Infomart Corporation Q4 FY2024 earnings call

• Overall Financial Performance

  • Q4 2024: Revenue of 4.386 billion yen (+20.2% YoY), cost of sales of 1.241 billion yen (-20.7% YoY), operating profit margin of 12.1%, a multi-year high.
  • Full year 2024: Consolidated revenue of 15.63 billion yen (+17% YoY), operating profit of 1.2 billion yen (+44.6% YoY). Revenue missed the original plan by 0.455 billion yen (driven by a 0.637 billion yen miss in ES business), but operating profit beat the original plan by 0.2 billion yen due to cost compression. Total cost of sales for the full year was 5.977 billion yen (+3.5% YoY), significantly lower than the typical 5%+ growth expected, due to cost savings from cloud migration. The combined ratio of cost of sales and SG&A to revenue was 87.9% in Q4, a 3 percentage point improvement quarter-over-quarter.
  • Total client companies across the platform reached approximately 1.15 million, an increase of 140,000 from the end of 2023. Full-time headcount grew to 716, a net increase of 119 in 2024 (100 from organic hiring, 19 from the TANOMU acquisition), accelerating the pace of hiring year-over-year.

• Key Operational Milestones

  • Implemented a price increase for FOOD business in August 2024, completed full cloud migration of servers in September 2024. Both changes are permanent, and the 12.1% operating margin achieved in Q4 is expected to be sustained through 2025 and 2026.
  • Acquired and integrated TANOMU to capture growing demand for digital ordering among food wholesale enterprises. The FOOD business expanded into new verticals including hotels, inns, and catering, which maintained steady seller user growth of 2,000 new sellers per year without a slowdown in penetration pace.
  • For ES business, post-invoice制度 large client penetration continues to expand: after initial large enterprise contracts from the 2022-2023 invoice special demand, adoption is spreading to internal departments and group affiliate companies, driving sustained organic growth. BtoB Platform TRADE is advancing industry expansion outside of food aligned with the company's "Industry DtoD" strategy, with growing demand for end-to-end commercial digitalization.

• Mid-Term Strategy Progress

  • All three pillars of the 3-year old mid-term management plan are on track: 1) Core business strengthening: BtoB platform penetration and cross-industry expansion are progressing smoothly; 2) Sustainable revenue and profit growth: the profit expansion targets for 2025 and 2026 are on track to be achieved; 3) Synergy and monetization for invested entities: post-acquisition PMI for TANOMU is progressing well, no large or medium-sized M&A completed in 2024.
  • For FOOD business, management estimates the segment is only 70% complete, with remaining priorities including expanding wholesale order penetration, improving customer satisfaction, expanding cross-service partnerships, and driving data-based consulting for existing clients.
  • For ES business, vertical industry deepening is progressing gradually: industry-specific customization for new verticals is high-value but high-difficulty, so the company expects the process to take time but remains committed to building 2-3 new food-level industry verticals by 2030 aligned with the DtoD vision.
  • Fintech services including early payment for e-invoices and open account settlement are progressing gradually, aligned with customer demand. The company maintains its 50% payout ratio dividend policy, and plans to pay a total dividend of 4.46 yen per share for 2024, 2.5x the prior year's dividend.

1. BtoB-PF FOOD Business: Full year revenue grew 17.8% year-over-year. Within the segment, core service BtoB Platform Ordering grew 19.8% YoY, while BtoB Platform Ordering Light and TANOMU combined grew 38.2% YoY. The segment achieved an operating profit margin of 30.7%. As of end-2024, the segment has 46,133 seller users, 1,163 wholesale receiving enterprises, and a combined 270,000 ordering stores, with monthly transaction volume reaching 270.737 billion yen. Revenue contribution for the full year: FOOD business accounts for approximately 60% of total consolidated revenue. 2. BtoB-PF ES Business: Full year revenue grew 15.6% year-over-year. Within the segment, core service BtoB Platform Invoice grew 14.6% YoY (missed the internal 26% growth target due to post-invoice制度 special demand pullback), while BtoB Platform TRADE grew 71.2% YoY. The full-year segment operating loss totaled 0.7 billion yen, though BtoB Platform Invoice already achieved profitability in 2024. As of end-2024, BtoB Platform Invoice has 12,879 paid users and 1.141 million transaction partners, while BtoB Platform TRADE has 271 client companies, 60-70% of which are from the construction industry. Revenue contribution for the full year: ES business accounts for approximately 40% of total consolidated revenue.

• For full year 2025 (December fiscal year), Infomart guides: Consolidated revenue of 19.491 billion yen, +24.7% YoY (the highest revenue growth rate in 10 years); operating profit of 2.3 billion yen, +91.6% YoY, nearly doubling from 2024.
  • ES business is expected to achieve over 30% revenue growth in 2025, driven by accelerating expansion among existing large clients and a planned price increase for BtoB Platform Invoice.
  • Cloud migration is expected to reduce total cost by approximately 1.073 billion yen in 2025, resulting in a net total cost reduction of 64 million yen after accounting for growth-driven variable cost increases.
  • ES business overall is guided to achieve full profitability in 2025.
  • ROE and ROIC are expected to exceed 11% in 2025.
• For 2026, the company targets operating profit of 5 billion yen, doubling 2025's target profit, which would bring ROE and ROIC to a 20-25% range. This is aligned with the original mid-term management plan that invested heavily in growth in 2022-2024 and will deliver accelerating profit growth in 2025-2026.

• ES business growth is facing higher than expected post-invoice制度 special demand pullback: BtoB Platform Invoice growth missed the original 2024 plan due to a larger than expected slowdown in new client growth after the 2022-2023 special demand period.
  • Cross-industry expansion for the ES business's DtoD strategy is higher difficulty than initially expected: deepening industry-specific customization for new verticals requires adapting to unique industry customs, which will take more time than originally planned.
  • Competitive intensity in the e-invoice space remains high: many new competitors entered the market during the invoice制度 special demand period, and competition has not eased significantly, though management believes the market is starting to mature and its Data-to-Data model has a competitive advantage for upstream commercial digitalization.

Q: What is the nature of the cloud migration of the data center, and was there any overlapping dual cost during the transition? / A: The company already used external data centers before, previously on an on-premises model, and now completed a shift to full public cloud that is still hosted by third-party providers. The shift lowered overall costs significantly because cloud allows shared resource utilization compared to dedicated on-premises capacity. Migration was done in phases: ES business was moved first, followed by FOOD business over 6-12 months. There was no overlap of costs for the same operations, so no double counting of costs occurred.

Q: Why did ES business's Q4 deficit expand, and is this a temporary issue? / A: The increase in deficit in Q4 was driven by a temporary spike in sales promotion expenses, which rose from around 0.2 billion yen in Q3 to 0.5 billion yen in Q4. The company concentrated local TV commercials and promotional events for BtoB Platform Invoice in Q4, leading to the one-time cost increase. Management confirms the increase is temporary, and the segment remains on track for full profitability in 2025.

Q: What is the competitive landscape for ES business, and how does Infomart position against competitors? / A: Competition has intensified after the invoice制度 reform, as many new competitors launched similar e-invoice services, and this competitive environment remains. However, the initial wave of special demand-driven competition has stabilized. Most competitors rely on an AI-OCR based analog-to-digital conversion model that does not support end-to-end upstream commercial processes like quoting, ordering, and delivery notes. Infomart's Data to Data (Industry DtoD) model is better positioned to capture growing demand for upstream commercial digitalization, which will become a key competitive advantage going forward.

Q: Why is ES business guided to grow to 30% in 2025 after Q4 2024 growth slowed to ~4%? What drives this acceleration? / A: The growth acceleration comes from two main sources: first, the company plans to implement a price increase for BtoB Platform Invoice, which will directly lift revenue. Second, and more significantly, large enterprise clients that signed on during the invoice special demand period are currently only using the service in limited scope. Management expects widespread expansion to other internal departments and entire group affiliate networks in 2025, which will drive large incremental revenue growth from the existing client base.