RACCOON HOLDINGS,Inc. Q1 FY2026 earnings call

Overall Consolidated Performance

• Total consolidated revenue: 1.559 billion yen, up 2.3% YoY; excluding the impact of rent guarantee business divestment, revenue is up 9.7% YoY
• Gross profit: 1.272 billion yen, up 4.3% YoY
• Operating profit: 0.271 billion yen, down 9.6% YoY, primarily driven by a 31 million yen increase in overseas shipping costs from US tariff changes
• Group GMV (net of double-counting) is up 10.7% YoY (double-digit growth)

EC Business Operational Updates

• Domestic: Average customer purchase size decline has bottomed out after double-digit drops in previous quarters, with only a 1.3% YoY drop this quarter. Purchasing customer count grew 11.3% YoY (double-digit growth). Management is prioritizing organic traffic growth (including SEO) to break the proportional link between GMV growth and advertising spend, as organic-acquired customers have ~3x higher LTV than advertising-acquired customers. A new AI recommendation feature launched in June 2025 to drive higher customer count and average purchase size, with expected future improvements as data accumulates.
• Overseas: South Korea grew 12.2% YoY, Taiwan grew 3.2% YoY (maintained positive growth on recovery path), US grew 11.7% YoY (below internal expectations), Hong Kong dropped 23.1% YoY (advertising investment suspended due to poor cost-effectiveness, with resources reallocated to other markets). US growth was impacted by new de minimis rule changes that extended tariffs to sub-$800 shipments, causing temporary customer purchase hesitation and a one-time jump in shipping costs after switching logistics providers. Improvement initiatives are already showing progress as of August 2025.

Financial Business Operational Updates

• Core business (Paid and URIHO) delivered solid double-digit growth. The near-flat segment profit is due to a 60 million yen gross profit loss from the divestment of the rent guarantee business, which was almost fully offset by 49 million yen in gross profit growth from core business.
• Selling, general and administrative (SG&A) costs have been optimized after the divestment, allowing more technical and human resources to be reallocated to high-growth core services. Cost of sales ratio remains well-controlled at ~75% gross margin, with strict credit screening maintained amid rising corporate bankruptcies.

SG&A Updates

• Total advertising and promotion expense increased to 0.256 billion yen from 0.243 billion yen YoY. EC business advertising increased 13 million yen YoY, while financial business advertising was near flat. Personnel costs increased due to planned base salary adjustments and new graduate hiring, with the planned round of base increases completed in the first half, so future growth rates will slow. The 31 million yen increase in shipping costs was recorded in the "other expenses" category, expected to be temporary limited to Q1.

1. EC Business: Segment revenue is 0.922 billion yen, up 6.6% YoY, contributing 59.1% of total consolidated revenue. Segment profit is 0.287 billion yen, down 3.8% YoY. Total GMV is 7.267 billion yen, up 8.5% YoY, missing the full-year 10.8% growth target. Domestic GMV is 5.293 billion yen, up 9.9% YoY (beating the 9.4% full-year target). Overseas GMV is 1.974 billion yen, up 4.9% YoY, missing the 14.5% full-year target. 2. Financial Business: Segment revenue is 0.636 billion yen, down 3.2% YoY, contributing 40.9% of total consolidated revenue. The YoY decline is entirely due to the divestment of the rent guarantee business; excluding this impact, core business revenue is up 14.5% YoY. Segment profit is 0.181 billion yen, down 1% YoY (near flat). Core KPIs: Paid transaction volume is 10.975 billion yen, up 12.2% YoY; URIHO guarantee balance is 65.911 billion yen, up 14.9% YoY.

• Management maintains the original full-year guidance, and does not expect material deviations from the target. The full-year plan includes sufficient buffer, and management is not concerned about achieving full-year results, supported by solid domestic growth in both core segments.
• The negative impact of US tariff changes and higher shipping costs is expected to fade gradually starting from Q2, with significant improvement already visible in August 2025.
• Financial business growth is slightly behind full-year target in Q1, which is normal for its gradually accumulating business model, and management expects full recovery in the second half of the fiscal year.
• Management reaffirmed the medium-term target of building the "Racoon BtoB Network", and confirmed no change to the M&A-focused growth strategy to achieve non-linear growth.

• US tariff policy changes (expanded de minimis tariffs on all imports to the US) caused temporary higher shipping costs, lower purchasing customer count, and lower-than-expected growth in the US market, which was the primary driver of lower Q1 consolidated operating profit.
• Hong Kong's weak economic environment and poor advertising cost-effectiveness have led to sharp declines in GMV, though resources have been reallocated to other higher-return markets.
• The existing organic customer acquisition strategy caps near-term customer count growth, as large-scale advertising investment would increase near-term costs with slower payback.
• Core business growth is naturally gradual and cumulative, making structural rapid non-linear growth difficult to achieve without external M&A.

Q: What is the progress of the "Racoon BtoB Network" initiative in the medium-term management plan? / A: The plan aims to unify fragmented customer IDs across the company's existing EC and financial services, enabling seamless access to all services with a single ID and creating cross-selling opportunities. The company will add new internal or acquired services to the unified network, and will pursue M&A more actively after a long period of limited activity. Work has already started, including evaluating ID integration methods and screening potential target companies to add to the network.

Q: Is the company planning large-scale advertising investment (such as TV commercials) in the second half to accelerate domestic purchasing customer count growth after average purchase size bottomed out? / A: Management confirms there are no plans for large-scale one-off advertising like TV commercials this fiscal year. Past experience shows one-off TV ads only deliver temporary growth, with limited sustained effect, and sustained year-round advertising would not be affordable under current profit levels. The company will keep focusing on organic customer acquisition to control ad spend growth.

Q: Is there any change to the M&A strategy for driving non-continuous growth? / A: There is no change to the strategy announced 3 months ago in the medium-term plan, and deal sourcing is already underway. M&A is not a goal in itself; the company targets acquisitions that fit into the BtoB Network, enable cross-selling, and expand service penetration to drive overall GMV and transaction growth, which can deliver the non-linear growth that organic expansion struggles to achieve structurally.

Q: What is the outlook for meeting the full-year target given the Q1 shortfall in overseas EC business? / A: Management expects the temporary shipping cost impact to end soon, and the full-year guidance already includes sufficient buffer. Domestic EC and core financial services are performing very well, so management does not have major concerns about achieving the full-year target. The company has reallocated advertising budget from underperforming US to new markets like France, the UK, and Southeast Asia, which are already delivering strong double-digit growth.