Sansan,Inc. Q3 FY2025 earnings call

Overall Company Performance

• Consolidated revenue for the 3rd quarter grew 30.2% YoY, with an accelerating growth rate. Gross margin increased 2.3 percentage points YoY, driven by improved Bill One margin from data operation optimization.
• Adjusted operating profit grew 136.5% YoY, with an adjusted operating margin of 16.3% (up 9.4 percentage points YoY), a record high for the company, driven by revenue growth, improved gross margin, and lower SG&A as a share of revenue.
• Annual Recurring Revenue (ARR) as of February 2025 reached approximately 39.42 billion yen.
• One-time office relocation costs were fully recognized in the 2nd quarter, with only a 0.171 billion yen recurring increase in rent in the 3rd quarter.

Cost Management

• Total payroll increased by 0.743 billion yen YoY, but payroll as a percentage of revenue decreased 2.3 percentage points.
• Total advertising expense increased by 95 million yen YoY, but advertising as a percentage of revenue decreased 1.3 percentage points.

Bill One Operational Updates

• 3rd quarter order value and net new MRR came in below 2nd quarter levels, partially due to seasonal headwinds from the year-end/new-year holiday period, plus larger-than-expected temporary sales productivity deterioration during the sales team scaling and training period.
• Management notes that continued sales training is starting to deliver incremental results, and planned marketing (including TV commercials) will be scaled up in the 4th quarter as expected, given solid year-to-date profit performance. Management expects stronger order intake in the 4th quarter than the 3rd quarter.

1. Sansan/Bill One Segment: Total revenue grew 26.5% YoY. The core "Sansan" product grew 18.0% YoY, with 17.6% YoY growth in stock revenue, 10.4% YoY growth in contracted customers, 7.3% YoY growth in monthly stock revenue per contract, and maintained a low 0.41% 12-month average monthly churn rate. New order value grew 43.4% YoY. "Bill One" grew 52.4% YoY, with February 2025 MRR up 48.2% YoY, 38.8% YoY growth in paid contracted customers, 6.9% YoY growth in monthly stock revenue per paid contract, and maintained a very low 0.39% 12-month average monthly churn rate. Adjusted operating profit for the segment grew 106.9% YoY despite higher payroll from sales hiring, driven by revenue growth, improved Bill One gross margin, and lower SG&A as a percentage of revenue. Included smaller businesses: Contract One hit 323 total contracts, up 113 contracts YoY, and Creative Survey's services continue to grow steadily.
2. Eight Segment: Revenue grew 71.8% YoY. Adjusted operating profit increased by 0.351 billion yen YoY, with the segment recording black ink (profit) for both the 3rd quarter and 9-month cumulative period. B2C services remained steady, while B2B services (led by Eight Team) grew strongly, supported by an increased number of business events held in the 3rd quarter due to improved internal infrastructure.

• There is no change to the medium-term financial policy announced in July 2024: the company targets a 22-27% 3-year CAGR for revenue, and an 18-23% adjusted operating margin by the 2027 May term. The 3rd quarter adjusted operating margin of 16.3% is seen as on track to meet medium-term targets. Long-term, the company expects to achieve at least 30% adjusted operating margin once business growth stabilizes at market average levels.
• The full-year 2025 May term guidance announced at the start of the fiscal year is maintained, as both revenue and adjusted operating profit are tracking within the forecast range through the first 9 months.

• Bill One is experiencing temporary larger-than-expected sales productivity deterioration amid the sales team expansion and training process, which has resulted in lower-than-expected order intake in the 3rd quarter.

Q: When does management expect Bill One sales productivity to recover to the earlier trend of over 10% quarter-over-quarter MRR growth, and will this recovery happen in Q4 or take longer? / A: Management cannot give a specific timeline at this stage. It will assess Bill One's outlook for next fiscal year after Q4, which is historically the strongest quarter for sales results, so current visibility is limited. Management does expect to see evidence of recovering and improving sales productivity sometime next fiscal year, as new modules like expense management and invoice issuance are gaining traction, and the company is working to build out a scalable, high-productivity individual sales model. These efforts should drive higher productivity and stronger Bill One growth.

Q: Given that Sansan has already restored strong productivity growth, will Bill One's productivity recovery take more than six months? / A: It took roughly three and a half years for Sansan's stock revenue growth to recover to current levels, due to lingering COVID-19 impacts, but management gained confidence that growth can be restored even after a multi-year period. Management does not expect Bill One's recovery to take as long as Sansan's, and is confident the business can return to strong growth performance.