ASIRO Inc. Q3 FY2025 earnings call

• Overall 3Q Performance Context

  • 3Q reported slight year-over-year revenue decline, which is not due to broad underperformance but rather: 1) 2Q had an exceptionally strong performance by pulling in HR segment revenue that would normally spread to 3Q, and 2) Derived Media faced temporary struggles in ad operations. Management confirms 3Q is not broadly weak.
  • Full-year earnings guidance has been upward revised, and a dividend increase is planned.

• New Product Launches

  • bonobo, the company's new legal expense insurance product for SMEs, has been officially released after delayed preparation due to insurance industry regulations and licensing requirements. It targets 10,000s of policies by 2030.
  • Multiple AI product development initiatives are ongoing, with steady progress under the company's quiet development strategy.
  • M&A business succession collaboration with Batons is in early exploratory stage, leveraging existing user demand from the company's inheritance service without full commercialization yet.

• Transparency Commitment

  • Management proactively disclosed 4Q's weaker-than-expected operating profit factors in line with fair disclosure rules, to share full current status with all investors rather than disclosing only to institutional investors.

1. Legal Media Segment: High-priced products saw minor impact from client budget adjustments in 4Q; no major permanent revenue decline reported, with strong stock-based revenue growth year-over-year. 2. Derived Media Segment: Struggled with low advertising operation efficiency in 3Q, leading to weaker-than-expected operating profit compared to the strong 2Q performance. 3. HR (Human Resources) Segment: 30 million yen in operating profit that normally spreads across quarters was concentrated in 2Q, resulting in lower recognized revenue/ profit in 3Q, with pre-positioning completed for 130% growth next fiscal year. 4. Insurance Segment: New product bonobo was successfully launched after regulatory/ licensing preparation; operating in pre-growth stage with ongoing upfront investment, no material expansion of losses reported.

• Management reaffirms its medium-term target of 20 billion yen in revenue by 2030, with a maintained 20% operating margin target. The target will be disclosed in full once the relationship between insurance sales growth and reserve requirements is clarified to ensure forecast reliability.
• 4Q 2025 is projected to reach 1.5 billion yen in revenue and 200 million yen in operating profit, which represents a year-over-year increase from 1.4 billion yen in 2024 4Q, and management expects to land the full year at a solid growth level.
• Management expects next fiscal year's operating profit to be higher than the current fiscal year, driven by ongoing ad efficiency improvements in Derived Media, recovery of high-priced legal media client budgets, contribution from the new insurance business, and new product launches including AI offerings.

• Derived Media segment currently faces reduced marketing efficiency, which has pressured near-term profitability.
• Insurance business sales are progressing slower than initial plans, with customer education required to explain the value of the novel legal expense insurance product, which may delay near-term revenue growth.
• Flow-based revenue segments have higher volatility than the company's traditional stock-based revenue, leading to greater quarterly profit fluctuations that may increase investor uncertainty.
• Large client budget adjustments in the legal media segment have created temporary near-term revenue pressure, though the change is confirmed to be temporary.

Q: Based on the upward earnings revision, 4Q is projected at 1.5 billion yen revenue and 200 million yen operating profit, which is far lower than 2Q. Does this reflect the company's actual operating capability, and does this imply next year will see lower revenue and profit? / A: Management notes the market reaction to this projection is overly pessimistic. 3Q and 4Q both show year-over-year growth compared to the prior year, and existing businesses are making steady progress on improving ad efficiency for derived media and securing client budget for legal media. New products including insurance will contribute revenue starting in 4Q, and HR business is positioned for 130% growth next year with sufficient preparation. There is no need to be excessively pessimistic about next fiscal year's performance.

Q: Will the announced AI service be monetized, and when will it be launched to the public? / A: Management expects AI offerings to be monetized at some scale, and even if external sales do not materialize, AI will reduce internal marketing and operating costs to support growth. Asiro follows a "wolf in sheep's clothing" strategy of quiet development, where progress is not disclosed early but monetization advances under the hood. AI development is already progressing rapidly, and the company will publicly disclose it once it reaches material contribution to earnings.

Q: What is the synergy between the new insurance business and Asiro's existing legal media business? / A: The insurance product covers corporate legal counsel and litigation attorney fees, so if the insurance is sold to 10,000 to 30,000 client companies, those companies will turn first to Asiro for legal consultations when needs arise, instead of relying on third-party search platforms. This lets Asiro gather corporate legal demand while earning insurance premium revenue, which creates strong, clear synergy with the existing legal media business.

Q: Is the reduced budget from the large legal media client a permanent churn or a temporary adjustment? Will this spread to other clients? / A: This is strictly a temporary internal budget adjustment from the client, not a permanent customer cancellation. There is zero risk of this spreading to other clients. Management clarifies that no large client has been lost, and has corrected the miswording "cancellation" that appeared in earlier presentation materials, noting any actual cancellations would be disclosed transparently.