Q&A - 9th Ordinary General Meeting of Shareholders - Part 2
3. Answers to Other Received Questions
① Related to Shareholders' Meeting
46 Question
Your company's director candidates all seem to be men, but there is the current situation where the Corporate Governance Code recommends improving the ratio of female executives, etc. In your business, women and foreigners play very important roles. Is there a plan to involve them in the management layer?
Answer
In our company, the appointment of female employees to managerial positions and above is increasing, and the female ratio is improving. Going forward, we will continue to consider the appointment of women from a diversity perspective.
47 Question
What is the reason for not including non-monetary compensation such as stock options in the compensation for directors for this fiscal year?
Answer
It is because no stock compensation expenses for stock options have occurred, so they are not included in the compensation.
48 Question
Regarding major risks and countermeasures, for the "risk related to the popularity, activity frequency, activity continuation, etc. of affiliated VTubers," the possibility of materialization is "medium," and the timing of materialization is "medium-term." Considering the situation over the past year, it can be seen as a risk with high frequency and short-term materialization possibility; is your view that no review is necessary? Also, has a review of the risk management system been implemented in response to the result of multiple risks materializing?
Answer
Risks are evaluated periodically based on business importance and impact, considering past performance from our company's medium- to long-term strategic perspective. Therefore, it does not necessarily reflect only the most recent situation, and there is no change in our current recognition.
49 Question
Regarding Proposal 2, please explain the contributions of Mr. Wada and Mr. Ueda to the metaverse business. I can confirm that metaverse development is progressing, but currently, it feels like progress similar to metaverse businesses that "failed in the past or have not succeeded," so please explain the parts where both are having a positive influence on metaverse development.
Answer
We recognize both as professionals in the field who have succeeded in operating large-scale online games (MMOs) for many years. Based on their rich experience from a management perspective, they provide important advice to avoid past failure cases and increase the success probability of the business. Of course, we are not simply imitating past successes. We receive advice from the perspective of how to fuse their experiential knowledge with our strengths in IP and unique experience creation, and their presence serves as a "compass" in this grand challenge.
50 Question
The deadline for pre-questions from the shareholders' meeting convocation notice is extremely short. Such questions were seen last year as well. But this year's deadline was also abnormally short. Why is there no improvement?
Answer
We prepare according to the period stipulated by law, but we apologize that the deadline becomes short due to the time required from shipment to arrival. On the other hand, this time we extended the pre-question acceptance period by one day, and including other measures, we will proceed with improvements as much as possible. Also, since we plan to continue pre-questions in the future, please consider questions in advance and submit within the period.
51 Question
In previous meetings, there were cases where answers to pre-questions or on-the-day questions gave the impression of not fully grasping the content. For answers that feel insincere, there is no opportunity for pointing out, and as a shareholder, I feel there is no way to verify the validity of answers. Do you plan to introduce a mechanism where questioners can confirm their questions and answers (e.g., individual answers to questioners, publication of question collections)? Please share your views along with measures.
Answer
As pointed out, for questions that we could not fully answer due to time constraints on the day, we create and publish a "questions and answers collection" after the shareholders' meeting, striving to supplement and share information in a form that captures the intent of the questions as much as possible. At present, we do not have a mechanism for individual answers to individual shareholders, but we emphasize fulfilling transparency and accountability by enriching the answer collection so that information is fairly conveyed to all shareholders. Going forward, we will continue to improve the communication approach in shareholders' meetings to aim for more appropriate and convincing responses.
52 Question
Due to the virtual-only shareholders' meeting, substantial dialogue with shareholders is lost. Inconvenient questions can be avoided, and insufficient answers cannot be pointed out. I feel that this insincere attitude leads to shareholders' distrust and decline in corporate governance. To improve dialogue quality and fulfill sincere accountability in the future, please share your views on the reasons for continuing virtual-only and measures to ensure interactivity (answering all questions, publication, etc.).
Answer
In considering the implementation format, we chose this format for smooth operation, considering the safety of participants including shareholders based on past irregular actions, and ensuring shareholder equality such as participation by distant shareholders. Also, starting with publishing answers to questions including pre-questions, we will consider improvement points as issues for future meetings and review the optimal form each time, taking the situation into account appropriately.
53 Question
I would like you to separate the shareholders' meeting and business briefing. The shareholders' meeting should focus mainly on voting on proposals, and after it ends, set a venue for strategic explanations from management and communication with shareholders. Please consider a format where communication can be taken more frankly.
Answer
For smooth operation, we review the appropriate form each time, and we will reference the point you mentioned for future meeting formats.
② Related to IR/SR
54 Question
I understand the policy of returning to shareholders by improving stock value through reinvestment in business and investment in new businesses to enhance corporate value, but do you think the current stock price is sufficiently returning to shareholders?
Answer
For the time being, we prioritize growth investments as the use of cash. On the other hand, if the stock price significantly deviates from the actual corporate value and remains low, or if capital efficiency greatly declines due to cash accumulation in business progress, we would like to consider implementing flexible return measures.
55 Question
How about distributing live streaming tickets for fests, TCG, HoloCoins in HoloEarth, etc., as shareholder benefits?
Answer
This overlaps with the answer in "Question Number 7," but utilizing to deepen understanding of our content may be implemented in the future. Currently, considering usefulness and implementation costs, we will appropriately review the feasibility.
56 Question
Regarding shareholder returns in the capital allocation policy, it is explained that there is a possibility of shifting to a consideration stage, but what time frame do you anticipate for consideration and presentation of conclusions?
Answer
For shareholder returns, there are various methods such as dividends, share buybacks, and shareholder benefits, and we are considering each appropriately. Therefore, we cannot indicate or affirm that we will definitely implement this measure at this time, but we plan to consider and implement at appropriate timings in accordance with disclosure policies.
57 Question
The amount (information) of IR releases is small; won't you increase it?
Answer
We disclose information useful to investors, but we recognize that the VTuber market is relatively new, so there are parts that are hard to understand. Going forward, we will consider and improve various measures to advance business understanding.
58 Question
Since listing in March 2023, our stock price has repeated significant fluctuations. As the main cause is considered insufficient IR activities, to stabilize the stock price, please present specific improvement plans for IR measures and information disclosure enhancement to be implemented in the future.
Answer
Regarding the stock price, we recognize that it is influenced by various external factors such as daily supply and demand in the stock market, investor sentiment, industry trends, and macroeconomic environment. On the other hand, as a growth company, we believe it is important for stock price stability to increase the ratio of long-term investors by firmly communicating our medium- to long-term expansion policy and its progress to the market, and we are considering and implementing various measures such as meetings with institutional investors and information disclosure on the IR site.
59 Question
To correspond with the TSE recommending a minimum investment amount of about 100,000 yen, you should quickly do a 2-for-1 split and show the TSE that you are taking all measures toward Prime transition.
Answer
We will reference your thoughts on stock splits and market category transitions in considering future responses. As a company, we are appropriately advancing the fulfillment of necessary requirements and application processes toward transitioning to the Prime Market. Regarding the review process and content, there are points we cannot unilaterally disclose from the company, but if matters to disclose arise in the future, we will promptly disclose at the appropriate timing. We will continue to value fair and transparent information disclosure and dialogue with shareholders while aiming for long-term corporate value enhancement.
60 Question
Considering the current influence of Hololive, the relatively low market capitalization raises concerns about the risk of becoming a takeover target. To avoid such risks, I believe measures to improve stock price are necessary; what are your thoughts on this point?
Answer
Considering the current shareholder composition, we believe the risk of immediate takeover is limited.
61 Question
The forecast of 11.2 billion yen in operating profit for this fiscal year after adding back upfront investment expenses seems quite aggressive. Besides TCG overseas expansion, are there new projects expected to contribute to sales?
Answer
We anticipate profit margin improvements through increasing the proportion of merchandising and license/tie-up sales, and new areas like TCG, and for this fiscal year, profits will be somewhat suppressed due to upfront investments, but as you indicated, we expect profitability to improve more than before in the added-back profit expectations.
62 Question
Your company habitually gives conservative performance forecasts and lands above in 3Q-4Q. Because of this, the upside in full-year results is offset by the simultaneously released conservative forecast. This is a structural issue due to major revenue-impacting events in 4Q, etc., and not easily solvable, but instead of just issuing conservative full-year forecasts, won't you consider measures like issuing in ranges as other companies do?
Answer
In our company, at the beginning of each period, we formulate performance forecasts based on available information and outlook, being careful not to be excessively conservative. However, due to our business nature, fan base expansion and business developments like live events tend to progress toward the period end, and we recognize that upside in full-year results often occurs. On the other hand, setting and disclosing overly stretched targets from the period start may affect supply plans and promotion intensity, risking excessive burden on talents and fans, so we consider a cautious balance necessary. Including your suggestion of range-format disclosure, we will continue to review appropriate expressions and disclosure methods for performance outlooks more aligned with reality, while gaining understanding from investors.
63 Question
Couldn't you create an online space for individual shareholders to interact? Anonymous between users, but registering shareholder number, shares held, and name at registration.
Answer
Thank you for your opinion. With the number of shareholders constantly fluctuating due to daily stock trading, it is difficult to manage shareholders timely and appropriately, so we are not considering providing a community from the company at this time.
64 Question
As before, but especially recently, numerical forecasts in financial reports are increasingly conservative. There were even quarter forecasts with effectively negative profit from the previous year. Also, IR communications are extremely weak, and the criteria for issuing IR are inconsistently scattered. Please tell me the names of the directors who give the GO sign for numerical forecasts in financial reports and the director overseeing IR. If this continues, I will choose no confidence.
Answer
In our company, at the beginning of each period, we formulate performance forecasts based on business information and external environment, while being mindful not to be excessively conservative, but carefully considering business characteristics and variable factors. In actual operations, there is a tendency for fan base expansion and business activities like live events to activate toward the period end, and we recognize that full-year upside cases are common. On the other hand, assuming overly high targets from the period start for forecasts may affect supply plans and promotion operations, potentially burdening talents and fans excessively, so we emphasize balance with sustainability. Note that the formulation of performance forecasts is summarized by Executive Officer CFO (current Director CFO) Yohei Kaneko on business progress and growth outlooks of each department, and then finalized through board approval resolution. Also, for IR disclosure policies and operations, management collaborates and implements based on judgments of necessity and timeliness. We accept concerns about IR issuance criteria and content as issues for future improvement and will continue to build a transparent and consistent IR system.
65 Question
I have doubts that the response to explanatory meetings or IR for individual investors is insufficient. Along with reporting on system expansion and personnel securing status, do you think you have provided sufficient explanations to the market? Also, announcements are mostly ex-post facto, with no explanations at all regarding shareholder improvements, etc. Aren't you considering improving the IR department in the future?
Answer
Our company emphasizes appropriately communicating our situation, including medium- to long-term expansion policies and progress, to shareholders and investors, and last fiscal year, we continuously communicated the overall plan and business progress through IR briefings, timely disclosures, and various materials. On top of that, considering changes in the market environment and diversification of investor layers, we are working to further improve IR and disclosure to promote understanding and convincing communication. We position such initiatives not as temporary responses but as important management challenges contributing to medium- to long-term corporate value enhancement, and will advance them stepwise and planned.
66 Question
The paternity leave acquisition rate for male workers has greatly increased, which is wonderful, but how do you think about the work-life balance not only for employees but also for affiliated talents? Do you have any numerical targets?
Answer
As stated in previous related questions, we recognize maintaining the physical and mental health of talents as the most important issue and are continuously reviewing and improving the operation system. Specific initiatives include introducing mental care services for talents and supporting health checkups to maintain physical and mental health. Note that we do not have specific numerical targets at present.
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