NETSTARS Co.,Ltd. Q2 FY2025 earnings call

Financial Performance Overview

• Total revenue grew 25.6% year-over-year, hitting all-time record highs for half-year and single-quarter GPV, driven by large new merchant wins that are clearly reflected in results.
• Operating profit reached 59 million yen, a 317 million yen improvement year-over-year; ordinary profit was 151 million yen, and net profit was 127 million yen, with a major turnaround from the prior year's deficit to stable positive profitability.
• Gross margin reached 79% in the half, boosted by strong GPV growth, though management notes this is a high current level and may not be sustained for the full year.

Core Business Growth Drivers

• Expanded merchant network: Accelerated new merchant acquisition, including high-profile additions like Tokyu Department Store Shibuya, which launched on schedule after planned POS renovations. There have been almost no large merchant cancellations (churn) this year, so low churn plus new acquisition is driving accelerating transaction volume growth.
• Increased transaction value from existing merchants: Growth comes from higher usage frequency and higher average transaction values for existing partners.
• Expanded service scope and faster monetization of payment-related add-on services.

Operational Efficiency & Strengths

• Core infrastructure efficiency has improved greatly: Server operation optimization, cloud cost rationalization, and selling, general and administrative (SG&A) expense normalization have reduced per-transaction costs, with cost improvements accelerating. Multi-year investments in AI and in-house generative AI development have contributed materially to core system structure improvements, driving better operating and ordinary profit even at the same gross margin level.
• Partner ecosystem expansion: The company has deepened partnerships with large new partners such as Stripe, plus added new niche/segment-specialized partners, expanding the scope of collaboration. Partner deepening is a core 2025 strategic priority, and progress is on track. Three key new operational updates since April 2025:
  • Achieved first ever single-quarter GPV over 500 billion yen
  • Launched the first domestic JPQR Global service at the Osaka-Kansai World Expo, as the Japanese-side switcher for this government-backed unified QR standard inbound payment project, with initial support for Cambodian payment schemes, and more country integrations planned
  • Launched a partnership with Mercari's "Mercari Hello" service, allowing Netstars' 15,000 existing merchants to sign up for Mercari Hello directly through the StarPay-Works merchant management portal, deepening existing partner relationships and opening new add-on revenue opportunities

Strategic Priorities

• Domestic growth: Continue cross-selling to existing merchants, develop new industry verticals, and continuously acquire large merchant cases
• Overseas growth: Accelerate expansion of payment and DX services focused on Asia and the Middle East
• New service development: Strengthen high-value-added service areas including payment data utilization and in-store support, and continue prioritizing the adoption and expansion of JPQR

1. Cashless Payment Gateway Service: This segment is the primary revenue driver, with payment fees outperforming plan. It contributes the majority of total revenue, with its share of adjusted revenue composition remaining stable from the first quarter (over 98% excluding minor terminal sales variation). Core Gross Payment Volume (GPV) reached 980.3 billion yen for the half-year, up 33.3% year-over-year, with single-quarter GPV exceeding 500 billion yen for the first time in company history. 2. StarPay-DX (One-stop DX Solutions): Segment revenue is approximately 20 million yen below plan, as large-scale project wins have not yet materialized. However, the number of small and medium-sized cases has grown significantly, in line with the company's strategy of prioritizing cumulative small/medium deals over large project dependency. DX services also drive additional cross-sold payment fee revenue that benefits the overall business. 3. Terminal Sales: Sales volume is slightly higher year-over-year, but the revenue contribution remains within a 1% range of total revenue, with no material change to overall segment composition.

Management maintains the overall full-year strategic and operational framework with no major changes to prior guidance, but notes that first-half results exceeded expectations:

• GPV was originally guided at 940 billion yen for the half, and actual results reached 980.3 billion yen, meaning core volume came in well above prior guidance
• Overall revenue was nearly in line with plan, but gross profit and operating profit came in well above plan due to stronger-than-expected performance from high-margin payment fees and aggressive cost optimization
• No changes to existing financial/capital strategy for the half-year period
• Management will continue to monitor macro conditions closely rather than raising guidance aggressively at this stage, while carrying momentum from the strong first half into the second half

• External macro risk: Changes in US trade policy, specifically Trump-era tariffs, may impact macroeconomic conditions and domestic Japanese consumption trends, with potential negative effects on second-half (third and fourth quarter) results that cannot be fully ruled out at this stage
• While the tailwind of domestic cashless adoption is currently strong enough to outweigh any observed macro impacts, management will continue to closely monitor and assess risks rather than take an overly optimistic stance on forward projections
• DX segment performance has lagged plan in the first half, as large-scale project wins have not yet materialized, though the gap is fully offset by stronger payment segment results

The provided transcript does not include a transcribed Question and Answer section, so no key exchanges can be summarized.