BRIDGE REPORT
(6552)

東証マザーズ

GameWith, inc. (6552)
President Takuya Imaizumi
President
Takuya Imaizumi
Corporate Profile
Company
GameWith, Inc.
Code No.
6552
Exchange
TSE Mothers
Industry
Business Services
President
Takuya Imaizumi
Address
Roppongi Hills Mori Tower 20F, 6-10-1 Roppongi, Minato-ku, Tokyo
Fiscal Year-End
May
URL
Stock Information
Share Price Number of Shares Issued
(Excluding Treasury Shares)
Total Market Capital ROE (Actual) Trading Unit
¥1,239 17,311,932 shares ¥21,449 million 41.1% 100 shares
DPS (Est.) Dividend Yield (Est.) EPS (Est.) PER (Est.) BPS (Actual) PBR (Actual)
¥0.00 0.0% ¥36.01 34.4x ¥147.00 8.4x
*Share price is closing price as of July 27. Number of shares issued at the end of the most recent quarter excluding treasury shares. ROE and BPS are based on previous term's results.
 
Non-Consolidated Earnings Trends
Fiscal Year Net Sales Operating
Income
Ordinary
Income
Net
Income
EPS DPS
May 2015 (Actual) 389 127 124 94 6.42 0.00
May 2016 (Actual) 994 330 329 220 13.45 0.00
May 2017 (Actual) 1,581 657 654 465 28.39 0.00
May 2018(Actual) 2,677 1,168 1,168 816 48.73 0.00
May 2019 (Forecast) 3,154 905 904 623 36.01 0.00
*The forecasted values were provided by the company.
*The company conducted a 40-for-1 share split in Mar. 2016, a 50-for-1 share split in Apr. 2017 and a 2 for 1 share split in Feb. 2018. EPS has been retroactively adjusted.

This Bridge Report reports GameWith's financial results for the term ended in May 2018 and an outlook for the term ending in May 2019.
 
Key Points
 
 
Company Overview
 
GameWith, Inc. ("GameWith") operates a media business, offering game guides, game reviews, community function, and video streaming. By providing articles and functions for playing games, the company attracts clients, and also provides advertisers with advertisement slots to earn revenue.
 
[Corporate history]
 
Originally started in an apartment unit in 2013, GameWith was founded during a time when the game-playing environment was moving from browsers to apps, smartphone games were becoming a sophisticated trend, and the need for game guides was growing. In June 2013, GameWith was established with the purpose of operating a video game information site under the belief that "players will be able to enjoy games more if there is a place where they can get necessary game tips and information."
 
In September 2013, the company's game information portal was released. Initially, it was a simple Q&A site in which users inquired mainly about game tips. In May 2014, GameWith established a full-scale system for producing walk-through articles, after which page views skyrocketed. In September 2015, the company started Game Review, and in September 2016 launched a video streaming for game guides. In March 2017, the company began offering the community function.
 
GameWith, Inc. was listed in the Mothers of Tokyo Stock Exchange in June 2017, four years after its incorporation.
 
 
[Business Description]
 
GameWith acts as an intermediary between players and game companies by commercializing their needs. By providing articles and functions for gaming, the company attracts users and provides sponsors with advertisement slots to earn revenue. Both Internet and Smartphone Advertising markets currently continue to grow strongly.
 
Primary Services
The four main services offered by GameWith are Game Guide, which provides information to improve the users' game play; Game Review, which is a source of information for finding good games; Community, which enables game players to communicate with one another, and Video Streaming, in which exclusive and talented gamers stream their game play on YouTube. Users attracted to the game tips are led to such services as Game Review, providing opportunities to cross-sell services.
 
Game Guide
Through its Game Guide service, the company provides articles on game tips, predominantly for smartphone games. Through effective recruitment of players of popular games, training players as writers and methodically producing articles, GameWith developed a robust system for swiftly responding to events and producing high quality, game-related content.
 
Game Review
The Game Review service offers reviews that can motivate users to start playing different games. When information on a new game is released, the writers of GameWith publish reviews (note: for some games, video is produced in-house) In addition to writing articles to introduce games, the company also provides unique ranking information with quick reporting for rating games as well as a comprehensive game database.
 
Community
Provides the function to enable gamers to communicate after registering for free membership. It is aimed at increasing enthusiasm about games by connecting players who are playing the same game. The Community service leads to the vitalization of gaming media on the whole and increases its market value; in addition, Community supports game companies by tacitly encouraging gamers to play games for a longer period of time
 
Video Streaming
 
Currently, it is used as a means to plan and disseminate attractive content to users through streaming live game-play videos.
These webcasters are also selected from the game guide writers employed by the company, or they are the creators who have exclusive management agreements with the company. Since September 2016, the company has been earning advertising revenues by inserting ads in the videos, and also selling the service in which the video performers not only promote the games, but also do sales promotion of products as an advertising commodity.
 
Earning revenue from online advertisements
GameWith earns revenue by selling advertisement slots for its network or tie-up advertisements utilizing the network to sponsors and advertisement agencies whilst offering content.
 
In network advertisement, GameWith earns revenue by selling its internet advertisement slots, as well as advertisement slots in video streaming and game guide apps through its advertisement distribution network. On the other hand, tie-up advertisement is those negotiated mutually with the game providers, and they order these advertisements for an improvement in their app games' recognition and retention rate of their users as part of their promotional activities.
 
In the game reviews, GameWith offers the app games introduction services for free, but the effectiveness of free services like this tends to be restrictive. Therefore, the company also offers various value-added (paying) services such as article ads (including banner ads and game introduction videos), and production, management and operation of gaming guide information. Game providers can expect an improvement in their games' recognition and retention rate of their users by using these value-added services (i.e. ordering GameWith's advertisement services).
Incidentally, the company's tie-up advertisement service was only set up in the term ending May 2017 and therefore its sales are still to be reinforced.
 
 
Financial Results for Fiscal Year Ended in May 2018
 
 
Sales Up 69.3%, Operating Income Up 77.8% Year on Year
Sales were 2,677 million yen, up 69.3% year on year. The sales of network advertisements to be distributed over the internet and smartphone applications increased over 50%, thanks to large scale promotions of specific game titles and efforts to raise the PV unit price after constructing an advertisement operation system in January 2017. By capturing needs for transitions of game guides from text to video, network advertisements through videos grew 2.6 times. For specific game titles, tie-up advertisements provided on GameWith's website grew 2.9 times with the production of high added value advertisements using videos or containing extra information.
 
Operating income was 1,168 million yen, up 77.8% year on year. In addition to overseas expansion and new businesses, GameWith also strengthened its management department in connection with share listing, and there were increased personnel-related expenses as a result of active recruitment, as well as temporary expenses related to the increase in office space and special benefits for shareholders. Due to the above reasons, SG&A expenses increased 78.7%. However, they were offset by a 3.4 point rise in the gross profit ratio due to increased sales, higher PV unit prices, and the greater role played by tie-up advertisements in terms of sales distribution. As a result, operating income increased substantially.
 
Initial estimates include sales of 2,070 million yen, an operating income of 787 million yen, an ordinary income of 785 million yen, and a net income of 527 million yen.
 
 
 
 
 
In the fourth quarter, sales were 725 million yen and operating income was 246 million yen. Sales marked a record high, even exceeding sales in the first quarter (in which there was a temporary special demand for promotion). Operating income ratio fell, due to temporary costs associated with the increase in office space, shareholder benefit expenses, and strategic investment based on medium-term business strategies (investment in overseas expansion, new businesses, organizations, and personnel strategies). Excluding these costs, operating income ratio was 41.0%.
 
 
PV remains at a high monthly average, and unit price indicators continue to rise due to routine operational improvements (they reached record highs, excluding the temporary circumstances in the first quarter).
 
 
With the combined contribution of network advertisements (videos) and advertisements (Web, App) distributed over the internet and smartphone applications, sales of network advertisements marked a record high, excluding the first quarter (in which there was a temporary special demand for promotion). There was also a strong demand for tie-up advertisements, which saw greater sales growth than that of network advertisements. The sales distribution ratio for tie-up advertisements is on an upward trend, also marking a record high.
 
 
The total number of subscribers for network advertisements (videos) now exceed 3.4 million, making the business profitable. GameWith is successfully capturing users' increasing need for the transitions of game guides from text to video.
 
 
"Sayodora" (fifth from the left) is the most popular YouTube creators regarding battle game.
 
 
In the fourth quarter, personnel-related expenses increased due to overseas expansion, new businesses, and the active recruitment of management staff. In addition, GameWith recorded temporary expenses related to the increase in office space and special benefits for shareholders.
"Personnel-related expenses" are recorded under cost of sales and SG&A expenses, and include remuneration for directors, salary and allowances, bonuses and provision for bonuses, statutory welfare expenses, outsourcing costs, recruitment costs, and staff training expenses. The total number of personnel is obtained by summing up the numbers of executives and employees (as well as temporary employees).
 
(3) Topics of the Fourth Quarter
In the fourth quarter, GameWith actively made upfront investments for mid- and long-term growth. Entry into the eSports (electronic sports) industry is one of them. In addition, the company made investments (seed investment) in a game server company, Game Server Services Co., Ltd. and GCUBE ASIA PTE. LTD., which manages game guide media for Southeast Asia.
 
Entering into the eSports Business
In March 2018, GameWith formed a professional team "GameWith" (Director: Norimitsu Oba) at the time of the inauguration of the "Clash Royale League," the official eSports league of the real-time battle-type mobile card game "Clash Royale" (March 2018). The company intends to accumulate the know-how of event management, including investments and plan to operate various eSports-related businesses. The company's team participated in the first season of the "Clash Royale League Asia," which was held from April 27, 2018 (Fri.) to July 15, 2018 (Sun.), and won the second prize.
 
The term "eSports" is an abbreviation for "electronic sports" and is a name to call competitions using computers and video games. It refers to an entertainment that allows viewers to enjoy competitions among players via various media. "Clash Royale" is a mobile game provided by Supercell Oy (Finland). In 2017, an eSports event "Clash Royale World Finals (Crown Championship)" with a total prize of about 100 million yen was held, and more than 27 million players from 187 countries participated in the event.
 
*For more details of formulating a professional eSports team.: https://gamewith.co.jp/1503
 
Seed Investment
In March 2018, GameWith made an investment in Game Server Services Co., Ltd., which provides game servers optimized for smartphone games. In May 2018, it made an investment in GCUBE ASIA PTE. LTD., which manages game guide media for Southeast Asia. It will continue to actively make investments and work together with partners to co-create new business opportunities and values.
 
Investment in Game Server Services Co., Ltd.
On March 30, 2018, GameWith underwrote the allocation of new shares to a third party by Game Server Services Co., Ltd. (Headquarters: Kitanagoya, Aichi, Representative Director: Kazutomo Niwa, hereinafter referred to as "GS2"). GS2 provides a backend server called 'Mobile Backend as a Service (mBaaS)' specialized in mobile game development.
 
GS2 offers cloud-based game servers for game developers to develop smart device games, under the slogan of "Moving away from developing game servers: Changing game servers from what you develop to what you use." Using the GS2 servers, game developers can securely and reliably process high traffic websites without having in-depth knowledge about server development. In other words, the GS2 servers offer an environment in which game business can be operated without developing and operating a game server.
GameWith will provide better services to the game industry by strengthening relationships with GS2. It is aiming to realize its corporate philosophy of "Create a more enjoyable gaming experience."
 
Investment in GCUBE ASIA PTE. LTD.
On May 30, 2018, GameWith underwrote the allocation of new shares to a third party by GCUBE ASIA PTE. LTD. (Head office: Singapore, Director: Liang Zhenlong, hereinafter referred to as "GCUBE"), which manages game guide media in Indonesia (Investment ratio: 16.6%).
 
Based on its concept to "create a more enjoyable gaming experience by providing gaming information to users in Southeast Asia in their mother language," GCUBE aims to become Southeast Asia's largest gaming community.
One of the challenges of GameWith is overseas expansion, and, in December of 2017, it released the Taiwanese version of "GameWith." The company's decision to underwrite the allocation of new shares to a third party by GCUBE will strengthen the relationships between the 2 companies and will be beneficial in accelerating international business expansion, in light of the fast-growing mobile gaming market in Southeast Asia.
 
 
Mid-term Business Plan and Business Strategy
 
[ Mid-term Business Plan - Beyond the Domestic Media Business ]
Under the vision of "Go for the global gaming infrastructure" GameWith established a business model centered on the media business such as game guides, game reviews, video streaming and community function and managed to generate sales and monetize the domestic media business.
From the fiscal year ending May 2019, it will further grow under the vision of "Go for the global gaming infrastructure " (beyond the domestic media business). Specifically, it will go into the overseas market on a full scale and make efforts to enter new business domains. As for overseas, it will accelerate the business expansion in English-speaking countries on a full scale. To enter new business domains, it will operate new businesses in various game-related areas other than the existing media business.
 
Vision of GameWith      Go for the global gaming infrastructure
GameWith will become infrastructure of all those involved in enjoying games by providing experiences and values that only GameWith can provide to people who play games and manufacturers that develop games. GameWith will not just stay in the media business but will enter all business domains to create more enjoyable gaming experience.
 
Getting up to speed in overseas expansion
According to the company's data (Source: Newzoo International B.V. "2018 Global Games Market Report"), game revenue in 2018 (forecast of revenue recorded under smartphone, console, PC, etc.) was 19.2 billion dollars in the Japanese market, while that of the world market was 137.9 billion dollars, which was 7.1 times larger than the Japanese market.
At the company, the operation of Taiwanese "GameWith" (first overseas expansion) that was launched in December 2017 is progressing steadily, and, in May 2018, it made an investment in GCUBE that provides game guide media targeting Southeast Asia. In the future, it will expand the business in English-speaking countries on a full scale and accelerate growth of the overseas business.
 
Challenges into new business territory
Points are (1) game and blockchains, (2) eSports, and (3) game and fund raising. For (1) game and blockchains, the company will catch the new trend of games generated by the blockchains and work on building a future business model to distribute game data. For (2) eSports, it will develop new markets through the operation of professional teams and game competitions. For (3) game and fund raising, it will financially support game development by collecting funds from users and release more games to the world.
 
(1) Game and Blockchains
In the future, through blockchains, items that are available in games will have the same value as real assets. The users enjoy the current games by using money within the game provided by game companies, while the users enjoy games developed using the blockchain technology not only by using money but also by gaining money through activities in the games. Blockchains will bring about a new game market. Therefore, the company will expand the business domains, develop games for market and case development, create platform for item trading and game stores, and provide support for game development including promotion and development support.
 
 
(2) eSports
According to the company's data (source: NEWZOO "2018 GLOBAL ESPORTS MARKET REPORT"), sales in the eSports industry worldwide continues to grow as high as 493 million dollars in 2016, 655 million dollars in 2017, and 906 million dollars in 2018. It is expected to expand to 165 billion yen in 2021 (27% annual growth rate). The company will accumulate know-how through the operation of the professional teams and events and will work on establishing a position as an eSports platformer.
 
(3) Game and Fund Raising
Based on the fact that game development risk is increasing, the company will work on building a business model to fund game development as a platformer by gathering game development funds from users and bringing more games into the world.
 
 
In addition to the above, the company will develop and grow the in-house IP creation support business and game development support business as well as co-create new business opportunities and values with partners.
 
[ Business Strategy ]
Until now, GameWith has been focusing on expanding media, expanding user scale, improving advertisement unit price, strengthening tie-ups, and expanding employment, aiming at becoming the top in the domestic media industry. As a result, it established a business model centering on the media business and managed to generate sales and monetize the domestic media business.
Going forward, the company aims to go for the global gaming infrastructure with long-term enterprise value improvement in mind. It will pursue growth through full-fledged overseas development and will work to expand the earnings base of existing businesses (strengthen the capabilities of video streaming and tie-up products) and nurture new business. To achieve it, it intends to accelerate investments both in Japan and overseas, strengthen recruitment and upgrade organizational and personnel strategies to strengthen the foundation from "human resources" perspective.
Under the above strategy, the company will make strategic investments in overseas businesses and new businesses, and in the fiscal year ending May 2021, it is aiming to achieve sales of over 5.5 billion yen, operating income of over 2 billion yen, overseas business sales ratio of over 15%, and new business sales ratio of over 15%. The fiscal year ending May 2019 is positioned as the period of strategic investment, and the fiscal years ending May 2020 and 2021 are positioned as the investment recovery period.
 
 
 
Financial Forecast for Fiscal Year Ending in May 2019
 
 
Sales Estimated to Rise 17.8% Year on Year, Operating Income Projected to Decline 22.5% Due to Strategic Investment
Led by sales of video and tie-up advertisements, sales are estimated to rise 17.8% year on year to 3,154 million yen, but due to a total of 291 million yen being strategically invested into overseas expansion, new businesses, organizations, and personnel strategies, operating income is expected to fall 22.5% to 905 million yen.
Excluding expenses for strategic investment, operating income is expected to rise 2.5% year on year to 1,197 million yen.
 
 
 
Future Considerations
 
In FY 5/18, efforts to strengthen and increase profitability were met with steady results. Specifically, in network advertisements, the establishment and strengthening of the advertisement operation system are beginning to pay off, and GameWith is doing well in handling the increase in demand for transitions of game guides from text to video. The results of strengthening proposal-based sales can also be seen in tie-up advertisements. Sales and profits are expected to grow at a rapid pace for the foreseeable future, including significant sales growth in FY 5/19. However, there is some concern regarding medium-term growth only by existing businesses. Accordingly, the company will prepare for sales in these businesses to temporarily level off. For the time being, the aggressive investment into growth can be thought of as taking advantage of the bright outlook for existing businesses.
While mid-term business designs and strategies include game development and e-sports, the company's goal is to focus on infrastructure and create platforms. In time, this will be explained in more detail. We look forward to seeing the company's progress.
 
 
<Reference: Corporate Governance>
 
 
◎ Corporate Governance ReportUpdated Oct. 23, 2017
Basic policy
Under the motto "Create a more enjoyable gaming experience," our company is working to establish a system which is robust and transparent, where rapid decision-making is made possible, as well as strengthening our internal control including stricter compliance and risk management, in order to develop a system of business operation to provide an optimal environment for all people and companies involved in gaming. Through these measures, we will strive to further enhance corporate governance and maximize our corporate value.
 
<Reasons for Non-compliance with the Principles of the Corporate Governance Code (Excerpts)>
Our company follows all of our corporate governance codes.
 
<Disclosure Based on the Principles of the Corporate Governance Code (Excerpts)>
[Principle 1-4 The so-called strategically held shares]
Our company may hold shares of other companies as a means to maintain or improve our transaction and cooperative relationships. The basic requirement for holding such shares is that these strategically held shares are expected to increase our corporate value, and they will be considered based on the possibility that they will maintain and strengthen medium to long-term cooperative relationship between the issuing company and our company, facilitate a transactional relationship, and create or develop business opportunities.
Regarding the voting rights arising from the strategically held shares, each resolution in question will be considered for its contents and its medium and long-term influences on increasing our corporate value, and the deciding authority as stipulated in the "Regulations of Administrative Authority" will make the decision, after comprehensively considering if the issuing company 1) possesses the objectives and businesses that are in line with our company's policy for strategically held shares, 2) discloses information of its corporate activities regularly and appropriately, and 3) possesses the business foundation that enables continuous growth.
 
[Principle 1-7 Transactions among parties concerned]
When the directors of our company perform a transaction that may constitute a conflict of interests, such a transaction shall be approved by the board of directors in accordance with laws and regulations as well as the rules governing the board of directors, so that such transactions are kept under appropriate observation. Additionally, should such a transaction that may constitute a conflict of interest be performed, the important facts shall be appropriately disclosed pursuant to laws and regulations.
[Principle 5-1 Policy on constructive dialogue with shareholders]
Our company operates a system that ensures continued constructive dialogue with shareholders from the mid and long-term viewpoints, regarding such matters as corporate governance, business strategies, capital policies, business results and financial condition, and service contents and its risks, in order to maintain the continuous growth of our corporate values and to build a strong relationship of trust with our shareholders.
- Dialogue with shareholders are supervised by the president, while individual interviews are held by the head of corporate planning, in consideration of purposes and effects of such meetings and the attributes of the shareholders, and the attendees for such events are carefully selected including the potential attendance by the president and the executive administrative managers, where the strategies are discussed in depth beforehand.
- Our Investor Relations (IR) staff collects necessary information from each section within the company, especially the business and management sections, and develops explanations that are easy to understand through close internal cooperation in order to enrich our dialogue with shareholders.
- Our company continues activities to deepen understanding of shareholders regarding management policies, corporate governance, strategies, and the present condition of businesses.
- For dialogues with our institutional investors, our company holds individual interviews as well as financial results briefings, held each half term. Additionally, through the page dedicated to shareholders and investors on our website, we disclose information of such events to individual investors as well as hold company information sessions for individual investors.
- When the interests and concerns of shareholders emerge through dialogue with them, they will be duly communicated to the management (heads of departments or higher) and are reflected in our business analyses and the examination of our methods of information disclosure.
- In the course of dialogue with shareholders, insider information is appropriately controlled in compliance with internal regulations.
- Our company has set aside a "silence period" in which we do not engage in dialogue concerning financial results.
Disclaimer
This report is intended solely for informative purposes, and is not intended as solicitation to invest in the shares of this company. The information and opinions contained within this report are based on data made publicly available by the Company, and comes from sources that we judge to be reliable. However, we cannot guarantee the accuracy or completeness of the data. This report is not a guarantee of the accuracy, completeness or validity of said information and or opinions, nor do we bear any responsibility for the same. All rights pertaining to this report belong to Investment Bridge Co., Ltd., which may change the contents thereof at any time without prior notice. All investment decisions are the responsibility of the individual and should be made only after proper consideration.
Copyright(C) 2018 Investment Bridge Co., Ltd. All Rights Reserved.
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