4071.T

Overall Financial Performance

• Full-year 2025 September total revenue: 17.084 billion yen, up 22.8% year-over-year; operating profit: 6.378 billion yen, up 40.8% year-over-year, with an operating margin of 37.3%; net profit: 3.258 billion yen, after including 1.1 billion yen in goodwill impairment from two acquired subsidiaries. The full-year result beat the revised plan, with revenue hitting 100.5% of target and operating profit hitting 104.6% of target, driven by stronger than expected Q4 performance.
• Net assets increased by 2.709 billion yen year-over-year, and the company approved a full cancellation of all outstanding treasury shares equal to 1.1% of total issued shares.

Strategic and Operational Updates

• The company is executing an enterprise-focused shift: prioritizing high-value large enterprise customers over high-volume small customer acquisition, which improves ARPU and enables more effective marketing cost management.
• New partnership and product launches: (1) Launched OEM service "Mynavi TalentBase" for Mynavi, integrating Talent Palette core functions with Mynavi's recruitment and training resources to build a combined recruitment and talent management platform; (2) Entered into a capital and business alliance with Luxer, planning to launch OEM product "Rakuraku Jinji Romu" targeted at companies with fewer than 300 employees, with Luxer handling sales while Talent Palette focuses on enterprises with over 300 employees; (3) Signed Japan's first alliance partnership with LinkedIn to enable integration between Talent Palette and LinkedIn's professional talent network, with future plans for recruitment solution integration; (4) Launched new generative AI training service "AI Talk Tore", which uses real customer interaction data to deliver realistic role-play training for call center operators and HR interviewers, differentiated from generic generative AI tools; (5) Began full-scale expansion of HR consulting services, expanding from tool utilization consulting to end-to-end HR strategy consulting for large enterprises, with plans to integrate consulting需求 into future Talent Palette feature updates; (6) Talent Palette completed registration for ISMAP-LIU, meeting public sector cloud security requirements to support public sector bidding.

Impairment of Acquired Assets

• The company recorded 1.1 billion yen in goodwill impairment for two acquired recruitment-focused subsidiaries: Grow Up (operator of new graduate direct recruiting service Kimisca) and Attack (recruitment process outsourcing provider). Both businesses underperformed expectations due to limited market size and intensifying competition. The company plans to revitalize these businesses through deeper collaboration with Mynavi in the recruitment space.

• Full-year 2026 September guidance: 19.5 billion yen in total revenue (14.1% year-over-year growth), 7.5 billion yen in operating profit, with an expected operating margin of 38.5%. HR Solution will be the primary driver of growth, while Marketing Solution will have a conservative plan as it completes rebranding and new feature integration for generative AI. The expected full-year gross margin is 71%, slightly lower than 2025, reflecting the planned decline in Marketing Solution revenue.
• Mid-term target: 28.5 billion yen in revenue by 2029 September, and 30 billion yen including new business and M&A. Operating profit is targeted to exceed 10 billion yen by 2028 (two years out).
• Shareholder return policy: Targets ROE of at least 30% and a payout ratio of around 30%. Plans to allocate sufficient retained earnings for growth investment while maintaining stable dividends, with a planned year-end dividend of 38 yen per share for 2026 September.
• 2026 marketing cost guidance: Expected to hold at ~450 million yen per quarter, no large increase like the 2025 Q1, with ongoing work to transition from traditional SEO to LLM optimization for generative AI search.

1. HR Solution: Total full-year revenue was 11.468 billion yen, up 29% year-over-year, accounting for 67.1% of total company revenue. Pre-allocation operating profit was 5.93 billion yen, up 41.8% year-over-year. 4Q revenue was 4.603 billion yen, up 13.8% year-over-year, with a profit margin of 42.3%. Key KPIs: total customer contracts exceeded 2,000; monthly churn rate was 0.37%, below the full-year target of 0.47%; ARPU (average revenue per user per month) was 459 thousand yen, up 14.2% year-over-year, with half of the growth coming from price adjustments and half from option add-ons and plan upgrades. Enterprises with over 1,000 employees contribute over 70% of recurring revenue for Talent Palette, and enterprises with over 5,000 employees account for 32% of total revenue, with the most significant ARPU growth. 2. Marketing Solution: Customer count decreased by 102 contracts year-over-year and 18 contracts quarter-over-quarter; churn rate rose to 1.29%; recurring revenue and MRR have declined slightly, leading to overall flat to slightly down total revenue. However, ARPU for retained customers increased 10.7% year-over-year, and marketing costs have been optimized after cuts starting from Q2 FY2024.

• The two acquired recruitment subsidiaries (Grow Up and Attack) have underperformed for an extended period, requiring goodwill impairment, and their future recovery depends on successful collaboration with Mynavi, which carries execution uncertainty.
• Marketing Solution's core product "Mieruka Engine" faces sustained elevated churn and declining MRR, and the turnaround via rebranding and generative AI feature updates is still in the trial stage with uncertain outcomes.
• Smaller enterprise customers have limited ARPU growth potential, and the shift to enterprise-focused growth has slowed customer count expansion, creating a tradeoff between volume growth and higher margin/ARPU growth that may impact near-term top-line growth.
• Traditional search-based marketing channels are facing reduced traffic and engagement due to generative AI disruption, and the transition to new LLM-optimized marketing strategies is still in early stages with uncertain effectiveness.

Q: Why did gross margin dip slightly in Q4 2025, and what is the 2026 gross margin expectation? / A: The gross margin decline came entirely from lower-margin subsidiary businesses, specifically low-margin consulting services and temporary cost increases at some acquired units, with no meaningful decline in the core business profitability. Management expects 2026 gross margin to come in at 71%, a slight decrease from 2025. This modest decline reflects the expected small reduction in Marketing Solution revenue, even as the impact of low-margin subsidiary headwinds begins to ease.

Q: What does the "qualitative change" in Talent Palette's customer base mean, and why is ARPU rising especially for large enterprise clients? / A: The qualitative change refers to the company shifting away from chasing small, low-price customers to focus on winning higher-value large enterprise contracts. While the net customer addition pace has slowed, the average contract value of new business has increased significantly. For large 5,000+ employee clients, gradual ARPU growth comes from organic plan upgrades as client headcount grows and adoption of paid add-on features, with occasional sharper increases tied to seasonal plan upgrades around new graduate hiring cycles.

Q: Why split the target customer base between Rakuraku Jinji Romu (for <300 employees) and Talent Palette (for >300 employees) with Luxer? / A: The split aligns with differing customer needs by size. Smaller firms under 300 employees typically only require core HR and payroll functions, which matches the simplified, lower-priced OEM offering that Luxer will sell. Firms over 300 employees generally need full talent management capabilities that the full version of Talent Palette provides. This clear segmentation allows both companies to pursue efficient market expansion without channel conflict.

Q: What is the outlook for Mynavi TalentBase, and when will it contribute to earnings? / A: The service just launched October 1, and early sales activity is progressing as expected, with management seeing strong initial potential. The current 2026 plan already includes expected revenue equal to a low single-digit percentage of the overall Talent Palette business. Since it launched at the start of the fiscal year, management expects it to deliver meaningful contribution to the full-year 2026 result.