■Future Outlook LeTech <3497> expects an increase in sales and ordinary income of more than 20%, with sales of 2.14 billion yen (+33.8% YoY), operating income of 150 million yen (+7.7% YoY), ordinary income of 100 million yen (+21.7% YoY), and net income of 1.03 billion yen (-11.4% YoY) for the July 2024 term, and has maintained its initial forecast (announced in September 2023).
1. Performance outlook for fiscal year ending September 2024.
The consolidated operating performance of interspace <2122> for the fiscal year ending September 2024 is expected to increase revenue by 11.2% YoY to 810 million yen, decrease operating profit by 7.8% to 730 million yen, decrease ordinary profit by 20.8% to 720 million yen, decrease net income attributable to parent company shareholders by 26.6% to 430 million yen compared to the previous year's performance. However, it has been revised upward from the initial plan. The early recovery of advertising revenue from 'Mama Sta.' is the main reason for the increase. On a semi-annual basis, while the second half is expected to increase revenue to 410.4 million yen, up from the first half, operating profit is expected to decrease to 295 million yen. This is due to the uncertain trend of domestic performance advertising and continued pre-investment, such as the recruitment of core personnel from overseas subsidiaries. In addition, due to the wage revision in April 2024, personnel expenses in Japan are expected to increase by about 20 million yen compared to the first half. However, there is also a possibility of an upward trend in profits, as there will be no more TV CM costs in the future and as long as there is no significant change in the market environment in the media business according to our company.
The company set three business policies for the fiscal year ending September 2024 at the beginning of the period. These are the promotion of investment in comparison and review media, investment in overseas affiliates and the development of revenue models, and investment in the marketing solution field and improving the productivity of affiliates in order to build a growth foundation for fiscal year ending September 2025 and beyond.
In the promotion of investment in comparison and review media, we are working to improve profitability by shifting from attracting customers through advertising to attracting them through organic methods. In the first half, we achieved an increase in revenue by strengthening personnel and improving the UI of the site. We will continue to focus on user-oriented site construction, such as expanding content, in the second half and beyond, in order to increase organic customer acquisition and improve profitability.
In the investment in overseas affiliates and developing revenue models, we aim to create a virtuous cycle of investment and growth by recruiting and training personnel, standardizing revenue models, and accumulating know-how. In terms of personnel, we consider it important to recruit excellent core personnel, and we are promoting recruitment in Malaysia and Thailand based on the success of Indonesia. As of the end of March 2024, the number of employees is about 85 throughout overseas subsidiaries. The challenge is to acquire more advertising clients and leading partner sites. In Thailand and Malaysia, aside from Indonesia, which has become profitable in the previous year, sales growth has been languishing due to the fact that advertising clients are dependent on a small number of major companies in the finance sector. Therefore, it is necessary to cultivate a wide range of advertising clients, including the industry. Furthermore, with regard to partner sites, the acquisition of leading influencers and affiliate media is important, and these initiatives will be the key to future sales growth. Regarding overseas business, a loss is expected to continue in the second half as well as in line with company plans.
Regarding investment in the marketing solution field and improving the productivity of affiliates, marketing solutions have been progressing steadily, such as an increase in the number of contracts for 'Dareka-nablock' due to the effectiveness of promotions implemented in the first half. We will continue to build up stock revenue while controlling costs for service functionality development and customer acquisition. The operating profit of the marketing solution field in the second half is expected to turn slightly profitable, as TV CM costs will be eliminated.
(1) Performance marketing business.
As for the performance marketing business, the domestic performance advertising business, which is the mainstay, has been relatively weak in the field of services centered on esthetics and personnel dispatching, although the financial sector has been performing well in the third quarter. In addition, the environmental situation is not necessarily good, as in the case of the functional food sector, which has been in the news for health hazards. Regarding the EC sector, we plan to cover the decrease in existing customers by focusing on developing customers with long-tail sales, such as fashion and goods. Furthermore, for the financial sector, we are progressing with the acquisition of operating companies, as crowdfunding-based real estate investment is becoming active, which is expected to contribute to future sales growth, aside from the development of the recruitment of personnel and the standardization of revenue models.
In the field of marketing solutions, in-store DX solutions are expected to see steady revenue growth through increasing numbers of contracts for "Pocket Backup" and "Dare Kana Block". The initial goal for the number of contracts for "Dare Kana Block" is 50,000. Despite profit contributions not expected until at least September 2025 due to early investment, potential demand is expected to be large among seniors amid an increasing number of fraud cases utilizing smartphones. As a result, it is expected to become a stable source of revenue in the medium- to long-term.
Regarding the web improvement tool "SiteLead," the acquisition numbers are slightly below plan, so reconsideration of acquisition methods is being considered for the latter half of the period. Although a loss is expected for the September 2024 period due to the investment phase, it is aimed to accumulate contract numbers by further expanding awareness by taking advantage of the high price competitiveness compared to competitors to achieve early monetization.
Revenue from overseas performance advertising is expected to grow by double digits annually, primarily in Indonesia. However, the scale itself is still small, and the expansion of advertisers and partnership acquisition remain as challenges toward monetization.
(2) Media business
Among content-type media, advertising conversion fees for "Mama-Star" have significantly increased due to reward advertising and recommended widget advertising, and recovery is expected to continue in the latter half as well. In addition, for other media, similar strategies are being promoted following the growth of "4yuuu" due to collaboration with major media.
For comparison and review-type media, the aim is to increase revenue through organic traffic by focusing on user-oriented site construction, as previously mentioned. Regarding "Juku-Shiru," the number of paid posted classrooms has exceeded the initial goal of 10,000 to 12,000 classrooms, and customer acquisition for major learning centers has also progressed. In the future, we will focus on strengthening content to expand performance compensation through traffic, with the advantage of having more comprehensive information for parents and students compared to competing portal sites. There are three routes for sending customers to the site; requesting materials, trial classes, and phone inquiries, but the number of trial class applications and phone inquiries are particularly high, resulting in a higher enrollment rate for sent customers than competing sites. Therefore, if we can increase site traffic organically, it is expected to lead to the expansion of performance compensation and monetization in the foreseeable future.
(Written by FISCO guest analyst, Jo Sato)