CHANGE Holdings,Inc. Q4 FY2025 earnings call

• Overall FY2025 Performance

  • Consolidated operating profit reached 13.5 billion yen, exceeding the target of 13 billion yen, an 83.1% year-over-year increase. Total consolidated revenue grew 25% year-over-year to 46.387 billion yen. The acquisition of fundbook completed the growth foundation for the Digitize & Digitalize Japan Phase 3 (DJ3) medium-term plan.
  • DPS increased from the initial forecast of 14.5 yen to 20.9 yen per share, and a new 3.6% DOE dividend policy was announced.
  • EPS missed the target at 96% achievement, due to higher financial costs from investment securities valuation losses and increased tax burden from deferred tax asset write-downs, but still grew 82.5% year-over-year.
  • The company maintains strong financial discipline: net interest-bearing debt to EBITDA is 0.26x (well below the 2x internal limit), and net debt to equity is 10% (well below the 50% internal limit), leaving ample debt capacity. Risk-weighted assets (goodwill + intangibles) equal 91% of equity, within the 100% internal limit.

• Strategic Business Updates

  • Private DX/M&A Intermediation: Renamed from the previous "labor shortage solution (provisional)" segment following fundbook's consolidation starting Q4 FY2025. DFA Robotics completed structural reform after a 2024 impairment charge and saw significant profit improvement. The company leverages its existing 1,600+ customer base to capture consulting and training demand, and is expanding DX tool (robot/AI) offerings, including a successful full-scale deployment of hospital delivery robots via a joint proposal with B-Cap.
  • Cybersecurity: Formed alliances with large customer-base partners including SMBC Cyberfront and Pronexus to build new sales channels, expanded solutions through partnerships with cutting-edge security firms, launched new services including generative AI-related vulnerability scanning, and partnered with S&J to strengthen monitoring and operation services to build a full end-to-end cybersecurity offering.
  • Regional Revitalization (PublicTech): Furusato nozei business OEM expansion (including the KABU& service that exceeded 900 million yen in donations) delivered stable profit. Spun off Grivity, a logistics technology subsidiary staffed entirely by former Yamato Group executives, to provide SaaS-based return gift shipping management for furusato nozei, already serving 300 local governments and 15,000 businesses, with mid-term plans to expand into local circular economy businesses like local production for local consumption school meals. Launched a joint venture inbound promotion business with WAmazing, targeting profitability from FY2027.
  • Public DX (PublicTech): LoGo series SaaS for local governments continues to grow, with nearly 1,000 paid local government clients for LoGo Chat and over 700 for LoGo Form, and is expanding cross-selling of new products like LoGo AI Assistant. Shifted Gabumetsu's focus to standalone BPR consulting and reallocated resources to win central government contracts, already securing 1.3 billion yen in new Q4 orders. Acquired TCS for the education and local government ICT business, positioning to capture tablet replacement demand for schools. Carbon credit business development is ongoing leveraging TCS' existing forestry cooperative client base.

• DJ3 Medium-Term Strategic Direction

  • Long-term vision: Become a hub for key stakeholders to build and scale a replicable model for regional revitalization across Japan.
  • Core competency: Leverage cross-sector synergies from DX know-how, talent development capabilities, and an existing large customer network across the group's subsidiaries.

1. NEW-IT Transformation Segment: Reported revenue of 20.797 billion yen and operating profit of 6.08 billion yen. This segment grew rapidly from 11.5 billion yen in FY2024 to nearly match the size of the PublicTech segment, driven by growth in both the Private DX/M&A Intermediation and Cybersecurity sub-segments. It accounts for approximately 44.8% of total consolidated revenue. 2. PublicTech (パブリテック) Segment: Projected revenue for FY2026 is 27.3 billion yen, nearly balanced with the NEW-IT Transformation segment. The segment delivered stable operating profit in FY2025, supported by OEM growth in the furusato nozei (hometown tax donation) business within the Regional Revitalization sub-segment, and steady user growth for the LoGo series of local government SaaS tools in the Public DX sub-segment. It accounts for approximately 55.2% of total consolidated revenue based on FY2025 total revenue.

• FY2026 (March ending) guidance:
  • Revenue is projected to grow to 55 billion yen, with NEW-IT Transformation segment revenue growing to 28.283 billion yen to nearly match the PublicTech segment's projected 27.3 billion yen. Operating profit is projected at 14 billion yen, a 3.6% year-over-year increase (a 17.2% increase excluding the one-off DGA revaluation gain in FY2025). DPS is projected at 23 yen, a 2.1 yen increase year-over-year.
• DJ3 3-year medium-term guidance (ending FY2028 March):
  • Revenue target: 670 billion yen organic, 860 billion yen including M&A. Operating profit target: 18 billion yen organic lower bound, 23 billion yen including M&A upper bound (a 1.7x increase from FY2025), aligned with performance stock option vesting terms. EPS is targeted to reach 160-200 yen, with DPS reaching 31-33 yen.
  • CAGR assumption: ~20% for most segments, with a conservative +2.9% total growth for the furusato nozei business over the 3-year period.
  • Capital allocation: 300 billion yen allocated to M&A over 3 years, 45 billion yen for capex, 50 billion yen for shareholder returns, with 100 billion yen held for working capital. 3.6% DOE is set as the base dividend policy, with a 15% lower bound payout ratio. Share buybacks will be considered if M&A capacity is underutilized or excess capital exists.
  • Market opportunity: All core businesses operate in growing markets, with 1.8x projected growth for Japan's domestic DX market by 2030, large untapped potential for business succession M&A, growing cybersecurity investment, 1 trillion yen of additional expansion room for the furusato nozei market, and policy-backed growth for inbound tourism.

• After the October 2025 ban on point incentives by furusato nozei intermediary sites, intensified competition from incumbents' pre-ban advertising and point promotions creates near-term downside risk for the direct ふるさとチョイス channel, so management has incorporated conservative assumptions into the current forecast.
• New inbound and carbon credit businesses in the regional revitalization segment require upfront investment, with profitability not expected until FY2027 at the earliest, creating near-term margin pressure.
• M&A activity carries the risk of goodwill impairment, which could lower ROE and impact overall profitability, though the company maintains internal limits to keep risk assets below 100% of equity. Execution risk for the new medium-term plan: Achieving the upper 23 billion yen operating profit target depends on successful M&A execution and synergies, which are not guaranteed.
• While the company maintains financial discipline within internal limits, the current 91% ratio of risk assets to equity leaves relatively limited remaining investment capacity for additional M&A in the near term.

The provided transcript does not include the full text of the question and answer discussion, so no exchanges can be summarized.