Starts Publishing Corporation Q4 FY2024 earnings call

• Core Strategic Priorities
  • Maximize revenue via IP expansion: 15 adaptations of company-originated content (10 films, 2 dramas, 3 animes) are confirmed over the next 3 years. The company participates via production committee investment, and will capture additional revenue from production dividends, overseas translated publishing, and merchandise sales, while also driving increased reprints and sales of original books.
  • Comic shift and new label launch wave: Comics have higher sales volume and profit margins than prose content, so the company merged its prose and comic editorial departments into a new hybrid target-based structure in January 2025, where all editors develop both prose and comic content, leading to a large expected increase in comic output from 2026 onward. 8 new labels are launching between late 2024 and end-2025, with heavy granular targeting of niche reader segments: Noichigo Pop (for early elementary school girls), BeLuck Bunko (school-appropriate BL for teen girls), Berry's Bunko with (for 30-40 year old women), etc. New labels follow a "stacked revenue" model, where consistent monthly new releases build a catalog over time, hit works drive brand recognition for the whole label, and back catalog sales grow alongside new release sales. 2025 is an investment phase for these new labels, with monetization expected to ramp up from 2026.
  • Improve productivity via generative AI: The company has mandated generative AI adoption for time-consuming routine work across all business units, to shorten lead times, reduce labor requirements, cut external outsourcing costs, and free up employee time for creative work. A deployed use case for Ozmall cuts store page draft production time from 1 week to near-instant (with minor internal edits), reducing outsourcing spend.
• Capital Structure and Shareholder Return
  • The company has a very strong balance sheet: total assets of 11.9 billion yen as of FY2024 end, equity ratio of 81%, and zero interest-bearing debt.
  • Changed dividend policy to target a 30% payout ratio aligned with sustained profit growth, up from the previous stable dividend policy. Annual dividend increased from 60 yen per share to 110 yen per share (23.1% payout ratio for FY2024), with a planned 120 yen per share dividend for FY2025.
  • Changed shareholder benefits from free book gifts to OZ no Premium Yoyaku digital coupons, with 2,000 yen to 6,000 yen in value based on holding size and tenure.
• Media Solution Business Updates
  • Ozmall's new large-group/private booking service broke out in late 2024 year-end parties, with continued growth into 2025 New Year/going-away parties, expected to drive growth in corporate client usage going forward.
  • The company is expanding its brand solution business (leveraging long-running local media brands) to create custom regional tourism promotion campaigns, and has added Chinese-language SNS content to target Taiwanese inbound tourists.
• Long-Term Vision
  • Expand comic content distribution to North America and Southeast Asia. Grow inbound tourism promotion business. Develop new AI-powered services in addition to productivity improvements.

1. Book Content Business: Increased revenue with a slight decrease in profit. It grew rapidly over the past 5 years, and 2024-2025 is positioned as an investment period for future re-growth. In H2 2024, segment revenue declined year-over-year due to the absence of major film adaptations that drove sales in 2023. Currently, male-oriented comics label グラストCOMICS and re-positioned ベリーズ文庫 are growing, and newly launched BeLuck文庫 has a strong early performance.
2. Media Solution Business: Slight revenue increase with a large profit improvement. After a sharp decline during the COVID-19 pandemic, it has recovered gradually and is growing steadily. It returned to profit in 2023, and profit grew sharply in 2024 after crossing the breakeven point for its core OZ no Premium Yoyaku business. The new private/large-group booking feature launched in 2024 is performing very well, with both total listed store count and total booking volume growing steadily.

• FY2025 (full year): Guidance of 8.9 billion yen in revenue, 2.4 billion yen in operating profit. Q1 2025 is expected to be down sharply year-over-year due to the lapping of huge 2024 Q1 hits from the film adaptation of Ano Hana ga Saku Oka de, Kimi to Mata Deaetara. and other major works, but growth is expected to resume from Q2 onward for a full-year upward trend.
• Mid-term 3-year plan (FY2025-FY2027): Aims to exceed 10 billion yen in revenue in FY2026 (with 2.8 billion yen in operating profit), and exceed 10.6 billion yen in revenue and 3 billion yen in operating profit in FY2027. The book content segment is in an investment phase in FY2024-FY2025, with profit growth expected to accelerate from 2026. The media solution segment is expected to grow profit steadily year-over-year, with strong growth in 2027 driven by new initiatives for Ozmall.

• The overall Japanese publishing market has been in a long-term secular decline, with paper book demand particularly weak, pressuring the company's legacy book business.
• New label launches require upfront investment in production costs, and there is no guarantee that new labels or individual works will achieve commercial success.
• IP adaptation projects have long lead times (1-3 years from confirmation to release), so revenue from confirmed projects will not be realized for 2+ years, and projects can face delays or cancellations.
• The stacked revenue model for new labels requires 12+ months to build a sufficient catalog and achieve profitability, so near-term investment costs will weigh on results in 2025.

Q: Is the correct strategic direction that the company will maximize IP value by expanding beyond book sales to license and adaptation revenue? Is it true that newly confirmed 2026 film projects are already locked in, and future projects will be scheduled for 2027 or later? / A: Yes, that understanding is correct. The decline of physical book retail is an unavoidable industry trend, but Japanese comic IP has strong global demand, so the company will prioritize expanding IP-based business. Screen adaptations take 1-3 years from initial planning to release, so projects confirmed today have been in development for multiple years, and any newly greenlit projects will release in 2027 or later. When adaptations release, they drive sustained stacked sales growth across all existing and future volumes of the source comic.

Q: What is the difference between Ozmall and large general platforms like Hot Pepper and Tabelog, and what is Ozmall's competitive advantage? / A: Unlike large platforms that list every available restaurant, Ozmold follows the curated editorial legacy of its parent magazine Ozmagazine: the company only lists venues that its editorial team personally vets and recommends to readers. It also offers Ozmall-exclusive plans tailored to its user base. This curated, user-aligned approach has built strong trust with users, leading to steady long-term growth in users and repeat usage even against much larger competitors.

Q: What level of benefit can merchandise sales provide to the company's IP business? / A: Film adaptations are unlikely to drive large merchandise demand, but anime adaptations with strong, distinct characters create significant merchandise opportunities. The company has already run small experimental merchandise sales (keychains, clear files) that have proven popular with fans. Major bookstore chains are expanding in-store merchandise sales for popular IP, and fan demand for character goods is growing, so the company expects merchandise to become an meaningful additional revenue stream for popular adapted IP.