i-mobile 6535
アイモバイル
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2022-04-04
2022-03-10
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N 2F N.E.S. Building, 22-14 Sakuragaokacho, Shibuya-ku Tokyo 150-0031
Summary
i-mobile Co., Ltd. has two main business segments—Online Advertising and Consumer Service. i-mobile aims to be a company that can contribute to people’s lives through marketing, and operates a hometown tax donation business (Consumer Service business), ad platform business (Online Advertising business), and media solution business (Online Advertising business).
Interactive Media & Services
Key dates
2019-03-15
Coverage initiation
Executive summary
Business overview
Business: i-mobile Co., Ltd. has two main business segments—Online Advertising and Consumer Service. i-mobile aims to be a company that can continue creating businesses that contribute to people’s futures by providing valuable experiences through marketing, and operates a hometown tax donation (Furunavi) business (Consumer Service business), ad platform business (Online Advertising business), and app operation business (Online Advertising business). In FY07/21, the company recorded revenue of JPY17.8bn (+19.7% YoY) and operating profit of JPY3.4bn (+50.6% YoY).
Consumer Service segment (39.2% of total revenue; 58.0% of total operating profit in FY07/21): The segment consists largely of the company’s hometown tax donation* business, which operates the hometown tax donation portal site “Furunavi.” Whenever a site user makes a tax payment (essentially a donation) to one of the 841 municipalities registered with Furunavi (as of end-January 2022), i-mobile receives a commission from the local government receiving the donation. The company also operates a range of services for Furunavi members including a travel business, a restaurant PR business, and a point service business.
Revenue structure of Furunavi business: Donors donate to local government bodies via the company’s “Furunavi” website and, based on the amount donated, the company receives a commission from the local government receiving the donation. The operating profit margin at the Furunavi business is high. Variable costs (largely linked to revenue) include sales promotion expenses for Furunavi Coin, which can be exchanged for Amazon gift certificates rewards, PayPay balance, d-points, and other third-party digital payment options, as well as advertising expenses for online ads. Fixed costs consist of advertising expenses for TV commercials to increase public awareness of the Furunavi website and the hometown tax donation system. Under the hometown tax donation system, donors can receive an income tax deduction for the current calendar year (January 1–December 31), and residence tax credits for the following calendar year. The Furunavi business is seasonal. The number of donors tends to increase in December, which is the donation deadline for each fiscal year. As a result, the company’s revenue in Q2 (November to January of the following year) tend to be relatively high, while revenue in other periods tend to be relatively small.
Hometown tax market size: According to the “Results of the Survey on the Current Status of Furusato Tax Donation System (July 30, 2021)” released by the Municipal Tax Policy Division of the Local Tax Bureau, the amount of donations received for hometown tax in FY2020 was JPY672.5bn (about 1.4x the figure in FY2019), and the number of donations received was 35mn (about 1.5x as much as in FY2019). The amount of the resident tax credit was JPY431.4bn (about 1.2x higher than in FY2019), and the number of people eligible for the credit was 5.5mn (about 1.3x higher than in FY2019). The company attributes the growth in new middle-class users to an increase in the amount of time spent on the Internet resulting from an increase in telecommuting and refraining from going out due to the COVID-19 crisis, as well as taxpayers’ desire to save money.
Online Advertising segment (60.8% of total revenue; 40.2% of total operating profit in FY07/21): The Online Advertising segment includes the company’s ad platform business, media solutions business, ad agency business, and app operation business. The ad platform business consists of an ad network business and an affiliate business (payment-by-result ads). At its media solutions business, the company acts in the capacity of a Google Certified Publishing Partner to help client companies improve their media earnings over the long term with products provided by Google. The ad agency business conducted by subsidiary Cyber Consultant provides online ad agency services and digital solutions. As for i-mobile’s app operation business, Ohte and other subsidiaries run various apps such as puzzle game apps as the company’s proprietary media.
Revenue structure of the Online Advertising segment: As of Q1 FY07/22 (after the application of the Accounting Standard for Revenue Recognition described below), the app operations and media solutions businesses accounted for around 60% of Online Advertising business revenue. Revenue in the app operation business can be explained as MAU (monthly active users) x ARPU (advertising revenue per user). The promotion costs of the Online Advertising business are mainly invested in the acquisition of users for the app operation business. In the media solutions business, revenue tends to increase as the number of installed accounts builds up.
Application of the new accounting standard for revenue recognition: The company adopted a new accounting standard for revenue recognition from FY07/22. As a result of this change, some of the company’s revenue will be recorded on a net basis rather than a gross basis (i.e., revenue will be equivalent to gross profit), which will have an apparent negative impact on revenue. If the new revenue recognition standard had been applied in FY07/21, consolidated revenue would have been JPY11.6 billion (JPY17.8bn under the old standard), revenue in the Consumer Service business would have been JPY7.7bn (JPY7.8bn), revenue in the Online Advertising business would have been JPY3.9bn (JPY12.2bn), and the OPM in the Online Advertising business would have been 36.9% (11.7%).
Earnings trends
FY07/21 results: For FY07/21, the company reported full-year consolidated revenue of JPY17.8bn (+19.7% YoY), gross profit of JPY11.6bn (+59.6% YoY), operating profit of JPY3.4bn (+50.6% YoY), recurring profit of JPY3.4bn (+49.8% YoY), and net income attributable to owners of the parent of JPY2.3bn (+33.1% YoY). Compared with the company’s revised full-year forecast issued April 20, 2021, consolidated revenue finished 5.3% ahead of expectations, while gross profit came in 5.5% above plan, operating profit 12.7% above plan, recurring profit 15.9% above plan, and net income18.1% above plan. By segment, Consumer Service reported a 71.9% increase in revenue and 48.0% rise in segment operating profit; Online Advertising logged a 6.1% increase in revenue and a 63.9% rise in segment operating profit. Both the Consumer Service business and the Online Advertising business have exceeded the April 2021 forecast.
FY07/22 forecast (reflects impact from the change in accounting standard for revenue recognition): For FY07/22, the company projects full-year consolidated revenue of JPY14.3bn (+23.1% YoY after retroactively applying the revised accounting standard to FY07/21 results; same below), operating profit of JPY3.8bn (+10.9% YoY), recurring profit of JPY3.7bn (+10.3% YoY), net income attributable to owners of the parent of JPY2.5bn (+8.9% YoY), and EPS of JPY116.49. In keeping with its shareholder return policy, the company plans to pay a regular, year-end dividend of JPY35.0 per share, equivalent to a dividend payout ratio of 30%, for FY07/22. By segment, for Consumer Service the company projects full-year revenue of JPY10.1bn (+31.1% YoY) and segment operating profit of JPY2.4bn (+21.5% YoY); key assumptions here include an operating profit margin of 23.7% (-1.9pp YoY) and 900 municipal governments registered with its hometown tax donation service by the end of FY07/22. For Online Advertising, the company projects full-year revenue of JPY4.2bn (+6.6% YoY) and segment operating profit of JPY1.4bn (-1.0% YoY), assuming an operating profit margin of 34.4% (-2.5pp YoY).
Medium-term business plan (FY07/22–FY07/24): Along with its FY07/21 results announcement on September 8, 2021, the company unveiled its new medium-term business plan for the years FY07/22 through FY07/24. Under the new plan, the company targets FY07/24 consolidated revenue of JPY16.0bn, operating profit of JPY4.5bn (representing an operating profit margin of 28.1%), and net income attributable to owners of the parent of JPY3.0bn. These target figures for FY07/24 represent CAGR of 11.4% for revenue, 10.0% for operating profit, and 9.4% for net income—note that CAGRs, including those for segments below, are calculated after adjusting FY07/21 figures for the change in revenue recognition standard. The company also targets an annual dividend payment of JPY42 per share, based on a dividend payout ratio of 30% or dividend on equity ratio of 5%, on projected EPS of JPY140 for FY07/24. For the Consumer Service segment, i-mobile targets FY07/24 revenue of JPY11.3bn and segment operating profit of JPY2.8bn (representing an operating profit margin of 25.0%); these target figures for the segment represent CAGR of 13.7% for revenue and 12.7% for operating profit. For the Online Advertising segment, the new medium-term plan targets FY07/24 revenue of JPY4.7bn and segment operating profit of JPY1.8bn (representing an operating profit margin of 37.3%); these target figures for the segment represent CAGR of 6.4% for revenue and 6.8% for operating profit.
Strengths and weaknesses
Shared Research thinks i-mobile’s strengths are: (1) Brand recognition of the Furunavi hometown tax donation portal site among municipalities and taxpayers, (2) Furunavi’s large membership largely stemming from a tendency of taxpayers to remain with the same service allow it to remain competitive in the hometown tax donation business, and (3) a solid business foundation enables it to propose ads to both media and clients (advertisers) at the Online Advertising segment; its proprietary online advertising technology and marketing expertise developed at the Online Advertising segment can also be utilized at its app operation and hometown tax donation businesses.
We see its weaknesses as: (1) The company’s profit structure being easily affected by changes in tax systems and regulations since the hometown tax donation business accounts for a high percentage of operating profit, (2) the existence of competitors with a higher share in the hometown tax donation business than i-mobile, and (3) the limitation of the necessity of avoiding competition with major media platforms in the Online Advertising segment.
Key financial data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Figures may differ from company materials due to differences in rounding methods.
Recent updates
Acquisition and cancellation of treasury shares
On April 26, 2022, i-mobile Co., Ltd. announced acquisition and cancellation of treasury shares.
Acquisition details
The company's planned acquisition of treasury shares will cause increases in the ownership ratios of two major shareholders, Chairman Toshihiko Tanaka and Representative Director and President Tetsuya Noguchi. To reduce this impact, the company plans to conduct an additional purchase of treasury shares from these two shareholders through ToSTNeT-3).
Cancellation details
Trends and outlook
Quarterly trends and results
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Figures may differ from company materials due to differences in rounding methods.
1H FY07/22 results
For 1H FY07/22, i-mobile reported consolidated revenue of JPY10.2bn (+28.5% YoY), operating profit of JPY3.3bn (+26.8% YoY), recurring profit of JPY3.3bn (+29.0% YoY), and net income attributable to owners of the parent of JPY2.3bn (+33.4% YoY). Versus plan, 1H consolidated revenue was 0.4% short of the company's target but operating profit still came in 28.0% above plan thanks to below-plan spending on promotion and advertising. Operating profit margin of 32.2% was down 0.4pp YoY. (Note: All YoY comparisons have calculated after retroactively applying the new accounting standard for revenue recognition, which the company adopted in FY07/22, to FY07/21 results.)
Consumer Service business: 1H segment revenue of JPY8.0bn was up 30.2% YoY; segment profit of JPY2.5nn was up 23.6% YoY. Versus plan, segment revenue was 2.6% below plan but segment profit 26.1% above plan. Consumer promotional spending rose 35.3% YoY to JPY5.1bn. With cost-effectiveness in mind, the company decided not to carry out as many promotions in December as it had initially projected as it had already largely reached its revenue target. Segment operating profit margin slipped to 31.0%, down 1.6pp YoY.
Online Advertising business: 1H segment revenue of JPY2.1bn was up 22.1 YoY; segment profit of JPY837mn was up 44.3% YoY. Versus plan, segment revenue was 8.6% above plan and segment profit 43.7% above plan. Revenue came in above plan in the media solution and ad platform businesses. Online advertising promotional costs fell 34.6% YoY to JPY292mn. Advertising and promotion costs came in below plan as the company implemented measures to prevent promotion effectiveness from deteriorating. With revenue coming in above plan and promotion costs under control, segment operating profit also came in above plan, lifting segment operating profit margin by 6.0pp YoY to 39.0%.
Full-year forecast for FY07/22: The company made no changes to its initial full-year forecast, 1H results having left it with 71.2% of its full-year target for revenue, 87.1% of its full-year target for operating profit, 89.7% of its full-year target for recurring profit, and 90.5% of its full-year target for net income attributable to owners of the parent. The hometown tax donation deadline of December 31 makes the company's Q2 (November–January) busiest time of year for the Consumer Service business. Although the company made strong progress against profit targets, it noted that it had not reached a level requiring a forecast revision as defined by the TSE at the time of Q2 results announcement. For further details on the company’s estimates and the assumptions underlying for FY07/22 forecast, see discussion under the “Company forecast” section.
Results by segment
Consumer Service business
In 1H FY07/22, the Consumer Service business reported revenue of JPY8.0bn (+30.2% YoY) and segment operating profit of JPY2.5bn (+23.6% YoY). Versus plan, segment revenue was 2.6% below plan, but segment profit was 26.1% above plan. Consumer promotional spending rose 35.3% YoY to JPY5.1bn. With cost-effectiveness in mind, the company decided not to carry out as many promotions in December as it had initially projected as it had already largely reached its revenue target. Segment operating profit margin slipped to 31.0%, down 1.6pp YoY.
The number of donations in Q2 (November 2021–January 2022) was up 8.7% YoY. The average donation amount rose YoY. This was mainly attributable to contributions from experience-based gifts (such as coupons and points that can be used at lodging facilities and restaurants in the municipalities receiving the donation), aided by 4x YoY increase in the number of partner lodging facilities to a total of 840 facilities. As of end-Q2 FY07/22, the company had more than 1.5mn Furunavi members and 841 registered municipalities (versus fiscal year-end target of 900). The company assumes the market grew by 20–25% and its overall market share increased slightly, although market share varies by municipality. The company says it will continue to develop its unique gifts and that it will actively carry out promotions while the market is expanding rapidly.
Online Advertising business
For 1H FY07/22, the Online Advertising business reported revenue of JPY2.1bn (+22.1% YoY) and segment profit of JPY837bn (+44.3% YoY). Versus plan, segment revenue was 8.6% above plan, and segment profit was 43.7% above plan. Revenue came in above plan in the media solution and ad platform businesses. Online advertising promotional spending fell 34.6% YoY to JPY292mn. Advertising and promotion costs came in below plan as the company implemented measures to prevent promotion effectiveness from deteriorating in the app operation business. With revenue coming in above plan and promotion costs kept under control in the app operation business, segment operating profit also came in above plan, lifting segment operating profit margin by 6.0pp YoY to 39.0%.
In Q2 (November 2021–January 2022), the app operation business saw a drop in the number of monthly active users (MAU). The company thinks this is because more users had opportunities to go out as the COVID-19 pandemic temporarily settled. Meanwhile, the company still managed to keep its customer Lifetime Value (LTV) numbers steady at high levels thanks to rising eCPM (ad rates). There has been no change in the company's stance of actively expanding the business overseas, and it has continued to develop new titles and polish apps released on a trial basis.
In the media solution business, the number of accounts that installed products for publishers in Q2 was up 13% YoY. The app operation business and the media solution business are both considered strategic growth areas by the company, and together accounted for roughly 60% of the revenue in the Online Advertising business in Q2.
The ad platform business (ad network and affiliate businesses) saw higher revenue and profit in Q2. The company attributed the gains to large, ongoing projects from existing customers, noting that its sales and marketing efforts toward new customers were hampered by new rounds of COVID-19 infections that led to more people working from home.
Q2 revenue in the Online Advertising business was largely flat from Q1. On the other hand, segment profit in Q2 came to JPY390mn, down from JPY447mn in Q1. The company noted that profit margins fell due to an increase in the revenue mix of video ads, which are expensive to deliver, and implementation of more promotions in the app operation business compared to Q1. The company also noted that it has already begun measures to curb video ad delivery costs.
Impact of the adoption of Accounting Standard for Revenue Recognition
In FY07/22, the company started using the new accounting standard for revenue recognition. As a result, some revenue previously recognized on a gross basis will now be recognized on a net basis (the net amount being equivalent to the amount previously booked as gross profit on these revenue). As this change will give the appearance of lowering revenue but have no impact on operating profit, on the surface the operating profit margin will appear to be rising. The impact from this change in revenue recognition standard will mainly affect the Online Advertising segment, as some of the revenue previously reported on a gross basis by its ad platform, ad agency, and media solutions businesses will be reported on a net basis.
Company forecast for FY07/22 (see note regarding change in accounting standards)
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Figures may differ from company materials due to differences in rounding methods.
Supplementary information accompanying 1H results announcement (March 9, 2022)
The company made no changes to its initial full-year forecast, with consolidated results for 1H having left it with 71.2% of its full-year target for revenue, 87.1% for operating profit, 89.7% for recurring profit, and 90.5% for net income attributable to owners of the parent. The hometown tax donation deadline of December 31 makes the company's Q2 (November–January) the busiest time of year for the Consumer Service business. Although the company made strong progress against profit targets, it noted that it had not reached a level requiring a forecast revision as defined by the TSE at the time of Q2 results announcement.
In the app operation business under the Online Advertising business, the company expects it will be difficult to surpass YoY growth rates for MAU as MAU figure was elevated in Q3 and Q4 FY07/21 as people refrained from going out due to the pandemic. The company mentioned that it expects revenue growth from higher eCPM (ad rates).
Supplementary information accompanying Q1 results announcement (December 8, 2021)
The company left its initial forecast unchanged. Progress rate versus full-year FY07/22 company forecast was 17.8% for revenue, 23.2% for operating profit, 25.1% for recurring profit, and 25.0% for net income attributable to owners of the parent. As the deadline for hometown tax donation is at the end of December, Q2 is usually a very busy period for its Consumer Service business.
The company's specific policy on shareholder returns is to "aim for total shareholder returns based on stable and continuous dividend payments with a target payout ratio of 30% and a dividend on equity (DOE) ratio of 5%, as well as the flexibility to repurchase shares as appropriate." Based on its ROE track record, the company has added DOE of 5% as a criterion for its existing policy.
Initial company forecast for FY07/22 (September 8, 2021)
For FY07/22, the company forecasts full-year consolidated revenue of JPY14.3bn (+23.1% YoY after retroactively applying the new revenue recognition standard to FY07/21 results), operating profit of JPY3.8bn (+10.9% YoY), recurring profit of JPY3.7bn (+10.3% YoY), net income attributable to owners of the parent of JPY2.5bn (+8.9% YoY), and EPS of JPY116.49. In keeping with its policy of targeting a dividend payout ratio of 30%, the company plans to pay a regular, year-end dividend of JPY35.0 per share for FY07/22.
Impact of adopting the new accounting standard for revenue recognition
With the company’s move to the new accounting standard for revenue recognition in FY07/22, some revenue previously recognized on a gross basis will instead be recognized on a net basis (the net amount being equal to the amount previously booked as gross profit on these revenue). As this change will give the appearance of reducing revenue but have no impact on operating profit, on the surface the operating profit margin will appear to be rising. The impact from this change in revenue recognition standard will show up mainly in the figures reported for the Online Advertising segment, as some of the revenue previously reported by its ad platform business, ad agency business, and media solutions business will change from being reported on a gross basis to a net basis.
By way of example, the company said that the JPY17.8bn in consolidated revenue reported for FY07/21 under the old revenue recognition standards would come down to JPY11.6bn under the new revenue recognition standards. At the individual segment level, the revenue reported by the Consumer Service segment for FY07/21 would come down to JPY7.7bn versus JPY7.8 under the old standards. The revenue reported by the Online Advertising segment for FY07/21 would come down to JPY3.9bn versus JPY12.2bn under the old standard, but the Online Advertising segment would show an operating profit margin of 36.9% versus 11.7% under the old standard.
Breakdown of company forecast for FY07/22 by segment
Consumer Service segment
For the Consumer Service segment, the company projects full-year revenue of JPY10.1bn (+31.1% YoY, after retroactively applying the new revenue recognition standard to FY07/21 results) and segment operating profit of JPY2.4bn (+21.5% YoY); key assumptions include an operating profit margin of 23.7% (-1.9pp YoY) and 900 municipal governments registered with its hometown tax donation service by the end of FY07/22.
In FY07/22, the company aims to increase its market share by aggressively investing in marketing to attract new users and improve the usage rate of existing users. As for the market growth rate, the company thinks 2020 enjoyed the tailwind effect of the expansion of middle-class users due to the increase in internet contact time resulting from the increase in telecommuting and refraining from going out due to the COVID-19 pandemic, as well as increased taxpayers’ interest in saving money. The company also assumes that the market growth rate will continue at the same level in 2021. The company expects to increase TV commercial expenses (included in advertising expenses) from FY07/21, but the specific scale is not disclosed.
Online Advertising Service segment
For the Online Advertising Service segment, the company projects full-year revenue of JPY4.2bn (+6.0% YoY, after retroactively applying the new revenue recognition standard to FY07/21 results) and segment operating profit of JPY1.4bn (-1.0% YoY), assuming an operating profit margin of 34.4% (-2.5pp YoY).
In the ad platforms business, the company expects the market environment to remain challenging. Despite the strong performance in Q3 and Q4 FY07/21, the company does not expect this momentum to be sustained and has conservative projections. In addition, amendments to the Pharmaceuticals and Medical Devices Act came into effect in August 2021. The company's advertising regulations have also been adjusted to comply with the revisions to the Act. The revision is expected to reduce advertising efficiency in some client industries, resulting in a decrease in ad placements, and the company expects its ad platform business to be partially affected. This impact has, however, been reflected in the initial plan. The company also stated that its app operation business would not be affected by the revision of the Pharmaceuticals and Medical Devices Act.
The company expects to make investments in Ohte (app operation business).
Medium-term business plan (FY07/22–FY07/24)
Along with its FY07/21 results announcement on September 8, 2021, i-mobile unveiled its new medium-term business plan for the years FY07/22 through FY07/24, as outlined below. Under the new medium-term plan, the company intends to focus its efforts on creating a stable revenue and earnings stream at its ad platform business while strengthening the growth businesses of its hometown tax donation service and app operations business. The company will use its assets to grow its businesses with the aim of sustaining growth over the medium to long term.
Positioning of each domain
Strategic investment areas: Capturing cultivated businesses through M&A, etc., and monetizing Furunavi peripheral businesses
Growth areas to be strengthened: Hometown tax donation business (Furunavi), media domain such as Ohte, media solutions business
Mature areas: Aim for stable earnings in the ad platform business
Stance on M&A
The company cited (1) growth potential and (2) high user engagement as conditions for potential M&A targets. As long as these conditions are met, any industry can be an investment target, the company says. Ohte and Simple App Studio Inc., a weight management application operator that the company has already announced it would make a wholly owned subsidiary, meet these conditions. For example, Simple App Studio’s app, which requires users to measure and record their weight every day, is a service with high user engagement.
New medium-term business plan (FY07/22–FY07/24)
Consolidated earnings targets
The company targets FY07/24 consolidated revenue of JPY16.0bn, operating profit of JPY4.5bn (representing an operating profit margin of 28.1%), and net income attributable to owners of the parent of JPY3.0bn. These target figures for FY07/24 represent CAGR of 11.4% for revenue, 10.0% for operating profit, and 9.4% of net income. Note that since the company has adopted the new accounting standard for revenue recognition from FY07/22, the CAGRs indicated for its target figures for FY07/24, including those for segment targets below, have been calculated after adjusting FY07/21 figures to the same accounting basis. The company targets an annual dividend payment of JPY42 per share, based on a dividend payout ratio of 30% or dividend on equity ratio of 5%, on projected EPS of JPY140 for FY07/24.
Revenue growth is expected to be highest in FY07/22 (+23.1% YoY), followed by FY07/23 (+7.2% YoY) and FY07/24 (+4.9% YoY). This is largely due to the growth rate of the Consumer Service business described below.
The company expects the OPM to decline 2.9pp YoY to 26.3% in FY07/22, but expects it to rise to 27.5% in FY07/23 and 28.0% in FY07/24. The decline in FY07/22 will be largely due to the Consumer Service business, while the rise in FY07/23 will be largely due to the Online Advertising business.
Note: Figures may differ from company materials due to differences in rounding methods.
Notes: Figures may differ from company materials due to differences in rounding methods.
Transaction volume equals revenue under the previous revenue recognition standard.
Consumer Service
For the Consumer Service segment, the company targets FY07/24 revenue of JPY11.3bn and segment operating profit of JPY2.8bn (representing an operating profit margin of 25.0%). These target figures for FY07/24 represent CAGR of 13.7% for revenue and 12.7% for operating profit.
Revenue growth is expected to be highest in FY07/22 (+31.1% YoY), with 5.8% YoY growth expected in FY07/23 and 5.9% YoY growth in FY07/24. Although the company expects the market size (total amount of donations received) of hometown tax donation to grow at an annual rate of 10% or more in the near term, it has made conservative assumptions about the growth rate of the market from FY07/23 in this medium-term business plan. In addition, the company assumes that the increase in the market growth rate will gradually slow down as the broadening of the user base means a decrease in the amount of donations per person. The company also took into account the risk of downward pressure on take rates in the medium to long term due to changes in the external environment.
The company expects the OPM to decline 1.9pp YoY to 23.7% in FY07/22, when it plans to invest proactively in marketing. The OPM is forecast to rise, however, to 24.1% in FY07/23 and 25.0% in FY07/24.
Online Advertising
For the Online Advertising segment, the company targets FY07/24 revenue of JPY4.7bn and segment operating profit of JPY1.8bn (representing an operating profit margin of 37.3%). These target figures for FY07/24 represent CAGR of 6.4% for revenue and 6.8% for operating profit.
Revenue growth is expected to be 6.0% YoY in FY07/22, 10.4% YoY in FY07/23, and 2.8% YoY in FY07/24. In FY07/23, the company aims to increase overseas revenue and accelerate domestic revenue growth supported by the results of marketing investments related to Ohte, which are expected in FY07/22. The company assumes that the OPM will decrease 2.5pp YoY to 34.4% in FY07/22—when Ohte plans to invest proactively in marketing—but that it will rise to 37.0% in FY07/23 and 37.3% in FY07/24.
From FY07/22 onward, due to the application of the new revenue recognition standard, revenue after the application of the new standard will be the amount equivalent to gross profit on revenue under the old standard. This means that there will no longer be continuity with revenue under the old standard.
Capital and shareholder returns policies
Capital policy: While securing the internal reserves necessary for future business development and strengthening of the financial position, the company aims to maximize shareholder returns by raising the return on equity (ROE) through direct profit distribution and by realizing a total return on equity. This includes an increase in the share price through sustainable business growth.
Shareholder returns policy: The company thinks the hometown tax donation system has stabilized thanks to increased awareness and legal amendments. Considering that uncertainty in the hometown tax donation business has declined and the business has entered a period of stable growth, the company has determined that the conditions have been met for the implementation of a shareholder return program. In addition to stable and sustainable dividend payments with a target payout ratio of 30% and a dividend on equity (DOE) ratio of 5%, the company will flexibly conduct share buybacks to provide total shareholder returns.
Sustainability initiatives
The company has formulated a basic sustainability policy in conjunction with this medium-term management plan. In order to realize the group's vision of “Continuing to create businesses that contribute to the future of people,” the company will work to solve social issues through its business and other corporate activities, and will aim to continuously improve its enterprise value as an attractive company for all stakeholders.
Revenue from the hometown tax donation business, one of the company’s core businesses and the one that accounts for the majority of the Consumer Service business, is fee income from local governments, which can be said to be borne indirectly by taxpayers. As a precondition for the company’s sustainable business, it is important that society, local governments, and taxpayers continue to support the hometown tax donation system.
Four materiality (key) issues
In particular, the company plans to support the four materiality issues listed below through its Furunavi and corporate hometown tax donation businesses. The figure below shows the correspondence with the SDGs as indicated by the company.
Improving people’s quality of life: Companies will work together to address issues facing local communities and improve people’s quality of life.
Creation of social value: The company aims to contribute to technological innovation by continuing to create new value for the market by leveraging its speed, creativity, and the unique technological capabilities it has cultivated over the years.
Sustainable urban development: The company will effectively cooperate with local governments to address social issues facing local communities and proactively provide support to areas affected by natural disasters. In doing so, it intends to contribute to safe and sustainable urban development.
Creating regional attractions: By creating new regional brands, the company can help revitalize the region.
Business
Corporate profile
The company has two main business segments—Online Advertising and Consumer Service. i-mobile aims to be a company that can continue creating businesses that contribute to people’s futures by providing valuable experiences through marketing, and operates a hometown tax donation business (Consumer Service business), ad platform business (Online Advertising business), and app operation business (Online Advertising business). In FY07/21, the company recorded revenue of JPY17.8bn (+19.7% YoY) and operating profit of JPY3.4bn (+50.6% YoY).
Summary by segment
Consumer Service segment
Overview
In FY07/21, i-mobile’s mainstay Consumer Service segment delivered revenue of JPY7.8bn (39.2% of total revenue). Operating profit was JPY2.0bn (58.0% of total operating profit), and segment OPM was 25.0%. The Consumer Service segment’s core business is Furunavi (https://furunavi.jp/), the hometown tax donation portal site service. The company has not disclosed revenue composition by business in the Consumer Service segment, but says that in FY07/21 the bulk of revenue and operating profit came from Furunavi.
Hometown tax donation business (Furunavi)
The hometown tax donation business accounts for the bulk of revenue in the Consumer Service segment. i-mobile’s Furunavi tax donation portal site (https://furunavi.jp/) lists gifts from about 841 registered municipalities (as of end-January 2022). When a site visitor makes a tax donation, i-mobile receives a commission (amount undisclosed) from the relevant municipality. Since the revenue from this commission is not recorded until the donation is recognized by the municipality, there is a delay from the time when a website visitor makes a donation and i-mobile books the corresponding revenue. For example, the company may not record revenue from commissions on tax donations made near the end of December until January.
Commission rates (take rates)
The company does not disclose the rates it charges municipalities, nor does it disclose calendar-year revenue. However, Shared Research estimates commission rates are likely a little less than 10% based on interviews with the company and Consumer Service revenue in 2H FY07/18 and 1H FY07/19.
The company also earns promotion-related revenue separately from its regular commissions (take rate) for its unique gifts in return, such as experience-based gifts (including coupons and points that can be used at lodging facilities and restaurants in the municipalities receiving the donation). In addition, in the hometown tax donation business, the company sometimes sells advertising space (e.g., Yahoo! JAPAN top page ads) to municipalities, and this another form of revenue separate from regular commissions (take rate).
Medium-term market share target
The company has set a medium-term target market share of 20%. In other words, as of 2022, the company thinks it has some way to go before it reaches 20% market share.
Earnings structure
Donors donate to local government bodies through the “Furunavi” site, and the company receives revenue from the local governments in the form of commissions based on the amount donated. Furunavi’s gross profit margin is high. Sales promotion expenses (such as awarding Furunavi coins) are variable costs and largely linked to revenue, while advertising expenses to increase consumer awareness of the site (such as TV commercials and online ads) are fixed costs. The company has internalized advertising operations for its hometown tax donation business. One reason for the company’s competitiveness is its ability to efficiently acquire new users through the ad technology and marketing know-how it has cultivated over the years.
Seasonality
The Furunavi project is seasonal. The number of donors tends to increase in December, which is the donation deadline for each fiscal year. As a result, the company’s revenue in Q2 (November to January of the following year) tends to be relatively large, while revenue in other periods tends to be relatively small. The number of contracted municipalities is also seasonal, with a large increase in Q2, the peak season, and a slower increase in the other quarters.
Service users (donors)
Users of i-mobile’s services (donors) are individuals with enough income to be eligible to make hometown tax donations. The higher an individual’s income, the larger their maximum creditable tax donation. Therefore, we estimate that higher-income earners participate in the hometown tax donation system at a high rate. As the market grows, the remaining latent users (those not yet participating) will be comprised of two types of people: lower-income earners with a small maximum creditable tax donation, and individuals who feel applying to the system is troublesome. The changing makeup of latent donors means that the company will have to change the targets of its marketing efforts as the hometown tax donation market expands. Also, since existing users are information-sensitive, it will be important for the company’s portal site to provide existing users with the utmost value to remain attractive.
Characteristics of the company’s service
Furunavi has more municipalities listing home appliances as gifts in return for donations than its rivals. Users typically make donations using i-mobile’s website, but since November 2020 it has been possible to use Yahoo! Shopping, operated by Yahoo!, a subsidiary of Z Holdings (TSE1: 4689). i-mobile also offers services such as Furunavi Premium, a service for large donors.
Services aiming to enhance user convenience
Furunavi Premium (launched November 2015): A free-of-charge hometown tax donation-related service limited to users donating JPY500,000 or more. Tax donation “concierges” propose optimal donation plans.
Furunavi Travel: In exchange for tax donations, individuals receive Travel Points that can be used on travel expenses. The company strengthened cooperation with municipalities to have the service further promote population mobility in rural areas through travel.
Furunavi Gourmet Points: A restaurant reservation service for Furunavi members, where points are awarded for restaurant use and restaurant review.
Furunavi gourmet experience: This is a "food and beverage experience" hometown tax payment that allows members to enjoy local specialties prepared at well-known restaurants in the suburbs of Tokyo, with the aim of "promoting attractive local specialties" and "creating a permanent relationship between local businesses and urban areas through hometown tax donation." Participating restaurants are certified by local government as businesses that promote the region.
Furunavi Catalogue (launched in October 2019): In general, when donors make tax donations they must first choose the gift they would like to receive in return. However, Furunavi Catalogue enables users to choose their gift at the timing of their choice, not necessarily at the point when they make a donation. Since they can decide on what kind of gift they would like to receive after making a donation, Furunavi Catalogue makes hometown tax donation easy during the period right before the deadline at the end of the year.
Tamaru Mall: This is a type of rewards points site. The service allows users to earn Furunavi coins that can be exchanged for Amazon gift vouchers, PayPay balance, d-points, and other third-party digital payment options, by shopping, making reservations for travel and meals, and applying to attend free talks and seminars, for example, via Tamaru Mall. To use this service, users need to register as a member of Furunavi.
Services aiming to contribute to society
Furunavi Saigai Shien (launched in April 2016): This fundraising site uses the hometown tax donation system to aid recovery in municipalities (or their proxies) that have been affected by natural disaster.
Furunavi Crowdfunding (launched in April 2018): Municipalities, or individuals or groups recognized by municipalities, can become crowdfunding project owners. When users make tax donations using Furunavi, they can receive gifts from municipalities or other gifts prepared by project owners.
Online Advertising segment
Impact of adopting the new accounting standard for revenue recognition
With the company’s move to the new accounting standard for revenue recognition in FY07/22, some revenue previously recognized on a gross basis will instead be recognized on a net basis (the net amount being equal to the amount previously booked as gross profit on these revenue). As this change will give the appearance of reducing revenue but have no impact on operating profit, on the surface the operating profit margin will appear to be rising. The impact from this change in revenue recognition standard will show up mainly in the figures reported for the Online Advertising segment, as some of the revenue previously reported by its ad platform business, ad agency business, and media solutions business will change from being reported on a gross basis to a net basis.
By way of example, the company said that the JPY17.8bn in consolidated revenue reported for FY07/21 under the old revenue recognition standards would come down to JPY11.6bn under the new revenue recognition standards. At the individual segment level, the revenue reported by the Consumer Service segment for FY07/21 would come down to JPY7.7bn versus JPY7.8 under the old standards. The revenue reported by the Online Advertising segment for FY07/21 would come down to JPY3.9bn versus JPY12.2bn under the old standard, but the Online Advertising segment would show an operating profit margin of 36.3% versus 11.7% under the old standard.
Overview
In FY07/21, the Online Advertising segment had revenue of JPY12.2bn (60.8% of total revenue), operating profit of JPY1.4bn (42.0% of total), and segment OPM of 11.7%. The Online Advertising segment includes the company’s ad platform business, media solutions business, ad agency business, and app operation business. The ad platform business consists of an ad network business and an affiliate business (payment-by-result ads). At its media solutions business, the company acts in the capacity of a Google Certified Publishing Partner to help client companies improve their media earnings over the long term with products provided by Google. The ad agency business conducted by subsidiary Cyber Consultant provides online ad agency services and digital solutions. As for i-mobile’s app operation business, Ohte and other subsidiaries run various apps such as puzzle game apps as the company’s proprietary media.
As of Q1 FY07/22 (after the application of the Accounting Standard for Revenue Recognition described below), the app operation and media solutions businesses accounted for around 60% of Online Advertising business revenue. Revenue in the app operation business can be broken down into MAU (the number of monthly active users) x ARPU (advertising revenue per user). The promotion costs of the Online Advertising business are mainly invested in the acquisition of users for the app operation business. In the media solutions business, revenue tends to increase as the number of installed accounts builds up.