Pole To Win Holdings,Inc. Q4 FY2026 earnings call

• Group Restructuring & Growth Base Rebuilding

  • 2023/1 term: Completed merger of 3 major domestic subsidiaries to streamline operations. In 2026/1 term: Full exit from the Media & Content business, completed rebranding of overseas subsidiaries, promoted group-wide efficiency and governance strengthening. Promoted the previously unlisted subsidiary SynX (a high-growth subsidiary) to direct wholly-owned subsidiary status, and strengthened group headquarters functions.
  • Total group connected headcount decreased by 434 YoY to 7,704, primarily driven by the Media & Content exit, with minor additional reductions from headcount optimization in both Domestic and Overseas Solutions.
  • Completed impairment of goodwill and intangible assets from prior M&A in 2026/1 term, reducing future amortization burden by approximately 200 million yen for Domestic Solutions and 300 million yen for Overseas Solutions annually.

• Commitment to Net Profit Return to Positive for 2027/1 term

  • The 4-year period through 2026/1 term is defined as the "restructuring period", while 2027/1 term onward marks the start of the "re-growth period" focused on returning to profitability. Executive compensation will be reduced in 2027/1 term to demonstrate management commitment and recover market trust.
  • For Overseas Solutions: Implemented agile organizational slimming to address temporary demand fluctuations, while continuing targeted investment in AI capabilities to capture long-term growth.

• Mid-to-Long Term Corporate Value Improvement Initiatives

  • Opened a new hub in Taiwan (a top global game market) in January 2026 to strengthen partnerships with local developer communities and expand the user base.
  • Core strategic transformation to AI-driven business: The company targets shifting from a traditional labor-intensive model to an AI-centered high-value-added, knowledge-intensive model. Generative AI and automation will be integrated into historically labor-reliant areas such as debugging, testing, and development support to dramatically improve productivity and quality.
  • The company's unique value proposition is "Authorization": AI can reach 99% completion of work, but human expertise remains indispensable for context understanding, cultural/emotional judgment, and final quality assurance. Human validation of AI output to confirm intent, quality, and user experience is the core of the company's value, and AI is viewed as an opportunity rather than a threat.

• Balance Sheet and Cash Flow

  • Total assets decreased significantly in 2026/1 term: Current assets decreased 3.176 billion yen from the Media & Content exit, and intangible fixed assets decreased 3.823 billion yen from goodwill impairment. Net assets decreased 4.022 billion yen, bringing the equity ratio to 37.7%. Management targets an appropriate equity ratio of ~50% for its asset-light business model and will work to improve the ratio through early profit growth.
  • Cash and cash equivalents saw only a minor decrease in 2026/1 term, compared to large decreases from M&A spending in prior periods. This was due to 888 million yen in proceeds from selling consolidated subsidiaries and no new M&A activity during the term.

For the 2026/1 term (fiscal year ended January 2026):

1. Consolidated total revenue: 48.837 billion yen, representing a 3.388 billion yen year-over-year decrease driven by the exit from the Media & Content business. Operating income was a 238 million yen deficit, and net income was a 3.479 billion yen deficit.
2. Domestic Solutions:
   • Absolute revenue: +1.314 billion yen year-over-year. Revenue contribution breakdown by sub-segment: Game (48%), Tech (27%), E-commerce (25%). Game sub-segment grew 13% YoY, while Tech and E-commerce saw slight YoY declines. Operating income was 582 million yen lower YoY due to the absence of a high-margin large E-commerce project in the prior year and increased SG&A from new office openings.
   • 2027/1 term projection: 28.362 billion yen (9.5% YoY growth), 1.212 billion yen operating profit (7.5% YoY growth), which is expected to be the highest revenue on record for the segment.
3. Overseas Solutions:
   • Absolute revenue: +550 million yen year-over-year. Revenue contribution breakdown by service: Customer Support (20%), Debugging (15%), Translation & Language Testing (20%), Voice Recording (40%), Development Support (5%). Revenue growth was driven by spot orders for voice recording, but unplanned costs led to a 982 million yen YoY operating decline. Higher costs came from a required allowance for doubtful accounts after a European client filed for insolvency, unplanned higher layoff costs from business downsizing and exit from overseas content business.
   • 2027/1 term projection: 18.72 billion yen (10% YoY decrease, reflecting the reversal of temporary spot voice recording orders and exit from unprofitable lines), 651 million yen operating profit (1.591 billion yen YoY increase, after business restructuring is completed).
4. Media & Content Business:
   • Full exit was completed in 2026/1 term, reducing total revenue by 5.253 billion yen YoY, but reduced the segment's annual operating loss by 506 million yen YoY. The 2027/1 term expects an additional 2.139 billion yen revenue reduction but a 141 million yen operating profit improvement from exiting this unprofitable business.

• Overall 2027/1 term (fiscal year ending January 2027) guidance: Total revenue of 47.082 billion yen (3.6% YoY decrease), operating income of 2.014 billion yen (2.253 billion yen YoY increase), net income of 700 million yen (a full return to net profitability after 3 consecutive years of deficits, 4.179 billion yen YoY improvement).
• Quarterly performance projection: Revenue will peak in Q3, with total first-half revenue of 21.691 billion yen and second-half revenue of 25.391 billion yen. Operating profit is projected at 304 million yen in the first half and 1.71 billion yen in the second half, also peaking in Q3. Q1 will still incur remaining restructuring and exit costs for overseas content business, with consistent quarterly profitability expected from Q2 onward.
• The company is targeting an accelerated timeline for achieving profitability and is working company-wide to move the net profit break-even point earlier than currently projected.
• Dividend policy: The annual dividend per share is maintained at 16 yen, unchanged from the prior term, consistent with the company's principle of stable continuous dividends despite negative net profit over the past several years. At current share price levels, this represents a dividend yield of approximately 5%. The company's long-term shareholder return policy maintains a target total payout ratio of 30% or higher and a minimum DOE of 3%, and has not cut the dividend since listing.
• The company is currently in an improvement period to maintain its listing on the Prime Market, and will focus on both profit recovery and enhanced IR activity to drive share price growth and meet the listed market's tradable market capitalization requirements.

• The company has posted 3 consecutive years of net losses, which has eroded shareholder trust and put pressure on the company's share price and Prime Market listing compliance.
• In Overseas Solutions, rapid industry consolidation and changing market conditions have led to increased vulnerability to external factors, including project interruptions from client ownership changes and vendor re-selection, and unexpected client insolvency that required unplanned allowance for doubtful accounts in 2026/1 term.
• The domestic Tech (software testing and development) segment is relatively new for the company, leaving significant room for growth but also requiring further strengthening of market grip and operational capabilities.
• While impairment of all problematic goodwill was completed in 2026/1 term, the large one-off loss reduced net assets and lowered the company's equity ratio below management's target appropriate level.
• 2027/1 first half is still projected to post a net loss, relying on second half profitability to achieve full-year positive net income, leaving some execution risk.

Q: Regarding the handling of legacy negative issues, how complete is the cleanup of past negative legacy now? (The question text was cut off in the transcript, the following are the full recorded Q&A pairs:)

Q: There is a widespread impression that stronger execution and grip on individual projects would have led to better profitability. How much progress has been made on strengthening business grip to improve performance?

A: For Domestic Solutions, the business has strengthened considerably over the past several years, even with existing competition. Going forward, the company aims to further strengthen its grip in non-game areas such as software QA, which is a newer business for the company with plenty of room for growth. For the core game business, where the company has operated for ~30 years, the current position is positive. For overseas business, which is centered on game services, the company has not adequately adapted to rapid industry restructuring and market changes in recent years. The business has often been impacted by external factors such as client ownership changes, project interruptions from client restructurings, and re-tendering of vendor contracts. Going forward, the company will leverage AI to build stronger vendor capabilities to survive and grow amid ongoing client industry restructurings. The CEO is personally dedicating most of his time to client engagement and sales strengthening to lead this effort, with a focus on acquiring new clients and expanding the contracted business.

Q: Looking ahead to next term and beyond, what opportunities does the company see, and where will it focus? There is an impression that the company has not captured client flow well in recent years leading to a tougher operating environment, but the CEO appears optimistic. What is the basis for this positive outlook?

A: There are several positive foundations built over the past several years of restructuring. First, the company has prioritized and strengthened recruitment over the past 4 years both domestically and overseas, which has significantly improved its competitiveness in talent acquisition. Even for in-demand roles such as software QA and development engineers, the situation has improved considerably, and the company expects higher revenue from better talent utilization going forward. Second, AI adoption is driving operational efficiency that will directly improve profits. Combining talent and AI will allow the company to build more efficient, ideal operational workflows, and enable the company to expand beyond traditional downstream testing services to also win combined upstream contracts including development work. The company is already integrating AI into PM/PMO services to enable end-to-end project contribution, which will become a core competitive strength going forward. Third, after several years of opening and closing overseas hubs to adjust to market conditions, the global footprint has now stabilized. Restructuring of high-cost hubs such as the UK location has been completed over the past 2-3 years, and the business is now in a phase where it can pursue steady expansion from the stabilized base. These steady improvements to the business underpin the optimistic outlook, after several years of difficult restructuring.