istyle Inc. Q4 FY2025 earnings call

Overall Financial Performance

• Consolidated revenue for the 2025 June fiscal year hit 68.8 billion yen, 22.6% YoY growth; consolidated operating profit reached 3.16 billion yen, 63.1% YoY growth, with both figures marking new all-time records. Results significantly exceeded the initial management guidance (64 billion yen revenue, 2.4 billion yen operating profit), with operating profit hitting 131.9% of the initial target.
• EBITDA reached 5.6 billion yen, ROE hit 17.3%, which is well above the company's estimated cost of capital of 10-11%.
• Selling, general and administrative (SG&A) rate remained well-controlled at around 38% for the full year, even as absolute SG&A increased with business expansion and headcount growth.

Core Operational Milestones

• The @cosme platform maintains stable monthly active unique users at 16.7 million, with total registered members growing to 10.6 million.
• The annual June @cosme SPECIAL WEEK sales event grew to 2.7 billion yen in revenue this year, 9x higher than its first year launch in FY20.
• The company's third flagship store, @cosme NAGOYA, opened in June 2025 as an expanded 230-240坪 location in partnership with JR Nagoya Takashimaya, with strong initial customer foot traffic. It serves as a test case for partnerships between istyle and existing department stores to grow the overall regional beauty market.
• Cross-channel usage of EC and physical stores reached 26%, up from lower levels in 2019, confirming progress in creating a synergistic cross-channel ecosystem across the company's media, EC, and store touchpoints.

New Mid-Term Growth Strategy

Management shifted its core performance KPI focus from monthly active user (MAU) growth to total user actions (which include samples requests, engagement, in-store visits, and purchases, in addition to basic site visits), organized around four key priorities:

• Increase total user action volume: Grow the total number of user interactions across all touchpoints, rather than just expanding raw user count, to build a robust pre-purchase customer database that delivers value to brand partners.
• Expand user action touchpoints: Add new interaction points beyond existing media, EC, and stores, including expanded partnerships on social media, new industry events (such as the upcoming TOKYO BEAUTY WEEK 2026), and AI-powered tools like AI beauty agents.
• Monetize user actions: Launch new data solution services for brand partners, including the upcoming @cosme Copilot AI tool for review and user action analysis, and build out formal data consulting services.
• Expand beyond core cosmetics to broader beauty categories: The first new category launch is inner care supplements, with plans to further expand into aging care, femtech, and other adjacent beauty areas.

1. Marketing Support: Revenue of 9.65 billion yen, 15.7% YoY increase, contributing 14% of total consolidated revenue; Operating profit of 2.82 billion yen, 74.5% YoY increase. Growth was driven by synergy with the Retail segment, which expanded user and brand engagement data for more effective marketing services.
2. Retail (Online + Offline): Revenue of 53.4 billion yen, 26.9% YoY increase, contributing 77.6% of total consolidated revenue; Operating profit of 3.11 billion yen, 18.2% YoY increase. Both physical stores (including the newly opened @cosme NAGOYA flagship) and EC (driven by the successful @cosme SPECIAL WEEK event) posted strong growth, with improved operating margin year-over-year even excluding inter-segment license revenue.
3. Global: Revenue of 4.17 billion yen, 6.1% YoY increase, contributing 6.1% of total consolidated revenue; Operating loss of -0.17 billion yen, a 33 million yen improvement in deficit YoY. Excluding pre-opening costs for the upcoming Hong Kong flagship store, the segment returned to profitability for the first time in years, driven by recovery in South Korea operations and Chinese cross-border EC.
4. Other: Revenue declined following the termination of some B2C subscription services, with results in line with management expectations. Contributes less than 3% of total consolidated revenue.

• For the 2026 June fiscal year, management guidance targets 83.0 billion yen in consolidated revenue, 3.8 billion yen in operating profit, 3.8 billion yen in ordinary profit, and 2.65 billion yen in net income, representing 20% YoY growth for both revenue and operating profit.
• The Marketing Support segment is projected to exceed 10.0 billion yen in revenue for the first time. The Retail segment is projected to reach 63.3 billion yen in revenue, pushing istyle's domestic cosmetics market share above 2%. The Global segment is projected to move toward operating profit breakeven.
• Total planned investment in new business growth is 0.63 billion yen, with 1.27 billion yen in expected incremental profit from existing business growth. Most profit for the 2026 fiscal year is expected to be realized in the second half, due to pre-opening investment for the Hong Kong flagship store (planned to open between November and December 2025).
• Management reaffirmed its mid-term target of reaching 100.0 billion yen in consolidated revenue and 8.0 billion yen in operating profit, noting the revenue target is now within achievable range, with further upside to operating profit if investments are deployed effectively.

• ROE may experience volatility in the future due to changes in outstanding equity from convertible bond conversions and warrant exercises, though management notes that continued business growth is the core driver of sustained higher ROE.
• The EC industry has become increasingly competitive, which may put pressure on future growth of the Retail segment's online business.
• Pre-opening costs for the Hong Kong flagship store will pressure near-term Global segment profitability, with the success of the new flagship store uncertain.
• New strategic initiatives (expanded touchpoints, new category expansion, AI tools) require upfront investment that may not deliver expected growth or returns in the projected timeline.

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