CYBERLINKS CO.,LTD. Q4 FY2025 earnings call

Overall 2025 Results

• 2025 fiscal year results were all-time record highs, and the previous mid-term management plan (launched 2021) was completed ahead of schedule.
• A new 5-year mid-term management plan covering 2026 to 2030 was formally announced.

New Mid-Term Management Plan Vision & Portfolio Strategy

• New corporate vision: "Contribute to people's prosperous lives, become an IT company chosen by all stakeholders (customers, employees, investors, local communities)". Segment-specific visions aligned to this corporate vision were defined for all four business units.
• Dynamic portfolio growth plan:
  • Distribution Cloud Business: Expected to become the largest profit driver, growing recurring profit from 0.7 billion yen to 1.8 billion yen by 2030, expanding across business scale, profitability, and total profit.
  • Government Cloud Business: Expected to deliver steady growth through 2030.
  • Trust Business: Currently unprofitable, targeting to turn net positive and grow into a high-profit business over the 5-year plan period.
  • Mobile Network Business: Aiming to maintain performance amid challenging market conditions through operational efficiency improvements.

Distribution Cloud Business Strategic Priorities

• Food Retail: Continue expanding share in the small/medium retail segment, while accelerating penetration of @rmsV6 into the large/medium retail segment (a larger total market by store count, with stronger growth expectations). Expand existing competitive peripheral services to non-food retail segments such as drug stores and home centers. Product development priorities include embedding AI for automated decision-making, strengthening security and disaster resilience as competitive advantages, mitigating third-party software cost inflation via open-source adoption, and improving development productivity via generative AI.
• Food Wholesale & Overall Food Distribution: Establish overwhelming top market share for the Cloud EDI-Platform in the processed food wholesale market (targeting to increase large corporate share from 55% to 75% by 2030). Enter new markets including small food manufacturers (via ultra-simple smartphone-based EDI) and daily goods wholesalers. Grow penetration of the C2Platform inter-enterprise collaboration platform, and target to increase ID count from 693 to 6,500 by 2030.
• Overseas Expansion for Specialty Stores: Support Japanese specialty stores expanding into Southeast Asia via the RetailPro system. Target 700 overseas stores and 1,300 domestic stores by 2030, and promote common cross-border use of the system.
• 2030 targets for the segment: 8.04 billion yen revenue, 6.48 billion yen recurring revenue, 1.85 billion yen recurring profit, 23% recurring profit margin.

Government Cloud Business Strategic Priorities

• Grow via a two-axis strategy: national-scale cloud services for growth, and region-focused services for stable profit.
• ActiveCity (core national document management product): Target to increase market share from 10% to 20% (become top share) by 2030, focused on small municipalities. Strategies to maintain growth after expected market peak in 2028 include expanding add-on adjacent products and embedding AI capabilities leveraging the company's 2025 AI acquisition.
• 2030 targets for the segment: 9.57 billion yen revenue, 5.06 billion yen recurring revenue, 1.42 billion yen recurring profit. Note that 2025 and 2026 will see high revenue and profit from special demand tied to national core system standardization policy, with a temporary pullback in 2027 before returning to growth from 2028.

Trust Business Strategic Priorities

• Aligned with the global shift from centralized to decentralized digital trust infrastructure (Web3.0), the company leverages its existing My Number Card-based authentication and digital certificate technology to build a full end-to-end digital trust platform. Key upcoming product launches include:
  • 2026 launch of a new eKYC service covering all required authentication factors, with Passive Liveness face recognition for global-standard security, to address growing demand for strict online identity verification.
  • Launch of a VC (Verifiable Credentials) wallet app that lets users securely manage and selectively disclose digital certificates on smartphones, enabling user-controlled data for the Web3.0 era.
• 2026 target: achieve full profitability. 2030 targets: 0.5 billion yen revenue, 0.39 billion yen recurring revenue, 0.2 billion yen recurring profit, 40% recurring profit margin.

Financial & Human Capital Strategy

• Financial Strategy (focused on cost of capital and share price awareness):
  • Current analysis: PBR is 1.7x (above 1x but below the information and communications industry average of 2.6x for the Tokyo Standard Market), ROE is 15.3% (above industry average of 12.1%), PER is 10.8x (well below industry average of 21.4%).
  • Targets for 2030: PBR ≥2.2x, ROE ≥13% (maintaining a ≥3% equity spread over estimated 10% cost of equity), PER ≥17x.
  • Shareholder returns: Commit to a progressive dividend policy, with planned dividend increases from 17.0 yen per share (2024) to 30.0 yen (2025) and 35.0 yen (2026). Plan to pursue flexible share buybacks as appropriate. 5-year cash allocation: expects 14.0 billion yen in operating cash flow, allocates 5.2 billion yen to growth investments including M&A, with balanced allocation to shareholder returns, fixed asset investment, and new head office relocation.
  • IR strategy: Prioritize improving share liquidity first via expanded outreach to individual investors (through briefings, trade shows, and social media), while also pursuing active engagement with institutional investors over time.
• Human Capital Strategy: Address core challenges including long working hours, incomplete training systems, staffing shortages, and productivity improvement. Implement improvements across working environment, training, recruiting, organizational activation, and personnel systems to build a workplace where all employees can work healthily, productively, and with higher satisfaction.

Sustainability

• E (Environment): Discloses CO2 emissions and reduction data.
• S (Social): Raised salary levels, achieved 2025 targets for female promotion (28.5% of supervisor positions held by women), and achieved 92.3% paternity leave uptake in 2025. Promoted company-wide AI adoption to improve productivity.
• G (Governance): Strengthening outreach to individual investors to improve share trading liquidity, in response to feedback from institutional investors.

1. Distribution Cloud Business: Increased revenue driven by expanded service delivery and price revisions, but decreased profit. Profit was dragged down by software amortization costs for the newly launched @rmsV6 (in early adoption stage) and upfront labor costs for business expansion. Annual recurring revenue (ARR) grew steadily by approximately 0.2 billion yen, anchored by growth of food retail services such as @rms core. @rmsV6 added 2 new operating clients in 2025, and the fresh produce EDI system Sendone.net V2 saw growing demand and multiple new orders. This business is expected to be the primary growth engine for the company through 2030. 2. Government Cloud Business: Increased both revenue and profit. Strong performance came from robust demand for government core system unification and standardization projects, expanded delivery of the ActiveCity document management system, and disaster prevention radio construction projects. ActiveCity added multiple new operating clients and won large new orders including Ota Ward and Funabashi City. The company also acquired an AI technology firm in this segment during the period. This business was the largest contributor to the company's overall profit growth in 2025. 3. Trust Business: Increased revenue and reduced net loss. Growth was driven by expanded delivery of the CloudCerts digital certificate issuing service, expanded use cases (including adoption of CloudCerts-issued digital student IDs as commuting certificates at some Okinawa public transport agencies), and progress on a contracted national qualification examination system development project. The business has been unprofitable to date, but the loss narrowed in 2025. 4. Mobile Network Business: Increased both revenue and profit. This business operates Docomo Shops in Wakayama Prefecture with ~50% market share. Profit growth came from higher incentive revenue driven by meeting carrier performance targets, expanded terminal replacement demand ahead of the 2026 3G service shutdown, and operational efficiency trials for online in-store customer service. Consolidated company-wide: 2025 recurring profit reached 1.85 billion yen, a 0.59 billion yen increase year-over-year. Company-wide costs increased due to a core system refresh for operational efficiency. Revenue contribution percentages for each segment were not explicitly provided in the transcript.

• 2026 Fiscal Year Full Year Guidance:
  • Total company revenue: 19.2 billion yen, total recurring revenue: 9.6 billion yen. Growth will be led by the Distribution Cloud and Government Cloud segments.
  • Total company recurring profit: 1.90 billion yen, representing an increase year-over-year. Growth will come from contributions of government core system standardization projects, reduced amortization burden from the Synergy M&A, and expanded service delivery in Distribution Cloud. The company targets continued revenue and profit growth in 2026, absorbing higher personnel costs from staffing expansion.
  • Distribution Cloud Business: Expect increased revenue and profit, driven by expanded delivery of @rms, AI automatic ordering, Sendone.net V2, and Cloud EDI-Platform. @rmsV6 will complete 4 new launches in 2026, and Sendone.net V2 will complete 6 new launches. Profit will remain flat in the near term due to ongoing upfront amortization for @rmsV6, while the company builds the foundation for long-term growth.
  • Government Cloud Business: Expect increased revenue and profit driven by ongoing local government DX projects. ActiveCity will grow recurring revenue via expanded adoption and AI feature development. The Minna no Madoguchi online citizen window service will launch in Tokyo's special wards in 2026, beginning full national expansion. Software amortization from the Synergy acquisition completed in 2025; goodwill amortization will continue through 2027.
  • Trust Business: Expect increased revenue driven by CloudCerts expansion and large contracted development projects, with a target of achieving full profitability in 2026. The company will actively promote the business via exhibition participation, develop wallet functionality and a digital certificate distribution platform, and continue cross-segment collaboration with Government Cloud.
  • Mobile Network Business: Expect slight revenue growth driven by higher terminal prices, but decreased profit due to higher promotion costs and personnel costs from wage increases. The business will centralize operations at a hub office and scale up online in-store customer service to improve productivity.
• 2026-2030 New Mid-Term Management Plan Guidance:
  • 2030 full company targets: 22.1 billion yen total revenue (+22.1% vs 2025), 12.6 billion yen total recurring revenue (+44.8% vs 2025), 3.0 billion yen total recurring profit (+61.5% vs 2025).
  • Recurring profit will see a temporary dip in 2027 due to the unwinding of special demand from government core system standardization projects, before returning to growth from 2028 onward.

• Distribution Cloud: The Japanese food retail market is facing long-term contraction due to population decline, with accelerating closures and M&A of small and medium retailers. The industry also faces structural headwinds including severe labor shortages and rising operating costs (logistics, labor). Third-party software required for service delivery has seen sharp cost inflation, which could pressure margins if not mitigated.
• Government Cloud: Local governments face structural challenges including population decline, aging, fiscal pressure, and staff reductions, which could lead to slower project adoption or tighter budget constraints than expected. The core document management system market is expected to peak in 2028, requiring the company to successfully expand new products and capabilities to maintain growth.
• Trust Business: Growth depends on the progression of regulatory and legal reform for decentralized digital trust and digital IDs in Japan. Delays or changes in policy direction could slow adoption of the company's new products and platform strategy.
• Mobile Network Business: The market environment is challenging, with pressure on margins from rising personnel costs and promotion expenses.
• Financial: The company's current PER is well below the industry average, and share liquidity is insufficient for broad institutional investor participation. Failure to improve liquidity and valuations could negatively impact the company's ability to raise capital and deliver shareholder returns.
• The transcript does not mention any material operational failures during the 2025 fiscal year.

Five questions were listed in the agenda, but full questions and answers were not included in the provided transcript. The listed topics for Q&A are as follows: 1.

Q: What impact will the advancement of AI technology have on Cyberlinks' business?

A: No answer text provided. 2.

Q: Are there any services provided by the company that are at risk of being displaced by AI advancement?

A: No answer text provided. 3.

Q: What factors caused the slowdown in ARR growth for the Distribution Cloud business in Q4 of the 2025 December fiscal year?

A: No answer text provided. 4.

Q: Can you explain the software amortization treatment in the Distribution Cloud business?

A: No answer text provided. 5.

Q: What is the potential impact of the new GIGA School Initiative on the company's business performance?

A: No answer text provided.