SEPTENI HOLDINGS CO.,LTD. Q2 FY2025 earnings call

• Overall Consolidated Performance

  • 1H cumulative total revenue reached 15.2 billion yen, 8.7% YoY increase; Non-GAAP operating profit reached 2.07 billion yen, 16.8% YoY increase, achieving both revenue and profit growth. Excluding one-time gains from the previous year's subsidiary share sale, continuing business intermediate profit grew 4% YoY. Non-GAAP operating margin improved 1.0 percentage point YoY, with revenue growth outpacing sales growth.
  • Both revenue and Non-GAAP operating profit exceeded 50% of the full-year forecast, putting performance on track to meet full-year targets.

• Partnership Progress

  • Total collaboration sales with Dentsu Group reached 8.86 billion yen YoY, 18.6% YoY increase. The number of clients with quarterly transaction volume over 0.1 billion yen increased by 7 YoY, showing steady expansion of collaboration.

• Operational Initiatives by Segment

  • Marketing & Communication Business: Launched TikTok Shop merchant support services in Japan after TikTok Shop's domestic launch; the company has built a dedicated TikTok team since 2018, and 1H transaction volume is already approaching the total of the past three quarters. It is integrating generative AI into vertical video creative production to improve production efficiency and ad effectiveness.
  • Direct Business: Entered into a capital and business alliance with food tech firm AuB to strengthen D2C business, focusing on joint product development and marketing enhancement. It aims to create synergy through combining the two firms' expertise.
  • Data & Solution Business: Launched ADPILOT, an automated display ad operation system, to support marketing digital transformation for clients by maximizing ad performance and improving operation efficiency. It targets growth in the expanding small and medium business (SMB) ad market.

• Human Resource Strategy

  • 81 new graduates joined the group in April 2025. The company prioritizes productivity improvement, and will adjust mid-term hiring volume based on performance progress while focusing on flexible mid-career hiring.

1. Marketing & Communication Business: 4.8 billion yen revenue, 1.4% YoY increase. In Q2 (4-6 months), revenue grew 4.5% YoY to 7 billion yen despite a 3.6% YoY decrease in sales from reduced transactions with a large client, driven by margin improvement. It accounts for approximately 31.6% of total cumulative 1H revenue. Temporary profit decrease occurred due to increased new hire-related costs, with growth expected to resume in Q3. 2. Direct Business: 1.61 billion yen revenue, 39.2% YoY large increase; Non-GAAP operating profit of 0.33 billion yen, 32.4% YoY large increase. It accounts for approximately 10.6% of total cumulative 1H revenue. Growth was driven primarily by expansion of offline projects, and operating margin has gradually improved since Q3 FY2024 after reaching a bottom. 3. Data & Solution Business: 0.81 billion yen revenue, 1.5% YoY increase; Non-GAAP operating profit of 0.16 billion yen, 64.7% YoY large increase. It accounts for approximately 5.3% of total cumulative 1H revenue. Profit grew sharply due to gross margin improvement and workforce optimization focused on overseas locations.

• Management maintains the original full-year FY2025 guidance: 30.3 billion yen consolidated revenue, 4.0 billion yen Non-GAAP operating profit, and 3.8 billion yen profit attributable to parent company shareholders. All three segments are projected to achieve both revenue and profit growth for the full year.
• All segments are progressing in line with plan, with 1H progress exceeding 50% of the full-year target. Management expects steady performance in the second half, with solid momentum for meeting the full-year earnings forecast.
• Management targets V-shaped recovery through continued revenue growth and returning to operating profit growth for the full year, centered on the mid-term strategy of "Focus & Synergy" to drive top-line growth.

• The Marketing & Communication Business is facing a temporary negative impact from reduced transaction volume with a large client, which caused a slight sales decrease in Q2 and temporary profit decline in 1H due to increased new hire costs.
• Data & Solution Business saw a slight revenue impact from the completion of some large projects in 1H.

Q: Can you share the scale of Septeni's TikTok business, its importance to overall performance, and its business model and profitability? / A: While specific figures are not disclosed, TikTok transaction volume for Septeni has grown to approach the scale of other major mega platforms, and the TikTok ad market in Japan is growing much faster than other major platforms. It will remain a strong growth driver over the next several years. There are two business segments: first, the core ad business, which relies on high-engagement vertical dynamic creative, has higher user response and maintains better profitability than search and static display ad segments on other platforms. Second, the newly launched TikTok Shop merchant support business, which is a solution-focused sales model different from traditional ad margin business, and has strong potential to improve overall group profitability as volume grows.