rakumo Inc. Q2 FY2025 earnings call

• Overall Financial & KPI Performance • Adjusted EBITDA reached 0.279 billion yen (41.4% YoY growth), with adjusted EBITDA margin expanding 6.5pp YoY to 34.8% • Operating profit reached 0.224 billion yen (31.2% YoY growth), with operating margin expanding 3.4pp YoY to 28.0% • ARR hit 1.6 billion yen (18.2% YoY growth), ARPU increased 16.8% YoY to 638 thousand yen, client count grew to 2,499 (19 net new in Q2), gross churn held steady at ~1%, while net churn is 0.73% (below 1%) • Unique user count decreased 15,000 quarter-over-quarter to 571,000 due to concentrated large client churn, but this had limited impact on overall revenue and profit

• Product Development & AI Initiatives • Continued rolling out generative AI features across the rakumo product line: added AI reading/auto-input for receipts to rakumoケイヒ, following prior AI functionality for rakumoワークフロー • Developing the general AI assistant feature rakumoエージェント for all core products, which will automate scheduling, information sharing reminders, workflow form creation and other manual tasks, with rollout starting in the second half of the fiscal year • A major product update adding AI functionality to rakumo for GWS has been announced, accompanied by price increases for key plans, with full revenue impact expected by FY2027

• New Product & Partnership Launches • Launched alooop, a talent pool management and alumni re-recruitment solution, in partnership with Pasona in May 2025. Pasona provides HR expertise and BPO recruiting support, while rakumo leads product development • Alooop supports alumni database management, outreach, and also includes functionality for non-alumni candidate pools like past dropouts and referral candidates, with strong initial high-probability pipeline

• M&A Completion • Completed acquisition of two companies in H1: Startore (a CMS SaaS provider for SMBs based in Nagoya with 3,100 existing clients, strong SMB sales capacity, ARR of 0.6 billion yen and adjusted EBITDA of 0.15 billion yen) and Agent Share (a HR tech firm with four recruiting-focused SaaS solutions, 559 existing clients, ARR of 0.15 billion yen and adjusted EBITDA of 0.1 billion yen) • Expected synergies: Startore will sell rakumo to its SMB client base, expanding rakumo's underpenetrated SMB market; Agent Share's HR products cross-sell naturally with aloop, and complement rakumo's expanding HR tech strategy

• Targeted Marketing Progress • Implemented industry-segment specific marketing focused on local governments, education and healthcare, adding 7 new public sector clients in Q2 to reach 86 total, including the first prefectural government win at Akita Prefectural Government • Inbound inquiries from other local governments have increased following this win, though most contracts will close and contribute revenue in the next fiscal year

• Medium-Term Plan Progress • After the first year of the three-year medium-term plan, core target progress is over 50%: ARR is at 53.3% of the 3 billion yen FY2027 target, adjusted EBITDA is at 55.9% of the 1 billion yen FY2027 target, and M&A investment is 16.3 billion yen out of the 30 billion yen total three-year budget, all on track. Adding the two newly acquired companies' ARR brings total group ARR to 2.3 billion yen, well ahead of plan

1. SaaS service segment: Revenue of 0.785 billion yen, 18% YoY growth, accounting for 98% of total consolidated revenue. This is the company's core focus segment. 2. Other segments (solution services, IT offshore development): Remaining 2% of total consolidated revenue. The company is actively reallocating personnel from these non-SaaS segments to the core SaaS business, and this transition is progressing as planned. Total consolidated interim revenue is 0.802 billion yen, with a 49.8% progress rate against the full-year target.

• The company maintains its original full-year guidance of 1.612 billion yen in total revenue, 0.5 billion yen in adjusted EBITDA, and 0.4 billion yen in operating profit as of the interim earnings announcement
• Management is currently reviewing the full-year guidance to incorporate the revenue and profit contribution from the two newly acquired companies, and expects full-year revenue to be higher than the current published target
• An upward guidance revision will be disclosed promptly once the review is complete and meets timely disclosure requirements
• For the medium-term plan, management reaffirmed all original targets for FY2027: 3 billion yen ARR, 1 billion yen adjusted EBITDA, 0.7 billion yen operating profit, 30% payout ratio, and 30 billion yen total M&A investment over three years, all of which are progressing ahead of schedule
• Price increase revenue impact will gradually build, reaching full effect in FY2027; aloop is expected to start contributing meaningful revenue from FY2026, with material scale by FY2027

• Concentrated churn of large enterprise clients (driven in part by Google Workspace reseller margin changes that pushed clients to switch to other resellers) led to a decline in unique user count, though the revenue impact has been limited to date
• Higher sales and general administrative expenses in H1 driven by M&A transaction fees, stock-based compensation, increased R&D spending for AI development, and hiring for sales and M&A capacity expansion
• Most new local government client contracts will close next fiscal year, so they will not contribute material revenue to the current fiscal year's results
• Price increases could lead to higher churn if clients do not value the added AI functionality, though management expects minimal churn impact from the change

Q: Why has unique user count decreased even as SaaS revenue and profit keep growing? / A: The decrease came entirely from concentrated churn of large, discounted enterprise clients in Q2. These clients had large license volumes (driving big unique user impact) but relatively low gross MRR due to discounts, so the hit to overall revenue and profit was limited. Client count continues to grow, and upselling/cross-selling to existing clients is pushing up average revenue per client, offsetting the churn impact.

Q: What synergies are expected from the two recent acquisitions? / A: Startore has extremely strong SMB sales capabilities and 3,100 existing SMB clients, while rakumo has historically focused on larger enterprises. Startore will sell rakumo products to its SMB client base, opening a new high-growth market segment. Agent Share has deep existing relationships in HR recruiting, so it will cross-sell aloop to its clients, and rakumo will cross-sell Agent Share's products to aloop's prospects, creating strong mutual growth synergies. rakumo will also provide development resources to strengthen both acquired companies' products.

Q: Why did you switch to reporting net-based churn instead of gross-based churn? / A: rakumo records revenue from Google Workspace reselling on a net basis, only recognizing the margin it earns. Gross churn calculation incorrectly counts full contract values of terminated Google Workspace reseller contracts, which overstates churn magnitude relative to actual revenue impact. Switching to net-based churn aligns churn measurement with revenue accounting, giving a more accurate view of retention, and net-based churn has stayed below 1% even during last year's price adjustment period.

Q: What is the early market response to aloop after launch? / A: Pasona is prioritizing aloop sales development, and there are already multiple high-probability prospective clients. First implementations are expected to start in the second half of this fiscal year, so aloop will not have material revenue impact this year. Revenue contribution will start gradually in FY2026, and the company expects aloop to reach a meaningful revenue scale by FY2027.