Ateam is an IT company that operates diverse businesses for various markets online. Target markets include house moving, automobiles, bridal services, and financial services. Its customers are companies and individuals, and end users are individuals. Ateam’s segments are the Lifestyle Support Business (65.2% of revenues and 76.2% of operating profit in FY07/21), where it plans, develops, and operates various comparison and information websites related to consumers’ daily lives; the Entertainment Business (23.3% of revenues, 19.4% of operating profit), where it plans, develops, and operates games (for mobile phones, computers, and consoles) that are distributed digitally in the broader global game market; and the E-Commerce Business (11.5% of revenues; 4.4% of operating profit), where it plans, develops, and operates a website that specializes in selling bicycles and delivers fully assembled bicycles to consumers.
Ateam had balanced stability and robust growth (CAGR for operating profit was 22.3% in the five years through FY07/18) by running three businesses with unique features. Following this strong growth phase, operating profit declined for the third consecutive year in FY07/21 amid slowing growth in the Entertainment Business and upfront spending in the Lifestyle Support Business as it develops new business areas, exacerbated by the negative impact of the COVID-19 pandemic. The company is developing games for the broader global digitally distributed game market in the Entertainment Business; expanding existing services and getting new business territories up and running in the Lifestyle Support Business; and aiming at the best product lineup and customer service equivalent to brick-and-mortar stores as it develops its online bicycle store in the E-Commerce Business. In FY07/22, the company will promote operational efficiency and support the generation of stable revenue through existing services that sustain its business operations. Through these efforts, the company will aim to ensure that the various measures in which it invested during FY07/21 generate growth in overall earnings.
In the Lifestyle Support Business, the company has two subsegments: the Digital Marketing Support business and Platform business. In the Digital Marketing Support business, the company plans, develops, and operates comparison, information, and e-commerce sites linked to various areas of customers’ lives, such as sites related to moving, cars, and weddings. Revenue is primarily commissions for referring potential customers to client companies (including moving companies, used car dealers, and wedding hall operators). The Platform business includes healthcare services primarily via Lalune, a women’s health management and consultation app, and engineering-oriented services such as Qiita, a technical information sharing service for programmers, and Qiita Jobs, a job search support service for engineers. Revenues come mainly from advertising, e-commerce sales, and recruitment fees.
In the Entertainment Business, the company used to focus on planning and developing original games and tool apps for smart devices. From FY07/20 onward, its strategy has focused on planning and development for the broader global digitally distributed game market. This entails collaborations with other companies’ IP as well as mobile phone, computer, and console games for distribution worldwide. The company has infrastructure to distribute directly to 155 countries around the world and is building its expertise. The product lineup includes role-playing games (such as Unison League and Valkyrie Connect), simulation games (Derby Impact), and other games, which are played both in Japan and overseas. Most of revenues come from players’ in-app purchases.
The company uses in-house engineers to develop websites and apps, allowing accumulation of planning through operation expertise. This includes online promotion expertise from developing its services, systems infrastructure that can be deployed in various fields, and the ability to refer customers across businesses due to its operation of multiple services. Particular characteristics of Ateam’s operations include Search Engine Marketing (SEM) to increase customer traffic to websites via search engines, the steady building of relationships with client companies, and effective user support via a call center and other means. These characteristics are the source of the company’s competitive edge.
Ateam’s president, Takao Hayashi, has been a software development enthusiast since elementary school, and he has accumulated much experience. He emphasizes both engineer- and user-driven development. As such, while most game industry peers tend to rely on a few hits, Ateam has multiple games that contribute to earnings growth. Its development team includes international members and weaves in elements from games popular overseas to produce global hits. In the Lifestyle Support Business, the company cultivates relationships with client companies by providing them with feedback based on user surveys.
Ateam reported FY07/21 revenues of JPY31.3bn (-1.5% YoY), operating profit of JPY701mn (-44.9% YoY), recurring profit of JPY895mn (-28.3% YoY), and net income attributable to owners of the parent of JPY877mn (versus a net loss of JPY519mn in FY07/20). Revenues on an overall basis declined 1.5% YoY. Despite the COVID-19 pandemic contributing to an ongoing deterioration in revenues at the wedding venue information website Hanayume, revenues in the Lifestyle Support Business improved 1.5% YoY thanks to firm demand during the busy season at moving service comparison website Hikkoshi Samurai. Revenues in the Entertainment Business dropped 13.9% YoY as revenues from existing games continued to slide. Revenues in the E-Commerce Business were up 12.5% YoY thanks to not only improved operational efficiency, solid inventory control, and successfully revised product lineups, but also strong demand for bicycles amid the COVID-19 pandemic and the favorable impact from 2H mass advertising campaigns featuring celebrities. Operating profit on an overall basis was down 44.9% YoY. Profit in the Lifestyle Support Business dropped 23.5% YoY. In addition to the decrease in profit as a result of reduced revenues at Hanayume, profit was affected by increased investment in listing ads in response to the impact its cash loan and credit card comparison websites suffered in line with Google’s December 2020 core algorithm updates on search engine optimization (SEO). Despite continuing to efficiently operate existing game apps, operating profit in the Entertainment Business declined 52.4% YoY on the booking of development costs tied to the FINAL FANTASY VII THE FIRST SOLDIER smart device app for the global market jointly developed with SQUARE ENIX CO., LTD. On the other hand, the E-Commerce Business recorded profit on a full-year basis for the first time as improved revenues and enhanced operational efficiency moved it from a loss of JPY43mn in FY07/20 to profit of JPY84mn. GPM was 70.2% (-2.3pp YoY), and with the SG&A ratio dipping 0.8pp YoY to 68.6%, OPM fell 1.4pp YoY to 1.6%.
Company forecast for FY07/22 (released March 11, 2022) calls for revenues of JPY32.5bn (+4.0% YoY), an operating loss of JPY700mn (profit of JPY701mn in FY07/21), a recurring loss of JPY700mn (profit of JPY895mn), and a net loss attributable to owners of the parent of JPY850mn (net income of JPY877mn). Ateam had refrained from disclosing a forecast for FY07/22, citing the difficulty in calculating appropriate and reasonable earnings estimates for FINAL FANTASY VII THE FIRST SOLDIER released on November 17, 2021. The company announced its full-year forecast as above, as it has accumulated sufficient data for making reasonable earnings estimates.
In 1H, revenues and earnings from FINAL FANTASY VII THE FIRST SOLDIER were not sufficient to provide a boost to overall performance, and revenues and earnings from the newly released game app failed to offset the slump in existing game apps and some services in other businesses. In the Lifestyle Support Business, while the financial media business continued to struggle, car appraisal and purchase website Navikuru saw increases in customer acquisition and ARPU due to a rise in the number of partnering companies. The bridal-related business, which was hit the hardest by the COVID-19 pandemic, was on a recovery track. The E-Commerce Business posted higher revenues owed to strong performance of cyma, which despite Q2 being traditionally a slow period, benefited from selling price revisions implemented by bicycle model and strong sales through online marketplaces. Profits were mainly affected by development and advertising expenses recorded in connection with the release of FINAL FANTASY VII THE FIRST SOLDIER.
The company expects a recovery in performance in 2H in part because Q3 is a busy period for the Lifestyle Support Business and E-Commerce Business and in part because it plans to roll out a series of initiatives aimed at expanding earnings from FINAL FANTASY VII THE FIRST SOLDIER in the Entertainment Business. Furthermore, the company anticipates additional upward performance impact from the elimination of temporary investment burdens.
We think Ateam’s strengths are stable earnings from segments with differing business cycles, a development process with strong awareness of market needs, and business diversification grounded in digital marketing expertise, business development capabilities, and technological capacity. Weaknesses include limited segment cooperation, operation of financial media and other businesses with low barriers to entry, and low name recognition and remote location that make hiring difficult (see Strengths and weaknesses).
|Gross profit margin||77.7%||85.5%||87.3%||82.3%||84.9%||84.3%||83.6%||81.5%||79.8%||75.9%||73.8%|
|Operating profit margin||11.0%||16.8%||15.6%||12.1%||13.2%||9.6%||11.8%||12.5%||7.6%||4.0%||2.2%|
|Recurring profit margin||11.0%||16.4%||15.6%||12.2%||13.7%||9.1%||11.9%||12.6%||7.6%||3.9%||2.9%|
|Per-share data (split-adjusted; JPY)|
|Shares issued (year-end; '000)||26.8||9,196.5||9,597.5||9,674.6||19,405.6||19,450.0||19,469.8||19,738.2||19,786.2||19,783.2||19,789.2|
|Dividend per share||0.00||0.00||10.61||10.00||12.50||12.50||27.00||32.50||16.00||16.00||16.00||16.00|
|Book value per share||0.11||54.36||91.18||106.76||207.19||263.36||389.03||593.76||636.32||594.54||605.98|
|Balance sheet (JPYmn)|
|Cash and cash equivalents||553||1,339||1,944||2,217||3,098||3,505||5,004||5,984||6,713||6,480||6,035|
|Total current assets||1,341||2,710||3,761||4,034||6,335||6,919||9,810||11,731||11,543||11,130||10,383|
|Tangible fixed assets||40||46||103||120||125||1,322||1,666||1,684||1,711||1,384||1,195|
|Investments and other assets||261||277||368||995||737||724||1,157||1,459||2,495||3,070||3,380|
|Total current liabilities||658||1,154||1,136||1,306||3,648||4,127||5,203||4,465||4,031||3,847||3,640|
|Total fixed liabilities||106||383.65||-||-||-||388||481||485||730||493||527|
|Total interest-bearing debt||270||100||-||-||1,700||1,166||632||100||-||-||-|
|Statement of cash flows (JPYmn)|
|Cash flows from operating activities||375||816||1,109||1,209||1,677||1,731||3,463||2,790||3,318||1,108||451|
|Cash flows from investing activities||-77||-223||-560||-899||-1,121||-535||-1,213||-2,257||-1,766||-1,030||440|
|Cash flows from financing activities||-173||194||357||-176||111||-766||-768||444||-816||-313||-1,343|
On March 11, 2022, Ateam Inc. announced a reduction in executive compensation.
The company, taking the deterioration in its earnings seriously, has decided to reduce compensation for its executives as below to clarify the responsibilities of top management and streamline management through curtailing expenses.
Overview of reduction in executive compensation
|President||10% reduction in monthly compensation|
|Director, General Manager of Entertainment Division||Same as above|
On January 20, 2022, Ateam Inc. announced the results of its share repurchase and the completion of the transaction.
The company has purchased its own shares as follows, with the transaction completed in accordance with the resolution of the Board of Directors passed on September 10, 2021.
Type of shares acquired: Common stock of the company
Total number of shares acquired: 71,700
Total value of shares acquired: JPY57.2mn
Period of acquisition: January 4–19, 2022 (trade basis)
Method of acquisition: Market purchase on the Tokyo Stock Exchange
|Gross profit margin||77.8%||77.3%||75.7%||72.5%||75.2%||75.2%||74.6%||70.2%||71.7%||73.1%|
|Operating profit margin||1.8%||2.5%||8.5%||3.0%||5.0%||-||4.2%||1.6%||-||-|
|Recurring profit margin||1.8%||2.6%||8.1%||2.9%||5.2%||-||4.3%||2.1%||-||-|
|Cumulative||Q1||Q1–Q2||Q1–Q3||Q1–Q4||Q1||Q1–Q2||Q1–Q3||Q1–Q4||Q1||Q1–Q2||% of Est.||FY Est.|
|Gross profit margin||77.8%||77.6%||76.9%||75.9%||75.2%||75.2%||75.0%||73.8%||71.7%||72.4%|
|Operating profit margin||1.8%||2.1%||4.3%||4.0%||5.0%||1.5%||2.5%||2.2%||-||-||-|
|Recurring profit margin||1.8%||2.2%||4.2%||3.9%||5.2%||2.4%||3.1%||2.9%||-||-||-|
|Earnings by segment||FY07/20||FY07/21||FY07/22|
|Digital Marketing Support||5,367||4,999||5,330||3,804||4,463||4,428||5,362||4,588||4,509||4,299|
|% of total||65.9%||63.6%||63.6%||51.8%||59.6%||60.0%||62.1%||59.3%||61.5%||56.2%|
|% of total||1.7%||1.6%||1.4%||1.8%||1.9%||2.3%||2.1%||2.3%||2.4%||2.4%|
|% of total||0.2%||0.3%||0.3%||0.3%||1.9%||3.3%||2.4%||3.6%||4.6%||4.9%|
|Personnel and hiring expenses||1,581||1,560||1,549||1,583||1,548||1,582||1,585||1,556||1,590||1,557|
|Payment platform fees||1,054||1,099||1,147||1,359||1,114||1,329||1,358||1,378||1,264||1,100|
|Outsourcing expenses and server fees||553||539||519||502||457||464||502||633||576||552|
|No. of employees (quarter-end)||1,113||1,123||1,193||1,165||1,162||1,182||1,197||1,155||1,129||1,171|
In 1H FY07/22 (August 2021–January 2022), Ateam reported revenues of JPY15.0bn (+0.7% YoY), an operating loss of JPY1.1bn (profit of JPY221mn in 1H FY07/21), a recurring loss of JPY1.1bn (profit of JPY363mn), and a net loss attributable to owners of the parent of JPY729mn (net income of JPY741mn). The operating loss was primarily due to development and promotional costs associated with FINAL FANTASY VII THE FIRST SOLDIER (released on November 17, 2021), a smart device app for the global market jointly developed with SQUARE ENIX CO., LTD. Ateam also recorded about JPY1.2bn in temporary investments in 1H. The company expects impact associated with this investment to dissipate in 2H and accordingly projects an improvement in profitability.
Versus the full-year FY07/22 company forecast (released March 11, 2022), 1H revenues reached 46.1% (versus 47.6% of full-year results in 1H FY07/21). On the profit front, the company posted an operating loss (31.5%), a recurring loss (40.6%), and a net loss attributable to owners of the parent (85.2%).
Revenues in Q2 (November 2021–January 2022) were JPY7.6bn (+3.7% YoY; +4.3% QoQ), while operating loss amounted to JPY891mn (versus operating losses of JPY157mn in Q2 FY07/21 and JPY252mn in Q1 FY07/22), recurring loss JPY894mn (JPY30mn in Q2 FY07/21 and JPY242mn in Q1 FY07/22), and net loss attributable to owners of the parent JPY584mn (versus net income of JPY483mn in Q2 FY07/21 and net loss of JPY145mn in Q1 FY07/22).
Revenues in 1H amounted to JPY15.0bn (+0.7% YoY). Meanwhile, revenues were up 3.1% YoY in the Lifestyle Support Business, but down 11.2% in the Entertainment Business. E-Commerce Business revenues grew 14.8% YoY.
In 1H, revenues and earnings from FINAL FANTASY VII THE FIRST SOLDIER, a smart device app for the global market, were not sufficient to provide a boost to overall performance, and revenues and earnings from the newly released game app failed to offset the slump in existing game apps and some services in other businesses. In the Lifestyle Support Business, while the financial media business continued to struggle, car appraisal and purchase website Navikuru saw increases in customer acquisition and ARPU due to a rise in the number of partnering companies. The bridal-related business, which was hit the hardest by the COVID-19 pandemic, was on a recovery track. The E-Commerce Business posted higher revenues owed to strong performance of cyma, which despite Q2 being traditionally a slow period, benefited from selling price revisions implemented by bicycle model and strong sales through online marketplaces.
Revenues in Q2 (November 2021–January 2022) amounted to JPY7.6bn (+3.7% YoY; +4.3% QoQ). The company reported YoY revenue growth of 0.3% and QoQ revenue decline of 3.3% in the Lifestyle Support Business. Meanwhile, in the Entertainment Business, revenue declined 5.8% YoY while rising 23.1% QoQ. In the E-Commerce Business, revenue rose 59.9% YoY and 15.8% QoQ.
Operating loss in 1H was JPY1.1bn (versus operating profit of JPY221mn in 1H FY07/21). In the Lifestyle Support Business, segment profit dropped 39.2% YoY due to lower revenues in the financial media business and deterioration in cost per acquisition (CPA). The Entertainment Business booked a segment loss of JPY897mn, as the company incurred advertising expenses for large promotions at the time of the release of FINAL FANTASY VII THE FIRST SOLDIER, a smart device app targeting the global market jointly developed with Square Enix. The E-Commerce Business likewise booked a segment loss of JPY53mn due to a decline in profitability resulting from price revisions and investments in the new service Obremo.
Gross profit margin fell 2.8pp YoY to 72.4%, while SG&A expense ratio rose 6.3pp YoY to 80.0%.
In Q2 (November 2021–January 2022), the company posted an operating loss of JPY891mn (versus an operating loss of JPY157mn in Q2 FY07/21 and an operating loss of JPY252mn in Q1 FY07/22). In the Lifestyle Support Business, the company reported JPY118mn in operating profit (+84.1% YoY; -38.4% QoQ). Meanwhile, in the Entertainment Business, operating loss amounted to JPY737mn (versus operating profit of JPY121mn in Q2 FY07/21 and an operating loss of JPY160mn in Q1 FY07/22). Operating loss in the E-Commerce Business was JPY19mn (versus operating profit of JPY6mn in Q2 FY07/21; operating loss of JPY34mn in Q1 FY07/22). In the Lifestyle Support Business, performance from the Navikuru car appraisal and purchase website was solid, reflecting robust activity in the used car market. Meanwhile, in the Entertainment Business, profitability deteriorated due to development and advertising costs associated with a new jointly-developed game. The company reported an operating loss in its E-Commerce Business and attributed this loss to a decline in profitability stemming from adjustments to sales strategies for the cyma website (downward revisions to some selling prices) and investment in the Obremo pet food brand.
On February 1, 2022, the company completed its reorganization of consolidated subsidiaries (company split and absorption-type merger) and and made corresponding name changes as scheduled.
The purpose of this company split and absorption-type merger was to concentrate management resources and improve efficiency and strengthen functions for the further growth of the Digital Marketing Support business in the Lifestyle Support Business operated by Ateam’s subsidiaries. In addition, the company aimed to facilitate digital transformation and improve customer lifetime value (LTV).
The company conducted a share buyback over the period spanning from September 13, 2021 through January 19, 2022.
In the Lifestyle Support Business, 1H revenues amounted to JPY10.0bn (+3.1% YoY).Revenues in the financial media business fell due to the ongoing impacts of changes in search engine optimization (SEO) rankings caused by Google algorithms updates and increased online ad placements by competitors. However, the downturn here was offset by increases in customer acquisition and ARPU driven by a rise in the number of partnering companies in car appraisal and purchase website Navikuru. As a result, segment revenues as a whole were up slightly YoY.
Navikuru generated profit on higher revenues, but due to a decline in revenues in the financial media business and a deterioration in CPA, segment profit fell YoY.
In the Lifestyle Support Business, the company works with businesses that operate services for the individual users in various business areas. Based on the mindset of benefiting the seller, buyer, and the community, the company operates various websites, including comparison, information, and e-commerce sites linked to various events and aspects of customers’ lives.
Starting in FY07/20, the Lifestyle Support segment altered its sub-segment scheme. It is now split between two sub-segments, the Digital Marketing Support business and the Platform business. As of FY07/21, e-commerce operations falling under the Platform Business and conducted within the women’s healthcare service (minorie, etc.) were classified under “Other Business”.
The Digital Marketing Support business, whose main service is referring prospective customers to partner companies via its own media, has the potential for rapid horizon expansion with its business model that generates revenues and profits by being able to quickly launch and expand services into different business areas. Individual users generally use these sites for free. The main source of revenues is commissions for referring potential customers to partner companies and commissions if those customers enter a contract.
The Platform business provides a “hub” where the data collected via applications and websites can be accumulated and utilized to enhance its unique value and create a more advantageous market position; the business model here aims to provide solutions utilizing these data, thereby creating a cycle that increases value. The main revenue sources are advertising revenues, membership fees, and sales from providing software tools and e-commerce solutions. The Platform business currently covers the fields of healthcare and engineering, with its healthcare-related services consisting mainly of the Lalune women’s health consultation app and its engineering-related services centering on its Qiita online community for software engineers.
Revenues in Q2 (November 2021–January 2022) amounted to JPY4.9bn (+0.3% YoY; -3.3% QoQ). About JPY4.3bn of this amount stemmed from the Digital Marketing Support business (-2.9% YoY; -4.7% QoQ), while JPY186mn came from the Platform business (+8.8% YoY; +7.5% QoQ) and JPY374mn from the Other business (+53.9% YoY; +10.3% QoQ).
Operating profit was JPY118mn (+84.1% YoY and -38.4% QoQ).
In the Digital Marketing Support business, customer acquisitions and ARPU associated with car appraisal and purchase website Navikuru rose along with an increase in partner companies, reflecting robust activity in the used car market. Meanwhile, revenues generated through the bridal-related business, which had previously incurred negative impact from the COVID-19 pandemic, grew YoY. Despite associated investment, profitability in the category of new businesses improved due to ongoing revenue growth. At the same time, the financial media business continued to incur negative performance impact from growth in the volume of web advertising from competitors and changes in search engine optimization (SEO) rankings stemming from algorithm updates implemented by Google. While performance in the categories of small-loan lending and credit cards loans was strongly affected by these updates, performance in the insurance category grew thanks to expansion in ad placement.
In the Platform business, revenues generated through the Lalune app declined YoY due to a decrease in average proceeds per advertisement that was caused by revisions made to the Pharmaceutical and Medical Device Act (one of which mandated the establishment of a legal compliance system for ensuring public trust, which levies administrative monetary penalties for false or exaggerated advertising of pharmaceutical products). In contrast, revenues generated through the Qiita Jobs recruitment support service grew YoY due mainly to proceeds from fees for events held in December 2021, and overall revenues in the Platform business increased as a result. On January 25, 2022, the company officially launched Qiita Discussions, a platform that facilitates communication between management and users of Qiita, one of Japan's largest communities of engineers. Using GitHub Discussions (a collaborative communication forum for communities), Qiita Discussions has provided a place for open and two-way communication through which users can express their opinions and management can share information.
In 1H, the Entertainment Business posted revenues of JPY3.3bn (-11.2% YoY) and a segment loss of JPY897mn (profit of JPY214mn in 1H FY07/21).
Revenues from existing game apps remained on a downward track, although some game apps performed strong temporarily owed in part to promotional events. Revenues from the new game app FINAL FANTASY VII THE FIRST SOLDIER, released on November 17, 2021, failed to cover the slump in existing game apps, resulting in lower revenues for the Entertainment Business as a whole.
Segment profit fell substantially (falling into the red) due to the booking of advertising expenses for large promotions in connection with the release of FINAL FANTASY VII THE FIRST SOLDIER.
Under the Entertainment Business, the company offers proprietary game apps for smart devices via dedicated third-party platforms for distributing apps, such as App Store (Apple Inc.) and Google Play (Google Inc.). With the game apps themselves downloadable at no charge, the company derives most of its revenues here from in-app purchases by users seeking to advance more quickly in the game.
In response to changes in the global game market and user needs and technological advances in recent years, the company has decided to move away from its dependence on smartphone games and focus on the broader game market around the world, including the digital distribution of console games and PC games, as well as mobile device games. Medium- to long-term growth plan calls for designing games in partnership with popular IPs around the world.
In Q2 (November 2021–January 2022), revenues amounted to JPY1.8bn (-5.8% YoY; +23.1% QoQ), and segment loss came to JPY737mn (versus profit of JPY121mn in Q2 FY07/21; loss of JPY160mn in Q1 FY07/22). The YoY decline in revenues was due to a decrease in performance from existing game titles and weak initial performance from new titles. Meanwhile, the segment loss stemmed primarily from development and advertising expenses associated with a new title (FINAL FANTASY VII THE FIRST SOLDIER). In Q2, advertisement costs in the Entertainment Business expanded to JPY874mn (an increase of about JPY743mn compared to Q1) as the company temporarily expanded its spending on advertising. Investment in development also grew during Q2. However, the company expects that the impact associated with these temporary expenditures will diminish in 2H and projects that it will secure profit in the Entertainment Business as revenues grow. The company also anticipates a decline in promotional expenses starting in Q3.
From Q3, the company will strive to increase earnings generated through FINAL FANTASY VII THE FIRST SOLDIER by making operational improvements and introducing updates in response to user requests. On February 28, 2022, season 2 Dominate the Sky was released, and the company has observed gradual improvement in KPIs since its launch. Moving forward, the company will introduce new collaborative efforts and implement further updates, thereby facilitating improvement in monetization methods and an increase in purchasing rates achieved through the marketing of items that appeal to users and the application of gacha features. The company also plans to improve the game's playability because it has observed some functional issues including crashes.
The company recognizes that its user base is dominated by FINAL FANTASY fans, which means that in addition to catering to battle royale fans, it must also satisfy the high expectations of users who pay more attention to story elements. Due in part to these conditions, the company has reported a lower number of established users than initially expected. Development of season 2 was completed before its release, so the company will introduce improvements that address observed issues beginning with the release of season 3. Additionally, the company will consider adding and monetizing features in response to user feedback.
During its Q2 earnings announcement, the company revealed that it is preparing to enter the NFT game and metaverse markets by leveraging the technology and expertise it has accumulated over the years. The company believes that it can leverage the following three strengths in these new business domains.
Both the company and the gaming industry at large are taking notice of the Non-Fungible Token (NFT)* game titled Axie Infinity, which was released by Vietnam-based operator Sky Mavis in 2021. Although it foresees some difficulties related to the management of ownership and digital content, the company believes that it can leverage the strengths it has previously accumulated through its global releases and operations because the NFT games with which it is preparing to enter the market target emerging economies. With regard to the metaverse market, the company envisions a global rollout utilizing 3D technology. Content within the metaverse will be fully synchronized, so Ateam believes that it will be able to leverage the server and application administration capabilities that it cultivated through its experience with the battle royale genre.
*Non-Fungible Token (NFT): Digital data with non-falsifiable certificates of authenticity or proofs of ownership that are issued and traded on using blockchains. NFTs are characterized by programmability (additional features can be added to the data, such as the option of making partial payments to authors when data changes hands), tradability (NFTs can be freely transferred), and interoperability.
The company has two existing development pipelines (Pipelines 1 [Original content developed in-house] and 2 [Collaboration with third parties]) and reported slight changes to Pipeline 2 (removal of some IPs). With the addition of the NFT and metaverse pipelines (both encompassing original content developed in-house), the company now has four development pipelines.
E-Commerce Business revenues in 1H amounted to JPY1.8bn (+14.8% YoY), and segment loss came to JPY53mn (versus profit of JPY80mn in 1H FY07/21).
Revenues increased YoY. Growth here was attributed to strong performance of the online bicycle shop cyma, where the number of units sold increased thanks to selling price revisions implemented by bicycle model and strong sales through online marketplaces.
The company reported a segment loss in the E-Commerce Business due primarily to a decline in profitability caused by selling price revisions and investment in the new Obremo service.
Under the E-Commerce Business, the company operates multiple e-commerce sites handling various merchandise, including the online bicycle shop cyma.
The online bicycle shop cyma in operation since December 2013 has stockpiled more than 200 models of fully assembled bicycles that were purchased from both overseas and domestic manufacturers at its three distribution centers (in the Tokai, Kanto, and Kansai regions). With its distribution centers all employing certified bicycle mechanics, Ateam is able to offer fully assembled bicycles online and deliver them to the buyer's home.
With a mission of "shopping that moves your heart," the company will improve its product lineup, sales methods, and delivery quality each day so as to provide services allowing users to experience shopping that well exceeds their expectations.
*Fulfillment refers to the core process in the mail-order business, including the management of order receipts and inventories, picking, sorting and packaging, shipping, charging, and payment processing. It also includes peripheral work, such as customer support (e.g., handling complaints, questions, and returns and exchanges of goods), as well as the management of customer data.
In Q2 (November 2021–January 2022), the company posted revenues of JPY966mn (+59.9% YoY; +15.8% QoQ) and a segment loss of JPY19mn (versus profit of JPY6mn in Q2 FY07/21; loss of JPY34mn in Q1 FY07/22). Revenues increased as revised selling prices led to higher sales volumes from the cyma bicycle shopping site and as the company generated strong sales through online shopping malls. Performance in terms of KPIs deteriorated temporarily due to excess inventories and price competition, but the company later reported an improvement in inventory turnover and other KPIs, as well as accompanying growth in revenues, thanks to selling price revisions.
On the other hand, the company reported a small loss due in part to a decline in the profitability of cyma that occurred as a result of selling price revisions and in part to investment in the new Obremo service. The cumulative sales volume of Obremo, a human grade dog food, exceeded 50,000 servings by the end of Q2.
In the category of bicycles, the company believes that expansion in demand stemming from the COVID-19 pandemic has subsided but also surmises that the culture of purchasing bicycles via e-commerce has firmly taken hold. With regard to the pet food category, Ateam maintains that people are spending more time with their pets due to the pandemic and indicates that demand for high-quality pet food is growing. Accordingly, the company believes that it can achieve earnings growth that is commensurate with expansion in demand for pet food. As of end-Q2, the company exclusively sold dog food, but it plans to expand into the cat food market moving forward.
E-Commerce Business: quarterly gross profit
E-Commerce Business: quarterly inventory turnover days and rate
|(JPYmn)||1H Act.||2H Act.||FY Act.||1H Act.||2H Act.||FY Act.||1H Act.||2H Est.||FY Est.|
|Cost of revenues||3,595||4,060||7,655||3,687||4,506||8,193||4,134|
|Gross profit margin||77.6%||74.2%||75.9%||75.2%||72.5%||73.8%||-|
|Operating profit margin||2.1%||5.9%||4.0%||1.5%||2.9%||2.2%||-||2.5%|
|Recurring profit margin||2.2%||5.7%||3.9%||2.4%||3.2%||2.9%||-||2.5%|
Company forecast for FY07/22 (released March 11, 2022) calls for revenues of JPY32.5bn (+4.0% YoY), an operating loss of JPY700mn (profit of JPY701mn in FY07/21), a recurring loss of JPY700mn (profit of JPY895mn), and a net loss attributable to owners of the parent of JPY850mn (net income of JPY877mn).
Ateam had refrained from disclosing a forecast for FY07/22, citing the difficulty in calculating appropriate and reasonable earnings estimates for FINAL FANTASY VII THE FIRST SOLDIER released on November 17, 2021. The company announced its full-year forecast as above, as it has accumulated sufficient data for making reasonable earnings estimates.
In 1H, revenues and earnings from FINAL FANTASY VII THE FIRST SOLDIER were not sufficient to provide a boost to overall performance, and revenues and earnings from the newly released game app failed to offset the slump in existing game apps and some services in other businesses. In the Lifestyle Support Business, while the financial media business continued to struggle, car appraisal and purchase website Navikuru saw increases in customer acquisition and ARPU due to a rise in the number of partnering companies. The bridal-related business, which was hit the hardest by the COVID-19 pandemic, was on a recovery track. The E-Commerce Business posted higher revenues owed to strong performance of cyma, which despite Q2 being traditionally a slow period, benefited from selling price revisions implemented by bicycle model and strong sales through online marketplaces.
Profits were mainly affected by advertising expenses incurred in connection with the release of FINAL FANTASY VII THE FIRST SOLDIER.
The company expects a recovery in performance in 2H, as Q3 is a busy period for the Lifestyle Support Business and E-Commerce Business, and as it plans to roll out a series of initiatives aimed at expanding earnings from FINAL FANTASY VII THE FIRST SOLDIER in the Entertainment Business while eliminating burdens associated with temporary investment.
Commentary below was made prior to the release of the full-year company forecast. Shared Research plans to update the section after interviews with the company.
The company has refrained from disclosing full-year FY07/22 forecast, citing the difficulty in calculating reasonable figures. More specifically, the company explained that it was unable to estimate post-launch performance of FINAL FANTASY VII THE FIRST SOLDIER, a smart device app for the global market co-developed with SQUARE ENIX and launched on November 17, 2021, at the beginning of FY07/22. The company is considering providing disclosures that take into account post-launch performance around the time of its Q2 earnings announcement.
The company plans call for strengthening and expanding operations under all segments, and building out its business portfolio with the help of ongoing investments that will foster continued growth.
Along with its efforts to facilitate remote-work arrangements and a variety of different work-styles, Ateam looks to optimize its fixed costs, including right-sizing of its office space requirements. It will hold down new hiring while continuing to direct its efforts toward personnel training and improving its organizational structure and governance. The company will also continue to invest in its businesses moving forward. However, it believes that it will need to exercise patience in FY07/22 as it pursues stable proceeds through existing services and streamlines its operations to ensure that the various measures in which it invested during FY07/21 will generate growth in overall earnings.
In FY07/22, the company plans to pay a dividend of JPY16.0 per share (flat YoY).
In the Lifestyle Support Business, the company assumes that the pandemic and related mitigation measures will continue to adversely impact its business activities, but nevertheless looks to increase the number of users, revenue per user, and profit margins in its Digital Marketing Support and Platform businesses, while focusing its efforts on making reciprocal customer referrals between services and acquiring repeat customers.
In the Entertainment Business, Ateam aims for efficient management of existing game titles such as Valkyrie Connect, Unison League, and Revue Starlight -Re LIVE, while focusing on development and post-release operation of the FINAL FANTASY VII THE FIRST SOLDIER smart device app for the global market jointly developed with SQUARE ENIX (TSE1: 9684), which the company plans to release in FY07/22. Depending on when the title is released, as well as subsequent promotions and operating conditions, FINAL FANTASY VII THE FIRST SOLDIER could provide a significant boost to earnings, though the company as of September 10, 2021 believed it too soon to make a reasonable estimate in regard to potential earnings.
In addition to developing the cyma online bicycle
store, the company released the new Obremo product in August 2021 (see Medium- to long-term policy section for details). As it
continues to work to strengthen fulfillment, the company by providing new
purchasing experiences aims to establish a position for itself as an original e-commerce
service capable of generating sustainable profit over the medium- to long-term. While
there remain a number of ongoing uncertainties, including seasonal factors, the
COVID-19 pandemic, and the launch of new products, the company intends to
invest flexibly with an eye toward changing external conditions and long-term
From September 13, 2021 to January 31, 2022, Ateam plans to spend a maximum of JPY500mn to acquire treasury stock (up to 350,000 shares) through market purchases on the Tokyo Stock Exchange. This follows on from the 742,400 shares bought between March 15 and August 24, 2021, for a total acquisition cost of JPY1.2bn. The aim is to improve capital efficiency and manage capital flexibly in response to changes in the business environment. Another factor is that with a market capitalization of about JPY30.0bn at end-August 2021, the company’s enterprise value and shareholder value were lower than what it deems to be its intrinsic value. Ateam aims to boost value per share in line with its policy on shareholder returns. It will obtain the necessary funds by selling some of its investment securities.
On August 1, 2021, the company shifted to a holding company structure. Using an absorption-type company split, wholly owned subsidiaries Ateam Entertainment Inc. and Ateam Commercetech Inc. (established as split preparation companies) took over the Entertainment Business and the E-Commerce Business, respectively. The company will remain listed on the stock exchange as a holding company.
The company plans to consolidate Lifestyle Support businesses under Ateam Hikkoshi Samurai (name change planned). The automobile-related, end-of-life planning, financial media, and human resources businesses will be transferred to surviving company Ateam Hikkoshi Samurai through an absorption-type company split. The company split and absorption-type merger contracts are expected to be concluded from mid-November to December 2021 and become effective on February 1, 2022. One aim is to boost efficiency and strengthen capabilities by consolidating the Digital Marketing Support business organization inside the Lifestyle Support Business. Another is to promote growth and establish a competitive advantage by concentrating investment in DX and AI.
The company had not released a concrete medium-term management plan but it did release a medium- to long-term policy when it announced its results for FY07/19. In FY07/21, Ateam posted the third consecutive fall in operating profit amid slowing growth in the Entertainment Business and upfront spending in the Lifestyle Support Business as it develops new business areas, exacerbated by the negative impact of COVID-19. The company believes that results bottomed out in FY07/21 and expects strong earnings growth in FY07/22 (while
continuing to invest in its businesses) as previous upfront investment in a
variety of areas begins to bear fruit. It is developing multidevice products in the Entertainment Business; expanding existing services and getting new business territories up and running in the Lifestyle Support Business; and aiming to combine the best product lineup with customer service equivalent to brick-and-mortar stores in the E-Commerce business as it builds its online bicycle store.
It maintains a corporate philosophy aiming to “produce happiness through business” and to “grow for the next 100 years.” Under this philosophy, the company prioritizes management that focuses on flexibly responding to changes, such as those in market environment, and on securing sustainable medium- to long-term growth, rather than on maximizing profits just for a quarter or one year.
While maintaining its existing business core of planning, developing, and operating comparison, information, game content, and e-commerce websites that stimulate support and use by individual internet users, the company intends to test the waters in a variety of technical and business areas to create new earnings opportunities.
The company’s strategy is to aim for growth by maintaining a balance between its three business segments: the Lifestyle Support Business, which is characterized by its stability and sustainable growth, the Entertainment Business, which is expected to grow explosively, and the E-Commerce Business, a challenge the company took on to generate new sources of earnings. These three business segments have three elements in common that the company considers to be a strength: digital marketing expertise, business development strategies, and technological capability. These three elements also form the foundation of each business segment. Supported by these attributes, the company will aim for revenues of JPY100.0bn and an OPM of about 15% in the medium to long term.
In the Lifestyle Support Business, the company is developing many services that enrich the events that occur through all stages of people’s lives (employment, marriage, birth, nursing care, and funerals), while also making those lives more convenient. In FY07/20, the company classified its subsegments as the Digital Marketing Support business and the Platform business. It aims to move toward a Platform business while focusing on its Digital Marketing Support business. The company is also working to cultivate new businesses while expanding existing services. Using the successful example of the twelve “Wedding Desk” locations operated in association with wedding hall information website Hanayume, the company plans to provide services bridging the online and real worlds by making staff, call centers, and other functions available to complement its websites. For customers uneasy about planning wedding ceremonies due to COVID-19, the company is providing support by holding online bridal events. Through the Entertainment Business, the company will provide entertainment to people around the world by collaborating with other companies (using their IP) in developing titles distributed digitally in the broader global game market. The company is aiming to move away from its specialty in its original game titles for smart devices (smartphones and tablets) to cultivate global markets through the development of digitally distributed games, including computer and console games. It aims for overseas revenues to account for around 50% of total revenues (34% in FY07/21). In the E-Commerce Business, rather than limiting itself to online sales of bicycles, the company plans to actively enter the area of peripheral services for bicycles. It aims to combine the best product lineup with customer service equivalent to brick-and-mortar stores as it builds its online bicycle store. It aims for a 3% share of the domestic bicycle market in the medium to long term.
Ateam expects the Lifestyle Support Business to contribute by increasing the number of users of its websites, developing new businesses, and keeping advertising expenses in check via referrals between its websites. In the Entertainment Business, the company is focusing on new game development through collaboration with other companies and aiming for profit expansion through spending on advertising that is commensurate with the scale of revenue. The E-Commerce Business turned a profit one year ahead of plan in FY07/21 by increasing revenues and improving the efficiency of purchasing and delivery.
According to Ateam, although the Entertainment Business sees explosive growth that pulls in hefty earnings when it creates a hit game, it needs to update constantly to keep users entertained. Yet if services operated by the Lifestyle Support and E-Commerce Businesses become trusted brands, this could lead to stable, ongoing profit growth. By operating segments with such different characteristics, the company aims to balance stable earnings with robust growth. Although these segments will remain the core of its operations, Ateam hopes to generate new revenue sources by launching new businesses, with the aim of achieving sustainable growth in corporate value.
Subsegments were classified as Digital Marketing Support business and Platform business, with the goals of producing consistent profits for all four Digital Marketing Support business services (moving-related, automobile-related, bridal-related, and financial media) and expanding new business areas. The company plans to develop the Platform business into another pillar moving forward while focusing on its Digital Marketing Support business.
The company believes that the services launched through its Lifestyle Support Business are characterized by three strengths: Web promotion (expertise accumulated through experience and sheer scale), systems (the company’s systems have been developed to fit a diverse range of service fields), and synergy (the company’s customer bases for several services are expanding).
The company classifies its subsegments into the Digital Marketing Support business (online customer referral) and the Platform business, as it is working to produce new development while expanding existing services.
Yano Research Institute Ltd. forecasts that the scale of the Japanese Internet advertising market, which is a prerequisite for the company’s business domains, will grow from JPY1.7tn in 2019 to JPY2.8tn in 2023, achieving an annual growth rate of 10.9%. While focusing on the following three key points, the company will expand services in the Digital Marketing Support business, including information service related to end-of-life planning; real estate; and life, household finance, and saving services. It is gradually cultivating services that make events more rewarding at each stage of life, as well as making life more convenient overall. The company has the following thoughts regarding business development.
However, the company does sometimes develop new services in situations such as when the service in question has a small scale in the Internet advertising market but produces high customer synergy with existing businesses, or when the service has a small market growth rate but allows the company to apply its expertise.
In the Platform business, the company will accumulate data primarily submitted by its user base and use it to provide new value and solutions. Specifically, it will offer platforms through which customers and engineers can share information concerning healthcare (mainly Lalune, a health management tool for females) and engineering (primarily Qiita, a service that enables programmers to share technical information). Through the accumulation and application of user data (thereby improving its own value), the company aims to secure a market advantage moving forward.
Moving forward, the company will strengthen the Platform business further, with a focus on the Digital Marketing Support business (online customer referral). Specific examples are listed below:
The company plans to consolidate several of its Lifestyle Support business subsidiaries under subsidiary Ateam Hikkoshi Samurai in February 2022. It will integrate the user databases and view customers of individual services as group customers to build data that will flow through to the next service. The company aims to increase user count and ARPU for all businesses. However, it plans to pivot from its previous ARPU-oriented approach to an LTV-oriented one, in a bid to grow earnings. Services were standalone in the past, so email magazines were the only way to cross-sell to an individual user. The company had also been attracting customers through individual vertical media, but growth has been slowing. While it gained market share in individual media, it had not found a new business pillar. Each individual media had spot revenues but no recurring revenues. In order to shift from one-time to recurring revenue business, the company restructured the organization on the view that it needed to increase the efficiency of vertical media websites.
Plan, develop, and operate in Japan and offer services worldwide through multidevice development conducted via collaboration with other companies (utilizing their IPs)
Starting in FY07/20, the company aimed to move away from its specialization in game titles for smart devices (smartphones and tablets) to cultivate the broader global market including digitally distributed games for computers and consoles. The three keywords associated with this effort are “IP,” “Global,” and “multidevice.” This policy change was based on the following background and reasons:
Background behind policy change: According to the Newzoo Global Games Market Report, the scale of the global game market will grow from USD175.8bn as of 2021 to USD218.7bn in 2024 (CAGR of 7.5% from 2021–2024). Under these circumstances, development costs per game are rising (the company’s development costs for released games in 2018 were ten times what they were in 2012). Ten years ago the game ecosystem was divided into console, PC, and mobile games, but distinctions are blurring amid innovations in cross-platform games. Development costs can be spread out by developing a single game for multiple devices.
First reason for policy change: Collaboration and alliances with IP holders
The company’s technical capabilities have been recognized and praised thanks to its global development of a number of game apps, leading to a variety of proposals for collaboration and alliances from IP holders over the past several years.
The company also has a track record related to collaboration with IP holders concerning a variety of in-game events.
Second reason for policy change: Expertise that enables global expansion
Over the last nine years (up until FY07/20), the company has released nearly all of its game apps globally.
Ateam has assembled an internal global team from its staff, which includes members from approximately ten different countries, building a quality management system.
The company spent nine years building a system that has established a track record of offering multilingual support at a low cost.
Ateam has established partnerships with several major regional media that enable it to conduct global promotion.
The company is equipped with a multilingual customer support system and community management capabilities.
The company has put in place infrastructure to distribute directly to 155 countries around the world and is building its expertise.
Third reason for policy change: Environments and experience that enable multidevice support
Ateam has been providing apps since the era in which smartphones began take off and has the technical capabilities to offer content using a variety of technologies, including both 2D and 3D content and offline and online content.
The company has experience successfully producing games for home gaming devices, such as WiiWare, and conducting joint Japanese and North American releases of these games.
Ateam possesses human resources that have experience in a variety of areas, including consumer game production.
The company has established game development environments that enable smooth ports to PCs and home gaming devices utilizing game engines.
In addition to operating in North America and Japan, the company targets large markets such as Asia and Europe
Focus on a few game titles, channel staff, and enrich games. As of September 30, 2020, the company had three games in its development pipeline for FY07/21 and beyond. Two themes these games have in common are “IP” and “Global.” One of these games in the pipeline is a major-scale collaborative game for smartphones and the company has its eye on multidevice development for the two other games.
Aim for total annual revenues in the tens of billions of yen in global markets and for 50% of revenues from overseas.
Aims to secure 3% of domestic bicycle sales, in terms of actual bicycles, in the medium to long term. In terms of actual bicycles manufactured or imported, the domestic bicycle market had gradually declined, from 9.5mn in 2012 to 7.0mn in 2018, before recovering to 7.1mn in 2019. Amid the COVID-19 pandemic, sales grew to 7.2mn in 2020 and 12.1% YoY to 2.0mn in April–June 2020. On the other hand, manufacturing and import costs in the domestic bicycle market had expanded, from JPY113.0bn in 2012 to JPY140.0bn in 2015, before falling to JPY128.4bn in 2019, and reaching JPY130.6bn in 2020. Assuming it accounted for 50% of these manufacturing and import costs, the scale of the domestic bicycle retail market in 2019 was approximately JPY260.0bn (Source: Japan Bicycle Promotion Institute).
Through its E-Commerce Business, the company aims for revenues of JPY3.8bn (versus JPY3.6bn in FY07/21) and operating profit of JPY30mn (operating profit of JPY84mn in FY07/21) in FY07/22. Ateam had been developing an e-commerce site for bicycles for six years (up until FY07/19). The company gained expertise* facing and resolving various issues that surfaced during this period. Applying this expertise, Ateam aimed to break even in the E-Commerce Business over three years (meeting its target one year early in FY07/21) by targeting improvements in its entire supply chain (including procurement, distribution, and sales) through investment beginning in mid-FY07/21 aimed at raising the efficiency and precision of systems. After reaching this milestone, the company aims for an operating profit margin of about 5–10% over the medium term.
*In May 2019, the company reshuffled its business directors (accompanying a structure change) and began working to resolve inventory issues to raise the efficiency of product procurement, storage, and shipment. It also worked to optimize its inventory with the goal of raising operational efficiency and endeavored to cut back on slow-moving stock with the aim of improving the operation rates of its distribution warehouses. As a result of these efforts, during the three months following the structure change, the company reduced its total inventory by 44.9%, cut inventory that was stagnant for three or more months by 41.5%, and increased its inventory turnover ratio by 20.0% (comparing figures for end August 2019 and end May 2019).
Actively enter area of peripheral services for bicycles, rather than simple online sales
The company has long been interested in products not yet widely available through e-commerce. On August 30, 2021, it launched online sales of Obremo, a new human-grade dog food** produced in Japan with domestically sourced ingredients, free from synthetic additives. It is produced under a carefully selected production system (OEM at factory under contract), offering a good balance of ingredients and nutrition. People are spending more time at home with their pets during the pandemic and there are mounting needs for healthy premium dog food.
There are three choices available for small dogs (chicken, horsemeat, and venison). The type most suitable for the customer's dog will be suggested after they answer eight questions. Packages are small at 800g as they do not contain synthetic additives or preservatives. Single item sales are JPY4,900 including tax for two 800g bags. Customers can sign up for regular sales for JPY3,920 for the first and subsequent purchases.
** Dog food that uses raw materials managed under the same standards as human food. Pet food comes under the "miscellaneous goods" rather than "food" category, and commonly uses raw materials and additives that fall short of human food standards. In view of potential adverse health implications, human-grade food is becoming increasingly popular.
Ateam previously had a strong tendency to make in-house arrangements for required elements, but to realize growth in the medium to long term and increase corporate value, it has now moved to a forward-looking stance on M&A. Potential M&A targets are companies or businesses that can be expected to lead to enhanced competitiveness for its existing businesses or companies conducting a particular business that would be hard for Ateam to enter on its own or would require significant lead time. For example, for the Lifestyle Support Business this might include a business or related media that could help the company expand its share or produce synergies with existing businesses. For the Entertainment Business it might include domestic or overseas media that would help it gain or secure users. For the E-Commerce Business, it might include other domestic or overseas e-commerce products not necessarily related to bicycles.
Ateam is also actively considering venture capital investment, with two primary targets. One is any unlisted startup possessing technology or involved in a business area that is appealing in the long term, but which Ateam is hesitant to enter on its own due to its uncertain nature. The other is any unlisted startup involved in a business with the potential for significant growth by leveraging the company’s expertise. Ateam’s involvement could take the form of a simple capital investment or a business alliance.
Ateam’s three business domains are covered by the Lifestyle Support Business, the Entertainment Business, and the E-commerce Business. Having three businesses with different characteristics has enabled the company to stabilize operations while posting ongoing growth. Breakdown under the segmentation in FY07/21: Lifestyle Support (65.2% of revenues and 76.2% of operating profit), Entertainment (23.3% of revenues and 19.4% of operating profit), and E-Commerce (11.5% of revenues and 4.4% of operating profit).
In the Lifestyle Support Business, the company has two subsegments: the Digital Marketing Support business and Platform business.
In the Digital Marketing Support business, the company plans, develops, and operates comparison, information, and e-commerce sites linked to various areas of customers’ lives, such as sites related to moving, cars, and weddings. Revenue is primarily commissions for referring potential customers to client companies in those areas. The company uses in-house engineers to develop websites and apps, allowing the company to accumulate expertise in planning through operation (the source of Ateam’s competitiveness). The bulk of revenues are commissions for referring potential customers from its comparison websites to client companies (including moving companies, wedding hall operators, and used car dealers).
In the Platform business, the company provides customers a hub for information and boosts its intrinsic value by accumulating and using user data. This includes healthcare services via Lalune, a women’s health management and consultation app. This can help predict the user’s menstrual cycle and manage basal body temperature and body weight. It also has an associated community provided free of charge, over which members can discuss their problems. The main sources of revenues in this business are in-app advertisements and charges for premium member services. Another important source of revenues is supplement sales via a pregnancy supplement offering, minorie. The Platform business also operates engineering-oriented services such as Qiita, a technical information sharing service for programmers that receives revenue from community sponsors in the field of engineering, and Qiita Jobs, a job search support service for engineers, which receives recruitment fees.
In the Entertainment Business, the company used to focus on planning and developing original games and tool apps for smart devices. From FY07/21 onward, its strategy has focused on planning and development aimed at the broader global market for digitally distributed games. This entails collaborations with other companies’ IP as well as mobile phone, computer, and console games for digital distribution worldwide. This is a response to changes in the global game market and user needs and technological advances in recent years. The company has put in place infrastructure to distribute directly to 155 countries around the world and is building its expertise.
The company plans, develops, and operates game and tool apps for smart devices (current titles include RPGs such as Unison League and Valkyrie Connect and simulation games such as Derby Impact) and collects in-app purchase fees from players.
Moving forward, the company plans to wean the Entertainment Business from its dependence on smartphone games and focus on the broader global game market with smartphone games and digitally distributed computer and console games. Longer-term plans call for partnering with internationally popular IP to boost growth further.
The E-Commerce Business operates cyma (a specialist online bicycle store) and most segment revenues come from bicycle sales.
|Performance by segment||FY07/11||FY07/12||FY07/13||FY07/14||FY07/15||FY07/16||FY07/17||FY07/18||FY07/19||FY07/20||FY07/21|
|% of revenues||61%||51%||60%||51%||50%||55%||100%||100%||100%||100%||100%|
|% of operating profit||80%||68%||75%||64%||60%||61%||100%||100%||100%||100%||100%|
|Number of employees||261||300||446||541||530||583||718||955||1,115||1,165||1,155|
|Revenue per employee||17||23||29||24||30||41||53||45||36||28||27|
|Operating profit per employee||2||4||5||3||4||4||6||6||3||1||1|
Ateam has continued to enjoy robust earnings despite a variety of external changes impacting markets. One reason is that its Lifestyle Support, Entertainment, and E-Commerce Businesses have very different characteristics.
Ateam views the Lifestyle Support Business as a business that achieves both stability and continuous growth.
The Entertainment Business is subject to impact from volatility in the game business, which fluctuates between good performance to poor performance. However, the company can expect explosive growth in this business when its games become hits.
The company views its E-Commerce Business as an opportunity for creating new sources of revenue.
The company has made what it believes to be its three primary strengths (digital marketing expertise, business development capabilities, and technical capabilities) the foundation of its three businesses.
According to the company, its history can be roughly divided into three phases.
In its early years, the company expanded by being contracted to develop official feature phone sites. Takao Hayashi, currently the president of Ateam, started the company as a sole proprietorship in June 1997 by doing contracted software development, mainly for corporate systems. However, in February 2000 after receiving a contract from Nihon Enterprise Co., Ltd. (TSE1: 4829) to develop an official app for feature phones, the company started to mainly do contracted development for Nihon Enterprise.
During the second phase, aiming to break out of contracted development, Ateam accelerated development of its own products. It grew revenues by developing official sites for feature phones, but conditions remained difficult in the subcontracting business, so it began developing its own mobile games for feature phones in summer 2003. In December 2003, it released its first game developed in-house, a romance simulation game for feature phones of KDDI Corporation (au). It also developed and began selling a tool to easily create feature phone official sites, and turned its focus to developing its own products.
It expanded product lineup, including ringtones and wallpapers, and focused on growing the Entertainment Business, with feature phone official sites still at its core. In September 2006, it released Japan’s first feature phone MMORPG.* The advantages the company gained by being the first on the scene with such a game led to the segment being strong in feature phone MMORPGs.
*MMORPG stands for massively multiplayer online role-playing game, where many users can interact in real time. In the mid-2000s, there were MMORPGs for PCs, but the development of such games for feature phones was considered too difficult. Nevertheless, Ateam eventually developed a MMORPG for feature phones using the techniques and experience it had accumulated building feature phone official sites.
In the third phase Ateam expanded into the Lifestyle Support Business and started to shift toward smartphone-related development. In June 2006, taking a hint from popular hotel comparison websites, the company launched a website to compare and estimate moving prices, one of the current major services of the Lifestyle Support Business. The segment went on to introduce a variety of services: automobile-related (used car appraisal comparison website), bridal-related (short-notice wedding hall search, reservation, and information website), and financial media (cashing and card loan comparison website).
The Entertainment Business, which had been enjoying revenue growth from its core feature phone official sites, saw a slowdown in revenue growth around 2008 with the arrival of smart devices, so the company began a full-fledged shift from feature phones toward development for smart devices (smartphones and tablets). From around 2009 the social game market promoted by companies like GREE Inc. (TSE1: 3632), DeNA Co., Ltd. (TSE1: 2432), and mixi (TSE Mothers: 2021) was also expanding. For these reasons, Ateam decided to shift software development away from feature phone official sites toward games for smart devices and social games for platforms of GREE Inc., DeNA Co., Ltd., and mixi.
Through 2012 the company released over 100 social games, but most were unable to maintain momentum past their initial release. Ateam finally created a hit in 2011 with AKB48 Stage Fighter, an RPG developed through a capital tie-up with GREE Inc. and leveraging Ateam’s technical ability. In contrast to feature phones, smart devices use standard global platforms, so the Entertainment Business began focusing on developing games with a potential for global development, especially targeting the US market. Global game Dark Summoner was released in February 2012 and became a top grossing app in Japan and abroad.
Operating profit declined for three years in a row from FY07/19 to FY07/21 as the company invested upfront in developing new businesses and suffered the adverse impact of the COVID-19 pandemic.
The company announced that it would divide its Lifestyle Support Business into two subsegments in FY07/20: the Digital Marketing Support business and the Platform business. It also announced its intention to develop the Platform business into another pillar, with a focus still on the Digital Marketing Support business. In the Entertainment Business, starting in FY07/20, the company aims to move away from its specialization in game titles for smart devices (smartphones and tablets) and cultivate global markets through development of game titles for consoles (home gaming consoles), PCs, and other digitally distributed games. In the E-Commerce Business, the company has been developing an e-commerce site for bicycles over the past eight years (up until FY07/21). The company gained expertise facing and resolving various issues that surfaced during this period, and posted an operating profit in FY07/21, one year ahead of plan.
The company expects strong earnings growth in FY07/22 (while continuing to invest in its businesses) as previous upfront investment in a variety of areas begins to bear fruit.
Ateam’s president, Takao Hayashi, has been a game software development enthusiast since elementary school and has accumulated much experience. He ran a cram school and had various part-time jobs before founding Ateam. He gained experience operating official feature phone sites and learned about the difficulties of launching social games. It was these experiences that helped him take a user-driven development approach, while still emphasizing engineer-driven development.
Compared to game companies that tend to rely on a limited number of hit game titles, Ateam books stable revenues from many games in the Entertainment Business. As it aims to bring its games overseas, the company has a development team with international members and can produce hit games that combine the in-game atmosphere, language, visuals of games popular overseas with elements of games popular in Japan.
In the Lifestyle Support Business, the company directs potential customers through its websites to client companies and provides these client companies with feedback from periodic user surveys. Although Ateam is an IT company, it does not rely solely on technology, but also on staff to help build relationships with client companies, which gives it a competitive edge. The moving-related business (operating Hikkoshi Samurai) asks website users to complete surveys about a moving company’s services (satisfaction on price and service quality). Two- or three-months’ worth of surveys are consolidated and provided to client moving companies. Ateam also asks its clients to complete questionnaires about the service provided by its salespeople and uses the results to help improve service quality. According to the company, the bridal-related business has a similar process. In the moving-related and automobile-related businesses, Ateam’s salespeople regularly visit clients (moving companies and used car dealers).
Ateam uses models that have proven successful when expanding into new areas. For example, in September 2006 it launched Japan’s first domestic feature phone MMORPG, Eternal Zone. This game, which had been a popular PC game, gained popularity as a feature phone game.* Dark Summoner, which continues to be popular in Japan and overseas years after its release, incorporates dark fantasy elements of popular games in the US. In the Lifestyle Support Business, the moving-related business took hints from successful hotel reservation sites when launching Hikkoshi Samurai.
Details have not been released, but sales in the financial media business have exceeded sales of the bridal-related, automobile-related, and moving-related businesses to make it the largest item in Lifestyle Support (Shared Research estimate based on graphs supplied by company). Ateam believes this success is thanks to its experience with search engine marketing (SEM*) and search engine optimization (SEO**) gained by operating multiple services including Hikkoshi Samurai.
*SEM (search engine marketing): Marketing leveraging search engines such as using product listing ads and SEO
**SEO (search engine optimization): Measures to optimize a website’s information and structure to improve usability and increase visibility on search engines.
Ateam says its engineers involved in SEM always conduct SEM from the perspective of management. Engineers participate from the planning stage, communicating with those in charge of sales, design, and business planning and with the management team as they analyze user trends. Each engineer actively conducts development and operation.
AKB48 Stage Fighter, a game the company developed in cooperation with GREE Inc., was successful because it combined the popular idol group AKB48 and the popular card battle game format. The company continues to develop new products that use this strategy of combining popular elements, while adding its own features.
In the early 2000s, Ateam operated about 400 official feature phone sites. According to the company, most of these were popular, but this had less to do with the company’s technique and more with the fact that they rode on the wave of trends. Making use of the experience of operating official feature phone sites in its later expansion, the company always honored two principles: “applying successful models to other areas” and “combining success with success.” According to the company, it is not uncommon for companies to forget these two simple strategies and overemphasize their own preferences as they grow. Ateam is able to differentiate itself from its competition by keeping to these principles.
Ateam has established 12 “Wedding Desk” locations* (consultation counters) operating in association with wedding hall information website Hanayume, using a hybrid business model combining online presence and physical stores. In this way, the company has been able to get its foot in the door of the wedding industry, which had essentially been an oligopoly.
It is gaining the trust of business partners and a high degree of satisfaction from users by clarifying target user attributes for each service and offering services that are readily selectable and easy to use for both partners and users, while conducting thorough, uniform management of customers by coordinating online services with physical stores. In addition to in-store customer support, the company offers it online, via LINE, and over the phone.
According to the company, if it only used an online strategy it would risk startups nipping at its heels. Accepting the risks associated with investing in physical stores and developing offline services have allowed Ateam to establish a business model that is harder for startups to imitate.
*Four stores in the Kanto region (in Ginza; west and east exits of Shinjuku Station; and in Yokohama), two stores in the Tokai region (at Mei Station Midland Square and in the AEON Mall Hamamatsu-Ichino), four stores in the Kansai region (in Links Umeda; in Shinsaibashi; in Sannomiya, Kobe; and in Kyoto), and one store in Kyushu (in the Hakata Marui department store)
Ongoing hiring, especially of software developers, is key to Ateam’s growth. However, the company struggled to secure enough staff, in part because its head office is located in Nagoya. In response, it established an Osaka office in September 2012 and a Tokyo office in September 2015 as satellite development sites. The company also established a subsidiary Ateam Vietnam Co., Ltd. in Vietnam in December 2016 and opened its Fukuoka office in February 2018.
The company started having employees work from home in stages from February 2020 as the COVID-19 pandemic took hold, and as of end-August 2020, roughly 85% were doing so. The company has decided to continue these arrangements as there are no barriers to business operations compared to working at the office, and it would like to support flexible work-styles among its employees.
In light of this situation, the company decided to terminate the leases for part of its Osaka office and its Fukuoka office in FY07/21 in order to streamline its operating structure and reduce fixed costs.