Gurunavi,Inc. Q3 FY2025 earnings call

• Core Business Performance • Core food and beverage support business performed strongly in the quarter, with disciplined cost allocation and company-wide operational efficiency driving large YoY growth in operating profit • Online reservations: While per-store reservation count was only moderately above YoY levels, the mix of reservations shifted positively: large-group reservations (5+ people) increased 1.1 percentage points in share, while small-group (1-4 people) declined 1.1 percentage points, indicating recovering large-group/banquet demand. Rakuten ID-linked members book an average of 5 people per reservation vs 3.3 people for non-members, and frequent repeat users have higher average group sizes and growing share of total reservations. The new "Organizer Rank Program", which offers more Rakuten points for repeated/large-group bookings, is well-aligned with this trend and expected to drive further growth. • Marketing Agent services: The Google Business Profile operation support product has seen steady growth in the number of partner stores, as it meets broad demand for web promotion support from food and beverage operators. • Gurunavi FineOrder (mobile order service): Contracted companies reached 122 as of December 2024, with over 80% of contracted stores completed onboarding and a 97% active utilization rate. The service has expanded from mid-sized/large chains to ultra-large chains, and is also being adopted by non-restaurant venues including hotel room service, sports facilities, and employee cafeterias to address labor shortages.
• New Strategic Initiatives • Launched the Gurunavi Next Project in August 2024, focused on full utilization of generative AI to drive company-wide innovation, with goals of delivering better consumer dining experiences, accelerating store digital transformation for restaurants, and improving internal operational efficiency. • Beta testing of the new generative AI-powered restaurant discovery app UMAME! (formerly named UMAME!, the core project under Gurunavi Next) started on iOS in January 2025. Unlike traditional search-based services, it provides personalized restaurant recommendations based on natural language queries about mood/atmosphere, with recommendation accuracy improving with usage. An Android version with multi-language support is in development for full launch. • Joint experiential promotion business with Epson Sales: The partnership installs large displays in restaurants to deliver branded video content for product manufacturers/regional governments, combined with in-store promotions, sampling, and consumer research. Participating restaurants earn additional advertising revenue, and the first promotion for Ishikawa Prefecture is running in 20 Tokyo-area locations, with plans to expand to other major Japanese urban areas.
• ESG and Industry Initiatives • Continued initiatives to promote Japanese food culture, including hosting the RED U-35 2024 young chef competition in November 2024 and selecting eel (related to sustainable full aquaculture development) as the 2024 "Dish of the Year".

For the 9-month cumulative 3rd quarter period:

1. Total company net sales: 9.488 billion yen, operating profit: 0.607 billion yen, parent-attributable net profit: 0.692 billion yen
2. Food and beverage promotion services:
   • Stock-type services: Grew 8.7% year-over-year (YoY), with steady monthly sales expansion from solid new orders and reduced cancellations. The segment saw both increased ARPU and a slight rise in the number of paid member stores, reversing prior trends of flat/declining store counts. This segment contributes the majority of core recurring revenue.
   • Spot-type services: Grew ~20% YoY, driven by expanded spot promotion product sales and online reservation commission revenue. Total food and beverage promotion services grew 10.1% YoY overall.
3. Promotion business: Revenue declined YoY, but is on track to meet full-year plan targets.
4. Related businesses: Revenue increased, primarily from sales contribution of the kitchen equipment retail store "Tenposu Gurunavi", which opened in April 2024.
5. Store development business: The segment has scaled to a meaningful size, and the company is now focusing on improving profitability, having paused some new orders in the 3rd quarter to prioritize high-return projects.

• Management maintained the full-year 2025 March fiscal year earnings guidance at its current level, with no upward or downward revision. Any future material changes to guidance will be disclosed promptly.
• The decision to keep guidance unchanged reflects two key factors: 1) the store development business has moved to a more selective new order approach focused on profitability, which near-term reduces order volume but improves long-term returns, and 2) the company is reviewing the initially low bonus payout rate, as employee performance has put profit on track to exceed initial targets, and this will increase full-year expenses if adjusted.

• Persistent labor shortages across the food and beverage industry limit restaurants' ability to reach full sales potential and constrain industry growth, even as consumer dining demand has fully recovered to pre-pandemic norms.
• The store development business faces uncertainty from volatile materials prices and variable customer traffic potential for new properties, requiring selective order approval to protect profitability.
• Competition for AI and digital talent is intense across industries, creating challenges for hiring the skilled personnel needed to execute the Gurunavi Next Project.
• The company currently does not meet the Tokyo Stock Exchange's trading market capitalization listing requirement, and requires sustained share price improvement and operational performance to maintain compliance.

Q: What algorithm does the new AI app UMAME! use for restaurant recommendations, and how will the company monetize the service in the future? / A: UMAME! does not use a fixed ranking like traditional restaurant search. It generates personalized recommendations for each user based on their search behavior, usage history, preferences, and current context, with matching accuracy improving as more users interact with the app. Management says traditional paid top-ranking ad models do not apply here, but monetization opportunities exist: when two restaurants have similar match quality for a user, preferential placement for upgraded member restaurants could be offered, and paid AI-powered consulting services to help restaurants improve their match quality and user engagement can also be monetized. Any new paid offering will focus on driving increased restaurant sales, rather than just ad space sales.

Q: What is Gurunavi's view on current industry conditions for consumer dining and restaurant investment? / A: Consumer dining demand is fully recovered to pre-pandemic normal levels, with clear growth in large-group and banquet demand, particularly for alcohol-serving restaurant formats. However, labor shortages remain a major constraint for the industry, so demand for digital transformation (DX) solutions that improve operational efficiency is growing, and Gurunavi is seeing rising interest from restaurants in its DX offerings including mobile order. Inbound tourism consumption growth is also driving increased traffic to the platform, and the company is working to improve conversion of this traffic to restaurant visits. Technology-forward restaurant operators are increasingly interested in Gurunavi's AI initiatives, with growing inbound inquiries for collaborative AI projects.

Q: What is the company's position on ownership structure, given its close ties to the Rakuten Group, and potential expansion of Rakuten's shareholding? / A: Expansion of Rakuten's shareholding is a decision for Rakuten Group based on its own priorities, not for Gurunavi management to determine. Gurunavi will continue leveraging its existing close relationship to drive increased usage from Rakuten members and improve送客 performance. At the same time, reaching a broad base of consumers outside of the Rakuten ecosystem is critical to growing the business, so the company will continue exploring approaches to attract neutral, diverse users, including considering ownership structure implications for this goal.

Q: How has organizational change impacted operational performance over the past year? / A: The 2024 organizational change, focused on improving product development capabilities, has improved cross-functional collaboration on problem-solving. The new structure enables quicker, more focused project-based work, with clear role assignments, regular progress checks, and faster iteration on initiatives. This has already delivered visible improvements in core business areas including Marketing Agent services, and the company plans to extend this operating model to peripheral businesses to increase cross-business synergy going forward.