RACCOON HOLDINGS,Inc. Q4 FY2025 earnings call

• Core Mission and Market Position

  • The company's mission is to improve the operational efficiency of small and micro enterprises (SMEs) by providing IT and financial services to address SMEs' common pain points of limited IT capability, understaffing, and limited financial access.
  • The company operates two core businesses: 1) EC business: Super Delivery, a B2B wholesale platform connecting apparel/general goods manufacturers with domestic and overseas retailers, earning commission based on GMV; 2) Financial business: Paid (B2B post-payment payment processing service that assumes full credit risk) and URIHO (trade receivable guarantee service for B2B transactions).

• 2025 April Term Operational Achievements

  • Completed the V-shaped recovery after 2024 April Term's strategic investment: In 2024 April Term, the EC business eliminated buyer monthly membership fees to reduce entry barriers, and invested heavily in advertising (doubling promotion costs year-over-year) to drive user growth. This investment depressed 2024 profit but successfully grew the user base, with the cost normalizing to 3.681 billion yen in 2025 April Term.
  • Achieved on-target performance matching opening guidance, reflecting strong KPI management capability.
  • The company maintains a high gross margin of ~80%, and as an IT-driven business, SG&A is expected to grow slower than revenue, supporting long-term operating margin expansion.

• Long-Term and Mid-Term Strategy

  • Long-term vision: Build the "Raccoon BtoB Network", a one-stop service platform for SMEs that integrates existing Super Delivery, Paid, URIHO with additional new services from internal development or partners, with unified user accounts to enable seamless cross-service access for SMEs.
  • 3-year mid-term plan (2026-2028 April Term): The core theme is growing existing services based on customer needs and improving LTV via cross-selling group services to existing customers. Mid-term targets for 2028 April Term are: net sales 9.26 billion yen, operating income 2.38 billion yen, operating margin increasing from 20.6% (2025 April Term) to 25.7%, and ROE targeting 25%.

Overall consolidated net sales for the 2025 April Term increased 5% year-over-year (9.9% after adjusting for a sold subsidiary). Operating income reached 1.254 billion yen, achieving V-shaped recovery from 566 million yen in the 2024 April Term and surpassing the previous all-time high of 1.198 billion yen.

1. EC Business (contributes ~60% of total revenue): After adjusting for the subsidiary sale, it grew 6.9% year-over-year. Total 2025 April Term GMV across Super Delivery was ~27 billion yen, with 20 billion yen from domestic business and 7.6 billion yen from cross-border business.
2. Financial Business (contributes ~40% of total revenue): After adjusting for the subsidiary sale, it grew 14.8% year-over-year. URIHO guarantee outstanding balance reached approximately 62 billion yen, with subscription-based guarantee growing the fastest. Paid transaction volume grew steadily, with increasing adoption among startups and large IT clients.

• 2026 April Term guidance: Net sales is projected to grow 10.5% year-over-year, and operating income is projected to grow 12.4% year-over-year to 1.41 billion yen. This guidance already includes an expected 100 million yen new cost for newly launched shareholder benefits.
• Shareholder return guidance: Maintains a target payout ratio of 45% to 50%. The 2026 April Term projected dividend is 22 yen per share, with a payout ratio of 49.7%, consistent with the target range. The company has actively repurchased shares in recent years (over 5% of shares outstanding in 2025 April Term) and will continue to conduct repurchases opportunistically based on share price. Starting from 2026 April Term, the company will launch new digital gift shareholder benefits for qualifying long-term holders, with total annual cost budgeted at 100 million yen.
• Market growth outlook: Both business lines operate in very low penetration markets: B2B EC penetration is only a few percent (vs ~20% for B2C), and third-party B2B credit risk penetration has doubled to 2% in three years but remains very low, providing large long-term growth headroom.

• Reinsurance cost impact: The company recorded a one-time 55 million yen provision cost due to worsening reinsurance terms, driven by reinsurance companies' response to rising overall corporate bankruptcies in the market. This does not reflect an increase in the company's own uncollected receivables, and terms could be revised back downward if default rates stabilize in future periods.
• 80% of total credit risk is retained on the company's own balance sheet, with only large individual risks over the internal tolerance threshold ceded to reinsurance, exposing the company to broader macroeconomic downside that could increase SME default rates.
• Overseas financial service expansion currently lacks local credit risk assessment know-how, limiting near-term growth opportunities in this area.

Q: What was the reason for the large advertising investment in the 2024 April Term? / A: Previously, EC business charged domestic retail buyers a monthly membership fee of 2,000 yen, which became a bottleneck for new user growth even though the fee generated steady revenue. The company launched a free membership plan in 2024 April Term to lower barriers, and invested heavily in advertising (including TV commercials and listing ads) to publicize the new plan, which successfully drove user growth.

Q: What caused the one-time cost from reinsurance condition revision? Is it driven by rising internal credit costs? / A: The one-time 55 million yen cost comes from worse terms from reinsurance providers, driven by rising overall corporate bankruptcies across the market, not an increase in Raccoon's own uncollected receivables. Raccoon cedes only risks exceeding internal per-transaction tolerance to reinsurance, retaining 80% of total credit risk on balance sheet. If default rates decline in future periods, terms could be revised favorably.

Q: What is the company's current stance on M&A, and would you pursue M&A that lowers near-term profit margin? / A: M&A was frozen in the last mid-term plan to focus on core business growth that accelerated post-COVID. For the new mid-term plan, M&A is a key tool to advance the Raccoon BtoB Network vision, and the company is now more proactive toward M&A. The finance head prioritizes low cost dependency over static near-term margin: acquisitions where revenue growth does not require proportional SG&A growth are acceptable even if near-term margin is low, as margin will automatically improve as scale grows.

Q: What are the key initiatives to achieve 2026 April Term growth targets? / A: For EC business, the negative impact of free membership on average revenue per user has largely resolved, so continued user acquisition will drive clear growth. The key priority is increased investment in new overseas markets beyond Taiwan, Hong Kong, US and Korea, with a focus on Southeast Asia, Australia, Canada and China. Expansion of financial services (Paid/URIHO) overseas is a long-term goal, but the company currently lacks local credit assessment know-how for international markets, so no near-term launch is planned.