and factory,inc Q2 FY2025 earnings call

Long-Term Corporate Strategy

• Core long-term goals: Restructuring non-digital industries and creating products rooted in daily consumer habits
• Expanding beyond traditional digital content into cross "real x digital" business areas, building technology-driven new businesses including the AI/Webtoon production studio
• Strengthening core infrastructure for AI and bibliographic information management, with long-term plans to expand into corporate SaaS and licensing business

Webtoon Production Studio Strategic Progress

• Positioned as a key future growth engine, targeting 5 to 7 title releases by the end of 2025; 1 title is already in final preparation for launch
• Prototype for an AI-powered auto-base-coloring tool is complete, with ongoing work to improve accuracy and generalizability to reduce creator workload while maintaining quality
• Formed a business partnership with Rocket Staff Co. to combine their efficiency technology with and factory's proprietary Webtoon tools, offering B2B solutions to creators and publishers including automatic base coloring, auto-generation of preview URLs, and automatic conversion of vertical Webtoon to horizontal reading format
• Organizational capacity has been expanded with dedicated new hires, enabling full-package commissioned production, with long-term plans to expand beyond services to IP licensing and media-mix expansion

Segment-Specific Operational Initiatives

• Manga Business: Running promotional campaigns across all manga apps (including 8th-anniversary binge-reading events for "Manga UP!", free full-episode campaigns for media-adapted titles on "Manga Park") to recover MAU and ARPU declines from the concluded popular series. The firm is also improving app UI/onboarding design to boost new user retention, and will refocus the business portfolio and cycle management to improve profitability.
• Entertainment Business: Fortune-Telling: Following success with monthly subscription and website renewal for "Hoshi Hitomi's Fortune Telling" which boosted average user spending, the strategy going forward is "selection and concentration" plus external expansion. The firm will leverage accumulated know-how in fortune content development, payment funnel design, and fortune-teller partnership management to offer these capabilities to external partners for additional revenue growth.
• RET Business: Focusing on creating new experiential value through IP collaborations to shift from price competition to experience value competition. A prior VTuber accommodation collaboration achieved over 90% occupancy and strong user engagement, and an upcoming immersive mystery escape event with VTubers and popular manga authors is scheduled. Cross-segment collaboration with the firm's content and data expertise is used to optimize pricing and event design.

1. Manga Segment: Consolidated net sales of 546 million yen, operating profit of 1 million yen. This segment accounted for approximately 34.5% of total 2Q revenue. The acquisition of the "Soku Yomi" e-book store and consolidation of subsidiary South Works drove top-line growth, but this was offset by the conclusion of multiple popular series and ongoing investment in the "Ponta Manga" service, which held back profitability.
2. Entertainment Segment: Revenue grew 12% year-over-year, with strong performance from core fortune-telling content including "uraraca" and "Hoshi Hitomi's Fortune Telling". This segment contributed approximately 28-30% of total revenue. Operating profit increased year-over-year, driven by strong user retention, growing user numbers, and a stable monthly subscription model that improved profit structure.
3. RET (Real Estate & Hospitality) Segment: Revenue decreased year-over-year due to the loss of one-time accommodation revenue from a property sale recorded in the prior year period. The segment remained operating profitable, supported by high-margin real estate advisory revenue. &AND HOSTEL locations maintained high occupancy rates for core accommodation business. This segment accounted for approximately 20-25% of total revenue.
4. South Works (Localization/Publishing Subsidiary): Revenue was solid, driven by increased repeat localization contracts. The firm added Spanish language support, expanding coverage to 6 major global languages, and has built a pipeline of upcoming indie game titles for publishing.

• Management downwardly revised full-year 2025 August fiscal year guidance to: 3.2 billion yen in total revenue, an operating loss of 310 million yen, an ordinary loss of 310 million yen, and a net loss attributable to parent shareholders of 380 million yen.
• The downward revision is driven by slower-than-planned recovery for the manga segment, with MAU and ARPU coming in below forecast due to early conclusion of popular series and continued difficulty acquiring new users, combined with ongoing upfront investment in new services that is pressuring profitability.
• The Entertainment and RET segments are expected to remain solid and support overall earnings through the second half of the fiscal year.
• The firm is currently accelerating cost structure review, cutting inefficient spending, and reallocating resources to high-profit areas to build a stronger base for profit growth starting from fiscal 2026.

• The manga segment faces near-term pressure from reduced revenue after the conclusion of multiple high-performing popular series, with MAU and ARPU declines that have negatively impacted profitability. The "Ponta Manga" service is still in the investment phase and not yet contributing to earnings, delaying overall profit improvement for the segment.
• Overall group profitability is pressured by the combination of manga segment weakness and ongoing investment in new growth areas (Webtoon studio, Ponta Manga), leading to a projected full-year operating loss for the fiscal year.
• Revenue for the RET segment is vulnerable to volatility from one-time property sale transactions, as seen in the year-over-year revenue decline from the absence of the large one-time real estate sale recorded in the prior year period.

The provided call transcript does not include a transcribed question and answer section, so no exchanges are available to summarize.