Money Forward reports third quarter results. Money Forward, a Japanese financial company… | by Norbert Gehrke | Tokyo FinTech | Oct. 2024

Money Forward, a Japanese financial technology company, held its Q3 2024/24 financial results conference call on October 15, 2024. The company presented a positive outlook for the quarter, highlighting strong performance across several key metrics, including steady progress in revenue and EBITDA, continued quarterly EBITDA surplus and robust growth in the SaaS business.

Strong overall performance

Money Forward demonstrated solid overall performance in the third quarter, with both net sales and EBITDA showing good progress towards full-year guidance. In particular, the company achieved a quarterly EBITDA surplus, thereby strengthening its financial stability. This positive momentum was driven by strong growth in both home and business, particularly in the SaaS business.

Consolidated revenue and EBITDA performance

Third-quarter consolidated revenue reached JPY 9.81 billion, up 31% year-on-year. This growth was driven primarily by the division, which reported a 35% year-over-year increase in net sales. However, it is important to note that third quarter revenues decreased slightly compared to the previous quarter due to the absence of proceeds from the sale of HIRAC FUND, a venture capital firm, recorded in the previous quarter. Excluding this one-time effect, consolidated net sales continued to show an upward trend.

EBITDA for the third quarter was JPY 410 million, with gross profit of JPY 6.53 billion. The company highlighted the positive development of the EBITDA margin, which improved significantly from around -30% in 2022 to almost 20% in the previous year. Management expressed confidence that it would achieve a 10-15% improvement in the EBITDA margin this year and continue this positive trend in the future.

SaaS Business: A Key Growth Driver

The SaaS business proved to be a key growth driver for Money Forward. SaaS ARR reached JPY 27.96 billion, up 32% year over year. This growth was completely organic and was driven by strong performance in both the enterprise and individual user segments. The enterprise segment reported 35% year-over-year growth in enterprise ARR, while the individual user segment recorded 41% year-over-year growth. This positive momentum is a testament to the company’s strategy to focus on product development and customer acquisition in the SaaS space.

However, the Money Forward X segment, which focuses on subscription services with financial institutions, posted flat quarter-on-quarter growth. This was due to challenges in co-selling with regional banks due to the prevailing rising interest rate environment. The company expressed its determination to overcome these challenges by deploying various strategies and measures to restore growth in this segment.

Key initiatives and future prospects

Money Forward unveiled several key initiatives aimed at further strengthening its market position and driving future growth. These initiatives include:

• Improving user experience through continuous feature updates: The Company strives to improve the user experience by introducing new features and improving existing ones. This includes using generative AI to automate tasks, integrating with external services such as tax filing software, and providing enhanced data visualization and reporting capabilities.
• Expansion to companies with more than 300 employees: Money Forward is actively expanding its customer base to include larger companies. The company achieves this by developing features tailored to the needs of larger enterprises, building knowledge in the mid-sized business space, and providing dedicated customer support for new and existing users.
• Providing a composable ERP model with flexibility and scalability: Money Forward focuses on providing a flexible and scalable ERP solution that can be easily integrated into existing systems. This approach allows customers to implement individual features as needed and add new ones over time, reducing implementation effort and allowing greater flexibility.
• Reorganization of financing services to strengthen SaaS and Fintech strategies: To further advance its SaaS x Fintech strategy, Money Forward announced a reorganization of its financing services. This restructuring aims to consolidate its financing services under Money Forward Kessai, Inc., while taking over Money Forward’s sales and marketing efforts. This move is expected to streamline operations and increase customer reach.

Partnership with Sumitomo Mitsui Card (SMCC)

Money Forward highlighted its strategic partnership with Sumitomo Mitsui Card (SMCC) in the home business. The company has formed a joint venture with SMCC, combining its popular personal financial management service Money Forward ME with SMBC Group’s financial services, including Olive and V Point. This partnership aims to create a more personalized and convenient financial service for users and strengthen Money Forward’s presence in the personal finance market.

Financial outlook

The company reiterated its full-year outlook for FY11/24 and expects an advertising to revenue ratio of 15-17% and an improvement in EBITDA margin of 10-15% compared to FY11/23. Money Forward also highlighted its medium- to long-term goal of achieving revenue of over JPY 100 billion and EBITDA of over JPY 30 billion by 2028.

Overall, Money Forward presented a positive outlook for the third quarter of fiscal 2011/24, highlighting strong performance in key areas, including its core SaaS business and strategic partnerships. The company’s continued focus on innovation, customer acquisition and operational efficiency positions it well for sustainable growth in the rapidly evolving fintech landscape.