ibis inc. Q4 FY2024 earnings call

• Overall Financial Performance:
  • Full-year total revenue reached 4.625 billion yen, up 17.3% YoY, but missed the upward revised Q2 guidance by 3.5 percentage points.
  • Operating profit reached 1.155 billion yen, up 168.4% YoY (2.7x), with operating margin expanding from 10.6% to 25.0%. Net profit increased 190.8% YoY to nearly 3x the prior year level, beating the revised full-year plan.
  • Advertising expenses were cut as planned (targeted a 50% reduction), and the shift to organic growth is broadly working.
• ibisPaint (Mobile Segment) Key Updates:
  • ibisPaint is ranked #1 in active users in Europe and the US for 5 consecutive years, and top 3 globally for 5 consecutive years. It has 440 million cumulative downloads, 39.88 million MAU, with 93.7% of downloads and 73.9% of revenue coming from overseas. 44.6% of users are under 25, and it holds 90.5% user share among under-25 mobile paint app users globally.
  • Two new subscription-focused features were released in FY2024: the pro-grade Vector Layer feature, and the AI-based AI Learning Blocking feature to prevent AI from imitating user art styles. Both features were well received and drove subscription growth. Subscription contracts grew 94.4% YoY to 232,000. DAU was almost flat at +0.9% YoY, maintaining stable user traction.
• Acquisition: Technospeech, the developer of AI singing voice synthesis app VoiSona, was fully acquired at the end of January 2025.
• Medium and Long-term Strategy:
  • The core priority is growing ibisPaint subscriptions, with a target to have total paid subscription revenue exceed app advertising revenue within 2 years. Management targets 2 million potential subscribers from existing heavy users, which would generate approximately 6 billion yen in annual subscription revenue.
  • A Mac version of ibisPaint is planned for release within 1 year to expand into the professional creator market.
  • The Solution Segment will focus on high-margin projects and shift to quality-focused hiring, while exploring M&A opportunities.
  • The AI singing voice synthesis segment will leverage ibisPaint's global marketing experience to grow VoiSona, with a focus on expanding to global creator communities aligned with Japanese otaku culture.

1. Mobile Segment: Total revenue grew 6.3% year-over-year, contributed 56.4% of total company revenue. App advertising revenue declined 41.2% YoY to 350 million yen, down from a peak of 596 million yen in Q4 FY2023. ibisPaint subscription revenue grew 94.9% YoY to 680 million yen (more than doubled). Segment profit grew 76.7% YoY; gross margin declined due to increased development headcount. 2. Solution Segment: Total revenue grew 23.5% YoY, contributed 43.6% of total company revenue. IT technician dispatching revenue grew 17.0% YoY, while contract development revenue declined 6.6% YoY. Segment profit grew 204.2% YoY after aggressive hiring investment in FY2023, with gross margin recovering. 3. AI Singing Voice Synthesis Segment (newly acquired Technospeech): Total annual revenue is approximately 100 million yen, with 41.2% from the VoiSona app and 58.8% from voice-related contract development. It posted a net loss in FY2024 after the completion of a large multi-year contract.

• For FY2025/12, management guides total revenue of 4.9 billion yen, up 6.1% YoY, with operating profit of 1.25 billion yen, up 8.2% YoY, and operating margin expanding slightly to 25.5%. The guidance is intentionally conservative due to uncertain app advertising market outlook.
• Mobile Segment guidance: Revenue will grow 7.1% YoY, with profit up 7.8% YoY. App advertising revenue is projected to decline 11.8% YoY, while subscription revenue will grow 62.2% YoY to 1.11 billion yen (1.6x the FY2024 level). DAU is expected to stay flat at 5.897 million, and subscription contracts will grow 47.4% YoY to 342,000. Advertising expenses are planned to decline 17.6% YoY, while development investment will increase 26.9% YoY.
• Solution Segment guidance: Revenue will grow 4.7% YoY, with profit up 18.5% YoY. IT dispatching revenue is expected to decline 2.4% YoY, while contract development revenue will grow 24.7% YoY, gradually increasing the proportion of high-margin contract work. Development investment will increase 4.6% YoY, and headcount is expected to see a slight decline as retirements are projected to outpace new hires.
• Shareholder Return: Payout ratio will increase from 20% to 25%, and full-year dividend per share is planned to increase 25% YoY to 50 yen.
• Management targets a compound annual growth rate of 10%+ for total company revenue over the medium term.

• App advertising revenue is volatile and hard to predict, impacted by external factors including advertising market conditions, Google algorithm changes, and potential unexpected technical bugs, which can lead to large year-over-year swings that offset subscription growth.
• The Solution Segment faces ongoing talent issues: there is a visible mismatch between available engineers and project requirements, and net headcount has been flat as retirements outpaced hiring in FY2024.
• The newly acquired Technospeech is currently unprofitable, and it will take time to build out its growth strategy and achieve break-even, with no material positive impact on group profit expected in the near term.
• Subscription growth relies on continued release of popular high-value new features, which depends on successful recruitment and retention of skilled engineering talent.

Q: What caused the ibisPaint ad revenue decline, how much loss came from the technical bug, and can this happen again? / A: Management confirms a bug that sent extra ad requests did occur, but the exact cause of the full revenue decline cannot be definitively isolated. Other potential factors include weak mobile ad market conditions and Google ad algorithm changes, and it is not possible to calculate an exact loss amount from the bug alone. The team has implemented recurrence prevention measures and is working to avoid similar issues going forward.

Q: Why has ad revenue not recovered after fixing the bug, and what are you doing to drive recovery? / A: Management believes the bug is only a partial contributor, and weak market conditions and Google algorithm changes are more likely the main causes of the continued decline. The team is testing small-scale changes based on different hypotheses about algorithm impacts, and analyzing correlations between past initiatives and revenue changes to identify incremental improvements.

Q: What is your plan to monetize Technospeech after acquisition, and what makes its technology unique? / A: Technospeech was founded by leading global AI voice synthesis researchers, and its output quality is widely regarded as very close to real human singing. It was unprofitable in FY2024, but management plans to leverage ibisPaint's existing global marketing and user growth experience to scale VoiSona globally. Plans include multi-language localization, cross-promotion via ibisPaint's 290 million subscriber YouTube channel, and eventual cross-app integration to let ibisPaint creators use VoiSona for animation and music video projects.

Q: Why did subscription revenue miss the FY2024 guidance, and how confident are you in the FY2025 subscription growth target? / A: The miss occurred because management was overly aggressive when updating guidance in Q2, after launching Windows版 subscriptions with limited historical data to base projections on. For FY2025, management notes subscription growth has a consistent accelerating trend that is easy to forecast, and growth is supported by strong organic word-of-mouth: the app is already very popular among teen users, and DAU remains stable even with reduced user acquisition spending. Continued release of popular new features and improved in-app conversion funnels are expected to drive sustained growth, matching the guided 47.4% increase in subscriptions.

Q: What is the potential synergy between ibisPaint and VoiSona? / A: Both products serve overlapping creator communities focused on Japanese otaku and anime culture, so there is natural alignment. Management is currently exploring multiple synergy paths, with the most exciting opportunity being enabling users to create complete music videos by combining ibisPaint illustration with VoiSona singing, similar to the historic VOCALOID creator ecosystem. No concrete timeline for integration has been set yet.