MIT Holdings CO.,LTD. Q4 FY2025 earnings call

• Overall Financial Results
  • Total revenue for FY25 is 5.117 billion yen, a 2.3% decrease year-over-year. Gross profit is 1.098 billion yen, a 6.6% decrease year-over-year. Operating profit is 169 million yen, a 14.2% decrease year-over-year, with an operating profit margin of 3.3%. Ordinary profit is 162 million yen, a 13.6% decrease year-over-year. Net income is 94 million yen, a 23.9% decrease year-over-year.
  • Balance sheet improvement: The company actively reduced interest-bearing debt, leading to a 7.1 percentage point improvement in equity ratio to 34.3%, strengthening the financial position.
  • Cash flow: Operating cash flow decreased slightly but maintained a stable level that does not impact business operations. Investing cash flow was mainly used for development investment on in-house products. Financing cash flow recorded an outflow due to interest-bearing debt repayment, which does not affect overall operations.
• Business Highlights
  • System Integration Service: Major customer orders remain solid, with large projects and expansion of existing projects in the energy sector, and progress in acquiring new projects. Prime end-user projects have increased average order value, and the effect of profit margin improvement is gradually emerging. The revenue decrease was caused by the completion of a large transportation and logistics project won in the previous period, delayed launch of follow-up projects leading to opportunity loss, and overall lower operating man-hours compared to last year.
  • DX Solution Service: All core stock-based revenue streams are stable. Wisebook stock revenue grew 4.7% compared to 5 years ago, and DynaCAD stock revenue has an average annual growth rate of 6.5% over the past 5 years. The overall revenue decrease was temporary, caused by pullback from previous period orders, delayed version upgrade launches extending the lead time for revenue recognition across fiscal periods. Limited new sales were also driven by development delays for new versions of core products. New growth areas including scaffolding drawing CAD services, bicycle parking management systems and meal reservation management systems recorded expanding new orders. Cloud solution GIGA School support bid orders decreased, but new growth verticals are expanding.
  • Operating profit change drivers: System integration recorded a 29 million yen negative impact from lower operating man-hours due to engineer shortage and opportunity loss. DX solution recorded a 93 million yen negative impact from pullback in digital marketing orders. Cost savings including 17 million yen from subsidiary integration, 30 million yen from lower procurement and outsourcing costs, 10 million yen from other cost cuts offset part of the profit decline. The company prioritized employee returns via wage increases and bonuses, and human capital investment for engineer skill improvement and new technology development, which increased overall costs and led to year-over-year profit decline.
• Mid-Term Management Plan Review (3-year plan, FY25 was the final year)
  • The original revenue target was 5.7 billion yen, with an actual result of just over 5.1 billion yen, for a fulfillment rate of 89.8%. System integration achieved a 92.9% fulfillment rate, and DX solution achieved a 75% fulfillment rate. The underperformance was caused by longer-than-expected time spent on system integration engineer team reform and new large project launch, leading to lower-than-planned operating man-hours; for DX solution, delayed version upgrade launches for Wisebook and DynaCAD CUBE limited new sales to below target levels.
  • The original operating profit target was 285 million yen, with an actual result of 169 million yen, for a fulfillment rate of 59.3%. The shortfall was caused by revenue missing targets across both segments, plus the company prioritized human capital investment (wage increases, engineer skill training) and profit structure reform to shift to higher-margin projects, which dragged down near-term profits.
• Organizational & Group Updates
  • The group structure remains unchanged, with holding company MIT Holdings at the center, 2 system integration-focused operating subsidiaries (System Io, APS), and 2 DX solution-focused operating subsidiaries (Vegale, Netwinks). Total group employees are 382, with an average age of 36.1 years. The average wage increase rate increased 1 percentage point to 5.9% year-over-year, and the company will continue prioritizing employee returns.

1. System Integration Service (core business): Revenue of 4.378 billion yen, a 0.7% decrease year-over-year, accounting for 85.6% of total company revenue. 2. DX Solution Service: Total revenue of 739 million yen, an 11.2% decrease year-over-year, accounting for 14.4% of total company revenue. Within DX Solution Service: a. Digital Marketing (centered on Wisebook): Revenue of 142 million yen; b. Drawing DX Solution (centered on DynaCAD): Revenue of 386 million yen; c. Cloud System Solution: Revenue of 210 million yen.

• FY26 (November 2026) Guidance: Target total revenue of 5.7 billion yen (11.4% year-over-year growth), operating profit of 285 million yen (68.4% year-over-year growth), and an operating profit margin of 5%.
  • System Integration Service Growth Plan: Expand orders from prime companies focusing on upstream processes, optimize employee allocation to improve engineer skills, raise engineer unit price, and strengthen proposal capabilities through adoption of new technologies including AI.
  • DX Solution Service Growth Plan: Continue strengthening the foundation of stable stock-based business, improve service value through data utilization and AI application for in-house products.
  • Dividend Policy: The company maintains a target of consolidated payout ratio of 30% or higher. For FY25, a total dividend of 30 yen per share is planned (26 yen ordinary dividend plus 4 yen commemorative dividend for the group's 35th anniversary). For FY26, a 30 yen per share ordinary dividend is planned, maintaining the current dividend level.
  • New Shareholder Benefit Program: A new shareholder benefit program is introduced starting this period. Shareholders holding 300 shares or more as of November 30 each year will receive a 5,000 yen QUO card, and this program will continue going forward.
  • Long-Term Target (by 2030): Target total revenue of 10 billion yen and an operating profit margin of 10%. System integration will remain the core stable growth base, while DX solution will be strategically accelerated. The company aims to increase DX solution's revenue share to nearly 30% by 2030, transitioning to a higher-margin business structure.

• Engineer shortage limited operating man-hours for system integration, leading to opportunity loss and lower revenue compared to plan.
  • Development delays for in-house product version upgrades delayed new sales and revenue recognition, leading to revenue underperformance for DX solution.
  • Project timing mismatches (large project completion leading to gaps before new projects launch) caused temporary revenue volatility across fiscal periods.
  • Higher near-term costs from prioritized wage increases, employee returns and human capital investment led to lower than planned near-term profits.

• Q: System integration service reports solid major customer orders but still saw a revenue decrease. Can you confirm that major customer orders are actually maintained and expanding?

A: Major customer orders centered on public, energy and finance sectors remain stable. The FY25 revenue decrease was caused by timing factors: the completion of large projects won in the previous period, and longer-than-expected launch time for next large projects, which spread revenue recognition across periods. This is a temporary factor caused by project size and timing, not a deterioration of the order environment. Going forward, we will expand orders from prime companies that handle upstream planning and requirement definition processes, increase order value and project stability to drive sustainable growth.

• Q: DX solution service saw notable revenue decline, has its positioning as a growth business changed?

A: The positioning has not changed. This period's revenue decrease was caused by delayed timing of new projects. Stock-based business revenue remains stable, and development of new versions of both Wisebook and DynaCAD is progressing. We expect growth in both new orders and stock revenue going forward.

• Q: Why do you maintain the dividend at 30 yen per share despite lower profit this period?

A: We prioritize stable and continuous dividends as a core management policy. Although we saw lower profit this period, we judged the dividend level is maintainable based on our strengthened financial position and the forecast for future profit recovery. We also have a clear mid-term target of a 30% or higher consolidated payout ratio, which supports maintaining the dividend.

• Q: What is the goal of introducing the new shareholder benefit program?

A: The goal is to encourage more individual investors to hold our shares for the medium to long term. We aim to improve investment attractiveness and stabilize the shareholder base by combining dividends and benefits.

• Q: What is the most important message you want to share with investors?

A: We are currently at an inflection point transitioning from a temporary adjustment phase to the next growth phase. We prioritize medium to long-term value creation including profit structure improvement, financial position strengthening, and stable shareholder return, rather than focusing solely on short-term financial results. We ask for your understanding and support from a medium to long-term perspective.