CROSS MARKETING GROUP INC. Research Coverage Report by Shared Research Inc. | Coverage initiated on: 2022-11-29 |
Last update: 2023-12-04 | |
3675
Cross Marketing Group
Shared Research Inc. has produced this report by request from the company discussed in the report. The aim is to provide an "owner's manual" to investors. We at Shared Research Inc. make every effort to provide an accurate, objective, and neutral analysis. In order to highlight any biases, we clearly attribute our data and findings. We will always present opinions from company management as such. Our views are ours where stated. We do not try to convince or influence, only inform. We appreciate your suggestions and feedback. Write to us at sr_inquiries@sharedresearch.jp.
INDEX
Executive summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3. Key financial data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5. Trends and outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.
Quarterly trends and results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13. . Business overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13. . Market and value chain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23. . Strengths and weaknesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28. .
Historical results and financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30. . Income statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36. . Balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37. . Cash flow statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39. .
Other information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40. . News and topics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43. .
Company profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46. .
Cross Marketing Group 3675
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Executive summary
Business overview
Cross Marketing Group Inc. (TSE Prime: 3675; hereafter "CMG") provides an extensive range of digital (DX) solutions to companies in the marketing sector. In FY06/23, CMG reported revenue of JPY25.1bn, operating profit of JPY2.0bn, and OPM of 7.8%. CMG's three business segments are Digital Marketing (36.0% of revenue, OPM of 5.2%), Data Marketing (38.9% of revenue, OPM of 26.1%), and Insight (25.1% of revenue, OPM of 14.4%). The company is not reliant upon any specific customer and maintains a client base that includes 6,700 companies and covers a wide range of industries.
In the Digital Marketing business, the company operates Moratame.net and other e-commerce sites, handles promotions utilizing panel data (described below), and provides IT solutions. These solutions span the development, operation, and maintenance of smartphone apps and online systems. In FY06/23, media and promotions accounted for 64% of Digital Marketing revenue, and IT solutions for 36%. At Moratame.net, the company procures product samples from manufacturers and provides them either for free or for a nominal fee to its roughly 2,000,000 members (as of end-January 2023), who then provide evaluations, comments, and other feedback to the manufacturers. In promotions and IT solutions, the company provides services ranging from business strategies for developing e-commerce sites and other applications to online advertising and other marketing activities to acquire customers, following up with customer relationship management (CRM).
In the Data Marketing business, the main service in online research, in which surveys are conducted via the internet using a panel network with a cumulative total of about 8,080,000 members (as of end-June 2023). A panel is a group of potential survey targets (registered panelists) with various attributes. Compared to conventional methods of conducting surveys and questionnaires door-to-door or via mail, online research can be conducted quickly at low cost. Clients can have online research done in as little as two days, starting at JPY90,000 for 100 responses to a set of 10 questions. CMG annually receives some 6,000 orders for online research. Order value can vary greatly from one order to the next, but averages roughly JPY1mn.
In the Insight business, as in Data Marketing, the company uses panels for research, using offline methods such as group interviews and in-venue or in-store surveys. For group interviews, it gathers about eight participants and interviews them in a roundtable discussion format. For in-venue surveys, it gathers participants at a venue, where, for example, they sample foods or beverages and respond to questionnaires. The number of offline survey projects, including group interviews and in-venue surveys, averages approximately 1,000 per year. The fee for a group interview session starts at JPY550,000 for a group of four or more. CMG has five interview rooms around Tokyo.
Although the company positions Data Marketing and Insight as separate segments, many client orders involve a combination of online research and group interviews. CMG does not have its own panels, but instead uses panelists registered with its equity-method affiliate Research Panel, Inc. (60% stake held by CARTA HOLDINGS Inc. [TSE Prime: 3688] and 40% by CMG) or with any of 27 other affiliated panel companies. CMG pays commissions for its use of the panels (to cover panelist recruitment).
CMG was established in April 2003 as an online research firm. Thereafter, it expanded its in-person research services, such as group interviews and in-venue surveys, and became a comprehensive research firm. Although a latecomer to the online research business, the company was able to expand its operations rapidly by using external panels instead of building its own panels, allowing it to focus on sales activity and data analysis. Since August 2011, it has expanded its business domain into the IT field through acquisitions, including a company that develops systems for mobile devices. As a result, CMG has grown from an online research firm to a company that provides its clients with total marketing support. As of end-June 2023, the CMG group comprised 32 consolidated subsidiaries and three equity-method affiliates.
The company began expanding overseas in February 2012 with the establishment of a marketing research firm in China. As of June 2023, it operates in 10 countries, including the US, the UK, China, India, and Singapore, and its research is used mainly by Western companies seeking to track the needs of Asian consumers. In FY06/23, overseas subsidiaries accounted for roughly 30% of Data Marketing revenue, 20% of Insight revenue, and 22% of the company's total revenue. The overseas research business endured a period of deteriorating profitability, but as a result of restructuring conducted from FY12/17 to FY12/19, has been back in the black since FY06/21.
In FY2022, the domestic marketing research market was worth JPY226.9bn (source: Japan Marketing Research Association's "Fact-Finding Survey of Management Operations"). Shared Research believes CMG to be third in terms of revenue scale, following Intage Holdings Inc. (TSE Prime: 4326) and Macromill, Inc. (TSE Prime: 3978). Established in March 1960, Intage Holdings has a long track record in nationwide consumer and retailer panel surveys that regularly collect information from
Cross Marketing Group 3675
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panelists. Established in January 2000, Macromill was a pioneer in the area of online research. Businesses other than marketing research, such as IT-related business, accounted for 36.0% of CMG's consolidated revenue in FY06/23, compared to 11.5% at Intage Holdings and 20.4% at Macromill.
CMG aims to be a marketing DX partner for its clients by providing total marketing support. For this reason, it believes its competitors to be closer in style to Dentsu Digital Inc. (unlisted), which is more steeped in the online domain when compared to other members of Dentsu Group Inc. (TSE Prime: 4324) than it is when compared to online advertising agencies or to marketing research firms such as Intage Holdings and Macromill. According to Fuji Chimera Research Institute, Inc., the domestic digital transformation (DX) market was worth JPY1.4tn in FY2020, and is expected to grow to JPY5.2tn in FY2030, for a 10-year CAGR of 14.2%.
Earnings trends
In FY06/23, the company reported revenue of JPY25.1bn (+0.8% YoY), operating profit of JPY2.0bn (-22.6% YoY), recurring profit of JPY1.9bn (-24.8% YoY), and net income attributable to owners of the parent of JPY1.0bn (-35.4% YoY). While revenue reached a record high, operating profit decreased due to an increase in SG&A expenses. By business segment, the Digital Marketing segment saw a decline in revenue due to cutbacks in advertising budgets by some clients. However, the Data Marketing performed strongly both domestically and internationally, driving overall revenue growth.
For FY06/24, the company forecasts revenue of JPY30.0bn (+19.5% YoY), operating profit of JPY3.0bn (+53.8% YoY), recurring profit of JPY2.9bn (+54.3% YoY), and net income attributable to owners of the parent of JPY1.8bn (+78.7% YoY). The company aims to achieve the medium-term management plan, DX Action 2024, which ends in FY6/24. It expects to increase revenue in all business segments and will work to create business restructuring synergies, recover order unit prices, and curb SG&A expenses.
The company targets market capitalization of JPY30.0bn, revenue of JPY30.0bn, and operating profit of JPY3.0bn in FY06/24, the final year of its DX Action 2024 medium-term management plan. Breaking down revenue, it expects Digital Marketing to generate JPY12.0bn (three-year CAGR of 20.8%), Data Marketing JPY8.0bn (7.2%), Insight JPY7.0bn (5.9%), and new businesses and M&A JPY3.0bn. CMG considers the period covered by the medium-term plan to be a growth period, and intends to accelerate growth by integrating CRM data from its group companies and establishing a structure for linking their systems together.
Strengths and weaknesses
Shared Research views the company's strengths as the following:
High growth rate and capital efficiency realized by transitioning from being a comprehensive research firm to being a marketing DX solutions firm
Rapid business development due to a corporate culture born from the company's vision ("Just go for it!") and policy (one aspect of which is "Getting past failure")
Use of its own e-commerce sites, Moratame.net and Tentame!, to obtain consumer evaluations through unconventional methods, complementing its capacity to provide clients with comprehensive marketing support as a marketing DX partner
However, we view the company's weaknesses as the following:
Lower operating profit growth and ROIC than at IT-driven marketing support firms, which CMG aims to be, since roughly half of its revenue still derives from low-growth marketing research-related operations
Lack of coordination in client information management to generate synergies among group companies, due in part to rapid business expansion through M&A and the establishment of new companies
Significant disparity between initial company forecasts and actual results due to the sensitivity of the marketing business to economic trends and the fact that the company is working to enhance its organizational structure in the midst of rapid business expansion
Cross Marketing Group 3675
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KeyIncome statement financiaFY12/15 | l FY12/16d | ataFY12/17 | FY12/18 | FY12/19 | FY12/20 | FY06/21 | FY06/22 | FY06/23 | FY06/24 | ||||
(JPYmn) | Cons. | Cons. | Cons. | Cons. | Cons. | Cons. | Cons. | Cons. | Cons. | Cons. | |||
Revenue | 14,859 | 15,969 | 16,758 | 17,492 | 18,580 | 15,985 | 10,758 | 24,899 | 25,094 | 30,000 | |||
YoY | 82.5% | 7.5% | 4.9% | 4.4% | 6.2% | -14.0% | - | - | 0.8% | 19.5% | |||
Gross profit | 6,318 | 6,539 | 6,623 | 6,430 | 7,164 | 6,331 | 4,311 | 10,337 | 10,394 | ||||
YoY | 105.2% | 3.5% | 1.3% | -2.9% | 11.4% | -11.6% | - | - | 0.6% | ||||
Gross profit margin | 42.5% | 40.9% | 39.5% | 36.8% | 38.6% | 39.6% | 40.1% | 41.5% | 41.4% | ||||
Operating profit | 1,233 | 1,342 | 727 | 955 | 1,267 | 986 | 1,007 | 2,522 | 1,951 | 3,000 | |||
YoY | 129.9% | 8.9% | -45.9% | 31.4% | 32.7% | -22.2% | - | - | -22.6% | 53.8% | |||
Operating profit margin | 8.3% | 8.4% | 4.3% | 5.5% | 6.8% | 6.2% | 9.4% | 10.1% | 7.8% | 10.0% | |||
Recurring profit | 1,185 | 1,267 | 597 | 840 | 1,150 | 1,078 | 1,048 | 2,498 | 1,880 | 2,900 | |||
YoY | 127.3% | 6.9% | -52.9% | 40.6% | 36.9% | -6.2% | - | - | -24.8% | 54.3% | |||
Recurring profit margin | 8.0% | 7.9% | 3.6% | 4.8% | 6.2% | 6.7% | 9.7% | 10.0% | 7.5% | 9.7% | |||
Net income | 559 | 837 | -703 | 507 | -477 | 467 | 540 | 1,559 | 1,007 | 1,800 | |||
YoY | 127.6% | 49.8% | -184.0% | -172.1% | -194.2% | -197.8% | - | - | -35.4% | 78.7% | |||
Net margin | 3.8% | 5.2% | -4.2% | 2.9% | -2.6% | 2.9% | 5.0% | 6.3% | 4.0% | 6.0% | |||
Per-share data (split- and reverse split-adjusted; JPY) | |||||||||||||
No. of shares outstanding at the end of FY(000 | 19,531 | 19,531 | 19,531 | 19,562 | 19,970 | 19,970 | 19,970 | 19,970 | 19,970 | ||||
shares) | |||||||||||||
EPS | 30.81 | 42.85 | -36.00 | 25.92 | -24.12 | 23.67 | 27.50 | 79.07 | 51.00 | 90.13 | |||
EPS (fully diluted) | - | - | - | - | - | - | 27.42 | 78.29 | 50.57 | ||||
Dividend per share | 6.00 | 5.50 | 5.50 | 5.50 | 6.00 | 6.20 | 4.00 | 9.60 | 12.00 | 13.00 | |||
Book value per share | 193.17 | 221.49 | 177.75 | 193.79 | 166.19 | 179.58 | 204.27 | 291.24 | 312.99 | ||||
Balance sheet (JPYmn) | |||||||||||||
Cash and cash equivalents | 2,384 | 2,160 | 2,047 | 2,606 | 2,714 | 5,218 | 5,174 | 5,542 | 6,478 | ||||
Total current assets | 6,423 | 6,557 | 6,459 | 7,130 | 7,780 | 9,327 | 9,556 | 10,715 | 11,292 | ||||
Tangible fixed assets | 462 | 457 | 391 | 365 | 315 | 248 | 297 | 293 | 278 | ||||
Investments and other assets | 802 | 1,000 | 972 | 1,236 | 1,219 | 1,299 | 1,245 | 1,146 | 1,276 | ||||
Intangible assets | 2,283 | 1,918 | 1,742 | 1,699 | 613 | 543 | 677 | 979 | 1,462 | ||||
Total assets | 9,970 | 9,932 | 9,564 | 10,429 | 9,927 | 11,416 | 11,775 | 13,133 | 14,308 | ||||
Accounts payable | 1,048 | 1,198 | 1,379 | 1,573 | 1,562 | 1,384 | 1,448 | 1,325 | 983 | ||||
Short-term debt | 1,120 | 885 | 801 | 897 | 1,332 | 1,646 | 1,198 | 1,147 | 1,339 | ||||
Total current liabilities | 4,090 | 3,697 | 3,704 | 4,298 | 4,773 | 4,995 | 5,051 | 5,036 | 5,147 | ||||
Long-term debt | 1,677 | 1,510 | 2,032 | 1,983 | 1,488 | 2,642 | 2,106 | 1,674 | 2,759 | ||||
Total fixed liabilities | 1,935 | 1,762 | 2,262 | 2,231 | 1,734 | 2,827 | 2,385 | 1,961 | 3,072 | ||||
Total liabilities | 6,025 | 5,459 | 5,966 | 6,529 | 6,507 | 7,823 | 7,436 | 6,998 | 8,220 | ||||
Total net assets | 3,945 | 4,474 | 3,598 | 3,900 | 3,420 | 3,594 | 4,339 | 6,136 | 6,089 | ||||
Total interest-bearing debt | 2,837 | 2,405 | 2,834 | 2,881 | 2,821 | 4,288 | 3,304 | 2,821 | 4,098 | ||||
Cash flow statement (JPYmn) | |||||||||||||
Cash flows from operating activities | 801 | 437 | 931 | 1,035 | 637 | 1,638 | 1,046 | 1,951 | 1,796 | ||||
Cash flows from investing activities | -18 | -220 | -1,353 | -351 | -302 | -366 | 292 | -900 | -902 | ||||
Cash flows from financing activities | 204 | -127 | 302 | -99 | -222 | 1,272 | -1,471 | -777 | 27 | ||||
Financial ratios | |||||||||||||
ROA (RP-based) | 13.3% | 12.7% | 6.1% | 8.4% | 11.3% | 10.1% | 9.0% | 20.1% | 13.7% | ||||
ROE | 17.2% | 20.7% | -18.0% | 14.0% | -13.4% | 13.6% | 14.3% | 31.9% | 17.1% | ||||
Equity ratio | 37.8% | 43.6% | 36.3% | 36.3% | 33.4% | 30.9% | 34.0% | 43.9% | 42.0% |
Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: FY06/21 was an irregular accounting period due to a change in the fiscal year-end.
Cross Marketing Group 3675
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Trends and outlook | |||||||||||||||||||||
Quarterly trends and results | |||||||||||||||||||||
Quarterly results | |||||||||||||||||||||
Cumulative | FY06/22 | FY06/23 | FY06/24 | FY06/24 | |||||||||||||||||
(JPYmn) | Q1 | Q1-Q2 | Q1-Q3 | Q1-Q4 | Q1 | Q1-Q2 | Q1-Q3 | Q1-Q4 | Q1 | Q1-Q2 | Q1-Q3 | Q1-Q4 | % of | FY Est. | |||||||
forecast | |||||||||||||||||||||
Revenue | 5,347 | 12,300 | 19,078 | 24,899 | 6,102 | 12,999 | 19,651 | 25,094 | 5,629 | 18.8% | 30,000 | ||||||||||
YoY | - | - | - | - | 14.1% | 5.7% | 3.0% | 0.8% | -7.8% | 19.5% | |||||||||||
Cost of revenue | 3,161 | 7,168 | 10,947 | 14,562 | 3,516 | 7,569 | 11,363 | 14,700 | 3,607 | ||||||||||||
YoY | - | - | - | - | 11.2% | 5.6% | 3.8% | 0.9% | 2.6% | ||||||||||||
Cost ratio | 59.1% | 58.3% | 57.4% | 58.5% | 57.6% | 58.2% | 57.8% | 58.6% | 64.1% | ||||||||||||
Gross profit | 2,186 | 5,132 | 8,131 | 10,337 | 2,586 | 5,430 | 8,288 | 10,394 | 2,022 | ||||||||||||
YoY | - | - | - | - | 18.3% | 5.8% | 1.9% | 0.6% | -21.8% | ||||||||||||
Gross profit margin | 40.9% | 41.7% | 42.6% | 41.5% | 42.4% | 41.8% | 42.2% | 41.4% | 35.9% | ||||||||||||
SG&A expenses | 1,700 | 3,422 | 5,399 | 7,815 | 2,076 | 4,100 | 6,115 | 8,443 | 2,039 | ||||||||||||
YoY | - | - | - | - | 22.1% | 19.8% | 13.3% | 8.0% | -1.8% | ||||||||||||
SG&A ratio | 31.8% | 27.8% | 28.3% | 31.4% | 34.0% | 31.5% | 31.1% | 33.6% | 36.2% | ||||||||||||
Operating profit | 486 | 1,710 | 2,732 | 2,522 | 510 | 1,330 | 2,172 | 1,951 | -17 | - | 3,000 | ||||||||||
YoY | - | - | - | - | 5.0% | -22.2% | -20.5% | -22.6% | - | 53.8% | |||||||||||
Operating profit margin | 9.1% | 13.9% | 14.3% | 10.1% | 8.4% | 10.2% | 11.1% | 7.8% | - | 10.0% | |||||||||||
Recurring profit | 452 | 1,661 | 2,683 | 2,498 | 535 | 1,271 | 2,094 | 1,880 | -57 | - | 2,900 | ||||||||||
YoY | - | - | - | - | 18.5% | -23.5% | -22.0% | -24.8% | - | 54.3% | |||||||||||
Recurring profit margin | 8.4% | 13.5% | 14.1% | 10.0% | 8.8% | 9.8% | 10.7% | 7.5% | - | 9.7% | |||||||||||
Net income | 267 | 1,111 | 1,809 | 1,559 | 327 | 764 | 1,251 | 1,007 | -135 | - | 1,800 | ||||||||||
YoY | - | - | - | - | 22.3% | -31.2% | -30.8% | -35.4% | - | 78.7% | |||||||||||
Net margin | 5.0% | 9.0% | 9.5% | 6.3% | 5.4% | 5.9% | 6.4% | 4.0% | - | 6.0% | |||||||||||
Quarterly | FY06/22 | FY06/23 | FY06/24 | ||||||||||||||||||
(JPYmn) | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | |||||||||
Revenue | 5,347 | 6,953 | 6,778 | 5,821 | 6,102 | 6,897 | 6,652 | 5,444 | 5,629 | ||||||||||||
YoY | - | - | - | - | 14.1% | -0.8% | -1.9% | -6.5% | -7.8% | ||||||||||||
Cost of revenue | 3,161 | 4,007 | 3,779 | 3,615 | 3,516 | 4,053 | 3,794 | 3,337 | 3,607 | ||||||||||||
YoY | - | - | - | - | 11.2% | 1.1% | 0.4% | -7.7% | 2.6% | ||||||||||||
Cost ratio | 59.1% | 57.6% | 55.8% | 62.1% | 57.6% | 58.8% | 57.0% | 61.3% | 64.1% | ||||||||||||
Gross profit | 2,186 | 2,946 | 2,999 | 2,206 | 2,586 | 2,844 | 2,858 | 2,106 | 2,022 | ||||||||||||
YoY | - | - | - | - | 18.3% | -3.5% | -4.7% | -4.5% | -21.8% | ||||||||||||
Gross profit margin | 40.9% | 42.4% | 44.2% | 37.9% | 42.4% | 41.2% | 43.0% | 38.7% | 35.9% | ||||||||||||
SG&A expenses | 1,700 | 1,722 | 1,977 | 2,416 | 2,076 | 2,024 | 2,015 | 2,328 | 2,039 | ||||||||||||
YoY | - | - | - | - | 22.1% | 17.5% | 1.9% | -3.7% | -1.8% | ||||||||||||
SG&A ratio | 31.8% | 24.8% | 29.2% | 41.5% | 34.0% | 29.4% | 30.3% | 42.8% | 36.2% | ||||||||||||
Operating profit | 486 | 1,224 | 1,022 | -210 | 510 | 819 | 843 | -222 | -17 | ||||||||||||
YoY | - | - | - | - | 5.0% | -33.0% | -17.5% | - | - | ||||||||||||
Operating profit margin | 9.1% | 17.6% | 15.1% | - | 8.4% | 11.9% | 12.7% | - | - | ||||||||||||
Recurring profit | 452 | 1,210 | 1,022 | -185 | 535 | 735 | 823 | -214 | -57 | ||||||||||||
YoY | - | - | - | - | 18.5% | -39.2% | -19.4% | - | - | ||||||||||||
Recurring profit margin | 8.4% | 17.4% | 15.1% | - | 8.8% | 10.7% | 12.4% | - | - | ||||||||||||
Net income | 267 | 843 | 698 | -249 | 327 | 437 | 487 | -244 | -135 | ||||||||||||
YoY | - | - | - | - | 22.3% | -48.2% | -30.3% | - | - | ||||||||||||
Net margin | 5.0% | 12.1% | 10.3% | - | 5.4% | 6.3% | 7.3% | - | - |
Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Since FY06/21 was an irregular accounting period due to a change in the fiscal year-end, YoY comparison for FY06/22 is not available.
Earnings at the company tend to be seasonal, with the April-June and July-September quarters relatively quiet, and the October-December and January-March quarters relatively busy.
Cross Marketing Group 3675
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Results by segment | ||||||||||||||
Cumulative | FY06/22 | FY06/23 | FY06/24 | |||||||||||
(JPYmn) | Q1 | Q1-Q2 | Q1-Q3 | Q1-Q4 | Q1 | Q1-Q2 | Q1-Q3 | Q1-Q4 | Q1 | Q1-Q2 | Q1-Q3 | Q1-Q4 | ||
Revenue | 5,347 | 12,300 | 19,078 | 24,899 | 6,102 | 12,999 | 19,651 | 25,094 | 5,629 | |||||
YoY | - | - | - | - | 14.1% | 5.7% | 3.0% | 0.8% | -7.8% | |||||
Digital Marketing | 2,314 | 5,067 | 7,776 | 10,083 | 2,244 | 4,600 | 6,845 | 9,037 | 2,203 | |||||
YoY | - | - | - | - | -3.0% | -9.2% | -12.0% | -10.4% | -1.8% | |||||
Data Marketing | 1,745 | 4,173 | 6,553 | 8,366 | 2,292 | 5,048 | 7,885 | 9,754 | 1,956 | |||||
YoY | - | - | - | - | 31.3% | 21.0% | 20.3% | 16.6% | -14.7% | |||||
Insight | 1,288 | 3,060 | 4,750 | 6,449 | 1,566 | 3,350 | 4,921 | 6,303 | 1,470 | |||||
YoY | - | - | - | - | 21.6% | 9.5% | 3.6% | -2.3% | -6.1% | |||||
Operating profit | 486 | 1,710 | 2,732 | 2,522 | 510 | 1,330 | 2,172 | 1,951 | -17 | |||||
YoY | - | - | - | - | 5.0% | -22.2% | -20.5% | -22.6% | - | |||||
Operating profit margin | 9.1% | 13.9% | 14.3% | 10.1% | 8.4% | 10.2% | 11.1% | 7.8% | - | |||||
Digital Marketing | 165 | 526 | 771 | 655 | 107 | 290 | 446 | 472 | 1 | |||||
YoY | - | - | - | - | -35.1% | -44.8% | -42.2% | -27.9% | -99.2% | |||||
Operating profit margin | 7.1% | 10.4% | 9.9% | 6.5% | 4.8% | 6.3% | 6.5% | 5.2% | 0.0% | |||||
Data Marketing | 529 | 1,413 | 2,242 | 2,473 | 591 | 1,427 | 2,321 | 2,545 | 282 | |||||
YoY | - | - | - | - | 11.7% | 1.0% | 3.6% | 2.9% | -52.3% | |||||
Operating profit margin | 30.3% | 33.9% | 34.2% | 29.6% | 25.8% | 28.3% | 29.4% | 26.1% | 14.4% | |||||
Insight | 216 | 605 | 973 | 1,268 | 280 | 588 | 853 | 910 | 102 | |||||
YoY | - | - | - | - | 29.9% | -2.8% | -12.3% | -28.2% | -63.8% | |||||
Operating profit margin | 16.7% | 19.8% | 20.5% | 19.7% | 17.9% | 17.5% | 17.3% | 14.4% | 6.9% | |||||
Adjustments | -425 | -833 | -1,254 | -1,874 | -468 | -975 | -1,448 | -1,977 | -401 | |||||
Quarterly | FY06/22 | FY06/23 | FY06/24 | |||||||||||
(JPYmn) | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | ||
Revenue | 5,347 | 6,953 | 6,778 | 5,821 | 6,102 | 6,897 | 6,652 | 5,444 | 5,629 | |||||
YoY | - | - | - | - | 14.1% | -0.8% | -1.9% | -6.5% | -7.8% | |||||
Digital Marketing | 2,314 | 2,753 | 2,709 | 2,308 | 2,244 | 2,356 | 2,245 | 2,192 | 2,203 | |||||
YoY | - | - | - | - | -3.0% | -14.4% | -17.1% | -5.0% | -1.8% | |||||
Data Marketing | 1,745 | 2,428 | 2,380 | 1,814 | 2,292 | 2,756 | 2,837 | 1,870 | 1,956 | |||||
YoY | - | - | - | - | 31.3% | 13.5% | 19.2% | 3.1% | -14.7% | |||||
Insight | 1,288 | 1,773 | 1,690 | 1,700 | 1,566 | 1,784 | 1,570 | 1,382 | 1,470 | |||||
YoY | - | - | - | - | 21.6% | 0.7% | -7.1% | -18.7% | -6.1% | |||||
Operating profit | 486 | 1,224 | 1,022 | -210 | 510 | 819 | 843 | -222 | -17 | |||||
YoY | - | - | - | - | 5.0% | -33.0% | -17.5% | - | - | |||||
Operating profit margin | 9.1% | 17.6% | 15.1% | - | 8.4% | 11.9% | 12.7% | - | - | |||||
Digital Marketing | 165 | 360 | 245 | -116 | 107 | 183 | 156 | 26 | 1 | |||||
YoY | - | - | - | - | -35.1% | -49.3% | -36.5% | - | -99.2% | |||||
Operating profit margin | 7.1% | 13.1% | 9.1% | - | 4.8% | 7.8% | 6.9% | 1.2% | 0.0% | |||||
Data Marketing | 529 | 883 | 829 | 231 | 591 | 836 | 894 | 224 | 282 | |||||
YoY | - | - | - | - | 11.7% | -5.4% | 7.9% | -3.0% | -52.3% | |||||
Operating profit margin | 30.3% | 36.4% | 34.8% | 12.7% | 25.8% | 30.3% | 31.5% | 12.0% | 14.4% | |||||
Insight | 216 | 389 | 368 | 295 | 280 | 308 | 265 | 57 | 102 | |||||
YoY | - | - | - | - | 29.9% | -20.9% | -28.0% | -80.6% | -63.8% | |||||
Operating profit margin | 16.7% | 21.9% | 21.8% | 17.4% | 17.9% | 17.2% | 16.9% | 4.1% | 6.9% | |||||
Adjustments | -425 | -409 | -421 | -620 | -468 | -507 | -473 | -529 | -401 |
Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Since FY06/21 was an irregular accounting period due to a change in the fiscal year-end, YoY comparison for FY06/22 is not available.
Q1 FY06/24 results (out November 13, 2023)
Summary
Revenue: JPY5.6bn (-7.8% YoY)
Operating loss: JPY17mn (profit of JPY510mn in Q1 FY06/23)
Recurring loss: JPY57mn (profit of JPY535mn in Q1 FY06/23)
Net loss attributable to owners of the parent: JPY135mn (profit of JPY327mn in Q1 FY06/23)
Progress versus company forecast
Versus the company's full-year FY06/24 forecast, Q1 revenue reached 18.8% (24.3% of the full-year FY06/23 results in Q1 FY06/23). In terms of operating profit, the company recorded a loss of JPY17mn (vs. JPY510mn in 1H FY06/23), recurring loss of JPY57mn (JPY535mn), and net loss attributable to owners of the parent of JPY135mn (JPY327mn). According to the company, progress in Q1 was below the forecast (not disclosed). However, the company's performance is known to be seasonal, with approximately 80% of annual earnings weighted toward Q2 and Q3. Given that the company expects its performance to recover from Q2, it left its full-year targets unchanged.
Revenue
Revenue was JPY5.6bn (-7.8% YoY). Earnings at the company tend to be seasonal, with the April-June and July-September quarters relatively quiet, and the October-December and January-March quarters relatively busy. By segment, revenue was down in the Digital Marketing segment, dropping 1.8% YoY to JPY2.2bn, in the Insight segment by 14.7% to JPY2.0bn, and in the Data Marketing segment by 6.1% YoY to JPY1.5bn.
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Operating profit
The company reported an operating loss of JPY17mn (compared to an operating profit of JPY510mn in the same period of the previous year). The drop in operating profit (falling into the red) was attributed to a rise in cost ratio, which rose by 6.5pp YoY to 64.1%. Additionally, SG&A expense ratio increased by 2.2pp to 36.2%. The main factors contributing to the increase and decrease in operating profit were as shown in the table below.
Reasons for changes in operating profit
Reasons for increase
SG&A, such as a decrease in outsourcing expenses | JPY40mn |
Reasons for decrease
Decrease in gross profit due to lower sales in Data Marketing | JPY260mn |
Decrease in gross profit due to lower sales and gross margin in Insight | JPY110mn |
Decrease in gross profit due to lower sales in Digital Marketing | JPY190mn |
Source: Shared Research based on company data
Digital Marketing
Revenue: JPY2.2bn (-1.8% YoY)
Operating profit: JPY1mn (-99.2% YoY)
OPM: 0.0% (4.8% in Q1 FY06/23)
Digital Marketing revenue was JPY2.2bn (-1.8% YoY). Media and promotions revenue was JPY1.5bn (+2% YoY), rising YoY for the first time in five quarters, due to the bottoming out of order unit prices and consolidation of Tokyo Gets Co., Ltd. Order unit prices rose 7% YoY in Q1 FY06/24, turning back to a recovery trend, after falling down 9% YoY in Q1 FY06/23, 24% YoY in Q2, 25% YoY in Q3, and 2% YoY in Q4. Meanwhile, IT solutions revenue was approximately JPY710mn (-10% YoY). Growth was sluggish in the contracted development and human resources fields.
Operating profit was JPY1mn (-99.2% YoY). The main reason for the decrease was a decline in gross profit due to a lower gross profit margin resulting from the expansion of relatively low-margin businesses, in addition to the impact of the decline in revenue. The company maintained profitability by controlling SG&A expenses.
Data Marketing
Revenue: JPY2.0bn (-14.7% YoY)
Operating profit: JPY282mn (-52.3% YoY)
OPM: 14.4% (25.8% in Q1 FY06/23)
Data Marketing revenue was JPY2.0bn (-14.7% YoY). Forex factors raised revenue by about JPY20mn. When excluding forex factors, revenue was down 16% YoY. The main factors contributing to the decrease in sales were as follows: 1) In the domestic market, despite the uncertain economic situation, research demand from client companies remained relatively stable, resulting in a slight decrease YoY. On the other hand, 2) in the overseas market, revenue decreased significantly YoY, as the concentrated demand seen mainly in North America after the onset of the COVID-19 pandemic ran its course.
Operating profit was JPY282mn (-52.3% YoY). Forex factors were negligible. Excluding forex factors, the growth rate decreased by 50% YoY. The main factors for the lower profit were a decrease in gross profit due to the decrease in revenue, and an increase in SG&A expenses as a result of personnel strengthening at overseas bases until end-FY06/23.
Insight
Revenue: JPY1.5bn (-6.1% YoY)
Operating profit: JPY102mn (-63.8% YoY)
OPM: 6.9% (17.9% in Q1 FY06/23)
Insight revenue was JPY1.5bn (-6.1% YoY). Forex factors boosted revenue by about JPY110mn. When excluding forex factors, revenue was down 7% YoY. The decrease was primarily the result of two factors: 1) In the domestic market, although demand for full-service online surveys was steady, the growth in the medical and healthcare areas was sluggish and remained flat. 2) In the overseas market, the business struggled mainly in the UK.
Operating profit was JPY102mn (-63.8% YoY). Forex factors were minimal. When excluding forex factors, operating profit was down 16% YoY, mainly due to lower gross profit from revenue decline and higher SG&A expenses as a result of personnel strengthening until end-FY06/23.
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Overseas operations
Overseas operations, which are included in both the Data Marketing and Insight segments, generated revenue of roughly JPY1.1bn (-26% YoY) in Q1. Forex factors boosted revenue about JPY40mn. When excluding forex factors, revenue was down 29% YoY. Demand in North America peaked, and the UK continued to face challenges. India performed well, capturing strong research demand from consulting and research companies. Indonesia secured orders across various industries, including government-owned energy, automotive, and electronics sectors, without significant bias. The Philippines and Thailand showed positive performance, although their contribution was relatively small.
Topics
The app developed by Cross Communication, a consolidated subsidiary, on order from Daiwa Connect Securities Co., Ltd. (unlisted; consolidated subsidiary of Daiwa Securities Group [TSE Prime: 8601]) received the Good Design Award 2023. The app was recognized for its user-friendly design and intuitive operability.
Moratame.net, an e-commerce site operated by DO HOUSE, a consolidated subsidiary, started collaborating with the comprehensive shopping site "au PAY Market" in October 2023. The site operates the Sample Monitor by Moratame service within "au PAY Market" to expand their sampling services.
FY06/24 c | ompanyFY06/22forecast | FY06/23 | FY06/24 | |||||||
(JPYmn) | 1H | 2H | FY | 1H | 2H | FY | 1H Est. | 2H Est. | FY Est. | |
Revenue | 12,300 | 12,599 | 24,899 | 12,999 | 12,096 | 25,094 | 30,000 | |||
YoY | - | - | - | 5.7% | -4.0% | 0.8% | 19.5% | |||
Operating profit | 1,710 | 812 | 2,522 | 1,330 | 621 | 1,951 | 3,000 | |||
YoY | - | - | - | -22.2% | -23.5% | -22.6% | 53.8% | |||
Operating profit margin | 13.9% | 6.4% | 10.1% | 10.2% | 5.1% | 7.8% | 10.0% | |||
Recurring profit | 1,661 | 837 | 2,498 | 1,271 | 609 | 1,880 | 2,900 | |||
YoY | - | - | - | -23.5% | -27.2% | -24.8% | 54.3% | |||
Recurring profit margin | 13.5% | 6.6% | 10.0% | 9.8% | 5.0% | 7.5% | 9.7% | |||
Net income | 1,111 | 449 | 1,559 | 764 | 243 | 1,007 | 1,800 | |||
YoY | - | - | - | -31.2% | -45.9% | -35.4% | 78.7% | |||
Net margin | 9.0% | 3.6% | 6.3% | 5.9% | 2.0% | 4.0% | 6.0% |
Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: FY06/21 was an irregular accounting period due to a change in the fiscal year-end.
The company's full-year FY06/23 forecast calls for revenue of JPY30.0bn (+19.5% YoY), operating profit of JPY3.0bn (+53.8% YoY), recurring profit of JPY2.9bn (+54.3% YoY), and net income attributable to owners of the parent of JPY1.8bn (+78.7% YoY). The company aims to achieve the mid-term management plan, DX Action 2024, with FY06/24 as the final year.
By segment, the company is targeting JPY12.0bn (+32.8% YoY) in Digital Marketing, JPY11.0bn (+12.8% YoY) in Data Marketing, and JPY7.0bn (+11.1% YoY) in Insight. The company has not disclosed operating profit by segment. The company will strive to create business restructuring synergies and recover order unit prices while working to curb SG&A expenses.
In Digital Marketing, demand has been increasing from customers that handle products consumed relatively quickly, such as beverages, food, and cosmetics (daily necessities) after bottoming out in Q3 FY06/23. The company aims to achieve synergy effects through business restructuring. Specifically, its consolidated subsidiaries DO HOUSE and D&M plan to merge in January 2024. In Data Marketing, the company anticipates continued solid growth. In Insight, the company expects a continued recovery in offline surveys and sustained high growth in Indonesia.
In May 2023, the company acquired shares of Tokyo Gets Co., Ltd. Tokyo Gets has expertise in utilizing and managing intellectual property content, including anime and various characters. It has a track record of developing collaborative products with high-profile content such as One Piece and Attack on Titan and proposing and implementing tie-up promotional campaigns for consumer goods. The company plans to further enhance its marketing support for consumer goods-related clients through this acquisition.
In terms of shareholder return, the company plans to implement a stable dividend payout ratio of about 15%. It plans to pay an interim dividend of JPY6.5 per share (versus JPY6.0 per share in FY06/23) and an year-end dividend of JPY6.5 per share (versus JPY6.0 per share in FY06/23) bringing its annual dividend forecast to JPY13.0 per share (versus JPY12.0 per share in FY06/23). In addition, from May to July 2023, the company repurchased its shares (total repurchase price: JPY500mn, total number of shares repurchased: 676,000).
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Historical initial forecasts versus results
In FY06/23, Digital Marketing fell short of the company's initial forecast due to a decline in order unit prices. Some customers, such as daily necessities and beverage manufacturers, cut back on promotional spending due to the impact of high raw material and resource prices.
Digital Marketing earnings were above plan in FY06/22, due mainly to the strong performance of consolidated subsidiaries DO HOUSE and D&M. In addition, although the company had been conservative with its projections in light of the pandemic, recovery in revenue levels at Data Marketing's overseas subsidiaries exceeded expectations.
In FY12/20, the pandemic resulted in the postponement or cancellation of some offline research projects in the research business and restrictions on activity at overseas bases due to urban lockdowns.
In FY12/18, revenue fell short of projections in the domestic and overseas research businesses, and profits fell short of estimates due to increased outsourcing costs accompanying the receipt of orders for large projects.
Initial forecasts versus actual results
Results vs. Initial Est. | FY12/14 | FY12/15 | FY12/16 | FY12/17 | FY12/18 | FY12/19 | FY12/20 | FY06/21 | FY06/22 | FY06/23 | |
(JPYmn) | Cons. | Cons. | Cons. | Cons. | Cons. | Cons. | Cons. | Cons. | Cons. | Cons. | |
Revenue | Initial Est | 8,600 | 14,733 | 16,535 | 17,350 | 18,614 | 20,000 | 19,570 | - | 23,051 | 28,000 |
Act. | 8,141 | 14,859 | 15,969 | 16,758 | 17,492 | 18,580 | 15,985 | 10,758 | 24,899 | 25,094 | |
Difference | -5.3% | 0.9% | -3.4% | -3.4% | -6.0% | -7.1% | -18.3% | - | 8.0% | -10.4% | |
Operating profit | Initial Est | 838 | 945 | 1,251 | 1,400 | 1,250 | 1,250 | 1,360 | - | 1,903 | 3,000 |
Act. | 536 | 1,233 | 1,342 | 727 | 955 | 1,267 | 986 | 1,007 | 2,522 | 1,951 | |
Difference | -36.0% | 30.4% | 7.3% | -48.1% | -23.6% | 1.4% | -27.5% | - | 32.5% | -35.0% | |
Recurring profit | Initial Est | 830 | 900 | 1,213 | 1,382 | 1,172 | 1,109 | 1,330 | - | 1,850 | 2,900 |
Act. | 521 | 1,185 | 1,267 | 597 | 840 | 1,150 | 1,078 | 1,048 | 2,498 | 1,880 | |
Difference | -37.2% | 31.7% | 4.5% | -56.8% | -28.3% | 3.7% | -18.9% | - | 35.0% | -35.2% | |
Net income | Initial Est | 476 | 476 | 640 | 825 | 600 | 570 | 820 | - | 1,101 | 1,800 |
Act. | 245 | 559 | 837 | -703 | 507 | -477 | 467 | 540 | 1,559 | 1,007 | |
Difference | -48.4% | 17.3% | 30.8% | - | -15.6% | - | -43.1% | - | 41.6% | -44.1% |
Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: FY06/21 was an irregular accounting period due to a change in the fiscal year-end.
Medium-term outlook
Medium-term management objectives
In August 2021, CMG announced its medium-term management plan, DX Action 2024, targeting market capitalization of JPY30.0bn, revenue of JPY30.0bn, and operating profit of JPY3.0bn in FY06/24, the final year of the plan.
Medium-term management plan targets | |||||||
FY06/21 | FY06/24 | 3 year | |||||
(JPYmn) | Act. | Targets | CAGR | ||||
Market capitalization | 13,740 | 30,000 | |||||
Revenue | 19,043 | 30,000 | 16.4% | ||||
Digital Marketing | 6,800 | 12,000 | 20.8% | ||||
Data Marketing | 6,500 | 8,000 | 7.2% | ||||
Insight | 5,900 | 7,000 | 5.9% | ||||
New businesses/acquisitions | - | 3,000 | - | ||||
Operating profit | 1,828 | 3,000 | 18.0% | ||||
Operating profit margin | 9.6% | 10.0% | |||||
Net income | 930 | 1,800 | 24.6% | ||||
Net margin | 4.9% | 6.0% | |||||
EPS (JPY) | 46.5 | 90.1 | 24.7% |
Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: FY06/21 market capitalization is the closing price on June 30, 2021, while revenue and operating profit figures are sums of 2H FY12/20 and FY06/21 results (since FY06/21 was an irregular accounting period of six months).
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Cross Marketing Group Inc. published this content on 04 December 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 04 December 2023 03:23:34 UTC.
