Net Protections Holdings Q1 Earnings Q&A Analysis: Re-growth of 'NP Atobarai' and Profitability Improvement Scenarios for B2B and 'atone'

In the Q&A session of the Q1 earnings call for Net Protections Holdings, discussions centered on the GMV (Gross Merchandise Value) trends of its flagship service 'NP Atobarai' , the potential for cost-of-sales improvements in the membership-based payment service 'atone' , and the growth sustainability of 'NP Kake-barai (B2B)' alongside the progress of the alliance with Sumitomo Mitsui Card . This report provides a multi-faceted analysis of the key management realities and business strategies highlighted during the session.

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1. Growth Momentum and Profitability of the B2C Business (NP Atobarai & atone)

For the flagship service 'NP Atobarai' and the next-generation payment service 'atone', the focus remains on expanding transaction volume while maintaining control over margin structures.

① Background of the GMV Turnaround in NP Atobarai

The primary driver behind the return to positive GMV growth for 'NP Atobarai' is the successful launch of large-scale merchants . Sales performance remains extremely robust, and the company expects this GMV growth trajectory to continue.

② Competitive Environment and Impact on Gross Profit Margin

Meanwhile, due to the intense competitive landscape in the BNPL (Buy Now, Pay Later) market, price competition (a certain degree of take-rate compression) has emerged in merchant acquisition. As a result, while GMV is growing steadily, the gross profit margin is showing a slight downward trend . Excluding one-time factors from the previous fiscal year, the growth rate of gross profit for the full year is expected to be 'slightly higher than the previous year (roughly flat on an adjusted basis)' .

③ Cost Reduction and Gross Margin Improvement Potential in atone

For 'atone', several cost-reduction initiatives are underway to expand margins. Management indicated that there is still significant room for reduction in the following areas:

• Reduction of default rates (bad debt costs) : Mitigating defaults through the enhancement of credit scoring models.
• Efficiency in collection costs : Digitizing collection operations and optimizing dunning workflows.
• Compression of operating and system-related expenses . The company aims to achieve sustainable long-term improvement in gross profit margins by realizing this potential for cost reduction.

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2. Current Status of the B2B Business (NP Kake-barai) and Timing of Alliance Effects

Regarding the B2B business (NP Kake-barai), which provides comprehensive billing and payment outsourcing for companies, the company explained the factors behind short-term growth adjustments and the expected ramp-up period for large-scale collaborative initiatives.

④ Factors Improving Collection Rates in B2B

Regarding the temporary slowdown in collection rates observed in the previous quarter, the company attributed it to 'calendar-related collection delays.' It was confirmed that collection rates have recovered as planned following the strengthening of dunning operations .

⑤ Analysis of the Temporary Slowdown in B2B GMV Growth

The main reasons for the current moderate B2B GMV growth rate are as follows:

• Normalization of the previous year's large-scale merchant effect : The high hurdle created by large projects that went live in Q1 of the previous fiscal year.
• Strategic allocation of sales resources : The pace of new merchant acquisition slowed temporarily as resources were concentrated on large alliance projects and ultra-large merchants. However, the current pipeline of business negotiations remains very strong , and management expressed confidence in returning to the planned cruising speed.

⑥ GMV Contribution and Full-Scale Launch of the Sumitomo Mitsui Card Alliance

Regarding the business alliance with major financial institution Sumitomo Mitsui Card , the introduction of prospective clients is accelerating ahead of the full-scale implementation scheduled for July onwards. The impact on financial performance is projected as follows:

• Launch timing : 'At the earliest, the second half of this fiscal year, with full-scale operation generally expected from the next fiscal year.'
• Impact on long-term growth : While B2B GMV is expected to trend moderately this fiscal year, the alliance effects are projected to fully materialize from the next fiscal year, re-accelerating growth to the high-pace trajectory outlined in the medium-term management plan.

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3. atone Take-Rate Outlook and Future Business Development

⑦ atone Take-Rate Trends and Portfolio Changes

In response to concerns regarding the decline in the 'atone' take-rate (merchant commission rate), management explained that this is due to 'the expansion of transactions centered on the EC digital domain.' While commission rates for digital goods and EC platforms tend to be set lower than those for in-store or specific physical goods, the commission levels in this domain are not excessively low, and acquisitions are proceeding while securing appropriate margins . Therefore, it was emphasized that there is no expectation of a sharp deterioration in the overall take-rate for atone.

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4. Summary of Key Points from the Earnings Q&A

The business trends of Net Protections Holdings revealed through this Q&A session can be summarized in the following three points:

1. Balance between Top-line Expansion and Margins : While NP Atobarai's GMV growth is recovering due to the launch of large merchants, the focus remains on maintaining and improving gross margins amidst a competitive environment.
2. Existence of Cost-Reduction Levers : Reducing defaults and optimizing collection costs in atone will be key drivers for future profitability improvements.
3. B2B Re-acceleration Scenario for Next Fiscal Year : Although growth is currently tempered by resource concentration and year-over-year hurdles, the company expects a return to medium-term plan targets through the full-scale operation of the Sumitomo Mitsui Card alliance (H2 to next fiscal year).