As its corporate philosophy, the Group has established its mission of “Turning encounters into innovation” and its vision to “Become business infrastructure.” To realize this mission and vision, the Group is developing services to change the way companies and business people facing various business challenges work and to promote DX, and it believes that the promotion of these business activities will contribute to solving social issues and eventually maximize shareholder value and corporate value of the Group.
At the beginning of the fiscal year ended May 31, 2023, the Group announced its medium-term financial policy aiming to achieve growth in both net sales and adjusted operating profit*1 for the period from the fiscal year ended May 31, 2023 to the fiscal year ending May 31, 2025. In light of the solid performance progress to date, we have set forth a new three-year policy at the beginning of the fiscal year ending May 2025.
Under the new medium-term financial policy, the Group aims for consistent, solid growth in net sales and accelerated growth in adjusted operating profit. Specifically, we expect net sales, the most important management indicator, to grow at a three-year CAGR of 22% to 27%. On the profit front, we aim to achieve an 18% to 23% adjusted operating profit margin for the fiscal year ending March 31, 2027 by accelerating growth even after making necessary investments for top-line growth.
As for the medium- to long-term outlook for major costs, the cost of sales ratio is expected to decline due to the improved profitability of Bill One. We also forecast to see declines in the ratios of S&M expenses*2 to net sales and G&A expenses*3 to net sales in line with historical trends. Over the long term, we are reasonably confident that we can achieve at least a 30% adjusted operating profit margin.
*1 Adjusted operating profit: Operating profit + Share-based payment expenses + Expenses arising from business combinations (amortization of goodwill and amortization of intangible assets)
*2 Sales and marketing (S&M) expenses: the sum of advertising expenses, and personnel and corporate common expenses related to sales promotion
*3 General and administrative (G&A) expenses: the sum of personnel expenses for corporate departments and related corporate common expenses
The Group sets appropriate performance indicators for each of its business units to formulate and implement management strategies. In the Sansan/Bill One Business, in light of the vast potential market size of both Sansan and Bill One, we are working to maximize net sales, the most important indicator, while at the same time striving to improve the growth speed of adjusted operating profit. In the Eight Business, we are operating the business with a greater emphasis on profitability considering that it is important to grow adjusted operating profit steadily while increasing net sales efficiently.
We consider that securing outstanding human resources, addressing security risks, and strengthening technical capabilities are measures that need to be taken throughout the Group. Moreover, we are working to achieve discontinuous growth through the creation of new services based on our competitive advantage and the active use of M&A backed by our cash-generating capability.
The digital transformation (DX) market related to our services continues to expand primarily due to raising awareness of DX, changes in the way we work, and a growing interest in SaaS business. The DX market is forecast to reach ¥8,035.0 billion by FY2030 (up ¥4,015.3 billion from FY2023)*4, while the SaaS market in Japan is forecast to reach ¥2,099.0 billion by FY2027 (up ¥686.2 billion from FY2023)*5.
Documents handled by the Group such as business cards and invoices are still frequently used in paper form, leaving significant room for operational efficiency. We have estimated the potential market size for each service as follows. First, Sansan users account for only about 4% of the total working population in Japan as of May 31, 2024. Next, Bill One had 2,816 paid subscriptions as of May 31, 2024, which is an extremely small coverage considering the total addressable market, which comprises approximately 2 million companies in Japan. We can safely say that there is still vast room for development in both markets.
*4 Based on Market Edition and Corporate Edition of 2024 Outlook of the Digital Transformation Market by Fuji Chimera Research Institute
*5 Based on 2023 New Software Business Markets by Fuji Chimera Research Institute
For the Group to achieve sustainable growth, it is crucial that we hire many talented professionals with diverse career backgrounds, and then improve our sales, development and managerial structures. We will strive to ensure diversity of our people while establishing work environments and arrangements that substantially fuel employee motivation for talented professionals who share an understanding of the Group’s corporate philosophy and business activities.
Given that the Group handles substantial volumes of important information assets such as personal information through services we provide, it is crucial that we continuously strengthen our system for managing information. We continue to take the utmost care to safeguard information with measures including strict management of information assets based on our Information Security Policy and Policy on Personal Information Protection. We will persist in our efforts to strengthen and maintain our in-house systems and management approaches in that regard going forward.
As technology to accurately digitize analog information is the Group’s major competitive advantage and acts as a common platform underpinning growth of the various services the Group provides, we believe it is important to continuously improve and strengthen this technology. We accordingly engage in initiatives to further improve our technological capabilities, through efforts that involve hiring outstanding technical experts in and outside Japan while also investing in and monitoring cutting-edge technologies.
The Group has been creating new services that promote corporate DX by applying the strengths and expertise it has earned through existing services to other areas, with the focus on technologies to digitize analog information. We will continue to create new services and expand the provision of them in business areas with room for significant efficiency gains through digitization.
By effectively utilizing our management resources and business operation know-how, we will promote measures to increase the corporate value of each Group company so as to create synergies. In addition, since we have been already generating stable operating cash flow and free cash flow while executing investments necessary for the growth of our main services, we have positioned the use of M&A as one of our important growth strategies for further future growth and will continue to actively consider this option.