CROOZ,Inc. Q4 FY2025 earnings call

Strategic Portfolio Restructuring

• The company has completed a major structural reform, consolidating operations into two core profitable segments: IT Outsourcing and Ada., exiting all other non-core businesses including the entire game segment, former SHOPLIST e-commerce, and Rankou
• All exited declining businesses have been sold or wound down, leaving zero ongoing red ink from legacy operations; both core segments have already crossed the break-even point and entered a phase of profit growth alongside revenue expansion
• The restructuring is intended to eliminate the conglomerate discount that has suppressed the company's market valuation, by creating a simplified, focused business profile

Core Business Operations

• IT Outsourcing's core SES business has seen strong recruitment growth, with revenue up 160% year-over-year; average monthly engineer unit price is 600 thousand yen, with a diversified customer base across manufacturing, utilities and other industries, with no single sector making up a majority of clients
• Ada. is currently focused on expanding sales primarily through the ZOZOTOWN platform, with explosive volume growth over the past two years
• The newly launched care welfare human resources service leverages SES's existing recruitment advertising operations and candidate management knowhow, following the same revenue and cost structure as the core IT staffing business

Capital Allocation & Investments

• The company holds over 100 billion yen in cumulative real estate investments, made as part of surplus capital deployment; management selects high-liquidity prime central Tokyo properties that have low downside risk and solid return prospects, with decisions made via a fast internal evaluation process
• All major divestment costs have already been recognized, with only a small residual game business loss expected in Q1 FY2026, and no additional material restructuring costs

1. IT Outsourcing (including SES business): Revenue grew 1.6x year-over-year. The segment includes the newly launched care welfare human resources service, where current upfront investment pushes down the segment's overall reported profit margin. Revenue is structured as (active engineer headcount × monthly unit price), with primary costs being recruitment and personnel expenses. 2. Ada. business: Transaction value grew from 1.1 billion yen in the prior fiscal year to 4.4 billion yen in FY2025, a nearly 4x increase year-over-year. 3. Other: This segment mostly consists of unallocated corporate headquarters costs and remains deeply in the red. All declining non-core businesses (games, SHOPLIST, Rankou) have been completed divested or exited, with only residual transition costs in this segment. Full exit from the game business will be completed in Q1 of FY2026.

• Management reaffirmed the medium-term target of 1.5 billion yen in operating profit for the IT Outsourcing segment by the FY2028 March year end, and views this target as achievable, while noting it is a plan not a binding commitment
• Full-year earnings guidance is not disclosed at this stage: both core businesses only recently crossed break-even, with Ada. only 18 months of scaled operation, and management states that reliable forecasting of top and bottom line is not yet possible, with growth already exceeding initial expectations; guidance disclosure will be considered once the business matures
• Management expects significant year-over-year revenue growth for the core businesses in coming quarters, though acknowledges potential near-term quarterly volatility from cost allocation and residual legacy items
• Shareholder return (including dividends, treasury share cancellation, and sustained buybacks) will not be considered until approximately 3 years from now, after medium-term business targets are achieved, prioritizing reinvestment for growth in core businesses first

• The company reported a 1.033 billion yen negative operating cash flow and 6.328 billion yen negative investment cash flow in FY2025: nearly 900 million yen of the operating deficit came from the legacy game business, which will not impact results going forward, and the large investment outflow is primarily from the real estate investment program which is done within prudent financial limits using a mix of debt and surplus capital
• While both core businesses are past break-even, they have only recently crossed the threshold, so near-term quarterly profit may see some fluctuations, with no guarantee of consolidated profit starting from Q1 FY2026
• Higher recent turnover reflects insufficient retention support during the period of aggressive recruitment expansion, but management views this increase as temporary and is rolling out new retention initiatives to address the issue
• The company's historic image as a multi-business conglomerate (particularly as a game company) creates valuation discount, and successful rebranding to a focused human capital × IT firm is not guaranteed
• Management sees the current PBR of 0.6x as unjustifiably low, but there is no guarantee that improved IR and business focus will close this valuation gap

Q: What is the company's plans for M&A to grow the core IT outsourcing business? / A: Management is not actively pursuing M&A at this time. The company plans to grow organically for the next 2-3 years, with opportunistic deals only considered if an exceptional opportunity arises, but organic growth is the core strategic priority.

Q: What led the company to fully exit the entire game business? / A: The decision came from large ongoing deficits (nearly 0.9 billion yen in red ink in FY2025), very high development costs for new titles (hundreds of millions of yen per game), and an extremely low hit rate, around 30% for released titles and even lower when including cancelled projects. As an unbranded mid-cap listed company, management concluded the high uncertainty of game development is incompatible with being a public company, where sustained unpredictable losses hurt morale and investor confidence, and only large branded incumbents can absorb the industry risk.

Q: The company's current share price and PBR of 0.6x is very low: what is management's view on this? / A: Management strongly believes the current valuation is deeply unjust. Core IT outsourcing has grown from zero to substantial scale in 4-5 years, and Ada. has grown 4x in two years, performance that deserves a much higher valuation. The prior conglomerate structure created a discount that the company will now address through improved IR and transparent communication focused on the two high-growth core businesses, and management views re-rating as a key priority going forward.

Q: Why is full annual earnings guidance still not disclosed now that the business is consolidated to two stable core segments? / A: Both businesses have only just crossed break-even: IT outsourcing is still scaling after 4 years of buildout, and Ada. is only 1.5 years into scaled operation, with growth already exceeding initial internal expectations. The growth trajectory is still uncertain in both directions, so management cannot produce a reasonably reliable forecast at this stage, and will introduce guidance once the business matures.