RECOMM CO.,LTD. Q4 FY2025 earnings call

• Opening Apology

  • Management apologized to shareholders for missing full-year 2025 targets significantly, resulting in a dividend cut.
  • Total company revenue hit a record high (first since 2007 September fiscal year); adjusted operating profit (excluding prior year 200 million yen business transfer gain) was 5.9x year-over-year, adjusted net profit was 2.8x year-over-year, with the Overseas Solutions segment driving overall revenue and profit growth.
  • A partial goodwill impairment was recorded for the Thai acquisition due to underperformance relative to initial projections, after revising future cash flow forecasts.

• Recent Strategic Updates & New Initiatives

  • Kawahara Office Machinery Co. (based in Iwate Prefecture) will be added as a consolidated subsidiary via share transfer, to expand domestic sales coverage into the Tohoku region, where Recam has had no presence for over 10 years.
  • The new AI Agent business is on track: the Japanese version of the AI agent platform (developed via JV with Chinese AI firm Shizai Intelligence) completed development in August 2025, with test sales starting in October 2025, full commercial launch planned for January 2026 after final adjustments. English version development is underway, with launch focused on Malaysia after the Japanese release.
  • Two consolidated domestic subsidiaries (Recam Japan and Opus) merged effective October 1, 2025, to unify customer data, create cross-sell/upsell opportunities, and integrate end-to-end sales, construction, and maintenance to improve customer satisfaction.

• Human Capital Management

  • 95% of all employees completed the company's mandatory 100-hour annual training program in 2025; 196 group employees have completed AI skill training to upskill the workforce.
  • A new merit-based evaluation and compensation system was rolled out to local ASEAN employees starting October 2025, unifying core compensation frameworks across all global group employees.
  • 43 new graduate hires (a company record) will join in April 2026, supporting aggressive sales headcount expansion across segments. A performance-linked paid stock option plan was approved to align employee incentives with mid-term plan targets.

• Long-Term Global Specialty Trading House Strategy

  • The strategy follows four sequential stages to grow global business: (1) Stage 1: Acquire new customers with low-cost, clearly value-add LED products; (2) Stage 2: Lock in customers via one-stop IT and carbon neutral solutions; (3) Stage 3: Expand from Japanese clients to large local enterprise markets; (4) Stage 4: Develop country-specific new businesses to maximize local revenue, profit, employment, and contribute to host country economic growth.
  • Current progress: Malaysia and Singapore are in Stage 3 (local market expansion); Vietnam, Thailand, Indonesia are in Stage 2; large markets India and China remain in Stage 1, with only 2 of 7 markets entered for local enterprise expansion to date.

• Mid-Term Management Plan

  • Core three-year targets are: 20%+ CAGR for revenue, 10%+ operating margin, and 20%+ ROE by the final year. After the first year, actual performance was 17.3% CAGR, 3.1% operating margin, and 4.5% ROE, below target. The plan calls for building revenue growth foundations this period, then hitting all targets in the next fiscal year.
  • Two group-wide core priorities: (1) Sales DX: Systematize customer engagement via CRM, standardize sales knowhow to enable consistent sales performance across all team members; (2) M&A (focused on cross-border deals): Acquire established local firms with existing customer bases that lack DX capabilities, roll out Recam's sales DX framework to improve enterprise value for all group companies, creating a sustainable growth cycle.

1. Overseas Solutions Segment: 2025 September fiscal year revenue was 8.417 billion yen, an increase of 1.8 billion yen year-over-year; 1.6 billion yen of this increase came from the consolidation of the Singapore subsidiary. Segment profit was 485 million yen, a 143 million yen (41.8%) increase year-over-year. This segment contributed 64.2% of total company revenue in 2025.
2. Domestic Solutions Segment: 2025 September fiscal year revenue was 4.096 billion yen, a 375 million yen decrease year-over-year. Segment profit was 194 million yen, a 29 million yen decrease year-over-year. This segment contributed 31.2% of total company revenue in 2025.
3. BPR Segment: 2025 September fiscal year revenue was 574 million yen, a 24 million yen decrease year-over-year. Segment profit was 11 million yen, a 19 million yen decrease year-over-year. This segment contributed 4.4% of total company revenue in 2025.

• Full-year 2026 September fiscal year consolidated guidance expects 14.8 billion yen in revenue (+13.1% year-over-year), 550 million yen operating profit (+35.1% year-over-year), 560 million yen pre-tax profit (+25.3% year-over-year), 320 million yen net profit (+37.9% year-over-year), and 757 million yen EBITDA (+23.3% year-over-year). Revenue is projected to hit a second consecutive record high, with operating and pre-tax profit hitting post-COVID highs.
• Segment guidance:
  • Overseas Solutions: 9.499 billion yen revenue (+12.8% YoY), 552 million yen segment profit (+13.7% YoY). Key growth drivers: expand SPACECOOL sales beyond air conditioner outdoor unit use to multiple new applications, growing sales 170% YoY and increasing SPACECOOL's revenue share from 3% to 5% (leveraging its high margin to improve overall segment profitability); expand AI server sales in Singapore by increasing engineering headcount to meet rapidly growing demand and capture new clients; add 25% more sales staff for Japanese client carbon neutral business, with DX enablement to speed up new hire ramp-up.
  • Domestic Solutions: 4.691 billion yen revenue (+14.5% YoY), 350 million yen segment profit (+80.4% YoY). Key initiatives: 40% sales headcount increase (focused on new graduates) with DX training for fast ramp-up; expand sales territory via the recent Kawahara Office Machinery M&A and new franchise store openings; expand product assortment in wholesale channels to drive volume growth.
  • BPR: 611 million yen revenue (+6.4% YoY), 49 million yen segment profit (+328.2% YoY). Key initiatives: boost bundled sales of Robo Worker RPA and BPO services via consulting sales leveraging Recam's internal DX success; drive internal DX at offshore centers to cut selling, general and administrative costs; optimize task allocation to improve profitability of underperforming domestic and Myanmar centers.
• Dividend guidance is 1.2 yen per share, aligned with the company's 30% payout ratio policy linked to net profit.
• Mid-term plan targets (20% CAGR, 10% operating margin, 20% ROE) are maintained, with management targeting achievement of all three goals in the 2027 September fiscal year.

• The Thai M&A investment underperformed initial projections, requiring a partial goodwill impairment charge in 2025.
• Domestic Solutions: Declining sales at franchise and agency channels (driven by falling security product sales) offset growth in direct operations, leading to a year-over-year revenue and profit decline.
• BPR segment: Failed to achieve growth targets from prior investments in web-related services (SNS monitoring, website projects), leading to a year-over-year revenue decline. Yen depreciation increased yen-converted costs at offshore centers, and political instability in Myanmar pushed the Myanmar center into deficit due to elevated turnover, eroding segment profit.
• Mid-term plan progress is behind the original target schedule: after the first year, all three core mid-term targets (CAGR, operating margin, ROE) are below planned levels.
• Global expansion progress is slow: only 2 of 7 priority markets have entered Stage 3 (local enterprise market expansion), leaving most of the large untapped local market opportunity undeveloped.

The provided transcript does not include a transcribed Question and Answer section, so no key exchanges can be summarized.