coconala Inc. Q2 FY2025 earnings call

Overall Company Performance

• Total company revenue reached 2.341 billion yen, growing 69.7% year-over-year. Gross profit reached 1.497 billion yen, growing 26.4% year-over-year. EBITDA came in at 185 million yen, near the 200 million yen level, with operating profit and ordinary income significantly exceeding initial forecasts.
• The company now operates 10 businesses under the Cocona Economic Zone strategy, up from its original 2 core businesses, with newer businesses still in the early investment phase. Profit generated by the core marketplace segment more than covers losses from early-stage investments, with excess profit exceeding expectations.

New Product & Feature Launches

• Recurring subscription function: Launched for the Cocona Skill Marketplace in late 2024, with strong growth in seller listing counts and growing monthly recurring revenue, while improving user convenience. The mobile app version launched in March 2025, driving further growth in recurring order share, which is expected to improve long-term user retention.
• Resume upload function: Implemented to expand the talent database. The new function allows users to upload existing resumes, with AI automatically extracting and filling in platform profile fields, aiming to improve both the volume and quality of talent profile data.
• Generative AI update for Cocona Recruitment: Updated the reverse matching feature (where buyers post projects and sellers apply) with AI to reduce user input friction. This has already improved project posting completion rates, with an additional AI-powered full project description generation feature in development to accelerate matching for ongoing service projects.
• Upcoming Cocona Scout launch: Scheduled for April 2025, this new matching function lets clients search for talent directly from the 1 million+ talent database, rather than searching by service/project. It simplifies bulk outreach and matching for open projects, and can also support targeted invitations for public recruitment posts, expected to boost matching volume across existing platform features.

Strategic Direction

• The company's long-term vision is to create a society where individuals can live on their own terms, by providing opportunities to monetize skills, knowledge and experience, and building a full-service platform where all skill and talent matching needs can be met.
• The company pursues "multiplicative management", prioritizing synergies from existing assets (database, product infrastructure, marketing/sales base) rather than additive new business development. It unifies the core talent and customer database as a shared common infrastructure for cross-selling across all business lines.
• Generative AI is being embedded across all user funnels to simplify the matching experience for users of all digital literacy levels, turning AI from a threat into a growth opportunity.
• The company is focusing concentrated investment on the high-growth Cocona Assist Agent business, while focusing on efficient operations for Cocona Tech as PMI progresses. New business Cocona AI Studio has launched for B2B clients, with inbound interest exceeding expectations.

1. Marketplace (excluding legal consultation): Gross transaction value grew over 10% year-over-year after adjusting for the leap year impact. Segment revenue grew 11.7% year-over-year, maintaining a high segment profit margin. Purchasing unique users saw a slight temporary decline due to SEO impacts, which have already been addressed, while average revenue per purchasing user increased driven by growing business usage. Member registration and service listing counts grew steadily, with the talent database expanding to over 1.07 million entries.
2. Marketplace (legal consultation): Revenue grew 12.6% year-over-year. Both paid registered lawyer count (up 9% year-over-year) and ARPU grew, with all KPIs performing well.
3. Agent: Revenue grew sharply year-over-year due to the inclusion of former Anne Consulting under Cocona Tech. Quarter-over-quarter revenue decreased as the company prioritizes cultural and operational fit over top-line growth during post-merger integration (PMI), while maintaining profitability. Cocona Assist (hourly-based administrative/operational talent matching) has seen rapid growth in transaction count and revenue, driving overall broadly flat growth for the Agent segment. Cross-selling from Cocona Assist to Cocona Tech and Cocona Pro has begun, showing early synergies across the Agent portfolio.

• Management maintains the expectation that top-line growth will translate to growing profit over the next fiscal year and beyond, and plans to make targeted marketing investments in H2 FY2025 (second half) that will support long-term growth starting from FY2026.
• While 2024-2025 FY saw a temporary profit decline due to irregular investment costs, management confirmed that there is a clear path to return to profit growth in future periods, with updates to be provided as progress is made.
• The company targets a total addressable market of 37 trillion yen, expanded from the initial focus on only one-off project matching, to include ongoing service matching and enterprise agent matching. It aims to grow its current ~200 billion yen annual transaction volume to thousands of billions of yen in the long term.
• Financial strategy prioritizes reinvestment of profit from the high-margin core marketplace segment into new growth initiatives, with a medium to long-term target of achieving very high operating profit margin and absolute operating profit.

• Generative AI may displace certain skill matching categories, which could lead to a gradual decline in the company's total addressable market to 30 trillion yen or lower. Management notes that human involvement will still be required for context-specific work, but acknowledges the displacement risk.
• Purchasing unique users saw a temporary decline from SEO impacts, though management has already implemented countermeasures for future quarters.
• The Agent segment's post-merger integration for Cocona Tech has led to a quarter-over-quarter revenue decline as the company prioritizes strategic and operational fit over near-term top-line growth.

Q: Will corporate/enterprise (toB) usage continue growing, and what is the company's prioritization between toB and toC growth? / A: Long term, the company aims to serve all users regardless of toB/toC segmentation. However, in the short term, toB (especially mid-sized and large enterprise clients) is the clear primary growth driver. Cocona has historically excelled at acquiring consumers, microbusinesses, and small businesses through digital marketing, but the enterprise segment holds large untapped potential. / A: The company is currently building out its enterprise sales organization with experienced new hires, and is seeing early traction: increasing mid-sized and large client volumes, and growing cross-selling (from entry-level Cocona Assist engagements to larger Cocona Pro and Cocona Tech projects). Management expects this acceleration to drive strong top-line growth going forward and will deliver proof of this trend in coming quarters.

Q: [Unanswered in transcript] What caused the decrease in total assets compared to the previous quarter? / A: The full answer to this question is cut off in the provided transcript.

Q: What are the planned investment amounts for the third and fourth quarters of FY2025? / A: The full answer to this question is cut off in the provided transcript.

Q: [Uncollected in transcript] What is the progress of the recurring subscription function and its future impact on earnings? / A: The full answer to this question is cut off in the provided transcript.