GMO Pepabo,Inc. Q4 FY2024 earnings call

• Business & Market Context

• As of December 2024, GMO Pepabo supports over 8.54 million users creating digital content and online businesses, and has adapted to a market shift from generic low-cost internet services to high-function, use-case specialized offerings. Demand has shifted from low-price plans like Lolipop!"s Light and Economy plans to higher-value high-speed plans, and expanded to new use cases like personal servers for online gaming.
• The company completed 100% AI automation of external customer inquiry handling in 2024, which allowed 31 former customer service staff to be reassigned to other business and administrative divisions, enabling reskilling and reducing overall personnel costs.

• Mid-Term Strategic Priorities (2025–2027)

• Core priority is to strengthen the recurring (stock) revenue base and expand into new business areas, with a target of increasing the recurring revenue share from 65.5% in 2024 to over 70% by 2027. Targets for 2027 fiscal year are 12.6 billion yen in total revenue and 1.26 billion yen in operating profit, with average annual growth targets of 5% for revenue and 15% for operating profit over the 2025–2027 period.
• Strengthening core recurring revenue: Focus on growing revenue from "Lolipop!" and "ColorMe Shop", driving growth in high-price plan contracts, shifting users from discontinued low-price plans to higher-tier plans, and prioritizing acquisition of corporate customers to raise overall average customer value.
• Expanding business areas, three key initiatives:
  1. Extend existing recurring business: Grow contracts for "Lolipop! for Gamers" (launched 2024 to serve growing demand for personal gaming servers), and planned to launch a new niche specialized service in the domain/rental server segment in 2025.
  2. Commercialize AI implementation know-how via "GMO Sokuresu AI", a solution for businesses with customer inquiry management challenges, built on the company's own experience fully automating inquiry handling. The company will push sales to help solve labor shortage issues for other firms.
  3. Enter new growth areas: Launched "Alive Studio", a stream screen creation service for VTubers and live streamers in 2024 to enter the growing live streaming sector. Established the Metaverse Promotion Office in 2025 (staffed primarily by early-career employees) and entered a partnership with VRChat, to explore new service offerings in the growing metaverse market.

• Shareholder Return Update

• Updated shareholder return policy to increase the payout ratio target from 50%+ to 65%+, shifting from a mix of shareholding benefits and dividends to greater direct dividend-based return to shareholders.

1. Domain and Rental Server (formerly Hosting) Business: Revenue of 6.096 billion yen (105.9% YoY), operating profit of 1.918 billion yen (105.7% YoY), accounting for 55.8% of total consolidated revenue. Growth was driven by sustained price adjustment effects for core services "Lolipop!" and "Muumu Domain" and rising share of high-price plans, offset partially by development costs for the new "Lolipop! for Gamers" service. Both core services saw increased average customer revenue YoY.
2. EC Support Business: Revenue of 2.965 billion yen (98.9% YoY), operating profit of 777 million yen (118.5% YoY), accounting for 27.1% of total consolidated revenue. "ColorMe Shop" grew revenue from price adjustments, while "SUZURI" saw revenue decline from lower gross merchandise value (GMV). AI-driven cost cuts in customer service reduced overall expenses, leading to net profit growth despite the top-line decline. "ColorMe Shop" total GMV hit 52.3 billion yen (103.3% YoY), with bottoming market trends and rising per-store GMV and average customer value.
3. Handmade Business (minne): Revenue of 1.401 billion yen (94.1% YoY), operating profit of 62 million yen (285.6% YoY), accounting for 12.8% of total consolidated revenue. Revenue fell due to broader EC market slowdown and lower GMV, but improved profit margins from the "minne Ads" promotional program for creators drove significant profit growth.
4. Financial Support Business: Revenue of 452 million yen (69.1% YoY), operating loss of 43 million yen, a 1.021 billion yen improvement YoY, accounting for 4.1% of total consolidated revenue. Revenue fell after stricter invoice purchase standards reduced purchase volumes, but large reductions in credit loss expenses (from elevated 2023 levels) and progress in debt collection greatly narrowed the operating loss.

• 2025 December fiscal year full year consolidated guidance calls for 11.184 billion yen in total revenue (102.4% YoY) and 888 million yen in operating profit (107.2% YoY). Excluding the one-time non-operating gain recorded in 2024, recurring profit and net income attributable to parent shareholders are also projected to increase YoY.

• Segment-level guidance projects revenue and operating profit growth for the two largest segments: Domain & Rental Server, and EC Support.
• Key growth drivers for 2025: Domain & Rental Server will target corporate customer acquisition with Lolipop!'s new fixed-rate website creation plan, grow users of "Lolipop! for Gamers" via Minecraft-specific feature enhancements, and launch a new niche service in Q2 2025. For EC Support's "ColorMe Shop", the company will strengthen sales of the Premium Plan for high-GMV stores and develop new features for top-tier merchants to grow overall platform GMV, following observed bottoming of the physical goods EC market in 2024.
• Dividend guidance for 2025: Following the payout ratio increase, the planned annual dividend per share is 67 yen, a 10 yen increase from 2024's adjusted dividend.
• Mid-term targets are maintained: 12.6 billion yen revenue and 1.26 billion yen operating profit for 2027, 5% average annual revenue growth and 15% average annual operating profit growth over 2025-2027.

• EC market slowdown negatively impacted 2024 revenue for the handmade segment and the SUZURI business within EC support, with lower gross merchandise value reducing top-line results. • The financial support business still operates with stricter invoice purchase standards following 2023's large credit loss event, leading to sustained lower revenue, and still reported an operating loss in 2024 even after significant improvement from 2023. • The company is entering new, unproven market areas including live streaming, AI solutions for external clients, and metaverse services, which require upfront investment and carry uncertainty around future user adoption and revenue generation.

No formal question and answer section is included in the provided transcript.