Avex : Q4 Financial Summary of March 2022

Consolidated Financial Summary for the Fiscal Year Ended March 31, 2022

(Japanese Accounting Standards)

	May 12, 2022
Avex Inc.	Tokyo Stock Exchange, Prime Market
Code No: 7860	(URL https://avex.com/jp/en/)
Representative: Katsumi Kuroiwa, President, CEO
Contact: Shinji Hayashi, Representative Director, CFO	TEL: [phone]
Ordinary General Meeting of Shareholders: June 24, 2022
Scheduled date for commencement of dividend payments: June 9, 2022
Scheduled date to submit the Securities Report (Yukashoken Houkokusho): June 27, 2022

Supplementary documents for financial results: Yes

Financial results briefing: Yes (briefing for institutional investors and securities analysts planned to be held by video streaming)

Note: All amounts are rounded down to the nearest million yen.

1. Consolidated business results for the fiscal year ended March 31, 2022 (April 1, 2021 to March 31, 2022)

(1) Consolidated operating results

Note: Figures in percentages denote the year-on-year change.

Net sales

Operating income

Ordinary income

Profit (loss) attributable to

owners of parent

Year ended

million yen

%

million yen

%

million yen

%

million yen

%

March 31, 2022

98,437

20.7

2,582

‒

2,351

‒

919

(92.8)

March 31, 2021

81,527

(39.8)

(6,278)

‒

(6,538)

‒

12,831

‒

(Note) Comprehensive income

Year ended March 31, 2022: ¥2,538 million (-81.8%)

Year ended March 31, 2021: ¥13,978 million (‒%)

Net income

Diluted net income

Ratio of net income

Ratio of ordinary

Ratio of operating

to shareholders'

per share

per share

income to total assets

income to net sales

equity

Year ended

yen

yen

%

%

%

March 31, 2022

20.77

20.76

1.6

2.3

2.6

March 31, 2021

298.11

‒

25.3

(5.8)

(7.7)

(Reference) Equity in earnings of affiliates

Year ended March 31, 2022: ¥(218) million

Year ended March 31, 2021: ¥(337) million

(2) Consolidated financial position

Total assets

Net assets

Shareholders' equity ratio

Net assets per share

As of

million yen

million yen

%

yen

March 31, 2022

97,801

60,694

59.2

1,285.20

March 31, 2021

105,105

58,339

52.6

1,335.38

(Reference) Shareholders' equity

As of March

31, 2022: ¥57,872 million

As of March 31, 2021: ¥55,306 million

(3) Consolidated statement of cash flows

Cash flow from

Cash flow from

Cash flow from

Cash and cash equivalents

operating activities

investing activities

financing activities

at end of period

Year ended

million yen

million yen

million yen

million yen

March 31, 2022

(4,464)

(3,387)

(314)

44,671

March 31, 2021

(6,480)

70,041

(28,928)

52,654

2. Status of dividend payments

Annual dividends

Total dividend

Payout ratio

Dividend on

End of first

End of second

End of third

payment

equity

(Record date)

End of year

Annual

(consolidated)

(annual)

(consolidated)

quarter

quarter

quarter

Year ended

yen

yen

yen

yen

yen

million yen

%

%

March 31, 2021

‒

25.00

‒

96.00

121.00

5,067

40.6

10.1

March 31, 2022

‒

25.00

‒

25.00

50.00

2,251

240.7

3.8

Year ending

‒

25.00

‒

25.00

50.00

553.7

March 31, 2023 (forecast)

3. Forecasts for consolidated operating results for the year ending March 31, 2023 (April 1, 2022 to March 31, 2023)

Note: Figures in percentages denote the year-on-year change.

	Operating income	Profit (loss) attributable	Net income per share
	to owners of parent
Year ending	million yen		million yen		%	Yen
%
March 31, 2023	1,000	(61.3)	400		(56.5)	9.03

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Avex Inc. (7860) Consolidated Financial Summary for the Fiscal Year Ended March 31, 2022

• Notes
• 1. Changes in significant subsidiaries during the term (changes in specified subsidiaries in conjunction with changes in the scope of consolidation): None

New: - company (Company name) -

Excluded: - company (Company name) -

1. Changes in accounting policies and changes in or restatement of accounting estimates
   1. Changes in accounting policies in conjunction with revisions to accounting standards: Yes

2.	Changes in accounting policies other than 1:	None
3.	Changes in accounting estimates:	None
4.	Restatement:	None

(3) Outstanding shares (ordinary shares)

a. Shares outstanding at end of term (including treasury stock)

As of March 31, 2022:	45,440,100 shares
As of March 31, 2021:	45,343,500 shares
b. Treasury stock at end of term
As of March 31, 2022:	410,124 shares
As of March 31, 2021:	3,927,388 shares
c. Average number of shares during term
Year ended March 31, 2022:	44,281,705 shares
Year ended March 31, 2021:	43,042,553 shares

(Reference) Overview of non-consolidated business results

Non-consolidated business results for the fiscal year ended March 31, 2022 (April 1, 2021 to March 31, 2022)

(1) Non-consolidated operating results

Note: Figures in percentages denote the year-on-year change.

Net sales

Operating income

Ordinary income

Net income

Year ended

million yen

%

million yen

%

million yen

%

million yen

%

March 31, 2022

9,805

190.1

903

‒

(741)

‒

(1,920)

‒

March 31, 2021

3,379

(77.7)

(6,258)

‒

(9,528)

‒

10,971

152.7

Net income per share

Diluted net income

per share

Year ended

yen

yen

March 31, 2022

(43.37)

‒

March 31, 2021

254.91

‒

(2) Non-consolidated financial position

	Total assets	Net assets		Shareholders' equity ratio	Net assets per share
As of	million yen	million yen		%	yen
March 31, 2022	70,033	45,759		65.3	1,016.20
March 31, 2021	76,754	47,308		61.5	1,139.39
(Reference) Shareholders' equity	Year ended March 31, 2022: ¥45,759 million
	Year ended March 31, 2021: ¥47,189 million

• This summary of financial statements is outside the scope of audit procedures by certified public accountants and audit firm.
• Explanation for forecasts of business results and other notes
  The forecasts for operating results and others contained in this release are based on data and information that the Group has obtained so far and specific assumptions that the Group judges to be reasonable. Please note, therefore, that the actual results and others may greatly differ from the forecasts due to various factors.

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Avex Inc. (7860) Consolidated Financial Summary for the Fiscal Year Ended March 31, 2022

1. Overview of Operating Results, etc.

(1) Overview of operating results for the fiscal year under review

(Unit: million yen)

	Fiscal year	Fiscal year	Fiscal year	Fiscal year	Fiscal year
	ended March	ended March	ended March	ended March	ended March
	31, 2018	31, 2019	31, 2020	31, 2021	31, 2022
Net sales	163,375	160,126	135,469	81,527	98,437
Cost of sales	114,967	113,820	96,375	55,908	63,209
Gross profit	48,408	46,306	39,093	25,618	35,228
Gross profit margin	29.6%	28.9%	28.9%	31.4%	35.8％
Personnel expenses	13,232	13,200	12,170	12,128	11,029
Sales promotion and advertising	9,848	9,967	8,336	6,875	7,993
expenses
General expenses	18,388	16,048	14,553	12,893	13,622
Total SG&A expenses	41,469	39,216	35,060	31,897	32,645
Operating income (loss)	6,939	7,089	4,033	(6,278)	2,582
Operating margin	4.2%	4.4%	3.0%	‒%	2.6%

During the fiscal year under review, the economic outlook in Japan remains uncertain due to the prolonged COVID- 19 pandemic, despite a temporary recovery after the lifting of restrictions on activities imposed with occasional declaration of a state of emergency and implementation of Focused Anti-infection Measures.

In the entertainment industry, to which the Group belongs, the production of music software, including music videos, was down 0.4% year on year, to 193,638 million yen (January to December 2021; according to a survey by the Recording Industry Association of Japan). Sales of paid music downloads were up 14.4% year on year, to 89,538 million yen (January to December 2021; according to a survey by the Recording Industry Association of Japan). In the video-related market, sales of video software fell 0.2% year on year, to 136,926 million yen (January to December 2021; according to a survey by the Japan Video Software Association). The scale of the digital video distribution market, on the other hand, increased by 14.0% year on year, to 423,000 million yen (January to December 2021; according to a survey by the Digital Content Association of Japan), which is expected to continue to grow.

In this business environment, in an effort to achieve medium- to long-term growth, the Group sought to fulfill two missions, including the establishment of an earnings structure not dependent on the live performance market and the entry into the global market and a new technology market, during the fiscal year under review. To establish a new earnings structure, the Group signed new contracts with artists, celebrities, personalities, and creative professionals popular among young people, engaged in content production, launched a paid distribution service for online live performances with the cooperation of large partner companies in Japan and overseas, and expanded the market for a music streaming service. As part of its approach to the global market and the new technology market, the Group took steps to explore the potential for future entertainment, such as the development of new artists targeting the global market, the launch of worldwide distribution of the Group's content and artists' official merchandise, and the launch of sales of NFT content in the virtual world called the Metaverse.

In addition, the Company relocated its head office in March 2022 and gathered various companies and divisions from the Avex Group at the largest one-floor working space (approx. 750 seats) in Tokyo to promote teamwork and active communication. The Group also promoted hybrid working styles allowing employees to select freer and more flexible ways of working using approximately 400 new co-working spaces.

In addition to these activities, an increase in the number of live events thanks to gradual easing of restrictions on live events and strong sales of music packaged products during the fiscal year under review resulted in year-on-year growth in sales.

As a result, net sales stood at 98,437 million yen (up 20.7% year on year) while operating income came to 2,582 million yen (in comparison with an operating loss of 6,278 million yen in the previous fiscal year), and profit attributable to owners of parent came to 919 million yen (down 92.8% year on year).

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Avex Inc. (7860) Consolidated Financial Summary for the Fiscal Year Ended March 31, 2022

Operating results for the main business segments are as follows.

a) Music Business

			(Unit: million yen)
	Fiscal year ended	Fiscal year ended	Change
	March 31, 2021	March 31, 2022
Net sales	50,349	67,600	17,250
Cost of sales	35,293	43,981	8,687
Gross profit	15,055	23,618	8,562
Gross profit margin	29.9%	34.9%	5.0%
Total SG&A expenses	17,828	19,078	1,250
Operating income (loss)	(2,772)	4,540	7,312
Operating margin	‒%	6.7%	‒%
Sales to external customers	42,818	54,737	11,918

Net sales stood at 67,600 million yen (up 34.3% year on year) and operating profit came to 4,540 million yen (in comparison with an operating loss of 2,772 million yen in the previous fiscal year), the result mainly of an increase in live performance events and growth in sales of music packaged products.

b) Anime & Visual Content Business

			(Unit: million yen)
	Fiscal year ended	Fiscal year ended	Change
	March 31, 2021	March 31, 2022
Net sales	12,095	10,390	(1,704)
Cost of sales	8,910	6,424	(2,486)
Gross profit	3,185	3,966	781
Gross profit margin	26.3%	38.2%	11.9%
Total SG&A expenses	3,404	2,707	(697)
Operating income (loss)	(219)	1,259	1,478
Operating margin	‒%	12.1%	‒%
Sales to external customers	7,792	9,423	1,630

Net sales stood at 10,390 million yen (down 14.1% year on year) and operating profit came to 1,259 million yen (in comparison with an operating loss of 219 million yen in the previous fiscal year), thanks in part to an increase in the profit margin of non-package products such as movies.

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Avex Inc. (7860) Consolidated Financial Summary for the Fiscal Year Ended March 31, 2022

c) Digital Platform Business

			(Unit: million yen)
	Fiscal year ended	Fiscal year ended	Change
	March 31, 2021	March 31, 2022
Net sales	26,108	27,516	1,407
Cost of sales	19,777	21,729	1,951
Gross profit	6,330	5,787	(543)
Gross profit margin	24.2%	21.0%	(3.2%)
Total SG&A expenses	7,229	6,362	(866)
Operating loss	(898)	(575)	323
Operating margin	‒%	‒%	‒%
Sales to external customers	25,935	26,690	754

Net sales stood at 27,516 million yen (up 5.4% year on year) while the operating loss came to 575 million yen (in comparison with an operating loss of 898 million yen in the previous fiscal year), primarily due to an increase in e- commerce sales.

d) Overseas Business

			(Unit: million yen)
	Fiscal year ended	Fiscal year ended	Change
	March 31, 2021	March 31, 2022
Net sales	2,239	3,029	790
Cost of sales	1,449	1,960	511
Gross profit	790	1,069	278
Gross profit margin	35.3%	35.3%	(0.0%)
Total SG&A expenses	1,448	1,471	23
Operating loss	(657)	(402)	254
Operating margin	‒%	‒%	‒%
Sales to external customers	2,190	2,976	786

Net sales stood at 3,029 million yen (up 35.3% year on year) while operating loss came to 402 million yen (in comparison with an operating loss of 657 million yen in the previous fiscal year.)

e) Technology Business

			(Unit: million yen)
	Fiscal year ended	Fiscal year ended	Change
	March 31, 2021	March 31, 2022
Net sales	1,879	2,914	1,034
Cost of sales	1,270	2,297	1,027
Gross profit	609	617	7
Gross profit margin	32.4%	21.2%	(11.2%)
Total SG&A expenses	2,234	2,314	80
Operating loss	(1,624)	(1,697)	(72)
Operating margin	‒%	‒%	‒%
Sales to external customers	1,877	2,904	1,027

Net sales stood at 2,914 million yen (up 55.1% year on year) while operating loss came to 1,697 million yen (in comparison with an operating loss of 1,624 million yen in the previous fiscal year.)

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