coconala Inc. Q1 FY2026 earnings call

• Company Vision & Mission: The company maintains its vision of 'creating a world where every person can live their own story', and its mission of providing a platform that visualizes and matches everyone's knowledge, skills, and experience. - Overall Q1 Performance: Consolidated performance exceeded all initial forecast targets across all funnels, with the company focusing on steady quarterly revenue and profit accumulation while growing the top line and implementing strict cost control. Consolidated revenue increased 3.9% year-over-year, hitting an all-time high, and gross profit also reached an all-time high. Operating profit, ordinary profit, and net income are all in line with forecasts, with strong growth coming from the agent segment; higher profit is expected in the second half of the fiscal year. EBITDA recovered to normal levels after a temporary decline driven by one-off investments in the prior year fourth quarter; Q1 EBITDA is slightly lower than the prior year period due to planned higher hiring costs from strong hiring activity, which is in line with internal plans. Cost of sales saw a large increase due to higher worker salary expenses from strong agent segment growth, and overall cost control remains appropriate. - Key Marketplace Updates: The 'Cocorara Skill Market' has surpassed 1 million listed services more than 10 years after launch. PayPay was added as a payment method to attract more casual users and expand penetration. The official version of the 'Seller Success' feature was launched (upgraded from the popular beta 'Seller Support' released last fall), which supports sellers to grow their sales, activates the marketplace, and generates additional option revenue that contributes to overall revenue growth. - Strategic Positioning: After focusing on marketplace-led growth through FY2025 and laying the groundwork for new businesses under the 'Cocorara Economic Zone' initiative, the company is entering a phase where new businesses led by Cocora Assist will drive large revenue growth and enter the profit generation phase heading toward 2030. Moving beyond in-organic growth, the company plans to accelerate growth via M&A to gain time and know-how, with the long-term goal of becoming a social infrastructure platform that allows anyone to find work and any individual or business to find the talent they need. - Market Environment: Japan's shrinking labor population is a key opportunity, as the company can leverage its strong talent database to deliver social value. Generative AI, often seen as a threat, is viewed as an opportunity; the company is using AI to simplify matching processes to reach previously unreachable user segments. - Target Market Expansion (TAM): The company historically focused on one-off service provision for individuals and SMEs via its EC-style skill marketplace, and now plans to expand into ongoing service provision and expand coverage to large enterprises to significantly grow its total addressable market. - Core Strengths & Assets: 1. Talent database: Over 1.3 million skill registrants across more than 740 service categories, covering almost all potential service needs. Matching to available workers requires no additional marketing cost once client demand is secured, which is a key competitive advantage. 2. Customer database: 540,000 accumulated corporate members built via SEO, web ads, and TVCM, with reach to additional partner corporations via Mizuho Cocorara. Strong brand recognition drives consistent direct traffic from branded search. 3. Product infrastructure: Common infrastructure for heavy core functions allows easy development of new products. - Three Core Growth Strategies: 1. Marketplace Matching Expansion: Expand the scope of service provision to include ongoing services, and expand matching methods beyond EC-style to include recruitment-style and scout-style matching. For categories where category-specific customization improves conversion, build vertical EC structures to deliver better user experience and higher conversion. 2. Agent Business Launch & Expansion: Historically focused on frontline talent matching (engineers via Cocorratech, HR/marketing/accounting talent via Cocora Assist), and will now develop new segments where full-time consultants deliver value at the executive and business unit level. Cocora Assist has four core competitive advantages: (1) Accessibility: can connect local clients struggling with hiring to skilled online-based workers in urban areas; (2) Speed: can deliver matched workers within a few days to address urgent staffing gaps; (3) Cost flexibility: offers variable cost staffing rather than fixed-cost full-time hiring, supporting flexible cost management; (4) Specialized capability: can deliver spot access to specialized talent such as AI experts and niche consultants, allowing clients to build internal expertise without permanent hiring. Cocora Assist has already secured multiple major client implementations and strong demand from SMEs. 3. AI Utilization: (Customer-facing product evolution: Generative AI-powered AI agent matching allows users with limited digital literacy to find required services and talent with AI support, opening up access to the mass majority user segment that was previously underserved, which is expected to drive transaction growth. (Internal productivity improvement: The company is using generative AI to handle non-core work to improve efficiency and drive organizational improvement via better knowledge sharing. Customer support first-response and inquiry handling has already been AI-enabled, reducing headcount while improving user satisfaction. AI transformation (AX) will be expanded to all functions including sales, development, planning, and accounting to strengthen overall organizational capability. - M&A Strategy: The company plans to pursue both organic growth and in-organic growth via M&A, targeting 1-2 M&A transactions per year to accelerate expansion of the Cocorara economic zone, with opportunities in both existing and new business areas.

1. Marketplace Segment: Gross transaction value increased 1% year-over-year, with continuous growth achieved. Segment revenue and profit increased 7.2% year-over-year. Growth was driven by a new sales organization initiative to acquire more projects, which increased project posting volume for the crowdsourcing business model 'Cocorra募集' and boosted revenue growth. Core KPIs excluding legal consultation: registered members, service listings, and skill registrants are all steadily increasing; skill registrants, the foundation of matching, continue to show strong growth potential. Average revenue per purchase continues to grow steadily, but purchasing unique users decreased 7% year-over-year, driven by reduced ultra-low-price transactions due to generative AI and a temporary negative SEO impact on new purchasing users; new purchasing unique users have already shown a strong recovery trend after technical countermeasures, and existing purchasing unique users remain unaffected and stable. For the legal consultation sub-segment, both the number of paid registered lawyers and ARPU are performing steadily. 2. Agent Segment: After temporary sales decline during the post-merger integration (PMI) of Cocorratech last year, sales shifted to positive growth starting from the previous fourth quarter, achieving a V-shaped recovery. It is currently on track to become the second core growth pillar comparable to the marketplace segment, driven by the recovery of Cocorratech and rapid growth of Cocora Assist. KPIs: both client count and worker count increased, with client count seeing particularly large growth. This follows years of sales organization strengthening that resulted in a new dozens-person sales team structure, which is generating strong leads and project acquisition, with growth effects expected to increase further in subsequent quarters. Sub-segment breakdown: - Cocorratech: Successfully completed the transition from a dual-face sales model to a dedicated account sales model, and has started matching for full-time engineer recruitment. It still accounts for the largest revenue share of the entire agent segment. After implementing KPI management expertise from Recruit-veteran team members, a highly reproducible and efficient system where any salesperson can generate consistent sales is being built, leading to growing negotiation volume and a trend of achieving record-high engineer placement counts. - Cocora Assist: It is in a phase of strong growth from low single-digit sales in the prior fiscal year. A highly reproducible new sales business model has been built, so more sales hiring directly translates to more sales generation. Beyond talent introduction, it has launched multiple high-margin team-based BPO services aligned with client demand, which have received strong demand and growing order volume. Cumulative project placements exceeded 450 cases approximately 2 years after launch, with multiple new BPO packages launched sequentially (sales agency, subsidy application support, SNS operation agency) that have all received high market acceptance, with more new packages planned going forward.

• Full-year 2026 August period consolidated earnings guidance is maintained, with no upward or downward revision. - Q1 performance is running ahead of internal forecast targets, and management believes the full-year target is on track to be achieved comfortably. - The Q1 progress rate for operating profit and net income is below 20%, which is expected because the agent segment is accelerating growth, with stronger growth projected from Q2 through Q4. This progress rate is considered appropriate and consistent with planning. - Management currently believes the full-year consolidated revenue target of 11 billion yen is fully achievable based on Q1 performance, and outperformance versus the plan is a possible outcome. The company will aim to deliver excess profit across revenue, EBITDA, operating profit, and net income. - For AI-driven growth: management is actively preparing in FY2026, with full-scale AI-driven revenue and profit growth targeted to start from FY2027.

• Purchasing unique users in the marketplace segment saw a 7% year-over-year decline, driven by temporary negative SEO impact and reduced ultra-low-price transactions from generative AI. While new purchasing users have already recovered, full return to prior growth trends will require continued execution. - The agent segment is still in an acceleration phase, with most profit growth projected for the second half of the fiscal year; near-term progress is dependent on continued execution of growth plans for Cocorratech and Cocora Assist. - No other material operational failures or new risks are explicitly discussed in the transcript.

Q: Agent segment revenue grew 10.9% quarter-over-quarter in the prior quarter and has recovered strongly. What are the core drivers of this recovery?

A: There are two core drivers. First, PMI for Cocorratech, which accounts for the largest share of agent segment revenue, is complete, and sales have reversed from decline to growth. The transition from a dual-face sales model to a dedicated sales system was completed successfully, and KPI management has leveled up sales team capability, building a system where any salesperson can achieve consistent results. Second, Cocora Assist is growing strongly. Cocora Assist leverages Cocorara's core assets of customer database and talent database to deliver effective matching. The company has strengthened the sales organization focused on customer acquisition, which has driven strong growth.

Q: Can you share an update on progress and the future evolution of Cocorara driven by generative AI utilization?

A: The company's goal is to make Cocorara's services accessible and easy to use for users of all literacy levels, and to drastically simplify the entire matching process using AI. This covers every step from membership registration, to searching for talent/services, to matching after finding a counterparty. The company aims to build a world where any user can get matched as quickly as possible, regardless of skill level. To achieve this, the company implemented a large organizational restructuring in December, launching a new Assets & AI Strategy division and appointing a new executive officer to lead the initiative. This new organization has drastically improved execution capacity, and the company is actively making preparations this fiscal year to lay solid groundwork for full-scale AI-driven revenue and profit growth starting in FY2027.

Q: Q1 revenue progress is approximately 22% of the full-year target of 11 billion yen. Do you still feel confident achieving the full-year target?

A: Q1 is showing strong growth, and the company is tracking growth via management accounting and KPI management. If current growth trends continue, the full-year 11 billion yen consolidated revenue target is fully achievable, and outperformance versus plan is entirely possible. The company will focus on achieving as much excess profit as possible across revenue, EBITDA, operating profit, and net income.