I-ne CO.,LTD. Q1 FY2025 earnings call

• Company Background & Mission • Founded in 2007 as a student startup by CEO Taihei Onishi, began in feature phone apparel e-commerce before pivoting to beauty e-commerce. Listed on the Tokyo Stock Exchange Mothers market in 2020, transferred to the Prime market in 2023, and has delivered consistent revenue and profit growth since listing. • Mission: "We are Social Beauty Innovators for Chain of Happiness" — focused on expanding a chain of happiness to customers by solving beauty problems and delivering positive product experiences, with the long-term goal of becoming a global Japanese beauty brand. • Operates as a fabless manufacturer, maintaining an in-house R&D team (with senior members from large consumer goods companies and university research partnerships) and outsourcing production to a network of 200+ optimized OEM factories.

• Core Competitive Strengths • 1. Brand Creation Capability: Combines science (data-driven filtering of 10,000+ annual internal ideas) and art (qualitative, creative judgment to select ideas aligned with I-ne's identity and viral potential). ~20% of 400+ employees are creators/designers, with consistent design across packaging, advertising, and in-store displays, and early adoption of AI to accelerate creative workflows. Maintains high product quality via in-depth R&D collaboration with OEM partners at the ingredient level. • 2. OMO (Online Merges with Offline): Employs 82 top-tier Japanese digital marketers who iteratively improve in-house digital marketing to compete with large incumbents on limited ad spend. Has built offline distribution to ~65,000 reachable retail stores, enabling combined reach to both social media-focused trendsetters and mass-market consumers who shop at drugstores. • 3. IPTOS Proprietary Brand Management System: A gated, stage-based process (Idea > Plan > Test > Online & Offline > Scale) that reduces launch risk (allows quick exit from underperforming test products before large-scale offline distribution), improves hit reproducibility by accumulating data from past successes and failures, and increases demand forecasting accuracy to avoid excess inventory or stockouts.

• M&A Activity • Divestiture example: I-ne created the CHILL OUT beverage brand, and sold its full stake to Coca-Cola Japan in 2023 for ~3 billion yen, allowing focus on the core beauty category. • Recent acquisitions: 2022 purchase of foundation brand WrinkFade; October 2024 purchase of skincare brand TOUT VERT for ~10 billion yen; 2024 purchase of Artemis, the trading company for SALONIA, eliminating ~80 million yen in annual intermediate margin costs. • TOUT VERT synergies: TOUT VERT is a fast-growing (45% 3-year CAGR) ingredient-focused retinol skincare brand that grew organically via influencer word-of-mouth with minimal ad spend, but lacked e-commerce operations capacity and offline distribution. I-ne is supporting TOUT VERT's operations, expanding its EC sales via I-ne's digital marketing capabilities, and rolling out gradual low-risk test offline distribution (already seeing strong early results at Loft stores), with no plans to alter TOUT VERT's core brand identity due to highly aligned corporate missions and culture.

• 2025 Q1 Operational Performance: I-ne achieved strong double-digit revenue and profit growth, with TOUT VERT driving massive growth in the skincare segment, and is off to a strong start to the full fiscal year relative to plan.

1. Hair Care: The company's largest segment, holding top 2 market share in Japan, with flagship brands BOTANIST and YOLU. It delivered steady growth in the 2025 December fiscal year Q1. No absolute revenue or percentage contribution figures were provided in the transcript. 2. Beauty Appliances: Led by the SALONIA brand, which holds leading domestic market share for hair straighteners. It also delivered steady growth in Q1. No absolute revenue or percentage contribution figures were provided. 3. Skincare & Other: This segment includes skincare products, the ReWEAR fabric softener brand, eye drops, and the recently acquired TOUT VERT brand. Driven by the contribution of TOUT VERT, this segment grew 410.9% year-over-year in Q1 2025. No absolute revenue or percentage contribution figures were provided.

• The company targets 100 billion yen in revenue, 11 billion yen in operating profit (11% operating margin), and 14 billion yen in EBITDA (14% EBITDA margin) between 2028 and 2030, as part of its goal to become a leading Japanese beauty mega venture. • Growth strategy to hit targets: 1) Continue steady growth of core hair care and beauty appliance businesses; 2) Develop new growth pillars by launching hit products across new consumer categories; 3) Pursue active M&A to acquire new capabilities and expand business scale (organic growth remains the top priority, M&A is used to buy time and strengthen core strengths); 4) Build out global business infrastructure in existing markets (Taiwan, Hong Kong, Southeast Asia), which are currently in the investment phase, to develop into a new core growth pillar. • The company plans to balance growth investment (including M&A) with gradual increases in shareholder returns via dividends and shareholder benefits, pursuing both goals on parallel tracks. • Management expects reduced quarterly earnings volatility over time from increasing e-commerce revenue share and diversifying across more product categories, and will improve investor communication to explain temporary volatility, addressing undervaluation of the stock in current markets. • I-ne's long-term vision is to build the first Japanese global beauty mega venture, leveraging Japan's top-tier beauty R&D and quality control and I-ne's marketing strength to increase the global presence of Japanese beauty brands, setting an example for other Japanese venture and small-to-medium enterprises to pursue global expansion.

• Quarterly earnings volatility is common due to timing shifts in drugstore shelf restocking cycles (which occur in spring and fall), where delayed shipment of planned products can shift revenue between quarters, leading to investor concern and stock price volatility that does not reflect full-year performance. • The company's historical 2017-2018 crisis demonstrated the risk of unstructured rapid expansion: after the hit of BOTANIST, the company rapidly hired staff and launched many new brands at once, leading to a proliferation of unprofitable brands, excess bad inventory, organizational chaos, and high employee turnover, a past experience that now informs the company's structured gated IPTOS process to mitigate this risk.

Q: Will M&A play a major role in hitting your 100 billion yen 2028-2030 revenue target? / A: Management prioritizes organic growth as the most important driver of long-term growth. M&A is viewed as a tool to buy time and strengthen I-ne's existing core strengths, so the company will continue to actively pursue strategic M&A that aligns with its beauty-focused growth goals. This matches past M&A activity that included both revenue expansion and cost-saving deals like the Artemis acquisition, which cut annual intermediate costs by 800 million yen. (312 characters)

Q: What synergies does the TOUT VERT acquisition deliver, and are the two companies' corporate cultures compatible? / A: TOUT VERT was growing very fast but lacked e-commerce operational capacity to handle demand, so I-ne's existing e-commerce expertise fills this gap. I-ne can also expand TOUT VERT's digital sales via its digital marketing capabilities and add gradual offline distribution without damaging the brand. The corporate cultures are actually highly aligned: both companies share a customer-first mission focused on delivering high-quality products that create happiness, and TOUT VERT chose I-ne over other potential acquirers that likely offered higher prices specifically because of this shared culture. I-ne plans to preserve TOUT VERT's unique brand identity rather than overhaul it. (594 characters)

Q: Why is I-ne's stock undervalued at current levels, and how will you address this? / A: Management acknowledges that current shares are significantly undervalued, which it attributes to high quarterly earnings volatility. This volatility comes from variable timing of drugstore shelf restocking, which can shift revenue between quarters, plus the company's willingness to front-load investment for long-term growth opportunities. To address this, I-ne will improve investor communication to explain that volatility is temporary and the company has delivered consistent full-year growth since listing. Over time, volatility will also decrease as e-commerce grows as a share of total revenue and I-ne diversifies across more product categories. (476 characters)

Q: What is your long-term global vision for I-ne? / A: Management notes that despite Japan having world-leading beauty R&D and quality control, only Shiseido ranks in the top 100 of the North American cosmetics market at 41st place. This gap exists because Japanese brands have lagged in global marketing capability. As a marketing-focused beauty company, I-ne aims to build the first successful Japanese global beauty mega venture to prove it can be done, which will encourage other Japanese venture and small-to-medium enterprises to pursue global expansion, increasing the global presence of Japanese beauty overall. (419 characters)