Sansan Inc

Thank you for joining our briefing today. I am Chika Terada, CEO of Sansan Inc., and I will explain the results. This is a table of contents, and I would like to explain the highlights of the first half of the fiscal year results and the growth strategies. First, I'll give the highlights of the first half of the fiscal year financial results. Page 5, net sales increased by 32.5%, and contrasting with the loss in the same period in the previous year, operating profit returned to black. Although the progress rate of operating profit against the full-year forecast seems lower, this was due to the advertising activities centered on TV commercials in the second quarter. This measure was in line with the plan. In the first half, both net sales and operating profit made steady progress against the full-year forecast announced at the beginning of the fiscal year. In the second quarter, we actively promoted the Sansum business in new and peripheral areas. Page 6. Here's an overview of our consolidated figures. Net sales increased by 32.5% year-on-year to 6.294 billion yen. Operating profit increased to 109 million yen. The gross profit margin improved by 2 points to 85.5% and remained at a high level. Next page, here are the detailed results by segment. In the sansan business, net sales increased by 27.5% year-on-year to 5.78 billion yen. Operating profit increased by 65.3% to 2.112 billion yen. The growth rate is slowing down as the scale of net sales increases, but we are currently working on increasing the number of salespeople and expect that the effects will gradually appear from the second half onwards. Eight business net sales increased 139.8% year-on-year to 504 million yen, and high growth continued. In accordance with the increase in net sales, the operating loss decreased by 142 million yen to 466 million yen. With regard to the adjustments, the negative amount increased, but this was due to the increases in, for example, recruiting expenses due to the strengthening of personnel throughout the company and rents. Next, with regard to the main topics for the second quarter, I would like to cover two points. Both are related to the new and peripheral areas in the Sansom business. Page 9, the first point concerns the anti-social forces check option, which are being jointly developed by Refinitiv Japan KK. Currently, we are advancing development with implementation targeted for March 2020, a function to complete the anti-social forces check automatically by simply scanning a business card. while identifying risky companies by aggregating the company name data of the business card information that has undergone digitization with the same company's compliance-related database. If applicable, a notification will be displayed on Sansan so that those exchanging business cards and legal personnel will be immediately aware of the risk. Amidst the recently increasing awareness, for example, risk management and governance in each company, we believe that this function can provide value, such as faster and more efficient anti-social forces check and in preventing dependence on the compliance personnel. This function is planned to be provided as an option for Sansan, and a service fee will be estimated individually for each company, but it is assumed that the monthly usage fee will increase by about 20%. The second point is our capital and business alliance with Wing Arc First Inc., which was announced on November 1st. As part of the business alliance, we will develop Wing Arc First Motion Board service as an application that can be used on our San San service. MotionBoard is an information usage dashboard service that can integrate and make visual a variety of information and data that exists both inside and outside of companies. Making MotionBoard operable in Samsung will enable various analyses linked to business card data that is accurate customer information. We believe that we can provide value, including decision support and business improvement to our user companies. We will also implement cross-selling through mutual sales activities. Next, I will explain our future growth strategy in page 11 and onwards. Page 12, we are currently working to achieve medium to long-term growth in net sales in three major areas, and I would like firstly to present an outline. The first is to promote the further expansion of Samsung use in existing areas of the Samsung business. As a measure toward this end, while continuing to promote advertising to a certain extent as before, we are currently working to strengthen the sales department, mainly by increasing the number of salespeople. The second area is the initiatives related to the new and peripheral areas in the Sansan business, which were introduced earlier as topics. We will add a variety of optional functions and promote the development of Sansan as a platform. The third area is strengthening monetization in the B2B domain in the H business. In addition to strengthening the sales and sales structure in existing monetization plans, we will also work on the development of new plans. Firstly, with regard to the first area, that of the existing Sansan business, I would like to explain the thinking behind the markets we regard as targets. Sansan's market share has already reached 81.9%, but there is still much room for this market to grow. For instance, the proportion of Sansan users to all employees working in Japan is about 1%, meaning we theoretically have the capacity for several 10 times of growth. Of course, that is only theoretical, but we believe that at least 10 to 20 times growth is realistic. Page 14, acceleration of work style reform and digital transformation will boost needs for cloud-based contact management. We aim to leverage these trends to achieve high growth for our business. As for the concrete growth strategy, we think that an increase in both the number of subscriptions and sales per subscription are required. From the second half of the previous fiscal year, we have been working to strengthen our sales department, focusing on increasing the number of salespeople. To increase the number of subscriptions, we are establishing a sales system for medium and large-sized companies and promoting a wide range of sales activities through domestic and overseas basis. As it will take at least six months after recruiting the salespeople for them to be up and running, they will not be a sudden big impact. We expect that the effects will gradually appear from the second half of the current fiscal year. At the same time, we are working to increase net sales per subscription by acquiring large-scale subscriptions on the assumption that these will be used by the entire company and by promoting greater use by existing customers. For example, the Ministry of Economy, Trade and Industry installed Sansan at some of its bureaus in 2015. The ministry decided to expand the introduction of Sansan on a trial basis with the aim of sharing business card information widely within the ministry and using Sansan efficiently to form a solid basis for a personnel networking platform. Next, with regard to the second area, that of the Sansan business new and peripheral areas, I would like to explain the improving of the value of business platform. In page 16, as a reference, this diagram shows the main options offered by Sansan and the status of external service integration. Page 17, even now, Sansan functions not only in the capitalization of business cards, but also possesses functions to, for example, link with external tools such as SFA, CRM, and marketing automation by the use of OpenAPI. and functions that enable the acquisition and utilization of information from external services, we are also seeking improvements in user convenience. And we have provided specific examples on several occasions before, but in addition to these developments, we would like to aim for improvements in its value as a business platform by adding a variety of options that function via the SunSun application. In other words, we will connect various operations that already exist in the business flow of the existing client company with Sansan and provide various solutions that can be seamlessly handled on Sansan. In the years to come, when adding the various functions, we will consider actively utilizing not only in-house developments but also as alternatives partnership with other companies and M&A. Here are some specifics on the main optional functions that have been released before. Sansan Data Hub on the upper left is a function that has been covered several times such as in past financial results materials. It is a service that enables the consolidation and enrichment of customer data existing in a company. For example, Samsung Data Hub can be useful for data that can be utilized for advanced marketing activities by preventing the double registration of data managed on CRM, SFA, such as Salesforce, or on an MA tool like Marketo, and by adding a variety of additional information. In addition, Sansan questionnaire for seminars powered by creative survey on the bottom left is a new optional function we launched in November. This is a solution function that can be provided Sansan link questionnaire function required for seminars and other events. These are just some examples and we would like to add many more such options. Page 19, third is the monetization of the eight business in the B2B area. There are currently monetization plans for our companies, as you can see, but we will work on strengthening the system to expand sales and developing new plans, and we will aim for profitability of the ape business in the near future. At the end of my part, I'd like to talk about our full-year forecasts. Page 21. Regarding the full-year forecast, there is no change from the initial announcement. In fiscal 2019, consolidated net sales are expected to increase by 35.4% to 13.816 billion yen, mainly due to the continued growth of the Sansan business and the monetization of the 8 business. In addition, with the increase in net sales, we expect to make profits. With this, I would like to conclude my explanation. Next, Hashimoto will explain the details of the second quarter financial results. I am Hashimoto and I am the CFO of Sansan Inc. Now I will explain the quarter results for the second quarter and page 22 and onwards. Page 23, here is an overview of our consolidated figures for the three months in the second quarter. Net sales increased by 29.5% year-on-year to 3.194 billion yen. With regard to the operating profit, second quarter net sales were negative due to the strengthening of advertising activities centered on TV commercials. But due to the increase in net sales, there was a 338 million yen improvement year-on-year. Page 24, I will explain the background to the improvement in operating profit. In the second quarter, personnel expenses and other SG&A expenses increased due to the progress made in the recruiting of personnel, but the negative amount decreased due to the increase in net sales and a decrease in advertising expenses. Page 25, here are the quarterly operating profit and advertising expenses from the previous year. We tend to strengthen advertising activities centered on TV commercials in the second quarter, and as a result, operating profit is difficult to generate in this quarter. As in the previous year, operating profit in the second quarter was negative due to the broadcasting of TV commercials, but this was as planned at the beginning of the fiscal year. Advertising expenses in third and fourth quarters are expected to be lower than in the second quarter. Page 26. I will give an overview of the consolidated balance sheet. Due to the financing associated with the IPO and other factors, there has been a large change from the end of the previous fiscal year, but there were two major changes in the latest second quarter. Mr. Terada explained that capital and business alliance with Wingark First and investment securities increased by 5.019 billion yen, mainly due to the acquisition of shares associated with this alliance. In addition, long-term borrowings under non-current liabilities increased by 3.889 billion yen due to the effect of 5 billion yen in bank borrowing for the purpose of the share acquisition cost. Page 27, here are the detailed results by segment. First of all, in the Sansan business, net sales increased by 25.4% year-on-year to 2.941 billion yen, and operating profit increased by 111.9% to 848 million yen. Operating profit margin improved by 11.8 points due to the increase in net sales and the decrease in advertising expenses. Page 28. Regarding the status of KPIs and Sansan business. The number of subscriptions for Sansan increased 11.5% to 6,263, and average monthly sales per subscription increased 8.9% to 159,000 yen. In existing contracts, monthly sales per subscription are expanding steadily. On the other hand, the growth rate slowed down for the first half due to the effect of increasing the number of salespeople, and new contracts were acquired from relatively small companies. As you can tell on the right-hand side, the number of employees in the Sansan business as a whole was 357, an increase of 102. The number of employees increased by 16 compared to the end of the first quarter, and the pace of the increase was somewhat moderate, but we expect that recruitment will accelerate in the second half and thereafter. Due to the progress in hiring, orders received an increase in ASB. For the cumulative second quarter, this represents the largest order ever received. Page 29, the average monthly churn rate for the last 12 months is 0.54%. It remains at very low level. Page 30. When breaking down Sansan's revenue by client size or employee number, as with previous trends, revenue from large companies over 1,000 employees increased by 34% year-on-year. From the second half of the previous fiscal year, we have increased the number of employees in the sales department and are working on strengthening sales activities for large companies. However, it takes some time for these additional staff to make their presence felt, so this measure has not yet fully affected our business results. We aim for net sales growth while continuing hiring, strengthening training and education for salespeople. Finally, I'll explain about 8 business in page 31. Net sales increased 110.2% year-on-year to 253 million yen thanks to strengthening monetization of B2B services. Operating loss decreased by 83 million yen to 227 million yen due to increased net sales. The number of eight company premium subscriptions was 1,164, an increase of 149.8% year-on-year. Compared with the first quarter, the year-on-year growth rate of net sales declined due to the decrease in the number of meetings for the business event meets. Page 32. the number of 8 users continues to grow steadily with an increase of 290,000 year-on-year to 2.58 million users. That brings me to the end of our presentation. Thank you.