IRRC Corporation Q2 FY2025 earnings call

• Long-Term Strategic Direction

  • This fiscal year is the final year of the existing 3-year mid-term management plan, and a new 3-year plan will be announced next fiscal year focused on two core goals: becoming the No.1 insurance shop chain and No.1 insurance solutions provider in Japan, to become the leading solution company in the insurance field.
  • The insurance agency channel market share has grown 1.5x over 9 years and now accounts for 1/4 of total insurance sales, with continued expansion expected; アイリックコーポレーション currently operates 278 保険クリニック stores (less than 10% of the national total), giving large room for growth, with active M&A opportunities available.
  • Upcoming regulatory reform mandating comparison-recommended sales (expected to ban single-product specific sales) creates a major business opportunity: the company holds the only industry-wide comparative insurance sales system, and is rapidly developing a non-life insurance version of the AS Platform to serve the entire 1.18 million life insurance agent market with an open, free-to-use platform with paid add-on services.

• H1 2Q Cumulative Operational Highlights

  • All core profit and revenue metrics reached a record high for the first half cumulative period, with total consolidated revenue of 4.48 billion yen, operating profit of 263 million yen (46.5% revenue progress, 37.6% operating profit progress against full-year target, operating profit exceeded internal plans despite a temporary increase in advertising spend).
  • Operating profit progress was lower than revenue progress due to one-time advertising costs from ambassador change and pulling forward unspent Q1 advertising budget to Q2; recurring stock revenue ratio rose to 36.2% YoY, continuing the upward trend.
  • For system products: スマートOCR (AI-powered OCR for irregular forms) now has three revenue streams (fixed monthly subscription, usage-based recurring revenue, custom development) with growing custom development demand from government and large enterprise clients; DenHo AI electronic book storage service and brox enterprise search service both have growing client traction, with brox seeing recent large enterprise adoption.

1. Insurance Sales: Total revenue of 2.686 billion yen, 35.7% year-over-year growth, accounting for 60% of total consolidated revenue. Direct stores saw strong growth from effective Web promotion; corporate/RM segment grew slightly from new large corporate contracts; Life Assist contributed large growth as it was not consolidated in the prior year period, and posted a temporary operating loss due to changed accounting standards after acquisition. Key KPIs: 85 total stores (72 direct, 13 Life Assist), new customer visits grew driven by Web traffic, repeat visits saw a small Q2 dip but are expected to recover in H2, and contract volume grew with increased customer traffic.
2. Solution Business: Total revenue contribution of 25.2% of consolidated revenue, with both sub-segments growing year-over-year. AS Division: 8.5% YoY revenue growth, 81.1% of segment revenue is recurring subscription revenue, subscription sales grew 12.5% YoY, AS Series IDs reached 13,982 with sharp growth from large insurance company clients. FC Division: Store initial and monthly fees grew 10.5% YoY to 204 million yen, insurance commissions from acquired FC stores grew 15.8% YoY, joint recruitment commissions grew 13.9% YoY, total FC stores reached 198 (up 5 stores in H1), total combined store count (direct + FC) is 283 nationwide.
3. System Business: Total revenue contribution of 14.8% of consolidated revenue, with strong growth driven by large orders for スマートOCR and brox. 76% of segment revenue is recurring revenue, up from prior periods. Infodio is shifting its business focus to ADX (AI Document Transformation) centered on スマートOCR, with no large insurance client custom development projects in the period similar to the prior year.

• The company maintains the full-year 2025 June fiscal guidance announced at the start of the period, with no upward or downward revision. Full-year targets are:
  • Consolidated revenue: 9.64 billion yen, gross profit: 7.591 billion yen, operating profit: 700 million yen (41.3% YoY growth), recurring profit: 705 million yen (30.9% YoY growth), net income attributable to parent shareholders: 422 million yen, EBITDA: 1.041 billion yen (38.5% YoY growth), ROE target of 11.3% (up 1.6pp YoY).
• Segment-level full-year revenue guidance:
  • Insurance Sales: 5.61 billion yen (23.8% YoY growth), Solution Business: 2.413 billion yen (7.7% YoY growth), System Business: 1.618 billion yen (40.6% YoY growth). Management expects H2 (Q3-Q4) to deliver catch-up growth for solution and system segments to hit full-year targets.
• Sub-company full-year targets:
  • アイリック単体: 6.387 billion yen revenue (10.2% YoY growth), 584 million yen operating profit (16.3% YoY growth); Infodio: 1.824 billion yen revenue (30.5% YoY growth), 101 million yen operating profit (return to profitability); Life Assist: 1.838 billion yen revenue (54.5% YoY growth including consolidation of full-year results), 94 million yen operating profit (57.3% YoY growth).
• Shareholder return guidance: The company maintains a ~50% dividend payout ratio as a guideline, and will continue to deliver steady dividend returns to shareholders.
• The company does not expect to hit the 26% 保険クリニック brand awareness target this fiscal year due to focusing on targeted Web advertising rather than mass TV advertising, but notes that targeted advertising has still driven strong growth in customer traffic.

• A temporary dip in insurance sales occurred in late 2024 (Q2) driven by yen depreciation reducing sales of foreign currency-denominated single-premium insurance products, though management notes this is a temporary impact and sales have already recovered by December 2024.
• The company faces execution risk in scaling store expansion: while improved talent recruitment schemes have made hiring easier, store expansion still depends on securing good locations and qualified talent, which can limit growth speed.
• Regulatory change timing risk: The mandated comparison-recommended sales reform is still moving through the legislative process, and demand for the company's comparative sales platforms may not materialize until after the law is enacted, leading to slower-than-expected revenue growth in the near term.
• Revenue timing risk: Some solution and system business projects have slipped from H1 to H2, which temporarily reduced H1 revenue growth but is expected to be resolved by the full year.

Q: The Q2 standalone results show 8% YoY revenue growth but 50% YoY profit decline, what is driving this slowdown and is it a permanent issue? / A: There was a temporary sales dip in October-November from yen yen depreciation hurting foreign currency insurance sales, but sales recovered by December. The main profit impact came from pulling unspent Q1 advertising into Q2 and one-time costs for the ambassador change. Cumulative H1 results are still above plan, so there is no material long-term concern from this quarterly volatility.

Q: How has last year's staff expansion impacted performance and future growth? / A: Staff expansion has resolved prior understaffing that limited store opening plans, so the company can now accelerate new store openings. New stores now reach profitability in approximately 3 months, much faster than the historical cost-leading model, so new stores will feed into profit growth much sooner than in prior periods.

Q: What is the outlook for AS System following the upcoming comparison-recommended sales regulatory reform? Will it drive material growth? / A: Regulatory reform is still progressing, and insurance companies will likely start implementing compliance measures after the law passes. The company will launch the non-life insurance version of the AS System and new platform features in Q3, so management has high expectations for future sales growth of the system.

Q: How will the upcoming ban on specific single-product insurance sales impact アイリックコーポレーション's client growth? / A: The ban will force all currently single-product focused agencies to adopt comparison tools to comply with the new rules, which will very likely increase the company's system client base. It will not directly increase walk-in customers for the company's own retail stores, but it can help improve brand awareness and indirectly drive customer growth over time.

Q: Will the company need to aggressively increase advertising spend going forward, or can it maintain current spending levels? / A: Web-driven customer acquisition is already growing over 20% YoY, and targeted digital advertising (including targeted ads on services like TVer) allows the company to reach its core demographic more efficiently than mass TV advertising. The company will continue with this strategy, and has no plans for a large one-time increase in mass media advertising spending at this time.