3031.T

• Company Overview and Mission

  • Raccoon HD is a holding company operating two core business segments: EC and Financial, with the mission of improving the efficiency and convenience of corporate activities, specifically focusing on streamlining and activating transactions between small and medium-sized enterprises (SMEs).
  • The company targets underpenetrated, low-competition (blue ocean) markets and entered these markets at an early stage to drive growth. KPI growth from the 2022 April term to the 2025 April term (previous mid-term management plan period) has been relatively steady, with consistent cumulative revenue growth and no historical revenue declines.

• Business Segment Details

  • EC Business: Operates the "Super Delivery" BtoB wholesale e-commerce platform that connects geographically concentrated Japanese manufacturers with dispersed domestic and overseas retail buyers, streamlining the wholesale and procurement process. The business has expanded to Asia, the US, and Europe, with growing transaction volumes in these markets.
  • Financial Business: Operates two BtoB post-payment credit services: URIHO (provides payment collection guarantee for suppliers) and Paid (handles end-to-end invoice issuance, collection, and includes URIHO's payment guarantee, streamlining credit management and cash collection for BtoB transactions, which are overwhelmingly post-paid in Japan).

• Market Opportunity

  • EC Business: As of 2024, the BtoB wholesale e-commerce penetration rate in Japan is only 6.1%, up from 5.1% in 2020, compared to 24% for BtoC e-commerce, leaving large room for growth. Overseas markets have roughly equal BtoB and BtoC e-commerce penetration rates, so e-commerce adoption will continue to grow in the Japanese BtoB space.
  • Financial Business: As of 2024, only 2.3% of BtoB post-payment accounts receivable are guaranteed by third parties, up from 1.0% in 2020 (a 2.3x increase in 4 years). In developed markets like Germany, the penetration rate is around 20%, so the Japanese market is expected to see similar growth, which the company views as a major business opportunity.

• Long-Term Vision: Raccoon BtoB Network

  • The long-term vision is to expand beyond existing EC and credit services to build a full-service network that solves multiple pain points for SMEs, enabling SMEs to focus on their core product and service capabilities by handling all back-office and transaction efficiency needs.
  • The network will be built around credit (credit checking, settlement, collection, risk taking) as a shared core hub for all BtoB transactions, leveraging the company's unique expertise in serving newly established SMEs and micro-entities that most competitors avoid serving.

• Strategic Partnership

  • Since November last year, the company has partnered with Advantage Partners, a large investment firm, which has provided capital via convertible bonds and share warrants. Advantage Partners provides support for sales, marketing, and KPI management, and will assist with M&A sourcing and execution to accelerate the expansion of the BtoB Network.
  • M&A will initially target businesses close to the company's existing e-commerce and financial expertise that add value to current customers, with potential future expansion into adjacent areas such as BPO services (like bookkeeping outsourcing, which is a common pain point for small and new businesses). Cross-service synergies (such as using purchase points from Super Delivery to pay for BPO services) are envisioned.

• Updated Shareholder Return Policy

  • The company added a progressive dividend policy and a profit-linked incremental dividend to its existing 45-50% consolidated payout ratio policy. A floor of 22 yen per share (excluding special commemorative dividends) has been set, and the dividend will not fall below this level.
  • For the profit-linked incremental dividend: 60% of net profit between 1.2 billion yen and 1.5 billion yen will be paid out as dividends, and 70% of net profit above 1.5 billion yen will be paid out.
  • A new shareholder benefit program was introduced: for shareholders holding 500-1,000 shares for over 1 year, 7,500 yen in digital gifts are provided annually; for shareholders holding over 1,000 shares for over 1 year, 15,000 yen in digital gifts are provided.
  • The company prioritizes direct return via dividends and benefits over share buybacks at present, while not ruling out future share buybacks. The company's cash flow structure is naturally cash-rich with fast turnover, so it can balance shareholder returns and growth investment.

• Organic growth target for the company's long-term plan is a 15% compound annual growth rate (CAGR), which is achievable with existing EC and Financial businesses. Minimal M&A impact is baked into this target, and any completed M&A will add incremental growth above this base. M&A is currently in the deal sourcing stage, with no definite outcomes to include in guidance at this point.
• The 10% average order value growth achieved in the third quarter of EC business is expected to be sustainable: the growth came from an internal change to how points and coupons are distributed, which was tested successfully and can be rolled out to new customers going forward. Management plans to balance customer acquisition growth and average order value growth in future quarters, expecting to grow both metrics.
• For the Financial business, after strengthening sales capabilities with support from Advantage Partners, management expects to see improved results from proactively targeting large customers, which is an untapped growth opportunity for the segment.

1. EC Business (Super Delivery): In the third quarter of the current fiscal year, achieved the highest quarterly operating profit in its history. The segment faced negative pressure from Trump tariffs in overseas markets, but domestic operations remained solid. After several quarters of flat or slightly declining average customer order value, the segment implemented new promotional measures in the third quarter, driving an approximate 10% increase in average customer order value, which led the segment to hit a record high profit. 2. Financial Business (Paid, URIHO): Profit in the third quarter was roughly flat compared to the second quarter, but the segment has seen very steady profit growth starting from 2025. No absolute revenue or profit figures or revenue contribution percentages were provided in the transcript.

• For EC business overseas operations: Rising crude oil prices may drive higher international shipping costs. While Raccoon does not directly absorb shipping costs (these are passed through to buyers), higher shipping costs could lead to reduced purchase volumes from overseas buyers, especially those in distant markets. The negative impact of higher shipping costs may be offset by the positive impact of yen depreciation, which makes Japanese goods cheaper for overseas buyers, resulting in a net mixed impact.
• For Financial business: Rising crude oil prices and economic stagnation could further worsen the operating environment for Japanese SMEs, which have already seen rising bankruptcy rates over the past several years. While this increases demand for the company's credit guarantee services, the company takes on the default risk, so there is a theoretical risk of higher uncollected costs. Management states that risk controls have worked effectively so far: even amid rising SME bankruptcies in recent years, uncollected costs have actually declined, so management is confident in ongoing risk control.
• The company's third quarter cumulative revenue came in slightly below target due to the negative impact of Trump tariffs on EC overseas business. The company also faced 50 million yen in unexpected shipping cost overrun due to an internal pricing error for overseas shipments, plus a 46 million yen expense from the newly introduced shareholder benefit program that did not exist in the prior year, leading to a flat year-over-year profit result.

Q: What is the impact of current high crude oil prices and yen depreciation on the company's businesses?

A: For EC overseas business, higher crude oil prices raise shipping costs, which are passed through to buyers, but may cause buyer purchase pullback in distant markets. Yen depreciation is fully positive: it makes Japanese goods cheaper for overseas buyers, increasing demand. These two impacts may offset each other to some degree. For Financial business, while a worsening SME environment could increase bankruptcies, it also increases demand for the company's credit guarantee services from suppliers worried about collection risk. Although the company takes on default risk, uncollected costs have actually fallen even amid rising bankruptcies in recent years, so risk is well controlled.

Q: What types of targets is the company considering for M&A as part of the BtoB Network strategy?

A: M&A will start with companies in sectors close to the company's existing e-commerce and financial expertise that improve the value proposition for current customers. In the future, the company may expand into adjacent sectors that address common needs of its 500,000 existing SME customers, such as bookkeeping BPO, which is a major pain point for new and small businesses. Cross-service synergies such as using purchase points to pay for BPO services are possible.

Q: What is the strategic goal of having credit as the hub of the BtoB Network? Could loan guarantee services be added in the future?

A: Credit (including settlement, invoicing, collection, and risk taking) is a core component of every BtoB transaction across all industries, so it is the natural hub. The company has unique expertise in serving small and newly established SMEs, which most competitors do not serve, so this builds a unique competitive position. Loan guarantee is a possible future service, as money-related services present large business opportunities that fit the network strategy.

Q: How much M&A growth is included in the company's 15% CAGR long-term sales target?

A: The 15% CAGR target is based on organic growth from existing EC and Financial businesses, with minimal M&A impact baked in. M&A is still in the deal sourcing stage, so it is too early to estimate the impact, and any completed M&A will add incremental growth above the 15% base.

Q: Is the 10% average order value growth in EC business sustainable, and will it remain at the current high level?

A: Yes, the growth is sustainable because it came from a permanent change to how the company distributes points and coupons, not external factors. The new distribution method was tested successfully in the third quarter, and can be rolled out to all new customers going forward. In the third quarter, the company prioritized testing the average order value strategy over customer growth, but will balance both goals going forward, growing both average order value and total customer count.

Q: Is there room to grow customer acquisition for Financial business by strengthening sales capabilities with Advantage Partners' support?

A: Yes, especially for the Paid service, sales capability is critical. Compared to the main large competitor, the company's product offering is roughly equivalent, but the company is smaller because it has not focused on acquiring large enterprise customers, and currently operates on an inbound inquiry-based model. With Advantage Partners' support, the company will improve its sales capabilities to proactively target large potential customers, which is a large untapped growth opportunity that management expects will deliver positive results.

Q: What is the background for introducing the new progressive profit-linked dividend policy, and what is the company's current stance on share buybacks?

A: The company has always prioritized direct shareholder returns. While capital gains from share price growth are desirable, many factors impacting share price are outside of the company's control, but dividends and benefits can be directly controlled via company decisions, so the company wants to deliver assured returns to shareholders. Some investors question whether high shareholder returns conflict with growth investment for the BtoB Network, but the company's business model generates fast, strong cash flow and is naturally cash-rich, so it can balance both goals. The company's stance on share buybacks is unchanged, but given that the company has recently issued new securities to Advantage Partners, it currently prioritizes dividends and share benefits over buybacks.