advantage.

(Q2)

• I had a feeling that in your Q3 financial results announcement, you made clear your posture to emphasize profit.
• We have just heard your explanation about outbound sales activities. What initiatives will you take to increase profit other than outbound sales activities?

(A2)

• As we describe in the Q3 results briefing video, we will take initiatives to increase profit margins steadily by continuing to expand Revenue and improving productivity.
• First, the shortage of Operational Capacity issue from the previous fiscal year are solving steadily. We are also improving productivity by holding down the employee turnover rate and thereby

1 This material is not a transcript of questions and answers at the results briefing but a concise summary of them including additions and revisions made at our own discretion to facilitate reader understanding.

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improving their proficiency and changing business processes.

• We think we have moved beyond the phase where we significantly increase Total Employee Expenses and Outsourcing Expenses, particularly for solutions in fields that significantly contribute to profits, such as Online Research and Digital. We will reduce the pace of increase in the two types of expenses to a level below the Revenue growth rate.
• Therefore, we believe that if we expand Revenue by taking the initiatives described above, profit margins will naturally improve.
• In addition to that, rising raw materials prices and personnel expenses are global trends, and we cannot avoid them. In this environment, we will strive to implement strategic pricing.

(Q3)

• I understand that after the sale of the Overseas (ex-Korea) Business, which was announced in the Q3 earnings announcement, net profit at the newly integrated company, which will include the Overseas Business, will be incorporated at Macromill as equity method profit.
• What will profit at the integrated company be? What is your outlook for profit at the company?

(A3)

• The transaction will be closed on June 1, 2023, and in the fiscal year ending June 30, 2023, profit at the new integrated company for only one month will be consolidated. The effect of the new company will thus be insignificant.
• On the other hand, the impact of the new company on our next fiscal year, we need taking into consideration a business plan that will be examined and projected at the Toluna and MetrixLab.
• We will closely examine the business plan and announce the impact of the new company on our next financial guidance in August this year.

(Q4)

• I would like to ask a question about consolidated figures, including those in the Overseas Business sold.
• I understand that in Q3, Revenue was lower than expected.
• Did you curb any expenses as Revenue growth was low?

(A4)

• Since this quarter, we disclose results in Continuing Business and Discontinuing Business separately. Thus, let me explain results Japan and Korea Business as Continuing Business, and Overseas (ex-Korea) Business as Discontinuing Business, separately.
• Of Operating Expenses in continuing operations, Panel Expenses decreased in tandem with Revenue. We curbed Outsourcing Expenses and Other Expenses, and they were lower than the initial forecasts. Total Employee Expenses was roughly on a par with the initial forecast.
• Revenue in discontinued operations was initially forecast to increase 9% YoY but has continued to grow strongly and increased more than 20% YoY in the Q3 YTD. Looking at Operating Expenses, Total Employee Expenses have been increasing to create additional Operational Capacity for future Revenue expansion, and Other Expenses have also been rising, reflecting more active operating activities. Consequently, an increase in profit in discontinued operations was minor and insignificant.

Ends,

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