Commerce One Holdings Inc. Q4 FY2025 earnings call

Corporate Mission & Growth Direction

• The group's mission is to "maximize the power of people using technology" and "build a fair society where everyone can pursue self-realization". Founded in 2006 to address trust issues in early-stage e-commerce, the company pivoted to EC solution services and grew via acquisitions of futureshop and SOFTEL.
• Management plans to pursue active investment in both core and new businesses to drive further growth.

Core Business (futureshop) Strategy & Operations

• The company focuses on a high-value-added strategy to grow ARPU, prioritizing customer growth over pure contract volume growth. 2+ year retained customers achieved average 27.1% year-over-year revenue growth, and per-store GMV is higher than peer SaaS EC platforms, driven by the company's hands-on customer success model.
• The omni-channel futureshop omni-channel offering grew from 126 brands to 136 brands year-over-year, with continued expansion targeted in the online-offline integration (OMO) space. Customer industry mix has been stable historically, but the food & beverage category has grown rapidly post-COVID-19, and the company has strengthened temperature management and other tailored solutions for this segment.
• futureshop has won the EC site building category "Leader" badge for 23 consecutive years on the ITreview business IT review platform, reflecting high customer satisfaction and market recognition.

SOFTEL Strategy & Operations

• SOFTEL is shifting to higher-value customization projects, which has driven growth in per-customer development revenue but temporarily hurt profitability due to increased requirement complexity and higher-than-expected engineering costs. The company plans to improve profitability via knowledge accumulation and operational efficiency gains.

Cross-Business Synergy & New Business Development

• The group is integrating specialized services from across subsidiaries into futureshop to build a stronger, more unified platform, offering tools for marketing/branding support, cross-border EC support, and back-office efficiency improvement.
• The joint SaaS back-office system Commerce Connect with futureshop and SOFTEL enables unified management of sales data across EC marketplaces, brand websites, and physical stores, creating new business opportunities via more efficient EC operations.
• The company is developing cross-border EC services in partnership with the KEMBO Group to support Japanese customers entering the Chinese market and other overseas markets, leveraging KEMBO's global marketing expertise.
• The company has launched AI Creative One, an AI image generation service for EC creatives, acquired via group integration, to improve customer value and competitive positioning.
• The company holds an equity stake in Enecycle, a decarbonization technology startup that converts organic waste to energy via proprietary carbonization technology. Enecycle produces high-purity biochar for carbon credit generation (the largest component of the current global carbon credit market) and bio-coal as a replacement for fossil coal, with large market growth expected towards 2030.

1. futureshop: Revenue of 2.76 billion yen, up 190 million yen year-over-year; operating profit of 840 million yen, up 20 million yen year-over-year; operating margin of 30.4%, down 1.4pp year-over-year. GMV reached 205.2 billion yen, up 6.36 billion yen year-over-year; total contracts stood at 2,795, down 86 year-over-year; ARPU was 81,473 yen, up 7,218 yen year-over-year. This segment accounts for 74.8% of total consolidated revenue.
2. SOFTEL: Revenue of 850 million yen, down 10 million yen year-over-year; operating profit of 50 million yen, down 20 million yen year-over-year; operating margin of 6.6%, down 3.3pp year-over-year. This segment accounts for 23% of total consolidated revenue.

• For the FY2026 March term, the company guides consolidated revenue of 4.38728 billion yen, representing 18.8% year-over-year growth, and consolidated operating profit of 665.32 million yen, representing 4.2% year-over-year growth. Profit growth lags revenue growth due to planned increased marketing investment to acquire new customers.
• The company guides parent net income of 485.07 million yen, a sharp recovery from FY2025's 91.59 million yen, as the transitory impairment and valuation losses recorded in FY2025 will not repeat in FY2026.
• A full year dividend of 21 yen per share is planned, with a targeted payout ratio of 30.8%.
• The company targets ROE of 18% for FY2026, moving back towards its mid-term strategic target of 20%, which was missed in FY2025 due to large transitory impairment losses. Management remains committed to hitting the 20% ROE target in future years, and plans to improve investment efficiency after the continued investment phase of FY2026.
• Management will accelerate growth efforts to meet the new TSE Growth Market listing maintenance requirement of 10 billion yen market capitalization, and will review the mid-term business plan as needed to align with this goal.

• Transitory one-time charges in FY2025: 250 million yen valuation loss for Enecycle's pre-revenue investment, 70 million yen write-off for office relocation, 70 million yen impairment for delayed in-development software, and 26 million yen valuation loss for underperforming investment securities, leading to a 323.27 million yen year-over-year drop in parent net income.
• futureshop contracted store count has declined slightly post-COVID-19 due to consolidation of low-performing stores added during the pandemic-driven EC boom. The average service price point is also not low, which limits uptake from very small, unproven EC businesses.
• SOFTEL's profitability has temporarily declined as it shifts to larger, more complex customization projects, due to higher-than-expected engineering costs.
• The Enecycle investment has had a large negative impact on current earnings, and its long-term profitability and scalability remain unproven.
• Macroeconomic uncertainty from global trade policy shifts makes business performance difficult to forecast accurately for the company's current size.
• The company must grow its market capitalization to 10 billion yen to meet the new TSE Growth Market listing maintenance requirements, which adds pressure to accelerate growth.

Q: Why is futureshop's per-store GMV much higher than competing SaaS EC platforms?

A: Management prioritizes supporting customer growth over maximizing raw contract count, rather than focusing on only very large enterprise clients. The company has a dedicated free customer success team that provides detailed improvement support, sharing visualized performance data with clients to help them resolve operational issues, and partners with third-party providers to roll out new optional features quickly. This model resonates particularly well with growth-oriented mid-sized clients, who drive the higher average GMV.

Q: Why has futureshop's total contract count not grown recently, and is this a concern?

A: Contract count saw a sharp surge during the COVID-19 pandemic, as many brick-and-mortar businesses rushed to launch EC sites quickly. Post-pandemic, many low-performing or ill-suited businesses consolidated or exited, leading to a slight net decline. Most new clients now are higher-GMV businesses that explicitly select futureshop after comparing against competitors, so the overall GMV growth trend remains solid. The company maintains its focus on customer growth rather than pure contract volume.

Q: What is the outlook and strategic rationale for the Enecycle decarbonization business?

A: Global policy support for decarbonization, including recent Japanese legislation like the GX Promotion Act and Hydrogen Society Promotion Act, has created large long-term market opportunities for decarbonization solutions. Enecycle's core technology converts organic waste to high-purity biochar, which is the dominant input for global carbon credit purchases led by large global tech and transport companies, and can also be sold as a carbon-neutral replacement for coal. Most large-scale projects will launch starting from 2026-2027, and management expects the business to become a meaningful long-term profit pillar despite the current valuation loss.

Q: How is the company approaching the new TSE Growth Market 10 billion yen market capitalization listing requirement?

A: Management views the new requirement as a catalyst to accelerate the pace of business growth and increase corporate and business value. Organic growth from maturing new businesses will contribute, and the company will also actively pursue M&A to top up growth where organic growth is insufficient. Management will review and adjust the existing mid-term plan as needed to meet this goal, while monitoring macroeconomic uncertainty that impacts market valuation.