Avex : Q4 Financial Summary of March 2023

Consolidated Financial Summary for the Fiscal Year Ended March 31, 2023

(Japanese Accounting Standards)

	May 11, 2023
Avex Inc.	Tokyo Stock Exchange, Prime Market
Code No: 7860	(URL https://avex.com/jp/en/)
Representative: Katsumi Kuroiwa, President, CEO
Contact: Shinji Hayashi, Representative Director, CFO	TEL: [phone]
Ordinary General Meeting of Shareholders: June 23, 2023
Scheduled date for commencement of dividend payments: June 8, 2023
Scheduled date to submit the Securities Report (Yukashoken Houkokusho): June 26, 2023

Supplementary documents for financial results: Yes

Financial results briefing: Yes (briefing for institutional investors and securities analysts planned to be held by video streaming)

Note: All amounts are rounded down to the nearest million yen.

1. Consolidated business results for the fiscal year ended March 31, 2023 (April 1, 2022 to March 31, 2023)

(1) Consolidated operating results

Note: Figures in percentages denote the year-on-year change.

Net sales

Operating profit

Ordinary profit

Profit attributable to owners

of parent

Year ended

million yen

%

million yen

%

million yen

%

million yen

%

March 31, 2023

121,561

23.5

3,385

31.1

4,055

72.5

2,742

198.2

March 31, 2022

98,437

20.7

2,582

‒

2,351

‒

919

(92.8)

(Note) Comprehensive income

Year ended March 31, 2023: ¥2,626 million (3.5%)

Year ended March 31, 2022: ¥2,538 million (-81.8%)

Profit per share

Diluted net income

Ratio of net income

Ratio of ordinary

Ratio of operating

to shareholders'

per share

income to total assets

income to net sales

equity

Year ended

yen

yen

%

%

%

March 31, 2023

60.80

‒

4.7

3.9

2.8

March 31, 2022

20.77

20.76

1.6

2.3

2.6

(Reference) Equity in earnings of affiliates

Year ended March 31, 2023: ¥(20) million

Year ended March 31, 2022: ¥(218) million

(2) Consolidated financial position

Total assets

Net assets

Shareholders' equity ratio

Net assets per share

As of

million yen

million yen

%

yen

March 31, 2023

108,915

58,838

53.3

1,286.29

March 31, 2022

97,801

60,694

59.2

1,285.20

(Reference) Shareholders' equity

As of March

31, 2023: ¥58,074 million

As of March 31, 2022: ¥57,872 million

(3) Consolidated statement of cash flows

Cash flow from

Cash flow from

Cash flow from

Cash and cash equivalents

operating activities

investing activities

financing activities

at end of period

Year ended

million yen

million yen

million yen

million yen

March 31, 2023

9,192

(3,131)

(2,493)

48,143

March 31, 2022

(4,464)

(3,387)

(314)

44,671

2. Status of dividend payments

Annual dividends

Total dividend

Payout ratio

Dividend on

End of first

End of second

End of third

End of year

Annual

payment

(consolidated)

equity

(annual)

(consolidated)

quarter

quarter

quarter

Year ended

yen

yen

yen

yen

yen

million yen

%

%

March 31, 2022

‒

25.00

‒

25.00

50.00

2,251

240.7

3.8

March 31, 2023

‒

25.00

‒

25.00

50.00

2,257

82.2

3.9

Year ending

‒

25.00

‒

25.00

50.00

112.8

March 31, 2024 (forecast)

3. Forecasts for consolidated operating results for the year ending March 31, 2024 (April 1, 2023 to March 31, 2024)

Note: Figures in percentages denote the year-on-year change.

	Operating profit	Profit attributable to	Profit per share
	owners of parent
Year ending	million yen	%	million yen	%	yen
March 31, 2024	2,000	(40.9)	1,100	(59.9)	24.38

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Avex Inc. (7860) Consolidated Financial Summary for the Fiscal Year Ended March 31, 2022

• Notes
• 1. Changes in significant subsidiaries during the term (changes in specified subsidiaries in conjunction with changes in the scope of consolidation): Yes
     New: - company (Company name) -
     Excluded: 1 company (Company name) Avex Broadcasting & Communications Inc
  2. Changes in accounting policies and changes in or restatement of accounting estimates
     1. Changes in accounting policies in conjunction with revisions to accounting standards: Yes

2.	Changes in accounting policies other than 1:	None
3.	Changes in accounting estimates:	Yes
4.	Restatement:	None

1. Outstanding shares (ordinary shares)
   a. Shares outstanding at end of term (including treasury stock)

As of March 31, 2023:	45,558,800 shares
As of March 31, 2022:	45,440,100 shares
b. Treasury stock at end of term
As of December 31, 2023:	410,302 shares
As of December 31, 2022:	410,124 shares
c. Average number of shares during term
Year ended March 31, 2023:	45,110,898 shares
Year ended March 31, 2022:	44,281,705 shares

(Reference) Overview of non-consolidated business results

Non-consolidated business results for the fiscal year ended March 31, 2023 (April 1, 2022 to March 31, 2023)

(1) Non-consolidated operating results

Note: Figures in percentages denote the year-on-year change.

	Net sales	Operating profit	Ordinary profit		Profit
Year ended	million yen	%		million yen	%	million yen		%	million yen		%
March 31, 2023	10,144	3.5		499	(44.6)		(153)		‒	(885)		‒
March 31, 2022	9,805	190.1		903	‒	(741)		‒	(1,920)		‒
	Profit per share		Diluted profit per share
Year ended		yen			yen
March 31, 2023		(19.62)			‒
March 31, 2022		(43.37)			‒

(2) Non-consolidated financial position

	Total assets	Net assets		Shareholders' equity ratio	Net assets per share
As of	million yen	million yen		%	yen
March 31, 2023	74,722	42,791		57.3	947.80
March 31, 2022	70,033	45,759		65.3	1,016.20
(Reference) Shareholders' equity	Year ended March 31, 2023: ¥42,791 million
	Year ended March 31, 2022: ¥45,759 million

• This summary of financial statements is outside the scope of audit procedures by certified public accountants and audit firm.
• Explanation for forecasts of business results and other notes
  The forecasts for business results and other forward-looking statements contained in this release are based on data and information that the Group has obtained so far and specific assumptions that the Group judges to be reasonable. Please note, therefore, that the actual results and others may greatly differ from the forecasts due to various factors.

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Avex Inc. (7860) Consolidated Financial Summary for the Fiscal Year Ended March 31, 2022

1. Overview of Operating Results, etc.

(1) Overview of operating results for the fiscal year under review

(Unit: million yen)

	Fiscal year	Fiscal year	Fiscal year	Fiscal year	Fiscal year
	ended March	ended March	ended March	ended March	ended March
	31, 2019	31, 2020	31, 2021	31, 2022	31, 2023
Net sales	160,126	135,469	81,527	98,437	121,561
Cost of sales	113,820	96,375	55,908	63,209	82,574
Gross profit	46,306	39,093	25,618	35,228	38,987
Gross profit margin	28.9%	28.9%	31.4%	35.8%	32.1%
Personnel expenses	13,200	12,170	12,128	11,029	12,671
Sales promotion and advertising	9,967	8,336	6,875	7,993	8,354
expenses
General expenses	16,048	14,553	12,893	13,622	14,576
Total SG&A expenses	39,216	35,060	31,897	32,645	35,602
Operating profit (loss)	7,089	4,033	(6,278)	2,582	3,385
Operating margin	4.4%	3.0%	‒%	2.6%	2.8%

During the fiscal year under review, the economic outlook in Japan remained uncertain, with a global increase in the cost of living and exchange rate fluctuations, among other factors, despite signs of a moderate recovery following the significant easing of restrictions on economic activities that had been put in place during the COVID-19 pandemic.

In the entertainment industry, to which the Group belongs, the production of music software, including music videos, was up 4.5% year on year, to 202,349 million yen (January to December 2022; according to a survey by the Recording Industry Association of Japan). Sales of paid music downloads were up 17.3% year on year, to 105,018 million yen (January to December 2022; according to a survey by the Recording Industry Association of Japan). In the video- related market, sales of video software fell 16.1% year on year, to 114,819 million yen (January to December 2022; according to a survey by the Japan Video Software Association). The scale of the digital video distribution market, on the other hand, increased by 7.1% year on year, to 453,000 million yen (January to December 2022; according to a survey by the Digital Content Association of Japan), which is expected to continue to grow.

In this business environment, with the aim of clarifying the purpose of its corporate activities and the social significance of its presence, the Group defined a new Corporate Philosophy: "Continue to pursue the potential of entertainment." Based on this philosophy, the Group formulated Avex Vision 2027, a medium-term management plan, which was announced in May, 2022. Under the priority strategy: "Seek to discover and develop 'beloved' intellectual property in many different regions and fields," which was set out in the medium-term management plan, the Group stepped up its investment to discover, develop, create and acquire new IP in each business field. In addition to these efforts, the Group succeeded in increasing the number of large live performances in the music business in the wake of the easing of movement restrictions, which had been imposed during the COVID-19 pandemic.

As a result, net sales stood at 121,561 million yen (up 23.5% year on year) while operating profit came to 3,385 million yen (up 31.1% year on year), and profit attributable to owners of parent came to 2,742 million yen (up 198.2% year on year).

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Avex Inc. (7860) Consolidated Financial Summary for the Fiscal Year Ended March 31, 2022

Operating results for the main business segments are as follows.

As of the fiscal year under review, the Company has changed the business segments that it lists as its reported segments. Comparisons and analyses for the fiscal year under review are based on the segments after this change.

a) Music Business

			(Unit: million yen)
	Fiscal year ended	Fiscal year ended	Change
	March 31, 2022	March 31, 2023
Net sales	76,529	94,139	17,610
Cost of sales	48,488	64,332	15,843
Gross profit	28,040	29,807	1,767
Gross profit margin	36.6%	31.7%	(4.9%)
Total SG&A expenses	24,091	27,007	2,916
Operating profit	3,949	2,800	(1,148)
Operating margin	5.2%	3.0%	(2.2%)
Sales to external customers	71,949	90,067	18,118

Net sales stood at 94,139 million yen (up 23.0% year on year), and operating profit came to 2,800 million yen (down 29.1% year on year), mainly reflecting an increase in the number of large live performances.

b) Anime & Visual Content Business

						(Unit: million yen)
		Fiscal year ended	Fiscal year ended		Change
		March 31, 2022	March 31, 2023
Net sales		11,038		15,253		4,215
Cost of sales		7,322		11,296		3,974
Gross profit		3,716		3,957		240
Gross profit margin		33.7%		25.9%		(7.8%)
Total SG&A expenses		3,024		3,347		322
Operating profit		691		609		(81)
Operating margin		6.3%		4.0%		(2.3%)
Sales to external customers	10,071		14,065	3,994

Net sales stood at 15,253 million yen (up 38.2% year on year) and operating profit came to 609 million yen (down 11.9% year on year), reflecting an increase in sales of movies, etc.

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Avex Inc. (7860) Consolidated Financial Summary for the Fiscal Year Ended March 31, 2022

c) Digital Business

			(Unit: million yen)
	Fiscal year ended	Fiscal year ended	Change
	March 31, 2022	March 31, 2023
Net sales	13,682	12,379	(1,302)
Cost of sales	10,885	9,374	(1,511)
Gross profit	2,796	3,004	208
Gross profit margin	20.4%	24.3%	3.9%
Total SG&A expenses	4,437	3,550	(886)
Operating loss	(1,640)	(546)	1,094
Operating margin	‒	‒	‒
Sales to external customers	13,303	11,983	(1,320)

Net sales stood at 12,379 million yen (down 9.5% year on year) while the operating loss came to 546 million yen (in comparison with an operating loss of 1,640 million yen in the previous fiscal year). This largely reflected decreases in sales from digital video distribution and fan clubs.

d) Overseas Business

			(Unit: million yen)
	Fiscal year ended	Fiscal year ended	Change
	March 31, 2022	March 31, 2023
Net sales	3,029	5,199	2,169
Cost of sales	1,960	2,626	665
Gross profit	1,069	2,573	1,503
Gross profit margin	35.3%	49.5%	14.2%
Total SG&A expenses	1,472	2,102	630
Operating profit (loss)	(403)	470	873
Operating margin	‒	9.0%	‒
Sales to external customers	2,976	5,199	2,222

Net sales stood at 5,199 million yen (up 71.6% year on year) while operating profit came to 470 million yen (in comparison with an operating loss of 403 million yen in the previous fiscal year), mainly due to large events held overseas.

e) Other Businesses

			(Unit: million yen)
	Fiscal year ended	Fiscal year ended	Change
	March 31, 2022	March 31, 2023
Net sales	1,387	821	(566)
Cost of sales	1,181	621	(560)
Gross profit	205	200	(5)
Gross profit margin	14.8%	24.4%	9.6%
Total SG&A expenses	225	159	(65)
Operating profit (loss)	(19)	40	59
Operating margin	‒	4.9%	‒
Sales to external customers	136	246	109

Net sales stood at 821 million yen (down 40.8% year on year) while operating profit came to 40 million yen (in comparison with an operating loss of 19 million yen in the previous fiscal year.)

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