Announcing the Financial Results for the First Quarter of the Fiscal Year Ending November 2024
Hello, this is Kashima, CFO of note (5243).
Since Miura-san, who was in charge of IR, began her maternity leave last month, I will be writing the summary of our financial results from this time forward.
Financial Results Summary for the First Quarter of the Fiscal Year Ending November 2024
Financial Highlights
In the FY24-1Q financial results, due to sales growth and strengthened cost management, operating profit was -7 million yen, which represents a further reduction in the deficit from -221 million yen in FY23-1Q, -88 million yen in FY23-2Q, -53 million yen in FY23-3Q, and -16 million yen in FY23-4Q.
Additionally, we achieved a monthly profit in January 2024, and on an EBITDA basis, we achieved a profit in 1Q.
Since our company has not been executing M&A, there is no significant difference between EBITDA and accounting operating profit, but we are already profitable on a cash flow basis, and I included this as an indicator because I wanted to demonstrate that.
Sales also saw significant growth in the GMV (Gross Merchandise Value) of our core service, note, achieving high growth of 4,198 million yen, +28.6% YoY for the quarter.
Sales growth in the note business drove the overall top-line increase, and 1Q sales of 804 million yen (+23.0% YoY) reached a record high on a quarterly basis.
Factors Behind the Operating Deficit
Although the deficit has narrowed and we have become profitable on an EBITDA basis, it is a fact that we are still in the red from an accounting perspective. The reason for the deficit is the increased promotional expenses for the initial campaign of note points, which we introduced for the first time.
In January 2024, we introduced our own points system, "note points", and simultaneously launched an initial campaign offering up to 20% back. The fact that these promotional expenses amounted to approximately 24 million yen is the main reason for the deficit.
We believe that the points had a certain contribution to the increase in GMV, such as by raising the ARPPU of note, so I have no intention of saying that we would have been profitable if not for the point promotional expenses! However, we believe that points serve as a catalyst to expand the user experience of note, and by allowing users to realize the high quality of content on note, it will lead to repeat purchases. We expect the effects of these points to continue beyond this 1Q accounting period.
Trends in Key KPIs
Other key KPIs are also growing steadily. The number of registered members, 7.77 million (+24.8% YoY), seems to be larger than the population of Hong Kong, and the city of note is expanding. The number of published content items is 42.59 million (+31.5% YoY), and we believe that a platform with such an abundance of high-quality, unique content like note is one of the largest in Japan.
Recent Initiatives
I would like to introduce two recent initiatives.
Partnership with Bengo4.com regarding issues such as defamation
On April 8, the same week as our earnings announcement, we announced a partnership with Bengo4.com. This initiative aims to create a mechanism to resolve problems arising from various troubles caused by online flaming and defamation, which have led to unfortunate incidents recently.
By combining note's expertise in technologies like AI with Bengo4.com's legal expertise, we aim to realize a safe and secure internet space for all users and create a society where it is easier to express oneself.
Specifically, we are planning to verify a feature where AI detects content with potential risks of defamation or flaming under the supervision of Bengo4.com when posting content on note, and issues an alert in advance. Since these issues are challenges for the entire internet, not just note, we hope to be able to provide the API to external services for a fee in the future (though this is not yet concrete).
note actually celebrated its 10th anniversary since the service launch this April, and note's CEO, Kato, founded the company to create a free and sustainable creative ecosystem on the internet.
From the very beginning of the service, we have placed great importance on the comfort of the community and creating a safe and secure place for creation, and this partnership with Bengo4.com is also backed by Kato's desire to 'create an internet where everyone can feel safe'.
If you are interested, please also take a look at Kato's note regarding the 10th anniversary.
Start of content payment support from the app
As a second announcement, on April 10, the same day as the earnings announcement, we started providing a feature that allows users to purchase paid articles on note from the app.
Actually, until now, it was not possible to buy paid articles on note from the app, and they could only be purchased from a browser, but now content can finally be purchased from the app as well.
You might think, 'Why is such a simple thing only happening now?', but it is actually a very complex mechanism, and we have put a lot of effort into both the concept and development.
From the creator's perspective, the sales channel for paid articles expands from the browser to the app, which increases revenue opportunities, and we can expect a positive impact on note's GMV as well.
Since there was no purchase flow from the app until now, it was difficult for us to focus on the app, but by proceeding with functional enhancements to the app from here on, we can improve user convenience and also expect the effect of increasing user engagement across all of note.
Together with the points introduced earlier, we would like to implement various initiatives for service improvement and business growth in the future.
Earnings Forecast
There are currently no changes to the earnings forecast for the fiscal year ending November 2024, which was released in January of this year. While both sales and profits are progressing well, we believe that a certain level of growth investment is necessary for long-term top-line growth. We aim to grow as a growth company while balancing this with profitability.
Should it become necessary to revise our earnings forecast based on future business progress, we will disclose such information promptly.
Upcoming IR Events
As an upcoming IR event, we will participate in an online IR event hosted by Growth Capital at the end of this month, on Tuesday, April 30. Our CEO, Kato, will explain the latest situation based on today's Q1 financial results, so please be sure to watch.
You can register for participation via the URL below (free of charge).
Click here for various disclosure materials
The materials disclosed today are as follows; please check them as well.
Financial Results Presentation for the First Quarter of the Fiscal Year Ending November 2024
Financial Results Summary for the First Quarter of the Fiscal Year Ending November 2024
Notice Regarding the Launch of Paid Article Purchase Function on the note App
These are posted in the "IR Library" on our IR website.
IR Contact Information
For inquiries regarding IR, such as questions about financial results or opinions and feedback on our IR initiatives, please use the inquiry form below.
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We operate the "IR note Magazine," where you can see IR information published by listed companies on note in one place. It shares information about each company's initiatives that cannot be fully explained through timely disclosures or IR websites, so please take a look at this magazine as well.
We are also accepting new participants at any time. Listed companies wishing to participate, please contact us via our IR inquiry desk.
In closing
As note celebrates its 10th anniversary, we will continue to work hard to become a social infrastructure that meets everyone's expectations, so we look forward to your continued support!