FreeBit Co.,Ltd. Q3 FY2025 earnings call

Overall Business Performance

• All three product segments achieved year-over-year sales growth, with core operations progressing solidly despite a reported decline in net profit attributable to parent company shareholders driven by one-time factors.
• One-time factors reducing net profit include an 87 million yen non-operating expense for the announced SoftBank capital alliance and Gigaprize TOB recorded in the third quarter, and the absence of a 259 million yen special gain recorded in the prior year's same period.

Growth Investment Strategy

• Aligned with the medium-term plan 'SiLK VISION 2027', management is actively investing in new growth drivers, with 168 million yen in total investments deployed in the third quarter.
• Investments are focused on data center relocation, multi-faceted expansion of the StandAlone platform, web3-related projects, creator DX business expansion, and Asia-centered overseas expansion, with the bulk of recent investments allocated to the Enterprise & Creator 5G DX Support segment.

Key Strategic Announcements (January 31, 2025)

• Management announced a capital and business alliance with SoftBank Corp., and a tender offer (TOB) to take consolidated subsidiary Gigaprize private. Management will hold a dedicated briefing after the TOB process is completed.
• The alliance and Gigaprize privatization are intended to accelerate the company's transformation into a 'communication-born web3 social implementation company' through a new four-business strategy.
• Capital allocation update: Growth investment was initially projected at approximately 7.5 billion yen for the fiscal year; the Gigaprize share acquisition will increase total investment above this initial projection. Funding will come from proceeds of the SoftBank capital alliance alongside additional borrowing from financial institutions, with continued operating cash flow generation to support sustained long-term growth and enterprise value improvement.

Operational Milestones by Segment

• 5G Infrastructure Support: The value-added freebit MVNO Pack package continues to sell well. The 'Doko-demo IP' B2B direct service launched in September 2023 achieved 24.8% user growth between Q2 and Q3, and the new 'freebit mobile Biz' (Furimo) corporate direct communication service is being actively promoted via promotional campaigns.
• 5G Lifestyle Support: Effective sales promotion cost control for TONE Mobile supported profit growth alongside the core 5G Homestyle expansion.
• Enterprise & Creator 5G DX Support: Full Speed launched a new overseas affiliate operation consulting service in partnership with group company Forit Inc. New artist service expansion on the StandAlone platform is progressing, with the goal of expanding fan community building for the 5G/web3 era.

1. 5G Infrastructure Support Business: Segment profit was 1.056 billion yen, a 25.7% decrease year-over-year. Sales grew due to expanded mobile service adoption, but profit declined due to higher costs for communication quality improvements, data center relocation, mobile infrastructure renewal, and workforce strengthening for the medium-term plan. This segment accounts for approximately 26.0% of total segment profit. 2. 5G Lifestyle Support Business: Segment profit was 2.67 billion yen, a 27.3% increase year-over-year. Sales grew driven by increasing contracted units for Gigaprize's core 5G Homestyle multi-family dwelling ISP service, which reached 1,299,000 contracted units as of the end of the third quarter. This segment accounts for approximately 57.5% of total segment profit. 3. Enterprise & Creator 5G DX Support Business: Segment profit was 0.976 billion yen, a 26.6% increase year-over-year. Sales grew driven by domestic and global expansion of Full Speed Group's affiliate services, with cost reduction from service portfolio optimization also supporting profit growth. The segment is actively investing in future growth including overseas expansion and StandAlone platform development. This segment accounts for approximately 16.5% of total segment profit. Total consolidated sales (excluding fiscal year change impact) was 40.55 billion yen, up 6.0% year-over-year; consolidated operating profit was 4.69 billion yen, up 9.8% year-over-year.

• Full year 2025 April fiscal year targets were maintained at 54.0 billion yen in consolidated sales and 57.0 billion yen in operating profit.
• Management revised lower full year ordinary profit to 50.0 billion yen and net profit attributable to parent company shareholders to 25.0 billion yen, driven by expected additional non-operating expenses related to the SoftBank capital alliance and Gigaprize TOB, which will primarily be recorded in the fourth quarter.
• Despite the third quarter net profit already exceeding 100% of the revised full year target, management expects the full year result to land in line with the revised guidance due to the expected fourth quarter one-time TOB-related expenses.
• The medium-term 'SiLK VISION 2027' plan maintains its targets of 63.0 to 70.0 billion yen in total annual sales and 8.0 billion yen in annual operating profit for the final fiscal year of the plan.

• A fiscal year change for the Gigaprize group created comparability issues for year-over-year period results, as the first three quarters of the current fiscal year include 10 months of Gigaprize results versus the standard 9-month period in the prior year.
• The ongoing TOB process limits management's ability to provide full details on the transaction and its impacts during the current call, with full disclosure deferred until after the transaction closes.
• 5G Infrastructure Support segment profit is facing downward pressure from near-term costs for infrastructure upgrades, data center relocation, and workforce expansion to meet medium-term targets.
• Active front-loaded investment in the Enterprise & Creator 5G DX Support segment creates near-term downward pressure on quarterly profit, though these investments are intended to drive long-term growth.

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