GMO Financial Gate,Inc. Q3 FY2025 earnings call

• Core Medium-Long Term Strategic Goals

  • Target to achieve 10 billion yen operating profit by 2033, supported by a cumulative target of 120,000 active IDs. The company expects total addressable market (TAM) to expand to 271 trillion yen by 2033, up from 124 trillion yen currently and 66 trillion yen in 2020.
  • The company follows a three-pillar growth strategy: core payment infrastructure, payment business digital transformation, and payment activation, with ongoing ecosystem expansion to support long-term growth.

• Key Operational Progress

  • High-ARPU large client acquisition: 4 new large clients among the top 10 GMV merchants were launched this quarter, driving above-target ARPU growth. Daily necessity retail segments (supermarkets, drugstores, home centers) now account for 59% of the top 30 merchants by GMV, up from 40% two years ago, making the merchant portfolio more resilient to economic cycles.
  • Active ID growth channels: 5 core expansion channels are prioritized: 1) Expanding from successful large client (commercial facilities, railway operators) implementations to new opportunities; 2) IoT-enabled payments for self-checkouts and cashless coin parking, where multi-year development work is now starting to deliver results; 3) Partnerships with card companies to leverage shared assets and expertise for new ID acquisition; 4) Targeted promotion of device-less terminal-less payments to SMEs, focused on segments with existing hardware infrastructure; 5) Improving packaged product offerings through alliances with mobile POS vendors to serve small long-tail clients.
  • M&A and OMO support acceleration: The company acquired a small restaurant operation support and mobile order business (current annual revenue under 50 million yen) to expand OMO (online merge offline) service capabilities, targeting in-store dining, food courts and department store food sections. The acquisition will support short-term OMO promotion in fast food and commercial facilities, with mid-term plans to explore collaboration with large platform providers.
  • Segment-specific expansion: Mobility segment added 28 new payment service providers this quarter, with full-line service on Tokyo Metro scheduled to launch in spring 2026. Contactless credit card touch payment now accounts for over 60% of total transactions, continuing to grow driven by changing consumer preferences.
  • Sustainability: The company earned the top "A" rating in CDP's Supplier Engagement evaluation, highlighting progress on ESG goals.

For the third quarter of the 2025 September fiscal year, total revenue was 13.19 billion yen, down 3% year-over-year. 1. Recurring revenue: total 6.42 billion yen, up 29.8% year-over-year, accounting for 48.7% of total third quarter revenue. This breaks down into: Stock sales of 1.539 billion yen (+21.7% YoY), Fee sales of 3.748 billion yen (+40% YoY), and Spread sales of 1.137 billion yen (+12.8% YoY). 2. Initial revenue: total 6.76 billion yen, down 21.7% year-over-year, accounting for 51.3% of total third quarter revenue. Aggregated core KPI performance: Total active IDs reached 424,000, with a net increase of 63,000 IDs (+17.5% YoY); Total payment processing volume hit 280 million transactions (+42.1% YoY); Total GMV reached 2.1 trillion yen (+28.8% YoY); Gross profit was 4.965 billion yen (+18.1% YoY); Operating profit was 1.81 billion yen (+27.9% YoY); Profit attributable to parent company shareholders was 1.351 billion yen (+44.5% YoY).

• Full-year 2025 September fiscal year guidance: Revenue was revised downward from 22.2 billion yen to 17.7 billion yen, driven entirely by a downward revision to initial sales, while recurring sales grew above the original forecast. Operating profit guidance was revised upward from 2.02 billion yen to 2.22 billion yen, due to stronger-than-expected recurring revenue growth and cost reductions from AI adoption that cut external outsourcing expenses.
  • Dividend guidance: The company announced a 10 yen per share increase to the full-year dividend despite the downward revenue revision.
  • Near-term active ID guidance: Full-year 2025 active ID net addition target is 60,000 IDs. A 75,000 ID net addition target has been set for the next fiscal year, with pipeline already built for a portion of this target, and planning underway for initiatives for the following fiscal year.
  • Spread sales guidance: The company maintains a target of over 15% full-year growth for spread sales, and expects to hit this target based on current progress.

• The company acknowledged that overlapping promotion for terminal-less payments and SME packaged products (which target the same SME segment) created a trade-off that pulled down initial device sales this year. Management recognizes weaknesses in forecasting and sales organization management that led to this outcome, and will strengthen management and operational controls to prevent similar missteps in the future.
  • SME segment active ID acquisition is currently underperforming internal targets, though the company plans to ramp up promotion starting in the fourth quarter of this fiscal year into next fiscal year, and expects growth to recover.
  • Terminal-less payments currently have approximately 10,000 registered IDs, but many registered SME startup clients have not yet transitioned to active operation, requiring adjusted, industry-focused promotion to improve activation rates.
  • Integrating hardware-less and software-only terminal-less payments into product offerings has lowered average initial revenue per ID, requiring investors to focus more on product mix shifts rather than just aggregate initial sales numbers.

Q: Why did the company lower the initial sales guidance, after previously stating Q4 would recover initial sales performance? Are macro changes, competition, or large project delays the main cause? / A: The downward revision stems entirely from an internal trade-off, not external market factors. Promotion of terminal-less payments and SME packaged products targeted the same customer segment, which pulled down demand for device-based SME packages and reduced initial sales this year. The company has acknowledged internal management shortcomings that led to the miss and will implement internal controls to avoid future forecasting errors.

Q: The 75,000 ID net addition target for next year is lower than implied by the stable large client pipeline. Is this because many large projects are delayed to 2027, or are large clients not the main driver of overall ID growth? / A: The public pipeline chart only covers large client projects, which make up a very small share of total overall ID growth. SME segment performance is the main driver of the 75,000 target. Large projects are strongly linked to recurring revenue growth due to their high utilization rates, but initial revenue from large projects depends heavily on product mix (terminal vs terminal-less offerings), so the pipeline cannot be directly used to forecast aggregate initial sales. Investors should focus on SME promotion progress as the key variable for overall ID growth targets.

Q: Does the plan to strengthen alliances with card companies only apply to the existing alliance with Sumitomo Mitsui Card, or is the company pursuing broader partnerships with multiple card issuers? / A: The company is pursuing discussions and collaborative development with multiple card companies, not just Sumitomo Mitsui Card. Card companies approach GMO Financial Gate to solve shared industry challenges, including monetizing inbound consumer spending, and developing cost-effective features and data products that benefit issuers and acquirers. GMO is expanding capabilities to meet these diverse needs and build win-win partnerships to drive ID growth, and considers alliance building a core strategic priority. The company cannot disclose full details of ongoing strategic discussions due to confidentiality requirements.