MicroAd,Inc. Q2 FY2025 earnings call

Overall Financial Performance

• Consolidated revenue grew 15.5% year-over-year, with UNIVERSE gross profit up 14% year-over-year and consulting gross profit up 11% year-over-year. All revenue and profit metrics outperformed initial full-year forecasts, with progress rates of 54.6% for revenue, 57.1% for gross profit, 139.6% for adjusted operating profit, and 191.4% for ordinary profit.
• 44 million yen in special loss was recorded for the liquidation of the Chinese development subsidiary, and 149 million yen in special loss was recorded for impairment of investment securities in Logly.

Personnel Productivity Improvement

• New hires added in the previous year have been successfully ramped up, driving top-line growth. Average revenue per employee and average accounts per employee have grown steadily, exceeding pre-new-hire levels due to improved efficiency. Recent new graduates have performed particularly strongly, contributing significantly to peak demand periods.

Sales Productivity Improvement via AI

• Generative AI is used to automate non-sales tasks such as client report creation and ad distribution management. The company has a target of cutting 10 business days of non-sales work per employee per month, and has already achieved 8 business days of reduction, increasing sales activity time by 40% and lifting the number of client proposals to 1.5x the prior period level, laying the groundwork for future revenue growth.

Gross Profit and Cost Improvement

• Liquidation of the Chinese development subsidiary reduced development costs, and cross-company optimal talent allocation within the group cut previously outsourced costs, lifting gross margin. The company expects 100 million yen in full-year cost reduction this fiscal year, with full annual contributions starting from next fiscal year.

Selling, General and Administrative Expense Control

• After significant hiring expansion last year, future headcount growth will be controlled, avoiding sharp cost increases. The company is transitioning to a growth model where top-line and profit expand gradually through productivity gains without relying on large headcount increases.

Strategic Growth Focus

• UNIVERSE prioritizes growth among small and medium-sized clients, which grew 21% year-over-year and 13% quarter-over-quarter. Average customer value has declined, but this is due to a sharp increase in new first-transaction clients from rapid account growth and is not a concern.
• Overseas business is expanding into new IP overseas sales, which will become a key future growth driver alongside inbound business.
• Management is positioning this fiscal year as a year to build a high-profitability structure, and will continue developing new business in the second half to prepare for expansion starting next fiscal year.

1. Data Products Segment: Overall revenue grew 6.0% year-over-year, with gross profit up 15.5% year-over-year. Excluding the deconsolidated MADS digital signage business, core data product UNIVERSE saw 23.8% year-over-year revenue growth and 26.7% year-over-year gross profit growth. UNIVERSE active accounts grew 29.5% year-over-year. 2. Consulting Segment: Overall achieved year-over-year growth in both revenue and gross profit. Domestic media consulting grew revenue 19.9% year-over-year and gross profit 4.7% year-over-year. Overseas consulting grew revenue 46.4% year-over-year and gross profit 35.1% year-over-year. 3. Alternative Data Business: Progress is mixed, with some successful initiatives and some underperforming, and optimization and new model testing continue. 4. New Business: New IP collaboration venture IP mixer has launched successfully, with its first VTuber collaboration product performing very well; URMS e-commerce media monetization service has 10 client companies and is growing gradually.

• Management upwardly revised full-year profit forecasts driven by stronger-than-expected first-half performance and successful productivity improvement initiatives.
• Full-year revenue guidance was maintained at conservative levels based on historical performance trends.
• Full-year net income guidance was also maintained at conservative levels to account for potential future risks after the impairment charge already recorded this period.
• The company has a medium-term target of reaching 1.5 billion yen in operating profit within 2-3 years.

• The alternative data business is still in testing, with mixed results and no consistent growth trajectory to date.
• The new IP and URMS new businesses are in early stages, with uncertain future market acceptance and revenue contribution.
• Management maintained conservative net income guidance to account for unforeseen future risks.

No question-and-answer section was included in the provided transcript.