FY2/12First Quarter Results Presentation

1

July 1, 2011Code: 2178

URL: http://www.tri-stage.jp/

FY2/12 First Quarter Results Presentation

2

Highlights

Net Sales continue to increase. Operating income down year on year due to earthquake disaster

NetSales ¥9,381million（YoY change up2.7％）Operating Income ¥591million（YoY change down25.9％）

FY2/12 1Q Results Steady Progress against Forecasts

Net Sales and Operating Income mostly in line with planNet Sales progress rate 50.0％ Operating Income progress rate 48.4％

Part 1 : FY2/12 1Q Results

Part 2 : Progress against FY2/12 forecasts, and 2Q measures

Part 3: Expected increase in available broadcast slots from switch to digital terrestrial broadcasting

End of terrestrial analog broadcast in July 2011 expected to lead to the gradual adoption of multichannel terrestrial broadcasts over the medium to long term.

The number of slots for TV shopping programs and commercials is also expected to steadily increase.

3

Contents

Part 1 : FY2/12 1Q ResultsPart 1 : FY2/12 1Q Results

Part 2 : Progress against FY2/12 forecasts, and 2Q measuresPart 2 : Progress against FY2/12 forecasts, and 2Q measures



Reference MaterialsReference Materials

4

FY2/12 1Q Results Highlights①

FY2/121Q

FY2/111Q

FY2/101Q

FY2/121Q

FY2/111Q

FY2/101Q

10,000

0

2,000

4,000

6,000

8,000

1,750

1,250

750

0

250

500

1,000

1,5008,0009,137

963 964798

＋2.7%

ー25.9％591

Net Sales Gross Profit Operating Income

1,240

1,750

1,250

750

0

250

500

1,000

1,500

ー13.9％


1,119

9,381

Net Sales YoY up 2.7％, Gross Profit YoY down13.9％, Operating Income YoY down25.9％

(¥ mn) (¥ mn) (¥ mn)

FY2/121Q

FY2/111Q

FY2/101Q

5

FY2/111Q

（Actual）

FY2/121Q

（Actual）

Increase/Decrease

YoYChange

Net Sales 9,137 9,381 +243 +2.7%Cost of Sales 8,017 8,417

（％） (87.7%) (89.7%)

Gross Profit 1,119 963 （％） (12.3%) (10.3%)

SG&A Expenses 320 372 （％） (3.5%) (4.0%)

Operating Income 798 591 （％） (8.7%) (6.3%)

Ordinary Income 801 593 （％） (8.8%) (6.3%)

Net Income 475 327 （％） (5.2%) (3.5%)

-147

-208

-207

+51

-26.0%

-31.1%

+16.0%

-25.9%

+5.0%

-13.9%-155

+399

FY2/12 1Q Results Highlights②

（￥mn)



6

Results by Quarter

10,000

0

2,000

4,000

6,000

8,000

（￥mn）

（￥mn）

1,250

750

0

250

500

1,000

1,500

（￥mn）（￥mn）

FY2/12FY2/11FY2/10

1Q

4Q

3Q

2Q

1Q

4Q

3Q

2Q

1Q

FY2/12FY2/11FY2/10

1Q

4Q

3Q

2Q

1Q

4Q

3Q

2Q

1Q

FY2/12FY2/11FY2/10

1Q

4Q

3Q

2Q

1Q

4Q

3Q

2Q

1Q

＋2.7％

ー13.9％ー25.9％

9,3818,000

963

591

1,240

964

9,137

1,119

798

1,250

750

0

250

500

1,000

1,500



Net Sales Gross Profit Operating Income

FY2/12

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

Net Sales 8,000 8,258 8,785 9,208 9,137 9,375 9,230 9,829 9,381Gross Profit 1,240 1,168 1,163 1,284 1,119 1,006 1,012 1,387 963Operating Income 964 866 853 934 798 650 639 1,131 591

Gross Profit Margin 15.5% 14.1% 13.2% 13.9% 12.3% 10.7% 11.0% 14.1% 10.3%Operating Margin 12.1% 10.5% 9.7% 10.1% 8.7% 6.9% 6.9% 11.5% 6.3%

FY2/10 FY2/11

7

FY2/111Q

（Actual）

FY2/121Q

（Actual）

Increase/Decrease

YoYChange

Net Sales 9,137 9,381 +243 +2.7%Solution Sales 9,067 9,318

（％） (99.2%) (99.3%)

Product Sales 70 62 （％） (0.8%) (0.7%)

+2.8%

-10.1%

+250

-7

Net Sales

Increase in volume of

media space sales,

program production

and call center

operations

（￥ｍｎ）

Sales declined in March as a result of the earthquake, but are gradually recovering.


8

FY2/111Q

（Actual）

Costcomposition ratio

FY2/121Q

（Actual）

Costcomposition ratio

Increase/Decrease

YoYChange

Cost of Sales 8,017 8,417 （％） (87.7%) (89.7%)

6,989 7,255

（％） (76.5%) (77.3%)

TV (programs) 5,050 4,895 （％） (55.3%) (52.2%)

TV (commercials) 1,671 2,135 （％） (18.3%) (22.8%)

Other 267 224 （％） (2.9%) (2.4%)

Outsourcing Costs 966 1,106 （％） (10.6%) (11.8%)

Cost of Goods Sold 61 55 （％） (0.7%) (0.6%)

Gross Profit 1,119 963 （％） (12.3%) (10.3%)

-13.9%

3.3%

12.1%

2.7%

13.1%

0.7%

-155

-43

+27.7%

-3.1%

+3.8%

+5.0%+399

+265

-154

+463

100.0%

-9.7%

+14.5%

-16.2%

+139

-5

58.2%

25.4%

Media AcquisitionCosts（Media Buying）

100.0%

0.8%

86.2%87.2%

63.0%

20.8%

Increase in volume of TV

commercials inparticular

Cost of Sales, Gross Profit

Cost of sales was affected by cancellations of TV programs and commercials and decline in media acquisitions as a result of the earthquake,

but is slowly recovering.Gross profit was down year on year due to the earthquake.

Increase involume of call

center operations

（￥mn）


9

FY2/111Q

（Actual）

FY2/121Q

（Actual）

Increase/Decrease

YoYChange

SG&A Expenses 320 372 （％） (3.5%) (4.0%)

Personnel Costs 181 214 （％） (2.0%) (2.3%)

Depreciation 9 10 （％） (0.1%) (0.1%)

Other 129 147 （％） (1.4%) (1.6%)

Operating Income 798 591 （％） (8.7%) (6.3%)

No. of Employees 80 100 +20 +25.0%

+0

+17

-207

+51

+33

+7.7%

+13.6%

-25.9%

+16.0%

+18.2%

SG&A Expenses, Operating Income

SG&A expenses up 16.0% year on year. The personnel recruitment was positively executed.

– Number of regular employees up 25.0% year on year.

Increase of 20 regularemployees

(7 new graduates,

13 mid-career hires)

（￥mn）


Increase in Outsourcing costs

10

Affects of the Great East Japan Earthquake

Affects of the Great East Japan Earthquake

1. Changes or cancellations in TV program schedule; Cancellation of TV commercials

2. Client companies refrained from broadcasting programs or placing TV commercials

3. Supply chain disruptions and delays at client companies forced changes in media placement plans


11

FY2/111Q

（Actual）

FY2/121Q

（Actual）Operating C/F -362 -150Investing C/F -68 43Financing C/F 0 -136

2,859 868Cash and cash equivalents

Financial Position

End of FY2/12 1Q

End of FY2/11

Strengthened financial base

（￥ｍｎ）

Assets

Increase in accountsPayable-tradeup ¥283million

Decrease in income taxes payable

Down ¥308million

Increase in accountsreceivable-tradeup ¥455million

Decrease in cash anddeposits

down ¥292million

current assets noncurrent assets net assets

Increase in retainedearnings

up ¥176million

（￥ｍｎ）

11,178

10,909

268

7,396

3,563

27

（￥ｍｎ）

End of FY2/12 1Q

End of FY2/11

10,000

0

2,000

4,000

6,000

8,000

10,98810,000

0

2,000

4,000

6,000

8,000

10,988

10,750

237

7,574

3,532

11,178

71

Dividend payments down ¥136milion


Balance Sheets

Cash Flows

Liabilities and Net Assetscurrent liabilities noncurrent liabilities

Income before income taxes up ¥556millionIncrease in accounts payable-trade up ¥283millionIncrease in accounts receivable-trade down ¥455millionIncome taxes paid down ¥528milion

12

Contents






13

FY2/11 Forecast Highlights

Net Sales and Operating Income mostly in line with plan

（￥ｍｎ）

Part 2 :Progress against FY2/12 forecasts, and 2Q measures

FY2/121Q

（Actual）

FY2/12First Half（Forecast）

ProgressRate

FY2/12Full year

（Forecast）

ProgressRate

Net Sales 9,381 18,760 50.0% 40,102 23.4%Operating Income 591 1,222 3,018

（％） (6.3%) (6.5%) (7.5%)

Ordinary Income 593 1,222 3,018 （％） (6.3%) (6.5%) (7.5%)

Net Income 327 684 1,726 （％） (3.5%) (3.7%) (4.3%)

19.7%

19.6%

19.0%47.8%

48.4%

48.6%

14

Current Status and Outlook – Client Companies

70

60

50

0

10

20

30

40

54

9

6

8

31

45

26

74

8

65

41

10

6

8

FY2/12FY2/11FY2/10

1Q

4Q

3Q

2Q

1Q

4Q

3Q

2Q

1Q

FY2/12FY2/11FY2/10

1Q

4Q

3Q

2Q

1Q

4Q

3Q

2Q

1Q

（￥ｍｎ）

12,000

10,000

0

2,000

4,000

6,000

8,000

20%

100%

80%

60%

40%

0%

Net sales

65.5%57.8% 57.2%


(Number of clients)

Analysis of Client Base by Sales Level

Over ¥250 million ¥125 million to ¥250 million

￥50 million to ¥125 million

Other

Net Sales and Top-Five Clients' Ratio of Net Sales

Top-5 Clients’ Share of Net Sales

Client companies continue to express strong willingness to make media placements.Number of client companies is steadily increasing

Share of net sales by top five client companies down year on year.

15

Current Status and Outlook – Media Buying

TV(commercials)

（￥ｍｎ）6,000

4,000

5,000

1,000

0

2,000

3,000

1,841

345

FY2/12FY2/11FY2/10

1Q4Q3Q2Q1Q4Q3Q2Q1Q

4,4714,434

1,334 1,488

4,7285,050

1,671

267179 188 270

1,674

4,710

Media buying declined temporarily due to the earthquake, but is recovering.Media buying needs remain firm, centered on television.

Outlook remains promising for media buying tailored to customer needs.

4,9004,879 4,8954,943

2,076 2,1351,828

2,086

276 244 317 224


Purchases of TV Program and TV Commercial Slots

TV (programs) Other media buying

16

2Q measures

Expand existing business focused on support for TV shopping, expand business fields for support of direct marketing,

and secure an overwhelming leading position in direct marketing support.

Radio,Newspapers,Magazines,

Internet,Mobile devices,

Out of home

TV(Programs),TV(commercials)

Business Planning, Creative Planning, Media Planning,

Order Management, Performance Analysis

ProductDevelopment

Data Processing, Distribution andPayment, CRM

media

Direct marketing support business field

HouseholdMiscellaneous,

Beauty, Health food

Conceptual Diagram of Second Phase Strategies

Category

１ Measures to expand existing business

３ Development of cross-media business

２ Strengthening of solution services

service

etc

16


17

Contents






18

Current Status and Outlook- TV Shopping Market Trends and Future Measures

Tri-Stage Other companies

31.9％29.9％

December 2010

Tri-Stage has an approximately 30% or more share of the market for terrestrial TV shopping programs.

There are still many TV program slots available to us, and we expect an expansion in market share.

31.6％

March 2011

The share of the market for terrestrial TV shopping programs

TV shopping programs of 3minutes,4minutes,14minutes,29minutes and 54minutes

August 2010

Source: Tri-Stage, random three-week average in January, May and August 2010

Source: Tri-Stage, random three-week average in May, August and December 2010

Source: Tri-Stage, random three-week average in August, December 2010 and March 2011

Part3;Expected increase in available broadcast slots from switch to digital terrestrial broadcasting

1919

Expected increase in available broadcast slots from switch to digital terrestrial broadcasting

End of terrestrial analog broadcast in July 2011 expected to lead to the gradual adoption of multichannel terrestrial broadcasts over the medium to long term.

The number of slots for TV shopping programs and commercials is also expected to steadily increase.

1 98765432 10 11 12 13

Terrestrial digital broadcast band: 13 Segments (6MHz)

Potential for multichannel terrestrial broadcasts

Potential for increase in number of slots for

TV shopping programs and commercialsHigh-definition (HD) broadcast (12 segments)

Standard-definition (SD) image

Broadcast 1 (4 segments)

Overview of a single station's terrestrial digital broadcast service


Broadcast 2(4 segments)


Data Broadcast (4 segments)


20

Increase in Broadcast Satellite (BS) Channels

NHK BS1

NHK BS2

NHK BShi

BS4

BS-TBS

BS Asahi

BS Japan

BS11 Digital

BS Fuji

TwellV

WOWOW Star ChannelHi-Vision

NHK BS Premium

NHK BS1

BS4

BS-TBS

BS Asahi

BS Japan

BS11 Digital

BS Fuji

TwellV

The University of the Air Foundation

WOWOW

WOWOW 2

WOWOW 3

Star ChannelPlus

Star ChannelClassic

GREENCHANNEL

Animax

BS-FOX

Sukachan 804

J sports 2

J sports 1

NHK BS Premium

NHK BS1

BS 4

BS-TBS

BS Asahi

BS Japan

BS11 Digital

BS Fuji

TwellV

The University of the Air Foundation

D-Life

WOWOW J sports 1

J sports 2

J sports ESPN

GREEN CHANNEL

Animax

BS-FOX

J sports Plus

Sukachan 804WOWOW 2

WOWOW 3

Star ChannelHi-Vision

Star ChannelPlus

Star ChannelClassic

CinefilImagica

BS-F（provisional name）

Japanese Movie Channel

DisneyChannel

Source： Weekly Toyo Keizai, February 19,2011 edition2011,Toyo Keizai Inc.

Currently12Channels

Oct.201122Channels

Spring 201229 Channels

Free-to-air broadcasts

Pay-TV broadcasts

Newly added channels


Star ChannelHi-Vision

21

Contents






22

(Number of clients)

Analysis of Client Base by Sales LevelReference Materials

FY2/12

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1QOver ￥250million 7 9 10 9 9 11 11 12 10

￥125 million to ￥250million 4 2 3 3 6 4 5 6 6￥50 million to ￥125 million 8 11 9 5 8 8 7 5 8

Other 26 26 31 33 31 32 40 39 41Total 45 48 53 50 54 55 63 62 65

FY2/11FY2/10

23

Company Profile

Established March 2006 Head Office 2-4-1, Shiba-koen, Minato-ku, Tokyo, Japan Representatives Isao Senoo (CEO); Akio Maruta(COO) Business Content Support services for direct marketing,

centered on television shopping sales Capital ¥633million (As of May 31, 2011) Shares Issued 7,528,200shares (As of May 31, 2011) No. of Employees 100 (As of May 31, 2011)

Providing a phone number, URL or other contact information through TV,

Internet or other media outlets, and selling products and services through

direct, interactive communication with consumers via telephone or email.

Definition of “Direct Marketing”

Reference Materials

24

We will contribute to society as a company that striveswholeheartedly to resolve issues in order to properly establishbonds between our clients’ products and services and consumers.

Philosophy, Creed and Management Principles

CorporatePhilosophy

The consumer’s satisfaction is the client’s satisfaction, and ours.Company

Creed

ManagementPrinciples Speedy Going Concern Innovation

Reference Materials

25

Business Domain

The direct marketing value chain

CRMDistribution

andPayment

Data ProcessingPerformance

Analysis

OrderManagement

MediaPlanning

Creative PlanningBusiness

Planning

Product Development

Pro

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Eff

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Comprehensive Suite of Services for Direct Marketing

Exa

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Reference Materials

26

Tri-Stage acquires the various services necessary for TV shopping from suppliers and outsourcers.

We then add our unique expertise to provide client companies with comprehensive support for direct marketing.

Suppliers/Outsourcers

Client Companies Tri-Stage

Provide Solutions

Various services

Purchase Solutions

Consumers

Products

Payment

Advertising agency

Program/creative producer

Call centers

Logistics companies

etc

Tri-Stage’s Business ModelReference Materials

Purchase payments

2727

Source of Competitiveness (Strengths)

Many premium TV time slotsMany premium TV time slots Order management expertise Order management expertise Data analysis capabilitiesData analysis capabilities

Pre-purchasesLarge volume purchasesFixed period purchases

Comprehensive order managementat call centers

In-house developed quantitativeassessment system

Maximize cost-effectivenessby lowering media costs

Maximize the lifetime valueof customers and products

Effective media typeand creative planning

Total solutions based on data analysis

Help expand business for companies using direct marketing

1. Media: Media ratio (sales to ad costs)1. Efficient call center management

2. Content: Monitoring system2. Response scripts (talk manuals)

3. Order Management: Various data evaluation systems

Reference Materials

28

38,648

52,43449,233

42,43146,032

55,39758,029

21,67923,131

24,71026,910

29,837

34,042

20,914

0

10,000

20,000

30,000

40,000

50,000

60,000

99 00 01 02 03 04 05 06 07 08 09 10 11 12

Direct Marketing (Merchandise) Trends

Appearance of full-time TV shopping

channelsNumerous on-line shopping services established

Increase in PC ownership and the Internet

Satellite digital broadcasts begin

（E） (Projection)

Direct marketing (merchandise) — ¥5.5 trillion market in FY2011

Reference Materials

Source:2010-2011 Direct Marketing and eCommerce Market: Situation and Outlook, Nov. 2010, Fuji-Keizai Co., Ltd.

(¥ 100mn)

(Projection)

29

OtherRetail outlets

インターネット

54%カタログ28%

テレビ

8%

Internet

54%

28％

TV8%

Direct Marketing (TV Shopping) Trends

【 Market Share by Media Type 】

【 TV Shopping Market 】

Satellite digitalbroadcasts begin

Appearance of fulltimeTV shopping channels

(E)

Sales through Internet, TV and mobile devices growing

Level-off or marginal rise tendency and forecast

Catalogs

MobileDevices

8%

20105.2 trillion

up6.5% YoY

１％

１％

Reference Materials

(Projection)

Source:2010-2011 Direct Marketing and eCommerce Market: Situation and Outlook, Nov. 2010, Fuji-Keizai Co., Ltd.

3,074

3,5573,747

3,9064,0444,0054,0093,934

1,8901,606 1,564

1,714

2,198

2,595

0

1,000

2,000

3,000

4,000

5,000

99 00 01 02 03 04 05 06 07 08 09 10 11 12

（¥100ｍｎ)

3030

FAQ

・ We do not recognize any other company as a true competitor at this point.・ While there is always the potential for a competitor to arise in the future,

we believe that our expertise founded on many years of experience, along with continual refinements that will enable us to retain the highest skill levels, will allow us to remain solidly competitive (in terms of market share, skill, expertise and personnel).

There are three methods: (1) a fluctuating rate based on client company sales and other results on top of costs from services provided; (2) a fixed fee on top of total costs from services provided; and (3) a fixed percentage of client company sales.

What is the potential for the rise of competitors?

How does Tri-Stage charge client companies?

・ The benefits of cross media are (1) greater earnings from new markets and an increase in customers; (2) an increase in sales synergies from cross-selling; and (3) reduced risk of earnings fluctuation. We feel that cross-media marketing will allow us to both increase earnings and reduce risk.

・ We are aggressively hiring new graduates each year, equalizing our age groups.

・ We will invest to expand business, including investing in internal IT systems, paying deposits to suppliers, and promoting the development of cross-media marketing.

How will earnings change with the increase in cross-media marketing?

What are your plans for increasing personnel (consultants), and your investment plans (financing needs)?

・ We expect the market for direct marketing to continue to grow, though the rate of growth is slowing as the market scale expands overall.

Will the market for direct marketing continue to grow?

Reference Materials

31

Contact

2-4-1, Shiba-koen, Minato-ku, Tokyo 105-0011, Japan

Head Office

Tri-Stage inc.Management Adiministration Dept.

Contact

81-3-5402-4111TEL

[email protected]

http://www.tri-stage.jpURL

Reference Materials

32

Disclaimer

Forecasts regarding future earnings presented in this presentation are estimated by the Company based on information available at the time of release, and include risks and other uncertainties. Accordingly, there is no guarantee that the Company will achieve these forecast figures.

Changes in the internal circumstances of the Company or external business environment may have an impact, whether direct or indirect, on the Company’s earnings. Please be aware of the possibility that the forecasts presented in this presentation may change.

FY2/12First Quarter Results Presentation

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