i-plug,Inc. Q4 FY2025 earnings call

• Overall Strategic Framework

  • No change to the 7-year medium-long term strategy announced last year: the first 3 years are defined as the 'Challenge Period' (current fiscal year is the second year), focused on evolving OfferBox, expanding value in the new graduate recruitment space, and developing a 'second pillar' business outside new graduate recruitment. The following 4 years are the 'Leap Period', focused on accelerating growth from the new second pillar.
  • Core strategic priorities remain two-fold: steady growth of the existing new graduate recruitment business via disciplined investment, and balancing new business development outside new graduate recruitment with profit growth. M&A and alliances will be strengthened in the current period to accelerate these priorities.

• Existing Business Growth (OfferBox)

  • OfferBox has driven an average annual growth rate of 26% from 2020 to 2024, and still has significant room for growth based on current market share. The company will leverage synergies with complementary services from group companies (such as aptitude testing in the People Analytics space) to deliver unique additional value.
  • Adjustments to promotion cost allocation timing implemented in 2025 fiscal year have already delivered positive results: 2026 graduate hires decided by the end of March of the third student year increased 54.4% year-over-year, on track to reverse the 2025 graduate slowdown.
  • The core growth driver is expanding the stock of early fixed-fee customers (which make up over 70% of revenue) and growing upsell: increasing corporate and student registrations, improving activity rates, growing hiring numbers, driving repeat purchases and price increases for existing customers, and converting success-based customers to early fixed-fee plans over time. The company has refined product features and adjusted marketing timing to optimize this flywheel.

• Non-New Graduate Business Development & Profit Discipline

  • The company will expand existing adjacent businesses (student services, mid-career recruitment, People Analytics from group firm e-falcon) while building out the new second growth pillar, which will be scaled in the Leap Period.
  • After over-investment (30% of revenue invested, leading to large losses and business failure in fiscal 2023), the company has enforced strict investment ratio controls: investment was held to roughly 20% of revenue from fiscal 2024, and cut further to 10% in fiscal 2025, enabling solid profit generation alongside growth that delivered record high annual profit.

• M&A & Alliance Strategy

  • 1. Prioritize high-quality partnerships that enhance competitive advantage for the core new graduate recruitment business
  • 1. Target partners that share the company's mission/vision and value alignment, with achievable synergies within the company's strategic domain
  • 1. Prioritize targets with proven ability to generate sustained cash flow and contribute to profits

• Capital Allocation & Exchange Strategy

  • The company's improved profitability has strengthened its balance sheet. Going forward, the company will continue disciplined growth investment, and will consider dividend returns to shareholders when it deems there is room for distribution after supporting growth.
  • The company will maintain its listing on the Tokyo Stock Exchange Growth Market, and is targeting reaching 10 billion yen market capitalization by 2030 to meet revised listing standards.

• Key Operational KPIs

  • Cumulative corporate registrations: 20,235 as of fiscal year end, up 15.8% year-over-year
  • 2025 graduate student registrations: 215,562, down 12.6% year-over-year due to the 2025 promotion cost allocation changes; 2026 graduate student registrations: 198,716, up 8.9% year-over-year and growing at a faster pace than 2025 graduates
  • Cumulative 2025 graduate offer sends: up 38.5% year-over-year; 2026 graduate offer sends are already growing at a faster pace than 2025
  • Cumulative 2025 graduate offer approvals: up 11.3% year-over-year, though approval rate has declined due to the very large increase in offers sent; 2026 graduate approvals are already well ahead of 2025 levels, reflecting earlier student recruiting activity
  • Final 2025 graduate hires through OfferBox: 7,323, down 1.0% year-over-year (hires increased but offer walkaways also rose year-over-year); conversion from student registration to hire continues to increase steadily due to improved service and matching quality

i-plug has two core product segments for its main service OfferBox, plus the discontinued PaceBox service:

1. OfferBox Early Fixed-fee: Revenue increased year-over-year due to rising orders, driven by growing corporate demand for early recruiting and the company’s front-loaded repeat customer outreach. This segment makes up over 70% of consolidated revenue. Order and revenue conversion decreased in Q4 compared to Q3 due to the earlier timing of order receipts, following the segment’s typical second-half weighted revenue recognition pattern.
2. OfferBox Success-based: Revenue decreased year-over-year, and missed plan targets significantly, as the number of 2025 graduate hires from the service grew slowly with lower-than-expected over-contract-hiring that drives success-based revenue.
3. PaceBox: The service was terminated in June 2024, so no revenue was generated in the second half of the period, and all prior investment in PaceBox was eliminated.

Consolidated full year results: Total revenue was 5.084 billion yen, up 10.5% year-over-year; operating profit was 0.578 billion yen, up 314.8% year-over-year; ordinary profit was 0.579 billion yen, up 321.1% year-over-year; net profit was 0.597 billion yen (the net profit exceeds operating profit due to a tax effect from carrying forward deferred losses from the absorption merger of pacebox).

• For the 2026 March full fiscal year, management guides: total revenue of 6.1 billion yen (20.0% year-over-year growth), operating profit of 0.7 billion yen (21.0% year-over-year growth), ordinary profit of 0.698 billion yen (20.4% year-over-year growth), and net profit of 0.418 billion yen (the decline from prior year net profit is due to the absence of the one-time tax effect that boosted 2025 net profit)
• Management maintains its long-term target of achieving sustained 20%+ annual revenue growth and 20%+ annual operating profit growth
• The upward trending early order pattern for OfferBox early fixed-fee plans is expected to continue from 2026 fiscal year onward
• Management confirms it expects to reach the 10 billion yen market capitalization target by 2030, and is targeting early achievement of this milestone via balancing growth investment and profit generation

• 2025 graduate hiring through OfferBox saw slower-than-expected growth, which led to a larger-than-planned decline in success-based revenue, limiting total revenue growth to 10.5% year-over-year (below the company's long-term 20%+ growth target)
• Aggressive, unconstrained investment in new business development in prior years led to high losses and business failure, creating a history of profit volatility that the company is still addressing via new investment discipline policies
• The Tokyo Stock Exchange has revised Growth Market listing maintenance standards, and the company remains below the 10 billion yen market capitalization threshold required for continued listing, creating a near-term priority to hit this target
• Rising promotion investment to drive student registration growth for future graduate cohorts increases near-term costs, and there is no guarantee that this investment will deliver the expected growth in hiring and revenue
• Offer approval rates have declined alongside the sharp increase in offer sends, which could indicate reduced student engagement or mismatched outreach that may hurt conversion to hires over time

Q: Beyond changes to promotion spending timing, are there other factors explaining the divergent student registration growth between 2025 graduates (down year-over-year) and 2026 graduates (up year-over-year)? Could it relate to changes in student activity levels or service adoption?

A: The primary driver is the intentional adjustment to promotion cost allocation that the company implemented in the 2025 fiscal year. The company shifted spending forward to target earlier recruiting cycles for future graduate cohorts, which pulled budget away from 2025 graduate recruitment marketing, leading to the 2025 decline. No material shifts in overall student activity or service desirability explain the gap, and the improved growth for 2026 graduates confirms the allocation strategy is working as intended.

Q: What is the company's timeline and plan to reach the 10 billion yen market capitalization target needed for Growth Market listing maintenance?

A: Management has targeted reaching 10 billion yen market capitalization by 2030, and is now aiming for early achievement of this milestone. The company will deliver this via its core strategy of balancing disciplined growth investment to drive top-line expansion with strict cost controls to deliver consistent profit growth, which will support market value gains and improve liquidity to meet listing requirements.