GMO Financial Gate,Inc. Q2 FY2025 earnings call

• Core Financial Performance
  • First half total revenue: 9.04 billion yen, YoY -2.1%, hitting 93.5% of the half-year plan and 40.7% of the full-year plan
  • First half operating profit: 1.38 billion yen, YoY +48.5%, hitting 126.8% of the half-year plan and 68.5% of the full-year plan
  • Gross profit: 3.398 billion yen, YoY +25.9%, hitting 116.6% of the half-year plan and 52.3% of the full-year plan
  • Pre-tax profit: 1.379 billion yen, YoY +49.2%; Interim profit: 1.034 billion yen, YoY +66.4%
• Key Operational KPIs
  • Total payment transactions: 230 million transactions, YoY +38.7%
  • GMV: 1.9 trillion yen, YoY +28%
  • Q2 active IDs: 411,000, with a net YoY increase of 66,000 IDs, on track to hit the full-year net addition target of 60,000-70,000 IDs
  • 52% of top 30 merchant GMV now comes from daily necessity merchants, up from 41% in the prior fiscal year, building a more resilient portfolio less sensitive to market volatility
• Strategic Growth Initiatives
  • Expanding target TAM to 271 trillion yen by 2030 (from 124 trillion yen in 2024) to support the 2033 10 billion yen operating profit target, focusing on payment core, payment operation DX, and payment activation vertical strategies
  • Ecosystem expansion: continuing development of cross-industry shared assets, with OMO integration scheduled for 2026 fiscal year, and mobile order, biometric authentication, and AI-powered digitalization targeted for 2027 fiscal year
  • ARPU improvement: current large enterprise recurring ARPU ranges from 23,000 yen to 44,000 yen, targeting a long-term 25,000 yen average ARPU by 2033, with a strong pipeline of high-ARPU large merchant projects
  • Expansion into mobility: 148 businesses have adopted the platform as of April 2025, up 33 YoY, with growing transaction volumes; contactless credit touch payment now accounts for 60% of total processed payments
• ESG Progress
  • Preparing SBT (Science Based Targets) application, aiming to become the first growth company to obtain SBT certification to support the 2050 net-zero GHG emission target

1. Initial Revenue: 5.02 billion yen, YoY -17.1%, accounting for 55.5% of total first half revenue. Weak performance was driven by lower-than-expected SME merchant acquisition, which negatively impacted terminal sales. 2. Recurring Revenue: 4.02 billion yen, YoY +26.4%, accounting for 44.5% of total first half revenue. Breakdown by sub-segment: - Stock Revenue: 986 million yen, YoY +20.5% - Fee Revenue: 2.301 billion yen, YoY +35.7% - Spread Revenue: 737 million yen, YoY +10% Recurring revenue grew driven by steady increases in active IDs and acquisition of high-ARPU merchants that have started operations.

• Maintains the existing full-year 2025 September fiscal year financial guidance; first half operating profit already reached 68.5% of the full-year target, outperforming plan
• For the second half of the fiscal year: management will push to front-load large merchant projects and lift the baseline trend of SME merchant acquisition to offset first half initial sales weakness
• Recurring revenue is expected to re-accelerate from the third quarter onward, as large merchant projects launched in late Q2 will contribute fully in subsequent quarters
• Management plans to implement targeted investments in talent, governance, and AI infrastructure in the second half to support long-term growth and margin improvement, while monitoring second half performance progress
• Targets 25%+ YoY growth in recurring stock revenue for the 2026 September fiscal year, and 15%+ YoY growth in spread revenue

Initial sales have underperformed plan due to lower-than-expected SME merchant acquisition inflow, partially driven by more aggressive prior planning and a shift toward device-less adoption that reduces terminal sales revenue

• A total of 420 million yen in conservative additional chargeback provisions have been recorded for a specific merchant in the first half, creating a drag on operating profit
• SME terminal acquisition faces strong competition from other providers, with higher price competition that can impact win rates

Q: Is the high confidence in recurring ARPU growth to 25,000 yen by 2033 justified, and can we confirm ARPU will be higher by 2027? / A: The slide shows both confirmed and in-preparation projects. Confirmed projects already hit 10,000 yen ARPU in the first half, putting the 20,000 yen target well within reach. The 25,000 yen 2033 target is being actively pursued via solutioning, but 2027 results cannot be guaranteed as terms for upcoming projects are still being finalized with merchants. Management prioritizes balancing active ID growth and ARPU growth to grow overall recurring revenue steadily.

Q: What is the impact of the current macro environment on investment appetite from SMEs vs large enterprise merchants? Is the current initial sales weakness just an inter-project lull after a period of large project activity? / A: SME merchants have not broadly tightened spending, with many growth-oriented SMEs still actively expanding. Weakness stems from GMO needing to refine its product packaging and go-to-market to improve win rates, not from reduced demand. Large enterprise merchants still see strong demand for cashless modernization, DX and AI tools for efficiency, unaffected by trade tariffs. The current period is indeed an inter-project lull after prior large project activity.

Q: What is the main driver of the current period's lower revenue but higher profit, and is this dynamic positive? Is the underperformance of terminal sales just a timing shift? / A: The top driver of higher profit is strong growth of higher-margin recurring revenue, plus improved product mix within initial sales. This dynamic is not negative, and profit growth is exactly aligned with original plans. For large merchants, delayed terminal sales do typically shift to later quarters, but for SMEs, weaker sales cannot be counted on to shift—some missed demand is permanent if GMO loses to competitors, so improving product appeal is a key priority. Weakness also comes from slightly more aggressive original forecasts and a shift to device-less options that do not generate terminal revenue.