GMO Pepabo,Inc. Q1 FY2025 earnings call

Overall Financial Performance

• Consolidated results achieved year-over-year revenue and profit growth: total revenue was 2.745 billion yen (103.7% of the prior year period), and operating profit was 335 million yen (143.0% of the prior year period).
• All business segments outperformed prior year revenue; even with increased investment in future growth products, net profit increased year-over-year. As of the first quarter, operating profit reached 37.8% of the full-year guidance, and EPS reached 44.2% of full-year guidance, indicating performance is on track.
• Combined stock-based revenue from core domain/hosting services and Color Me Shop reached 1.82 billion yen, growing steadily year-over-year.

Strategic Shift to Corporate-Focused High-Value Products

• Historically, the company built growth on a stock-based business model focused on supporting creators and accumulating large volumes of low-price contracts. To drive further growth, the company is shifting strategy to target higher average revenue per user by expanding high-functionality, high-value products for corporate clients, with full rollout of new services in 2025.
• Launched the new corporate VPN service "Lolipop! Fixed IP Access" in March 2025, which supports secure remote access to internal corporate servers from multiple locations with centralized IP access control, targeting remote work, global business, and multi-location retail use cases. The Japanese VPN market is projected to grow at a 17% CAGR to 510 billion yen by 2027, creating large expansion opportunities.
• Launched sales of Google Workspace (with Gemini AI access) through Muumu Domain starting in February 2025; the company earns referral fees and drives new corporate domain registrations for customer acquisition. GMO Sokuretsu AI, previously targeted at 10-employee small businesses, has seen strong interest from firms with 100+ employees, so the target market is being expanded to larger enterprises, and the product was approved for Japan's 2025 IT Introduction Subsidy to drive adoption.

Product and Ecosystem Expansion

• Integrated the 30days Album photo sharing service into the SUZURI brand, rebranding it as SUZURI Album. This integration brings total registered members to 3.55 million, making SUZURI the company's largest service by user count. A new user flow lets users create and sell custom goods directly from their stored photos, to leverage cross-service synergy and expand revenue opportunities.
• Alive Studio (for VTuber and content creator streaming) continues to add features, including a new Stream Deck integration plugin for smoother streaming control, and launched corporate collaborations such as branded content for Calbee's Jagarico snack brand, to attract new users.
• The Metaverse Promotion Office continues experimental initiatives, including hosting VR corporate information sessions for new graduate recruitment and supporting a VRChat x SUZURI original goods design contest to expand touchpoints with new users and build brand value in next-generation digital spaces.

AI-Driven Operational Efficiency Improvements

• Completed 100% AI automation for first-tier customer inquiry handling, which reduced customer service department working hours by approximately 50% in 2024.
• The efficiency gain enabled redeployment and reskilling of 31 customer service staff to other roles, reduced new hiring needs and external outsourcing costs, delivering an annual 82 million yen profit improvement in 2024.
• In the current fiscal year, expanded AI and no-code tool use, which doubled the internal design team from 35 to 71 staff (no specialized technical skills required to create images and websites), accelerating the pace of product initiatives and improving overall company productivity. AI automation will next be expanded to administrative departments for further efficiency gains.

Enhanced Shareholder Returns

• Increased the target payout ratio from 50%+ to 65%+ to strengthen direct shareholder returns, supported by the company's stable earnings base from stock-based services and healthy balance sheet.
• Continues a planned annual share repurchase program; as of April 30, 2025, 46 million yen worth of shares have been repurchased, and the program will continue through December toward an upper limit of 180 million yen.

1. Domain and Hosting (Hosting) Business: Revenue of 1.542 billion yen (101.3% of the prior year period), accounting for 56.2% of total consolidated revenue; operating profit of 476 million yen (91.7% of the prior year period). Revenue increased from steady growth in Muumu Server contract volume, but profit decreased due to increased investment in new corporate-focused products. 2. EC Support Business: Revenue of 701 million yen (105.5% of the prior year period), accounting for 25.5% of total consolidated revenue; operating profit of 200 million yen (145.8% of the prior year period). Growth was driven by plan consolidation at Color Me Shop, which accelerated shifts to higher-margin premium plans, and increased corporate and streaming-related sales plus cost controls at SUZURI. 3. Handmade Business (minne): Revenue of 364 million yen (101.3% of the prior year period), accounting for 13.3% of total consolidated revenue; operating profit of 49 million yen (256.1% of the prior year period). Revenue was flat year-over-year, but profit grew sharply due to increased transaction volume for high-margin minne Ads. 4. Financial Support Business: Revenue of 135 million yen (136.4% of the prior year period), accounting for 4.9% of total consolidated revenue; turned to an operating profit of 85 million yen. Growth came from increased invoice purchase volume for higher-margin individual transactions and strong bad debt collection performance, which reduced related credit costs.

• The company maintained its previously announced full-year 2025 December fiscal year earnings guidance, and first quarter performance is currently progressing in line with the forecast.
• Management reaffirmed the ongoing strategy of balancing continued investment in high-value corporate-focused products for future growth with enhanced shareholder returns, supported by the company's stable free cash flow generation from its core stock-based business.
• The company plans to launch new creator and user experience improvement features for minne in the third quarter of the fiscal year, and will continue growing stock-based revenue through minnePLUS monthly subscriptions.

No explicit discussion of material business risks, operational failures, or downside risk factors was included in the provided transcript segment.

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