CYBERLINKS CO.,LTD. Q2 FY2025 earnings call

• Overall Financial Performance

• The company achieved all-time record first-half results for the 2025 December fiscal year, with total consolidated revenue of 8.8 billion yen, recurring revenue of 4.2 billion yen, and recurring profit of 0.99 billion yen.
• Cumulative quarterly revenue has grown continuously since 2022, and the company expects to hit a new all-time full-year record profit after absorbing higher costs from M&A activity and development team expansion.
• Company-wide costs increased due to a core enterprise system refresh for operational efficiency.

• Strategic and Operational Initiatives

• Sustainability: Discloses CO2 emission and reduction data (Environment), invests in human capital via salary increases, promotes women's participation, and advances operational efficiency (Social), and expands IR activity and adopted online exercise voting (Governance).
• Capital and Shareholder Strategy: The company prioritizes corporate value improvement by boosting profit efficiency and building long-term market expectations; this framework will be included in the next mid-term management plan to be announced in February 2026.
• The company maintains a progressive dividend policy; it plans a 13 yen per share increase from the prior year, bringing the full-year dividend to 30 yen per share with a payout ratio of approximately 30%. The company will continue investing in system development, M&A, and human capital while increasing shareholder returns alongside profit growth.

1. Distribution Cloud Business: achieved revenue growth, but slight profit decrease. ARR increased significantly year-over-year driven by service expansion and October 2024 price revisions. One new @rmsV6 implementation went live during the quarter, a large existing customer completed full migration to the company's Cloud EDI-Platform expanding market share, and multiple new orders for the fresh food EDI system Sendo Net V2 were secured. Profit was pressured by higher labor costs (staff expansion and salary increases) and increased software amortization for @rmsV6 development.
2. Government Cloud Business: achieved double-digit growth in both revenue and profit. Driven by Japan's national municipal DX push, the segment saw strong performance across standardized core municipal system projects, expanded delivery of document management systems, and disaster prevention radio construction projects. Secured large orders for its ActiveCity document management system from major municipalities including Ota Ward (Tokyo) and Funabashi (Chiba), and launched its Minna no Madoguchi online municipal service window in Nara City.
3. Trust Business: achieved revenue growth driven by expanded adoption of its CloudCerts digital certificate issuing service, but recorded a slight profit decrease due to higher expenses from sales team expansion. Order volume has not yet hit target levels, but the business generated a record number of lead customers at the Japan DX Week exhibition in April 2025.
4. Mobile Network Business: achieved growth in both revenue and profit. While terminal sales revenue declined, a strategic focus on meeting carrier performance metrics led to increased incentive income, which significantly improved profit margin. The segment's first-half result already exceeded full-year profit guidance. The business holds approximately 50% market share for docomo shops in Wakayama Prefecture, making it the regional market leader.

• Full-year 2025: The company reaffirms its plan to achieve the mid-term management target and update the all-time full-year profit record, with overall performance tracking above initial plan through the second quarter.
• Distribution Cloud Business: First-half profit progress reached 83.4% of plan (slightly behind target). Management expects to deliver full-year results by executing backlogged orders for @rmsV6 and Sendo Net V2 in the second half, expanding adoption of the C2Platform supply chain platform at Life Corporation and rolling it out to wholesalers and manufacturers in partnership with the Japan Processed Food Wholesalers Association.
• Government Cloud Business: Management expects continued strong growth, with both core government cloud projects and the subsidiary Synergy's document management business tracking ahead of initial full-year plan. Demand will not collapse after April 2026, and support revenue will continue growing steadily with no major negative risks expected.
• Trust Business: Management will continue nurturing leads, target converting prospects into projects and securing large orders, and explore new market opportunities via cross-segment collaboration with Government Cloud Business.
• Mobile Network Business: Management will target maintaining its solid first-half performance into the second half, capitalize on growing terminal replacement demand tied to the March 2026 3G service shutdown, push operational efficiency via flexible staffing and online customer service rollout, and aim to deliver a full-year result above initial plan.

• Distribution Cloud Business: Unexpected customer churn from M&A activity (a supermarket user was acquired by a large drugstore chain that consolidated systems onto its existing platform) reduced recurring revenue. Large-scale system implementation projects have variable revenue recognition timing under percentage-of-completion accounting, and near-term costs are elevated by upfront hiring and external spending for large project delivery.
• Mobile Network Business: The segment's incentive income is dependent on Docomo's annual incentive structure, which is subject to change that is difficult to forecast during the company's annual planning process due to mismatched fiscal years (Docomo uses an April-March fiscal year while Cyberlinks uses a January-December fiscal year). Incentive program changes can create unexpected swings in segment profit.
• Trust Business: Order growth has not yet met management's initial expectations for the young business.

Q: Why did Distribution Cloud miss revenue and profit targets in the first half, and will this impact full-year results?

A: The miss was driven by one-time customer churn from an M&A consolidation, which reduced recurring revenue for the core @rms service. Large @rmsV6 implementations also have variable revenue recognition timing and higher upfront costs that pressured near-term profit. The underperformance will impact full-year results because recurring revenue from newly completed implementations will not be recognized until the next fiscal year.

Q: What drove the stronger-than-expected profit performance in Government Cloud, and will the strong performance continue after April 2026?

A: The upside came from earlier-than-expected revenue recognition on scheduled projects and stronger-than-expected order growth at the segment's document management subsidiary Synergy. Full-year results for both core government cloud and Synergy are tracking ahead of initial plan. Demand will not drop sharply after the 2026 government cloud migration deadline; steady growth will continue from post-migration support services, and no major negative risks are expected.

Q: Why did Mobile Network outperform first-half plans by such a large margin, and can this momentum continue in the second half?

A: The large upside came from unforeseen changes to Docomo and smartphone manufacturer incentive programs: mismatched fiscal years meant the company could not forecast these changes during planning. The team met the new incentive criteria and hit all non-communication targets, leading to the stronger result. While there are some negative factors from recent incentive revisions, management expects performance to remain solid, and will flexibly adapt to new program changes to deliver continued upside. The 3G shutdown will drive growing terminal replacement demand in the second half, which supports results.