I-ne CO.,LTD. Q4 FY2024 earnings call

• Core Financial Performance • Achieved 5 consecutive years of revenue and profit growth since listing, with full-year 2024 consolidated revenue of 45 billion yen (+8.1% YoY) and consolidated operating profit of 4.58 billion yen (+4.7% YoY), both all-time highs. Q4 single-quarter revenue reached 13.69 billion yen (+22.6% YoY) and operating profit reached 1.62 billion yen (+22.3% YoY), also new records. • Net profit hit 2.93 billion yen, far exceeding the initial forecast, driven by tax effect accounting from the liquidation of the Chinese subsidiary. • Logistics cost ratio decreased from 10.8% in 2020 (the year of listing) to 6.0% in 2024, a 4.8 percentage point cumulative reduction. Operating profit margin for 2024 was 10.2%, down 0.3 percentage points YoY due to M&A-related costs and strategic human capital investment.

• Strategic Investment and Organizational Building • Completed a full review of the compensation system to increase average salary and promotion rate, reducing turnover significantly. Added 90 employees (focused on senior roles) year-over-year, building organizational capacity for medium-term growth targets. • Completed two M&A deals in October 2024, recording a provisional goodwill of 9.05 billion yen. Goodwill amortization started in November 2024, with 150 million yen amortization recorded in 2024. PPA valuation is expected to be completed in Q1 2025.

• Sustainability Initiatives • Selected for Japan's Ministry of the Environment CFP model project, calculating full value chain CO2 emissions for partial BOTANIST products alongside OEM partners. Achieved its 30% virgin plastic reduction target ahead of schedule, maintained 100% FSC-certified paper usage, and started purchasing certified sustainable palm oil via the RSPO Book & Claim system.

• Updated Medium-Term Growth Strategy (2028-2030) • Retained the target of 100 billion yen in revenue by 2028-2030, updated the strategy with three core changes: cultivate new growth pillars (including existing skincare plus new categories like eye drops and fabric softener), use M&A to expand business capabilities and scope, and add EBITDA margin as an official target metric. • Planned profit framework: Core mature businesses target 15-17% for both operating margin and EBITDA margin. After allocating 1-2% of total revenue for new business development and 3-4% for M&A-related costs, the group-level target is 11% operating margin and 14% EBITDA margin. • Portfolio transformation goal: Shift from hair care representing 60-70% of current revenue to non-hair care categories representing ~60% of revenue by 2028-2030. The combined total addressable market for existing and new target categories is 5.2 trillion yen, 5x the size of I-ne's current core market. • Will continue to pursue disciplined M&A, with current post-merger integration ongoing for the 2024 acquisitions of TOUT VERT and Artemis.

1. Hair Care Segment: Full-year sales of 31.5 billion yen, +3.9% year-over-year, contributing 70% of total consolidated revenue. Overall category POS grew 6.2% year-over-year, with YOLU growing 13% year-over-year, BOTANIST 4Q single-quarter sales growing 11.5% year-over-year, and ROOTH growing 158.6% after its Q3 refresh.
2. Beauty Appliances Segment (anchored by SALONIA): Full-year sales of 10.66 billion yen, +15.6% year-over-year, contributing 23.7% of total consolidated revenue. SALONIA exceeded 10 billion yen in annual sales for the first time, with high-margin mid-to-high price products driving growth: EMS Lift Brush grew 322.7% year-over-year and Face Steamer grew 154% year-over-year.
3. Skincare & Other Segment: Full-year sales of 2.83 billion yen, +35.5% year-over-year, contributing 6.3% of total consolidated revenue. TOUT VERT (acquired in Q4) achieved record sales, WrinkFade grew 8.8% year-over-year in Q4, and SKN REMED grew 328.4% quarter-over-quarter.
4. Global Segment: Full-year sales of 1.34 billion yen, +19.2% year-over-year. Taiwan Q4 sales grew 93% quarter-over-quarter, Hong Kong full-year sales grew 33.4% year-over-year, and multiple Southeast Asian markets also achieved revenue growth.

• For full-year 2025 (ending December), management targets consolidated revenue of 52 billion yen (+15.5% YoY), consolidated operating profit of 5.04 billion yen (+10% YoY), with a targeted operating margin of 9.7%. It expects a 30.1% YoY increase in consolidated EBITDA to 6.76 billion yen, adding EBITDA as an official performance metric this year.
• Segment-level 2025 revenue guidance: Hair care 32.2 billion yen (+2.2% YoY), beauty appliances 11.5 billion yen (+7.9% YoY), skincare and other 8.3 billion yen (+192.3% YoY, driven by the full-year consolidation of TOUT VERT). All segments are targeted for revenue growth.
• 2025 cost outlook: Sales cost ratio is expected to improve by 3.3 percentage points YoY driven by Artemis-related supply chain optimization and ongoing OEM cost reduction efforts. Cost savings will be reinvested into growth initiatives, and while operating margin will temporarily decline due to upfront investment in new brands/categories, EBITDA margin is expected to improve 1.4 percentage points YoY.
• Quarterly performance outlook: Q1 2025 revenue is expected to decline quarter-over-quarter (due to market seasonality) but grow year-over-year, while operating margin and EBITDA margin will temporarily decline YoY due to upfront goodwill amortization and marketing investment. Margins are expected to improve sequentially from Q2 onward alongside revenue growth.
• Capital allocation and shareholder return: Growth investment remains the top priority for cash allocation. A 0.5 yen per share dividend increase is planned for 2025, bringing the annual ordinary dividend to 13.5 yen per share, and shareholder benefits will continue.
• Management revised the original 2025 revenue target of 55 billion yen down to 52 billion yen, due to intensifying competition in the hair care market, slower-than-expected growth in China, and slower growth in beauty appliances driven by yen depreciation-related price increases in 2024. The downward impact from these factors was partially offset by the upward contribution from the TOUT VERT acquisition.

• Intensified competition in the core mid-to-high price hair care market, with increasing new entrants raising barriers to sustained growth for mid-sized brands.
• Deteriorating market environment in China led to the decision to liquidate and exit the market, with remaining exit-related costs expected to keep the global segment slightly profitable in 2025, and positive earnings contribution from the exit not expected until 2026.
• Upfront investment in new categories, new brands, and M&A integration will temporarily depress group-level operating margin in 2025.
• Uncertainty around the final valuation of goodwill and intangible assets from the 2024 M&A deals, with a potential +/- 100 million yen swing in projected annual amortization cost before finalization in Q1 2025.
• Yen exchange rate fluctuations have placed upward pressure on product sourcing costs.

Q: What specific market conditions drove the update to I-ne's long-term plan, and what countermeasures is management implementing? / A: Two key conditions drove changes: rising new entry into I-ne's core mid-to-high price hair care market, and severe deterioration of the Chinese market after the treated water issue, which led to local competitors capturing significant share. For hair care, the 2025 growth target is set conservatively, with two main countermeasures: rolling out product renewals across brands (proven successful by ROOTH's post-renewal growth), and expanding high-performing seasonal limited products and sub-lines. For global business, after exiting China, management will focus resources on high-growth markets including Taiwan, Hong Kong, Southeast Asia, and the newly established US entity, with strengthened regional teams to drive expansion. I-ne will also leverage its strong existing e-commerce position, where hair care e-commerce sales grew 15% YoY in 2024, to drive further hair care growth.

Q: What core competitive advantages will I-ne leverage to succeed in new target categories? / A: I-ne has three core unique competitive strengths. First is its brand creation capability, including the ability to develop innovative products and its extensive existing OEM network. Second is its integrated OMO (Online Merges with Offline) capability, which few competitors can match—most competitors are strong in only one channel, while I-ne can combine both to develop and scale hit products. Third is its proprietary IPTOS brand management system, which continuously captures learnings from successes and failures via regular PDCA cycles, improving hit rates over time. These strengths have already been validated outside of core categories: the new I-ne eye drops brand Tearal has already become a hit driven by inbound demand, proving the model works for new categories.

Q: What are the 2025 sales plans for recently acquired TOUT VERT, and what growth upside exists? / A: TOUT VERT was only consolidated for November and December 2024, contributing 1 billion yen in revenue for those two months. I-ne's 2025 revenue target for TOUT VERT is 5 billion yen, which is a reasonable target: the final two months of 2024 had elevated sales from year-end e-commerce sales, and the business is inherently weighted to the second half. Significant upside exists: I-ne's strength in Amazon and other e-commerce channels can help drive further TOUT VERT growth, and offline expansion represents a large untapped opportunity that has not yet been timed. PMI is progressing well, and management is actively targeting upside to hit above the base 5 billion yen target.

Q: What can you share about the new categories I-ne is developing as part of its updated growth strategy? / A: I-ne is already test-launching a fabric softener brand called ReWEAR on e-commerce, which uses Danish enzymes to remove pilling and fuzz from clothing to restore them to their original condition. Early test sales have generated very strong positive consumer response. I-ne is also scheduled to launch a new functional tea brand called Teaflex on February 24. Multiple additional new brand launches are planned for coming periods, leveraging I-ne's core capabilities to enter new adjacent categories.