Sansan,Inc. Q2 FY2025 earnings call

• Overall Company Performance
  • Total company revenue grew 27.4% YoY for the 3-month 2nd quarter, and 27.5% YoY for the half-year cumulative period
  • Gross margin improved 2.1pp YoY driven by improved data conversion operations that lifted Bill One profitability
  • Adjusted operating profit grew 63.6% YoY for the quarter, despite higher costs from office relocation (double rent, one-time moving costs) and expanded hiring. Adjusted operating profit margin improved 1.3pp YoY
  • Operating profit growth lifted recurring profit 198.3% YoY, and net profit attributable to parent shareholders grew 394.1% YoY, boosted by a 416 million yen gain on sale of investment securities
  • The total YoY increase in costs: +949 million yen for personnel expenses, +197 million yen for advertising, +455 million yen for office relocation-related rent and moving costs
  • Total adjusted operating profit grew 241 million yen YoY
• Sansan Service Operational KPIs
  • Stock-based revenue grew 16.0% YoY
  • Total contracts grew 10.5% YoY, and average monthly stock revenue per contract grew 4.7% YoY, driven by strong acquisition of smaller customers from prior period sales hiring and training
  • 12-month average monthly churn held at 0.39%, remaining below 1% at a stable low level
  • 2nd quarter new order value grew 56.2% YoY, hitting an all-time high for a single quarter; the apparent slowdown in net contract additions vs Q1 is attributed to seasonal timing and a 1-2 month lag between order receipt and revenue recognition
• Bill One Service Operational KPIs
  • Monthly Recurring Revenue (MRR) grew 57.5% YoY as of November 2024; after a period of declining net MRR increases, net MRR growth turned positive at 75 million yen in November
  • Paid contracts grew 43.7% YoY, and average monthly revenue per paid contract grew 9.8% YoY
  • 12-month average monthly churn held at 0.36%, a very low stable level
  • 2nd quarter new order value grew 31% quarter-over-quarter and 8.3% YoY, reversing a prior declining trend after sales team hires from the prior period completed training
  • New adjacent offerings: Bill One Expense (launched June 2024) is adding dozens of new orders monthly, with expansion planned for the second half of the fiscal year; Bill One Issuing (launched September 2024) will be prioritized for sales starting in Q3

1. Sansan/Bill One Segment: Total revenue grew 26.1% YoY. Within this, the Sansan service revenue grew 16.1% YoY, and the Bill One service revenue grew 63.4% YoY. Adjusted operating profit for the segment grew 21.7% YoY, despite increased investment in sales hiring and marketing. Adjacent offerings: Contract One (contract database) grew 93 contracts YoY to 286 total contracts, and Creative Survey's services are also growing steadily. 2. Eight Segment: Total revenue grew 41.2% YoY. Adjusted operating profit grew 141 million yen YoY, turning a net profit for the 2nd quarter. The B2C portion of the business performed steadily, while B2B (led by Eight Team) grew strongly boosted by a large-scale business event.

• Mid-term financial policy (unchanged from July 2024 announcement): Target 22%-27% CAGR for revenue over the next 3 years. Target an adjusted operating profit margin of 18%-23% for the 2027 May fiscal year, while continuing to invest for growth. Long-term, management expects to achieve at least 30% adjusted operating profit margin once business growth aligns with market average levels.
• 2025 May full-year guidance (unchanged from July 2024 announcement): Revenue growth of 27.0%-30.0% YoY, adjusted operating profit growth of 76.2%-157.6% YoY, and adjusted operating profit margin growth of 2.0pp-5.0pp YoY. Management currently expects full-year adjusted operating profit to land around the midpoint of the guided range, after completing planned investments for the next fiscal year.

No explicit material operational risks or failures were discussed in the provided transcript.

Q: Is the strong Q2 new order momentum for both Sansan and Bill One only from new sales staff ramping up, or are there other drivers? Can this momentum be maintained in H2? / A: Strong Q2 performance is partially driven by seasonal trends (new orders are historically stronger in Q2 and Q4). Management confirms the ramping of prior period sales hires is a major contributing factor. The ramp-up of newly hired staff is an ongoing process, so management expects strong momentum to continue through Q3 and Q4. Prior period price optimization also contributed: average monthly revenue per new customer is 20% higher than for existing customers, for both services. The 20% uplift applies to both Sansan and Bill One.

Q: Why does Sansan show slower net contract growth but steady average revenue per contract growth this period, after strong growth from customer segment expansion last period? What is the expected growth driver for the rest of the fiscal year? / A: Quarter-over-quarter fluctuations in net contract additions are normal and driven by seasonal timing of orders and the 1-2 month lag between order closing and service activation, not a shift in targeting strategy. Management prioritizes maximizing total order value over hitting quarterly contract count targets, and focuses on full-year growth trends rather than short-term fluctuations. The current trend of 10.5% YoY contract growth and 4.7% YoY average revenue growth is expected to hold, with total stock revenue growing 16% YoY. For Bill One, cross-selling new offerings (Bill One Expense, Bill One Issuing) is expected to lift average revenue over time, but the current growth trend will remain broadly unchanged.

Q: Does Bill One appear to have bottomed out in new orders, and did the October postage price hike impact this? Is the recovery sustainable? / A: Management confirms Bill One has bottomed out, with the recovery almost entirely driven by the ramp-up of expanded sales staff, not the postage price hike. The postage hike only had a minor marginal impact on the invoice issuing side of the business. The full sustainability of the recovery will be confirmed through H2 results, but current trends are positive.

Q: Is there room for additional price adjustments for Sansan and Bill One after the current round of price optimization runs its course? / A: Price will continue to be adjusted as the company adds new functionality and value to products, which is an inherent part of software business. Hundreds of engineers are continuously working on new feature development (such as expanded digital business card tools), and management will continue to work to increase average monthly revenue per contract by adding new value, so future price optimization opportunities will emerge as new value is delivered.