Kaizen Platform,Inc. Q4 FY2025 earnings call

• Company Overview

  • Kaizen Platform is an AI integrator that supports business growth by improving customer experience, with 132 employees as of the end of December 2025.
  • The core market opportunity is in customer touchpoint digital transformation (DX): the overall DX market is 4.5 trillion yen, and customer touchpoint DX (covering sales, marketing, customer service) currently accounts for only the low tens of percentage points of this market, with projected growth to at least double by 2030. The opportunity comes from widespread corporate DX strategies focused on maximizing LTV (lifetime value) amid population decline, widespread labor shortages, and low current generative AI adoption in domestic Japanese enterprises.
  • Kaizen Platform addresses the key barrier of legacy IT infrastructure constraints: the company leverages its origin as an A/B testing tool provider to offer solutions that only require a simple tag implementation to modify existing front-end user experiences and integrate generative AI, without requiring changes to core legacy systems. It operates two core segments: Professional Services (fee-based human services including consulting, development, creative production, and marketing, leveraging a network of over 150,000 talent to build project teams) and Cloud Services (KAIZEN Cloud Service for UI/UX transformation and AI infrastructure).

• Competitive Advantages and Business Model

  • Three core reasons clients choose Kaizen Platform: 1) Cumulative data and knowhow from over 1,400 completed client transactions; 2) Faster implementation speed via cloud-native systems compared to client in-house environments; 3) Variable cost structure that reduces client fixed overhead.
  • Client benefits: No need to modify core legacy systems for high implementation flexibility, business units can lead projects without going through internal IT departments, and DX can be推进 with drastically reduced lead times and costs.
  • Strong business model features: Cloud service gross margins are more than double those of Professional Services, supporting high overall gross profitability; the variable cost project structure enables flexible team assignment and limits fixed headcount, and allows the company to pay higher rates to attract top talent, maintaining high person-month pricing.
  • The company targets the large enterprise DX outsourcing market (which accounts for over 80% of total DX demand), offers end-to-end services from upstream consulting to downstream development, marketing, and production, avoids legacy system disruption to reduce cost and lead time, balances high productivity and profitability via cloud use and flexible talent assignment, and improves ROI via generative AI productivity gains to support ongoing market expansion with increasing transaction values.

• Recent Operational Highlights

  • Released the AI-Driven Management White Paper 2026, which has been downloaded over 2,800 times and received strong market reception, driving significant new client inquiries.
  • Established new subsidiary Kaizen AIX Consulting to meet rapidly growing demand for AI-related consulting, including updating existing DX strategies for generative AI, AI talent development, AI operations integration, and AI-powered product development. The company is currently in active hiring for this new subsidiary.
  • Launched Kaizen AIX Agent, a talent placement and SES service focused on DX and AI roles that places startup CXO veterans as leaders for large enterprise AI and DX initiatives.
  • Completed the transfer of direct sales business and personnel to Septeni America's US subsidiary, and suspended all US business operations to concentrate management resources on the domestic Japanese market.
  • Consolidated connected employee and partner touchpoint count has grown steadily, with continued expansion of the company's external partner network.

• Long-Term Growth Strategy

  • Drawing on 60 years of IT industry history, technological innovation consistently follows a pattern of initial infrastructure investment followed by much larger growth in use case software and service markets, which overtake infrastructure markets over time because use cases follow recurring revenue models (subscriptions, performance-based pricing, ongoing maintenance) that grow larger over time. For generative AI, large-scale infrastructure (chip, data center) investment is already underway, so the next high-growth phase will be in practical use cases.
  • Kaizen Platform is shifting its core business model to become an AI integrator that solves client problems by integrating generative AI into customer-facing user interfaces and internal employee workflows, following a hybrid human-product model across its Professional and Cloud service segments.
  • Sales strategy follows a dominant focus approach: the company is prioritizing deep penetration into specific target industries (focused on insurance within financial services, real estate brokerage, and recruitment media/personnel placement) rather than broad horizontal expansion. Current wallet share in target segments is only approximately 2%, leaving 50x growth upside, and these segments face widespread labor shortages and are well-suited for value creation with current large language model (LLM) technology for repetitive work, making them ideal early focus areas.
  • The company currently has a 1:9 revenue split between Cloud Services and Professional Services, and targets reaching a 50%:50% split within three years as AI-driven cloud revenue scales.

Overall Full-Year 2025: Total revenue came in at 4.35 billion yen, a 3% decrease year-over-year including the impact of the US business transfer announced in Q3 of the prior year. EBITDA reached 109 million yen, approximately half of the prior year's level, while operating income, ordinary income, and net income all achieved full-year profitability. The core business's earning power is higher than in the prior year, with the EBITDA decrease driven by one-time factors: a reduction in depreciation after prior year impairment charges, and the reversal of previously booked bad debt provisions for delinquent US business receivables that negatively impacted EBITDA on a comparative basis.

Q4 2025 Overall Domestic Business: Average revenue per user (ARPU) increased 4% year-over-year, transaction account numbers decreased 6% year-over-year, leading to a 2% total revenue decrease year-over-year. Gross profit margin increased 1 percentage point year-over-year. Transaction account numbers turned positive on a quarterly basis for the first time after a period of decline, driven by the start of revenue contribution from generative AI initiatives.

Cloud Segment: Transaction account numbers increased 9% year-over-year, ARPU increased 13% year-over-year driven by the start of revenue recognition for AI offerings. Total revenue grew 22% year-over-year. Full-year gross profit margin increased 17 percentage points year-over-year, though it saw a 5 percentage point decrease on a quarterly basis. The quarterly gross margin decline is due to the large pipeline of generative AI projects in the pre-development investment stage, where only costs are recognized before project launch and pay-as-you-go revenue generation. Management expects revenue from these projects to be reflected in coming quarters as they launch.

Professional Services Segment: Transaction unit price increased 5% year-over-year, while transaction account numbers decreased 9% year-over-year. The segment's sales portfolio is shifting: generative AI-related consulting and development projects are growing strongly, while production-related revenue has stagnated and declined due to the impact of generative AI automation. Total revenue decreased 4% year-over-year, and gross profit margin decreased 1 percentage point year-over-year. Management expects this portfolio shift trend to continue for a period of time.

• For the 2026 December fiscal year, management projects total revenue of 4.6 billion yen (from domestic operations only, following the suspension of US business), with operating income of 40 million yen, ordinary income of 40 million yen, and net income of 20 million yen.
• The core focus of the 2026 fiscal year is to build a foundation for sustained profitability by strengthening the consulting organization via the new Kaizen AIX Consulting subsidiary and continuing to invest in generative AI development and go-to-market while maintaining consistent positive profitability.

• Intensified competition: Existing players and new entrants are increasingly targeting the generative AI integration space, which could lead to intensified competition in the short to medium term. However, Kaizen Platform's existing front-end generative AI integration capabilities and A/B testing infrastructure have high barriers to entry for new market participants, and meeting strict client security requirements is not easy. The company will continue to strengthen these capabilities and prioritize talent recruitment to build a competitive position that can withstand increased competition.
• Failure to keep pace with technological innovation: Generative AI technology is progressing extremely rapidly, and delayed adaptation could reduce the company's competitive positioning over the medium term. For example, AI already generates far more code than human engineers today, so the company is systematically building internal capabilities to improve engineer productivity and expand AI-assisted coding to adapt to this trend.
• System disruption risk: Large-scale system outages or security incidents could negatively impact business performance. The company responds to this risk with ongoing investment in security, server infrastructure, and system reliability.

The full question and answer exchange is hosted in a separate document available at the link provided by the company, no Q&A content is included in this earnings call transcript.