Data Applications Company,Limited Q2 FY2026 earnings call

Overall Consolidated Performance

• Total consolidated net sales grew 81.3% YoY to 2.032 billion yen, with the consolidation of 3 new subsidiaries the primary driver of growth. Operating profit grew 162% YoY to 70 million yen, ordinary profit grew 132.8% YoY to 97 million yen, and net income attributable to parent shareholders grew 70.1% YoY to 53 million yen. EBITDA totaled 171 million yen. Gross margin for the consolidated group is 53.26%.
• Total assets are 6.908 billion yen, net assets are 4.993 billion yen, and equity ratio is 69.69%, remaining stable. 598 million yen in goodwill was recognized from the recent acquisitions. The firm targets ROE of 15% or higher by the 2028 March fiscal year as part of its new medium-term management plan.

New Product Development

• The new cloud-based data integration platform ACMS Cloud is on track for release at the end of November 2025. The platform unifies EDI, ETL, and EAI functions to connect disparate enterprise systems on the cloud, enabling real-time data linkage between frontline operations and executive decision-making. Its core value propositions are democratization of data utilization, AI-powered business innovation, and support for data-driven management.
• A new Customer Success Edition of the Placul work management platform launched in October 2025, designed to enable shared platform use between client enterprises and their supporting vendors/integrators.

Group Synergy

• The three newly acquired subsidiaries are collaborating closely on the development of ACMS Cloud, leveraging their respective strengths to create group-wide value. The firm is also integrating customer networks across group companies to deliver higher-value services, with additional synergy initiatives under exploration.

New Medium-Term Management Plan (FY2026 March - FY2028 March)

• The plan is structured around three core strategic pillars:
  1. Business Area Expansion and Development: Promotional activities for ACMS Cloud are already underway (including website renewal and event sponsorship), and new customer case studies for ACMS Apex have been published to support sales expansion.
  2. Improved Revenue Stability: Subscription sales are progressing steadily, with the firm accelerating the shift of all licenses to a subscription model to build more stable recurring revenue.
  3. Promotion of Human Capital Management: The firm is focused on talent acquisition, development, employee wellbeing, and flexible internal talent mobility to maximize human capital value. Current initiatives include preparation for a Q3 talent survey, manager training, wellness and work-life balance education, and an ongoing rebranding project for the 40th anniversary.

Shareholder Return

• To mark the firm's 40th anniversary in November 2025, a one-time special anniversary dividend of 9 yen per share is planned for FY2026 March. The total planned dividend for the full year is 35 yen per share (26 yen regular + 9 yen special), returning to only regular dividend starting in FY2027 March.
• The firm's long-term shareholder return policy targets a dividend on equity (DOE) of 3.5%, with a minimum regular dividend of 25 yen per share to ensure stable, consistent returns.

Following the acquisition of 3 subsidiaries (WEEL, Digital Trans Communications, Melon), Data Application restructured into 3 business segments for the first consolidated reporting period. 1. Software Business: 1.204 billion yen in revenue, contributing 57% of total consolidated revenue. Recurring revenue (subscription, maintenance, term licenses) accounts for ~80% of the segment's total revenue, with strategic product ACMS Apex growing 20.9% YoY and representing 49.8% of the segment's product revenue. Subscription MRR exceeded 80 million yen as of September 2025, 6x the level from March 2021. The segment performed roughly in line with plan, with strong profitability from increased sales absorbing high fixed costs. 2. System Integration Business: 594 million yen in revenue, contributing 28% of total consolidated revenue. Operating profit was 18 million yen; after accounting for 12 million yen in goodwill amortization, segment profit was 6 million yen. Revenue grew driven by expanding demand for DX and cloud migration, with profit improvement underway via strengthened management and higher value-added project wins. 3. AI-related Business: 296 million yen in revenue, contributing 14% of total consolidated revenue. Operating profit was 22 million yen; after accounting for 35 million yen in goodwill amortization, segment profit was -12 million yen. The segment is in a strategic investment phase for growth, with continued investment in talent and business expansion ahead of future profit conversion. A 63 million yen consolidation adjustment (mostly elimination of inter-group transactions) is applied to total revenue.

• Full-year FY2026 March consolidated guidance is unchanged from initial projections. The firm maintains its target of 72.6% YoY sales growth to 4.5 billion yen, driven by the revenue contribution of the three newly consolidated subsidiaries and new products/services like Placul.
• Full-year operating profit is projected to decline 14.9% YoY to 280 million yen, due to increased costs from expanding personnel and management infrastructure after the acquisitions, as well as rising labor and outsourcing costs. Projected full-year EBITDA is 500 million yen, which maintains sufficient profitability while supporting ongoing growth investment.
• The current fiscal year is positioned as a preparation period to strengthen the group-wide foundation and build capacity for long-term sustainable growth, with continued strategic investment despite short-term profit pressure.
• The full-year dividend guidance of 35 yen per share (26 yen regular + 9 yen special anniversary dividend) is unchanged, with no change to the firm's commitment to stable shareholder return.

• The newly acquired System Integration and AI-related segments are still in a strategic investment phase, with continued upfront investment in talent and business expansion delaying profit conversion, leading to near-term downward pressure on group profitability.
• The Software segment has a high proportion of fixed costs, meaning swings in sales volume have a direct outsized impact on segment profit.
• M&A-related costs including goodwill amortization are dragging on near-term segment and consolidated profit.
• The shift to a subscription-based revenue model is still a work in progress, with the firm in a transition period for building long-term stable revenue and profit growth.
• Rising labor and outsourcing costs increase cost pressure and compress near-term margins.

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