From a company that can generate profits to a company that can grow profits — planning a H2 offensive with stablecoin commercialization and new StarPay terminal launch in September

Summary

H1 cumulative revenue came in at JPY 2,467M (+14.3% YoY), maintaining its growth trajectory; however, results fell 8.4% short of plan due to a slower-than-expected inbound tourism recovery, sluggish GPV growth at existing merchants driven by elevated crude oil prices, and a suspension of terminal sales during the transition to the new terminal. On the other hand, cost structure improvements centered on AI adoption proved effective, with operating income of JPY 154M (+161.6% YoY, +9.9% vs. plan) — all profit line items exceeded plan. The CEO noted that the company is transitioning to a stage where it can grow profits, and is advancing efforts to capture replacement demand through the new SUNMI P3H terminal launching in September, as well as working toward the commercialization of Stablecoin Pay. Building on the establishment of a profitable base, the company also introduced a new shareholder benefits program, initiating shareholder returns.

Key Points (Earnings Takeaways and Growth Actions)

• Management Strategy And Market Assessment
  • The CEO emphasized the stage transition from a company that can generate profits to one that can grow profits
  • Domestic cashless demand remains solid, but growth at gas stations and retail distribution (home improvement centers and general merchandise stores) has decelerated vs. plan
  • The decline in Chinese inbound group tourists persists; while overseas QR accounts for only 7.3% of the mix, the high take rate means the revenue impact is larger than it appears
• Current Business Progress And Drivers
  • Standalone 2Q GPV reached JPY 579.2B, a record high for any Q2 period, but came in 5.3% below plan
  • Terminal sales were suspended mid-Q2 due to certification transition for the new terminal, declining from the typical JPY 40M to JPY 12M (a JPY 28M shortfall)
  • AI-driven server cost containment and internal system efficiency gains continued, with SG&A coming in 3.9% below plan
  • Decline in inbound mix caused the take rate to decrease approximately 1bps QoQ from Q1
• Strategic Initiatives And Inflection Points
  • New SUNMI P3H terminal to launch in September, supporting all payment methods including stablecoins with improved processing speed and reduced weight
  • Stablecoin Pay service launched in July with merchant applications now being accepted, offered at a 0.98% fee
  • Preliminary proof-of-concept for stablecoin payments conducted at Lawson in August, advancing toward the commercialization stage
  • Management explicitly stated its policy to capture terminal replacement demand from 20,000+ stores following the bankruptcy of Zento-Shin using the new terminal

Outlook And Strategy

• Full-year guidance maintained: revenue of JPY 5,760M (+20.3%), operating income of JPY 500M (+70.8%)
• Interest rate hikes reflected from Q3 onward are expected to boost recurring profit through higher interest income (full-year interest income forecast: JPY 216M)
• Plan to add 10+ payment brands over the full year; against H1 actuals of +4, the company targets +10 in Q3 and +1 in Q4
• The 2030 vision targets GPV exceeding JPY 6T, company-wide revenue exceeding JPY 12B, and OPM above 25%, with investment in Web3 and AI-related areas also under consideration
• Shareholder returns prioritize growth investment first, with dividends to be considered going forward based on financial conditions
• Management indicated that order activity heading into next fiscal year is very robust, with multiple large new pipeline opportunities in the works

Positive Factors

• GPV 7-year CAGR of +162%, maintaining a gross profit margin of 76.4% — top-tier profitability among major PSP peers
• AI adoption enabled flat USD-denominated server costs despite a +33% increase in GPV, driving structural improvement in cost efficiency
• Launched Stablecoin Pay, Japan's first multi-stablecoin payment service, securing first-mover advantage with a take rate higher than inbound payments
• The Zento-Shin bankruptcy has created replacement demand at 20,000+ stores, presenting a prime opportunity for new customer acquisition via the new terminal
• METI's cashless ratio target (65% by 2030, ultimately 80%) versus the current 46.3% suggests substantial market expansion runway
• Expansion of digital gift certificate services for municipalities, with two new contracts secured for Yokohama Motomachi and Chinatown

Concerns And Risks

• Revenue missed plan in both Q1 and Q2; achieving the full-year target requires H2 revenue acceleration (H1 progress rate: 42.8%)
• Timing of Chinese inbound tourism recovery remains uncertain, with continued decline in China-based Pay usage
• Rising crude oil prices are weighing on GPV growth at gas stations and retail distribution, with limited visibility on macro improvement
• Retained earnings remain deeply negative at JPY -4.48B, requiring procedures such as drawing down capital reserves before dividends can be paid
• Implementation of stablecoin payments at major merchants requires 6+ months of POS system modifications, with revenue contribution not expected for at least one year
• A series of bankruptcies and security incidents across the payment processing industry poses industry-wide reputational risk

Performance Highlights

H1 cumulative revenue was JPY 2,467M (+14.3% YoY), operating income JPY 154M (+161.6% YoY), and recurring profit JPY 243M (+61.0% YoY), with all profit line items exceeding plan. GPV reached JPY 1,128.9B (+15.2% YoY), a record high for any H1 period, but came in 4.2% below plan due to sluggish inbound tourism and elevated crude oil prices.

Segment Performance

• GPV (Gross Payment Volume): JPY 1,128.9B (+15.2% YoY)
• Gross Profit Margin: 76.4% (vs. 78.0% in the prior-year period)
• Onboarded Merchant Accounts: Approx. 700,000
• QR Brand Coverage: Among Japan's largest (QR/stablecoin 70+, credit cards 7, e-money 8+)
• Interest Income: JPY 94M cumulative H1 (Q1: JPY 46M, Q2: JPY 48M)

Q&A List

• Q: Could you provide a range estimate for the P&L impact of the shareholder benefits program?
  A: The budget required is extremely limited. It is a flat JPY 2,000 for holders of 100+ shares. While we cannot disclose a specific figure, the range is from JPY several million to the low JPY 10M range — not a material amount worth reporting separately.
• Q: What drove the outperformance on cost containment versus your original plan?
  A: The biggest driver is AI adoption for cost containment. We have deployed AI across core server system optimization, application monitoring, analytics tools, and customer support, as well as development support. The AI integration into internal systems including sales operations, which we have been advancing since Q1, has reduced the need to add headcount significantly, contributing to personnel cost containment. Cost of revenue, including server costs, is also being reduced at an accelerated pace through AI utilization. Additionally, margins on our DX products have improved, with cost of revenue for development-and-delivery-type revenue declining considerably.
• Q: Is the Zento-Shin bankruptcy a net negative or positive for your company?
  A: For the market as a whole, it is negative in the sense that it damages the industry's reputation. On the other hand, it may trigger merchants to reconsider their payment terminals, which could translate into increased sales opportunities for us.
• Q: If the terminals are now unusable, wouldn't it have been faster to deploy existing terminals immediately to capture market share rather than waiting for the new terminal?
  A: We are deploying what we can. However, given the large volume, we need to procure in bulk to secure favorable margins. The legacy terminal has seen cost-of-goods increases due to semiconductor price inflation. Zento-Shin terminals essentially supported only credit cards and could not handle multiple Pay brands, so all terminals need to be replaced — and there is very strong demand for the latest version that supports diverse payment methods. The new terminal meets all three requirements: cost performance, ease of delivery, and support for diverse payment methods.
• Q: There was previously mention of a rich pipeline of potential deals for next fiscal year. How does order activity feel heading into next year?
  A: I hesitate to say too definitively, but it is very robust. If there is an additional opportunity for coverage, we would be happy to share more on the market environment.
• Q: Are there limitations on which wallets can process payments on your terminals for stablecoin payments?
  A: Currently, yes, there are limitations. The wallet coverage is limited — one has been implemented and approximately two more are scheduled for connection. However, we aim to expand to 10+ going forward. In terms of chains, Solana is the primary chain, with additional chains planned, but we are proceeding carefully, verifying each one, limited to those that can reliably support offline payment processing. Our policy is to connect all wallet, chain, and coin types, and coverage will expand at an accelerating pace starting this year.
• Q: When USD-denominated stablecoins are used for payment, does the company earn revenue from the FX spread?
  A: For the FX swap itself, we plan to use third parties such as exchanges and custodians, so from our perspective, that could be a cost. On the other hand, we do earn revenue on the settlement processing. So to the question of whether 100% of the FX spread becomes our revenue — the answer is no.
• Q: There have been major changes in the payment processing industry — the SBPS and SP Links integration, SoftBank and PayPay's investment in Seven, Digital Garage and Kakaku.com's initiatives. How do these industry changes create business opportunities for your company?
  A: In terms of consolidation, we are seeing more cases of players operating in somewhat adjacent fields within the broader payments landscape joining forces. Everyone is aiming for comprehensive strengthening of their economic ecosystems including e-commerce. However, there has not yet been significant movement in the settlement gateway space, and we expect M&A and MBO activity to emerge going forward. For us, the key is to position ourselves well while carefully evaluating partnerships. We are in an environment where we receive abundant inquiries about business and alliance opportunities, and our fundamental approach is to partner with the right counterparties and thoroughly evaluate promising proposals. We are exploring various options to ensure we catch the best wave first when consolidation in the in-store payment gateway space accelerates.
• Q: Regarding the macro-level decline in payment volumes, which sectors are seeing weakness? Is it beyond just gas stations?
  A: Volumes are not declining — rather, growth is falling short of plan. Domestically, gas stations and retail distribution are the areas in question. Within retail distribution, certain home improvement centers (including building materials) and multi-floor general merchandise stores are seeing reduced uptake of high-ticket items and have pulled back on purchasing, resulting in growth that is trailing plan. Gas station growth is also considerably more limited than planned. We continue to closely monitor these two sectors, as we have since Q1.
• Q: GPV increased QoQ, but payment-related revenue declined meaningfully. What explains this?
  A: The biggest factor is that roughly half of a large terminal deal was recognized in Q1, and that terminal revenue dropped out entirely in Q2. Payment processing fees themselves rose in line with GPV growth, but the loss of the terminal component caused overall payment-related revenue to dip slightly. Additionally, the inbound mix declined, and since inbound take rates are roughly double domestic rates, the blended take rate decreased approximately 1bps QoQ from Q1.
• Q: Why did you choose a shareholder benefits program rather than dividends for shareholder returns?
  A: Our retained earnings are still negative by over JPY 4B. While we could offset this with capital reserves to enable dividends, there is concern about disadvantaging investors who focus on capital-over-book-value considerations, and the negative balance is still substantial. We prioritized the benefits program first, as it can be executed within a controlled budget without touching retained earnings. Our policy of considering dividends going forward remains unchanged.

Q&A List

• Q: Should we think of interest income as roughly proportional to the product of GPV and the policy rate? Could cash flow dynamics shift?
  A: You can generally think of it as roughly proportional. However, since interest accrues on balances closer to the mid-month average, it is not perfectly proportional. The composition of payment types — d-barai, PayPay, Visa, Mastercard, etc. — varies by month, causing mid-month balance fluctuations, so it is approximately proportional but not an exact match. In terms of cash flow, the structure is straightforward: transaction volume flows in, interest accrues during the period before settlement to merchants, and that is essentially it.
• Q: Since the Zento-Shin bankruptcy occurred in July, is it correct to understand that the tailwind to GPV would only become visible from Q2 (Jul-Sep quarter) onward?
  A: That is correct. Our Q2 ends at the end of June. The bankruptcy was in July, but various things were being said in the market beforehand, so we had been preparing in advance. Terminal sales themselves begin in September, but we have mobilized all available inventory including existing terminals. Going forward, we expect that merchants who complete settlement with their existing gateways will progressively become target customers for us.
• Q: Regarding Stablecoin Pay, what types of players are showing interest? The take rate seems high — when might this become visible in the P&L?
  A: The take rate has the potential to come in higher than inbound payments. For general merchants, we are offering 0.98%, which is an attractive sub-1% level from the merchant's perspective as well. In terms of inquiries, we are seeing interest from multiple hobby-related customers, and hotels and other inbound-related businesses have very strong interest in USDC and USDT. Inquiries from major convenience store chains and large merchants have surged, but major clients with POS systems require 3 to 6 months for implementation on their end. Our view is that it will take at least one year to reach volumes comparable to top QR payment brands.
• Q: How much cheaper is the new terminal?
  A: On an absolute price basis, it is roughly the same as the legacy terminal. However, whereas the legacy terminal was susceptible to semiconductor price and FX volatility, the new terminal is designed to be less exposed to price fluctuations. For the same price point, we are delivering significantly higher specs — which is exactly what we were aiming for.
• Q: What new payment methods does the new terminal enable? Is it the stablecoin support? Couldn't most of this be handled through software?
  A: Some things cannot be handled through software alone. Stablecoin support is a major differentiator of the new terminal, enabling compatibility with all stablecoins. Processing slower chains reliably required improved specs including faster response times. The new terminal makes it possible to support all stablecoins. It also enables support for new Pay providers entering the QR space, contactless payments, and FeliCa — all with dramatically improved processing speed, allowing stablecoin payments to be processed even in basement or mixed-use building restaurants.
• Q: The take-rate-like metric calculated by dividing payment revenue (excluding terminal sales) by GPV dropped meaningfully in Q2. Are there factors beyond the inbound decline?
  A: If you calculate precisely, you should see approximately a 1bps decline, which is consistent with the figure when you factor in the inbound mix change. The decline in inbound mix is the primary driver.
• Q: When you mention settlement service providers, are you referring to players like bank subsidiaries — a different category from e-commerce payment processors?
  A: When I referenced the rationale for the new terminal, I was referring to in-store payment service providers where the business environment is currently shifting. In the context of industry consolidation, we are thinking about in-store payment service providers, which operate in a somewhat different business domain from e-commerce payment processors.
• Q: What are the key improvements in the new terminal launching in September? What was previously lacking? Is the revenue impact limited to new customers?
  A: The revenue impact is primarily from new customers. There is steady monthly replacement demand from existing customers, but that is not the main driver. The new terminal is lighter, optimized for portability, and has overwhelmingly faster processing speeds — the fastest in the market, enabling smooth processing even for payment types that typically take longer. Stablecoins can be used practically, and the device can handle dozens of Pay brands without capacity or spec limitations. The legacy terminal could technically handle this but risked becoming sluggish. We can offer the new terminal at the same price point with reduced price volatility risk. We expect slightly higher unit volumes, and will provide a more detailed update in Q3.
• Q: Does the current fiscal year plan include any upside from stablecoins? Is there a risk that the time required for stablecoin implementation could delay execution of existing orders?
  A: No upside from stablecoins is included in the plan. Implementation at major merchants takes over a year, so it is not factored in. Frankly, our hope is that usage will increase with the launch of the new terminal. There is no impact on execution of existing orders — we have allocated dedicated resources, but it is not at a level that disrupts normal operations. We are always running R&D on new payment methods, and the workload for stablecoins is comparable.