Sun* Inc. Q4 FY2025 earnings call

• Company Vision & Core Value Positioning

  • Sun Asterisk's vision is "a world where everyone can be passionate about value creation", and aims to become an infrastructure company supporting value creation in the AI age, rather than just a development firm.
  • The company sees AI advancement leading to the "democratization of technology", where technology becomes a baseline commodity, and competitive differentiation now comes from helping clients articulate and build unspoken, human-centric value; Sun Asterisk leverages business, technology, and creative expertise to co-create with clients from the initial stage of defining what product to build.
  • The company built out multiple AI infrastructure and organizational standardization frameworks throughout FY2025 to enable repeatable value creation, and expects this foundation to drive growth in coming years.

• Core Competitive Strengths

  • UX-centered business development is now standard industry practice, and there is widespread shortage of talent capable of full experience design; Sun Asterisk has 100 professional designers on staff, making UX-driven development a core differentiator.
  • Generative AI has shifted from PoC-focused use to production implementation, and Sun Asterisk has a 1,000-person engineering team that continuously upskills on AI R&D, builds internal AI tools, and can deliver AI-native partnered solutions.
  • In the AI age, coordination and governance has become the key bottleneck for large projects; Sun Asterisk has end-to-end experience leading client projects from planning through development and operation, with strong capabilities in stakeholder alignment, priority setting, risk assessment, and project facilitation.
  • The company's largest development hub in Vietnam provides scalable execution capacity for projects of all sizes.

• Q4 and Full-Year FY2025 Operational Milestones

  • Completed two high-profile client projects: supported TRUSTDOCK to launch the new eKYC-powered job matching service Careefy, and took over and completed 300 functions for the large-scale industry automotive maintenance platform FLEET PITLOCK, demonstrating capability to deliver complex enterprise core systems.
  • Deployed full planned growth investment in line with the initial FY2025 budget, focused on AI, incubation, and sales & marketing:
    • AI: Released multiple AI-powered products that are already adopted by clients, aiming to leverage fast implementation and scalability to drive both revenue growth and gross margin improvement.
    • Incubation: Conducted reskilling for engineers to enter the high-demand, talent-shortage cloud ERP market, and is currently building out the operational structure for full entry into this segment; continues to develop and operate new IP.
    • Sales & Marketing: Successfully hired planned talent, with both recruitment and sales performance on track, and built a strong growth foundation for FY2026, which management calls the most impactful structural reform the company has done.
  • Released multiple new internal and client-facing AI tools: launched MoMorph for design-led AI-driven development, launched the beta version of Ailla (an AI partner for visualizing validation points in new business development), and released the free beta version of BeCraft (a headless CMS that allows non-technical on-site staff to manage content, built around direct client feedback).
  • Earned key industry certifications: obtained AWS Foundation Technical Review (FTR) certification for its in-house digitalization solution based on Agile and DevOps, and was certified as a Microsoft Data & AI (Azure) Solution Partner, recognizing the company's global AI engineering capability.
  • Incubation milestones: launched the official fan club app for global boy group One OR Eight in 3 South American countries and Thailand, and continues to earn revenue share from the app's operations; acquired Global Gear via M&A, which continues to release multiple new casual games and maintains top rankings in the family game category on app stores.
  • Talent Platform milestones: signed a business matching agreement with Hokuriku Bank, the first partnership between the company's xseeds Hub global talent platform and a financial institution, expected to drive adoption among the bank's client base.
  • Completed two strategic M&A and investment transactions: brought software contract development firm MIXENSE into the Sun Asterisk group, a profitable company with strong digitalization capabilities that will accelerate growth in that segment; acquired a stake in Babel Method, a corporate-focused online Japanese education company that operates Japanese speaking tests, to leverage synergy with the xseeds Hub talent platform and grow both businesses.

• Financial Performance Overview

  • Full-year FY2025 revenue reached a new company record of 14.83 billion yen, hitting 98.6% of the revised full-year forecast, with almost exactly budgeted results thanks to C&E covering slight underperformance in other segments.
  • The negative impact on cost of goods sold from external partner usage on a specific unprofitable project ended in Q3 FY2025, and management expects gross margin to gradually recover from the 48.5% full-year level.
  • Selling, general and administrative (SG&A) expense increased primarily due to hiring for delivery and sales teams, which is framed as investment in future growth drivers rather than unnecessary cost increases.
  • Key KPIs: Unique customer count grew steadily, ARPU remained stable flat full-year; in Q3 and Q4 FY2025 customer count was flat but ARPU gradually increased, a trend management aims to continue.
  • Balance sheet: Fixed assets and long-term debt increased slightly due to the M&A transactions for Global Gear and MIXENSE, but the company maintains a strong equity ratio of 66.1%.

Sun Asterisk operates three core product segments under its Digital Creative Studio business: 1) Creative & Engineering (C&E): This is the company's core business that provides hands-on support for new business creation, product development, and organizational transformation consulting. In FY2025, the C&E segment outperformed expectations, achieved a quarterly record-high revenue, and covered for slight underperformance in other segments to bring full-year results nearly in line with budget. 2) Talent Platform (TPF): This segment focuses on discovery, development, and introduction of global IT talent. The segment slightly missed its full-year FY2025 revenue target. 3) Incubation: This segment works on new IP and content creation in the entertainment space. The segment also slightly missed its full-year FY2025 revenue target. No absolute revenue values or contribution percentages are broken out for individual segments in the provided transcript. For the full company, FY2025 total revenue was 14.83 billion yen, gross profit was 7.18 billion yen, operating profit was 1.05 billion yen, and EBITDA was 1.26 billion yen, with a 48.5% gross profit margin for the full year.

• Sun Asterisk is adopting IFRS international accounting standards for FY2026, with key changes related to goodwill amortization and paid stock option expenses. The company has provided both Japanese GAAP and IFRS-aligned forecasts for comparability.
• Full-year FY2026 revenue is forecast to be 18.2 billion yen, representing a 22.7% increase compared to FY2025, with growth expected across all three service lines. On an IFRS basis, revenue is forecast at 18.0 billion yen.
• Gross profit is forecast at 9.11 billion yen, a 26.8% increase year-over-year, with gross margin expected to recover to normal levels after the one-off negative impact from the unprofitable FY2025 project. On an IFRS basis, gross profit is forecast at 9.0 billion yen.
• IFRS-based operating profit is forecast at 1.71 billion yen, and EBITDA is forecast at 1.84 billion yen (1.85 billion yen on a Japanese GAAP basis).
• SG&A expense plan continues to prioritize investment in hiring to build out future growth drivers, in line with the company's structural reform efforts.
• Key operational priorities for FY2026:
  • Convert the strengthened enterprise new customer development from FY2025 into concrete revenue and profit results.
  • Restructured the former single Creative & Engineering segment into four distinct solution business lines to enable clearer customer targeting, improve resource capability visibility, and boost matching accuracy between client needs and internal resources, with a goal of maximizing profit for each line.
  • Focus on acquiring projects that match current internal resource capacity to improve utilization, while hiring talent for missing technical skill areas to expand the company's total service scope.
  • Realize the full growth benefits from the structural reforms and growth investments completed in FY2025, and achieve a new record-high full-year revenue.
• Average foreign exchange rates for the forecast period are set based on recent market trends.

No specific discussion of risks or operational failures is included in the provided transcript. The only negative point noted is that the one-off negative impact of an unprofitable specific project on gross margin ended in Q3 FY2025, and management expects recovery going forward, with the 2025 profit decline framed as an expected outcome of planned simultaneous structural reform and growth investment.

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