Direct Marketing MiX Inc. Q2 FY2025 earnings call

Core Business Overview

• The company provides outsourced BPO services for corporate sales activities, addressing the macro challenge of labor shortage facing Japanese companies, with outbound telemarketing sales as its founding core business.
• It operates 5,601 seats nationwide, concentrating hubs in densely populated urban areas (centered on the Kansai region) to efficiently secure diverse, high-quality talent, unlike traditional inbound contact centers that locate in rural areas for low costs.
• It operates under the client brand (no public disclosure of its own company name) and collects/accumulates detailed user information to improve sales accuracy, becoming a competitive advantage that exceeds clients' own internal capabilities.

Core Competitive Advantages

1. Diverse product and personnel matching mechanism: Adopts "non-selective recruitment" that accepts workers with any availability (part-time housewives, students, seniors, double-job workers) and matches diverse products across industries to worker skills, enabling flexible workforce scaling and productivity.
2. Overwhelming sales knowledge and AI utilization: Has over 2,500 full-time dedicated outbound staff (domestically unparalleled scale) accumulating massive outbound sales big data, and uses AI to replace supervisor experience for customer targeting and call list prioritization, improving operational efficiency.
3. Thorough sales quality management: Implements multi-layer verification (secondary confirmation by separate staff, multi-step audio monitoring) to prevent complaints, maintains strict compliance equal or exceeding client requirements, earning trust from major national clients and public sector entities, and even receives independent requests for quality management outsourcing.
4. High-productivity talent development system: Updates optimized talk scripts in real time (even every few hours), discloses daily performance rankings to drive competition, and uses a result-based incentive and cross-coaching evaluation system to create a positive cycle of productivity and incentives.
5. Upside-focused fee structure: Most contracts combine outcome-based fees (tied to acquisition/contract numbers) with a portion of fixed fees for stable operations, aligning company and client incentives and enabling maximum revenue growth with strong performance.

Expanded New Business Areas

• Hybrid Business: Provides online customer service for brick-and-mortar store window counter procedures to address client needs for omni-channel customer engagement driven by retail store consolidation and online migration, creating new growth from conversion of existing non-sales contact points to profit centers. Examples include online video consultation for EC sites and in-store online assisted procedures.
• DX Fullfillment: Provides end-to-end BPO support from customer acquisition to back-office operations for digital service providers (QR payment, ride-hailing, food delivery), with rapidly growing demand from resource-constrained digital startups that outsource operations from launch.

Recent Performance Trend

• After 2022, outbound shrank due to major client group restructuring, while hybrid and DX Fulfillment maintained flat overall revenue. The special restructuring factors have now passed, and outbound has entered a clear recovery, with the entire business entering a full recovery phase with improved revenue and profit.

As of the 2nd quarter of the 2025 December fiscal year, the company's three core focus domains account for over 80% of total business. Outbound accounts for 37.1% of total revenue. After shrinking due to major client group restructuring from 2022, outbound has entered a recovery trend after the one-off special factors resolved. Hybrid and DX Fulfillment offset the outbound downturn to maintain flat overall revenue during the stagnation period, and are now growing rapidly as the company's new expansion areas. The 2nd quarter of 2025 shows clear improvement in both revenue and profit, driven by outbound recovery and progressed price pass-through of higher labor costs.

• The company released the mid to long-term vision DmMiX Vision 500, targeting 50 billion yen in revenue and 5 billion yen in operating profit by 2030.
• Domain-specific growth targets: Outbound targets a 5.9% CAGR (moderate growth), with additional upside potential from cross-selling opportunities through carrier-financial sector partnerships and electricity/gas new business expansion. Hybrid (the highest priority growth domain) and DX Fulfillment both target high-teen percentage CAGR, driven by expanding demand for omni-channel customer engagement and digital service operational support.
• Targets restoring double-digit ROE as soon as possible from the current unsatisfactory level. Aims to achieve a payout ratio exceeding 40% at an earlier date than 2030 as the business recovers, and will advance capital policy planning toward this target.
• The company expects continued growth driven by both organic expansion and bolt-on M&A of adjacent businesses (such as advertising-related services), funded by internally generated cash flow without relying on equity dilution.
• Total domestic BPO/contact center market is ~2 trillion yen, with enormous additional untapped demand from internal corporate processes that have not yet been outsourced. The company currently holds a single-digit percent market share, with large room for further share growth.

• Rising hourly labor costs create margin pressure, which the company mitigates through efficient talent acquisition, productivity improvements from AI utilization, and price pass-through to clients (which is easier for the company's outcome-based fee model than cost-focused inbound contact centers).
• Intensifying industry competition: The company believes its hard-to-replicate outbound business model and focus on high-value-added, profitable projects avoids pure price competition, reducing this risk.
• Structural industry change from DX/automation: The company actively invests in AI and digital transformation to turn industry change into growth opportunities instead of threats, focusing on building long-term competitive advantage rather than short-term adaptation.
• Business concentration risk: Outbound remains the core revenue pillar, and client restructuring caused a period of business stagnation in 2022-2024, though this risk has been mitigated by business diversification into hybrid and DX Fulfillment.

Q: Does the company's new AI agent-based next-generation contact center service constitute unwanted spam outbound calling? / A: The new AI agent service is designed for inbound pre-screening, not outbound mass calling. It identifies cross-selling and upselling opportunities from inbound customer inquiries and routes qualified leads to human outbound teams, which is completely different from mass spam AI calling. Human agents still handle all direct customer communication for sales outreach.

Q: How is the company coping with rising hourly wage pressure? / A: The company's model relies on flexible non-regular employment, and it maintains low recruitment costs through its long-standing "non-selective hiring" and streamlined training system. The key mitigation is passing higher labor costs through to clients, which is easier for the company's outcome-based outbound model than cost-focused inbound contact centers, as clients accept reasonable price increases more easily for performance-based fees. The company expects price pass-through to continue progressing smoothly as long as it maintains high productivity and quality.

Q: How achievable is the Vision 500 50 billion yen revenue target by 2030? / A: While the target is challenging, the business has now exited the post-restructuring stagnation phase and client demand is growing strongly. The company can pursue growth through both organic expansion of its three core domains and bolt-on M&A in adjacent areas (like advertising) to scale faster. M&A will be funded through internally generated cash flow, so it will not lead to equity dilution. The company does not require large fixed capital expenditure, so it has flexibility to fund growth internally.

Q: What is the outlook for AI impact on headcount and capital expenditure? / A: AI is used to complement human work, not replace it fully: AI handles routine responses and data processing to free up staff for higher-value customer communication, so it will drive higher service value and expanded scope rather than just headcount reduction, though some moderate labor cost savings are expected. For capital expenditure, the company will primarily use cloud and third-party AI services to avoid large in-house investment, but will actively invest in data utilization and cybersecurity to build long-term competitive advantage.