ibis inc. Q2 FY2025 earnings call

• Core Business Positioning and Strategy

  • Ibis' flagship product ibisPaint is the #1 Japanese-developed app for active users in Europe and North America for 5 consecutive years, holding 90% share of the mobile paint app market, with 480 million total downloads and 39.25 million active users. 93.3% of downloads and 73.9% of revenue come from global markets, with heavy popularity among Gen Z.
  • The company's primary growth driver is shifting from app advertising to ibisPaint subscription services, with management targeting paid subscription revenue to exceed advertising revenue within 2 years, potentially even faster than the current projected timeline.
  • The long-term goal is to build out a global creator ecosystem covering illustration, music, and music video creation, targeting 10% CAGR for total company revenue.

• 2Q Operational Milestones

  • Released Android version of ibisPaint Edu for educational institutions, to build long-term user adoption through school seeding.
  • Completed major version upgrade of vector layer functionality, exclusively for premium subscription members, which has driven higher subscription conversion.
  • Launched a new AI meeting minute service, sold bundled with ibisStorage.
  • In August 2025, the company will launch a Mac version of ibisPaint to formally enter the professional creator market, complementing the existing Windows version launched in 2022.

• M&A and Synergies

  • Technospeech, developer of the AI singing voice synthesis product VoiSona, was fully acquired in January 2025 and consolidated starting in 2Q. The company leverages ibisPaint's global distribution infrastructure and 3 million YouTube subscriber base to expand VoiSona globally, creating synergies across the creator ecosystem. Management targets monthly break-even for Technospeech within 1 year.

• Shareholder Return

  • A 1-for-5 stock split will be implemented on October 1, 2025, to lower the per-share price into the 600-700 yen range to meet Tokyo Stock Exchange guidelines and improve accessibility for small/retail investors. The planned full-year dividend is adjusted from 50 yen to 10 yen post-split, representing 25% YoY growth, with a targeted payout ratio of 20-25%.

1. Mobile Segment: Revenue was up 0.8% YoY to an undisclosed absolute amount (2Q total company revenue is 2.37 billion yen). Within the segment, app advertising revenue declined 18.8% YoY to ~354 million yen, while subscription revenue grew 71.3% YoY (520 million yen in 2Q, 79.8% YoY growth overall for ibisPaint subscriptions). Operating profit for the segment grew 6.6% YoY, and operating margin exceeds 50% maintaining high profitability. The segment accounts for ~56% of total company revenue as of end-2024. 2. Solution Segment: Revenue declined 0.9% YoY; IT technician dispatch revenue fell 0.9% YoY and contract development revenue fell 13.8% YoY, though the segment saw a quarter-on-quarter reversal after prior declines. Segment profit grew 46.9% YoY as prior overinvestment in hiring normalized. The segment accounts for ~43% of total company revenue as of end-2024. 3. AI Singing Voice Synthesis Segment (added post-Technospeech M&A): 2Q revenue was 29 million yen, consisting of 24.1 million yen from VoiSona product sales and 5.4 million yen from contract development. The segment recorded a loss of 35 million yen, which includes goodwill amortization from the M&A (amortized over 6 years). For the full fiscal year, the segment is projected to generate 119 million yen in revenue with a full-year loss of 74 million yen including goodwill amortization.

• Full-year FY2025/12 guidance is maintained: total revenue is targeted at 5.02 billion yen (+8.6% YoY), operating profit at 1.17 billion yen (+1.8% YoY), and ibisPaint subscription revenue at 1.11 billion yen (+62.2% YoY). Management confirms that the full-year target is still achievable, though it will be a tight deadline to meet the goal. 2Q revenue and profit progress came in at 47-48%, just under 50%, which was in line with the original plan that weighted more sales to the second half of the fiscal year.
• The subscription revenue full-year target of 1.11 billion yen is expected to be exceeded, based on stronger-than-projected 2Q performance driven by new premium feature rollouts and optimized in-app conversion promotion.
• Management targets increasing ibisPaint subscription conversion rate from the current 0.77% of MAU to ~5% long-term, with 2 million identified potential subscribers representing 6 billion yen in projected annual revenue if conversion targets are hit. Subscription revenue per user is 14.7x higher than advertising revenue per user, so increasing conversion will drive margin expansion.

• App advertising revenue has continued to underperform, with eCPM remaining at low levels and advertising revenue down 18.8% YoY in 2Q, worse than the original projected 11.8% YoY decline. Advertising performance is heavily impacted by uncontrollable factors including SSP AI algorithm changes, broader macroeconomic conditions, and app advertising market trends, and management notes that advertising has always had cyclical ups and downs that are hard to predict or avoid. Clear root causes for the current prolonged downturn have not been identified.
• The AI singing voice synthesis segment is still in an early investment/challenge stage and is expected to remain unprofitable in the near term, though its small size (2% of total revenue) means it has minimal impact on overall group profitability.
• Expanding into the professional creator market will require long-term continuous feature development, as incumbents like Adobe have decades of feature buildout that cannot be matched quickly.
• Adding new features like fan-powered support ads requires solving complex copyright and content moderation challenges, which increase implementation complexity and costs.

Q: What is the timeline and target share for pro market expansion for ibisPaint? / A: Management acknowledges ibisPaint still lacks sufficient features to compete fully with established pro tools like Adobe Photoshop, which has 40 years of development and tens of thousands of developers. The company has already spent 14 years building out features, and will continue incremental development over the next 10-20 years to meet pro user needs. Management notes it is too early to specify a target market share: the global pro creative tool market is over 1 trillion yen in size, and Ibis is still a very small player. The immediate near-term goal is to surpass the revenue of domestic Japanese peer Celsys.

Q: Could introducing a user-powered support ad system help improve weak advertising revenue, and what is the estimated cost and timeline to build it? / A: Management calls the idea very interesting, and says it has not been proposed internally before, so management will review it. The estimated development cost is 100 million to 200 million yen, with an estimated timeline of roughly 1 year. The main challenges are content moderation for ad creative and links, and handling copyright issues for fan art/second creation content. Management will add it to the list of potential initiatives to evaluate against other priorities, but will not commit to an immediate launch.

Q: Is the full-year sales plan still achievable, given the stronger-than-expected subscription performance? / A: Management confirms that yes, the stronger-than-planned subscription growth offsets the advertising revenue shortfall, so the full-year target remains achievable. Management specifically expects to exceed the full-year 1.11 billion yen ibisPaint subscription revenue target, driven by recent premium feature upgrades and ongoing optimization of in-app conversion prompts for free users.

Q: Is there any sign of app advertising revenue recovery, and could it remain depressed permanently? / A: Management states that advertising revenue remains stuck at low levels with no clear recovery sign to date. It is impossible to predict if it will recover, as the main driver of performance is changes to Google's ad AI algorithm, which are not transparent to external developers. Advertising market has always had cyclical swings, so the future direction remains completely opaque.