3633.T

• Company Overview & Core Identity

  • Founded in 2003 in Fukuoka, joined the GMO Internet Group in 2004, and is focused on providing internet infrastructure to support individual expression and corporate information/ sales outreach, with a core business model built on recurring monthly subscription stock revenue.
  • To date, the company has supported output activities for 8.93 million individual and corporate users, with many more indirect end-users accessing services through supported sites and shops.
  • The company has intentionally shifted its business mix to increase the share of stable, high-margin stock revenue while reducing more volatile flow revenue, which has resulted in flattish overall top-line growth but expanding operating profit.

• Shareholder Return Policy

  • Previously used a 65%+ payout ratio as the base policy; added a new requirement of 10%+ Dividend on Equity (DOE), and will adopt whichever of the two requirements results in a higher dividend going forward. This change was made to reduce investor uncertainty around dividend stability during periods of fluctuating profit from active investment.
  • Last year's full-year dividend was 111 yen per share, including a 44 yen per share special dividend from non-operating gains (investment returns and business divestment); the current year forecast ordinary dividend is 93 yen per share, which represents an increase even excluding the prior year special dividend, continuing the trend of annual dividend increases. The company confirms it will consider special dividends for large one-time gains going forward.

• Strategic Growth Priorities

  1. Continue expanding stock-type revenue: The company is converting existing flow-based offerings to stock models, increasing the overall stock revenue share by ~3 percentage points last year alone, and will continue this trajectory.
  2. Shift focus to enterprise customers: Historically focused on individual and SMB users; now expanding into the enterprise segment to meet growing corporate demand for security, productivity tools, and AI-enabled DX. New offerings for this segment include ロリポップ！ Fixed IP Access for secure private network access and bundled Google Workspace with domain registration, both of which are growing rapidly, and aim to increase ARPU and expand the customer base.
  3. AI operational optimization and new AI business: The company implemented generative AI for first-tier customer support 2 years ago, handling ~1,000 daily customer inquiries, which enabled reskilling of former support staff to new business roles and improved efficiency. This internal expertise has been commercialized as GMO Sokuzoku AI, a stock-type AI agent deployment support service for enterprise and local government clients focused on automated inquiry response, with growing adoption.
  4. M&A for growth: The company has set a 3 billion yen total budget for M&A, targeting acquisitions that add to the company's existing stock revenue base or bring complementary technology that can scale with GMO Pepabo's existing user base. The budget can be allocated to a single large acquisition or multiple smaller acquisitions, and the company will not pursue deals that would cause material deviation from its 2027 operating profit target, with up to ~5% operating profit decline considered acceptable for strategic acquisitions.
  5. New business development: The company pursues new business via both top-down and bottom-up approaches, including annual internal new business idea competitions and development camps. Current strategy prioritizes small-start new businesses that leverage existing GMO Pepabo brand infrastructure and user synergies, to reduce upfront investment and risk, focused on two core new verticals: AI and creator support. An example is Alive Studio, a streamer layout design service that already has over 15,000 users.

• The company targets 1.26 billion yen in operating profit for the full year 2027 (December fiscal year-end).
• Management expects that after the current period of business mix rebalancing (which has resulted in flattish top-line growth), new businesses will gradually scale and return the company to revenue growth.
• The company expects new corporate-focused services in the domain/hosting segment to continue growing at their current rapid pace, as there is sufficient unmet demand in segments GMO Pepabo has not historically served.
• New stock-type services are expected to achieve high profit margins over time, though they are still in the investment phase currently, with full profitability expected to come after further scaling.
• Ordinary dividends are expected to continue growing steadily year over year, in line with the updated shareholder return policy.

GMO Pepabo operates three core business segments, with the 2025 revenue contribution breakdown as follows:

1. Domain and Rental Server (Hosting) Segment: 56.6% of total revenue. This is the company's founding and core segment, with 390,000 contracted subscriptions for the ロリポップ！ service and 1.02 million domains held under the Muumuu Domain brand. New value-added services in this segment (such as ロリポップ！ Fixed IP Access and bundled Google Workspace for Muumuu Domain) saw strong sales growth year-over-year, leveraging the company's existing user base for cross-selling.
2. EC Support Segment: 28.1% of total revenue. This segment includes two offerings: Color Me Shop (for merchants holding inventory) and SUZURI (on-demand, no-inventory custom merchandise). For Color Me Shop, while total store count has not grown sharply, overall GMV, per-store GMV, and average revenue per user have all increased, driven by growth in committed high-tiers plans from scaling merchants. For SUZURI, the service supports both custom merchandise for sale and one-off custom gifts/personal use, with growing demand from individual creators and corporate clients.
3. Handmade Segment: 11.8% of total revenue. This segment operates the minne handmade marketplace platform, which has 18.37 million registered works, 970,000 registered users, and also hosts large-scale in-person handmade market events that draw tens of thousands of attendees. Overall, 73% of the company's total revenue comes from recurring stock-type business, and this share has been increasing by several percentage points annually in recent years, reaching ~80% as of the latest reporting.

• The domain and rental server market overall is not expected to see explosive growth, as it is a mature market, unlike fast-growing AI cloud segments, so growth in this segment will be driven primarily by ARPU increases and market share gains rather than overall market expansion.
• While the company's new stock-type services have high long-term margin potential, they are still in the investment phase, which will delay full profit contribution in the near term.
• AI-powered copyright detection for SUZURI has become overly strict in some cases, leading to legitimate content created by rights holders being incorrectly rejected, which requires manual secondary review to resolve.
• Large upfront investment is required for new businesses in the current market environment, due to mandatory security and marketing requirements that did not exist when the company was founded, increasing the risk of new business failures.

Q: What are the competitive advantages for each of GMO Pepabo's segments?

A: In domain and hosting, we have over 20 years of operating experience, have built a large loyal user base, and we believe we are the leader in operational and support quality, as well as in balancing price and functionality. We will continue to differentiate by leveraging our existing user base and speeding up feature improvements for AI and enterprise DX needs. In EC support, we continuously add features to grow alongside our scaling merchants; we were the first in Japan to launch integrated features like Amazon Pay Buy Now, which is a capability only we can deliver through our strong corporate partnerships, giving us a unique competitive edge.

Q: What was the factoring business, and why was it divested?

A: We launched FREENANCE, a factoring service for freelancers and independent creators, because we had a large existing user base of freelance creators and web developers, and we wanted to improve their cash flow as a complementary service. However, as it was our first financial services business, some parts of the business did not perform as expected, and the business model was primarily flow-based rather than stock-based, which conflicted with our strategy of prioritizing stock revenue growth. We found a buyer that was a better fit for the business, so we divested it.

Q: What steps do you take to detect copyright-infringing content on SUZURI?

A: We have been working on copyright detection for many years, starting before the recent generative AI boom, using machine learning to identify infringing images like branded logos and copyrighted character art before they go into production. The detection accuracy has improved so much that we now sometimes incorrectly reject legitimate content posted by the actual rights holder, which we resolve via manual review, so the current level of screening is very strict.

Q: What synergies exist between your three core segments?

A: We have long had organic user flow between segments: for example, a user will first get a domain from us, then use our hosting, then open a Color Me Shop, or a minne handmade seller will expand to sell via SUZURI or their own Color Me Shop. We also build active cross-service integrations: for example, Alive Studio (our streamer design service) integrates directly with SUZURI, so streamers can display their custom merchandise directly on their stream layout, and viewers can purchase items without leaving the stream, with purchase confirmations showing up directly on stream. This creates a seamless cross-service experience that benefits all segments.

Q: Do you have plans for global expansion for Color Me Shop?

A: We previously launched an English-language version of Color Me Shop for the global market, but we failed at the marketing stage and withdrew the offering, so we have direct experience of the challenges of global expansion. Currently, we support existing Color Me Shop merchants that want to sell to international customers by enabling cross-border browsing and checkout for foreign buyers, which is already widely used by our merchants, and this is our current approach to international opportunity.

Q: What is your approach to new business development, including timeline for launch and investment discipline?

A: We use both bottom-up (from all employees) and top-down approaches to new business, including annual internal idea competitions and development camps to foster new ideas. Currently we prioritize new business that leverages our existing brands, user bases, and synergies to reduce upfront investment and risk, focusing on small starts instead of large upfront bets, because modern new businesses require more initial investment in security and marketing than they did when the company was founded, so small starts reduce risk. We focus on new offerings that fit into our existing brand frameworks to keep costs low.

Q: Will you allow crypto shareholding benefits to be received to external non-GMO accounts?

A: We have no plans to support this at the moment.

Q: Do stock-type contracts have minimum contract periods?

A: Each service offers multiple contract period options for users to choose from, and we also offer discounted pricing for longer-term contracts.

Q: How much growth potential does SUZURI have?

A: As individual expression becomes more common, SUZURI has significant remaining growth potential. We will continue to capture growing demand for "self-purchase" custom goods (custom items for personal use or gifting to family/friends) and corporate demand for custom novelty merchandise, leveraging our existing on-demand production infrastructure.

Q: Can you share more details on your new business areas?

A: We are pursuing new services along two core axes: AI and creator support. Our AI offering is GMO Sokuzoku AI for enterprise DX inquiry response, and our creator support offering is Alive Studio for VTuber and streamer layout design, which already has over 15,000 users.