WonderPlanet Inc. Q1 FY2025 earnings call

• Strategic Market Focus

  • The global mobile game market is currently polarizing between high-cost AAA titles and casual titles, with mid-core titles around 1.0 billion yen in development cost becoming increasingly difficult to succeed. Wonder Planet is focusing on expanding market share in the rapidly growing global hybrid casual game sector, which uses a hybrid monetization model combining in-app purchases and in-app advertising.
  • The global hybrid casual market grew 2.8x from 2020 to 2023, reaching 29.57 billion yen, and the company leverages its 10+ years of experience in long-term game operation, IP collaboration, and hybrid monetization to capture share in this segment.

• Organizational and Development Infrastructure Updates

  • The company reorganized its leadership and organizational structure in late 2024: it renamed its general game division to Mobile Game Business Headquarters, added a new COO position to oversee overall operations, and appointed three new executive officers with deep mobile game development experience to lead individual projects, to speed up decision-making and accelerate growth.
  • The company built a common development infrastructure platform called SEED to eliminate inefficient knowledge silos across individual projects, improve development quality, and free up more time for teams to focus on user experience and value creation. SEED is on track and will be used for all new in-development titles.

• Current Project Status

  • Existing long-running title "Crave Saga" held multiple successful collaborations in 1Q, including with Super Danganronpa 2 and Majirumi-e Inc., and is currently running its 9.5th anniversary campaign ahead of its 10th anniversary next year.
  • Pandora Land, the company's flagship new hybrid casual title, held multiple high-profile collaborations (with Hatsune Miku Magical Mirai 2024, Ultraman Series, and Bakusou Kyoudai Let's & Go!!) in 1Q and is undergoing operational improvements to move to profitability. Two new co-developed IP titles with prominent partners have been in full development for over a year and are progressing on schedule, with one planned for release within the calendar year. The company targets roughly one new release per year starting in 2025.
  • New joint projects adopt a structure that limits Wonder Planet's upfront cost burden for development and operation, in exchange for slower profit growth; the company expects long-term accumulated returns to match traditional joint venture structures by leveraging its core strength in long-term operation.

• Financing Plan

  • Following a 0.5 billion yen borrowing in August 2024, the company plans to issue 0.5 billion yen in 3-year unsecured SDGs private placement bonds through Resona Bank in Q2 2025 to fund ongoing growth investment.

1. Existing operational titles: Total company net sales in 1Q 2025 August FY was 0.531 billion yen. "Crave Saga (クラフィ)" recorded a year-over-year revenue decrease due to the pullback effect from its 9th anniversary campaign held in 4Q of the prior fiscal year. Development and operation revenue for new titles and Pandora Land reached 0.344 billion yen, a 115.1% increase year-over-year, accounting for approximately 64.8% of total 1Q revenue, which fully absorbed the revenue decline from the prior year's service shutdown of "Jumpch". 2. Closed title: Revenue recognition related to the service shutdown of "Alice Fiction" was completed in 1Q. All development and operating investment is currently concentrated on Pandora Land and two new co-developed IP titles, leading to an overall operating loss of -0.054 billion yen for the quarter.

• Q2 2025 August FY guidance: Management expects year-over-year and quarter-over-quarter revenue growth and an operating profit for Q2, and is targeting to absorb the 1Q upfront investment. "Crave Saga" is expected to grow revenue quarter-over-quarter from 9.5th anniversary campaign effects; Pandora Land's operating revenue is expected to stay flat with 1Q, while development revenue from new projects will increase quarter-over-quarter. Operating profit will grow on "Crave Saga"'s higher revenue, with continued upfront operating investment for Pandora Land and higher development costs for new projects matching prior expectations.
• Full-year 2025 August FY guidance: The full-year outlook is unchanged from the initial forecast: management maintains expectations for year-over-year revenue growth and full-year operating profit, while continuing to prioritize growth investment. Detailed numerical full-year guidance remains non-disclosed, consistent with prior periods, as management notes reliable forecasting is not currently feasible. No dividend is planned for 2025 August FY, as the company prioritizes improving retained earnings.
• Individual title outlook: "Crave Saga" targets re-growth in its 10th year of operation, with user re-engagement promotions planned for its 10th anniversary. Management is working to set a clear timeline for Pandora Land to turn to profitability within the 2025 August FY. For new development, higher development revenue is expected year-over-year alongside higher investment costs in 2025 August FY. Sustained profit growth is expected to materialize starting from the 2026 August FY after current development projects are launched and scaled.

• The company's current quarterly earnings are highly volatile, with 1Q and 3Q naturally tending to be investment-heavy while profits are concentrated in 2Q and 4Q driven by "Crave Saga"'s anniversary-driven revenue cycles, which creates earnings uncertainty until Pandora Land and the two new IP titles become stable profit pillars.
• New project development timelines are subject to change based on progress, which could delay planned new releases and push out expected profit growth.
• Retained earnings remain negative on the company's balance sheet, which precludes shareholder returns including dividends until retained earnings are restored to positive territory, with no clear current timeline for this milestone.

Q: Can you confirm if there is a new title planned for release this calendar year, and how are the two in-development IP titles progressing? / A: Management confirmed that one new title is scheduled for release within the calendar year, which is why the company states it will continue releasing roughly one new title per year starting after 2024. The two co-developed prominent IP titles have been in full development for over a year and are progressing smoothly, with public updates to be shared as they near release. The team that previously built the hit title Jumpch Heroes is leading development of these new projects.

Q: What is the confidence level for full-year 2025 August FY profitability, how long will the current period of upfront investment continue, and when will sustained profit growth begin? / A: All 1Q investment is concentrated on Pandora Land's operation and the two new IP titles, and all development investment is expensed on the income statement rather than capitalized, so full-year profitability depends on whether "Crave Saga"'s expected higher revenue in 2Q and 4Q can cover the upfront investment. Management maintains the original expectation that this will be achieved, with no material deviations from plan so far. Management expects to set a clear path for Pandora Land to reach profitability within this fiscal year, and targets sustained profit growth starting from 2026 August FY, though many variable remain at this stage. The company notes it needs to build three stable profit pillars (Crave, Pandora, plus one new IP title) to eliminate quarterly earnings volatility.

Q: Why is the company planning another 0.5 billion yen debt financing after a 0.5 billion yen borrowing in August 2024? / A: The financing is intended to build up working capital and a safety net in preparation for higher development investment as new titles near release. Debt financing is chosen over equity financing because it avoids share dilution for existing shareholders and has lower overall capital costs than alternative financing methods in the current market environment. The company will continue to choose the best financing option based on its own situation and market conditions going forward, and currently plans to continue relying on debt financing for future capital needs.

Q: When can shareholders expect dividend payments? / A: The company's retained earnings are currently negative, and returning retained earnings to positive territory is a prerequisite for any shareholder returns including dividends, so this will remain the top priority for the foreseeable future. There are too many variables at this stage to set a clear timeline for when retained earnings will turn positive and when dividends can be implemented.