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Tri-Stage

Tri-Stage 2178

トライステージ
Tri-Stage Inc.
Recent Updates
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Shiodome Bldg. 21F, 1-2-20 KaiganMinato-ku Tokyo 105-0022
https://www.tri-stage.jp/
03-5402-4111
Summary
Tri-Stage provides end-to-end direct marketing solutions to TV shopping companies. It helps companies win customers (Direct Marketing Support segment; about 70% of sales, almost all of operating profit) and retain them (Direct Mailingsegment).
Internet & Direct Marketing RetailCommercial Services & SuppliesProfessional ServicesMedia
Key dates
2017-05-29
Coverage initiation
Full Report
2022-05-09
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Executive summary

Core businesses

Tri-Stage Inc. ("Tri-Stage") provides end-to-end direct marketing solutions to companies involved in direct marketing through its TV, web, and Direct Mailing businesses. Of the JPY47.5bn in sales and JPY1.4bn in operating profit reported in FY02/22, the Direct Marketing Support segment (TV business, web business) accounted for 56.7% of sales generating operating profit of JPY1.2bn while the Direct Mailing segment accounted for 39.4% of sales generating operating profit of JPY225mn.

The Direct Marketing Support segment includes the TV business the company has been operating since its founding, and the web business it began when it made adflex communications, Inc. a subsidiary in March 2017.

In the TV business, the company provides one-stop support to TV shopping companies, from selecting suitable media and planning and producing TV shopping programs through taking product orders. Tri-Stage has the top market share of broadcasting slots, which it buys in bulk in advance, securing around 200,000 slots (for TV shopping programs and commercials) per month. By having available slots, Tri-Stage can flexibly respond to orders from TV shopping companies. The company has built an in-house database from basic information on nationwide broadcasting slots and product orders at contact centers, uses it to select broadcasting slots where target customer segments are most likely to respond to featured mail-order products and services, and draws on its experience and acquired data to produce TV shopping programs and commercials that enhance product sales. 

Advertising agencies compete in the offering of media, but Tri-Stage differentiates itself from competitors by selecting and providing optimal broadcasting slots for products and services based on its database, and offering comprehensive services ranging from product development to customer management. This core direct marketing service, which was launched in December 2019, is called Tri Direct Data Marketing (Tri-DDM).

Since the company’s founding in 2006, key clients have been TV shopping companies handling supplements and medications. Japan’s aging population has led to growth in health foods. In the TV shopping market, supplements/medications had the highest transaction volume, and Tri-Stage has a higher ratio of transactions in this category than competitors (50% in 2019 versus approximately 35% for the TV shopping market as a whole). According to research firm Fuji Keizai Co., Ltd., in 2019, mail order supplements/medications (27.0% of the mail order market by value) grew an estimated 0.7% YoY, while apparel (the second largest category at 21.0%) rose more sharply, by an estimated 1.5%. Tri-Stage has over a hundred clients but the top five account for roughly 40% of sales, so sales are affected by these clients’ product life cycles.

In the web business, adflex communications provides one-stop support regarding online ads for companies involved in direct marketing. In 2018, the company started providing an ad service harnessing AI tools, which contributed to improved advertising efficiency. Sales of these services grew 13.7% YoY in FY02/22.

At the Direct Mailing segment, Mail Customer Center Co., Ltd. (subsidiary since November 2012) acts as a forwarding agent for direct mailings designed to encourage repeat purchases, and is one of the industry leaders by pieces sent (more than 300mn sent per year). The ratio of transactions through agents becomes high in order for Tri-Stage to secure the number of pieces sent and enhance price competitiveness, but the company aims to improve segment profit by increasing the ratio of more profitable direct clients. It has also increased handling of small package deliveries (product DM), demand for which is on the rise in recent years.

Trends and outlook

FY02/22 results: Sales were JPY47.5bn (-0.6% YoY), operating profit was JPY1.4bn (+2.2% YoY), recurring profit was JPY1.3bn (+0.7% YoY), and net income attributable to owners of the parent was JPY845mn (-0.4% YoY). In the Direct Marketing Support segment, profit rose despite a decline in sales due to the restoration of profitability in the web business during Q1, which resulted from the acquisition of new clients and expansion in the volume of transactions conducted with existing clients. In the Overseas business, the company sold its shares in subsidiary PT. Merdis International during Q3 and withdrew from the businesses operated by this subsidiary.

FY02/23 forecast: The company has not announced its earnings forecast for FY02/23 because its shares will be delisted as a result of the tender offer received from BCJ-60 Co., Ltd.

Medium-term business plan: “Tri’s vision 2024”: Tri-Stage announced its three-year medium-term business plan, Tri’s vision 2024 (ending in FY02/24), at the time of its FY02/21 earnings announcement. The company targets underlying earnings, defined as consolidated operating profit excluding specialized factors, for FY02/24 (the final year in the three-year plan) of JPY2.0bn, largely through the implementation of growth strategies and moving loss-making businesses into the black. The company has also established net income as a key management indicator, setting a target for FY02/24 of JPY1.3bn, up from JPY848mn in FY02/21. The company will maintain its flexible stance toward shareholder returns, including dividends, by taking a comprehensive approach that factors in performance as well as the company’s financial condition.

Strengths and challenges

We think Tri-Stage’s strengths are 1) offering end-to-end development capabilities in the TV business from medium choice, program production, and order management through customer management; 2) scale economies in the Direct Mailing segment from sending 300mn pieces of direct mail a year; and 3) its ability to effectively make proposals and manage in the web business due to its consulting capabilities and use of AI tools. Challenges facing the company are 1) sales fluctuating with key clients’ product life cycles, 2) the TV shopping market reaching a plateau and constraining growth, and 3) inventory risks associated with buying broadcasting slots in bulk.

Key financial data

Income statementFY02/13FY02/14FY02/15FY02/16FY02/17FY02/18FY02/19FY02/20FY02/21FY02/22FY02/23
(JPYmn)Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Est.
Sales33,82636,02432,18537,13247,30255,77653,84450,44047,78347,519-
YoY-2.8%6.5%-10.7%15.4%27.4%17.9%-3.5%-6.3%-5.3%-0.6%-
Gross profit2,6812,8923,1933,5775,1525,6135,9826,1525,3615,356
Gross profit margin7.9%8.0%9.9%9.6%10.9%10.1%11.1%12.2%11.2%11.3%
SG&A expenses2,1842,1172,2732,6783,7574,5815,1725,5244,0414,006
YoY48.8%-3.1%7.4%17.8%40.3%21.9%12.9%6.8%-26.8%-0.9%
SG&A ratio6.5%5.9%7.1%7.2%7.9%8.2%9.6%11.0%8.5%8.4%
Operating profit4977759198981,3951,0328106281,3201,350-
YoY-74.9%56.1%18.6%-2.3%55.3%-26.0%-21.6%-22.4%110.2%2.2%-
Operating profit margin1.5%2.2%2.9%2.4%2.9%1.9%1.5%1.2%2.8%2.8%-
Recurring profit5047779328901,3679082724041,3351,345-
YoY-74.7%54.4%19.8%-4.4%53.5%-33.5%-70.0%48.5%230.5%0.7%-
Recurring profit margin1.5%2.2%2.9%2.4%2.9%1.6%0.5%0.8%2.8%2.8%-
Net income attributable to owners of the parent248375533475761386-992183849845-
YoY-78.4%51.1%42.3%-11.0%60.3%-49.3%-357.1%-118.4%364.8%-0.4%-
Net margin0.7%1.0%1.7%1.3%1.6%0.7%-1.8%0.4%1.8%1.8%-
Per-share data (split-adjusted; JPY)
Shares issued (year-end; '000)30,29930,43030,48030,49230,51730,15730,51730,51730,51730,517
EPS (JPY)8.3812.5917.8817.2427.3813.27-34.076.6933.3933.71
EPS (fully diluted; JPY)8.3112.5517.8417.1627.2113.19-6.6933.3833.69
Dividend per share (JPY)5.005.0017.7518.7522.5010.007.007.007.007.00
Book value per share (JPY)281.37288.03300.52232.40305.91298.18246.76245.94264.82297.80
Balance sheet (JPYmn)
Current assets11,22011,29111,9818,49113,10314,13714,15613,42914,08514,440
Cash and cash equivalents6,8495,9605,2443,4696,1896,2306,1836,3497,4518,334
Accounts receivable4,0643,7864,1474,8556,1487,0387,2236,6026,3405,876
Inventories5137939758538828820777
Other current assets3011,5332,58315736928436119186153
Fixed assets1,1061,4511,0061,3713,5143,8212,0902,0511,097894
Tangible fixed assets111327273264522471378377255151
Intangible assets5204703453311,4111,787703578264196
Investments and other assets4746533887751,5821,5631,0091,096578547
Deferred assets----776249---
Total assets12,32512,74212,9879,86116,69518,02016,29515,48115,18215,333
Current liabilities3,5663,6853,5954,1695,2925,7346,7675,2846,0037,356
Accounts payable3,0422,7192,6323,1793,7884,6024,4643,9784,0033,907
Short-term debt2193504152721104421,4545911,1182,908
Other3066165487191,394690849715882541
Fixed liabilities3714423982792,2763,3712,4933,2692,364500
Long-term debt2782892391072,0633,0952,2123,0062,101241
Other94153160173213276281264263259
Net assets8,3888,6158,9945,4139,1278,9157,0366,9276,8157,477
Capital stock638644645645646646646646646646
Capital surplus628634635635750746745745735736
Retained earnings7,2377,4647,8487,7928,1207,8526,5686,5577,2487,918
Treasury stock-148-148-148-3,696-729-703-1,164-1,298-1,838-1,833
Accumulated other comprehensive income--1-0-01051423253-1550
Share subscription rights--319313337372011
Non-controlling interests31231217205199173187159-
Total liabilities and equity12,32512,74212,9879,86116,69518,02016,29515,48115,18215,333
Cash flow statement(JPYmn)
Cash flows from operating activities1287206067198377408558191,9491,296
Cash flows from investing activities829-1,039-614,358-1,525-831-230-138329-179
Cash flows from financing activities-1381-149-4,3524,082233-657-461-1,170-255
Financial ratios
Interest-bearing debt4966396543782,1733,5373,6653,5973,2203,149
Net cash6,3535,3214,5903,0914,0162,6932,5182,7524,2325,185
ROA (RP-based) 4.3%6.2%7.2%7.8%10.3%5.2%1.6%2.5%8.7%8.8%
ROE3.0%4.4%6.1%6.6%10.7%4.4%-12.8%2.7%12.7%12.0%
Current ratio314.6%306.4%333.3%203.7%247.6%246.6%209.2%254.1%234.6%196.3%
Fixed ratio13.2%16.8%11.2%25.3%38.5%42.9%29.7%29.6%16.1%12.0%
Equity ratio67.8%67.4%69.1%54.5%53.3%48.2%41.9%43.3%43.7%48.7%
Source: Shared Research based on company data
Note: Figures may differ from company data due to differences in rounding methods.
Note: The company conducted a 4-for-1 stock split on March 1, 2017.

Recent updates

Commencement of tender offer by BCJ-60

2022-04-13

On April 12, 2022, Tri-Stage Inc. announced that BCJ-60 Co., Ltd. reached the decision to acquire its shares through a tender offer. The company also announced its approval of BCJ-60's tender offer and indicated that following the tender offer and a series of subsequent procedures, the company's shares will be made private and delisted.

  • Company making the tender offer: BCJ-60 Co., Ltd.
  • Relationships with Tri-Stage: No capital, personal, or business relationships
  • Tender offer price: JPY565 per share (closing price on April 12, 2022: JPY343 per share)
  • Purchase period: April 13, 2022–June 10, 2022

BCJ-60, the company making the tender offer, is a wholly owned subsidiary of BCJ-59 Co., Ltd. (all shares of the latter indirectly owned by Bain Capital Private Equity, LP and the investment funds advised by Bain Capital's corporate group). BCJ-60 is a corporation established on March 24, 2022 for the primary purpose of acquiring ownership of Tri-Stage's shares and controlling and managing the latter's business activities. Bain Capital Private Equity is an international investment firm with approximately USD120bn in assets under management worldwide.

Trends and outlook

Quarterly trends and results

CumulativeFY02/21FY02/22FY02/22
(JPYmn)Q1Q1-Q2Q1-Q3Q1-Q4Q1Q1-Q2Q1-Q3Q1-Q4(% of Est.) FY Est.
Sales11,62924,19336,24247,78311,83823,72335,96247,51998.1%48,442
YoY-12.4%-7.6%-6.3%-5.3%1.8%-1.9%-0.8%-0.6%1.4%
Gross profit1,3182,7574,0475,3611,3322,6614,0265,356
Gross profit margin11.3%11.4%11.2%11.2%11.2%11.2%11.2%11.3%
SG&A expenses9571,8993,0044,0419841,9652,9514,006
YoY-42.8%-40.0%-31.2%-26.8%2.8%3.5%-1.8%-0.9%
SG&A ratio8.2%7.8%8.3%8.5%8.3%8.3%8.2%8.4%
Operating profit3608581,0431,3203476961,0751,350105.6%1,278
YoY-679.3%192.0%110.2%-3.7%-19.0%3.1%2.2%-3.2%
Operating profit margin3.1%3.5%2.9%2.8%2.9%2.9%3.0%2.8%2.6%
Recurring profit3578801,0901,3353417001,0751,345108.5%1,239
YoY-1,536.1%262.6%230.5%-4.6%-20.5%-1.3%0.7%-7.2%
Recurring profit margin3.1%3.6%3.0%2.8%2.9%3.0%3.0%2.8%2.6%
Net income attributable to owners of the parent257426655849228743675845100.6%840
YoY--280.0%364.8%-11.2%74.6%3.0%-0.4%-1.0%
Net margin2.2%1.8%1.8%1.8%1.9%3.1%1.9%1.8%1.7%
QuarterlyFY02/21FY02/22
(JPYmn)Q1Q2Q3Q4Q1Q2Q3Q4
Sales11,62912,56312,04911,54111,83811,88512,23911,557
YoY-12.4%-2.8%-3.5%-1.9%1.8%-5.4%1.6%0.1%
Gross profit1,3181,4391,2901,3141,3321,3291,3651,330
Gross profit margin11.3%11.5%10.7%11.4%11.2%11.2%11.2%11.5%
SG&A expenses9579411,1061,0379849819861,055
YoY-42.8%-36.8%-8.1%-10.3%2.8%4.2%-10.8%1.8%
SG&A ratio8.2%7.5%9.2%9.0%8.3%8.3%8.1%9.1%
Operating profit360498184278347348379275
YoY-87.6%-25.4%2.4%-3.7%-30.1%106.1%-1.0%
Operating profit margin3.1%4.0%1.5%2.4%2.9%2.9%3.1%2.4%
Recurring profit357523209246341359375270
YoY-97.9%-15.1%137.4%-4.6%-31.3%79.0%9.7%
Recurring profit margin3.1%4.2%1.7%2.1%2.9%3.0%3.1%2.3%
Net income attributable to owners of the parent257169229193228515-68170
YoY--24.2%37.3%--11.2%204.9%--12.3%
Net margin2.2%1.3%1.9%1.7%1.9%4.3%-1.5%
Source: Shared Research based on company data
Note: Figures may differ from company data due to differences in rounding methods.
Segments (cumulative)FY02/21FY02/22
(JPYmn)Q1Q1-Q2Q1-Q3Q1-Q4Q1Q1-Q2Q1-Q3Q1-Q4
Sales11,62924,19336,24247,78311,83823,72335,96247,519
Direct Marketing Support6,89314,23220,94627,7156,96713,71720,54026,952
Direct Mailing4,3039,06613,88818,1554,3879,05713,93718,724
Overseas258459656857182365577577
Retail1764367511,0553035839071,266
YoY-12.4%-7.6%-6.3%-5.3%1.8%-1.9%-0.8%-0.6%
Direct Marketing Support-10.3%-5.7%-4.1%-1.5%1.1%-3.6%-1.9%-2.8%
Direct Mailing-9.6%-4.7%-4.5%-5.2%2.0%-0.1%0.4%3.1%
Overseas-24.6%-30.8%-30.5%-36.2%-29.6%-20.3%-12.0%-32.6%
Retail-55.8%-43.6%-37.0%-36.2%72.3%33.7%20.8%19.9%
Operating profit3608581,0431,3203476961,0751,350
Direct Marketing Support2586718201,1062926129601,179
Direct Mailing12624230432843106166225
Overseas19303625282144
Retail-42-86-120-141-15-44-55-59
Operating profit margin3.1%3.5%2.9%2.8%2.9%2.9%3.0%2.8%
Direct Marketing Support3.7%4.7%3.9%4.0%4.2%4.5%4.7%4.4%
Direct Mailing2.9%2.7%2.2%1.8%1.0%1.2%1.2%1.2%
Overseas7.2%6.4%5.6%2.9%15.2%5.9%0.7%0.7%
Retail--------
SegmentsFY02/21FY02/22
(JPYmn)Q1Q2Q3Q4Q1Q2Q3Q4
Sales11,62912,56312,04911,54111,83811,88512,23911,557
Direct Marketing Support6,8937,3396,7146,7696,9676,7506,8236,412
Direct Mailing4,3034,7634,8234,2674,3874,6714,8804,786
Overseas2582011982011821842120
Retail176261314305303281324358
YoY-12.4%-2.8%-3.5%-1.9%1.8%-5.4%1.6%0.1%
Direct Marketing Support-10.3%-1.0%-0.5%7.5%1.1%-8.0%1.6%-5.3%
Direct Mailing-9.6%0.3%-4.2%-7.4%2.0%-1.9%1.2%12.2%
Overseas-24.6%-37.4%-30.0%-49.7%-29.6%-8.4%7.2%-
Retail-55.8%-30.7%-24.8%-34.0%72.3%7.6%3.0%17.7%
Operating profit360498184278347348379275
Direct Marketing Support258414148286292320348219
Direct Mailing126116622443636060
Overseas19117-1228-6-170
Retail-42-44-34-21-15-28-11-4
Operating profit margin3.1%4.0%1.5%2.4%2.9%2.9%3.1%2.4%
Direct Marketing Support3.7%5.6%2.2%4.2%4.2%4.7%5.1%3.4%
Direct Mailing2.9%2.4%1.3%0.6%1.0%1.4%1.2%1.2%
Overseas7.2%5.5%3.5%-15.2%---
Retail--------
Source: Shared Research based on company data
Note: Figures may differ from company data due to differences in rounding methods.
SG&A by segment (cumulative)FY02/21FY02/22
(JPYmn)Q1Q1-Q2Q1-Q3Q1-Q4Q1Q1-Q2Q1-Q3Q1-Q4
SG&A expenses9571,8993,0044,0419841,9652,9514,006
Personnel expenses5431,1321,6702,2125411,0591,5632,088
Rent112232358481117223335447
Advertising expenses14316491225592179
Depreciation35661111753973109141
Goodwill amortization163239390000
Other2343997521,0312635538521,148
SG&A ratio8.2%7.8%8.3%8.5%8.3%8.3%8.2%8.4%
Personnel expenses4.7%4.7%4.6%4.6%4.6%4.5%4.3%4.4%
Rent1.0%1.0%1.0%1.0%1.0%0.9%0.9%0.9%
Advertising expenses0.1%0.1%0.2%0.2%0.2%0.2%0.3%0.4%
Depreciation0.3%0.3%0.3%0.4%0.3%0.3%0.3%0.3%
Goodwill amortization0.1%0.1%0.1%0.1%0.0%0.0%0.0%0.0%
Other2.0%1.6%2.1%2.2%2.2%2.3%2.4%2.4%
SG&A expensesFY02/21FY02/22
(JPYmn)Q1Q2Q3Q4Q1Q2Q3Q4
SG&A expenses9579411,1061,0379849819861,055
Personnel expenses543589538542541518504525
Rent112120126123117106112112
Advertising expenses1417332722333787
Depreciation3531456439343632
Goodwill amortization1616700000
Other234165353279263290297296
SG&A ratio8.2%7.5%9.2%9.0%8.3%8.3%8.1%9.1%
Personnel expenses4.7%4.7%4.5%4.7%4.6%4.4%4.1%4.5%
Rent1.0%1.0%1.0%1.1%1.0%0.9%0.9%1.0%
Advertising expenses0.1%0.1%0.3%0.2%0.2%0.3%0.3%0.8%
Depreciation0.3%0.2%0.4%0.6%0.3%0.3%0.3%0.3%
Goodwill amortization0.1%0.1%0.1%0.0%0.0%0.0%0.0%0.0%
Other2.0%1.3%2.9%2.4%2.2%2.4%2.4%2.6%
Source: Shared Research based on company data
Note: Figures may differ from company data due to differences in rounding methods.
Parent sales (cumulative)FY02/21FY02/22
(JPYmn)Q1Q1-Q2Q1-Q3Q1-Q4Q1Q1-Q2Q1-Q3Q1-Q4
Sales5,86612,35518,20523,7795,65111,26216,88422,123
New clients4008001,2001,600200400600800
Existing clients2,5005,4008,40011,3003,1006,0009,20012,100
Top 5 existing clients2,9005,9008,30010,5002,2004,6006,7008,600
% of total
New clients6.8%6.5%6.6%6.7%3.5%3.6%3.6%3.6%
Existing clients42.6%43.7%46.1%47.5%54.9%53.3%54.5%54.7%
Top 5 existing clients49.4%47.8%45.6%44.2%38.9%40.8%39.7%38.9%
Parent sales (quarterly)FY02/21FY02/22
(JPYmn)Q1Q2Q3Q4Q1Q2Q3Q4
Sales5,8666,4895,8505,5745,6515,6115,6225,239
New clients400400400400200200200200
Existing clients2,5002,9003,0002,9003,1002,9003,2002,900
Top 5 existing clients2,9003,0002,4002,2002,2002,4002,1001,900
% of total
New clients6.8%6.2%6.8%7.2%3.5%3.6%3.6%3.8%
Existing clients42.6%44.7%51.3%52.0%54.9%51.7%56.9%55.4%
Top 5 existing clients49.4%46.2%41.0%39.5%38.9%42.8%37.4%36.3%
Source: Shared Research based on company data
Note: Figures may differ from company data due to differences in rounding methods.

Full-year FY02/22 results (out April 12, 2022)

Overview

Full-year results for FY02/22: Sales were JPY47.5bn (-0.6% YoY), operating profit was JPY1.4bn (+2.2% YoY), recurring profit was JPY1.4bn (+0.7% YoY), and net income attributable to owners of the parent was JPY845mn (-0.4% YoY).

Achievement rates versus forecast: In FY02/22, sales achieved 98.1% of their corresponding projection in the company's full-year forecast, with operating profit reached 105.6%, recurring profit 108.5%, and net income attributable to owners of the parent 100.6%.

Sales down 0.6% YoY: Sales were down 2.8% YoY in the Direct Marketing Support segment, up 3.1% YoY in the Direct Mailing segment, down 32.6% YoY in the Overseas segment, and up 19.9% in the Retail segment. In the TV business under the Direct Marketing Support segment, the company focused on strengthening its ability to acquire TV broadcasting slots and enhancing its video production capabilities, including through its video resonance analysis service. In the Direct Mailing segment, sales activities were generally stable, but companies in some industries continued to refrain from sending direct mail. Through its Overseas business, the company transferred its shares in subsidiary PT. Merdis International ("MERDIS") during October 2021. In accordance with this move, the company removed MERDIS from its scope of consolidation and withdrew from businesses operated by the subsidiary in Q3. The Retail segment generated a YoY increase in sales driven by private brand product development and the expansion of the wholesale business, despite previously tough conditions, including store closures and shortened operating hours resulting from the spread of COVID-19.

Operating profit up 2.2%: Operating profit in the Direct Marketing Support segment rose 6.6% YoY as the web business turned profitable in Q1 owed to the acquisition of new clients and expanded business with existing clients. Operating profit in the Direct Mailing segment fell 31.3% YoY due in part to the partial reversal of allowance for doubtful accounts recorded in FY02/21. In the Overseas business, operating profit fell 82.5% YoY as the company sold off its stake in Merdis and subsequently withdrew from the business operated by the subsidiary. In the Retail segment, operating loss narrowed to JPY59mn (versus a loss of JPY141mn in FY02/21) as the company made steady progress with initiatives targeting improved profitability, including the use of various subsidies and the development of new private brand products. GPM increased 0.1pp YoY to 11.5%. Despite ongoing cost reductions stemming from business activity restrictions associated with the COVID-19 pandemic, SG&A ratio rose 1.1pp YoY to 9.1% due to the partial reversal of allowance for doubtful accounts recorded in FY02/21. The company's OPM was 2.4%, level with FY02/21.

Extraordinary loss: The company reported JPY467mn in extraordinary losses, including a JPY405mn loss on sales of shares in MERDIS.

Quarterly sales
Source: Shared Research based on company data
Quarterly operating profit

Segment earnings

Direct Marketing Support segment

Segment sales were JPY27.0bn (-2.8% YoY), while operating profit amounted to JPY1.2bn (+6.6% YoY).

In the TV business, the company provides end-to-end solutions to direct marketing operators for all their direct marketing needs, including supplying TV program and commercial slots, program and commercial production, order management, and customer management. It excels in acquiring new customers through “provision of optimal media based on data analysis,” “hit video production,” and “efficient order management.”

The company’s new direct data marketing business infrastructure Tri Direct Data Marketing (Tri-DDM) brings together and analyzes all of its data (including broadcast timeslot and order data) to bring clarity to the value of specific broadcasting slots, and facilitates accurate assessments of the right operating conditions for contact centers. In cumulative Q3 FY02/22, the company stably generated sales and gross profit as it focused on strengthening its ability to acquire TV broadcasting slots through Tri-Stage Media Inc. (established through an incorporation-type company split on February 1, 2021), improving the efficiency of order acquisition associated with its Tri-DDM service, and enhancing video production capabilities through its video resonance analysis service.

In the web business, the company’s efforts centered around adflex communications, inc. The company endeavored to maximize sales and profit generated by its clients through actively implementing AI tools (listing ad optimization tools, etc.) and through making proposals that utilize both TV and web. Following previous losses, the web business generated profit in Q1 thanks to progress in terms of new customer acquisition and expansion in business conducted with existing customers, although this progress was slower than initially expected due to a decline in opportunities to engage in business negotiations. In August 2021, the company signed a partnership agreement for exclusive rights in Japan with Optmyzr, Inc. and began offering Optmyzr, an AI tool that automatically optimizes listing advertisements. The company pushed ahead with the transition from existing tools to Optmyzr.

In April 2021, the company released “urutere,” a programmatic TV advertising platform. The platform plans, produces, and verifies the effectiveness of TV commercials and optimizes them based on data, as well as linking them with digital marketing initiatives. In October 2021, the company launched "ODASO," an ad distribution system that links TV commercials with online ads in real time, promoting marketing activities through collaboration between the TV and web businesses. 

Direct Mailing segment

Segment sales were JPY18.7bn (+3.1% YoY), while operating profit came to JPY225mn (-31.3% YoY).

The segment is involved in the direct mail agency business for Yu-Mail and Kuroneko DM Bin, with most of the operations handled by Mail Customer Center Co., Ltd. (MCC). The company strove to provide support for small package delivery services such as Neko Posu and Yu Packet, which are associated with rapidly expanding markets.

The company utilized its price competitiveness, which stems from its top-class direct mail handling volume, and was able to conduct generally stable sales activities. However, companies in some industries continued to refrain from sending direct mail due in part to a decline in events aimed at attracting customers. At the same time, DM shipping volume increased YoY due to the acquisition of new clients and growth in the volume of transactions conducted with existing clients.

Overseas segment

Segment sales were JPY577mn (-32.6% YoY, while operating profit amounted to JPY4mn (-82.5% YoY).

In October 2021, the company transferred all of its shares in MERDIS. In accordance with this move, MERDIS was removed from the company's scope of consolidation in Q3, and the company withdrew from businesses operated by the former subsidiary.

Retail segment

Segment sales were JPY1.3bn (+19.9% YoY), while operating loss amounted to JPY59mn (versus an operating loss of JPY141mn in FY02/21).

Nippon Department Store Inc., which runs Nippon Department Store retail stores, is striving to strengthen the wholesale business and increase profits from each of its stores. 

Although conditions remained adverse due to intermittent restraints on human movement caused by the COVID-19 pandemic, segment sales rose and segment operating loss narrowed YoY thanks to a YoY increase in operating hours, the successful development of private brand products, and expansion in the wholesale business.

Company forecast for FY02/23

EarningsFY02/21FY02/22FY02/23
(JPYmn)1H Act.2H Act.FY Act.1H Act.2H Act.FY Act.1H Est.2H Est.FY Est.
Sales24,19323,59047,78323,72323,79647,519---
YoY-7.6%-2.7%-5.3%-1.9%0.9%-0.6%---
Operating profit8584621,3206966541,350---
YoY679.3%-10.9%110.2%-19.0%41.7%2.2%---
Operating profit margin3.5%2.0%2.8%2.9%2.7%2.8%---
Recurring profit8804551,3357006451,345---
YoY-30.0%230.5%-20.5%41.6%0.7%---
Recurring profit margin3.6%1.9%2.8%3.0%2.7%2.8%---
Net income attributable to owners of the parent426423849743102845---
YoY-138.6%364.8%74.6%-76.0%-0.4%---
Net margin1.8%1.8%1.8%3.1%0.4%1.8%---
Source: Shared Research based on company data
Note: Figures may differ from company data due to differences in rounding methods.

The company has not announced an earnings forecast for FY02/23 because its shares will be delisted as a result of the tender offer received from BCJ-60 Co., Ltd.

Medium- to long-term outlook

On April 12, 2022, Tri-Stage revised its medium-term business plan ending in FY02/24. This was because the actual business environment diverged from the initial assumptions of the plan due to prolonged impact of COVID-19, changes in the operating environment, and the company's withdrawal from businesses in the Overseas segment. Meanwhile, Tri-Stage determined that the direction it was working toward and the corresponding initiatives remained reasonable to a certain degree. As such, it decided to reevaluate the assumptions of its medium-term business plan and the probability of achieving the original earnings targets, taking into account recent trends and other factors while not changing the basic strategies. Accordingly, it updated the status of each segment and revised the quantitative targets to figures that were more feasible. The final year of the plan was also extended by one year to FY02/25.

Medium-term business plan targets after revision
(JPYmn)FY02/21FY02/22FY02/23FY02/24FY02/25
Underlying earnings(Previous target) 1,1901,2781,7002,000
Underlying earnings(Act.) 1,1901,349
Underlying earnings(Revised target) 1,3471,4591,580
Net income(Previous target) 8481,070
Net income(Revised target) 1,070
Source: Shared Research based on company data
Note: Underlying earnings refer to consolidated operating profit at the Tri-Stage group excluding specialized factors, i.e., items not expected in the normal course of business, such as the sudden emergence of doubtful accounts and the COVID-19 pandemic.

The company revised down the target for underlying earnings in the final year of the plan from JPY2.0bn (FY02/24) to JPY1.58bn (FY02/25). Of this downward revision by JPY420mn, the TV business accounted for JPY200mn, web business JPY50mn, Direct Mailing segment JPY100mn, and Retail segment JPY20mn. The remaining JPY50mn was in the Overseas segment comprising businesses that the company withdrew from.

  • TV business: As the company faces a challenge in achieving fast-paced profitability in new services such as urutere, it changed the projections on sales and profit levels in this business.
  • Web business: The company factored in the possibility of achieving profitability at a slightly slower-than-expected pace due to the effect of COVID-19. It also changed some assumptions including for the order rates associated with new customers.
  • Direct Mailing segment: The company changed the assumptions for gross profit margin due to an increase in the sales mix of transactions using agents.
  • Retail segment: The company changed its assumptions for store reorganization (including withdrawal) and customer counts, among other factors.
  • Overseas segment: The company withdrew from businesses in this segment in FY02/22.

Medium-term business plan "Tri’s vision 2024" before the revision

Overview

Tri-Stage announced its three-year medium-term business plan, Tri’s vision 2024 (ending in FY02/24) on April 12, 2021. On November 15, 2021, the company released explanatory materials for the company's business plan and growth prospects regarding the progress of the medium-term business plan.

Key management indicators

The company targets underlying earnings, defined as consolidated operating profit excluding specialized factors, for FY02/24 (the final year in the three-year plan) of JPY2.0bn. The company has also established net income as a key management indicator, setting a target for FY02/24 of JPY1.3bn, up from JPY848mn in FY02/21. From FY02/22 to FY02/23, the company aims to turn around its loss-making businesses (FY02/22 for the web business and FY02/23 for the Retail segment), and from FY02/23 to FY02/24, it aims to realize the growth strategy.

The company will continue to adopt a flexible approach to shareholder returns (dividends, etc.) through taking account of business performance and financial conditions.

*Underlying earnings refer to consolidated operating profit at the Tri-Stage group excluding specialized factors, i.e., items not expected in the normal course of business, such as the sudden emergence of doubtful accounts and the COVID-19 pandemic.

(JPYmn)FY02/21FY02/22 (est.)FY02/23 (est.)FY02/24 (est.)
Underlying earnings1,1901,2781,7002,000
Net income8481,300
By segment

The three businesses the company will focus on are the TV business, web business, and the Direct Mailing segment. Meanwhile, the company will keep a close eye on progress in the Retail and Overseas segments.

TV business: Improve the value provided to customers by strengthening data marketing. Promote digital transformation of sales channels.

Web business: Grow the customer base through AI marketing services. Develop cross-channel service “urutere” (details below).

Direct Mailing segment: Increase the sales mix of direct mailing products. Promote digital transformation of sales channels.

Retail segment: Expand private brand products. Expand e-commerce.

Overseas segment: Aim to maximize profits within the scope of existing resources. (The company decided to sell the shares of consolidated subsidiary Merdis on September 14, 2021. Following this, the Overseas segment will cease to exist.)

Basic strategies

Improve value provided to customers by strengthening data marketing: Further strengthen Tri-DDM, the data marketing platform, for enhanced process optimization and improved customer effectiveness.

Expand customer base using cross-channel and AI marketing services: Expand customer and industry base, including in the digital (web services, e-commerce) and financial industries.

Launch new businesses: Invest in new services and businesses by promoting digital transformation in areas in which Tri-Stage excels.

The company’s view of the external environment

The direct marketing market is expanding amid the COVID-19 pandemic.

Cross-channel marketing is increasing in importance.

Offline media such as TV and newspapers are lagging behind online media in the use of data.

Strengthening data marketing to increase the value provided to customers

Tri-Star’s business vision is to “bring digital transformation and innovation to direct marketing.” The company recognizes that its strengths lie in data marketing for offline media, digital marketing using AI, and its marketing tool infrastructure including media and direct mailing assets.

Tri-DDM

In December 2019, the company began providing Tri Direct Data Marketing (Tri-DDM), a new service that consolidates and analyzes direct marketing data and enables measures aimed at improving customer acquisition and customer relationship management (CRM). The goal of this service is to provide support aimed at maintaining or improving cost per order (CPO; cost incurred to acquire a single order for products or services)related to TV infomercials and raising lifetime value (LTV: the total value a single customer generates for a company during the time he or she performs transactions with it).

Tri-DDM includes the consolidation of a variety of data, linking this data with marketing initiatives, and a customer data platform (CDP).Tri-DDM uses business intelligence (BI) tools to perform immediate, precise analysis of marketing strategies using direct marketing data integrated on the Arm Treasure Data CDP (customer data platform provided by Treasure Data K.K.) This facilitates analysis of media selection and contact center operational status to maintain and improve CPO as well as CRM initiatives aimed at boosting LTV.

The company does not receive direct compensation separately from customers in exchange for providing platforms. Instead, the company obtains earnings as added value (generated by encouraging customers to place advertisements) in the Direct Marketing Support segment (SaaS usage fees). At the same time, the company indicated that customers using Tri-DDM shoulder actual costs associated with monthly CDP usage fees.

Status of Tri-DDM

Existing clients have been gradually implementing Tri-DDM: Tri Direct Data Marketing, a direct marketing platform provided by the company. As of November 2021, 35 companies have adopted this platform. The service helped achieve target key performance indicators at each client (quantitative targets worked out with individual clients, including order rates*1 and upsell conversion rates*2, that are primarily applied to call centers). According to the company, performance generally improves from previous levels by about 10%.

Tri-DDM was relaunched in August 2021. The menu structure has been updated, screen specifications have been changed, and new screens have been added to improve convenience. The renewal has enabled the company to more quickly and accurately comprehend necessary information and current states of progress toward target achievement, allowing for more precise and speedy proposals.

Core services include: 

Media reporting: Service providing analysis of results associated with specific TV broadcast timeslots (enables metrics such as cost per order [CPO; cost required to acquire each product or service order] to be shown in real time)

Contact center reporting: Quantitatively reports on metrics such as response rate, order rate, upsell conversion rate, and operator utilization rate

Purchaser profile analysis: Statistical data regarding purchasers (gender, age, area, etc.). Previously, order data obtained from purchasers was simply passed along to clients in unaltered form.

 Through Tri-DDM, the company has launched a service that imports attribute data into a system and allows users to analyze purchaser profiles on-screen.

  • AI-based phone call forecasting: Reporting that uses AI to predict the volume of calls that will be received during TV broadcasts. Direct marketing through television programs aims to receive orders via telephone. Accordingly, companies conducting this type of marketing need to predict the volume of calls they will receive and allocate an appropriate number of personnel to their call centers.
  • Offer database: This service creates a database of all client products and provides offers (order elements) that have been optimized according to product categories (for example, selling products at half price, offering free samples, etc.).

*1: Order rate: Order volume ÷ number of incoming calls received at call centers
*2: Upsell conversion rate: Periodic purchase volume ÷ order volume 

The company has launched three new services since December 2020.

  • Video resonance analysis: This service provides a visualization of how well TV shopping programs resonate with viewers. The company conducts analyses and observations on the data obtained through call volume*3 waveform measurement, which is conduced while a program is on air, and online questionnaire surveys (approximately 300), then to propose specific improvements. The company says it can offer this service at roughly one-third of standard market prices since it is developed in-house.
  • As of November 2021, the system has been rolled out to 76 videos from 37 companies.

*3: Call volume data is obtained from NTT’s network systems and analyzed by broadcasting slot.

  • TV-linked listing ads: This is a system that automatically couples television broadcasting schedule data and listing ads bidding and management systems so that the information acquired through TV and online media can seamlessly be shared and managed. This service allows the operations of listing ads associated with places and times of broadcast as well as products on air. Specifically, it increases the conversion rate by raising bidding unit prices on general words for the products featured during given TV broadcast times.
  • QR tracking service: This service was introduced in July 2021. It promotes the purchase of products through directing customers to e-commerce sites by placing QR codes in TV shopping videos. In the past, a certain number of viewers had searched the internet on their own to purchase products, but the exact total could not be ascertained. The QR tracking service gives the company accurate data on which TV broadcasts have led to purchases. In total, this service increases order numbers by 3–9% by enabling companies to capture orders that had previously gone to other companies' products through online searches while maintaining the volume of conventional telephone orders. In principle, the company plans to attach QR codes to all TV shopping programs it produces moving forward.

The company plans to develop the following service:

  • AI-based order prediction: The company is currently developing a service that utilizes AI to predict the number of orders for each broadcasting slot using various data to predict the number of orders. This minimizes wasted effort in terms of selection of broadcast slots and call center staffing.

Through Tri-DDM, the company will utilize big data and AI technology to optimize marketing processes across multiple channels and maximize the effects these processes generate. In the future, the company wants to convert Tri-DDM into a foundation for marketing services provided through the TV, web, and Direct Marketing businesses. By making this conversion, the company aims to increase the value it provides to customers and raise its own corporate value.

Growing the customer base through cross-channel and AI marketing services

adflex launched the cross-channel service “urutere”*4 in April 2021. The service helps to visualize the effects of TV commercials on online orders, achieving a programmatic advertising framework similar to that of digital advertising that uses a PDCA (plan-do-check-act) cycle. adflex also provides marketing services that optimize digital advertising operations (SEM and SNS advertising) using AI, such as Optmyzr*5, Pattern89*6, Zalster*7, Lytics*8, and Dynamic yield*9. The subsidiary aims to develop customers in digital industries (finance and real estate) through cross-channel and AI marketing services.

*4: urutere: An on-off cross-channel programmatic advertising platform for TV commercials. It utilizes Tri-Stage’s expertise with offline media to plan, produce, verify the effectiveness of, and optimize TV commercials based on data, and to link them with digital marketing initiatives.
*5: Optmyzr: A platform that automatically optimizes listing ads
*6: Pattern89: An AI solution for Facebook/Instagram ad optimization
*7: Zalster: An AI solution for Facebook ad optimization
*8: Lytics: An AI-powered customer data platform (CDP) provided by Lytics
*9: Dynamic yield: Optimizes Web content and advertising for individual customers using AI

The company aims to utilize the above-mentioned TV-linked listing ads and QR tracking services to expand its cross-channel customer base.

Launching new businesses

Tri-Stage aims to launch new services by pursuing digital transformation of existing businesses and leveraging their strengths. At present, the company is considering online sales/marketplaces for marketing tools. The company already sells TV commercial broadcasting slots online through its Sokures service and introduces Direct Mailing services over the internet. However, it is working toward further digital transformation of the sales channels of these services. The company produces about 1,000 videos a year for TV. It currently relies on its personnel for the production expertise needed to carry out these orders. However, the company plans to promote the digital transformation (DX) of its video production by using AI to analyze videos.

In December 2020, the company launched its video resonance analysis service. This is a service that visualizes and analyzes viewer engagement in TV shopping, and improves the company's hit video production capabilities. It utilizes call volume waveform measurement and questionnaire surveys when videos are aired, and analyzes the results from multiple perspectives and proposes specific points for improvement.

(Reference) Previous medium-term business plan: “Tri’s vision 2021” and “Rolling Plan 2019”

Overview

Tri-Stage announced its three-year medium-term business plan, Tri’s vision 2021 (ending in FY02/21), at the time of its FY02/18 earnings announcement. However, with conditions having changed significantly since the plan was put together as the company missed its initial forecast for FY02/19 due to write-downs of investments in overseas subsidiaries and affiliates, the company found itself straying from its original medium-term plan, so much so that it re-evaluated the group’s growth strategy and original plan and came up with a new two-year plan that it announced at the time of its FY02/19 results announcement. Dubbed Rolling Plan 2019, the new medium-term plan covers FY02/20 and FY02/21.

Under Tri’s vision 2021, the company set a FY02/21 target for consolidated sales of JPY60.0bn (+7.6% versus FY02/18) and operating profit margin of 4.5% (versus 1.9% in FY02/18). In contrast, Rolling Plan 2019 targeted FY02/21 sales of JPY63.0bn (+13.0% versus FY02/18) and an operating profit margin of only 2.7%. The new plan called for “creating a new foundation for value” in FY02/20, meaning the company will continue building up its business infrastructure as it did in FY02/19, then move on to a new stage in FY02/21.

Group strategy
Establish areas of focus

Having established the Direct Marketing Support business run by Tri-Stage Inc., the web business run by subsidiary adflex communications, Inc., and the Direct Mailing business run by subsidiary Mail Customer Center Co., Ltd. as the group’s main areas of focus, the company concentrated management resources in these three companies.

“Select and focus” early on

Through upfront spending and concentrating resources, the group’s base operating profit* expanded from JPY884mn in FY02/19 to JPY1.2bn in FY02/21. However, the company recorded consolidated results of JPY47.8bn in sales and JPY1.3bn in operating profit in FY02/21, falling short of its sales target of JPY63.0bn (+13.0% versus FY02/18) and OPM target of 2.7% (target of JPY1.7bn in operating profit).

*Consolidated operating profit excluding extraordinary items (e.g., unexpected bad debts, the impact of the early stages of the COVID-19 pandemic, and other items that are not expected to occur under normal circumstances).

Expansion of growth businesses
Establishing a DDM platform

The company shifted its core strategy from direct marketing to direct data marketing (DDM), emphasizing Tri-DDM as a growth driver. The company constructed a DDM platform capable of integrating and analyzing assorted data, including purchase history, behavior history, and advertising information, and promoted to support customer companies comprehensively by securing new customers and improving customer lifetime value. With the Tri-DDM platform completed, the company has begun digital transformation of media and call center service operations. As better data is needed before further digital transformation will lead to gains in efficacy, the company plans to work on cross-channel (online) services toward this end.

Expansion of the web business

As a result of its effort to enhance the web business (mainly adflex), the company completed upfront spending and preparations to address changes in business format stemming from the active use of AI tools. The company worked to provide AI-based advertising solutions. Although it made steady progress in acquiring customers, expansion of the business was slower than expected due to the impact of the COVID-19 pandemic. As a result, the company was unable to achieve its goal of bringing the business into the black in FY02/21.

Others

The company implemented groupwide measures such as providing TV-linked ad listings. It launched Sokures as a new means of selling TV broadcasting slots. It also established Tri-Stage Media with the aim of strengthening its purchasing functions. In addition, the company completed restructuring of internal controls, and plans to further enhance them moving forward.

Tri’s Vision 2021 and Rolling Plan 2019: Comparison of sales and earnings target for FY02/21 (as announced on April 3, 2019)
Rolling Plan 2019
(JPYmn) 
FY02/18
Act. 
FY02/19
Act. 
FY02/20
Est. 
FY02/21
Target 
Sales55,776 
53,844 
54,528 63,000
Operating profit1,032810 671n.a
Operating profit margin1.9％ 1.5% 1.2% 2.7% 
Tri’s vision 2021
(JPYmn) 
FY02/18
Act. 
FY02/19
Est. 
FY02/20
Est. (directional) 
FY02/21
Target  
Sales55,77654,786higher60,000
Operating profit1,032830higherNA
OPM1.9％ 1.5％ higher4.5％ 
Source: Shared Research based on company data 

Business

Overview

Comprehensive support for direct marketing

Tri-Stage provides services that support direct marketing companies, mainly those engaged in TV shopping. The company has two main businesses, the Direct Marketing Support segment and the Direct Mailing segment. In FY02/22 sales were JPY47.5bn and operating profit was JPY1.4bn. The Direct Marketing Support segment accounted for 56.8% of sales and 87.3% of operating profit, and the Direct Mailing segment for 39.4% of sales and 16.7% of operating profit.

The mainstay Direct Marketing Support segment comprises the TV and web businesses. In the TV business, Tri-Stage specializes in TV shopping programs (more than 90% of segment sales). The company buys broadcasting slots in bulk from TV stations, and boasts strengths in the selection and provision of broadcasting slots suitable for products (“media selection”), the taking of product orders at partner contact centers around Japan (“order receiving support”), and the production of programs based on its unique expertise (“program production”). Further, according to Tri-Stage, it holds more than 20,000 broadcasting slots per month, boasting the largest market share in Japan. The web business provides AI tools to improve ad performance to companies engaging in direct marketing.

In the Direct Mailing segment, it carries out direct mailing preparation services which encourage repeat purchases by consumers. The company’s subsidiary Mail Customer Center Co., Ltd., acquired in 2012, is one of the top in the industry by number of direct mail pieces sent (over 300mn per year).

Business model
Source: Shared Research based on company data

In the Overseas segment (accounting for 1.2% of sales and 0.3% of operating profit in FY02/22), in addition to TV shopping support, the company aimed to provide sales support for retail, e-commerce, and catalog mail orders, and expanded local sales channels. Tri-Stage made JML Singapore Pte. Ltd. (a major TV shopping company in Singapore) a subsidiary in September 2016, and PT. Merdis International (a wholesaler to TV shopping programs in Indonesia) another subsidiary in December 2016. However, Tri-Stage sold all shareholdings in both JML Singapore and Merdis in FY02/20 and FY02/22, respectively, and withdrew from businesses operated by the two subsidiaries.

The Retail segment (2.7% of sales and -4.3% of operating profit in FY02/22) includes Nippon Department Store Inc., which the company took over in March 2016. Nippon Department Store retails local specialties from various regions of Japan under the Nippon Department Store brand name.

Until December 2020, the company sold Japanese-made Kampo medicines and supplements* through Nippon Healthcare Advisors (consolidated subsidiary established in March 2016),starting in March 2017 and did sales through television shopping programs starting in October 2017. Nippon Healthcare Advisors sold distinctive Japanese-made Kampo medicines and supplements while providing consultation by pharmacists. The Mail Order business was borne out of the company’s efforts to increase its understanding of mail order customers and expand its customer relationship management practices in the future. However, the company sold the business in FY02/20, because it did not turn an operating profit and produced no customer synergies with the Direct Marketing Support segment.

*Kampo medicines and supplements sold through Nippon Healthcare Advisors include hachimi-jio-gan extract for alleviating problems with frequent and nighttime urination, and toki-shakuyaku-san extract, kami-sho-yo-san extract, and keishi-bu-kuryo-gan extract for alleviating tinnitus and menopause-related symptoms (all in tablet form).

Performance by segment
Performance by segmentFY02/13FY02/14FY02/15FY02/16FY02/17FY02/18FY02/19FY02/20FY02/21FY02/22
(JPYmn)Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.
Sales33,82636,02432,18537,13247,30255,77653,84450,44047,78347,519
Direct Marketing Support30,81928,26524,66828,26233,87535,42031,68428,13427,71526,952
Direct Mailing3,0077,7587,5188,83011,53617,14418,49419,15418,15518,724
Overseas---406681,7561,7981,344857577
Mail Order-----66373156--
Retail----1,2221,3901,4951,6531,0551,266
YoY-2.8%6.5%-10.7%15.4%27.4%17.9%-3.5%-6.3%-5.3%-0.6%
Direct Marketing Support-11.5%-8.3%-12.7%14.6%19.9%4.6%-10.5%-11.2%-1.5%-2.8%
Direct Mailing-158.0%-3.1%17.5%30.6%48.6%7.9%3.6%-5.2%3.1%
Overseas-----162.6%2.4%-25.3%-36.2%-32.6%
Mail Order------466.9%-58.2%--
Retail-----13.7%7.6%10.6%-36.2%19.9%
% of total100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0%
Direct Marketing Support91.1%78.5%76.6%76.1%71.6%63.5%58.8%55.8%58.0%56.7%
Direct Mailing8.9%21.5%23.4%23.8%24.4%30.7%34.3%38.0%38.0%39.4%
Overseas---0.1%1.4%3.1%3.3%2.7%1.8%1.2%
Mail Order-----0.1%0.7%0.3%--
Retail---0.0%2.6%2.5%2.8%3.3%2.2%2.7%
Operating profit4977759198981,3951,0328106281,3201,350
Direct Marketing Support5097969781,0641,6371,2921,1407731,1061,179
Direct Mailing-12-20-59-562272360114328225
Overseas----161-295-316-422-82254
Mail Order-----13-238-271-76--
Retail----4232-103-140-59
YoY-74.9%56.1%18.6%-2.3%55.3%-26.0%-21.6%-39.2%63.1%114.9%
Direct Marketing Support-74.3%56.3%22.9%8.7%53.9%-21.1%-11.8%-32.1%43.0%6.6%
Direct Mailing-----341.7%32.2%-68.4%188.1%-31.3%
Overseas----------82.5%
Mail Order----------
Retail-----417.0%-91.3%---
OPM (excl. adjustments)1.5%2.2%2.9%2.4%2.9%1.9%1.5%1.2%2.8%2.8%
Direct Marketing Support1.7%2.8%4.0%3.8%4.8%3.6%3.6%2.7%4.0%4.4%
Direct Mailing-0.4%-0.3%-0.8%-0.1%0.5%1.6%1.9%0.6%1.8%1.2%
Overseas-----44.2%-18.0%-23.5%-6.1%2.9%0.7%
Mail Order--------48.6%--
Retail----0.4%1.6%0.1%-6.2%-13.3%-4.6%
% of total (incl. adjustments)100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0%104.3%
Direct Marketing Support102.5%102.6%106.4%118.4%117.3%125.1%141.0%123.3%83.9%87.3%
Direct Mailing-2.5%-2.6%-6.4%-0.5%4.4%26.4%44.5%18.2%24.9%16.7%
Overseas----17.9%-21.2%-30.7%-52.2%-13.0%1.9%0.3%
Mail Order-----0.9%-23.0%-33.5%-12.1%--
Retail----0.3%2.2%0.2%-16.4%-10.6%
Source: Shared Research based on company data
Note: The company began reporting earnings results of the Overseas business as an independent segment, and results of the Mail Order business (included in the Other segment in FY02/17) as an independent segment from Q1 FY02/18.

Segment overview

Direct Marketing Support segment

Business model

Flow of operations at TV shopping companies, Tri-Stage’s support services

The Direct Marketing Support segment (FY02/22 sales JPY27.0bn, operating profit JPY1.2bn) centers on TV shopping (roughly 82% of segment sales). Tri-Stage provides TV shopping companies with end-to-end direct marketing services, ranging from developing products through customer management. Tri-Stage explains that no other company provides direct marketing support services spanning upstream through downstream operations. Tri-Stage offers nine services (see following table), excelling especially in the services listed from numbers three to five.

Nine services offered in Direct Marketing Support segment
Flow of operations at TV shopping companiesTri-Stage’s services
1Product developmentPropose product selections and prices
2DM business planningAdvise on planning
3In-program expression and program planningPropose plans for shopping programs and commercials, select production companies, place orders
Propose shopping programs that are effective, based on proprietary evaluation system 
4Media selectionProcure program and commercial slots from TV stations and advertising agencies, propose broadcasting plans that effectively increase consumer/product contact points
5OrderingPropose ways of fielding telephone and internet orders, use outsourced contact centers to handle orders on client’s behalf; also help consumers understand products with explanations that supplement TV programs and commercials
6Analysis of shopping program effectivenessConduct media efficiency analysis and business forecasting
7Information processingProcess order and distribution and delivery data
8Distribution and paymentSet methods for product delivery and receivables collection 
9Customer managementMail Customer Center, a subsidiary, sends direct mail and provides information to encourage repeat product purchases (discussed in the Direct Mailing segment overview)
Source: Shared Research based on company data
Tri-Stage’s client companies

In FY02/22, Tri-Stage had around 100 clients in the TV business. According to the company's disclosure materials, one major client, Infomercial Product Inc. (unlisted), accounted for more than 10% of total sales. To lessen its dependence on a few key clients, Tri-Stage is working to boost sales to new clients. Whereas the top five clients accounted for 61% of sales in FY02/15, the figure was down to 39% in FY02/22, reflecting the company's progress on diversifying its risk.

Sales by major client companies
Sales to main clientsFY02/12FY02/13FY02/14FY02/15FY02/16FY02/17FY02/18FY02/19FY02/20FY02/21
(JPYmn)Par.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.
Sales34,81433,82636,02432,18537,13247,30255,77653,84450,44047,783
Informercial Design Co., Ltd.---3,2434,1525,3475,7395,6446,2525,712
Q'SAI CO., LTD.6,6586,6466,5805,7095,3865,2735,376---
TV Shopping Laboratory Co., Ltd.4,9064,8473,898-------
% of total
Informercial Design Co., Ltd.---10.1%11.2%11.3%10.3%10.5%12.4%12.0%
Q'SAI CO., LTD.19.1%19.6%18.3%17.7%14.5%11.1%9.6%---
TV Shopping Laboratory Co., Ltd.14.1%14.3%10.8%-------
Source: Shared Research based on company data
Transaction volume by product

TV shopping programs for supplements/medications account for 50% of Tri-Stage’s transactions, beauty (cosmetics) for 25%, household items for 15%, and food and other items for 10%. Tri-Stage mostly handles supplements/medications and beauty (cosmetics) products because its top two client companies sell these products. In the domestic TV shopping market, supplements/medications accounted for 29% of the total, apparel for 20%, beauty (cosmetics) for 18%, and home electronics and PCs for 13% (2020 estimates according to a survey by Fuji Keizai Co., Ltd.).

Tri-Stage’s relatively high composition of supplement/medication programs stems from the fact that company’s major clients mostly use infomercials. Infomercials communicate detailed product information, compared to multi-sponsor programs on dedicated shopping channels, which broadcast many products over short time periods, and are better suited for other product categories such as apparel. (See below for more details on the different types of TV shopping programs.)

Product composition
Transaction volume on shopping programs supported by Tri-StageOverall TV shopping market
(2019 estimate)
Supplements and medications50％29％
Apparel―20％
Beauty (cosmetics)25％18％
Household items15％n.a.
Other10％n.a.
Source: Shared Research, based on company data and results presentation materials for FY02/18 and Fuji Keizai “Mail order and e-Commerce Business 2021: Current Status and Future”

Tri-Stage focuses on infomercials, which provide product explanations

There are three major TV shopping categories, differing by the number of products introduced in a single program and the amount of time dedicated to each item: infomercials, multi-sponsor TV shopping programs, and programs on dedicated shopping channels. Tri-Stage provides services related to infomercials, which introduce one product (80% of TV business sales), as well as multi-sponsor TV shopping programs, which introduce multiple products (20% of sales). Product explanations are a key element of infomercials and multi-sponsor programs, which are pre-recorded videos that get aired. In comparison, programs on dedicated shopping channels involve 24-hour broadcasting and handle multiple products.

Types of TV shopping
Single itemMultiple items Hundreds of items
Infomercial programs (3–54 min.)Multi-sponsor TV shopping programs (29–60 min.)Channels that specialize in TV shopping such as Jupiter Shop Channel (live 24-hour broadcasts)
Infomercial commercials (60–120 sec.)
Source: Shared Research, based on company data and materials from Fuji Keizai Co., Ltd.
Infomercials

Infomercials (a combination of “information” and “commercial”) focus on a single product and drive consumers to buy with detailed explanations of product use, benefits, development and commercialization, and user experiences. There are infomercial commercials, which run 60–120 seconds, and infomercial programs, which run 3–54 minutes. Tri-Stage handles relatively more 29-minute programs.

Multi-sponsor TV shopping programs

With multi-sponsor TV shopping programs, several companies share the costs of producing and broadcasting a single program. Whereas infomercials are recorded in advance, multi-sponsor programs often feature live studio recordings of TV celebrities and program hosts. In this category, viewers can gauge celebrities’ responses to products when making purchasing decisions.

Sales and cost of sales

The following describes the sales and cost of sales in the Direct Marketing Support segment, and factors that affect them.

Sales

Tri-Stage’s sales are composed of TV shopping broadcasting slot sales and solution sales, such as those from contact centers and program production. Client companies’ business plans and product sales affect the number of TV shopping ads placed. Companies tend to place a relatively high number of shopping program ads when launching new products, as they want as many consumers as possible to view their offerings to win new customers. Conversely, when products are at a mature stage, companies tend to limit ad placements to a level in which they can just replace customers they have lost. Client companies tend to expand ad budgets when product sales are favorable, and shrink budgets when sales are sluggish.

Cost of sales (parent)

In FY02/21 (parent), Tri-Stage’s cost-of-sales ratio was 85.1%. Media costs––broadcasting slot procurement costs––took up most of sales (69% of sales), followed by outsourcing expenses (16%). Thanks to improvements in the contract terms with client companies and better matching of media buys with demand, the parent company was able to keep its cost-of-sales ratio flat YoY to 85.1% in FY02/21, which meant its gross profit margin was flat at 14.9%. This was the lowest CoS ratio (highest gross profit) in the past ten years.

Tri-Stage buys broadcasting slots mainly from Daiko Advertising Inc. (unlisted; subsidiary of Hakuhodo DY Holdings Incorporated [TSE Prime: 2433]), and half of media costs go to this company. The relationship originates from the founder of Tri-Stage working for Daiko Advertising before establishing his own company. Of remaining media costs, 30% goes to direct purchases from media stations and 20% to purchases through advertising agencies. On average, Tri-Stage purchases 20,000 broadcasting slots per month, of which 60% are for TV programs and 40% for TV commercials. Media costs depend on client companies’ ad placement volume (number of programs broadcast). Slot prices vary depending on the station, the region, and the time of day. Although slot prices can rise with higher demand, the company avoids major price variations by negotiating prices based on proprietary data.

By TV station broadcast type, terrestrial broadcasts accounted for around 55% of Tri-Stage’s media costs, broadcast satellite (BS) for 40%, and cable TV (CATV) and communications satellite (CS) for a combined 5%. Tri-Stage has no strong ties with any one TV station.

Outsourcing expenses (16% of sales) comprise program production costs and payments to the contact centers that take product orders from consumers.

Factors that affect Direct Marketing Support segment sales and cost of sales 
(JPYmn)FY02/21% of salesVariables
Sales23,779 100.0％ Clients’ ad placement volume, unit prices of services
Cost of sales20,238 85.1％ -
Media costs (TV programs)9,43339.7％ Clients’ ad placement volume, prices for TV program slots 
Media costs (TV commercials)5,97125.1％ Clients’ ad placement volume, commercial slot prices
Media costs (other)9784.1％ Clients’ ad placement volume, radio program slots
Outsourcing expenses3,83616.1％ Program production costs, contact center costs
Cost of merchandise90.0% 
Gross profit3,54014.9％ 
Source: Shared Research based on company data

Strategy and differentiators in the Direct Marketing Support segment

Strategies for increasing client companies’ sales

In the Direct Marketing Support segment, Tri-Stage works to optimize sales at client companies. Tri-Stage sees the formula for increasing client company sales as product strength x media strength x visual appeal x order processing capability.

Of these three elements that affect sales, Tri-Stage calculates a numerical value to media strength and visual appeal. The company uses these values when negotiating with TV stations, advertising agencies, and production companies to buy slots or outsource production as part of the services it provides.

Calculations of the value of media strength and visual appeal are based on mail orders placed at partner contact centers. The company accumulates data on consumer purchasing decisions (by which consumers, who watched which broadcasting slots, and after seeing which broadcast). Tri-Stage accumulates this data in Tri-DDM’s customer data platform (CDP), runs analysis on it, and visualizes it using business intelligence (BI) tools. It uses this when negotiating with TV stations and advertising agencies, as well as producing programs that increase product appeal. Tri-Stage thus achieves results through a combination of upstream and downstream involvement in direct marketing.

Tri-Stage’s initiatives for increasing sales at client companies
Source: Shared Research based on company interviews

Differentiating factors of Tri-Stage’s support services

Selecting optimal broadcasting slots

Tri-Stage differentiates by proposing optimal broadcasting plans based on data.

Stable procurement 

Tri-Stage stably procures broadcasting slots, based on its track record of purchasing slots since its founding. The company buys slots, under its own name and ahead of actual broadcast dates, every six months when programs are replaced, and it buys in bulk. This also allows for flexibility in providing slots to clients. Competitors, in contrast, tend to purchase fewer slots and do so under the name of their clients.

TV stations want to avoid empty broadcasting slots, so they prefer to provide slots to trusted business partners. Tri-Stage can buy broadcasting slots in bulk and in advance because it has earned TV stations’ trust: its management team with more than 30 years of experience in the advertising industry has built up a reputation for being able to fill the slots. 

Data-driven, optimal broadcast plan proposals

Tri-Stage has alliances with contact centers throughout Japan that take orders for mail order products from consumers. Tri-Stage accumulates and analyzes data on the orders contact centers receive. The company maintains data on broadcast slots by day, time of day, length, and media type, and tracks consumer responses for each of the slots. It then prices media accordingly. Through compilation of a database and ongoing analysis, Tri-Stage is able to suggest to clients the broadcasting slots that are most appropriate for certain products. Through broadcasting plan proposals, Tri-Stage explains to clients how many viewers exist for broadcasting slot A, for example, and what levels of sales are likely to result. Competitors who purchase fewer slots are unable to emulate this approach. 

Data accumulated by Tri-Stage
Broadcast slot ABroadcast slot BBroadcast slot C
DayTuesdayThursdaySunday
Time of dayLate nightMid-dayEarly morning
Length54 min.120 min.29 min.
Media typeCSTerrestrialBS
Number of customers won100100200
Media costJPY600,000JPY1mnJPY1mn
Cost per customerJPY6,000JPY10,000JPY5,000
Source: Shared Research based on company data
Program production
Uses proprietary analysis to propose optimal production of TV shopping programs

In the niche field of TV shopping, Tri-Stage uses proprietary analysis to propose the optimal production of TV shopping programs. The company starts with a detailed analysis of the product, and then adds various factors (such as choreography and pricing) as shown in the radar chart below. Tri-Stage outsources program production, but works to raise the quality of programs in order to reach viewers. Its sales representatives propose program production that will boost product sales, then take on the role of producer in managing production costs.

Tri-Stage has a track record in the area of program production, which allows it to make such proposals. It produces over 1,000 programs annually and provide content approval support services. The company has worked with 80% of the top 30-ranked companies involved in TV shopping marketing. 

Elements of Tri-Stage’s TV shopping program production
Source: Shared Research based on company data
Accepting orders
Efficiently taking orders using partner contact centers

Tri-Stage has alliances in place with around 10 contact center companies operating multiple locations around Japan (as of April 2018). These contact centers enable Tri-Stage to respond to as many as 300,000 calls per month. Such substantial capacity means Tri-Stage can respond to spikes in telephone orders that occur after TV shopping programs air without sacrificing sales opportunities. Contact centers also prepare original scripted explanations (call scripts), helping consumers to understand the products being sold. 

Direct data marketing (Tri-DDM)

Tri-DDM is a new service that consolidates and analyzes a variety of direct marketing data, linking this data with marketing initiatives, and offers a customer data platform (CDP). It will serve as the company’s main point of difference in the medium term. Since its foundation Tri-Stage has been known for its strengths in buying TV broadcasting slots for commercials, contact center management, and TV program production. Going forward, it is looking to focus its resources and maximize the value offered to customers with the help of its enhanced analytical services that make full use of its database and advanced AI and IT technology (see Medium- to long-term outlook section for details). 

Direct Mailing segment

Business model

The Direct Mailing segment (FY02/22 sales of JPY18.7bn, operating profit of JPY225mn) is operated by Mail Customer Center (MCC), which Tri-Stage acquired and converted to a subsidiary in November 2012. MCC uses the Kuroneko DM Bin service provided by Yamato Transport Co., Ltd. (subsidiary of Yamato Holdings Co., Ltd. [TSE Prime: 9064]), and the Yu-Mail service of Japan Post Co., Ltd. (subsidiary of Japan Post Holdings Co., Ltd. [TSE Prime: 6178]) to send out direct mail on behalf of client companies. The segment’s operating profit margin was negative until FY02/16 but the growth of the business and the accompanying increase in top-line revenues brought the operating profit margin up to 0.5% in FY02/17, 1.6% in FY02/18, and 1.9% in FY02/19. Although OPM dropped to 0.6% in FY02/20, this was due to the company booking an allowance for doubtful accounts related to client receivables after one client company’s financial situation suddenly deteriorated. In FY02/22, OPM was 1.2%, owing to an increase in the ratio of transactions through agents.

Links with the Direct Marketing Support segment

Working with Tri-Stage’s Direct Marketing Support segment, MCC works to encourage repeat consumer purchases. MCC has bases around Japan (Hokkaido, Tokyo, Nagoya, Osaka, Fukuoka) and handles some 200mn pieces of direct mail annually, giving it the top share in the market (according to an internal study by the company).

Tri-Stage and Mail Customer Center’s supporting role in direct marketing
Source: Shared Research based on company data

Performance trends

Establishment phase: FY02/07 through FY02/10

Tri-Stage recorded consecutive growth in sales and operating profit for the first three years after its establishment (FY02/07–FY02/10). This growth was mainly thanks to a rise in the number of shopping programs as key clients Q’Sai Co., Ltd., and Television Shopping Kenkyujo Co., Ltd., sought to expand mail order product sales. Partly because of its clients’ substantial demand for ad placements at the time, Tri-Stage was able to purchase even more broadcasting slots than it does now and at low cost, which boosted profit growth. Tri-Stage says the initial establishment period marked its peak in market share for broadcasting slots, at more than 30% (compared to around 25% in 2016, according to an internal company survey).

Transition phase: FY02/11 through FY02/14

After peaking at JPY37.6bn in FY02/11, consumer purchases of non-essential items such as supplements, cosmetics, and accessories fell off in the wake of the Great East Japan Earthquake. Demand for broadcasting slots for shopping programs declined accordingly, leaving Tri-Stage with more broadcasting slots in inventory than it had expected and compelling it to sell the slots back at below cost. Further, factors such as some major clients not being able to pay their debts also caused the company’s OPM to fall from 10.6% in FY02/10 to 1.5% in FY02/13.

Recovery phase: FY02/15 through FY02/17

To expand its scope of operations, in FY02/13 Tri-Stage acquired Mail Customer Center and converted it to a subsidiary. After its experience with the deterioration in profitability of broadcasting slots, Tri-Stage changed its slot buying methods. The company began using data analysis, shifting its focus to buying slots it deemed more effective in generating sales while passing up on those deemed to not have a corresponding sales impact. To respond more flexibly to fluctuations in demand for broadcasting slots, Tri-Stage shifted to a proposal-based sales approach, using analysis of its database to allocate suitable slots to TV shopping companies. The company also expanded the scope of its business, establishing an overseas business and a mail order business.

Earnings growth stalls: FY02/18 through FY02/19

In FY02/18 and FY02/19 the company moved to expand its business away from its core legacy business in the domestic TV shopping market and into other areas, including a web business and mail order business. In addition to growing its core Direct Marketing Support business and Direct Mailing business, Tri-Stage used mergers and acquisitions to move into growth areas. This expanded its top-line but earnings at the consolidated level stalled, hurt by losses in the new business areas, including its Overseas and Mail Order businesses.

Sales and earnings growth phase: from FY02/20

With Tri-Stage Inc. (which runs its mainstay Direct Marketing Support business), adflex communications, Inc. (web business), and Mail Customer Center Co., Ltd. (Direct Mailing business) serving as the core of the group’s operations, the group plans to focus on these business areas going forward and reallocate its resources accordingly. In other areas, including its Overseas business and Mail Order business, the company moved to select and focus on promising areas based on its assessment of profitability and potential synergies with other group companies in FY02/20.

Sales
Source: Shared Research based on company data
Operating profit
Source: Shared Research based on company data

Cost structure

Tri-Stage cost structure
Cost structureFY02/13FY02/14FY02/15FY02/16FY02/17FY02/18FY02/19FY02/20FY02/21FY02/22
(JPYmn)Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.
Sales33,82636,02432,18537,13247,30255,77653,84450,44047,78347,519
Cost of sales31,14533,13128,99333,55542,15050,16347,86244,28942,42142,163
Gross profit2,6812,8923,1933,5775,1525,6135,9826,1525,3615,356
SG&A expenses2,1842,1172,2732,6783,7574,5815,1725,5244,0414,006
Personnel expenses9181,1011,1721,3251,8122,0992,3552,2572,2142,089
Other1,2661,0161,1011,3531,9452,4822,8173,2671,8271,917
Operating profit4977759198981,3951,0328106281,3201,350
% of sales
Cost of sales92.1%92.0%90.1%90.4%89.1%89.9%88.9%87.8%88.8%88.7%
Gross profit7.9%8.0%9.9%9.6%10.9%10.1%11.1%12.2%11.2%11.3%
SG&A expenses6.5%5.9%7.1%7.2%7.9%8.2%9.6%11.0%8.5%8.4%
Personnel expenses2.7%3.1%3.6%3.6%3.8%3.8%4.4%4.5%4.6%4.4%
Other3.7%2.8%3.4%3.6%4.1%4.4%5.2%6.5%3.8%4.0%
Operating profit1.5%2.2%2.9%2.4%2.9%1.9%1.5%1.2%2.8%2.8%
Cost of sales breakdown (parent)FY02/13FY02/14FY02/15FY02/16FY02/17FY02/18FY02/19FY02/20FY02/21FY02/22
(JPYmn)Par.Par.Par.Par.Par.Par.Par.Par.Par.Par.
Sales30,81928,25524,66728,30233,95233,21529,29224,77923,779
Cost of sales28,29025,74021,76525,07130,00829,89625,69621,07820,238
Media costs23,37521,02318,66921,57225,84225,66722,02917,46716,382
Outsourcing costs4,7244,5492,9393,3334,0473,9973,6233,5993,836
Cost of merchandise19216815716611813042119
Gross profit2,5292,5152,9023,2313,9443,3193,5953,7003,540
% of sales
Cost of sales91.8%91.1%88.2%88.6%88.4%90.0%87.7%85.1%85.1%
Media costs75.8%74.4%75.7%76.2%76.1%77.3%75.2%70.5%68.9%
Outsourcing costs15.3%16.1%