AnyMind Group Inc. (5027) Q1 2026 Earnings Call Transcript

Thank you for taking the time to join us for our company's financial results briefing for the first quarter of fiscal year 2026. I am Sogo, CEO of AnyMind Group. I will now proceed with the presentation. Before going into the details of our financial results, I would like to first share our new vision and where we are heading. Ten years have passed since AnyMind was founded in 2016, and we have never stopped moving forward. Our challenge, which began in Asia, has now expanded to 15 countries and regions. Today, our overseas revenue ratio has reached 49%, and colleagues working in our overseas offices now account for 74% of our entire workforce. While we are a Japanese company, we have planted deep roots across Asia and are evolving into an enterprise that generates strong earnings on the global stage. We are firmly on that path today. To mark this 10-year milestone, we have established a new vision for our future, become the world's new-gen business infrastructure. To put it simply, we are aiming to become a new generation, technology-enabled general trading company. Japan's traditional general trading companies have a proud history of supporting the post-war Japanese economy and driving global trade. We are carrying that spirit forward, but we are building an entirely new form of business infrastructure, one redefined by technology and AI. Armed with our technology and a global network woven throughout Asia, we will connect enterprises and partners to create new business possibilities that transcend borders. This is our firm resolve for the next 10 years. If our first decade was dedicated to building the foundation of this company, our next decade is about leveraging that foundation to further contribute to the Japanese economy and significantly elevate our presence worldwide. As a global enterprise originating from Asia, we will continue to challenge the boundaries of new value creation alongside our customers and partners around the world. This slide summarizes today's presentation content. In the first quarter of fiscal year 2026, driven by the growth of our core businesses, revenue, gross profit, and all-profit metrics exceeded our first quarter forecasts. Revenue increased by 40% year-on-year, and gross profit increased by 39%, reaching record highs. In particular, the enterprise growth business maintained a high growth rate, primarily in Japan and Southeast Asia, strongly driving overall company growth. Operating profit declined year-on-year, but this was due to the emergence of a gap caused by extraordinary factors in the prior year, and this impact was largely absorbed within the first quarter. Regarding the full-year financial forecast, as previously noted, the first quarter results exceeded expectations, and accordingly, the initial forecast remains unchanged. Operational efficiency through AI-native initiatives utilizing generative AI is steadily progressing, and we expect operating profit to return to a growth trend from the second quarter onward. We will steadily advance initiatives to achieve our fiscal year 2027 targets by accelerating expansion in the commerce domain and deepening relationships with regional clients. Regarding corporate matters, synergies from the three M&As executed in January are already beginning to show as revenue growth. In addition, we have decided to implement a new share buyback program of up to 500 million yen to further strengthen shareholder returns. Next, I will share the highlights of our financial results for the first quarter of fiscal year 2026. Revenue reached 17.7 billion yen, up 40% year-on-year, and gross profit grew 39% to 6.7 billion yen, demonstrating steady growth. In particular, the core enterprise growth business strongly drove our growth with a 63% increase in gross profit, fueled by strong performance in enterprise e-commerce support in Southeast Asia and synergies from domestic M&A. Since our founding, the enterprise growth business, comprising marketing and e-commerce support, has been driving our growth, now accounting for 76% of our total gross profit. The growth rate remains high at 63% year-on-year, marking a record high performance. Next, I would like to discuss productivity improvements and trends in SG&A. In the first quarter, headcount increased primarily due to the impact of M&A. However, on an organic basis, excluding the personnel from the three subsidiaries acquired this quarter, the increase was limited to 35 employees compared to the previous quarter. The year-on-year headcount increase is also mainly driven by the M&A executed in 2025. Furthermore, the increase in personnel expenses has been controlled at a level below the gross profit growth rate. Driven by continued productivity improvements, monthly gross profit per employee has increased year-on-year. Regarding the SG&A to gross profit ratio, while it temporarily rose in the first quarter due to seasonal factors, we expect it to improve again from the second quarter onward. Next, I would like to discuss the progress of our profitability improvements. Operating profit for the first quarter was 193 million yen. While it decreased year-on-year due to a combination of factors, including changes in the environment for the creator growth business and office expansions, These year-on-year impacts have largely absorbed in Q1, and we expect to return to a profit growth trend from the second quarter onward. Temporary expenses associated with growth investments such as M&A and logistics efficiency improvements have also subsided. We do not anticipate fluctuations in headcount, and we expect expenses to remain stable in the second quarter. Furthermore, by advancing internal AI utilization and the global standardization of Next, I would like to discuss the factors behind the year-on-year changes in operating profit. The decrease in profit this quarter is attributable to two factors that emerged after the second quarter of last year. The contraction of the creator growth business and domestic office expansions. These factors have materialized in this year-on-year comparison. Excluding these special factors, operating profit actually increased on an organic basis. As shown on the right side of the chart, profit contributions from M&A, alongside growth and productivity improvements in existing businesses, resulted in a positive impact of 126 million yen. From the second quarter onward, these specific year-on-year differences will no longer apply, resolving the comparative gap. Driven by the growth of our existing businesses and M&A synergies, we expect to return to a profit growth trend. Next, I would like to discuss our progress in improving productivity. While steadily expanding our business, headcount growth has been highly controlled. Excluding employees from subsidiaries acquired since January 2025, our headcount at the end of this March saw a minimal year-on-year increase of just 3%, or 64 people. Furthermore, headcount has remained flat through April and May of this year. This demonstrates that our AI-driven operational efficiencies are resulting in business impact, transitioning us to a business structure capable of achieving revenue growth without additional headcount investment. Let me share two specific examples. First, in product development, the adoption of AI has improved productivity by approximately seven times based on internal metrics, dramatically increasing both development speed and coverage. Second, in our domestic marketing business, significant results are being achieved in frontline operations, with AI now capable of handling approximately 60% of planning tasks. Moving forward, we will continue to accelerate our company-wide AI-native transition to further drive profitability improvements. As a specific example, let me share our approach to profitability improvement in the marketing business. Currently, operating margins in this business vary significantly by country. We view this as a clear opportunity for margin expansion and are driving improvements by rolling out best practices from our high-margin bases. Additionally, as shown on the right side of the slide, we are globally advancing process automation powered by AI agents. By having AI handle proposal creation tasks that previously required significant time from multiple specialists, we are simultaneously shortening lead times and elevating output quality. These process and profitability enhancements are already beginning to yield results across our markets. By elevating our overall global margins, we are on track to achieve our operating profit target of 6.3 billion yen for fiscal year 2027. Next, I would like to explain the share buyback program announced today. After comprehensively considering our track record of profit growth, current stock price levels, and the earnings outlook for the current fiscal year, we resolve today to acquire up to 500 million yen of our own shares. There are three primary objectives for this repurchase. First, to enhance shareholder returns through buybacks in addition to dividends. Second, to improve capital efficiency by increasing metrics such as EPS. Third, to ensure flexible utilization for future M&A considerations and incentive plans. We remain committed to achieving sustainable growth and enhancing corporate value to meet the expectations of our shareholders. Additionally, I would like to explain the personal acquisition of company shares announced today. I will personally acquire up to 100 million yen of company shares through market purchases. This demonstrates my strong confidence in the company's future growth and my commitment to further enhancing our corporate value. The entire management team remains united in driving the business forward. This is the summary of our consolidated financial results for the first quarter of fiscal year 2026. Driven by the strong performance of our enterprise businesses and the consolidation of three newly acquired companies, we achieved significant top-line growth. with revenue increasing by 40% and gross profit by 39% year-on-year. Even on an organic basis, excluding M&A, revenue grew by 25% and gross profit by 23%, demonstrating solid progress against our full-year forecasts. Regarding operating profit, while it decreased due to the impact of environmental changes in the creator growth business, the impact was largely absorbed within this quarter. Furthermore, given the seasonality of our business, where performance typically accelerates From the first quarter through the fourth quarter, we expect to shift to profit growth from the second quarter onward on both a quarter-on-quarter and year-on-year basis. The progress rate against our full-year forecast for the first quarter was 22% for both revenue and gross profit, progressing smoothly at a pace that exceeds our initial projections. The progress rate for operating profits stood at 6%. While the same period last year saw unusually high levels due to revenue contributions from the creator growth business, This slide reiterates our earnings forecast for fiscal year 2026. Gross profit, our key metric, is expected to increase by 38% year-on-year. Operating profit is projected to reach 3.06 billion yen, up 70% year-on-year, and we anticipate the operating profit margin will improve from 3.1% to 3.9%. This slide simply recaps the assumptions behind our earnings forecast, so I will skip the detailed explanation. This is the performance by region. In the first quarter, Japan and Korea achieved high growth across all businesses, driving the group's overall performance and expanding their share of the total. In terms of gross profit composition, Japan and Korea accounted for 60%, Southeast Asia for 32%, and Greater China and India for 9%. Looking at growth Growth rates, the enterprise growth business, our focus area, is expanding steadily across all regions, increasing by 80% in Japan and Korea, 49% in Southeast Asia, and 44% in Greater China and India. This shows the trend in financial performance by quarter. In the first quarter, revenue increased by 40% year-on-year and gross profit increased by 39%. We are making steady progress toward our full-year plan. Operating profit for the first quarter was 193 million yen, a decrease year-on-year. However, the impact of changes in the business environment has largely absorbed in the first quarter, and we plan to shift to year-on-year profit growth from the second quarter onward. Adjusted EBITDA was 806 million yen, an increase of 79 million yen year-on-year. This shows the quarterly trend for SG&A. While the SG&A to gross profit ratio temporarily increased in the first quarter, primarily due to the consolidation of the three newly acquired companies, we plan for this ratio to gradually decline from the second quarter through the fourth quarter. Gross profit per employee, a key indicator for measuring profitability improvement, increased significantly by 20% year-on-year, driven by productivity gains. Furthermore, while headcount increased due to M&A and personnel investments in growth areas in 2025, we have successfully kept this increase below our initial plan. This shows the status of our balance sheet. In the first quarter of fiscal year 2026, we raised additional interest-bearing debt to fund our M&A activities. While the execution of M&As has led to an increase in goodwill and interest-bearing debt through bank loans, we continue to maintain a sound financial foundation. I would like to explain the performance by business segment. In the first quarter, within the enterprise growth segment, the marketing business achieved 24% year-on-year growth in gross profit, and the D2CEC business achieved high growth of 151%. The publisher growth business remained stable, increasing by 4% year-on-year. The creator growth business declined by 12% year-on-year, impacted by changes in the external environment and a review of our focus areas. Additionally, the company-wide gross profit margin has remained generally stable. In the first quarter, the enterprise growth business drove our overall expansion, further bolstered by the consolidation of the three companies acquired in January. As a result, the enterprise growth business's share of total gross profit expanded from 65% in the previous year to 76%. In the marketing business, gross profit increased by 24% year-on-year, While the growth rate was lower in the second half of last year due to the allocation of resources to the high-growth e-commerce support domain, the growth rate is now on a recovery trend driven by a strengthened sales structure. Furthermore, the development of AI agents to improve productivity entered the implementation phase in the first quarter, and we expect operational efficiency to progress from the second quarter onward. Regional gross profit growth rates for the marketing business were 34% in Japan and Korea, 8% in Southeast Asia, and 45% in Greater China and India. In addition to strong growth in Greater China, the growth rate in Japan and Korea is rising due to the acquisition of large-scale projects. In Southeast Asia, performance is also on an improving trend as we strengthen our sales resources. As a key highlight for this business, we received the TikTok Shop GMV Max Award in Japan. This award recognizes our ability to rapidly roll out our social commerce expertise, cultivated in the Southeast Asian market, to the Japanese market, delivering results at an early stage. We will continue to strive toward establishing a leading position in social commerce support within the Japanese market. In the first quarter, the D2C-EC business grew by 151% year-on-year. This growth was driven by the strong organic performance of our enterprise e-commerce growth business, alongside the contribution from the consolidation of SunSmile. By region, Southeast Asia continues to drive overall growth, while our business in Japan is also expanding steadily on an organic basis. This shows the trends in the number of e-commerce brands handled and revenue per brand. The number of creator brands remained stable compared to the previous quarter. While revenue per brand decreased quarter-on-quarter due to seasonality, it showed growth on a year-on-year basis. In the enterprise e-commerce growth business, the number of brands handled increased due to the consolidation of SunSmile. Furthermore, revenue per brand grew as the scale of projects expanded across all regions, driven by factors such as the progress of multi-country rollouts. This is an example of synergy creation between the D2C e-commerce business and the creator growth business. In a case study of the enterprise e-commerce growth business, we conducted live commerce on TikTok shop in Japan in collaboration with a live creator from B-Code, which joined the group in January. Over a period of two days, we conducted a total of five hours of live commerce and sold more than 4,300 items. Furthermore, in the creator D2C business, we have opened an AnyMind official shop on Red, a popular social media platform in China. By utilizing the network in Greater China cultivated through our creator growth business, we conducted effective live commerce. The GMV of this shop for the single month of March exceeded 10 million yen, driven primarily by sales from live commerce. In the enterprise e-commerce growth business, we continue to acquire new large-scale enterprise clients. We are supporting Storm Labels, which handles works by popular artists, in the construction and operation of their first official e-commerce site. Our support is a one-stop solution that extends beyond the construction of the overseas-compatible site to include logistics. On the right side of the slide is a case study of Samsung utilizing AnyLive, our AI Live commerce platform. Within a short lead time of two weeks, we simultaneously deployed 10 broadcasts across eight markets, creating over 4,550 hours of broadcasting slots per month. I would like to introduce our new platform, AnyAIOMO. This is a next-generation platform equipped with an AI agent that performs end-to-end analysis of both online and offline data and drives execution, including in-store improvements. The AI analyzes performance in real-time and automatically recommends specific next actions, such as enhancing advertising distribution and expanding shelf allocation. Additionally, we provide a unique support framework based on a BPAS model that integrates our AI technology with the offline distribution network of our subsidiary, SunSmile. Results are already being demonstrated with the U.S.-based brand Advanced Clinicals, where the ripple effect of online campaigns on physical store performance led to approximately 1.5x growth in target store sales month over month. Going forward, we will continue to leverage this strength to further solidify our unique support structure spanning both online and offline channels in the OMO sector. Gross profit for the partner growth business decreased by 5% year-on-year. While the creator growth business saw a year-on-year decline due to changes in the business environment and a shift in focus areas, the results exceeded our plan due to the recognition of one-time revenue related to copyrights. The publisher growth business remained stable, with a 4% increase year-on-year. In the publisher growth business, we continued to tighten our transaction screening standards with the objective of improving profitability and unit price levels. While this resulted in a partial decrease in the number of supported publishers, it has facilitated a qualitative shift toward a highly profitable publisher base. In addition, the planning and sales of our proprietary advertising products have been successful, leading to an increase in revenue and gross profit per publisher year on year. In the creator growth business, the number of contracted creators has decreased slightly due to a review of focus areas aimed at prioritizing medium-term synergies. On the other hand, revenue and gross profit per creator increased, driven by the recognition of temporary revenue such as copyright-related revenue. In the partner growth business, we continue to promote the diversification of our business models. On the left side of the slide is a case study of a collaboration between our publisher growth business and MISM, which joined the group in January. While UGC-style creatives are effective for supporting app user acquisition, the mainstream approach has previously been to outsource such production to external companies. Through our partnership with MISM, we have internalized this process and developed a solution that provides everything from creative production to ad distribution, analysis, and optimization as an integrated service. On the right side of the slide is an introduction of Matamata, a kids' group that debuted from Grove. Their music video, released in December last year, has surpassed 14 million views without any promotional support. A regular television program also began airing in April, attracting significant attention. Finally, I will once again explain the highlights and positioning of each of our businesses. The enterprise growth business, which accounts for close to 80% of our gross profit, is powerfully driving the entire group with its high growth rate. On the other hand, for the publisher growth business and the creator growth business, we are currently advancing further profitability improvements and optimization. These two businesses play an essential role as a powerful network foundation supporting the enterprise growth business, and we have constructed a portfolio where each business mutually creates synergies. These synergies, combined with our infrastructure spanning all of Asia and our unique data and operational BPAS model, have established our dominant position in the social commerce domain. We will continue to deepen the collaboration between our businesses to further solidify our medium-to-long-term growth. This concludes our presentation. Thank you for your attention.