Sansan,Inc. Q4 FY2025 earnings call

Overall Financial Performance

• Total company revenue grew 27.5% YoY, within the prior guidance range. Annual Recurring Revenue (ARR) exceeded 41.5 billion yen as of May 2025.
• Adjusted operating profit grew 108.0% YoY, driven by improved gross profit margin (up 1.5 percentage points YoY, primarily from improved Bill One profitability via data operation efficiency gains) and lower selling, general and administrative (SG&A) ratio.
• Net income attributable to parent shareholders fell 55.5% YoY due to a 2.3 billion yen special loss recorded on Unipos shares.
• Free cash flow margin reached 16.1% even with a 2 billion yen one-time expenditure for head office relocation, with free cash flow growing steadily alongside revenue and margin improvements.

Product Segment KPIs

• Sansan: Q4 stock revenue grew 17.8% YoY (accelerated growth), contract count up 10.4% YoY, average monthly stock revenue per contract up 6.6% YoY. 12-month average monthly churn held at a low 0.49%, with stable net negative churn maintained. Q4 new order value fell 12.6% YoY due to slightly higher seasonal churn in the renewal-heavy quarter, which management views as within expected ranges, with no material concerns about the long-term growth trend.
• Bill One: May 2025 Monthly Recurring Revenue (MRR) grew 42.7% YoY, paid contract count up 39.6% YoY, average monthly stock revenue per paid contract up 2.2% YoY. 12-month average monthly churn held at a very low 0.33%. New add-on offerings Bill One Expense and Bill One Receivables Management are off to a strong start, with Bill One Expense gaining 30-50 new monthly contracts over the past six months. Q4 new order value grew 14.9% YoY and 33.9% quarter-over-quarter, after prior quarter sales force ramp-up delays, with improved new order growth expected going forward.

Capital Allocation Strategy

• Management prioritizes capital allocation as follows (aligned with the company's current growth phase): 1) New business creation including M&A, 2) Share buybacks, 3) Dividends.
• Management will continue to consider opportunistic share buybacks, with no new buyback to announce at this time. A clear capital allocation policy will be published at an appropriate time as free cash flow expands, to maximize capital efficiency and shareholder value.

Generative AI Growth Strategy

• Management views structured, high-quality corporate data as the critical foundational requirement for effective enterprise generative AI, and Sansan's decades of data accumulation and data structuring capability create a strong competitive moat in the AI era.
  • Sansan: The company is developing an MCP Server to connect Sansan's structured contact/relationship data with external generative AI services (e.g., ChatGPT), enabling natural language querying of internal customer and contact data. The service is on track to launch as early as H2 2025, with strong early customer interest, and it is expected to drive higher ARPU over time. The company already launched Sansan BI, which uses generative AI to deliver cross-product data insights and automatically generate sales action recommendations.
  • Bill One: The company is combining natural language processing and generative AI to expand automated data capture to invoice line items, and develop new services to fully automate monthly closing processes, with a new service launch planned for 2025.
  • Contract One: The AI-powered contract database offering includes Contract One AI, which enables natural language querying of contract terms, automatic hierarchical contract tree structuring, and planned automated report generation, drastically reducing manual contract review and analysis time. The product is targeting 70%+ revenue growth in 2026 after starting TV advertising in late May 2025.
• Cost Reduction via AI: Sansan's proprietary generative AI Viola improves automated data capture accuracy for business cards, invoices, and contracts, reducing reliance on manual data entry. Viola is expected to deliver 100 million yen in cost savings in the 2026 fiscal year, building on decades of incremental cost reduction that has cut per-unit data capture costs to 5% of founding-era levels.

1. Sansan/Bill One Segment: Total revenue grew 26.2% year-over-year. Within the segment, Sansan revenue grew 16.9% YoY (accelerated growth rate), Bill One revenue grew 58.7% YoY (continued high growth). Adjusted operating profit grew 59.1% YoY despite increased advertising spend for large-scale promotions. Sansan achieved a 37.9% adjusted operating profit margin (up from prior year), maintaining stable growth while improving profitability. Bill One remains in an investment phase and is still unprofitable, but its operating balance has improved significantly alongside revenue growth. Contract One (included in other revenue of this segment) posted 38.2% YoY revenue growth to 574 million yen, with 393 contracted customers as of period end (up 77% YoY).
2. Eight Segment: Revenue grew 42.4% YoY. After allocation of corporate overhead, adjusted operating profit increased 526 million yen YoY, achieving full-year adjusted operating profit black ink (positive profit), with an adjusted operating profit margin that improved 14.3 percentage points YoY.

• The 2025-2027 medium-term financial plan is maintained with no changes to target numbers, and 2025 full year results are on track to meet plan objectives.
• For the 2026 May full year, management expects total revenue growth of 22.0% to 25.0% YoY, broken down as: 15.0% to 17.0% YoY growth for Sansan, 35.0% to 40.0% YoY growth for Bill One, and 27.0% to 33.0% YoY growth for Eight.
• Adjusted operating profit is expected to grow 92.7% to 143.0% YoY, with an adjusted operating profit margin of 13.0% to 16.0% (the first time full-year margin will exceed 10%). Adjusted operating profit is expected to be heavily weighted to the second half (25% H1, 75% H2) due to the cumulative nature of stock-based revenue and front-loaded advertising spend.
• Payroll cost is expected to grow ~19% YoY, with the revenue share of payroll cost falling, as total hiring planned at 370 new employees (down from prior year).
• Advertising spend is expected to grow ~28% YoY, with a slight increase in advertising as a share of revenue. The increase reflects large-scale promotion for newly scaled offerings Bill One Expense and Contract One, and remains aligned with the medium-term financial plan with no change to overall cost guidance.
• Bill One is on track to reach profitability by the 2027 May fiscal year, in line with prior guidance.

• The 12.5% decline in Q4 2025 Sansan new order value is within expected seasonal ranges, but continued higher-than-expected churn or slower new customer acquisition could negatively impact segment growth.
• Bill One has seen slower average revenue per user growth to date, which could pressure near-term profitability if it persists despite strong contract count growth.
• Large-scale simultaneous TV advertising across three products is a first for the company, so the customer acquisition and revenue impact is still uncertain, and CAC could rise if campaign performance is weaker than expected.
• Exact pricing and monetization for new AI-enabled offerings (including MCP Server) are not yet finalized, so the revenue impact from these new growth initiatives is uncertain.

Q: How does management plan to grow advertising spend going forward, and will higher spend worsen customer acquisition costs (CAC)? What is the split between customer acquisition and branding spend?

A: The 2026 advertising budget is 6.5 billion yen, a 28% increase from 2025's 5.1 billion yen actual spend, outpacing revenue growth guidance. The increase is driven by the need to promote newly scaled products Bill One Expense and Contract One, with the increase justified by proven customer acquisition traction that means CAC deterioration is not expected. Almost all advertising spend is focused on lead generation for new customers, with very little pure branding spend; it also supports cross-selling to existing Sansan customers by raising awareness of the company's other offerings, which management expects will deliver incremental cross-sell benefits. The current large-scale three-product simultaneous campaign is the first of its size for the company, and management will assess results to determine if faster top-line growth than the medium-term plan is possible.

Q: Which generative AI initiatives does management see as most impactful, and when will they contribute meaningfully to company financial performance?

A: Management expects the company's products to increasingly be positioned as critical data infrastructure for enterprise AI strategies, rather than just standalone workflow tools, which creates large new growth opportunities. The company should start to see meaningful contribution from generative AI initiatives internally by H2 2026. Each product fits into the AI ecosystem differently: Bill One focuses on AI-powered process automation, while Sansan and Contract One provide structured knowledge data that can connect to enterprise generative AI tools via MCP servers, enabling cross-product semantic responses to natural language queries that tie together customer, contract and billing data. This positions Sansan's portfolio as a critical component of the modern enterprise AI stack, opening long-term growth opportunities.

Q: Is MCP Server the core source of competitive advantage for Sansan, and how will the company monetize the offering?

A: MCP Server is a revenue-side opportunity (for top-line growth), while Viola the in-house generative AI is a cost-side opportunity to reduce data capture costs, so both are important to the company's strategy. At this stage, the exact pricing model for MCP Server has not been finalized, but the company expects to monetize it by positioning MCP access as a premium tier upgrade for existing customers, aligned with the company's historical product tiering approach. MCP Server has already received strong early inbound inquiries from enterprises that are building out their generative AI infrastructure and need access to structured existing corporate data, creating strong early demand that management will work to convert into revenue.