CYBERLINKS CO.,LTD. Q4 FY2024 earnings call

2024 Full Year Financial Performance

• The company achieved a second consecutive year of record total revenue and ordinary profit, and met all targets outlined in its current medium-term management plan ahead of the 2025 final plan year.
• The company completed an overhaul of its internal core enterprise systems (accounting, sales management, approval workflows) in January 2025 to drive long-term productivity gains.

Key Product & Business Milestones

• Distribution Cloud: Launched @rmsV6, a core system targeted at mid-to-large supermarket retailers; launched an AI automatic ordering system co-developed with AI venture SENSY; had its C2Platform business negotiation support service selected as the engine for a system run by the Japan Food Wholesale Association; implemented service price adjustments to offset inflation.
• Government Cloud: Grew adoption of the MyNumber Card electronic authentication service マイナサイン; achieved record annual new order volume for its ActiveCity document management system; expanded channel outreach via participation in municipal DX industry events.
• Trust Business: Launched digital pharmacist license certificates, added foreign language course completion certificates for Kindai University, and released a small-user version of CloudCerts.
• Mobile Network: Maintained active outreach via on-location sales and in-store events; staff successfully prevented a targeted fraud incident during customer service, highlighting strong customer protection standards.

ESG & Capital Market Initiatives

• Social: Improved employee benefits via enhanced corporate defined contribution pension plans; hit its 2025 target for female manager ratio (27.5%) one year early; renovated office space to improve working conditions; completed core system overhaul to improve productivity.
• Governance: Launched expanded outreach to individual investors via investor presentations and social media to boost trading liquidity of the company's stock, in response to feedback from institutional investors.
• A full formal framework for capital cost and share price focused management will be published with the company's next medium-term management plan.

1. Distribution Cloud Business: Revenue increased by 0.27 billion yen year-over-year driven by expanded service delivery. Operating profit decreased by 0.12 billion yen year-over-year due to rising labor and input costs, and increased software amortization. Annual Recurring Revenue (ARR) rose sharply in Q4 2024 following a October 2024 service price revision, which is expected to add 0.15 billion yen in annual revenue starting 2025. The business secured 7 new clients (approximately 300 stores total) for its new large-scale retail core system @rmsV6. 2. Government Cloud Business: Revenue was nearly flat year-over-year, but recurring revenue grew from expanding municipal digital transformation (DX) services, leading to a 0.10 billion yen year-over-year increase in operating profit. Annual amortization expenses related to the 2023 Synergy M&A are 0.24 billion yen, scheduled to decrease to 0.07 billion yen in 2025 and end completely by 2027. 3. Trust Business: Revenue grew and net loss narrowed, resulting in a 0.02 billion yen year-over-year increase in operating profit. The business launched Japan's first digital national pharmacist license credential on its CloudCerts blockchain platform, but missed 2024 sales and profit targets due to delayed sales organization buildout. 4. Mobile Network Business: The business exited a challenging 2023 operating environment, delivering increased revenue and a 0.22 billion yen year-over-year increase in operating profit, driven by strong sales of high-price devices and strong sales incentives, particularly in the first half of 2024. Total company 2024 results: Total revenue hit a record 15.8 billion yen, total ordinary profit hit a record 1.26 billion yen, with a 0.20 billion yen year-over-year increase in total ordinary profit.

• 2025 December fiscal year total revenue is guided at 17.7 billion yen, and total ordinary profit is guided at 1.73 billion yen, both exceeding the current medium-term management plan's original targets (17.0 billion yen revenue and 1.68 billion yen ordinary profit), and targeting a second consecutive year of record results. Recurring revenue is guided at 8.6 billion yen.
• Q1 2025 ordinary profit is expected to decrease year-over-year due to one-time startup costs for the new internal core system (including vendor support fees) and lapping a large one-off spot revenue in Q1 2024. Profit growth is expected to accelerate from Q2 2025 onward, with full year profit exceeding 2024 levels.
• Distribution Cloud: Guided to return to profit growth with a 0.11 billion yen increase in ordinary profit, driven by 0.73 billion yen revenue growth from expanded services, price revision benefits, and @rmsV6 implementation revenue; 2 of the 7 already secured @rmsV6 clients are scheduled to go live in 2025.
• Government Cloud: Guided to deliver a 0.44 billion yen increase in ordinary profit driven by large municipal DX projects, including migration work for 15 already awarded municipal core system standardization projects, continued rollout of the high-order ActiveCity document management system, and multiple large disaster prevention system projects expected to close in the second half of 2025.
• Trust Business: Guided to deliver 0.08 billion yen ordinary profit growth following the completion of sales team expansion and the launch of cross-selling with Government Cloud for municipal clients; the business will exhibit at Japan DX Week in April 2025 to accelerate expansion.
• Mobile Network: Guided to deliver a 0.03 billion yen decrease in ordinary profit but maintain its 2024 recovery trend, with continued active sales initiatives to maintain customer loyalty.
• Full year dividend per share is guided at 30 yen, a 13 yen (76.5%) increase over 2024, representing a major expansion of shareholder returns.

• Trust Business missed 2024 sales and profit targets due to delayed sales organization expansion, creating near-term execution risk for its 2025 expansion plan.
• Inflation has driven increases in labor and input costs across business segments, which could pressure margins if price adjustments and revenue growth do not fully offset cost increases.
• 2025 Q1 profit is expected to decline year-over-year due to one-time startup costs for the new internal core system, creating potential short-term earnings volatility.

Q: With 7 clients already secured for @rmsV6, is around 3 new orders per year the maximum capacity of Cyberlinks' current sales organization? Does the company see significant latent demand for the product in the target market? / A: The company is currently pacing sales activity moderately given the size of the already secured 7 client pipeline. Management sees strong unmet demand: mid-to-large supermarkets have traditionally relied on on-premise systems from large system integrators, where even small feature changes cost 10 million to 20 million yen, which many retailers cannot afford in the current operating environment. Additionally, large system integrators are increasingly unwilling to allocate engineering resources to retail projects due to lower profitability, creating a clear market opening for Cyberlines' cloud-based @rmsV6.

Q: Can @rmsV6 support supermarket clients with annual revenue as large as 200 billion yen, and can it scale to even larger businesses? / A: Yes, @rmsV6 is designed to support this scale. The platform uses optimized parallel processing that splits data along store and department matrix dimensions to maintain processing speed. By increasing server capacity, the platform can scale to support retailers with annual revenue of 300 billion to 400 billion yen.