Infomart 2492
インフォマート
Recent Updates
2021-12-03
2021-10-29
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Shiodome Shiba Rikyu Building 1-2-3 Kaigan, Minato-ku Tokyo, Japan 105-0022
Summary
Infomart aims to establish itself as a platform by offering apps designed to enhance operational efficiency through B2B Platform Ordering for the food industry and B2B Platform Invoicing for general corporations.
Internet Software & ServicesSoftware
Key dates
2012-02-14
Coverage initiation
Executive summary
Business
Infomart Corporation is a provider of online platforms for commercial transactions mainly to the food industry. It receives a monthly system usage fee from customers based on a fixed price or pay-per-use plan as well as a system set-up fee from new customers. The company has a stable earnings base, because monthly system usage fees account for around 95% of sales and cancellation rates are low. Whereas some upfront spending such as system development expenses arise before services are launched, the business model ensures high marginal profit rates after the service goes live. In FY12/20, sales were JPY8.8bn (+2.8% YoY), operating profit was JPY1.5bn (-40.4% YoY), and operating profit margin was 16.8% (28.9% in FY12/19). The company operates in two segments: B2B Platform Food and B2B Platform ES.
B2B Platform Food: Sales of JPY6.7bn (76.2% of total sales), operating profit of JPY2.7bn, and OPM of 40.2%. In this segment, Infomart provides online platforms that connect restaurant operators (both restaurant chains and independent restaurants) with wholesalers. Key platforms include 1) B2B Platform Ordering: an online platform that links restaurant companies with wholesalers, and wholesalers with food manufacturers; and 2) B2B Platform Standards Database: a platform of manufacturers’ food standards for processed foods converted to a database for use by wholesalers and restaurant companies. B2B Platform Ordering must be adopted by buyers and sellers of food ingredients to function, and its convenience increases in tandem with growth in the user base (network effect). Excluding special circumstances such as discontinued operations, cancellations are rare because platform users risk losing suppliers or sales channels when they cancel their contract.
B2B Platform ES: Sales of JPY2.1bn (23.8% of total sales), operating loss of JPY1.2bn. In this segment, Infomart operates platforms to digitize invoices, contracts, and other documents for companies across all business sectors. Key platforms include 1) B2B Platform Invoicing: a platform for easy issue, receipt, and management of electronic invoices; 2) B2B Platform Matching: a one-stop service for finding buyers and sellers, negotiating prices, price estimates, ordering, and payments; and 3) B2B Platform Contract: a platform for conclusion, management, workflow, and internal authorization of contracts between companies in electronic form and controlled centrally online.
Growing user base: As of March 2021, B2B Platform users totaled 566,446 companies (+37.4% YoY) and 1,101,158 offices (+27.0% YoY). In FY12/20, the total transaction value for the company’s platforms reached 12.7tn (+13.0% YoY). As of Q1 FY12/21, the core B2B Platform Ordering service facilitated orders between 3,230 buyer companies (restaurants, hotel chains, and other parties procuring food ingredients) (+3.1% YoY, market share above 40%), and 38,363 seller companies (manufacturers and wholesalers) (+4.5% YoY, market share above 50%). As of May 2021, B2B Platform Invoicing users exceeded 570,000 companies, and the service is also attracting users outside of the food industry. As of end-March 2021, B2B Platform Contract, a relatively new service launched in 2018, had signed up 16,751 users (number of companies logging in), reflecting YoY growth of 208.8%.
Trends and outlook
In FY12/20, Infomart reported sales of JPY8.8bn (+2.8% YoY), operating profit of JPY1.5bn (-40.4% YoY), and net income of JPY1.0bn (-40.2% YoY). The impact of the COVID-19 pandemic on the company’s businesses was mixed, with sales in the B2B Platform Food segment down 2.0% YoY on lower transaction volumes versus a 22.0% YoY rise in sales in the B2B Platform ES segment, which benefited from the growing trend toward the digitalization of business processes and was able to increase the number of companies under paid contract for its B2B Platform Invoicing service. Operating profit fell YoY as the build-up of the company’s server infrastructure pushed the cost of sales up 17.7% YoY, and SG&A expenses grew 21.9% YoY due to the hiring of more sales and sales support staff and increased promotion expenses.
The company's FY12/21 forecast (revised on October 29, 2021) calls for sales of JPY9.7bn (+11.0% YoY), operating profit of JPY940mn (-36.1% YoY), net income attributable to owners of the parent of JPY529mn (-47.8% YoY), and EPS of JPY2.32. As in FY12/20, Infomart will sacrifice short-term profit in its drive to expand its client base and accelerate sales growth over the medium term. At the segment level, the company expects sales in the B2B Platform Food segment to rise 4.0% YoY, assuming some ongoing drag from pandemic-related causes. In the B2B Platform ES segment, the company projects sales to grow 33.6% YoY on additions of new clients for paid contracts and rising utilization, mainly for its B2B Platform Invoicing service. The company expects cost of sales to rise 35.3% YoY with the addition of more servers to assure reliability. The company also anticipates SG&A expenses to grow 11.8% YoY as it aims to continue hiring more sales and sales support staff while maintaining high levels of promotion expenses. For FY12/21, Infomart plans to pay a dividend of JPY1.10 per share (JPY3.71 per share in FY12/20), representing a dividend payout ratio of 47.4% on projected earnings.
In the medium term, the company targets sales of over JPY10.0bn, operating profit of over JPY3.0bn, and OPM of over 30% in around three years’ time.
Strengths and weaknesses
Shared Research sees the company’s strengths as market dominance, CEO’s skill in driving creation of new value by utilizing data, and solid financials; its weaknesses are small size, cost of launching new services, and yet to become an industry standard. (See the Strengths and weaknesses section for details.)
Key financial data
Note: Figures may differ from company data due to differences in rounding methods.
Note: The company carried out 2-for-1 stock splits on January 1, 2014 (effective date), on January 1, 2015 (effective date), on January 1, 2017 (effective date), and on January 1, 2020 (effective date). Per share data above is adjusted for the stock splits.
Recent updates
Business matching contract with Tokyo Star Bank
On November 9, 2021, Infomart Corporation made an announcement regarding a business matching contract with Tokyo Star Bank, Ltd.
Infomart concluded a business matching contract with Tokyo Star Bank, Ltd. (unlisted) to support the growth of the bank's client companies.
Under the contract, Infomart will be able to provide cloud services, such as B2B Platform Ordering, B2B Platform Invoicing, and Electronic Invoice Early Payment (for quickly monetizing invoices and accounts receivable), to Tokyo Star Bank's client companies.
According to the company, the number of financial institutions considering offering business digitalization services and finance services to support the businesses of their client companies is increasing. This is because the promotion of teleworking by client companies amid the COVID-19 pandemic is causing adoption of cloud services for digitalizing business processes and forms that have done away with personal seals and faxed copies to increase. From the perspective of financing, increased attention is being paid to factoring services that monetize accounts receivable and secure cash on hand.
Infomart says that the two companies will work together going forward to support the growth of companies by promoting the digitalization of ordering and invoicing processes and speeding up the process of procuring business funds.
Investment in Deepwork that operates "invox" invoice processing automation service
Infomart Corporation announced that it has invested inDeepwork Co., Ltd. (unlisted).
About Deepwork
Deepwork operates the "invox" invoice processing automation service and strives to maximize time value by streamlining and automating operations according to the concept of "increasing time density and raising time value."
"invox" is a cloud-based service that automates operations associated with theprocessing of incoming invoices. Regardless of invoice format, this service generates remittance data, journal entry data, and invoice data with 99.9% accuracy and automates payment and recording processes associated with accounting.
Reasons for investment
According to Infomart, needs for the digitalization of accounting operations and electronic invoicing are increasing rapidly due to the spread and proliferation of teleworking, revisions to the Electronic Books Maintenance Act in January 2022, and the upcoming launch of a new qualified invoice system (requiring the retention and issue of qualified invoices) within Japan in October 2023. The company explains that it made the decision to invest in Deepwork in response to these circumstances and, through this investment, aims to further support companies as they digitalize their back-office operations and strive to achieve digital transformation in their billing processes. The company has not disclosed the total amount of spending associated with this investment.
The company views this investment as its first step toward forming a consortium built around its B2B Platform Invoicing service and plans to continue collaborating with other vendors and forming business alliances.
Partnership and establishment of a joint venture with Kushikatsu Tanaka HD
Infomart Corporation announced that it signed an agreement to establish a joint venture with Kushikatsu Tanaka Holdings Co.
Based on the resolution passed at its Board of Directors meeting held on September 17, 2021, the company concluded an agreement to form a partnership and establish a joint venture with Kushikatsu Tanaka Holdings Co. ("Kushikatsu Tanaka HD") on October 13, 2021. Under the partnership agreement, the two companies will jointly launch an app development business and develop Restaurant Operations Platform App (provisional name). Through this joint business venture, they will support the restaurant industry in its efforts to increase productivity and resolve the issues of labor shortages and rising labor costs.
Overview of joint venture
Reasons for partnership
The restaurant industry has been hit hard by the COVID-19 pandemic, as many restaurants had to temporarily close or shorten business hours to prevent the spread of the disease. With an eye toward business operations during and after the pandemic, Infomart has supported various businesses’ efforts to enhance operational efficiency and promoted digital transformation. The company operates B2B Platform, a cloud-based service that facilitates the shift of various commercial activities between companies to digital data with the goals of increasing operational efficiency, cutting costs, and realizing paperless operations. In addition to B2B Platform, the company has been aiming to develop a new system for increasing the convenience of users in the restaurant industry.
Kushikatsu Tanaka HD thinks that even if the COVID-19 pandemic comes under control, restaurant sales will not fully return to their pre-pandemic levels as the industry will continue to be affected to some degree by the wide spread adoption of remote work and avoidance of parties and other large gatherings, as well as the shift to eating at home and prepared foods. Further, there are concerns of personnel loss and reduced operational competency of employees due to extended periods of restaurant closures. In light of these factors, Kushikatsu Tanaka HD thinks it is necessary for restaurant operators to revise their earnings structures and realize labor savings through utilizing IT in store operations and increasing operational efficiency. Hence, it has been considering the development of an app to support restaurant operations management.
Infomart and Kushikatsu Tanaka HD entered into the partnership agreement based on the shared understanding that they can help realize labor savings and contribute to increased productivity of the restaurant industry through app development.
Outlook
Infomart expects the partnership agreement to have only a marginal impact on its earnings performance for FY12/21. The company said it would promptly disclose any matters regarding the agreement that may have material impact on its earnings.
Appointment of a new president
Infomart Corporation announced the appointment of a new president.
At a meeting of its Board of Directors held on September 17, 2021, the company resolved that itsManaging Director Ken Nakajima will replace current President and CEO Osamu Nagao as of January 1, 2022. Osamu Nagao will be appointed Chairman and Director on the same day.
Mr. Nakajima was born on March 31, 1966. He joined The Sanwa Bank, Limited (currently MUFG Bank, Ltd.) in 1988, and Informart in 2010. He has a proven track record taking responsibility in the company in a variety of areas, including the launch and expansion of electronic invoicing platforms, strategic human resources, and new business development.
With the appointment of Mr. Nakajima, who has been in charge of the sales division, to President and CEO, the company intends to accelerate the promotion of DX among Japanese companies by further expanding the B2B platform. In addition, current President and CEO Mr. Nagao will focus on assisting strategic collaboration with other companies and the planning and promotion of investments and M&A as Chairman of the Board.
Trends and outlook
Quarterly trends and results
Note: Figures may differ from company data due to differences in rounding methods.
Note: Figures may differ from company data due to differences in rounding methods.
Note: Figures may differ from company data due to differences in rounding methods.
Q3 FY12/21 results (out October 29, 2021)
Overview
Main points in Q3 results
Sales
Sales were up 11.6% YoY to JPY7.2bn. In the B2B Platform Food segment (+3.5% YoY), new starts by buyer companies seeking to use cloud-based management systems for the B2B Platform Ordering service and the B2B Platform Standards Database service increased. As a result, system usage fees from buyer companies grew.
In the B2B Platform ES segment (+39.0% YoY), system usage fees rose on the back of heightened interest in operational efficiency and digital transformation (DX) in the B2B Platform Invoicing service as well as increased adoption of teleworking.
As of end-September 2021, B2B Platform users totaled 641,129 companies (604,568 at end-June 2021) and 1,241,830 offices (1,175,773 at end-June 2021).
Costs and profits
Costs of sales rose 2.4% YoY due to higher data center costs owing to expansion of the company’s server infrastructure. SG&A expenses grew 7.4% YoY, reflecting higher personnel expenses owing to the hiring of more sales and sales support staff. Operating profit fell 13.7% YoY as a result of new investments to accelerate future sales growth.
Segment results
B2B Platform Food
Sales: JPY5.1bn (+3.5% YoY; 74.0% progress rate versus full-year FY12/21 forecast; 73.8% progress rate in Q3 FY12/20 versus FY12/20 results)
Operating profit: JPY1.7bn (-16.4% YoY; 82.8%; 74.2%)
Sales rose 3.5% YoY to JPY5.1bn. In the B2B Platform Ordering service, system usage and set-up fees from buyer companies rose in line with an increase in new customer count among buyer companies aiming to streamline workflows in takeout, delivery, and other new formats as well as hotel and school lunch operations. Seller companies were impact by business self-restraint and temporary closure of restaurants due to the pandemic. Transaction volumes of food materials and other goods were sluggish, and system usage fees for seller companies (pay-for-use) were also flat YoY. Users of B2B Platform Standards Database service grew, and revenue from system usage fees and set-up fees were up YoY.
The combined number of buyer and seller companies using the platform’s two services increased, with users of the B2B Platform Ordering service up 6.1% YoY to 43,048 companies and B2B Platform Standards Database users rising 7.1% YoY to 10,787.
Operating profit fell 16.4% YoY to JPY1.7bn.
Increased usage by new businesses and companies that have previously been reluctant to go digital
From the beginning of FY12/21, Infomart has seen an increase in contracts with businesses operating in new restaurant formats, including delivery services and ghost kitchens (restaurants that prepares meals exclusively for delivery). There has also been an increase in contracts with food service providers (such as company cafeteria operators), nursing care facilities, hospital food service providers, and hotels that were previously reluctant to use the company's B2B Platform Ordering and other services. According to the company, more and more companies, including smaller restaurants and major restaurant chains, are looking to streamline their purchasing operations to cut down on food waste losses.
B2B Platform ES
Sales: JPY2.0bn (+39.0% YoY; 77.5% progress rate versus full-year FY12/21 forecast; 70.6% progress rate in Q3 FY12/20 versus FY12/20 results)
Operating loss: JPY760mn (operating loss of JPY945mn in cumulative Q3 FY12/20)
Sales expanded 39.0% YoY to JPY2.0bn. For the B2B Platform Invoicing service, operational efficiencies and greater use of teleworking led to a 23.2% YoY increase in new companies under paid contract for using receiving and issuing models. In addition, system usage and set-up fees rose as utilization (shift to electronic invoice data) steadily progressed.
The operating loss was JPY1.7bn. This primarily reflected an increase in personnel expenses owing to the continued hiring of sales and sales support staff before and during 2020 as part of the company’s plan to expand the B2B Platform Invoicing service.
FY12/21 company forecast (revised on October 29, 2021)
Note: Figures may differ from company data due to differences in rounding methods.
Note: 2H FY12/21 figures are Shared Research estimates based on difference between full-year and 1H forecasts.
Overview
On October 29, 2021, the company upgraded its full-year FY12/21 forecast as follows. The previous forecast was announced on February 15, 2021.
Reasons for revision
Infomart expects sales to exceed its initial forecast (announced on February 15, 2021) by JPY203mn. The company anticipates earnings in both the B2B Platform Food segment and the B2B Platform ES segment to exceed its initial forecast (see below). The company expects the cost of sales (mainly software amortization, data center costs, and B2B Platform Invoicing commission fees) to be JPY133mn below the initial plan. On the other hand, the company expects SG&A expenses (mainly promotion expenses for B2B Platform Invoicing) to exceed its initial forecast by JPY96mn. As the downgrade to cost of sales exceeds the upgrade to SG&A expenses, the company expects operating profit, recurring profit, and net income attributable to owners of the parent to exceed its initial forecasts.
Segment breakdown
The company expects B2B Platform Food sales to exceed its initial forecast by JPY58mn. All prefectures lifted their states of emergency in October 2021, and the company expects a gradual recovery in the transaction volume of food materials and other goods toward the end of the year. As a result, the company anticipates the number of buyer and seller companies using B2B Platform Ordering to continue rising, and it projects revenue from system usage fees and set-up fees to exceed its initial target.
In the B2B Platform ES segment, the company expects sales to exceed its initial forecast by JPY143mn. The company projects revenue from system usage fees and set-up fees to exceed its forecast due to an increase in the number of new clients for paid contracts and steady growth in the use of B2B Platform Invoicing (conversion of invoices to electronic data), as operational efficiency improves and remote working becomes more common.
Overview by segment
B2B Platform Food
In cumulative Q3 FY12/21, sales in the B2B Platform Food segment were JPY5.1bn (+3.5% YoY), exceeding the company's initial forecast of JPY5.1bn. (For the company's initial forecast, please refer to the "FY12/21 initial company forecast and results (quarterly basis)" section below. Operating profit was JPY1.7bn (-16.4% YoY) in cumulative Q3, beating the initial forecast of JPY1.5bn. The state of emergency due to the pandemic continued into 2H, but the company expects a gradual recovery in the transaction volume of food materials and other goods toward the end of the year, as all prefectures lifted their states of emergency in October 2021.
As for the number of buyer companies (such as restaurants) and sellers (food wholesalers), although the impact of the pandemic will continue throughout FY12/21, the company has anticipated steady growth from the beginning of FY12/21. Even in FY12/20, while heavily affected by COVID-19, there was a net increase in buyers of 121 companies (+3.9% YoY), and sellers increased by 1,736 companies (+4.8% YoY). The company says it aims to obtain new customers at a slightly faster pace than in FY12/20 based on two main factors. First, in food-related industries as well, there is a growing push to adopt digital technologies to boost productivity. Second, the company has become quite adept at non-face-to-face marketing as well and is gaining success at winning contracts with this method (new contracts temporarily stagnated in FY12/20).
As a result, as of end-Q3 FY12/21, the total number of companies using the B2B Platform Ordering was 43,048, an increase of 1,931 from end-FY12/20. The pace of uptake is accelerating, as the total number of companies using the B2B Platform Ordering at end-Q3 FY12/20 was 40,591, up 1,331 from end-FY12/19.
Regarding the B2B Platform Standards Database (which accounts for more than 20% of the B2B Platform Food segment’s sales), the company expects to continue obtaining new contracts at a steady pace. With growing consumer conscientiousness regarding food safety and security as well as allergy measures, demand remains strong for the company’s B2B Platform Standards Database, which improves productivity by digitally managing food ingredients. Based on revised food safety legislation, compliance with hazard analysis and critical control points (HACCP) became fully obligatory in June 2021, which the company believes sets the stage to promote greater interest in the B2B Platform Standards Database.
B2B Platform ES
In the B2B Platform ES segment, cumulative Q3 FY12/21 sales of JPY2.0bn (+39.0% YoY) exceeded the initial forecast of JPY1.9bn (see table below for initial forecast). The operating loss of JPY760mn was smaller than the initial forecast of JPY1.0bn. Infomart is allocating the portion of sales that exceeded its initial forecast in 1H (JPY170mn) to additional promotional spending in 2H. The aim is to grow the number of paid contracts in B2B Platform Invoicing and accelerate the shift to electronic invoicing for existing paid contract customers.
The company anticipates sharp growth in sales, driven by B2B Platform Invoicing, which accounts for more than 60% of sales in the B2B Platform ES segment. Among companies, the need for digitization of invoices is increasing, reflecting the increased spread of remote work, revisions to the Electronic Books Maintenance Act in January 2022, the upcoming launch of a new qualified invoice system (requiring the retention and issue of qualified invoices) within Japan in 2023, and the improvement in productivity via digital transformation (DX).
Infomart plans to obtain new paying customers by promoting the product appeal of B2B Platform Invoicing in terms of four main points: 1) a large number of invoices can be issued in a batch; 2) invoices can be saved electronically; 3) the service can be linked with accounting or sales management systems; and 4) authorization system usage enables accounting to be done by telecommuting. It also plans to use the growing need for digitalization of contracts to increase the number of companies using B2B Platform Contract.
Cost of sales and SG&A expenses
Cost of sales in cumulative Q3 FY12/21 came to JPY2.5bn (+32.7% YoY). This was JPY128mn lower than initially forecast (JPY2.7bn), and the company revised down its full-year forecast by JPY134mn.
The largest factor in the YoY increase in the full-year forecast is the increase in data center costs (+JPY750mn YoY) due to the expansion of the server system. Infomart has been strengthening its server system in line with the rise in the number of its client companies. It expects to acquire more large client companies with many clients and high volumes of issuance and receipt of invoices. In addition to preparing for the anticipated increase in transaction volumes, Infomart plans to have servers with redundancy that are more reliable and capable of supporting business continuity plans. By doing so, the company hopes to secure customers who have high volume requirements in terms of items that need to be checked ahead of adoption of the new system.
Launch of planned data center operations commenced in July 2021.
The company expects to bolster its server system by end-FY12/22. It expects an increase in cost of sales of about JPY500mn in FY12/22.
SG&A expenses in cumulative Q3 FY12/21 were JPY3.7bn (+7.4% YoY). While this was JPY135mn lower than the initial forecast of JPY3.8bn, the company expects full-year SG&A expenses to reach JPY5.2bn, JPY96mn higher than the initial forecast of JPY5.1bn. In 1H, promotion expenses and travel expenses were lower than projected, but the company expects to book deferred promotion expenses in 2H as initially forecast. The company plans to allocate the portion of sales that exceeded its initial forecast in 1H (JPY107mn) to additional promotional spending.
Infomart expects the YoY growth in SG&A expenses for the full year to be driven by higher personnel expenses. It increased the number of sales and sales support staff to accelerate sales growth in FY12/20, and expects related impact to persist in FY12/21.
By segment, the company projects FY12/21 SG&A expenses of JPY2.5bn (+7.4% YoY) in the B2B Platform Food segment and JPY2.6bn (+16.9% YoY) in the B2B Platform ES segment. Thus, it plans on higher SG&A expenses particularly in the B2B Platform ES segment, which includes B2B Platform Invoicing.
In FY12/21, Infomart says it plans to hire a total of about 10 employees, including mid-career hires. It will slow down its hiring pace from FY12/20 (net increase of 37 employees).
FY12/21 initiatives
Business alliances
New initiatives under the company’s management policies (see below) include “diversifying earnings sources.”
Business alliance with Kushikatsu Tanaka Holdings
On October 13, 2021, Infomart signed an agreement with Kushikatsu Tanaka Holdings regarding a business tie-up and the establishment of a joint venture, Restartz Co., Ltd. Under this business alliance, the two companies will engage in the app development business, including the development of the Restaurant Operations Platform App (provisional name).
This app is designed to support the general operation of restaurants. The restaurant operation process, from opening to closing, varies depending on the type of restaurant, customer base, and location, and each restaurant utilizes its own management expertise. The app developed by the two companies aims to clarify and visualize this tacit knowledge so that even inexperienced employees can manage restaurant operations efficiently. The company believes this will facilitate savings in manpower and contribute to higher productivity in the restaurant industry.
Investment in Deepwork
On October 29, 2021, the company announced that it had made an investment in Deepwork Co., Ltd.
Deepwork operates the "invox" invoice processing automation service and looks to maximize time value by streamlining and automating operations based on the concept of "increasing time density and raising time value." "invox" is a cloud-based service that automates operations associated with the processing of incoming invoices. Regardless of the invoice format, it generates remittance data, journal entry data, and invoice data with 99.9% accuracy, and automates payment and recording processes for accounting.
Specifically, all the user has to do is upload a paper or PDF invoice to a dedicated invox folder or send the invoice to a dedicated email address. The system recognizes the layout of the invoice and converts it into electronic data (AI-OCR function).
Informat's B2B Platform Invoicing is already linked to Deepwork's invox system, which has an AI-OCR capability. The collaboration between the two companies was announced in December 2020.
According to Infomart, the need for digitization of accounting operations and electronic invoicing is increasing rapidly, reflecting the increased spread of remote work, revisions to the Electronic Books Maintenance Act in January 2022, and the upcoming launch of a new qualified invoice system (requiring the retention and issue of qualified invoices) within Japan in 2023. The company explains that it made the decision to invest in Deepwork to further support companies as they digitalize their back-office operations and strive to achieve digital transformation in their billing processes.
The company views this investment as the first step in the formation of a consortium centered on B2B Platform Invoicing, and plans to continue collaborations and business tie-ups with other vendors.
Launch of the new B2B Platform Trade service (July 2021)
The B2B Platform Trade service enables the management of quotes, order placements, order receipts, deliveries, product receipts, and acceptances on a single platform. In addition, linking the platform to B2B Platform Invoicing and B2B Platform Contract allows the completion on one platform of everything from quotes to invoicing and contract operations.
The company noted that the development of B2B Platform Trade will allow it to expand its revenue stream, which is now focused on the food industry. B2B Platform Trade can handle ordering operations in industries across the board and cover the full range of transactions between companies as well.
Shared Research understands that B2B Platform Trade will be the most comprehensive services offered by Infomart. The company's current key source of revenue, B2B Platform Ordering (launched in 2003), is an ordering service specializing in food industry commercial flow and is not used for other industries. While the B2B Platform Invoicing and B2B Platform Contract services can serve all industries, the company did not previously have a service that could cover quote and delivery notice functions.
Based on the company’s own survey (February 9–15, 2021), the paperless trend is not catching on very quickly in areas such as quotes, purchase orders, delivery notices, and invoices. More specifically, 60.1% of valid responses in the survey indicated that paper documentation is still in place for invoices and payment notices, while 54.3% of valid responses said the same for delivery and receipt notices. For companies using paper documentation, orders are often made via telephone or fax. B2B Platform Trade is a cloud service that converts analog-based operations into electronic data (similar to the B2B Platform Ordering service).
Revised Electronic Books Maintenance Act
The revised Electronic Books Maintenance Act is due to come into effect in January 2022. Shared Research understands that the revised act will accelerate the shift to electronic data for invoices generated in various inter-company transactions.
Types of national tax-related documents and methods of storage
The national tax-related documents that companies are required to keep are largely divided into accounting books and documents.
Accounting books are specific to each company, and include materials that are fundamental for the preparation of financial statements. These include journal entry ledgers, cash receipt and disbursement ledgers, accounts receivable and payable ledgers, fixed asset ledgers, and sales ledgers. If these documents are preserved using accounting software that meets the requirements for effective electronic storage (see below), they can be stored in this format rather than as paper originals. Alternatively, these paper documents can be retained and stored in their original format.
The documents are further divided into transaction-related documents and financial documents.
Transaction-related documents include invoices, contracts, purchase orders, quotations, receipts, and delivery notes. The legally valid storage method is determined separately depending on whether the documents are paper-based or in electronic format. Specifically, there are three methods. Documents created electronically (and issued on paper) are stored as electromagnetic records; electronic transaction data such as e-commerce transactions are stored as electromagnetic records; and documents created, issued, and received in paper form are saved as scanned data (stored as image data).
Financial documents include inventory lists, balance sheets, and income statements. The data can be stored in accounting software that meets the requirements for effective electronic storage.
Electronic transaction documents must be stored in electronic format
Under the revised Electronic Books Maintenance Act, preservation of transaction documents (transaction data) for electronic transactions via printout and storage is no longer recognized under tax law. Previously, output documents for electronic transaction records were accepted as transaction vouchers. For instance, if a company received a PDF file of an invoice or contract as an email attachment from a transaction counterparty, this could be printed out and saved. However, following the enactment of the new law, data in transaction-related documents for electronic transactions must be preserved in electronic format.
This revision of the act does not make scanning (electromagnetic storage) of documents created on paper mandatory. As previously, as long as the original documents are in paper form, there are no issues from a tax law perspective if the documents continue to be stored in paper form.
Requirements for effective electronic storage
The requirements for effective electronic preservation are to ensure truthfulness and visibility. There are five specific stipulations.
Note: Figures may differ from company data due to differences in rounding methods.
Outlook
Medium-term business plan
Infomart re-launched its medium-term business plan (management policy) when it announced FY12/18 results on February 14, 2019. The two pillars of the plan are combining growth with profit, and initiatives to diversify its earnings sources.
However, in regard to the balance between growth and profit, the company is temporarily putting an emphasis on growth, i.e., investment.
Combining growth with profit
This entails maximizing the value of B2B platforms by expanding the platforms that the company has developed so far, using outside management resources where appropriate, while maintaining growth rates and profit margins. President Nagao, who took over in March 2018, has experience of active involvement in corporate investment when he worked for Mitsui & Co. (TSE1: 8031). Utilizing outside management resources is a new management policy that draws on his expertise.
However, in terms of the balance between growth and profit, the company in FY12/20 decided to tolerate a temporary slowdown in profit and follow a policy focused on securing top-line growth through investment. In FY12/20, the COVID-19 pandemic contributed to B2B Platform Food sales declining YoY in Q2 and subsequent quarters. Despite this, the company chose not to cut expenses (including investment) for the sake of profit, electing instead to carry through with investment as planned for the year with the aim of achieving medium- to long-term growth. As a result, the company was able to launch operations at the planned data center in July 2021.
In light of the decline in sales in Q2 FY12/20, the company has assessedn the stress tolerance of its earnings and cost structures during periods characterized by a deterioration in operating conditions. The company determined that it would be able to post profits even amid the temporary lull in earnings seen during the pandemic, and accordingly decided to maintain its policy of expanding investment.
According to the company, the commercial flow of B2B Platform Ordering users declined 60% YoY in April–May 2020.
Initiatives to diversify earnings sources
The company has announced that it would implement specific measures to lay the foundations strategically to realize its vision of a business that fills the world’s B2B landscape while keeping existing businesses profitable. While continuing to focus on growing its existing B2B platforms, it aims to break through the limitation of the domestic market accounting for the bulk of its business by taking steps toward overseas expansion while utilizing the data acquired from existing B2B platforms to launch new businesses.
The company plans to take the following steps;
Commitment to expanding B2B platforms, begin acquiring new sources of earnings that leverage its advantages, and initiatives with a long-term perspective.
Commitment to expanding B2B platforms
The company will prioritize expanding its existing B2B platforms so that they form a solid core earnings base, devoting 40–60% of management resources to this end. The penetration rate of Infomart’s platforms is already high in the food industry, with around 50% of wholesalers using the system. Centering on B2B Ordering and Standards Database platforms, the company expects to increase its share further and aims to become the top platform for the food industry.
Infomart also seeks to make B2B Platform Invoicing a major source of earnings. The total number of paid contracts with issuing and receiving companies was 3,687 (+35% YoY), making it the company’s fastest-growing business, but the ES segment which is centered on invoicing, remains unprofitable at operating profit level. In the short term, the company will likely prioritize growth of free users by aggressive allocation of human resources, but aims to make the business an earnings pillar like the platforms for the food industry in the medium term.
The company plans a robust start for the new B2B Contract platform. While it is difficult for the company to differentiate itself in businesses such as B2B Matching and B2B Industry News & Data Portal platforms, it plans to grow these businesses in the longer term while improving profits.
Begin acquiring new sources of earnings that leverage its advantages
The company says it plans to reap the benefits of its efforts so far to maximize the value of its B2B platforms by harnessing access to trade flow, ordering data, and users, and knowledge of the industry and businesses. The share of management resources to be allocated to this strategy is 30–40%. Infomart’s platform business currently prioritizes improving the efficiency of issuing, receiving, and management of order documents, standards, and invoices. It has yet to capitalize on utilizing the data recorded in order forms, standards, and invoices. The volume of commercial transactions via the company’s platforms was a massive JPY8.5tn in FY12/18. We think the company’s medium-term business plan will explore ways to utilize this data to expand its business.
Specific examples of services that may generate revenue are transaction lending and order forecasting. Transaction lending helps companies with a short history and high growth potential access financing in return for a fee. Infomart manages ordering data as a third party and tracks monthly or daily orders. For fast-growing companies, sourcing (cash outflow) tends to precede inflow, but they struggle to gain low-interest loans from banks due to the absence of financial statements. Infomart could rank fast-growing companies based on recent ordering data and provide ranking score data or ordering data to banks as new credit information. Such use of order data will enable companies to receive bank loans as well as find new borrowers for banks, from which the company can receive commission.
Infomart is considering another service for food manufacturers in which the company forecasts demand based on order data. Food manufacturers usually receive order information from wholesalers, but often have difficulty tracking inventory that builds up at restaurant companies and wholesalers. Given that Infomart is in a position to know which menus are popular and which ingredients restaurant companies are sourcing more of from wholesalers, a demand forecasting service would enable food manufacturers to increase or decrease production quickly, thereby reducing their business risk. We are also positive on a new service that will improve the efficiency of the restaurant supply chain.
Initiatives with a long-term perspective
Infomart currently relies on system usage fees for around 95% of sales. The company plans to clarify the roadmap to diversifying earnings sources other than system usage fees and continue to research the latest technologies so that it can build next-generation B2B platforms. The share of management resources to be allocated to this strategy is 10–20%. The company plans to apply the B2B Platform Ordering system currently targeting food-related businesses to other sectors, proceed with horizontal and vertical expansion of platforms for the food industry, and expand its business overseas. Initiatives regarding the latest technologies include the use of blockchain technology that the company has accumulated.
Numerical targets
Medium-term numerical targets are sales of over JPY10.0bn, operating profit of over JPY3.0bn, and OPM of over 30%.
At the results briefing held on July 30, 2021, President Nagao noted that while the company was close to achieving its JPY10.0bn sales target, operating profit, contrary to initial expectations, was following a downward course. The company made no changes to the qualitative targets in its management strategy, but also took no measures to secure profit through reduced expenses, maintaining (as noted earlier) its policy of prioritizing investment for growth.
Operating profit at the company peaked at JPY2.5bn in FY12/19. In FY12/20, it dropped 40.4% YoY to JPY1.5bn. In FY12/21, the company forecasts operating profit declining 52.4% YoY to JPY700mn.
The company is maintaining its numerical targets and believes it could be possible to exceed its sales and operating profit targets within three to five years.
Business
Company overview
Infomart provides platforms for commercial transactions mainly to the food industry, receiving a monthly system usage fee from customers based on a fixed price or pay-per-use plan as well as a system set-up fee from new customers. The company has a stable earnings base, because monthly system usage fees account for around 95% of sales and cancellation rates are low.
The main platforms provided by Infomart are as follows:
1) B2B Platform Ordering: An online platform that links restaurant companies with wholesalers, and wholesalers with food manufacturers
2) B2B Platform Standards Database: A platform of food manufacturers’ food standards for processed foods converted to a database for use by wholesalers and restaurant companies
3) B2B Platform Invoicing: A platform for easy issue, receipt, and management of electronic invoices
4) B2B Platform Matching: A one-stop service for finding buyers and sellers, negotiating prices, price estimates, ordering, and payments
5) B2B Platform Contract: A platform for conclusion, management, and workflow (internal authorization) of contracts between companies in electronic form and controlled centrally online
FY12/20 sales were JPY8.8bn and operating profit was JPY1.5bn. Sales broke down by segment into B2B Platform Food (which handles B2B Platform Ordering and B2B Platform Standards Database) at 76.2%, B2B Platform ES (which operates B2B Platform Invoicing and B2B Platform Matching) at 23.8%, and Other at 0.5%.
Infomart was founded in 1998, listed on TSE Mothers in 2006, and had a listing change to TSE1 in 2015. The company had 599 employees (505 full-time and 94 part-time) at end-FY12/20.
Business model
Provider of B2B platforms
Infomart provides platforms that digitize ordering and invoicing operations via the cloud. Its revenue model centers on monthly fees received for providing companies with services to improve the efficiency of B2B transactions. While the business requires substantial upfront software development costs, booked as intangible fixed assets on the balance sheet and then amortized, it offers a high marginal profit rate, because cost of sales is unlikely to increase once the service is launched. Infomart offers seven platforms, including Ordering, Standards Database, Invoicing, Matching, and Contract. Penetration rates are high in the food industry for B2B Ordering and Standards Database platforms, which are targeted at food industry*, and these platforms are becoming industry standards.
Cloud service, recurring revenue model
The B2B e-commerce platform’s features:
1) Cloud service offering online solutions for daily business transactions—since the system is intended to be general purpose, there is no need to customize it for individual customers who pay monthly fees to use the services online without having to build their own systems
2) A monthly fee-generating structure that provides a steady source of revenue for the company
Infomart’s business has additional features:
1) Provision of a “one-stop” service lets users use the four systems described above to develop new accounts, engage in business negotiations and transactions, place and receive orders, and settle accounts
2) Leverage of groupware to share information between the company and existing customer accounts to increase business efficiency
B2B Platform Food business
In the B2B Platform Food business, Infomart operates a platform that includes B2B Platform Ordering and B2B Platform Standards Database for customers including restaurant operators. B2B Platform Ordering accounted for just under 80% of sales in FY12/20 and B2B Platform Standards Database just over 20%. The business also offers Ordering and Standards Database as a package called Safe & Secure Food and Ordering.
B2B Platform Ordering
The B2B Platform Ordering business offers an ordering management system for the restaurant industry that processes orders and invoices between sellers and buyers via the cloud. The company has been increasing its market share, partly thanks to the addition of new clients introduced by alliance partners and existing customers. It wants to create a platform that grows on its own accord without requiring sales expenses.
Note: Figures may differ from company data due to differences in rounding methods.
Note: The company has not disclosed FY12/19 sales and operating profit data due to a change in segmentation.
Ordering system: benefits to clients
The system cuts costs by improving the efficiency of, and digitizing, ordering procedures between buyers placing orders (such as head offices and stores), and those product sellers receiving orders. The system can systemize and organize information on the status of sales and product stock, plus handle store management and accounts payable/receivable in real time.
Seeks to expand outside the restaurant industry
The Ordering System was launched in 2003 and experienced rapid growth with the segment becoming Infomart’s core business. The majority of buyers are restaurant chains and izakaya (Japanese-style pubs), but meal catering services, ready-made meal companies, hotels, wedding halls, golf courses, and other similar establishments are using the system too. Initially, the platform’s focus was on catering to chain operators with at least 15 restaurants. Thereafter, Infomart extended service coverage to small restaurant chains with as few as five establishments, as many such chains aim to digitize and streamline their operations. From 2020, it has extended service to companies operating even just one restaurant and is seeking to expand sales to hotels, meal-catering companies, and commercial facilities. Business expansion in these areas is steadily progressing.
System becoming de-facto standard for food wholesalers
Sellers on the system are general and specialized commercial food wholesalers. The system is becoming a de-facto industry standard as user numbers increase. Of the estimated 7,600 restaurant chains with five or more stores in Japan, 3,185 companies were using the company’s ordering platform as of end-FY12/20 for an over 40% penetration rate. Of approximately 73,000 restaurant related wholesalers, 37,932 companies were using the platform as of end-FY12/20 for a more than 50% penetration rate.