Kakaku.com Inc

TSE:2371

Earnings Call Analysis

Strong Quarterly Growth with Strategic Business Segmentation

For the first quarter ending March 31, 2025, Kakaku.com reported revenue of JPY 17.713 billion, a 15.3% increase, and operating profit of JPY 6.977 billion, a 34.9% rise. Segment-wise, Kakaku.com grew its revenue by 8.4% and income by 11.4%, driven by a 21.6% boost in the services business. Tabelog saw a 19.2% revenue surge and 31.8% rise in segment income. Kyujin Box's revenue jumped 36.3%, with a 15.3% increase in income. Incubation revenue fell 1.8%, but income soared by 49.3%. Guidance remains unchanged for the fiscal year.

Strong Revenue Growth in the First Quarter

In the first quarter of the fiscal year ending March 31, 2025, Kakaku.com reported a revenue of JPY 17.713 billion, reflecting a robust year-over-year growth of 15.3%. The operating profit also saw a significant increase of 34.9%, reaching JPY 6.977 billion. This demonstrates a healthy business model where profit growth outpaces revenue growth, indicating that the company has effectively managed costs relative to revenue generation.

Segment Performance: A Closer Look

Breaking down the revenue by segments reveals diverse performance dynamics. Kakaku.com itself grew 8.4% in revenue with an 11.4% rise in segment income, driven by a strong service performance that increased by 21.6%. Tabelog, on the other hand, showed an impressive growth of 19.2% in revenue alongside a 31.8% growth in segment income, thanks to a higher number of contracted restaurants and improved advertising services. Furthermore, Kyujin Box experienced a remarkable revenue growth of 36.3%, reaffirming its strong market positioning.

Shifts in Business Segmentation

This fiscal year, Kakaku.com has revamped its segment definitions. The Finance business, previously under a different category, is now classified alongside other Kakaku.com offerings as an insurance service. Additionally, the Tabelog restaurant promotion has been divided into three more focused segments: advertising, reservations, and others. This restructuring may allow for better-targeted strategies and clearer visibility into revenue streams.

Challenges and Strategic Responses

Despite overall positive performance, certain challenges remain. For the advertising segment, the revenue continues to decline but at a decreasing rate. The Shopping business also reported a decline of 3%, attributed to previously decreasing direct sales from manufacturers. However, management anticipates this trend has reached its nadir. In contrast, the insurance business is witnessing growth, particularly in fire insurance products available online.

Future Initiatives: Expanding Online Capabilities

Kakaku.com is actively investing in improving user experience, particularly in their product detail pages, which could lead to longer visit durations and increased page views. Tabelog has also launched an inbound reservation service for travelers, aiming to tap into the growing number of international visitors to Japan. This initiative is still in its early stages, with about 1,600 reservations per day, lower than expected. However, the company sees potential for growth by enhancing site content and expanding partnerships.

Looking Ahead: Guidance for Future Growth

Despite the changes, the outlook remains optimistic. The full-year earnings forecast, which was earlier defined in May, remains unchanged as all segments are performing in line with expectations. The management is keen on leveraging tech partnerships to boost digital services, particularly in conjunction with collaborations with Digital Garage and KDDI. These initiatives are aimed at positioning Kakaku.com as a leading player in the digital landscape for consumers.

Conclusion: A Comprehensive Growth Strategy

Overall, Kakaku.com is strategically focused on capitalizing on its strengths while navigating sector challenges. With a well-defined growth strategy, a commitment to expanding its digital service offerings, and a clear outlook on maintaining growth, the company represents a strong potential investment opportunity for those looking for companies with resilient revenue generation amidst changing market conditions.

Earnings Call Transcript 2025-Q1

[村上 敦浩, executive]

Hello. This is Murakami from Kakaku.com. Thank you very much for joining us today. I will explain the financial results for the first quarter of the fiscal year ending March 31, 2025.

First, on Page 3, I will report on consolidated operating results. Revenue for the first quarter was JPY 17.713 billion, up 15.3% Y-o-Y and operating profit was JPY 6.977 billion, up 34.9% Y-o-Y. Since the first quarter of the previous year, saw a decrease in profit on a consolidated basis. The growth rate of operating profit is higher than the growth rate of revenue in this first quarter. But the progress rate is almost in line with the plan. So there is no change to the full year earnings forecast reported in May.

Next, on Page 4, our graphs showing quarterly trends in consolidated revenue and operating profit as well as trends in operating margin.

Page 5 shows the breakdown of consolidated operating expenses. Variable expenses such as advertising and commissions have increased in line with revenue growth, but fixed expenses such as personnel expenses and outsourcing costs have remained at the previous year's level.

Next, on Page 6, we have graphs showing quarterly trends in consolidated operating expenses and the sales ratios of major expenses as can be seen from the graph on the right, advertising and commissions, which are variable costs have increased, but are controlled to keep the sales ratio at a constant level.

Next, please refer to Page 7. I we have changed the disclosure categories, starting with the current financial results. So I will explain them before going into the operating results by segment. Firstly, the Finance business, which had been classified in the New Media and Solutions and Finance segment has been moved to the Kakaku.com segment as an insurance business.

Secondly, we have divided the restaurant promotion business of Tabelog into 3 segments: restaurant advertising, restaurant reservations and others. And lastly, we have changed the name of the new Media & Solutions business to Incubation.

Please see Page 8 for revenue and profit by segment. From this fiscal year, we are also disclosing income by segment. Adjustments of segment income shown at the bottom. Our corporate expenses not allocated to each segment and elimination of intersegment transactions, et cetera.

Let me explain the results of the first quarter. Kakaku.com posted Y-o-Y revenue growth of 8.4% and segment income growth of 11.4%. Tabelog posted Y-o-Y revenue growth of 19.2% and segment income growth of 31.8%. And Kyujin Box posted Y-o-Y plus 36.3% in revenue and plus 15.3% in segment income. Incubation was minus 1.8% Y-o-Y in revenue and plus 49.3% in segment income.

On the following pages, I will explain each segment in detail. First, on Page 10, we have details for Kakaku.com. Kakaku.com posted an increase of 8.4% Y-o-Y in revenue and 11.4% in segment income as a result of the continued strong performance of the services business, which grew 21.6% Y-o-Y and a further narrowing of the declines in the Shopping and Advertising businesses.

Next, on Page 11 and Page 12. I will explain each of Kakaku.com's businesses. First, in the Shopping business, the overall decline in revenue narrowed to minus 3% year-over-year as the decline in direct sales from manufacturers, which account for 30% of durable sales has bottomed.

Next, the Services business posted an overall plus of 21.6% Y-o-Y, thanks to strong performance in personal finance and telecommunications and a turnaround in the automotive domain, mainly in auto insurance.

Next, we have the Advertising business. The situation here continues to be difficult, but the revenue decline has been steadily decreasing.

Lastly, in the insurance business, earnings have increased, particularly for fire insurance as more insurance products can be applied for online.

Continuing on to Page 13 for details on Tabelog, the promotion service of Restaurant Advertising and the online reservation service of Restaurant Reservation continued to grow, resulting in a 19.2% Y-o-Y increase in revenue and the 31.8% increase in segment income for Tabelog. As for the increase in segment income, the increase in segment income was significantly improved by the increase in revenue, in addition to the fact that last year's increase in expenses due to the hiring of direct sales staff has run its course.

Continuing on Page 14, we have graphs showing quarterly changes in Tabelog's various KPIs. In the promotion service of Restaurant Advertising, both the number of contracted restaurants and ARPU increased. The number of contracted restaurants for the online reservation service of Restaurant Reservation also increased steadily. The number of online bookings also exceeded the previous year's peak season of the third quarter and reached a record high.

Then on Page 15, the details of Kyujin Box. The number of users in revenue per user both increased for Kyujin Box, resulting in a 36.3% Y-o-Y increase in revenue and a 15.3% increase in segment income. While revenue growth remained high, segment margins declined, but this was due to an increase in agency commissions resulting from an increase in job ad placements from hiring companies and upfront investments in brand advertising and other areas and is, therefore, progressing according to plan.

Continuing on Page 16, we have graphs showing quarterly changes in key KPIs for Kyujin Box. The number of monthly users in June exceeded 11 million users surpassing the initial forecast for the end of the fiscal year and reaching a new record high. On the other hand, revenue per user was slightly weak, landing at just under 17% Y-o-Y due to the recent slowdown in the growth of job postings. This trend is expected to continue in the second quarter.

Finally, on Page 17 are the details of the Incubation segment. The Incubation segment continues to show a revenue growth trend in real estate, and travel and transportation. Revenue decreased to 1.8% Y-o-Y, but segment income increased 49.3%. Please note that the lifestyle and entertainment revenue in the first quarter of the previous fiscal year includes the revenue of gaie, Inc., a subsidiary we divested in August of last year. Excluding the impact from gaie's revenue, both segment revenue and income increased.

Next, we have some topics we want to share with you. First, on Page 19, we have the renewal of the product detail pages on Kakaku.com with an updated layout and design, you can easily see options for different sizes, colors and specifications as well as older models and switch between product pages. This has improved the visit duration and page views per visit. We are going to continue making these kinds of improvements.

Continuing on Page 20, we have Tabelog's inbound reservation, the reservation service for travelers visiting Japan. As mentioned in the previous results briefing, this service officially started on June '26. As you can see here, over 35,000 restaurants are now available for reservations. In collaboration with Digital Garage, we also provide restaurants with a system that allows them to charge a cancellation fee in the event of a cancellation. The number of reservations after the release of this service is lower than expected, with currently about 1,600 per day, but we believe that there is a definite need for this service, and we would like to develop it as the next pillar of the Tabelog business by enhancing site content and expanding overseas partnerships.

Please have a look at this next introductory video. The UI is almost the same as the Japanese version, and it's quite simple and easy to understand. I like the Japanese version, where you have to log in, you can easily make a reservation by entering your e-mail address and credit card information. By entering the credit card information here, the user's credit line is checked and restaurants can charge a cancellation fee when the user cancels.

Continuing on Page 21, I will explain the growth vision for the Incubation segment. From this fiscal year, we will be focusing on new businesses, and we have provided a concrete image here, while we are also seeing growth in our existing businesses in areas such as real estate, travel, lifestyle, et cetera, we aim to achieve discontinuous growth through M&A by creating new business opportunities.

Next, on Page 22, we have indicated how we will approach this. We were asked about this at our last results briefing. We have the vertical approach that leverages the assets of existing businesses. This includes Tabelog order, et cetera. and we have the horizontal approach, which is handled by the Incubation segment. We are looking to expand our services horizontally into different industries, while leveraging the know-how of our existing Internet media businesses.

On Page 23, we show our initiatives with Digital Garage and KDDI. This is a conceptual diagram, which we intend to work with digital garage to leverage their strengths in data infrastructure, fintech and advanced technology to promote fintech services in our services and the introduction of advanced technology into our services.

With KDDI, we intend to leverage their strengths in user base and data infrastructure, their wide range of services for consumers in their telecommunications and advanced technologies to build a data analysis platform and further evolve our services through integration with KDDI's consumer service IDs and point services.

Finally, Page 24. As a specific example of the progress made in this first quarter, we are introducing our collaboration with Digital Garage on inbound reservations on Tabelog. The Digital Garage Group's payment agency function enables settlement and cancellation fee billing for inbound reservations. Going forward, we will collaborate with Digital Garage, which has an extensive overseas network to acquire OEM providers for Tabelog's inbound reservation service.

The number of foreign visitors to Japan is expected to reach 60 million by 2030 with a market size of JPY 15 trillion. And this forecast is also said to be achieved ahead of schedule. We would like to create a world where travelers visiting Japan can use online reservations through Tabelog at any point during their travels.

This concludes my brief explanation of the financial results for the first quarter of the fiscal year ending March 31, 2025. Thank you very much for your attention.