Golf Digest Online : FY2022 Earnings Conference Call Transcript(2 MB)

Event Name: Results briefing for the fiscal year ended December 31, 2022.

Date: February 14, 2023

Time: 4.00 p.m. - 5.00 p.m.

Place: Online (Zoom Webinar) Speakers:

Nobuya Ishizaka, President and CEO, Golf Digest Online Inc

Takehiro Yoshikawa, Executive Vice-President and COO, Golf Digest Online Inc Ryo Nakamura, CFO, Golf Digest Online Inc

Briefing and Commentary

Nobuya Ishizaka (hereafter, CEO Ishizaka): We announced our financial results at midday on February 14, 2023. I will provide an explanation on those results by summarizing a portion of the materials we disclosed. After reviewing FY2022, I will discuss our performance forecast for FY2023.

1.Review of FY2022

Summary

In this slide, I will review FY2022, which marked the second year of the current Mid- Term Business Plan. In FY2022, we focused on achieving further growth in the Overseas Segment and refining businesses and taking on challenges in the Domestic Segment toward achieving the Mid-Term Business Plan. Although we fell short of our revised plan, we recorded double-digit growth for net sales and EBITDA, achieving record highs for both. In particular, I feel that we attained several of our major qualitative targets. As the middle year of the Mid-Term Business Plan, I believe that FY2022 saw the Group carry out significant activities toward realizing its vision.

I will pick up five points from among those activities. The first is our investment in our overseas businesses and our achievement of growth in them, at the core of which is our U.S. business. In addition to pursuing a center-opening strategy, U.S. GOLFTEC completed the acquisition of the SkyTrak business in August 2022.

Second, we established a new Group business concept with a focus on SkyTrak and U.S. GOLFTEC and undertook M&A and other activities to realize that concept. Third, we made U.S. GOLFTEC a wholly owned subsidiary, which was an integral part of realizing the Group's concept, thereby allowing us to implement the investment in SkyTrak.

Fourth, we established and spread new services for customers in our retail business, which is one of our core domestic businesses. Fifth, we enhanced the profitability of

businesses including our golf course booking business, which is also one of our core domestic businesses. COO Yoshikawa will provide details on these developments later.

At the same time, we fell short of our financial targets, reflecting the severe impact of changes in our operating environment globally. Primarily, the fact that our U.S. business accounted for around 40% of our sales in FY2022 meant that we felt the impact of adversities, such as changes in the operating environment in the U.S. market and significant exchange rate fluctuations.

Second, although we largely achieved the guidelines set out in the Mid-Term Business Plan for net sales and EBITDA growth, our efforts to accomplish each of our profit plans by supplementing negative factors such as one-time expenses incurred for M&A, the impact of exchange rates, and the failure of existing businesses to meet their targets, through cost controls proved insufficient.

Third, our investment in new golf services in FY2022 to meet new demand arising from the growth triggered by robust golf demand in FY2021 had a short-term impact on our profits. Although our profits decreased, I believe that we were able to plant seeds for achieving growth over the medium to long term.

As a result, net sales came to 46.09 billion yen, up 22.2% from the previous fiscal year, and EBITDA amounted to 4.04 billion yen, an increase of 12.6%. In terms of profits, however, operating income was 1.18 billion yen and profit attributable to owners of the parent stood at 330.0 million yen, both falling short of the plan.

P/L Overview

This slide compares figures for FY2021 and FY2022 based on the newly adopted standard for revenue recognition.