Data Applications Company,Limited Q4 FY2025 earnings call

2025 Fiscal Year Core Results

• Total consolidated revenue: 2.607 billion yen, down 10.7% year-over-year. The decline is primarily due to the reversal of a one-off large packaged project recorded in the prior fiscal year, while subscription revenue stayed stable throughout the full year. WEEL acquisition and a new Q4 large packaged project supported overall revenue.
• Operating profit: 329 million yen, down 40.1% year-over-year, driven by lower revenue, higher personnel costs for business expansion, M&A-related expenses, and goodwill amortization. The license business model sees outsized profit impact from revenue shortfalls due to high fixed development costs, though strict cost control reduced total overall expenses.
• Recurring profit: 360 million yen (down 36.9% YoY); net profit attributable to parent shareholders: 268 million yen (down 45.7% YoY); EBITDA: 440 million yen.
• Subscription MRR hit 76 million yen in March 2025, 5.5x the level of March 2021, with steady low-volatility growth.
• Balance sheet: Total assets 6.179 billion yen, net assets 4.775 billion yen, 255 million yen in goodwill from the WEEL acquisition; equity ratio maintained at 77.3%, above the 70% stability target.

Business Expansion Updates

• ACMS Cloud cloud-based data integration platform started trial operations in May 2025 ahead of full launch; work management platform Placul launched a free tier.
• Three companies (WEEL, Digital Trans Communications (DTC), Melon) joined the group between July 2024 and April 2025, establishing a 4-company collaboration structure to build a next-generation data platform with advanced analytics including anomaly detection.
• The company is accelerating the shift of all licenses to a subscription model to improve revenue stability.

Human Capital Management

• Expanded training programs including tiered skill training, unconscious bias training, and achieved 100% e-learning course completion. Launched new human rights and health management policies in September 2024, and conducted engagement surveys for management staff.

New Mid-Term Management Plan (FY2026 March - FY2028 March) Strategy

• The new plan was launched to reflect the expanded group structure after three acquisitions, shifting from a standalone to consolidated group planning. The mission remains "Realizing DIGITAL WORK where individuals and organizations grow together", centered on the DAL PLATFORM that connects enterprise data, people, and knowledge.
• Three core strategic pillars:
  1. Expand business domains: Leverage core data integration platforms in existing domestic markets, add DTC's SI services for customized customer support, expand into new markets via ACMS Cloud, enter the work management market via Placul, and combine group AI capabilities from WEEL and Melon to deliver high value-added solutions.
  2. Improve revenue stability: Launch the group-integrated flagship solution ACMS Cloud, accelerate subscription conversion of all licenses to reduce revenue volatility, and pursue cost optimization via AI-driven operational efficiency and group-wide resource sharing while continuing strategic growth investment.
  3. Advance human capital management: Treat personnel as a core long-term growth asset, focus on talent portfolio building, diversity improvement, engagement growth, flexible work arrangements, and aligned organizational goal sharing to drive enterprise value improvement.
• The group is structured into three clear segments (Software, SI, AI-related) to maximize post-acquisition synergies.

Under the new 3-segment structure defined in the new mid-term plan: Software business, System Integration (SI) business, and AI-related business, no full-year 2025 March fiscal year absolute financials are provided for each new segment. For product categories in the 2025 fiscal year: 1. Strategic products (led by ACMS Apex): Revenue grew 3.3% year-over-year, accounting for 42.2% of total revenue. 2. Recurring (stock-type) revenue including subscription, maintenance, and term licenses: accounted for ~60% of total consolidated revenue. 3. Legacy packaged products: Revenue declined due to the reversal of a one-off large project from the prior year, though a new one-off large packaged project was secured in Q4. The acquisition of WEEL in July 2024 contributed to total consolidated revenue, with service revenue increasing following the subsidiary integration.

• FY2026 March Full Year Guidance: Consolidated revenue is projected at 4.5 billion yen, up 72.6% year-over-year, driven by contributions from Placul, DTC, and Melon. Operating profit is projected at 280 million yen, down 14.9% year-over-year, due to higher costs for personnel and management system expansion following the three acquisitions, and rising personnel and outsourcing costs. EBITDA is projected at 500 million yen, maintaining solid profitability while pursuing growth investment. The company frames FY2026 as a preparation period for long-term sustained growth, with short-term profit pressure expected as it builds out group infrastructure.
• 2025 Fiscal Year Dividend: A 1 yen increase to 26 yen per share final dividend was approved.
• FY2026 March Dividend Guidance: Dividend maintained at 26 yen per share, consistent with the policy of prioritizing stable shareholder returns.
• New Mid-Term Plan (FY2026 - FY2028) Targets:
  • Final year (FY2028 March) consolidated revenue target: 60 billion yen
  • Final year consolidated EBITDA target: 10 billion yen, more than double the FY2025 actual result
  • ROE target of 15% or higher by FY2028 March
• Financial and Capital Allocation Policy: No change to core financial policy. Maintain a minimum dividend of 25 yen per share, target a 3.5% dividend on equity (DOE), continue the existing shareholder benefit program. Allocate 0.5 billion to 1 billion yen to overseas expansion and human capital growth investment, 1 billion to 2 billion yen to M&A or share buybacks, and approximately 500 million yen to dividends over the plan period. Allocation will be adjusted flexibly based on business conditions, including potential use of interest-bearing debt.

• The legacy license business model has high fixed development costs, meaning revenue declines or shortfalls have a disproportionately large negative impact on operating profit.
• The company is in a transition period to a subscription-based business model, which has caused temporary revenue and profit declines in the short term as it builds a long-term growth base.
• Post-acquisition integration of three new group members requires short-term increases in personnel and administrative costs, creating near-term profit pressure even as it lays the groundwork for long-term growth.
• Operating in a highly volatile VUCA environment with rapid technological change (including AI evolution) and unpredictable macro/geopolitical risks, requiring constant strategic flexibility to adapt to market shifts.
• Current ROE levels are below the targeted 15%, and PBR has not sustained levels management views as appropriate for the IT industry, requiring sustained profit growth to improve shareholder value.

No question and answer section is included in the provided earning call transcript.