KeyHolder,Inc. Q4 FY2024 earnings call

Corporate Actions and M&A

• Added two new consolidated subsidiaries during 2024: 10ANTZ in January and Topos Enterprise in October, bringing the total group to 17 companies including equity-method investees.
• Reported full-year 2024 consolidated results: 31.09 billion yen revenue, 2.805 billion yen operating profit, and 2.5 billion yen net profit attributable to parent company shareholders, representing a 3.576 billion yen year-over-year revenue increase and 840 million yen year-over-year operating profit increase. Profit growth was driven by 2.551 billion yen in negative goodwill from the acquisitions, offset by 909 million yen in impairment of goodwill and intangible assets for the underperforming digital content division, plus a 245 million yen increase in holding company costs from a provision for the sponsor support of Ma Mère, which is in civil rehabilitation.
• Ended the period with total assets of 54.299 billion yen (up 27.084 billion yen year-over-year) and an equity ratio of 40%, with operating cash flow up 2.349 billion yen, investing cash flow down 3.904 billion yen, and ending cash balance of 4.11 billion yen (down 974 million yen year-over-year).

Segment Operational Progress

• Comprehensive Entertainment: SKE48 and Novelbright delivered profit growth from improved profitability and successful new fan acquisition initiatives. bijoux talent development is progressing well, with winning auditionees already securing drama, fashion show, and commercial placements. Nogizaka46 saw reduced large event revenues from key member graduations and slower-than-expected streaming sales growth, plus reduced equity method gains from lower government subsidy income. 10ANTZ's poor performance led to segment profit decline even with the revenue growth from the acquired game app business.
• Video Production: The variety division built a solid track record of new project wins, offsetting weakness in drama/film and talent dispatch to deliver overall stable revenue growth.
• Advertising Agency: The entire segment faced external headwinds from client industry changes that drove both revenue and profit declines.
• Logistics: The newly acquired Topos Enterprise delivered initial profits within three months of consolidation.

Strategic Priorities

• Prioritize resolving PBR below 1.0x (currently ~0.6x, with high 10%+ ROE but low 5.3x PER) to raise the stock price to a target of 1,100 yen or higher, which matches a 15x PER target for PBR 1.0x.
• Continue to pursue growth investment to expand business scale, while improving investor relations and corporate communications to increase market awareness and boost stock liquidity and valuation.
• Updated dividend policy to maintain a focus on progressive payout ratios, with a revised approach balancing dividends and shareholder benefits, and will continue to actively consider special dividends based on performance.

1. Comprehensive Entertainment Segment: Revenue increased 3.065 billion yen year-over-year, with the addition of 10ANTZ (which brought official mobile game apps for Nogizaka46, Sakurazaka46, and Hinatazaka46). 10ANTZ missed performance targets significantly due to declining existing content user counts, increased marketing costs for real events and new content development, resulting in an operating loss. Pre-impairment segment profit was 1.498 billion yen, a 627 million yen decrease year-over-year. This segment accounts for approximately 58% of total consolidated revenue. 2. Video Production Segment: Revenue increased 19 million yen year-over-year, as steady orders for regular variety programs and new projects recovered lost ground from the first half of the year. The variety production department delivered profit growth from 14 regular programs and 39 new/special programs, but the drama/film department saw profit declines from upfront co-production costs and increased talent development personnel expenses, while the talent dispatch department saw profit declines from higher management costs and a higher share of low-margin projects. Segment profit was 154 million yen, a 36 million yen decrease year-over-year. This segment accounts for approximately 5% of total consolidated revenue. 3. Advertising Agency Segment: Revenue decreased 1.452 billion yen year-over-year, impacted by industry-wide advertising spend reviews across the脱毛 industry, which is the main client base for the digital advertising division. While the traditional advertising division grew revenue after an organizational overhaul, unexecuted planned events and agency projects, plus rising costs led to profit declines. The digital advertising division saw further pressure from industry restructuring and intensifying price competition among脱毛 clients. Segment profit was 174 million yen, a 105 million yen decrease year-over-year. This segment accounts for approximately 18% of total consolidated revenue. 4. Other Businesses (including newly added Logistics): Revenue increased 1.945 billion yen year-over-year driven by the addition of Topos Enterprise logistics operations in October 2024. Segment profit was 229 million yen, a 211 million yen increase year-over-year, incorporating three months of Topos Enterprise results. This segment accounts for approximately 19% of total consolidated revenue.

• For the 2025 December fiscal year, KeyHolder guides 35.0 billion yen in total consolidated revenue, 1.5 billion yen in operating profit, and 1.3 billion yen in net profit. While the headline operating profit looks like a large year-over-year decrease, this is purely due to the 2.551 billion yen one-off negative goodwill gain in 2024; excluding this special factor, the core underlying business plan projects year-over-year profit growth for 2025.
• Comprehensive Entertainment: Expects flat annual output compared to 2024. SKE48 will launch a new team structure in April 2025 (12 years after the last restructuring) and expand stakeholder engagement via regular fan/industry roundtables to grow its regional presence. Nogizaka46 will continue to lead the domestic idol market with large-scale live events and ongoing new talent recruitment, with its 6th generation audition already receiving strong market response. The company will continue holding large-scale auditions to develop new talent and content, with a new audition already in planning.
• Video Production: Will continue pursuing new project wins for the core variety division, while improving profitability via stable talent dispatch to external projects. The segment is already seeing a growing pipeline of film projects, and will carefully manage impacts from ongoing broadcasting industry unrest while continuing to deliver high-quality content.
• Advertising Agency: The traditional division will continue improving top and bottom line performance by focusing on high-margin projects. The digital division will work to grow revenue via new client acquisition after 2024's weakness, while improving profit margins by increasing in-house production ratios and strengthening organizational structure.
• Logistics (to be reported as a standalone segment from 2025): The business already has the structure to deliver approximately 200 million yen in annual operating profit, and is already expanding beyond its historical pachinko hall client base into new sectors. Management will work to quickly establish a stable, profitable business portfolio via business review, cost control, and leveraging Topos Enterprise's core strengths.

• 10ANTZ, the newly acquired digital content subsidiary, significantly missed performance targets due to declining user counts for existing content, leading to an operating loss and requiring a 909 million yen impairment of goodwill and intangible assets.
• The advertising agency segment's digital division faced severe headwinds from industry-wide restructuring, intensifying price competition, and reduced advertising spend across the脱毛 industry, its core client base, leading to double-digit year-over-year revenue decline and significant profit decline.
• KeyHolder's stock price has resulted in a PBR of ~0.6x, well below the 1.0x threshold, creating pressure to improve market valuation and deliver shareholder returns.
• The video production segment is facing indirect negative impacts from ongoing unrest in the Japanese broadcasting industry, requiring careful and deliberate management of ongoing projects.
• The company recorded a 245 million yen provision for its sponsor support of Ma Mère, which is currently in civil rehabilitation, increasing holding company costs for the period.
• Nogizaka46, the group's core idol content, saw slower-than-expected streaming service sales growth, reduced large-scale event volumes tied to key member graduations, and lower equity method gains from reduced government subsidy income, all of which pressured segment profit for 2024.

No formal question and answer section was included in the provided earning call transcript.