NETSTARS Co.,Ltd. Q1 FY2025 earnings call

• Core Financial Performance

  • Total revenue increased 27.2% year-over-year, 3% above original plan, driven by above-forecast payment processing fees.
  • Operating loss narrowed to -2 million yen (near break-even), a 150 million yen improvement year-over-year, beating the planned operating loss of 63 million yen. Net income turned positive (black ink), 85 million yen above plan and more than 200 million yen above year-ago levels, boosted by over 30 million yen in non-operating interest income from higher interest rates.
  • GPV hit a record 467.4 billion yen, up ~30% year-over-year, with sequential volume nearly matching the prior quarter (typically Q4 is seasonally stronger than Q1), a strong outperformance. Domestic QR code payments and credit card/NFC payments led GPV growth, while inbound international QR payments were stable but below the pace of domestic growth.

• Operational and Competitive Strength Updates

  • Core competitive advantages: Leading technical development, a large established merchant network covering over 500,000 locations with connection to most of Japan's 60+ payment brands, and a broad base of over 300 partner companies to support growth with only ~250 total employees.
  • Technology efficiency: Advanced cloud container technology and generative AI integration have driven continual reductions in per-transaction server costs, which have fallen ~0.01 yen per transaction per quarter and are approaching zero. This cost efficiency has improved operating margins even as transaction volume grows 30% year-over-year.
  • New merchant acquisition: Added Taiyo Oil and Kygnus Oil as new merchant clients, expanding into underpenetrated verticals like gas stations where QR adoption is still growing, with limited competition. Netstars holds top market share in the airport vertical already.
  • Key new partnership: Selected as the exclusive Japanese QR code payment gateway partner for Stripe, the global fintech leader. The partnership will initially enable PayPay QR payments for Stripe's existing merchant base, with no immediate profit impact but large long-term growth potential as Stripe expands its domestic QR offering.
  • Overseas expansion: Existing operations in Qatar, Cambodia, and Mongolia continue to hit record annual transaction volumes, with multiple new expansion projects scheduled for 2025, targeting long-term revenue growth over a 3-5 year horizon.
  • 2025 DX priorities: StarPay-DX one-stop DX solutions are being expanded via partner channels (previously handled in-house) to accelerate cross-selling. The product supports all device and format types, covers functions from pre-ordering to delivery integration, and already has adoption across multiple retail and service verticals, with the goal of reducing churn and increasing revenue per merchant.

1. Cashless Payment Gateway (Payment Related) Segment: Revenue grew 35% year-over-year, drove 30% higher Gross Payment Volume (GPV). It contributed the vast majority of total revenue, generated 0.8 billion yen in gross profit (up 30% year-over-year), with a gross margin of ~76%.
2. DX / Mini App Segment: Revenue was 20% above plan, in line with plan in absolute terms, consistent with historical year-over-year performance.
3. Other / Terminal Sales Segment: Revenue saw a slight decline year-over-year; terminal sales volume was solid in the quarter but contributed far less to total revenue than payment related services.

• Management maintained the original full-year 2025 guidance, targeting over 200 million yen in operating profit and ~200 million yen in net income.
• The strong Q1 performance, with GPV well above the 440 billion yen projected start to the year, gives management a strong positive signal that the full-year profit target is achievable.
• Management expects to announce multiple new partnership and overseas expansion updates through the remainder of 2025.

• Management notes that future transaction volume growth will require monitoring for potential headwinds from GDP slowdowns and the impact of Trump-era tariffs on consumer sentiment, though it also observes that cashless payments tend to perform well even during periods of softer consumer demand.
• Approximately tens of millions of yen in POS modification and sales promotion costs were shifted from Q1 to Q2, which will impact Q2 expense results.

The provided transcript does not include a transcribed question and answer section, so no content can be summarized for this segment.