ibis inc. Q1 FY2025 earnings call

Overall Financial Results

• All profit levels from operating income downward hit record highs in Q1. Total company revenue was 1.16 billion yen, a 1.1% YoY decrease driven by soft app advertising performance. Operating income was 300 million yen, up 18.4% YoY, with operating margin expanding to 26.4% from 22.0% YoY, primarily due to reduced advertising expenses. Net income attributable to parent shareholders increased 14.1% YoY.
• Progress against full-year guidance: Revenue progress hit 23.1%, 1.9 percentage points below plan due to slow app advertising recovery, while all profit metrics (operating income 26.0%, ordinary income 25.8%, net income 25.4%) are ahead of plan. Management expects full-year results to meet original guidance as app advertising bottoms out and Solution segment headcount stabilizes.

Core ibisPaint Business Updates

• ibisPaint, the company's flagship mobile painting app, ranks 1st among Japanese apps for active users in Europe and the U.S. for 5 consecutive years, and top 3 globally. It has reached over 470 million cumulative downloads, 93.7% of downloads and 73.9% of revenue come from overseas, and it holds an 86.5% active user share among competing mobile painting apps, with strong popularity among Gen Z and especially teenage users.
• A major version 13.0.0 update was released in Q1, adding custom brush pattern creation and sharing features (limited to premium subscribers), which drove strong social media engagement and contributed to subscription growth. The company continues to develop and roll out new AI-powered features for the app. The Mac version of ibisPaint is currently in preparation for release to expand into the professional market.

Strategic Moves & Portfolio

• The company acquired Technospeech, a Nagoya Institute of Technology spin-out and leading developer of AI singing synthesis technology, in January 2025 as a new third business segment. Technospeech's core product VoiSona is aligned with the global Vocaloid creative culture, and management plans to leverage Ibis' existing global app growth and social media marketing expertise to scale VoiSona, with long-term plans for product collaboration between ibisPaint and VoiSona to leverage synergies between illustration and music creation.
• The company's long-term growth strategy is to shift from a reliance on app advertising to a subscription-focused revenue model; management expects subscription revenue to exceed app advertising revenue within 1-2 years, and targets a 10%+ annual compound growth rate for the entire company, supported by the new AI singing synthesis business.

Shareholder Return

• Management maintains a target payout ratio of 20-25%, and plans a 50 yen per share dividend for FY2025/12, a 25.0% increase YoY, and will continue to consider shareholder return aligned with profit growth.

1. Mobile Segment: Revenue decreased 3.8% YoY, segment profit increased 5.2% YoY. Subscription revenue hit 240 million yen, up 90.3% YoY, accounting for approximately 25.3% of total company revenue; app advertising revenue decreased 27.0% YoY, which was the main drag on overall segment revenue. DAU increased 7.6% YoY, and subscription contract count increased 97.6% YoY, nearly doubling from the prior year period. 2. Solution Segment: Revenue increased 2.7% YoY, segment profit increased 135.0% YoY. Within the segment, IT technician staffing revenue increased 15.4% YoY while contracted development revenue decreased 22.7% YoY, as the company scaled back overly aggressive expansion of contracted development from the prior year. The large profit growth came as prior aggressive hiring investments normalized and profitability recovered. 3. AI Singing Synthesis Segment (Technospeech): Acquired in late January, it will be consolidated starting from Q2 2025 and has no impact on Q1 results. For the full fiscal year, the segment is projected to generate 119 million yen in revenue and a 74 million yen operating loss, around 50 million yen of which is goodwill amortization.

• Full-year FY2025/12 consolidated guidance: Total revenue is projected to be 5.02 billion yen, up 8.6% YoY, an increase of 100 million yen from the original pre-acquisition guidance due to the addition of Technospeech. Operating income is projected to be 1.17 billion yen, up 1.8% YoY, with operating margin falling to 23.4% from 25.0% YoY due to Technospeech goodwill amortization of 50 million yen for the full year.
• Mobile segment full-year guidance: Revenue projected to increase 7.1% YoY, segment profit up 7.8% YoY. Subscription revenue is projected to reach 1.11 billion yen, up 62.2% YoY; app advertising revenue is projected to decrease 11.8% YoY, with management expecting that the segment has now hit the bottom of the advertising cycle. DAU is projected to be roughly flat year-over-year, while subscription contract count is projected to increase 47.4% YoY. Mobile segment development investment is projected to increase 26.8% YoY, while advertising expenses are projected to decrease 17.6% YoY in line with the company's prior plan to cut advertising spend.
• Solution segment full-year guidance: Revenue projected to increase 4.7% YoY, segment profit up 3.6% YoY. IT staffing revenue is projected to decrease 2.4% YoY, while contracted development revenue is projected to increase 24.7% YoY. Development investment is projected to increase 4.6% YoY.
• Management confirmed that despite Q1 revenue coming in slightly below plan, full-year guidance remains on track, with profit currently outperforming plan.

• App advertising revenue has underperformed, with Q1 revenue down 27.0% YoY. Management notes multiple potential contributing factors (prior implementation issues, market conditions, Google algorithm changes) but cannot fully quantify the impact of each, and advertising revenue has historically experienced cyclical swings, creating near-term uncertainty.
• The new AI singing synthesis segment is projected to post an operating loss for the full fiscal year, with profitability not expected in the near term, creating a drag on overall company profit due to goodwill amortization.
• The company's full-year revenue growth of 8.6% is below 10%, which management acknowledges has contributed to recent share price weakness.

Q: Do overseas users recognize ibisPaint as a Japanese product, and what is the potential for global expansion of VoiSona given the popularity of Japanese Vocaloid culture overseas? / A: Management does not track specific data on how many overseas users know ibisPaint is Japanese, but the company's 300-million-subscriber YouTube channel includes English and Japanese subtitles, so users who engage with the content are aware, while many others do not actively think about the app's country of origin. Japanese Vocaloid-influenced music has already gained significant global traction, as seen by hits like YOASOBI's Idol charting in the U.S., creating strong tailwinds for VoiSona. Even without active global marketing, a meaningful share of VoiSona users are already overseas, and management confirms they expect to grow VoiSona globally following a similar trajectory to ibisPaint over the next 5-6 years.