Mercari, Inc. (MCARY) Q4 2025 Earnings Call Transcript

Mercari (OTCPK:MCARY) reported strong FY2025 core operating profit of JPY 27.5 billion, significantly exceeding forecasts with 46% year-over-year growth, while revenue reached a record JPY 192.6 billion despite falling short of guidance due to slower marketplace and U.S. segment growth. Notably, all three core businesses—Marketplace, Fintech, and U.S.—achieved full-year profitability for the first time, with Fintech exceeding profit targets and the U.S. business breaking even. Looking ahead, Mercari reaffirmed its midterm strategy for double-digit revenue CAGR and over 25% core operating profit CAGR, emphasizing a strategic transformation into an "AI-native organization" to enhance product experience, boost development productivity, and accelerate top-line growth, particularly in cross-border transactions and Fintech. The company also recorded a JPY 8.3 billion tax benefit from a U.S. subsidiary dividend and plans to prioritize share buybacks for shareholder returns.

Analysis

Mercari, Inc. reported a mixed FY2025, characterized by robust profitability and a strategic pivot towards artificial intelligence amid slowing top-line growth. The company's core operating profit surged 46% year-over-year to JPY 27.5 billion, significantly exceeding its forecast. However, revenue of JPY 192.6 billion, while a record high, grew only 3% and fell short of guidance due to deceleration in its Marketplace and U.S. businesses. A key operational milestone was achieved as all three core segments—Marketplace, Fintech, and U.S.—attained full-year profitability for the first time. The domestic Marketplace GMV growth of 4% missed its 10% target, but this was partially offset by the high-growth cross-border transaction business, which reached JPY 90 billion in GMV. The Fintech segment was a standout performer, with core operating profit of JPY 4.5 billion handily beating its JPY 3 billion target, driven by the issuance of over 5 million Mercards. The U.S. business successfully executed a turnaround, achieving its first-ever annual profit of JPY 900 million and showing signs of GMV recovery in Q4. Looking to FY2026, Mercari guides for modest revenue growth of 4-9%, framing the year as foundational for achieving its unchanged mid-term targets of double-digit revenue CAGR and over 25% core operating profit CAGR by FY2027. Central to this strategy is a company-wide transformation into an "AI-native organization," leveraging AI to enhance user experience, security, and development productivity, which has already yielded a 64% year-over-year increase in output per engineer. The company also noted a JPY 8.3 billion tax benefit and confirmed its capital allocation policy prioritizes share buybacks over dividends.

Key Decisions for Investors

• Investors should closely monitor the execution of Mercari's 'AI-native' strategy as the primary catalyst for re-accelerating top-line growth, which is guided for single digits in FY26 after missing FY25 targets.
• Given the modest growth in the core domestic marketplace, focus on the performance of the high-growth cross-border and Fintech segments, as their continued expansion is critical to achieving the company's mid-term double-digit revenue target.
• The U.S. business's shift to profitability is a positive inflection point; however, investors should seek confirmation of a durable turnaround by watching for sustained positive GMV growth in the coming quarters.
• Consider the company's capital allocation policy, which prioritizes share buybacks and reinvestment for growth over dividends, as a signal of management's confidence in long-term value creation.