Bridge Report:（6191）AirTrip Corpthe Fiscal Year September 2022

President & CFO Yusuke Shibata	AirTrip Corp.（6191）

Company Information

Stock Information

*The share price is the closing price on November 25. Number of shares issued, ROE and BPS are from FY 9/22.

Earnings Trend

*Unit: yen, million yen. IFRS is discretionally applied from FY 9/18. Net income is profit attributable to owners of parent. Hereinafter the same applies.

This report outlines the Fiscal Year September 2022 earnings results and other information about AirTrip Corporation.

Table of Contents

Key Points
1. Company Overview
2. The Fiscal Year ended September 2022 Earnings Results
3. The Fiscal Year ending September 2023 Earnings Forecasts
4. Growth Strategy "AirTrip 2022"
5. Conclusions
＜Reference: Regarding Corporate Governance＞

Key Points

• The transaction volume in the fiscal year ended September 2022 was 53,463 million yen, up 59.0% year on year. Sales revenue decreased 22.9% year on year to 13,510 million yen, due to the revision of the business portfolio in addition to the COVID-19 pandemic. Gross profit declined 0.7% year on year to 7,563 million yen. Operating income fell 30.2% year on year to 2,193 million yen due to the revision of the business portfolio, etc.

   

• In the fiscal year ending September 2023, the company will aim for a transaction volume of 65-75 billion yen. The forecast was kept conservative, calling for sales of 17 billion yen and an operating income of 1 billion yen, without taking into account factors that would increase sales and profit, such as the recovery of domestic travel as the pandemic subsides and the recovery of revenues from international travel brought about by the alleviation of border measures in countries in the world. Meanwhile, the dividend amount has not been determined yet.

   

• “Regional Revitalization Business” has been added as a new business to “AirTrip 5000” in the growth strategy “AirTrip ‘Restart’.” Aiming to boost the number of visitors and revitalize local economy by deploying solutions based on “sightseeing tech” and “HR tech” in order to solve social issues such as the lack of population in the countryside, the company will work toward expanding revenues. We would like to anticipate prompt contribution of the decentralization and reconstruction of the business portfolio to the company’s revenues.

   

1. Company Overview

AirTrip Corp. conducts a variety of businesses centered on the AirTrip online travel business, which operates the comprehensive travel platform "AirTrip," boasting the largest Internet ticket trading volume. In the inbound travel agency business/Wi-Fi rental business, the company provides various services to foreign visitors to Japan and private lodging management companies. As for the IT offshore development business, the company has about 1,000 IT engineers and is engaged in the largest lab-type offshore development among Japanese companies. Moreover, the company is focusing on the investment business, aiming to expand service lines and improve profits by pursuing synergies through collaborations with investee companies by investing in growing companies.
The company set “AirTrip 5000” as their medium-term target to achieve a transaction volume of 500 billion yen.

【1-1 Corporate History】

In May 2007, Tabi Capital Co., Ltd. was established to provide online travel agency services.
Since then, the Company has been expanding its product line-up through M&A and business transfers.
In March 2012, the Company began IT offshore development business in Vietnam. Taking this opportunity, in order to clearly show the Company’s direction towards the integrated IT business, it changed its name to Evolable Asia Corp. in October 2013.
In March 2016, it was listed on the Mothers Section of the Tokyo Stock Exchange. One year later, in March 2017, it moved to the First Section of the Tokyo Stock Exchange.
In May 2018, the company achieved the largest Internet trading volume of airline tickets due to the reorganization of the former DeNA Travel into a subsidiary.
On January 1, 2020, as the operating company of "AirTrip," which has the largest Internet trading volume of airline tickets, the company unified its trade name and brand name to build a stronger business foundation and further improve the popularity of the "AirTrip" brand. Also, the company changed its name to AirTrip Corp. to demonstrate its stance of concentrating on various businesses centered on "AirTrip."
In April 2022, the company got listed on the Prime Market of the Tokyo Stock Exchange following the reorganization of the market.

【1-2 Corporate Philosophy, etc.】

【1-3 Business Description】

Regarding business domains, Regional Revitalization Business has been added to the five businesses: AirTrip Travel Business, IT Offshore Development Business, Inbound Travel Agency Business/Wi-Fi Business, Media Business and Investment Business.
There are three reportable segments: online travel business, IT offshore development business, and investment business. Inbound travel agency business/Wi-Fi rental business and Media business are included in the online travel business segment.

(1) Online Travel Business
① AirTrip travel Business
It sells travel products such as domestic airline tickets, domestic hotels, overseas airline tickets, overseas accommodations, AirTrip plus (Airline tickets + hotels), package tours, busses, rental cars, and Shinkansen through the comprehensive travel platform "AirTrip" and various sales channels.

（From the company's website）

※IATA (International Air Transport Association): The IATA is a trade association of the world’s airlines.

The comprehensive travel platform "AirTrip" handled domestic and international airline tickets, hotels, domestic and international tours, buses, rental cars, and the Japanese bullet train (Shinkansen).
Moreover, the company steadily increased the number of users by actively developing various advertising activities such as TV commercial to raise awareness, operating various campaigns, and improving UI and UX on a daily basis.

(Strengths of business)
The Company has the largest trading volume of airline tickets in the Japanese OTA industry.
The agreements with all domestic airline groups, a unique business condition enjoyed only by the Company, enable the Company to issue flight tickets. Advantageous procurement prices combined with self-issuing of tickets (no need to outsource) make its cost competitiveness overwhelmingly strong.

In addition, the Company has “competitive supply routes” based on strong relationships of trust with each airline company resulting from long-term business relationships, “diverse sales routes”, and “low-cost system development using its own offshore IT development capacity”. Because of these factors, the Company has created high barriers to entry.

②Inbound Travel Business/Wi-Fi Rental Business
The company uses the know-how nurtured in the AirTrip Travel Business to provide services for foreign visitors to Japan and companies operating private residence lease business.
(Primary Services)

*Wi-Fi Rental for Foreign Visitors to Japan
Inbound Platform Corp., a subsidiary of AirTrip, has been providing a Wi-Fi router rental service for travelers visiting Japan, with a performance of over 800,000 rentals, establishing its brand through the long-standing trust and word-of-mouth.

*Dynamic Package for Foreign Visitors to Japan
As the number of foreign visitors from Southeast Asia has been growing, the company has been strengthening its language support. They established the information on domestic hotels and inns in Thai to start with, and providing domestic hotel and inn contents to the “Japan’s first dynamic packages for foreign visitors to Japan” sold by JALPAK Co., Ltd. The company will further establish an environment to promote trips to Japan in other countries.

*One-stop Service for Hosts for Private Residence Lease
In order to efficiently utilize vacant houses that have been increasing in Japan, “AirTrip Stay” provides opportunities to manage such rooms pursuant to the Private Lodging Business Law. They became the first official partner of “Airbnb” in Japan, which is used by 1 of 5 foreign visitors, and provides one-stop support from property registration to property management. They plan to further expand the services in the future.

③ Media Business
Working with MagMag Inc., which is a consolidated subsidiary with the ethos of “distributing what you want to convey to those who want to know,” the company collects creators’ contents from all over the world, develops and provides systems to deliver the information to those who see value in them. They operate the free and paid email newsletter service “MagMag!,” holding the country’s largest 7.5 million-member base, “mine” where users can purchase respective articles, the online media “MAG2 NEWS,” “MONEY VOICE,” “TRiP EDiTOR,” and “by them,” in which users can discover contents and deliver them to a number of people who want to know.

(2) IT offshore development business
The company provides lab-type development services mainly for development companies for e-commerce, web-solutions, games and systems, in 3 locations in Vietnam (Ho Chi Minh, Hanoi and Da Nang). The company forms a team with dedicated staff members hired for each customer of its lab-type development services, which allows customers to check the development status of the lab whenever they need to.

（From the company's website）

(Features of the IT Hybrid Development)
The company has a number of project managers with 5 to 10 years or longer of practical experience in Japan, and carries out upstream processes in Japan, including the requirement definition. They communicate with customers in Japanese, while they communicate with engineers in Vietnamese, therefore, the company can provide development solutions that are consistent from upstream processes to downstream processes, without any inconsistency between their understanding.
Furthermore, they accumulate know-how by assigning dedicated development staff members, so that they can improve the efficiency of their business operation in proportion to the operation period. In addition, they achieve optimum cooperation and management by having a Vietnamese project manager on the ordering side.

(3) Investment business
It is positioned as the business having characteristics of CVC (corporate venture capital). The company will pursue a synergistic effect as well as opportunities for capital gains. The company also engages in investment incubation business.
As of the end of October 2022, the company had invested in a cumulative total of 83 companies, and the total investment amount was 3.6 billion yen.

2. The Fiscal Year ended September 2022 Earnings Results

(1) Consolidated Business Results

*Unit: million yen. IFRS is applied. Net income for this period means profit attributable to owners of parent.

Sales and profit decreased.
The transaction volume in the fiscal year ended September 2022 was 53,463 million yen, up 59.0% year on year.
Sales revenue decreased 22.9% year on year to 13,510 million yen, due to the revision of the business portfolio in addition to the COVID-19 pandemic. Gross profit declined 0.7% year on year to 7,563 million yen. Operating income fell 30.2% year on year to 2,193 million yen due to the revision of the business portfolio, etc.

（From the company's material）

In addition to the ongoing fixed cost reduction, the company aims to minimize cash-out costs by optimizing advertising costs in response to the increasing travel demand. In the fourth quarter of FY 9/22, the company controlled monthly SG&A expenses to 650-700 million yen.

（From the company's material）

(2) Trends by segment

*Unit: million yen. The composition ratio of operating income means operating income margin on sales.

①Online travel business
Sales and profit declined.
Although the recovery of demand for travel increased sales, sales declined due to a change in scope of consolidation.
Segment profit fell 7.7% year on year to 2,473 million yen due to the decrease in sales.

②IT offshore development business
Sales and profit dropped considerably.
Due to the change in the scope of consolidation, the company’s core group company, Hybrid Technologies Co., Ltd., was transformed from a consolidated subsidiary to an equity-method affiliate, which resulted in a fall in sales.
Segment profit declined 26.0% year on year to 423 million yen, due to the recording of spot profit stemming from a change in scope of consolidation (profit brought about by deconsolidation of a subsidiary) of 602 million yen in the previous term.

③Investment business
Sales and profit dropped considerably.
Sales decreased despite the transfer of shares associated with a new listing of a company in which AirTrip invested as part of initial public offerings (IPO). Segment profit fell 39.4% year on year to 443 million yen.

(3) Financial standing and cash flows

◎Summarized Balance Sheet

*Unit: million yen. “Cash, etc.” mean cash and cash equivalent. “Trade receivables, etc.” mean trade receivables and other credits. “Trade payables, etc.” mean trade payables and other liabilities. Interest-bearing debts include lease liabilities.

Retained earnings increased, and capital stock increased by 1,961 million yen to 10,097 million yen.
As a result, the equity ratio (the ratio of equity attributable to owners of the parent) improved 4.0 points from 34.9% at the end of the previous period to 38.9%.

◎Cash Frow

*Unit: million yen.

*Produced by Investment Bridge Co., Ltd. with reference to the material of the company.
*A ▲ in the expense item indicates an increase in expenses.

Free cash flow improved because of a decrease in use of investing cash flow. The cash position kept improving.

3. The Fiscal Year ending September 2023 Earnings Forecasts

(1) Earnings forecasts

In the fiscal year ending September 2023, the company will aim for a transaction volume of 65-75 billion yen. The forecast was kept conservative, calling for sales of 17 billion yen and an operating income of 1 billion yen, without taking into account factors that would increase sales and profit, such as the recovery of domestic travel as the pandemic subsides and the recovery of revenues from international travel brought about by the alleviation of border measures in countries in the world. Meanwhile, the dividend amount has not been determined yet.

Consolidated Business Forecasts

*Unit: million yen. IFRS is applied. Net income for this period means profit attributable to owners of parent.

The domestic travel domain was healthy, owing to the increase in demand for travel in the summer. All existing business domains other than travel were healthy and steady. The company is strategically forging ahead with the decentralization and reconstruction of the business portfolio, like in the previous fiscal year.

（From the company's material）

4. Growth Strategy “AirTrip 2022”

New growth strategy for the quickest achievement of AirTrip 5000 from Restart.

(1) AirTrip 2022 “Restart”

“Restart” is a new growth strategy for the quickest achievement of AirTrip 5000. They will aim for a trading volume of 500 billion yen. With the AirTrip Travel Business as the starting point, they will strategically realize discontinuous growth of the whole corporate group based on the continuous growth of the five existing businesses and the new business (Regional Revitalization Business).
They newly founded the “Regional Revitalization Business” as the sixth business, rebuilding the AirTrip Group business portfolio, which will be launched in the fiscal year ending September 2023.

（From the company's material）

①AirTrip Online Travel Business
They will expand their revenues at the fastest pace in the industry through strategical investment in marketing, accurately grasping diverse travel demand which will become the growth engine. They will aim for rapid growth of this business as the pillar of the whole group’s business portfolio.

（From the company's material）

②IT Offshore Development Business, Inbound Travel Agency Business/Wi-Fi Rental Business, and Media Business, Regional Revitalization Business
They will forge ahead with further decentralization and reconstruction of the business portfolio based on the continuous growth of the existing businesses and the new business. They will reinforce their competitive advantage, considering market trends, and aim for sustainable growth.

（From the company's material）

③Investment Business
They will strategically aim for the expansion of the AirTrip economic bloc based on proactive investment in growing fields, placing importance on the high probability of IPOs. They will create new business foundations and realize IPOs by proactively investing in growing fields.

（From the company's material）

(2) Restart toward the “profit recovery phase” after overcoming the period of suppressed advertisement

The domestic travel domain has steadily met the rising demand and driven the whole business portfolio. The other business domains have kept up sound business progress and achieved positive profit on a monthly basis throughout the term. The gross profit of the domestic travel domain significantly expanded throughout the term due to strategical investment in marketing.

5. Conclusions

“Regional Revitalization Business” has been added as a new business to “AirTrip 5000” in the growth strategy “AirTrip ‘Restart’.” Aiming to boost the number of visitors and revitalize local economy by deploying solutions based on “sightseeing tech” and “HR tech” in order to solve social issues such as the lack of population in the countryside, the company will work toward expanding revenues. We would like to anticipate prompt contribution of the decentralization and reconstruction of the business portfolio to the company’s revenues.

（From the company's material）

＜Reference: Regarding Corporate Governance＞

◎Organization type and the composition of directors

◎Corporate Governance Report
Last updated on Mar. 8, 2022.

<Basic policy>
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