More Content for More People! MEDIA DO Co., Ltd. Financial Results Briefing 証Sec券urコitiーes ドco：de3: 6367788 FY2020 (Ended February 2021) INDEX 1. Consolidated earnings highlights 2. Future growth plans (1) eBook distribution business －Invent future eBook markets —Media Do’s NFT initiatives (2) eBook distribution business －Stimulate the growth of eBook markets (3) Other businesses (4) FY2020 initiatives 3. Reference data 1 Copyright © MEDIA DO Co., Ltd. All Rights Reserved. - https://mediado.jp Earnings Results 1. Consolidated earnings highlights 2 Copyright © MEDIA DO Co., Ltd. All Rights Reserved. - https://mediado.jp Consolidated earnings highlights (1) All-time record net sales and profits by virtue of eBook demand growth driven by stay-at-home consumption Consolidated Net sales ¥83.5bn (+27% YoY) Operating profit ¥2,660mn (+44% YoY) EBITDA ¥3,420mn (+29% YoY) Profit attributable to ¥1,510mn (+72% YoY) owners of parent Of which, eBook distribution business Sales ratio 98.6% Net sales ¥82.3bn (+28% YoY) Operating profit ¥2,590mn (+39% YoY) 3 Copyright © MEDIA DO Co., Ltd. All Rights Reserved. - https://mediado.jp Consolidated earnings highlights (2) All-time record 4Q consolidated net sales and EBITDA again Quarterly consolidated Quarterly consolidated net sales +20% YoY EBITDA +5.4% YoY (Millions of yen) (Millions of yen) 24,000 1,000 22,000 21,533 900 Net sales growth rate slowed relative to We stepped up investment in 3-4Q as 20,000 1-3Q due to pirate sites’ increased impact 800 explained at 2Q earnings briefing 18,000 723 700 16,000 14,000 600 12,000 500 10,000 400 8,000 300 6,000 200 4,000 2,000 100 0 0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q FY2016 FY2017 FY2018 FY2019 FY2020 FY2016 FY2017 FY2018 FY2019 FY2020 Note: FY2016 data are Media Do’s nonconsolidated net sales and EBITDA. 4 Copyright © MEDIA DO Co., Ltd. All Rights Reserved. - https://mediado.jp Consolidated earnings highlights (3) Net sales and profits were both a bit shy of upwardly revised forecasts, weighed down by pirate sites’ impact ¥85.0bn ¥83.5bn Attainment rate* Revised –1.8% upward ¥3,550mn ¥3,420mn Revised –3.7% Net sales upward 98.3% ¥77.0bn (108.5% of initial net sales forecast) ¥3,000mn EBITDA Initial Revised Actual Initial Revised Actual forecast forecast forecast forecast 96.4% (114.1% of initial net sales forecast) Net sales EBITDA * Initial and revised forecasts are forecasts disclosed on April 14 and October 13, 2020, respectively. 5 Copyright © MEDIA DO Co., Ltd. All Rights Reserved. - https://mediado.jp Consolidated earnings highlights (4) Total return ratio 21.1% 21.1% 32.2% NA* 20.1% 20.1% FY2020 year-end DPS Dividends and/or share buybacks equivalent to total return ratio of at least 20% ¥21.00 ¥21.0 Note: Pending Board approval scheduled for April 22, 2021 Ongoing stable dividends ¥13.0 ¥10.5 ¥10.5 ¥2.5 ¥8.8 In FY2021, we plan to return to shareholders at ¥7.2 least 20% of profit attributable to owners of ¥10.5 parent through dividends and share buybacks, with the split between the two to be determined FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 based largely on our share price actual actual actual actual actual planned planned Note: Total return ratio = (total dividends paid + total share repurchases) *FY2018 total return ratio was omitted because a loss attributable to owners ÷ profit attributable to owners of parent of parent was incurred in FY2018 6 Copyright © MEDIA DO Co., Ltd. All Rights Reserved. - https://mediado.jp Review of current medium-term management plan (MTP) (1) Net sales surpassed MTP’s target; EBITDA was roughly in line with target Consolidated ¥90.0bn Consolidated EBITDA ¥83.5bn ¥6,000mn net sales ¥80.0bn ¥6,000mn ¥77.0bn EBITDA nearly hit ¥65.8bn ¥63.0bn Net sales initial target were well ¥50.5bn above target ¥3,420mn ¥3,500mn ¥3,000mn ・・・ ¥2,380mn¥2,600mn ・・・ . FY2018 FY2019 FY2020 FY2021 FY2022 FY2018 FY2019 FY2020 FY2021 FY2022 MTP’s 1st year 2nd year 3rd year 4th year 5th year MTP’s 1st year 2nd year 3rd year 4th year 5th year Actual Initial target (July 2018) Revised target (Apr. 2020) Actual Initial target (July 2018) Revised target (Apr. 2020) 7 Copyright © MEDIA DO Co., Ltd. All Rights Reserved. - https://mediado.jp Review of current medium-term management plan (MTP) (2) PMI and structural reforms completed PMI of 2017 acquiree DPIJ completed (1) Management integration (2) Operational integration (3) Mindset synchronization MEDIA DO HOLDINGS/Media Do Integrated eBook distribution Established mission, vision, values & merger operations (dominant domestic credo Appointed 10-CxO management market share) Integrated/implemented other (e.g., team Completed IT system integration HR) systems Structural reforms (4) Cost reduction (5) Improvement in financial condition Farmed out operations to Media Do Tech Improved financial condition and raised capital for Tokushima M&A through share acquisition rights offering Reduced infrastructure costs by integrating Media Formed capital/operational alliance with Tohan Do and DPIJ’s IT systems Corporation (private-placement capital raise) 8 Copyright © MEDIA DO Co., Ltd. All Rights Reserved. - https://mediado.jp Review of current medium-term management plan (MTP) (3) Improved financial soundness through capital raise Increase in shareholders’ equity Stabilization of financial balance (ratio) Cash and Net assets Shareholders’ equity Shareholders’ equity ratio (SER) deposits Announced on March 25 Private-placement offering to Tohan 20,000 28.0% 30.0% and buyback/retirement of share + pp acquisition rights ¥2,927 9.7 25.0% +¥3,249mn 16,000 mn 18.3% ¥12,104mn 20.0% 12,000 +¥5,189 15.0% mn 8,000 ¥6,975mn ¥12,703 ¥12,169 10.0% ¥9,454 mn mn mn ¥6,980 4,000 5.0% mn 0 0.0% As of Aug. As of Feb. 28, As of Aug. As of Feb. 28, As of Aug. As of Feb. 28, 31, 2020 2021 31, 2020 2021 31, 2020 2021 (18th share acquisition rights issue + private-placement offering to Tohan) 9 Copyright © MEDIA DO Co., Ltd. All Rights Reserved. - https://mediado.jp Business Strategy 2. Future growth plans 10 Copyright © MEDIA DO Co., Ltd. All Rights Reserved. - https://mediado.jp Future growth plans eBook Invent future Stimulate the distribution eBook growth of eBook business markets markets Other Proactive investment for businesses business expansion 11 Copyright © MEDIA DO Co., Ltd. All Rights Reserved. - https://mediado.jp eBook distribution business Invent future eBook markets 12 Copyright © MEDIA DO Co., Ltd. All Rights Reserved. - https://mediado.jp Invent future eBook markets (1) The world Media Do aims to bring about with blockchain technology New content service envisioned by Existing digital content services Media Do ＝ central server platforms ＝ blockchain platform Music/books/visual media, etc. Music/books/visual media 4 1 2 3 Asset model Content sales Subscription Advertising model model model DCA (no restrictions) Digital Content Asset (Trademarked by MEDIA DO) Spotify, Kindle, YouTube, Netflix, etc. Digital content with a concept of “units” and premiumization potential →Leveraging technology to maximize content value 13 Copyright © MEDIA DO Co., Ltd. All Rights Reserved. - https://mediado.jp Invent future eBook markets (2) The advent of NFTs (digital content with a concept of “units”) has ushered in a new era of digital content Cryptocurrencies NFT (non-fungible tokens) Existing digital content Decentralized system Decentralized system Technology Centralized system (Public chain) (Public chain) Fungible Non-fungible Fungible Fungibility (1 BTC has the same value no matter （Digital certificates of ownership with （All copies of the same content are who owns it) unique serial numbers; no two are the identical no matter who owns them） same） Cryptocurrencies Collectibles Publicly distributed eBooks, Examples （Bitcoin, Ethereum, （Digital collectibles: NBA Top Shot, music, visual media Ripple, etc.） CryptoKitties, etc.） （Kindle, YouTube, Spotify, etc.） →“Ownership” concept →NBA Top Shot* has racked up over 3mn trades collectively worth over $500mn since its launch in 4Q20 Source: Dapper Labs ‘ website（https://www.dapperlabs.com/） * A marketplace where US National Basketball Association fans can collect and trade photos of NBA players and video clips of plays as digital cards 14 Copyright © MEDIA DO Co., Ltd. All Rights Reserved. - https://mediado.jp Invent future eBook markets (3) NFT （Non-Fungible Token） Enabling users to digitally experience the fun of collecting to Elevate, expand and visibilize content fandom As a first step, we are partnering with Tohan, a major paper book wholesaler, to build a platform that taps into Tohan’s domestic network of book retailers to connect fans with each other in real life 15 Copyright © MEDIA DO Co., Ltd. All Rights Reserved. - https://mediado.jp Invent future eBook markets (4) Media Do will promote DX among paper book retailers/distribution channels as Tohan’s biggest shareholder Tohan commands an over one-third share of We aim to drive market growth and DX throughout domestic paper book distribution as a bridge the publishing industry as a major eBook between 3,000 publishers and 5,000 book retailers. distributor and publishing platform linking 2,200 It is pursuing demand-driven distribution to domestic publishers to 150 eBook retailers structurally reform publishing distribution by, e.g., reducing return rates. Private-placement offering of Media Do is now Tohan’s top Media Do stock Tohan is now a top-10 shareholder shareholder (5.56% stake) Acquisition of Tohan treasury stock of Media Do (3.09% stake)* *Based on issued share count at Feb. 28, 2021 Building a new publishing ecosystem of creation and distribution 16 Copyright © MEDIA DO Co., Ltd.