Internetworking and Broadband Consulting Co.,Ltd. Q2 FY2025 earnings call

• Overall Financial Performance

  • The company achieved the highest ever second quarter revenue in its 23-year history. Operating profit increased 87% year-over-year to 252 million yen (0.252 billion yen), while net profit jumped 1458% year-over-year to 184 million yen (0.184 billion yen), driven by strong license sales and a favorable year-over-year comparison base.
  • Gross profit increased 27% year-over-year to 856 million yen (0.856 billion yen), with an operating profit margin of 24% — more than double the IT industry average of 11.7%. This improvement came from license segment growth and a 20% product price increase implemented the prior year.
  • Selling, general and administrative expenses increased 12% year-over-year, primarily due to headcount expansion and wage hikes for talent investment to support business growth.
  • The balance sheet remains healthy: the equity ratio rose to 63% via continued profit accumulation and reduced interest-bearing debt, aligned with the company's sound management strategy.

• Sales and Channel Strategy

  • Direct sales currently account for approximately 40% of total revenue. The company has shifted to a prioritized partner strategy, partnering with major SIer vendors to expand into public administration, government, and education markets. Partner-led sales penetration has gradually improved and contributed to the current strong performance.
  • A dedicated special webpage for local government clients has been launched to support digital transformation (DX) promotion, and partner expertise is continuously incorporated into product updates for System Answer G3.

• Product and R&D Strategy

  • The company is developing AI-enhanced features for its core product System Answer G3, leveraging 23 years of operational monitoring expertise to train AI for predictive issue detection and automated operation, with the goal of improving outage response speed and operational efficiency.
  • Development of multi-cloud visualization capabilities is ongoing for major platforms including AWS, Microsoft Azure, Oracle Cloud, and Google Cloud Platform, to support growth in hybrid cloud environments.
  • The company holds a unique market position in multi-vendor infrastructure visualization for server, network, and security environments, enabling it to capture growing demand from DX trends.

• Market Expansion

  • The company is targeting growing demand from DX-driven public sector digitalization, including the GIGA School Plan in the education sector, and is gradually winning assessment, analysis, and product adoption opportunities via partner channels. Early positive results from this push have already appeared in the second quarter.
  • The manufacturing sector, driven by the government's smart factory promotion, is another key expansion market, where the company's infrastructure visualization tools are well-positioned to support ongoing DX investment.
  • The core operations management market has a total size of 189.4 billion yen, while the broader domestic information security market (including services and product sales) is 1.5852 trillion yen, with both markets growing at 8-10% annually, providing strong growth potential for the company.

• Human Resources Strategy

  • The company plans to add 9 new employees in the 2025 September fiscal year, prioritizing technical roles amid industry-wide hiring challenges.
  • Internal training initiatives have been expanded, including an in-house certification program to deepen product and technical knowledge, plus support for employees to earn national and vendor (AWS, Cisco) professional certifications.

• Shareholder Return and ESG

  • The company maintains a progressive dividend policy, and confirmed a planned 6 yen per share interim dividend, with a planned 6 yen per share year-end dividend for a full-year 12 yen per share payout. The company continues to support the NPO AlonAlon for people with disabilities, with employees and executive leadership participating in ongoing volunteer and support activities.

1. License Sales Business: Led overall growth, with cumulative second quarter revenue of 598 million yen (0.598 billion yen), a 53% increase year-over-year. This segment is the primary contributor to the company's profitability.
2. Service Provision Business and Other Product Sales Business: Revenue saw a slight decrease year-over-year, but remained in line with typical historical levels.
3. Stock (Recurring Revenue): Cumulative second quarter standalone stock revenue reached 724 million yen (0.724 billion yen), a 48% increase year-over-year. The stock revenue share rose 15 percentage points year-over-year to 68%, supporting a stable revenue structure. The core product System Answer maintained a 95% annual renewal rate, consistent with historical high levels.

• The company maintained its original full-year 2025 September fiscal year outlook, with year-to-date progress through the second quarter reaching 45% for revenue, 56% for operating profit, and 52% for net profit, which management considers on track to meet full-year targets.
• Management maintained the full-year operating profit margin guidance of 19%, which represents a 2 percentage point increase from the prior year's 17% margin, with the company continuing to prioritize margin expansion in its business strategy.

No explicit material business or operational risks were discussed in the provided transcript. Management noted that technical hiring remains challenging in the current market, which could impact the company's expansion pace.

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