Japan's Biggest IPO This Year Sees Profit in the Cards, Just Not Now

(Bloomberg) -- Sansan Inc., whose initial public offering on Wednesday was Japan’s biggest this year, plans to prioritize revenue growth rather than profitability in the near future, Chief Financial Officer Muneyuki Hashimoto said in an interview.

Sansan, which scans business cards so that people can discover who within a company knows whom, should be able to increase revenue by 30% and 50% annually, Hashimoto said. Daiwa Securities estimates that sales will rise 37% in the fiscal year ending in May 2020 and will grow 42% the following year.

Sansan raised 33.8 billion yen ($315 million) in the IPO, the biggest for a software company in Japan since mobile game maker Gumi Inc. went public in 2014. The shares soared 21% on its first day of trading Wednesday on the Tokyo Stock Exchange, underscoring investor optimism in its prospects. They climbed as much as 4.6% on Friday.

“The decision to go public was in part driven by the confidence that we can reach profitability while still continuing to invest,” Hashimoto said. “That’s not far off.”

He declined to give a specific timeline, saying the company plans to address the issue during the earnings announcement on July 12. Sansan has forecast an operating loss of 938 million yen for the year that just ended in May, as revenue climbs 38% to 10 billion yen. Daiwa analysts Taro Ishihara and Marina Oyama wrote in a report that the company will turn profitable this fiscal period thanks to a drop in advertising spending.

Sansan operates two businesses. The eponymous Sansan unit, serving over 5,700 corporations accounts for more than 90% of its revenue and is profitable. The cloud-based software can generate sales leads, or suggest go-betweens for any business deals by tracking relationships that are forged every time a card changes hands. A service called Eight targets individuals and small companies and has more than 2 million users.

“Sansan is the company that created this space,” said Osuke Honda, a general partner at DCM Ventures, an early investor in the company and its biggest outside shareholder. “They are an absolute leader.”

The Tokyo-based company dominates the business-card management market in Japan with about 80% share. Rather than chasing a bigger portion of the pie, Hashimoto said the focus is on expanding the market itself. He estimates that for companies with over 1,000 employees about one in 10 is a Sansan customer, but only 1% of their staff make use of the service.

“Right now the users are heavily sales staff, secretaries and executives,” Hashimoto said. “To make the service part of the infrastructure we need to get to rank-and-file and reach 10% or 20%.”

To contact the reporters on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net;Kazu Hirano in Tokyo at khirano1@bloomberg.net

To contact the editors responsible for this story: Edwin Chan at echan273@bloomberg.net, Peter Elstrom

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