R&D COMPUTER CO.,LTD. Q4 FY2025 earnings call

• Company Overview & Core Strengths

  • Founded in 1971, headquartered in Tamachi, Japan, with 563 consolidated employees, 2 subsidiaries, and 50+ consecutive years of profitable operations.
  • Core strengths include 50+ years of stable operating history, a strong customer base backed by deep technical and industry expertise, an average of 4.38 qualifications per employee (including both IT and client industry-specific certifications), and long-term deep partnerships with 30-40 core partners.

• 2025 March Fiscal Year Full-Year Results

  • Consolidated revenue of 13.73 billion yen, down nearly 0% year-over-year, 3.3% below the revised internal target. Operating profit came in at 1.433 billion yen, down 17.1% year-over-year, and net profit was 1.023 billion yen, down 17.1% year-over-year.
  • A single large unprofitable project generated nearly 0.5 billion yen in losses, offset partially by 75 million yen in cost savings from aggressive company-wide cost cutting after the project issue was disclosed. Reallocating staff to resolve the unprofitable project also limited new project launches, contributing to the flat top-line result.
  • The large unprofitable project is now fully closed.
  • Balance sheet: Total assets decreased 364 million yen year-over-year, total liabilities decreased 75 million yen, net assets increased 220 million yen, and equity ratio stands at 71.6%. Operating cash flow was 829 million yen, and ending cash and cash equivalents increased 48 million yen year-over-year.

• Strategic Priorities under Mid-Term Management Plan VISION 2025

  • Pursue proactive M&A that can generate synergies, and deepen collaboration with existing business partners, including an ongoing strategic business alliance with Toho System Science, a publicly listed firm with strength in financial and insurance services.
  • Advance DX business: Prioritize cloud native development, deepen collaboration with global platform providers (AWS, Azure, Oracle) to grow cloud infrastructure projects, adopt low-code and agile development methodologies, build an internal dedicated modernization team to meet growing client demand for legacy system (including mainframe) refresh, and expand modernization projects in partnership with Hitachi and Fujitsu.
  • Scale generative AI adoption: Completed company-wide environment setup in H1 2024 (including the internal Rand Task Collaborator knowledge center and GitHub Copilot access), launched client-facing generative AI-enabled offerings in H2 2024, and will shift focus to AI agent development in the current fiscal year.
  • Continue investing in talent development and strengthening core competitive areas, and expand revenue in the traditional SI business.

• Capital Policy & Sustainability

  • Committed to maintaining a payout ratio of 50% or higher; for 2025 March fiscal year, maintained dividends despite lower profit, resulting in a 66.7% payout ratio.
  • ESG priorities include talent development, 1:1 gender balance in new graduate hiring, 100% return rate from parental leave, certified healthy company management, and collaborative growth with core partner companies aligned with 7 prioritized SDG goals.

1. System Integration Service: Revenue decreased 2.7% year-over-year, with public sector growth offset by broad declines across other industries, driven by the negative impact of a large unprofitable project. 2. Package-based SI Service: Revenue grew steadily year-over-year, with growth in SAP and Salesforce-related projects, making it the fastest-growing segment. 3. Infrastructure Solution Service: Revenue decreased 9.3% year-over-year, largely due to client vendor organizational restructuring that limited sales activity. Legacy server/client work declined, but network and cloud sub-segments saw steady revenue growth.

For the 2026 March fiscal year, management forecasts 14.5 billion yen in consolidated revenue, 1.86 billion yen in operating profit, 1.88 billion yen in ordinary profit, and 1.25 billion yen in net profit, representing 20-30% profit growth year-over-year. The revenue forecast is 5 billion yen below the original VISION 2025 plan, reflecting a cautious approach after the 2025 fiscal year unprofitable project. The mid-term plan VISION 2025 met its original 2025 March fiscal year revenue target of 13.7 billion yen, and management expects to return to steady growth after the closure of the unprofitable project. The planned payout ratio for 2026 March fiscal year is 54.6%, meeting the 50%+ commitment, with a planned 2 yen increase in total annual dividend to 38 yen.

• A large unprofitable project in the 2025 March fiscal year generated nearly 0.5 billion yen in losses, pulling full-year profit down 17% year-over-year and forcing the reallocation of staff that limited new project development and top-line growth.
• The unprofitable project caused the company to miss its 2025 March fiscal year revenue target by 3.3%.

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