MATSUMOTO INC. Q4 FY2025 earnings call

• Company History & Core Foundation

  • Founded in 1932 as a small photography studio in Mojiko, Kitakyushu, Fukuoka, expanded into the yearbook business during Japan's post-war baby boom, and has evolved its business model with societal changes across generations.
  • The company began adopting full-digital production equipment (DTP, CTP technology) as early as the 1980s, which allowed it to rapidly expand market share. It currently holds unique technical advantages in printing, including early adoption of high-resolution industrial inkjet digital printing to meet small-batch demand from population decline, ownership of one of the few fully automatic inkjet web offset presses in Japan, and exclusive access to the Holonis hologram printing technology that is almost only held by the company in Japan.
  • The 90-year accumulated trust and national network of 7,000 partner schools and local photo studios are the company's core intangible assets.

• Strategic Transformation & Growth Drivers

  • The core strategic theme is redefining Matsumoto: leveraging 90 years of trust in the education sector to evolve into an education infrastructure provider through Web3.0 and AI, rather than remaining only a printing company. The company pursues a dual-wheel growth strategy, where the core album business and new Web3.0/AI business mutually reinforce each other to form a growth flywheel, with no plans to fully exit the traditional printing business.
  • The company's flagship new initiative is the Digital Asset Treasury (DAT) project, which aims to convert individuals' unseen capabilities and growth processes into verifiable digital assets, and build a self-sustaining circular economy ecosystem that connects education and finance. The project targets three core pain points of the current evaluation system: fragmented growth records, lack of objective proof of non-academic growth, and talent mismatch between individuals and enterprises.
  • DAT implements its solution in three steps: (1) Measurement: Use AI, behavioral science and Implicit Association Test (IAT) to scientifically quantify non-cognitive abilities that are difficult to measure with traditional academic scores; (2) Proof: Store tamper-proof growth records on the Solana blockchain to create lifelong verifiable credentials; (3) Value realization: Build a token economy to monetize growth records and enable circulating investment in education. Multi-modal AI analysis of voice, facial expression, text and behavior logs is used to eliminate human evaluation bias. The end goal is to shift education from being a cost center to a circulating investment ecosystem, with two forms of support: immediate grant-style support to prevent talented learners from dropping out for economic reasons, and future investment-style support that captures upside from learners' future career success.
  • Capital structure has been strengthened to support growth: In May 2025, the founding family (the largest shareholder) strategically transferred its shares to the Brand New Retail Initiative Fund, a fund founded by former investment bankers with specialized expertise in capital strategy, M&A, alliance building and investment in cutting-edge technologies such as AI and blockchain. This brings the necessary financial and technical expertise to advance the complex DAT initiative, which the company could not deliver independently.
  • The company has learned from early Web3.0 efforts that in-house development delivers too slow growth, so it now pursues an open innovation strategy where Matsumoto acts as the platform designer and partners with external companies for non-core work. Multiple partnership discussions and contract negotiations are currently underway with external parties that have not yet been publicly announced. The company also advances internal change gradually, through training and co-creation with external partners, to avoid internal friction, as the new vision aligns with the company's historic DNA of preserving personal records.

• Current Market Status

  • The company's stock price was depressed for a long time due to low growth expectations for the yearbook business amid population decline, but rose roughly 10x starting from June 2022, and rose again after the company announced its Web3.0 initiatives in fall 2022. Current market capitalization is just over 1 billion yen, which management considers far too low and is committed to increasing.

1. Album Business (core revenue segment): It is currently the main profit pillar of the company, accounting for approximately 80% of total revenue. The company issues around 620,000 yearbooks annually to approximately 7,000 schools across Japan, holding the 2nd largest market share in the Japanese yearbook industry (the industry leader serves approximately 9,500 schools). No absolute revenue figures for the current period are disclosed in this call.
2. New Web3.0/AI EdTech Business: This is an early-stage growth segment, currently in the proof-of-concept and pilot testing phase with no material revenue contribution as of the call date.

• The company sets an explicit target to reach 10 billion yen in market capitalization, with a phased roadmap:
  • Fiscal 2027 (April term): Positioned as the year of business structure transformation, with the goal of building a structure that maximizes synergy between the existing album business and new businesses.
  • Fiscal 2028 (April term): Realize the results of transformation initiatives, enter the AI × EdTech education and IT sector, and expand the scale of growth investment.
  • Fiscal 2029 (April term): Target 5 billion yen in total revenue and 0.6 billion yen in operating profit, with a focus on profitable, sustainable growth to meet shareholder expectations rather than pure scale expansion.
• The DAT project is currently in the proof-of-concept phase, and management plans to move to trial operation, further system improvement, and full social implementation as quickly as possible, following a clear step-by-step roadmap to achieve market penetration rather than remaining just a vision.
• The company's path to 10 billion yen market capitalization is based on maintaining a profitable core album business that funds the development of the related new DAT business, rather than an abrupt full shift to new business that abandons the company's 90-year history.

• A planned blockchain-based digital yearbook project with NTT Digital was paused shortly before delivery in spring 2025, after a ransomware attack on an industry peer raised cybersecurity risk concerns that forced the project to be put on hold.
• The DAT initiative faces multiple inherent challenges: cryptocurrency price volatility risk, complexity of token design and ecosystem building, difficulty establishing sustainable capital circulation mechanisms, and the need for specialized financial expertise that the company does not have internally. This is addressed through partnership with the specialized fund as the largest shareholder.
• The core album business faces long-term market shrinkage due to declining birth rates in Japan; without any changes, the business will trend downward over time. Additionally, most public school contracts are awarded through competitive bidding, leading to increasingly intense price competition that pressures margins.
• Changing the internal organizational culture to adapt to the shift from manufacturing printing to technology-enabled education services creates internal friction risk. Management addresses this by using external co-creation and gradual internal training to manage this change.
• Using the Solana blockchain carries chain change risk and regulatory risk, which management addresses through ongoing discussions with the Solana Foundation, and the company is building flexible system architecture to adapt to future changes.

Q: When did Matsumoto start full-digital production of yearbooks?

A: We began adopting full-digital production equipment (DTP and CTP technology) back in the 1980s, after these technologies emerged with the advent of the Macintosh in the US, and this adoption allowed us to rapidly expand our market share.

Q: What is your sales model for the yearbook business? Do you conduct in-house photography?

A: Our business model works with local photo studios located near each school: local photo studios take the photos, and we receive the photos to produce the yearbooks. Our national network of 7,000 schools was built by early employees establishing strong relationships with local photo studios across Japan, which allowed us to rapidly gain market share.

Q: What is the size of the industry leader compared to Matsumoto?

A: The industry leader serves approximately 9,500 schools, while we serve 7,000 schools as the second-ranked player.

Q: How is your Web3.0 initiative progressing, and how does it connect to your core business?

A: We started Web3.0 with an NFT marketplace in spring 2023, but realized standalone Web3.0 would be a one-off initiative disconnected from our core business, so we began a blockchain yearbook project with NTT Digital around two years ago. We advanced the project to the stage where we had proposed pilot cases to schools, but after a ransomware attack on an industry peer in spring this year, cybersecurity risks led us to pause the project, and this experience launched our current focused approach to Web3.0 aligned with our core education business.

Q: Will you pursue an open innovation model for the DAT initiative, since full in-house development is too difficult for such a large project?

A: Yes, after two years of working on Web3.0 we learned that trying to complete everything in-house drastically slows growth, which was a painful lesson. We are now actively advancing the project through partnerships with multiple external companies, and we already have ongoing business discussions and contract negotiations that cannot be disclosed publicly before official announcement.

Q: How do you approach internal talent development and cultural change to support this large transformation from printing to technology?

A: This is a very difficult challenge, but our new vision of visualizing and recording individual growth actually aligns very well with our company's 90-year DNA of preserving personal records, so the change is not overly disruptive. To avoid internal friction, we are advancing the initiative through external co-creation and partnerships first, and gradually introducing internal education and training to drive cultural change step by step.

Q: What concrete initiatives do you plan for technology integration in school education?

A: We have learned that changing the established school system takes a very long time, but we see that children's learning has become much more diverse, with many new learning opportunities outside of traditional school (such as after-school programs and after-school care). We see lower entry barriers in these non-school areas, so we are considering entering the market from non-school education segments first while continuing to work with traditional schools.

Q: What is your vision for social implementation of the data exit strategy beyond school education?

A: We are still finalizing parts of this plan that cannot be disclosed publicly yet, but our general approach is to build successful pilot model cases first, then expand nationwide leveraging our existing national school network by sharing successful examples. Our long-term goal is to make our evaluation framework and standards become the general industry standard for skill assessment.

Q: Are you considering M&A to expand market share and offset market shrinkage from declining birth rates?

A: We have already received multiple specific inquiries regarding consolidation, and we agree that as the market shrinks, industry consolidation will be necessary rather than pure competition. We are actively evaluating multiple options at this time.

Q: Do you face intense price competition from public sector bidding for school contracts?

A: Yes, most public school and public institution contracts use a bidding system, and competition has become extremely intense. To avoid being pulled into destructive price competition, we are focused on transforming our business to create additional value beyond basic printing that differentiates us from competitors.

Q: What is your strategy to become the market share leader in the yearbook industry?

A: Becoming number one is not impossible: we can deepen our partnerships with existing photo studio partners and pursue targeted M&A to expand share. However, we are a smaller company with limited resources, so we have to prioritize our initiatives. Our current strategic focus is on transforming the company for the new era rather than only prioritizing existing business expansion.

Q: How will you maintain profits in the album business amid long-term decline from declining birth rates?

A: Declining birth rates is a confirmed trend, and if we do nothing the business will shrink. Our strategy is to maintain our existing market share, appropriately pass through cost increases from inflation to customers, and build a business structure that can generate consistent profits even with a smaller market size.

Q: What is the cost and service life of your rare fully automatic inkjet web press?

A: The printing press itself costs around 0.4 billion yen, and when combined with peripheral equipment the total investment is 0.6 to 0.7 billion yen, which is a very large investment for a printing company. The equipment can be used for 10 to 20 years, but we need to continue transforming our business model over that period to keep up with market changes.

Q: What is the strategic path from 1 billion yen to 10 billion yen market capitalization?

A: Yearbook revenue already accounts for around 80% of our business, so we will continue to prioritize this core business that generates consistent profit as our foundation. Our new DAT business is deeply connected to our core album business, because our yearbook business already gives us direct access to students, so the two businesses are fundamentally connected. We will grow both businesses as two wheels of our strategy, and we have no plans to abruptly exit printing to fully shift to new business. We will preserve our 90-year history while creating new value to reach our market capitalization target.

Q: What is your strategy to improve profit and add value to the core yearbook business?

A: Price increases are very difficult for yearbooks, because yearbooks are purchased by all types of households across the income distribution, so we need to set prices that are accessible to all families, and prices are typically fixed years in advance when students start their schooling. To improve margins and add value, we are focused on developing customized products such as one-of-a-kind personalized yearbooks for individual students that increase household satisfaction and add incremental value.

Q: How do you address regulatory risk and chain change risk for using Solana blockchain?

A: We are currently working in discussion with the Solana Foundation, which is an officially recognized entity in Japan, so we do not see material regulatory risk at this point. We still will prioritize security and proceed cautiously with the project. We also recognize that chain change risk is a valid long-term concern, so we are building a flexible system architecture and working with relevant stakeholders to address this risk proactively.