AViC Co.,Ltd. Q2 FY2025 earnings call

• Core Business Model & Competitive Positioning

  • AViC’s primary business is internet advertising distribution agency services, purchasing ad inventory from media operators and earning consulting fees for client advisory and distribution execution
  • The secondary SEO consulting service improves clients’ organic search rankings, delivering high recurring (stock-type) value while reducing clients’ overall ad spending
  • Deep expertise in major platform algorithms lets AViC secure ad inventory at more favorable rates than competitors, improving client cost-effectiveness and ROI
  • AViC outperforms peer advertising agencies in both sales growth rate and operating profit margin, with an expected 26.5% average annual sales growth and 23.7% average operating margin from FY2023 to FY2025, which is top-tier for the industry

• Growth Strategy Execution

  • 1. Planned Talent Expansion: AViC combines structured new graduate hiring/development and experienced mid-career hiring to scale capacity aligned with business growth. A data-driven, scientific talent development system rapidly upskills new hires into multi-skilled capable staff. The 2026 April new graduate intake target is 20 people (the largest in company history), with 19 acceptances already secured
  • 1. Enterprise Client Base Expansion: AViC combines in-house client acquisition with strategic partnerships (including the ADK Marketing Solutions joint venture) to continuously and rapidly acquire new enterprise clients, with steady cumulative revenue growth from the enterprise segment
  • 1. Sustained High Productivity Management: AViC continues to operate its core management approach that balances growth and high productivity, delivering consistent high profitability across all existing services, including the acquired FACT business
  • 1. Cross-Deployment of Management Framework: AViC is rolling out its data-driven, productivity-focused management method to newly acquired businesses and newly developed services to replicate high growth and profitability across the entire portfolio

• New Strategic Initiatives

  • Established ASY Marketing, a joint venture with leading Chinese live commerce firm Cmile Yaowang, to enter the Japanese live commerce market, capitalizing on the expected 2025 launch of TikTok Shop that is projected to mark the start of mainstream live commerce adoption in Japan
  • Completed full acquisition of Relation Inc., a leading vertical short video marketing firm that is an official TikTok for Business Creative Partner, to build full-service capabilities for the emerging Japanese live commerce market, combining AViC’s digital advertising expertise, Relation’s video creation capabilities, and the JV partner’s live commerce experience

AViC operates two core product segments: Internet Advertising Operation Services and SEO Consulting Services. In the 2Q 2025 reporting period, consolidated total revenue grew 13.7% YoY, gross profit grew 19.2% YoY, and operating income reached 187 million yen (0.187 billion yen), a 39.7% YoY increase, which is a new record high for any single quarter. Revenue from enterprise (エンタープライズ) clients has grown steadily quarter-over-quarter, and the share of enterprise clients in total revenue increased above internal plan during the quarter, driving higher profitability. Acquired subsidiary FACT also achieved a very high operating profit margin in 2Q 2025. SEO Consulting Services delivered margin improvements from AI writing tool adoption that cut external outsourcing costs. No explicit separate revenue contribution percentages for the two core segments were provided in the transcript.

• Full-year 2025 September fiscal year guidance is maintained, with 30.1% YoY revenue growth, 50.4% YoY operating profit growth, and a 26.7% operating margin, which remains the top-tier for the industry
  • The third quarter 2025 is progressing above internal plan, with year-over-year quality growth (balanced growth and profitability) expected to continue. Revenue is projected to increase both YoY and QoQ
  • The ~30 million yen (0.03 billion yen) in M&A-related costs for the Relation Inc. acquisition will be recorded in Q3, leading to a slight QoQ decrease in profit, but this does not impact the likelihood of hitting full-year plan
  • While hiring progress has a small deviation from original internal plan, AI adoption and existing employee productivity improvements eliminate any supply capacity issues, so full-year guidance remains on track
  • Operating profit absolute target (a newly added key priority metric) is highly likely to be achieved based on current progress

• Intense industry competition: The Japanese internet advertising market has a large number of competitors including many small and mid-sized firms, so customer acquisition difficulty remains persistently high
  • Service commoditization: Growing platform automation is driving homogenization of service quality across providers, making differentiation from competitors increasingly difficult
  • Changing client demands: Clients are increasingly demanding expanded service offerings and end-to-end marketing strategy development (rather than just single-product service delivery) to drive client revenue and profit growth, which creates profitability challenges for traditional siloed, over-sized organizational structures
  • Talent scaling risks: Hiring progress has deviated slightly from internal plan, though AViC notes AI and productivity improvements mitigate current capacity risks

Q: What is driving AViC's strong recent stock price performance? / A: Management attributes the strong stock performance to the consistent delivery of quality growth (balancing high growth and high profitability) that matches market expectations, alongside clear progress on new strategic initiatives including M&A and live commerce market entry that have increased investor confidence in the company's future non-linear growth potential. AViC will continue to focus on executing its stated growth strategy to maintain this trajectory.

Q: What is AViC's overall M&A strategy and how do you select target companies? / A: AViC prioritizes M&A targets that add complementary service capabilities to expand its full-service marketing offerings, align with high-growth adjacent market opportunities (such as the fast-growing vertical video and live commerce segments), and meet strict financial discipline requirements to ensure acquisitions deliver appropriate profitability. All target evaluations are centered on whether the acquisition will support the company's core goal of sustained quality growth.

Q: What is AViC's outlook for the Japanese live commerce market and what is your competitive advantage in this space? / A: AViC expects 2025 to be the turning point (the "first year") of mainstream live commerce adoption in Japan following TikTok Shop's official launch, with the market poised for rapid large-scale growth going forward. The company's competitive advantage comes from combining three complementary strengths: AViC's existing expertise in digital advertising and client management, Relation Inc.'s leading vertical short video production and SNS marketing capabilities, and the joint venture partner's mature, proven live commerce operational experience from the large Chinese market, positioning AViC to become a leading player in the fast-growing Japanese market.

Q: How is AViC leveraging AI to improve its operations? / A: AViC has already rolled out AI writing tools for its SEO consulting business, which has driven material reductions in external outsourcing costs and directly contributed to the stronger than expected operating profit margin in 2Q 2025. The company continues to expand AI use across additional operational workflows to maintain and improve high productivity as it scales.