Appirits Inc. Q4 FY2025 earnings call

• Corporate Overview

  • Appirits operates 3 core business lines: Web solutions, digital human resource development and dispatch, and smartphone-only online games. 60% of employees are in their 20s, and the company prioritizes ongoing youth hiring for long-term growth.
  • Appirits completed 2 M&A transactions in the 2025 January term, and maintained its planned 16 yen per share full-year dividend despite the operating profit shortfall.
  • Q4 2025 consolidated revenue hit an all-time high of 2.5 billion yen, putting the company on an annualized run rate of ~10 billion yen. Operating profit saw a clear V-shaped recovery after the Q2 loss from the Web solution project delay.

• Post-Incident Remediation for Web Solution Business

  • The root cause of the 2025 delivery delay was insufficient middle management/project manager (PM) capacity, driven by rapid growth in the number and size of projects that outpaced internal PM development.
  • Management has implemented a new cross-team independent quality check governance structure for project management, and splits PM responsibility into technical and client-facing roles to distribute workload.
  • The company combines external mid-career hiring for experienced PMs with internal training of existing young employees to develop new PM talent, targeting PM-capable staff who can combine client business understanding with engineering and team management skills.

• Long-Term Growth Strategy

  • Appirits targets 20.0 billion yen in revenue and 2.0 billion yen in operating profit for the 2030 January term.
  • As a labor-intensive digital services business, the company prioritizes employee-centric initiatives (branded "academization") to accommodate diverse work values, focusing on growth opportunities, learning, and psychological safety, alongside tangible improvements like higher salaries and expanded employee housing.
  • M&A strategy targets 1-2 small-to-medium acquisitions per year, focused on acquiring talent (rather than just assets) to scale gradually. For online games, the company prioritizes growth via operation transfers and co-management, with a focus on idol/fan-oriented "oshi-katsu" IP.
  • Capital policy has shifted from a total payout ratio of 30% to a explicit 30% dividend payout ratio target, with an increased planned full-year dividend of 28 yen per share for 2026 January term.

For the 2025 January full term, consolidated total revenue was 9.008 billion yen, with 185 million yen in operating income (31% of the prior year's level).

1. Web Solution Business: Revenue declined in Q2 and Q3 due to a single large project with delivery delays; the underlying order environment remains strong, with ~70% customer retention rate for revenue. No underlying weakness to the overall segment performance outside of the one delayed project.
2. Digital Human Resource Development and Dispatch Business: Performance met plan, and has grown steadily following an M&A of a human resources firm. Group subsidiary Y's has delivered strong growth from strong hiring capabilities and regional expansion into Fukuoka. The segment also acts as a hub to reduce idle capacity for employees across the company's three business lines.
3. Online Game Business: Both revenue and segment profit hit record highs since Appirits' listing, driven by strong performance of large transferred/co-managed idol-focused fan games. The segment achieved its highest ever Q4 revenue on the back of anniversary event momentum.

• For the 2026 January term, Appirits guides consolidated revenue of 10.464 billion yen (double-digit year-over-year growth) and operating profit of 610 million yen. The profit guidance represents a return to ~2024 January term profit levels after the 2025 incident, with a projected operating margin of 5.8%, down from the original 8% target as the company prioritizes stabilizing foundations after 2025's issues.
• Revenue and profit are projected to be concentrated in the second half, a seasonal pattern consistent with prior years, due to new hire onboarding in the first half and concentration of online game anniversary events in Q3.
• The 2026 guidance does not include any potential M&A impacts, and management will issue timely updates if M&A activity requires guidance revisions.
• Overall sales growth remains on track with the company's prior medium-term plan; only operating profit is expected to recover gradually back to plan through 2026.

• The core ongoing risk is a balancing act between growth and capacity: avoiding overloading existing employees while also not slowing growth by avoiding large new projects. This is particularly acute for PM capacity, as demand outpaces internal development of experienced PMs.
• Uncertainty remains for the performance of large new co-management projects in the online game business, and the company notes that the online game market overall has high visibility into demand.
• While the 2025 delivery delay incident has been remediated with new process controls, the company notes that project delivery risk can never be fully eliminated in the Web solution business, and performance will continue to be monitored closely.
• The company faces ongoing industry-wide tight supply of experienced digital talent, which is required to support its scalable growth strategy.

Q: Why have new Web solution projects increased recently, and is this a strategic shift to new client acquisition, or driven by M&A impact? / A: Existing customer retention is slightly down but as a natural trend, not a strategic choice. Order inflow remains very strong, and the company does minimal active sales. It is intentionally taking on more new clients to expand its service scope, but has not fully shifted strategy to prioritize new clients over retained existing business. The DX market overall remains very strong, with growing average project size driving higher average revenue per project.

Q: Has Appirits gained more experience with online game operation transfers, and is the process now more stable than in the past? / A: Yes, the company has now completed multiple operation transfers for popular idol fan games including UNI'S ON AIR and 乃木坂的フラクタル, and has built specific expertise in managing fan-oriented "oshi-katsu" IP. It has accumulated internal processes and know-how to improve profitability after transfer via efficiency gains, and management has confidence this capability will continue to work well for future transfers.

Q: Is the 2026 guidance conservative, and what are the main remaining uncertainties? / A: Management acknowledges the guidance is somewhat conservative following the 2025 incident, but considers it an appropriate fair estimate, neither too high nor too low. The main uncertainties are whether large new online game co-management projects will perform as expected, and whether the new Web solution project management controls will fully prevent future delivery issues. In-progress mid-sized online game projects are expected to contribute to 2026 results.

Q: What is the target long-term segment profit balance across Appirits' three business lines? / A: Management expects to maintain a long-term target balance of ~30% of segment profit from Web solutions, ~30% from digital human resource dispatch, and ~30% from online games, with this mix maintained as the company grows overall.