Japan System Techniques Co.,Ltd. Q3 FY2026 earnings call

• Company Overview & Core Identity

  • JAST is a fully independent software development company founded in Osaka in 1973, currently in its 53rd year of operation. It operates a dual-headquarters system in Osaka (Nakanoshima) and Tokyo, with the Tokyo headquarters expanding and relocating to Takanawa Gateway City in July 2026. It has over 1,200 employees on a standalone basis and over 1,700 employees across the consolidated group, with 103 new graduate new hires planned for April 2026.
  • Mission: Dedicating wholeheartedly to solving social challenges, with the word "wholehearted" representing sincere customer service and continuous commitment to technological progress. Vision: To become a widely recognized problem-solving enterprise, expanding from a little-known behind-the-scenes player to a front-facing company recognized as indispensable for social problem-solving.
  • Core strengths: (1) Human-centric management: Employees are the company's only core asset, with a 100% project completion rate, over 90% repeat customer rate, and annual employee turnover of approximately 6%, far below the industry average. (2) Combined portfolio of client-driven DX & SI services and proprietary branded products: a rare structure among Japanese SIers. (3) Fully independent position with a diversified client base across industries, hedging against sector-specific downturns. Prime direct contract ratio has increased to nearly 60%, with reduced project rework and improved profitability as the prime contract business matures.

• Segment-Specific Operational Highlights

  • DX & SI Business: Provides custom system development and leverages large-scale solutions such as SAP and Salesforce to solve client problems. The company has expanded from focusing on downstream development, testing and operation to upstream planning and design consulting, which has improved overall profitability. It serves clients across all industries without sector specialization.
  • GAKUEN (University Package Business): Offers a one-stop integrated university administrative system, with an accumulated 477 installations out of 1,200 total 4-year colleges and junior colleges in Japan, holding a 27% active market share (industry top position). Tohoku University, a former Imperial University, recently completed a full non-customized "Fit to Standard" subscription deployment that went live without issues, generating strong inquiry interest from other major national and private universities. Growth initiatives include targeting untapped market share (remaining white space), expanding alumni networking services, launching cashless tuition payment support (card/PayPay), and co-developing an early alert system for student retention risk with Ehime University to add to the GAKUEN product suite.
  • BankNeo (Financial Package Business): Focuses on complementary niche information system and productivity improvement products for regional financial institutions outside of core core banking systems, with 64 banks (including 2 megabanks) already deploying the product as of the IR seminar, with a target of reaching 68 by the end of the current month, and plans to add approximately 5 new clients annually going forward.
  • Medical Big Data Business: The company's newest business line launched in FY2010, starting with automated computerized receipt (claim) checking that replaced manual inspection. It now has expanded into a range of big data analytics services, serving over 500 insurers across all insurer categories, with a monthly volume of nearly 10 million receipts, making it one of the industry leaders in transaction scope and data scale.
  • Global Business: DX & SI focused on the Asia-Pacific region, currently facing headwinds from underperformance at the Malaysian subsidiary.

For the third quarter of the fiscal year ending March 2026: 1. DX & SI Business: This is the company's core segment, contributing approximately 60% of total revenue. It delivered strong double-digit year-over-year revenue and profit growth. 2. Package Business (GAKUEN and BankNeo): Contributes approximately 20% of total revenue. It grew revenue and profit at near double-digit year-over-year rates, with strong performance across both product lines. 3. Medical Big Data Business: Contributes approximately 10% of total revenue. It also delivered strong double-digit year-over-year revenue and profit growth. 4. Global Business: Contributes approximately 10% of total revenue. It reported a year-over-year decline in both revenue and profit, driven by lower orders at Virtual Calibre (Malaysia), stemming from its client's weak business performance, reduced IT investment, and lower average project pricing. For the full fiscal year ending March 2025 (prior period), the company reported total revenue of 29.3 billion yen, operating profit of 3.1 billion yen, and ordinary profit of 3.2 billion yen. For the first nine months of the fiscal year ending March 2026, the company reported total revenue of 22.8 billion yen, operating profit of 2.6 billion yen, and ordinary profit of 2.7 billion yen, representing an 11% year-over-year increase in revenue, 28.5% increase in operating profit, and 28% increase in ordinary profit.

• Full fiscal year ending March 2026 guidance is maintained at 32 billion yen in total revenue, and approximately 3.6 billion yen in both operating profit and ordinary profit, representing continued year-over-year revenue and profit growth and a new all-time high profit, with the third quarter already tracking solidly ahead of plan.
  • Long-term vision JAST VISION 2035 targets 100 billion yen in total group revenue by 2035. Management estimates 70 billion yen to 80 billion yen can be achieved through growth of existing business lines, so 20 billion yen to 30 billion yen in additional revenue will need to come from new strategic business domains.
  • A new three-year medium-term management plan based on JAST VISION 2035 will launch in April 2026, and is currently in final stages of completion. It will be publicly announced once preparations are complete, and will include updated policies on capital allocation and shareholder returns.
  • Shareholder return guidance: The company maintains a target payout ratio of 30% and a target DOE of 4%, with a commitment to progressive dividends. For the current fiscal year ending March 2026, the company introduced interim dividends for the first time at 11 yen per share, and recently approved a 10 yen per share increase to the year-end dividend, bringing the year-end dividend to 34 yen per share and total annual dividend to 45 yen per share. The company also introduced interim shareholder benefits (1,000 yen QUO card) for individual investors.
  • The company is debt-free with a strong balance sheet and accumulated cash. After allocating for required working capital and shareholder returns, remaining cash will be allocated to growth investments including M&A, R&D, and human resource development, with detailed allocation plans to be released in the upcoming medium-term management plan.
  • GAKUEN business guidance: Management targets gaining additional share from competitors in the largely untapped Tokyo metropolitan area market, building on the momentum from the Tohoku University deployment.
  • BankNeo business guidance: 5 new client financial institutions are expected to be added annually going forward.

• Diversified industry exposure acts as a natural hedge against sector-specific downturns, in contrast to peer companies that follow a "selection and concentration" strategy that leaves them exposed to downturns in their focused sector.
  • The only reported current headwind is underperformance in the Global Business segment, driven by client IT investment cuts at the company's Malaysian subsidiary Virtual Calibre, which has led to reduced order volume and lower pricing, resulting in year-over-year revenue and profit declines for the segment.
  • GAKUEN still has unclaimed market share, concentrated in the Tokyo metropolitan area, that requires active capture to drive future growth.

Q: What are GAKUEN's future growth strategies?

A: While GAKUEN already holds the industry top share, it is still below 30%, so there is significant remaining growth opportunity in existing white space held by competitors, which is the first priority. Beyond core university administration services, GAKUEN is expanding into post-graduation alumni networking services, cashless tuition payment services, and data analytics add-ons such as the early alert system for student at-risk intervention co-developed with Ehime University, which adds new revenue streams to the business.

Q: What is the background and purpose for launching JAST VISION 2035 at this time?

A: The company marked its 50th anniversary three years ago with the theme of a "second founding," and has since focused on building a new organizational structure and strategic approach. This is the first time the company has created a formal long-term vision; prior medium-term plans simply aggregated individual business unit targets to hit a budget number. By setting a clear top-down 100 billion yen revenue target for 2035, the company can design the required organizational structure and business adjustments needed to hit the goal, which will be rolled out through the new three-year medium-term plan starting in April 2026.

Q: Can you share M&A plans within the company's growth investment strategy?

A: (The full question was cut off in the provided transcript, no answer was included in the available text.)

Q: What is the age breakdown of company employees?

A: As of March 1 on a standalone basis, approximately 40% of employees are in their 20s, 25% in their 30s, 20% in their 40s, 10% in their 50s, with the remaining 5% in their 60s.

Q: Are there any new employee education initiatives being explored or implemented?

A: As part of succession planning, the company has launched new assessments for executive officers, division heads, and department heads. It has also created a new consolidated management education package for managers (called "organizational support roles" internally), which combines systematic management knowledge training with ideological education to pass on the company's core JAST DNA.

Q: The share of foreign clients fell 3% year-over-year in the prior period. Was this an intentional choice to focus on domestic business? What is the background for this decline?

A: This was not an intentional reduction in foreign business. The decline in share is entirely a result of the revenue decline in the Global Business segment, which naturally reduced the proportional weight of foreign clients in the overall customer base.

Q: How much do you expect the number of client financial institutions using BankNeo to grow going forward?

A: As of the end of the current month, the company expects to reach 68 client financial institutions. Going forward, the target is to add approximately 5 new clients per year.

Q: What is the primary business that JAST does with Fujitsu?

A: JAST works with Fujitsu Group in both the DX & SI Business and Medical Big Data Business. In DX & SI, JAST works on multiple projects across different sectors, most commonly core information system migration for financial industry clients and SAP-related projects. In Medical Big Data Business, JAST partners with Fujitsu to provide public sector medical receipt management systems for local governments, and JAST develops the automated checking system RezeptPlus for this partnership.

Q: The company's equity ratio has been increasing over time. What is the target level for the equity ratio?

A: The company has not set a specific numerical target. The increase in the equity ratio came from accumulated surplus cash over time. Going forward, the company will prioritize more efficient capital allocation, and the new policy direction will be shared in the medium-term management plan that will be released early next fiscal year.