MicroAd,Inc. Q1 FY2025 earnings call

Core Financial Performance

• Core business UNIVERSE delivered ~24% YoY revenue growth, while overseas business grew ~15% YoY, both maintaining high growth.
• Q1 revenue reached 25.8% of the full-year guidance, with gross profit and all profit metrics coming in above forecast, resulting in a stronger-than-expected start to the fiscal year.
• Operating profit saw a slight YoY decline due to foreign exchange losses from overseas transactions; net profit attributable to parent shareholders was negative due to higher tax charges from the sale of MADS shares, which was in line with original plans and has no material impact on operations.

Productivity Improvement (Top Strategic Theme for FY2025)

• Personnel capability building: 2024 new graduates hired via last fiscal year's expansion have reached the average company-wide level for total account output per employee; sales productivity is currently half the average, leaving significant upside for future growth. Overall domestic sales productivity has already recovered to pre-onboarding levels after a temporary post-training dip.
• Operational efficiency initiatives: AI is deployed across workflows to automate non-sales tasks, with a target of cutting 4,800 minutes of non-essential work per sales employee per month (equivalent to ~10 business days). 2,900 minutes (equivalent to 6 business days) have been cut as of Q1, already driving early growth in active account counts.
• Gross margin improvement: A Chinese offshore development subsidiary will be liquidated in Q1 2025 to reduce development costs; headcount optimization across the growing group of subsidiaries will improve internal resource utilization, cutting outsourcing fees and development costs to lift gross margin.
• Selling, general and administrative (SG&A) control: SG&A growth is driven almost entirely by headcount increases, which will be held at a much slower pace than the sharp expansion seen in FY2024, and remains fully controllable per plan.

New Business and Strategic Updates

• Launched new service Conel for Revival, a follow-up service for e-commerce and online advertisers targeting users who abandoned purchases or applications. This complements UNIVERSE's core new customer acquisition function, building out a full-service offering from new customer outreach to post-purchase customer retention.
• Established new subsidiary IP mixer to leverage strong overseas demand for Japanese IP (anime, VTubers, etc.), building on MicroAd's 10+ years of overseas local operational experience to commercialize Japanese IP via merchandise sales and partnership projects. Trialing has already generated strong positive traction, with full launch planned going forward.
• Continues an active M&A and capital alliance strategy to acquire complementary services that fill gaps in MicroAd's service portfolio and build overall business capabilities.

1. Data Products: Overall segment revenue increased 11% YoY, gross profit increased 14% YoY.
   • UNIVERSE (core data product): Revenue and gross profit both increased 24% YoY; active accounts grew more than 10% YoY; average customer unit price remains at a high level. Agency-served large clients led growth with a 53% YoY revenue increase, and local government clients saw strong growth driven by year-end furusato nozei demand. Industry share is increasingly diversified, with no reliance on a single industry. UNIVERSE contributes the majority of the segment's growth.
   • Digital Signage: Only one month (October 2024) of results are included following its deconsolidation in November 2024; no further disclosures will be made from Q2 onward.
2. Consulting: Overall segment achieved revenue and gross profit growth, led by overseas operations.
   • Domestic media consulting: Revenue increased 5% YoY, gross profit decreased 15% YoY, a fluctuation driven by service mix with no material negative factors.
   • Overseas consulting: Revenue grew approximately 15% YoY, achieving both revenue and profit growth; a new IP-focused business is planned to serve as a new growth engine for overseas operations.
3. Alternative Data Business: The division ran a conservative portfolio in Q1, generating an annualized return of 3.51%.

• The full-year FY2025 September term adjusted operating income guidance (which adds back goodwill amortization and stock-based compensation to operating income to reflect core business growth) is maintained at roughly the same level as FY2024.
• Full-year FY2025 performance is tracking above original forecast across all metrics, and management expects a solid first-half performance based on current trends.
• Management targets 1.5 billion yen in operating profit within 2-3 years. After heavy headcount investment and expansion in FY2024, growth will be more moderate through FY2025, with incremental revenue conversion from the newly added headcount and slowing SG&A growth expected to gradually reduce SG&A as a percentage of revenue and lift operating margin over the coming years.

• Foreign exchange exposure from overseas transactions can create foreign exchange losses that impact bottom-line results, as seen in Q1.
• Newly hired employees have not yet reached full sales productivity targets, creating near-term margin pressure despite strong top-line growth.
• Planned operational and cost improvements (gross margin lift, SG&A control) rely on successful execution of headcount optimization, subsidiary liquidation, and workflow automation initiatives, which may not deliver expected cost savings or productivity gains on schedule.

The provided transcript does not include a question and answer section, so no content is available for this field.