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CEO Comment Vol.82 “Summary of Financial Results for the Second Quarter of the Fiscal Year Ending March 31, 2025 [IFRS] (Consolidated)”
Consolidated results showed a non-cash accounting loss, but the payment business, which is our revenue base, performed strongly.
With the approval of the Board of Directors today, we have announced financial results for the second quarter of the fiscal year ending March 2025.
I. Summary of Financial Results for the Second Quarter of the Fiscal Year Ending March 31, 2025
Consolidated financial results for the first half of the fiscal year ending March 31, 2025, showed revenue of 17,581 million yen (down 21.4% year-on-year) and loss before income taxes of 12,530 million yen (compared with income of 8,266 million yen in the same period last year).
In the Platform Solution segment centered on the payment platform that is the Group’s business foundation, payment transaction volume increased +20% year-on-year, mainly due to the successful alliance strategy in offline payment and the robust expansion in online payment. The Long-Term Incubation segment, consisting of equity-method profit from Kakaku.com, Inc. and revenue from new business groups, posted a year-on-year increase in the share of profit of investments accounted for using equity method due to the robust performance of Kakaku.com, Inc. In the Global Investment and Incubation segment, the Company made steady progress in selling its operational investment securities, resulting in an investment business income of 3.6 billion yen. On the other hand, we recorded a valuation loss on Blockstream totaling 10.3 billion yen in the second quarter. This accounting loss does not involve cash outflows, so it will not affect our business fundamentals.
The following is a slide summarizing the progress of our business in the second quarter of the fiscal year ending March 2025.
Here is a breakdown of consolidated results and profit for each segment.
The following slides show Blockstream’s historical impact on consolidated results and the securities balance of that company. As a result of the write-down, the balance on the book value has already been reduced to a few hundred million yen as of the end of September, and the impact on future earnings is expected to be limited.
First of all, I will explain some of the highlights of our business.
Cloud Pay, our strategic QR code payment business, has been installed on Square, and our partnerships with Resona Holdings and KDDI Group have also made progress.
1. Our Cloud Pay, a unified QR code payment solution, was implemented in Square, one of the world’s largest payment platforms. As a result, approximately 200 million users of the 7 QR code payment brands in Japan now have access to the platform. Cloud Pay is an easy-to-use, patented service that allows you to use major QR code payments by simply scanning a unified QR code with your smartphone. The recently launched “Cloud Pay Neo” accepts credit card payments, the most commonly used form of payment, and it is an innovative, next-generation strategic payment solution that requires no additional investment in terminals and can be used in a wide range of payment situations. Through this service, the company aims to promote the spread and expansion of QR code-related DX in Japan. Please watch this video for an overview of the service. Below is a video introduction of Cloud Pay & Cloud Pay Neo. (Only in Japanese)
2. We have kicked off a collaborative project with au Financial Services of KDDI Group to provide high-quality payment services for the au economic zone, including the design and development of such services.
3. Our capital and business alliance with Resona Holdings, Inc. has also made solid progress. We established a joint sales structure in the payment business through mutual secondments, and started integrated sales in the Kansai region in addition to the Tokyo metropolitan area. We also launched a new range of services for corporate clients through our equity-method subsidiary, Resona Kessai Services Co., Ltd.
Please see the latest updated slide of the strategic actions with the above segment highlights.
Please also see the following slides for an overview of the current PS segment by business domain.
II. Business Summary of the 3 Segments
Let me explain the business summary of the 3 segments and the overview of the Group.
<Platform Solution (PS) Segment>
Based on the payment business, the PS segment shifted its management resources to the “Enabling Business Group” and is steadily growing toward forming the “DG Economic Zone” through alliances with strategic business partners. The contribution to the company’s performance will come in the next fiscal year or later, and given the current strong performance, we see the situation as promising in the medium term as well.
In addition, we have established a system to accelerate the growth of the PS segment by connecting the LTI segment, which consists of Kakaku.com and new strategic business groups, and the GII segment, which promotes co-creation with startup companies and integration into the Group’s business.
The following are the main business highlights of the PS segment.
First, aiming to provide high-quality payment services in the au economic zone, we are developing a “co-creation collaboration” with au Financial Service Corporation through system development and dispatch of cooperative personnel on secondment. Utilizing the resources of telecommunications carriers, we will promote the joint development and deployment of new businesses to extend beyond the au economic zone.
Second, under the capital and business alliance with Resona Holdings, Inc., we have established a joint sales structure by transferring 12 employees. We are strengthening payment sales in the Metropolitan and Kansai areas. Also, by providing DG Financial Technology’s (DGFT) cutting-edge solutions to Resona Kessai Service Co., Ltd. (an equity-method affiliate of DG), we launched a new B2B payment service, “Online Invoice Card Payment” and an impersonal payment service, “Resona PayResort+” as new services for corporate customers of the Resona Group. PoC of short-term, small-lot online lending for small- and medium-sized companies and developing a next-generation payment platform are also in progress.
Third, by implementing “Cloud Pay,” a QR code payment solution, on “Square,” one of the world’s largest payment platforms, 7 brands of QR code payment are now available at “Square” member stores in Japan. The global technology company “Square,” operated by Block, Inc., is accelerating its expansion in Japan, and the number of domestic merchants has been growing significantly. We will continue to deepen our cooperation with “Square” to provide services that contribute to a broader range of businesses and end users.
Also, as a new service of diverse payment solutions, the number of customers that have adopted “Cloud Pay Neo,” a terminal-free payment service, has been expanding. This service enables the most frequently used credit card and various code payments by scanning QR codes with end-users’ smartphones. It is used in a wide range of business settings. We are currently developing products by identifying priority areas from various use cases.
We expect “Cloud Pay” and “Cloud Pay Neo” to expand our retail market share for offline transactions. For more information on “Cloud Pay” and “Cloud Pay Neo,” please refer to the following slides.
In the PS segment, the marketing division has been reorganized and transformed into an “enabling business” that will stimulate the Fintech business and the e-commerce market. We believe that this strategy will also contribute to our performance in the medium term.
＜Long-Term Incubation (LTI) Segment＞
In the LTI segment, we are pursuing the planning, development, and nurturing of new businesses in the 3 domains of “industry-specific DX business,” “B2B payment/financial business,” and “next-generation technology,” which have a high potential affinity with the payment business and have started full-scale commercialization in several projects. Sales in the Strategic Business Group grew 64% over last year, and payment transaction volume generated by the Strategic Business Group grew 363% over last year, contributing to the expansion of our payment platform, which is the foundation of our business.
In particular, “Musubell,” a DX service in the real estate domain, has seen a steady increase in adoption by real estate developers and real estate companies nationwide, with sales growth of 151% compared to last year. Furthermore, the service is growing into a service connected to Fintech, such as data integration with a bulk application service for mortgage screening.
Below is a video introduction to the service. (Only in Japanese)
In addition, several new Fintech-related businesses, including “Pangaea Delivery,” a retail tech service for bulk management and operation of online orders that has been fully introduced to major drugstores, and “DGFT Invoice Card Payment,” a B2B payment service with an increasing number of partners, are moving from the start-up phase to the growth phase.
Please review the slides below for details.
Group collaboration with Kakaku.com in each strategic sector is also accelerating, with the payment business as a starting point. With the full-scale development of “Tabelog’s multilingual reservation service for overseas travelers,” now available in 37,700 restaurants, the largest of its kind for visitors to Japan, the number of inbound bookings has grown steadily. The Group’s payment transaction volume, including the travel domain, has shown steady growth, increasing 25% compared to the previous year. We are also expanding the scope of our collaboration by leveraging DG’s global network to build partnerships between Kakaku.com and DGFT and overseas travel businesses.
Please see below a slide of the progress of the project with Kakaku.com.
＜Global Investment Incubation (GII) Segment＞
Blockstream’s fair value has fluctuated significantly in the past in response to the market for crypto assets. Still, with the new write-down, the balance on the balance sheet is virtually eliminated. Among the top investments in terms of fair value amounts, we believe that we will no longer be impacted by any particular investment in the future, as there have been no investments in the past that have experienced such large fluctuations as the company has.
Except for the top 5 companies, which have already reached the later stage and have stabilized their business, the portfolio has evolved into a highly stable portfolio, with risk diversification in geopolitics and the amount and fair value of each company’s investment.
Please review the following slide, which is an analysis of our portfolio.
In our Medium-term Plan announced last year, we are promoting the sale of securities in which our group directly invests to minimize as much as possible the noise to our business performance caused by non-cash changes in the fair value of our investments. We have already sold up to 15 billion yen, including those already in sight, against the 30 billion yen outlined in our Medium-term Plan, and we will continue to focus our efforts on bringing the Medium-term Plan forward.
In addition, we will clarify and work on the 3 points as written in the following slides as our future policy for the investment business.
First, concerning operational investment securities, we will accelerate the speed of sales and actively consider measures to promote off-balancing as well as joint funds with the Resona Group.
Second, for “On-Balance Sheet Investments,” in which we invest directly from our balance sheet, our policy is to carefully select startup companies that will accelerate our business’s growth and contribute to the enhancement of corporate value through co-creation of business and technology aspects with the investee companies.
Finally, we will make a more apparent shift to “Fund-type Investments,” utilizing the expertise and network we have cultivated to reduce fluctuations’ impact on consolidated performance and further expand our global network. Our group already manages 6 funds totaling approximately 30 billion yen as GPs, all of which are performing well, and we are also preparing for new funds.
III. Sustainability Efforts
Cyber security has become an urgent matter for all companies these days. We have established an information security operation system led by a Representative Director to improve the effects of information security. By appointing a Director in charge of information security and a Chief Information Security Officer (CISO) separately, we have clarified the supervisory and executive functions in security and established an operational system that enables prompt and flexible response in an emergency.
The company is designated as the country’s critical infrastructure operator for the operation of the payment system, and the importance of stable system operation 24/7 has been increasing. We will continue striving to ensure everyone can use our system safely.
We are also proactively pursuing environmental initiatives and set a target to reduce greenhouse gas (GHG) emissions by minus 50% by 2030 and achieve carbon neutrality by 2050. Our payment business contributes to reducing GHG emissions in society through the penetration of cashless transactions. Still, we will go a step further and contribute to creating a sustainable society.
In closing, we plan to publish an integrated report by the end of this year.
We hope this report will help you deepen your understanding of our group.
We look forward to your continued support and encouragement.