Payment volume is expanding rapidly, while PS profit recovery is the focus for FY2027-H1

Consolidated revenue in FY2027-Q1 was ¥9,432 million, down 1.4% from ¥9,569 million in the same quarter of the previous year. Meanwhile, the pretax quarterly loss narrowed from ¥1,345 million in the same quarter of the previous year to ¥428 million, while the quarterly loss attributable to owners of the parent also improved, narrowing from ¥673 million to ¥587 million. The group as a whole remained loss-making, but the loss narrowed, so it is necessary to distinguish between the core earnings of the payment business and valuation changes in the investment business.

PS revenue increased 2.3% year on year to ¥6,037 million. Payment volume rose 41.3% year on year to ¥2.9 trillion, driven by growth at Cloud Pay, collaboration with strategic partners and the launch of major projects for the KDDI Group. However, PS pretax profit fell ¥263 million, or 11.9% year on year, to ¥1,942 million. Since profit declined despite payment-volume growth, merchant mix, contract terms, the take rate and trends in system-related fixed costs are more important than payment volume alone.

In its company presentation, the company attributed the pressure on PS profit to the cancellation and repricing of large merchants in the previous fiscal year, as well as higher fixed costs associated with system enhancements. However, it has not disclosed the breakdown by amount of the revenue decline from merchant cancellations, the margin decline from repricing or the cost of system enhancements. In FY2027-H1, we will assess how much of these effects remains in the cumulative second-quarter results and whether the launch of major projects is more than offsetting the decline in revenue from existing customers.

The FY2027 presentation outlined targets of ¥11.5 trillion in payment volume and ¥2,262 million in PS segment profit. The ¥2.9 trillion payment volume in the first quarter alone is insufficient to assess progress after accounting for seasonality, but whether payment-volume growth continues through the cumulative second quarter and how far PS profit rises from ¥1,942 million will be important indicators in assessing the achievability of the full-year plan. Absorbing the increase in fixed costs and improving profitability after repricing will be necessary for payment-volume growth to translate into profit.