THECOO Inc. Q2 FY2025 earnings call

Company Overview and Mission

• The company pursues the corporate vision of "Continuing to challenge the impossible", and focuses on creating new businesses and delivering social value with 121 employees across two core business segments.
• The Fan Business Platform operates the Fanicon app, which allows creators, artists, athletes, teams and other public figures to easily launch paid exclusive fan communities, with revenue shared between the platform and creators via monthly subscription fees from fans.
• The Digital Marketing segment is a full-service online advertising agency covering both influencer marketing and general digital advertising, earning fees and margins from advertising clients. It maintains a database of over 330,000 influencer profiles to support end-to-end campaign planning and execution for clients.

Fanicon Strategic Positioning

• Fanicon uses a fully paid, exclusive membership model for three core strategic reasons: 1) It preserves the high engagement of core fans regardless of a creator's total fanbase size through a closed community structure; 2) It enables creators to secure reliable revenue from their community from launch to support their ongoing activities; 3) It creates psychological safety for high-engagement core fans, enabling more open, passionate interaction between creators and fans that free open platforms cannot provide.
• Fanicon saw new community launches across a broad range of categories in the second quarter, including idols, actors, and K-POP artists, confirming ongoing market penetration.

Company-wide Operational Progress

• THECOO achieved year-over-year revenue and profit growth in the second quarter, with total company revenue of 1.123 billion yen (+11.3% YoY), gross profit of 508 million yen (+22% YoY), and operating profit of 21 million yen (+85 million yen YoY), returning to both operating and net profit black ink.
• The company implemented a restructuring of business divisions centered on the sales and marketing department to improve organizational efficiency. It has controlled overall selling, general and administrative expenses (SG&A) to just a 1.4% year-over-year increase, prioritizing investment in sales promotion for Fanicon while containing other overhead costs.

1. Fan Business Platform Segment: Revenue reached 908 million yen (0.908 billion yen), an increase of 23.3% year-over-year. This segment contributes 80.9% of total company revenue. Operating profit for the segment was 54 million yen (0.054 billion yen). Key KPIs: 3,400 creator (icon) accounts (+13.3% YoY), 362,000 total fans (+13.1% YoY), gross merchandise value (GMV) increased 26% YoY, and ARPU saw a slight increase after a prior declining trend. 2. Digital Marketing Segment: Revenue was 214 million yen (0.214 billion yen), a 21.4% year-over-year decrease. This segment contributes 19.1% of total company revenue. Operating loss was 32 million yen (0.032 billion yen), a 11 million yen (0.011 billion yen) improvement in operating loss compared to the prior year same quarter. Both total handled cases and average project value decreased year-over-year amid industry headwinds.

• THECOO upwardly revised its full-year 2025 December fiscal year operating profit guidance by 73 million yen (0.073 billion yen) from the original February 2025 forecast, driven by stronger than expected performance from the Fan Business Platform segment.
• Full-year operating profit is now projected to reach 75 million yen (0.075 billion yen) at year-end. The upward revision comes from successful pricing optimization for non-subscription revenue in the Fan Business Platform segment, which delivered higher value-added offerings and better profit than initial forecasts.
• As of the end of the second quarter, total full-year revenue progress reached 46.2% of the full-year guidance of 4.76 billion yen, which management notes is a solid start compared to historical second quarter progress rates.

• The Digital Marketing segment continues to face headwinds from sustained advertising budget cuts by large clients, which has driven a second consecutive quarter of year-over-year revenue decline for the segment.
• Fanicon had experienced a declining ARPU trend prior to this quarter due to growth in fee-only OEM individual app partnerships, which have a different revenue structure than the core Fanicon platform, though this trend reversed to a slight increase in the second quarter.

No question and answer section is included in the provided transcript.