AUCNET INC. Q4 FY2025 earnings call

• Overall 2025 Full Year Performance

  • 2025 marked Aucnet's 40th anniversary of founding, positioned as a year of upfront investment for future growth. The company achieved 6 consecutive years of revenue and profit growth, and 5 consecutive years of record high profit.
  • Consolidated full year sales: 64.139 billion yen, +14.7% YoY; operating profit: 9.517 billion yen, +35.9% YoY; EBITDA: 10.559 billion yen, +31.5% YoY; net income attributable to parent company shareholders: 5.921 billion yen, +32.0% YoY.
  • The original full year guidance was upward revised in November 2025; revenue achievement rate reached 102.6%, and operating profit achievement rate reached 105.2%. The original Blue Print 2027 medium-term target of 10 billion yen EBITDA was achieved two years ahead of schedule.
  • Q4 2025 (final quarter) sales: 16.658 billion yen, +7.7% YoY; operating profit: 1.479 billion yen, +6.1% YoY; net income attributable to parent company shareholders: 1.359 billion yen, +52.5% YoY.

• Capital and Shareholder Return Updates

  • The company changed its dividend policy: starting from the 2026 fiscal year, the target payout ratio will be raised from 40% or higher to 50% or higher to strengthen shareholder returns. For 2025 full year, dividend per share is 58 yen, payout ratio reached 44.7%.
  • A 2-for-1 stock split is scheduled for April 1, 2026 to lower per-share investment unit price and improve accessibility for retail investors.
  • Total return ratio has exceeded 100% due to past share repurchases, ROE reached 22.7% in 2025, and PBR exceeded 3.6x as of the end of 2025.

• Medium-term Management Plan Blue Print 2027 Updates

  • The plan was originally established in 2025 with 2027 as the final fiscal year. After achieving the original EBITDA target two years ahead of schedule, the quantitative targets have been upward revised:
    • Original EBITDA target for 2027: 10 billion yen → revised to 13.5 billion yen
    • ROE target maintained at 15-20%
    • Dividend payout ratio target revised from 40% or higher to 50% or higher
  • Segment-level 2027 EBITDA targets: Lifestyle Products 10.7 billion yen, Mobility & Energy 4.7 billion yen, adjusted for corporate costs to reach the total 13.5 billion yen target.

• Segment Strategic Priorities

  • Digital Products (Lifestyle Products segment): Market environment: Smartphone replacement cycle has stabilized, major mobile carriers are expanding trade-in programs that increase available inventory, and GIGA School program device replacement cycle will drive growth in used tablet distribution. Overseas demand for used smartphones remains strong. Key strategies: 1) Expand distribution volume by strengthening collaboration with manufacturers and distributors to capture GIGA School replacement demand; 2) Strengthen operational infrastructure by continuing to introduce AI and automation to handle higher volume, and continue platform reform and buyer network expansion to maintain price premium for goods traded via Aucnet. Target distribution volume exceeds 3 million units by 2027.
  • Fashion Resale (Lifestyle Products segment): Market environment: The global pre-owned brand reuse market continues to grow, and "USED IN JAPAN" branded goods maintain strong global demand. Key strategies: 1) Strengthen core B2B auction operations and continue platform reform to differentiate from competitors; 2) Integrate the two consumer-facing subsidiaries Gallery Rare and De Facto Standard into Circlax, strengthen branding and promotion for the merged business, and leverage the new app for Brandear to drive buying and sales growth. Target: 1.14 million B2B contracted units and 22 billion yen consumer-facing transaction value by 2027.
  • Automobile (Mobility & Energy segment): Market environment: Despite short-term headwinds including semiconductor shortage, export restrictions and certification issues, long-term operating environment is stable. New car supply shortage has driven continued used car price increases. Key strategies: 1) Increase auction market share via the new member website and expansion of exclusive vehicle inventory; 2) Strengthen vehicle inspection services by hiring and training more inspectors and expanding the national inspection network to meet unmet demand. Target: 600,000 sold units (11.0% market share) and 1.78 million inspection units by 2027.

• M&A and Capital Allocation

  • M&A budget and strategy remain unchanged: total planned M&A investment is 5 billion to 7 billion yen, focused on targets in existing related fields that can generate synergy with core operations. One M&A was completed in 2025, acquiring system development firm yep as a consolidated subsidiary.
  • Cumulative operating cash flow of 27 billion yen is projected through 2027: 13 billion yen (half of total) allocated to shareholder return, 5 billion to 7 billion yen allocated to M&A, 7 billion yen allocated to DX and human capital investment, and 20 billion yen will be retained as operating cash reserve to support daily auction settlement requirements.

1. ライフスタイルプロダクツ (Lifestyle Products) Segment:

• Full year 2025 transaction value: 155.734 billion yen, +31.0% YoY
• Full year 2025 sales: grew 17.5% YoY, segment operating profit: 8.393 billion yen, +56.5% YoY
• Q4 2025 operating profit: 1.638 billion yen, +67.2% YoY
• Sub-segment performance:
  • Digital Products: Transaction value 83.9 billion yen, distribution volume 2.54 million units, +53.7% YoY; member count 2,103, +3.2% YoY
  • Fashion Resale B2B: Transaction value 52.6 billion yen, +1.1% YoY; 956,000 contracted units, +12.7% YoY; member count 6,883, +17.2% YoY; profitability improved despite slight drop in average contract unit price due to fee adjustments
  • Consumer-facing (C-side) Business: Transaction value 19.199 billion yen, +7.6% YoY, performance was soft due to external headwinds

1. モビリティ＆エネルギー (Mobility & Energy) Segment:

• Full year 2025 transaction value: 573.063 billion yen, +12.3% YoY
• Full year 2025 sales: grew 9.7% YoY, segment operating profit: 3.464 billion yen, -5.9% YoY
• Q4 2025 operating profit: 598 million yen, -33.6% YoY
• Sub-segment performance:
  • Automobile: Transaction value 560 billion yen; 553,000 contracted/sold units; member count over 16,000; total inspection volume reached 1.58 million units, 5th consecutive year of record high
  • Motorcycle: Transaction value 12.9 billion yen; 33,000 contracted/sold units; performance was solid supported by strong export demand and rising average unit price

1. Other Segment:

• Full year 2025 transaction value: 11.585 billion yen, -5.3% YoY
• Full year 2025 sales: grew 8.6% YoY, operating loss: 371 million yen; the deficit narrowed after exiting some unprofitable businesses
• Agri business: overall performance was soft, but transaction volume and member count at the Kansai location grew steadily
• Circular Commerce new business: partnership development is ongoing

Total consolidated full year 2025 transaction value: 740.383 billion yen, +15.4% YoY; after adjusting for corporate expenses of 1.968 billion yen, total consolidated operating profit reached 9.517 billion yen. By revenue contribution proportion, Mobility & Energy accounts for approximately 56.7% of total transaction value, Lifestyle Products accounts for approximately 21.0%, and Other accounts for approximately 1.6%.

• 2026 Full Year Consolidated Guidance

  • The company expects top-line and profit growth in 2026, as the one-time costs incurred in 2025 will not recur and existing business growth will add to performance. Guidance: sales 71 billion yen (+10.7% YoY), operating profit 11 billion yen (+15.6% YoY), operating margin 15.5%, ordinary profit 10.85 billion yen, net income attributable to parent company shareholders 7.2 billion yen. After stock split, EPS is 79.30 yen, pre-split equivalent is 158.60 yen.
  • Dividend guidance after stock split is 40 yen per share (pre-split equivalent 80 yen), with an expected payout ratio of 50.4%.
  • Quarterly performance expectation: Q1 2026 is expected to be slightly lower YoY, growth will resume from Q2 onward to achieve full year revenue and profit growth. Higher branding costs are expected in 2026 for the Brandear campaign (featuring celebrity TV commercial), but profit growth is expected from Q2 onward after absorbing existing depreciation costs that started in Q2 2025.

• Blue Print 2027 Updated Guidance

  • EBITDA trajectory: 10.5 billion yen achieved in 2025, projected 12.1 billion yen in 2026, and 13.5 billion yen in 2027. The original target of 10 billion yen was upward revised to 13.5 billion yen after early achievement two years ahead of schedule. Lifestyle Products segment is expected to remain the main driver of high growth through the plan period.

• Lifestyle Products Consumer-facing Business: Performance is highly sensitive to external macro factors and market fluctuations, including U.S. tariff policy, reduced inbound tourism from Greater China, and secondary market price volatility that negatively impact transaction volume and profitability.
• Mobility & Energy Segment: Strong demand for vehicle inspection services outpaces current inspection capacity, leading to unmet demand and lost business; the company is addressing this via inspector hiring and training.
• Motorcycle Business: Slight member count decline, attributed to ongoing financial stress among small and medium-sized dealer members.
• Agri Business: Current collection volume and average price are below prior year expectations, leading to soft near-term performance.
• Persistent cost pressure: Ongoing investment in human capital expansion, base salary increases, employee stock compensation, and group governance strengthening as the company scales up will lead to continued elevated corporate costs from 2026 onward.

Q: Will the growth momentum of the Digital Products business continue into fiscal 2026?

A: Aucnet views Digital Products growth, especially smartphone business growth, as critical to achieving the Blue Print 2027 medium-term targets. 2025 delivered results far beyond expectations: transaction value grew ~70% YoY and distribution volume grew over 50% YoY, which was higher than the company forecast. While the company continues to expect growth from new customer acquisition, stronger supplier partnerships and higher distribution volume, 2026 is not expected to match the 2025 growth rate. GIGA School device replacement will be a key growth driver in 2026, and the company will focus on capturing this demand to deliver stable growth from 2026 to 2027.

Q: What turnaround plans do you have for the underperforming consumer-facing (C-side) fashion resale business?

A: The consumer-facing business is more exposed to market volatility than Aucnet's core B2B auction business. Recent headwinds including U.S. tariff policy and reduced inbound tourism from Greater China have hurt performance, by limiting access to overseas customers and dragging down overall market volume and prices. To address these issues: 1) The company has integrated C-side operations adjacent to existing B2B operation centers to unify workflows, improve efficiency and realize group synergy; 2) The two C-side brands (mid-price Brandear and high-price Gallery Rare) have been merged under the new Circlax parent, and the company will scale up promotion and branding to improve market recognition; 3) The company is investing in building out a high-quality smartphone app for buying, complementing existing web and LINE channels, to improve user experience and drive higher buying volume. 2026 will see upfront investment costs for these initiatives, but the company expects growth to resume after this investment period.

Q: Why did you choose to update the existing Blue Print 2027 instead of launching a new medium-term plan after hitting the original EBITDA target early?

A: After the first year of the 3-year plan, the overall quantitative results are far better than expected, but the core strategic initiatives and direction for each business are still in progress and have not yet been fully implemented. There is still room for growth under the existing strategic framework. Therefore, the company only chose to update the quantitative targets (profit/earnings targets) and adjust the cash allocation framework, while keeping the existing segment-level strategies unchanged. The company will continue to execute the current strategy to deliver higher growth, so there is no need to launch an entirely new plan.

Q: Was the 2025 better-than-expected performance due to not spending the budgeted one-time costs, rather than underlying business strength? How were the planned one-time costs used?

A: The company fully spent all budgeted one-time investment costs, and deployed the funds appropriately to support future growth. Approximately 700 million yen was spent on C-side business transformation, including warehouse integration, business restructuring and store closure costs. An additional approximately 500 million yen was spent on one-time items including 40th anniversary events and employee stock compensation, for a total of approximately 1.2 billion yen in planned one-time costs that were fully utilized in 2025.

Q: Why did Mobility & Energy segment deliver revenue growth but profit decline YoY, even when all key operating KPIs were strong?

A: Around 90% of the Mobility & Energy segment is the Automobile business, which saw solid revenue growth of ~10% YoY, supported by strong demand from export buyers that was boosted by the weak yen, with solid growth in fee income. The profit decline was entirely due to increased investment-related costs: 1) The segment launched a new core system (BASE) and new member website (AUCNET CARS) to replace the 10+ year old legacy system, which triggered depreciation costs and one-time development expenses that were mostly recognized in the second half of 2025; 2) Employee stock compensation was recognized as an expense, and the Automobile business employs around half of Aucnet's total consolidated workforce (including AIS inspection and subsidiary Aioke), so this cost had a large impact on segment profit. Core operating earnings for the segment remain solid, so profit growth is expected to resume from 2026 onward.