hello uh thank you for watching this video I'm masar Zama group CFO of raxel uh we want to walk you through the second quarter earnings of Rexel in the fiscal year July 2025 this slide is the overview the quarter was characterized by strong organic growth across the board continued execution for Synergy as well as uh we're today uh happy to share with you our partnership with Adobe and coming upcoming product integration between rx.com and Adobe Express and also we're mindful of our Capital efficiency so this time we recognize a one-time profit 1 billion yen from the sale of hako bell shares and we're also increasing our dividend and also net income forecast for the four year this is our longer term growth story uh we continue to operate with a future direction of becoming an endtoend technology platform for small businesses we're starting off of our B2B eCommerce business graduate working our way through to software and finance and we continue to operate with quality growth growth with profits and cash flow with a healthy balance sheet and our Pursuit for Capital efficiency this is our future direction we're going to provide a technology platform that provides Solutions to's business challenges here in Japan uh unified by our common rxo ID and each area we're making steady progress within transaction our partnership with Adobe is starting in finance we're continuing to develop our raxel bank business in software we've recently launched a service called raxel website this is our transformation uh its trajectory so up until uh fiscal 2027 where we're aiming for 10 billion in ibita what we are doing is expanding our e-commerce e-commerce offering through organic as well as m&a and also we continue to pursue programmatic m&a in areas around us and also for vertical integration as well this is what gets us to roughly 10 billion in and when we think about the future um going to 20 30 billion in and Beyond uh initiatives that we're starting to take is transforming our company to become AI native and also our attempt to establish an ecosystem this includes things like software and finance as well uh this is about the uh recent announcement of partnership with Adobe uh so we're going to to be integrating functions between rexo and Adobe Express and users on rexo will be able to launch Adobe Express on our platform uh benefit from all the generative AI design components that adobe offers and this with this we're expecting our users to to benefit uh greatly uh from improved design functionalities uh and we're expecting uh positive outcomes for our customer Acquisitions as well in Adobe Express is a free-to-use Content creation application that allows users to create uh various SNS content Flyers videos and much more and any1 will be able to generate professional grade uh content uh with a fairly easy to use uh interface and also uh a lot of AI uh components and functions as well uh going through our strength uh we have four strengths that we want to talk about one is the Tam the large Tam and also it's expansion so if you look across our businesses our e-commerce and transaction business faces a 7 trillion yen Tam here in Japan our software and marketing uh faces a 6.5 trillion yen Tam and our finance business our future business faces a 2.4 trillion y transaction Market here in Japan and within each digital component is growing which allows us to increase uh our footprint as well as benefit from the expanding addressable Market our recognition among smmes continue to be strong and we also have uh plenty of upside in terms of uh onboarding new customers and our technology infrastructure uh continues to be very very strong uh our focus at this point is unification of user IDs and payment and our programmatic m&a uh we have done two deals uh so far this year and at this point we have multiple Lois uh submitted to various companies uh within both e-commerce and marketing and here's a bit of an update uh on uh uh on the m&a sourcing side uh so far in Fisco 2025 we have screened over 202 200 uh companies so far a number of letter of intent submitted is six at this point and as we announced in the first quarter we have completed two deals uh at this point all of which the paces are above where we were around the same time last year uh so we expect to close uh more deals uh going uh from here on uh throughout the rest of the year in terms of the areas that we focus uh in our m&a uh the exhibit on the bottom right uh of this slide uh basically shows you the categories of companies that we'll be pursuing uh split by existing products and services new products and services in the vertical on the horizontal our we splitting by existing markets and uh new markets and our Focus basically is on uh both existing customers and existing products which is for us a rollup strategy uh existing customers and new uh products which is basically expanding horizontally uh within our e-commerce businesses um and also new customers and existing products in which we'll be expanding into new customer segments uh and also vertical integration an example of that would be our uh digital printing Factory acquisition last year uh that's another uh element uh that we're looking at all of our acquisition strategy have plenty of room for sourcing and uh uh deals that we're considering are uh overall profitable companies with decent valuation so we believe that the return on invested capital and also uh given the sizes of the businesses that we acquire uh Synergy is imminent and uh some of the cost synergies are actually uh relatively uh structurally achievable continuously achievable and this is the progress as of second quarter on a post merger integration the graph on the left is unchanged from last quarter we're still expecting to double the E of the companies that we have acquired in 2024 and some of the initiatives that that where we have seen progress is ID integration where we have merged all of the new IDs at dumble one into raxel ID and we're getting ready to start cross selling uh from dumble one to raxel and payment integration is underway as well uh where if we are able to integrate all payments uh in a companies that we acquired will be able to turn around 1% of the newly acquired companies G MV into profits in the future and brand integration is also underway one example is we have recently uh created a new service called raxel website which is essentially uh new version of perichi and through efficiencies in marketing we're expecting to positively impact I by about 100 million for the fouryear uh once it annualized also today we have uh published our integrated report for the year uh we have a few few captures uh of the report throughout this presentation but this this slide uh is talking about what we mean by endtoend technology platform for small businesses in each specific phases and scenes of small businesses we have various services to offer uh which seamly connect seamlessly connects uh within users's experience and moving on to the financial highlights uh for the second quarter we continue to execute strong uh on the quality growth uh track record uh this year we're tracking very well towards the higher end rather higher end of the guidance range that we have provided at the beginning of the year 63 billion at the high end of Revenue 22 billion at the high end of gross profit and 6 billion at the high end of I and in terms of the growth profit gross profit growth as well as the Ia Market margin uh versus the gross profit we continue to expand uh very well uh into second quarter we've grown 30% in gross profit and our uh ibat gross profit margin is at 28.3% despite uh upfront investment into offices and new businesses we continue to grow with expanding margins this is the overview of the second quarter results and our Outlook into the third quarter uh the second quarter numbers uh we have seen steady growth in Revenue uh in procurement platform business steady growth in gross profit in the marketing platform business and this has flown through to ibit levels as well in net income we have uh recognized one billion yen of extraordinary gain from the sale of hakel Shar and uh uh we are going to see gradual shrink uh in the losses of the equity method affiliate going forward uh going into the Third quarter uh the revenues we're expecting uh around 20% growth in the procurement platform business roughly continuing uh the growth rates that we have seen in the second quarter uh and within the marketing platform business we're expecting quarter over quarter growth in gross profit uh between second and third quarter and in terms of third quarter ia uh as we uh mentioned in the first quarter call as well uh we're the second and third quarter this year is relatively cost heavy uh this is due to the office relocation happening between the second and third quarter and also new businesses kicking in as costs uh starting in the second quarter uh nonetheless uh third quarter is a seasonally High quarter for us and we're expecting quarter over quarter growth uh in ibita and also year over year uh as well at this point this is the changes that we're making to the fouryear forecasts uh once again we're tracking very well uh towards the high end of the guidance range that we have provided uh but this time we've changed basically reflecting the sale of the hakob Bell shares at this point so net profit uh J Gap we are revising from 1.78 billion uh to 2.28 billion to 2.48 billion to 2.78 uh billion EPS we're raising from 30.6 to 30.2 Yen per share to 42.6 to 47.7 Yen per share and we're also revising a dividend uh as well so dividend is a second part of our shareholder return program in the longer term uh after uh BuyBacks but we we also recognize the importance of dividends and also importance of steadly growing uh dividends with the profit growth so given the extraordinary profit and also the fact that our profits are record high uh this year we're raising from 2.3 Yen guidance to 3 Yen uh at the fiscal year end and this is how we're tracking versus four-year guidance uh pretty much at record high percentage uh versus uh the guidance range that we're providing this is the change in segments we made from the first quarter and here we have the revenue breakdown by segments and Subs segments uh all segments as well as Subs segments have seen a steady growth uh year-over-year with the exception of marketing platform but this is um pretty much a mix issue so we've seen steady growth and gross profit uh within marketing platform in each of the subs segments of the procurement platform I'll mention a bit of a bit more details later uh but uh both organic and inorganic growth have been steady uh this quarter this is the gross profit Trends uh for overall businesses we continue to grow uh in a very strong Pace uh year-over-year as well as gr quarter over quarter and higher margins that we have experienced in the first quarter continues to be so in the second quarter as well this is due to internalization uh the platform scale getting bigger and also within marketing platform the weight of the software business uh becoming a greater portion of the business this is the Ia Trend so in second quarter we have spent roughly 200 million yen uh in the quarter into the new office relocation ation cost of the m&a transaction and also uh cost of the new businesses uh materializing so excluding those uh second quarter would have been a record quarter in terms of IA nonetheless uh we continue to see high uh IA and also jgap operating profit growth uh throughout this is the sgna trend for us uh we continue to invest in advertising as well as technology development and we have seen increase in Tech cost due to full scale launch of investments into new businesses and within the other uh line we have seen an increase of roughly 70 million yen mainly due to the increase in rent as well as one-time expenses from the office relocation the higher cost levels will continue into uh third quarter but in Q4 uh rent will be the only impact remaining so between third to fourth quarter we're expecting roughly 50 million yen uh de increase or normalization from there onwards this is the overall performance of the procurement platform we continue to see a strong growth uh both through organic as well as m&a and the gross margin level was at 32.3% we continue to operate at a record high uh GP margin number of registered users on roo.com continues to be strong and the kpi trend is shown here there's a few elements to this uh the organic user growth uh for the quarter was 5.3% uh I understand this is a bit weaker from the previous quarter uh but if you exclude individual events uh that I which I will mention later the normalized user based growth was around 11.6% so the growth rate was roughly uh in line with the previous quarter or slightly better uh than the previous quarter and in terms of the order unit price is 11 12586 uh Yen um is growing 4.6% mainly through the growth of raxel Enterprise business raxel for larger companies and the number of uh average number of purchases uh has grown 3.5% uh over the quarter uh but this is partly due to uh number of infrequent buyers decreasing uh due to New Year cards and stamps which led to actually an increase in the average number of purchases per user so we expect various numbers to normalize uh starting in the third quarter there a bit of a uh one-time disruption that we have seen over this quarter and uh this is the factors uh that played into the second quarter Revenue growth so starting with uh the revenues last year we have seen an organic Revenue growth of roughly 16% excluding onetime factors uh companies that we acquired added another uh 780 million yen and onetime factors has decreased our revenues by about 60 million yen there's two factors to explain uh one is the New Year cards uh here in Japan uh we have seen a raise uh rise in postage price in October 2024 uh and this has significant ly reduced the demand for New Year cards uh throughout mainly in November to December uh last year so this has had an impact but New Year cards we usually sell in the second quarter every year so the impact going forward will be minimal and also at hanoa uh what happened two years ago uh back in October November 2023 uh here in Japan we saw the introduction of the invoice system uh at aoya we have sold a lot of stamps that has individual invoice number of businesses so this falling off uh has had an impact at hanoa revenues in the second quarter uh this has also uh leveled out and starting in January hqua is operating at year-over-year Positive Growth uh at this point so these are factors that played into the second quarter numbers but excluding those are organic growth rate is relatively unchanged uh versus the first quarter on the bright side uh roxo Enterprise business has continued to grow uh much faster uh than rest of the businesses um So within the procurement business raxo Enterprise is a printing e-commerce business for large companies and it has become uh about 16% of our Printing and solutions Revenue at this point uh and we provide services including customized uh workflow uh design functions order management for large companies and also this is basically allowing us to grow printing e-commerce uh not just only within small businesses but also through uh complicated workflows of larger companies by offering uh cheaper uh prices and also simplified and automated operations here are some examples that we have customer case uh case studies that we have in raxel Enterprise uh we're expanding through uh really various Industries uh with multiple locations with complicated printing operations and also we're providing uh a ver verification of how much Flyers were read uh at efficiencies as well and the revenues have grown 136% year-over-year uh in the second quarter this is the trend of the marketing platform business uh the revenue has declined uh year-over-year uh mainly due to the revenue mix within the advertising agency's business but if you look at gross profit we have seen 11% growth year-over-year uh due to good performance of SAS andme businesses which has which uh all have high gross margins and within the SAS andme marketing business we continue to see good quarter quarteron quarter growth Trend and also through rationalization of costs uh a positive EA is starting to to stick within this business and this is more detailed kpis of the marketing patform business we're starting we're gradually starting to see uh greater footprint uh ofme marketing and Sass and Professional Services business as opposed to a growing but volatile advertising agency business and more cross cells happening between uh SAS and the advertising agency as well and this is our medium-term financial policy we continue to track very well uh towards the 10 billion yen I Target in 2027 uh 30 billion yen gross profit Target in the same year and within the capital allocation we have done additional uh raise in dividends and we continue to perform well in terms of growth investment and also financing through debt and the acquisition of Treasury stocks the buyback which we announced in the first quarter has completed as of February 13th this is uh where our balance sheet is some of the items that affects the shape of our balance sheet include our Redemption of 5 billion convertible bonds on November 29th last year and also we've announced additional loans in Jan on January 21st and our net debt as of the first quarter uh as of the end of first quarter was 1.7 billion and we have transferred hakob Bell shares uh on January 31st and this is another page out of our uh integrated report uh where we're talking about quality growth and capital efficiency um so towards the right hand side of the page uh we're saying that we do recognize Divergence between two types of return on invested Capital One based on the business assets where we are over 20% if you take our long Gap operating profit figures and uh the one calculated through liabilities and equities uh where we're only at 99.9% Divergence we see as an issue and we will continue to pursue Capital efficiency uh through business growth uh pursue m& with high Capital efficiency and rationalization of balance balance sheet examplified by the sale of the hako Bell shares in this quarter and in terms of the status of the group companies uh at hakel uh we have taken uh we have uh acquired a truck book uh business from monopo Inc and we have also seen new investors joining uh the hako bell's list of investors environmental energy investment s growth partners and J Mitsy leasing quarterly Revenue continues to grow steadily and we're at 1.83 billion and at JIS we've raised 14 billion yen in Venture debt financing and also in addition to it device and SAS management function uh We've released a request portal for employees for uh access to new SAS uh which is quite important in workflows of companies uh in terms of the frequently asked questions uh this quarter one is about the outcomes of the long-term incentive granted to our CEO so in November 2023 we passed a resolution and disclosed about the long-term uh incentives that we're giving to our new CEO and on January 31st 2025 uh We've announced changes uh to the long-term incentives uh because the the granting of the rsus paid in stock option and stock Acquisitions they're uh going as planned but certain details had to change um so with regards to the acquisition of shares through loans from Rexel our Auditors uh have asked us to review uh in the perspective of preserving the company's asset uh have requested that nagami uh borrow from a thirdparty financial institution and also to reduce the amount uh of the company's loan uh So based on these requests and discussions uh we have decided that the purchase amount will go from 1.2 billion uh down to uh 400 million uh at the end um we continue uh and also this long-term incentive structure continues to provide uh risk and reward to nagami uh which is equivalent to a startup founder uh and we continue to commit to the long-term development uh of rexal grrip and the second Q&A is about the impact and our policies on the recent issues at Fuji uh television and in light of the recent events that we have seen at Fuji uh raxel as an Advertiser we recognize that terrestrial broadcasters broadcasters needs to have a higher uh greater governance structure and also conscientiousness on the human rights um this will assure uh that mass media will be developing uh will be growing in the longer term uh as an Advertiser uh in light of this we've decided to temporarily suspend advertising on Fuji and we're waiting for thirdparty committee uh to explain about the facts and uh measures to prevent uh such an issue and in the advertising agency business within marketing platform some clients have stopped advertising of television and changed their orders to other TV stations and digital media and at this point we have no uh Pro pnl uh impact uh from this shift at this point and lastly in terms of raxel Enterprise uh progress this is as explained in the slide 3 31 uh and at the roxel Enterprise business uh our registered users have grown to 3,659 users and the revenues are growing 136% and the rest is a reference material and thank you for uh tuning into this video if you have any questions about the earnings or requests for meetings please contact us at IR rx.com