SECURE,INC. Q4 FY2024 earnings call

• Capital and Business Alliance with Melco Holdings

  • Announced a capital and business alliance with Melco Holdings, parent company of Buffalo, via third-party allocation of new shares, raising approximately 1.45 billion yen in capital
  • The alliance aims to drive medium-to-long term revenue expansion and increase corporate value by combining complementary capabilities of both firms
  • Short-term cost synergies are already expected; Melco's larger-scale purchasing power, operational capabilities, technical expertise, and quality management will strongly support Secure's ongoing growth
  • While share dilution will occur from the capital increase, management expects the gains from improved performance and higher EPS to outweigh the dilution impact

• Operational Highlights

  • Full-year 2024 total revenue hit 6.247 billion yen (+20.3% YoY), operating profit reached 0.305 billion yen (+62.7% YoY), both hitting all-time records and meeting management expectations
  • Gross profit margin increased 1.7% YoY, even amid yen depreciation and inflation pressures, driven by large project wins for high-margin SECURE AC and product mix improvement
  • Sales and marketing headcount declined slightly in 2024 due to voluntary turnover despite strong hiring activity; management revised hiring frameworks, built new training programs, and will continue expanding toward a 100-person sales and marketing team
  • The SECURE AI STORE LAB2.0 initiative is progressing well with partner projects at Ministop and AEON MALL, and software development has reached a sufficiently practical level; new developments will be announced via press releases as they are finalized
  • The recently acquired JTN has a highly skilled team and significant untapped growth potential; management will focus on capturing synergy benefits from the acquisition going forward

1. SECURE AC (access control system): Revenue of 1.737 billion yen, +18.1% YoY, contributing 27.8% of total company revenue. 2. SECURE VS (surveillance camera system): Revenue of 3.885 billion yen, +9.5% YoY, contributing 62.2% of total company revenue. 3. SECURE Analytics and other: Revenue grew 39.5% YoY, driven by growing recurring stock revenue from maintenance services, and performed above plan. 4. SECURE ES (JTN business, acquired via M&A): Experienced a YoY revenue decline due to the pullback effect after prior year's large project, but the result was in-line with plan, and profitability was maintained despite lower revenue.

• Full-year 2025 (FY2025) guidance calls for 12.0% YoY revenue growth to 7.0 billion yen, and 30.8% YoY operating profit growth to 0.4 billion yen
• The impact of the Melco Holdings capital alliance is not reflected in the current guidance; management will provide timely disclosures once the business impact becomes clearer
• Large projects from 2024 will not recur in 2025, creating a temporary headwind, but management is actively building a pipeline of small and medium-sized projects to offset this impact, and large new projects are already in the pipeline for 2026 and 2027, leaving ample long-term growth headroom
• Compared to 2024, when large projects were concentrated in Q1, 2025 will see more revenue recognition in the second half:
  • Q1 2025 is expected to see YoY revenue and profit decline
  • The first half of 2025 is expected to see a slight YoY revenue increase and a slight YoY profit decrease
  • This short-term timing shift does not impact Secure's medium-to-long term growth trajectory

• There was unexpected turnover in sales and marketing staff in 2024, leading to a slight net decline in headcount against expansion plans
• SECURE VS reported a decline in recorded installation count, which is attributable to an accounting change shifting to bulk partner recording for retail installations, but it creates potential for misinterpretation of business growth trends
• The revenue decline at the newly acquired JTN business was expected, but it still creates near-term pressure on consolidated revenue growth
• The capital increase for the Melco alliance will create near-term shareholding dilution, although the long-term EPS benefit is expected to offset this

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