AUCNET INC. Q4 FY2024 earnings call

• 2024 Full Year Consolidated Results

  • Total revenue: 55.91 billion yen (+29.1% YoY), at 96.4% of the full-year guidance, impacted by underperformance in Fashion Resale transaction value. EBITDA reached 7.879 billion yen (+5.8% YoY), net income came to 4.485 billion yen, with EPS of 188.44 yen (+12.65 yen YoY). Full year 2024 DPS was set at 76 yen following a dividend payout ratio increase from 30% to 40.3%.
  • Q4 2024 results: Revenue +39.8% YoY, operating profit +12.5% YoY, ordinary profit +22.1% YoY, net profit +4% YoY, showing a strong quarter-end finish.

• Review of Previous Medium-Term Plan (Blue Print 2025, 2022-2024)

  • Achieved 4 consecutive years of revenue and profit growth, and expanded group scale significantly via 2 acquisitions in Lifestyle Products and 1 equity-method affiliate investment in Mobility. Cumulative 6.6 billion yen spent on share buybacks for capital efficiency and shareholder returns.
  • Targets: ROE of 20% and 30% payout ratio were broadly achieved, but the core targets of 1 trillion yen GCV and 10 billion yen EBITDA were not met, primarily due to slower-than-expected post-acquisition integration (PMI) and weaker-than-expected performance in Fashion Resale. 5.5 billion yen of the 10 billion yen allocated M&A budget was deployed over the 3-year period, as the firm maintains a selective approach focused on synergy, not just scale.

• Corporate & Capital Strategy Updates

  • Shareholder return enhancements: Raised the target dividend payout ratio from 30% to 40%+, announced a 2-for-1 stock split to improve share liquidity, plans to buy back up to 1.43 million shares (≈6% of outstanding shares) for up to 4.5 billion yen in February 2025, and introduced a employee stock compensation program to align employee and shareholder value.

• New Medium-Term Plan (Blue Print 2027, 2025-2027) Direction

  • Leverages Aucnet's core competitive advantage as a rare multi-category global reuse auction platform, with 40,000+ member companies across 76 countries and 5+ million annual product inspections. The plan targets 10 billion yen EBITDA by 2027, maintains ROE of 15-20%, 40%+ dividend payout ratio, and keeps 1 trillion yen GCV as a long-term target that combines reuse transaction value and environmental contribution metrics.
  • Lifestyle Products Strategic Initiatives: Digital Products will capture the upcoming wave of GIGA School retired device trade-ins, expand warehouse capacity and automation, target 2 million distribution units by 2027. Fashion Resale will integrate operations across the 3 acquired brand platforms (BrandAuction, GALLERYRARE, Brandia) to capture synergies, expand Southeast Asian distribution via a new Singapore office, and improve CtoC business profitability.
  • Mobility & Energy Strategic Initiatives: Automobile will grow market share to 11.5% by 2027 via upgraded core platforms, strengthened inspection capacity (including EV inspections), exclusive vehicle sourcing via partnerships with major lease companies and MOTA, and deepened loyalty marketing. Launched commercial operations for used EV battery diagnostic and repurposing platforms, targeting 2027 profitability. New circular commerce service Selloop offers secondary distribution launch support for manufacturers and retailers, with ongoing successful proof-of-concept projects.
  • M&A Strategy: Allocates 5-7 billion yen for M&A over the 3-year plan, targeting 0.7 billion yen additional EBITDA from acquisitions, maintaining a selective synergy-focused approach targeting the firm's core business areas. It plans 1-2 deals over the plan period, with a target of ~3 billion yen in transaction value in 2025.
  • Financial Strategy: Targets current ratio over 200%, equity ratio over 50%, EPS of 220 yen, maintains ROE of 15-20%. Excess cash (≈20 billion yen after working capital) will be allocated to shareholder returns, M&A, and digital transformation investments.

1. Lifestyle Products Segment: Operating profit of 5.362 billion yen, a 1.6% decrease year-over-year. Total segment revenue increased 42% year-over-year. Gross transaction value (GCV) was 118.8 billion yen, accounting for 18.5% of total company GCV. Within this segment, Digital Products had GCV of 49 billion yen (+15.6% YoY), with 5.1% YoY growth in distribution volume and 14.5% YoY growth in member count (over 2,000 total members). Fashion Resale BtoB had GCV of 52 billion yen (+18.1% YoY), with 5,800 total members driven by growth in overseas buyers; Fashion Resale CtoC had GCV of 17.8 billion yen (+52.6% YoY) but missed growth targets due to weak inbound demand.
2. Mobility & Energy Segment: Operating profit of 3.682 billion yen, a 23.6% increase year-over-year. Total segment revenue increased 9.8% year-over-year. GCV was 510.3 billion yen, accounting for 79.6% of total company GCV. Within this segment, Automobile had GCV of ~500 billion yen (+13% YoY), with 524,000 completed contracted units (+YoY) and 15,500 total members. Motorcycle business had over 29,600 contracted units (+YoY), with 34%+ GCV growth YoY. Inspection volume reached nearly 1.4 million units (+10.6% YoY), marking consecutive record highs.
3. Other Segment: Operating loss of 362 million yen, largely unchanged from the prior year. Revenue decreased 2.1% YoY. GCV was 12.2 billion yen, accounting for 1.9% of total company GCV. Overall total company GCV across all segments was 641.4 billion yen, up 14.3% year-over-year, and total consolidated operating profit was 7.005 billion yen, up 5.1% year-over-year.

• 2025 full-year guidance forecasts revenue of 59 billion yen (+5.5% YoY), operating profit of 6 billion yen (-14.3% YoY), ordinary profit of 6.02 billion yen, net income of 3.7 billion yen, and post-stock-split EPS of 80.98 yen (161.96 yen pre-split equivalent).
• DPS will be maintained at 76 yen pre-split (38 yen post-split), equal to 2024, resulting in a forecast payout ratio of 46.9% for 2025, as the firm prioritizes maintaining dividend levels while investing for future growth.
• 2025 is planned as an investment year: total one-time investment costs are expected to reach 1.2 billion yen, including ~0.7 billion yen for Lifestyle Products (Digital Products warehouse expansion/automation for GIGA School, Fashion Resale operational restructuring), 0.5 billion yen for company-wide one-time costs (40th anniversary events, employee stock compensation) plus 0.2 billion yen for base salary increases, partially offset by 0.2 billion yen in loss reduction from exiting unprofitable businesses. EBITDA is expected to dip in 2025 before recovering to exceed 2024 levels in 2026 and reach the 10 billion yen 2027 target.
• Blue Print 2027 reaffirms 10 billion yen EBITDA as the 2027 medium-term target, keeps 1 trillion yen GCV as a long-term target, and maintains ROE of 15-20% and 40%+ dividend payout ratio targets.

• Fashion Resale CtoC business underperformed 2024 targets due to a large drop in Chinese inbound demand and weak pricing for high-value goods, and integration of acquired businesses is taking longer than originally planned, delaying expected profit contributions.
• AIS inspection services in the Mobility segment is currently facing capacity constraints, as demand has outpaced existing operational capacity.
• M&A execution is subject to timing uncertainty, and the firm will not pursue deals that do not meet its synergy and profitability requirements, which may result in not fully utilizing the allocated M&A budget over the plan period.
• The overall reuse market growth may be impacted by broader economic conditions that affect consumer demand for secondhand goods.

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