Ricksoft Co.,Ltd. Q4 FY2025 earnings call

Strategic Growth Vision: "Reignite"

• The company stands at a critical inflection point, and has adopted "Reignite" as its core strategic keyword, representing a commitment to return to the company's founding roots of delivering genuine customer value while integrating advanced technologies including DX and AI to create new customer value.
• Management has identified the overextended focus on license sales as the company's core strategic mistake, which lowered the priority of the company's historical strength of customized value-added services and left customer needs insufficiently addressed.
• The new core business model will position the company as an indispensable strategic partner for customers, built on three core strengths: customer-centric thinking, advanced technology expertise, and co-creative innovative problem solving for customers.
• Going forward, the company will build industry-specialized teams focused on financial services, manufacturing, IT and other sectors to address industry- and customer-specific unique challenges, leveraging the company's existing customer base of over 150 Tokyo Exchange Prime-listed large domestic enterprises and 8,000 global customers.

Investment Plan

• The company will pursue investment along two core axes: 1) Business model transformation: 1 billion yen to 1.4 billion yen allocated to qualitative improvement from license-centric sales to strategic customer partnership; 2) Human capital investment (including M&A): 4 billion yen to 5 billion yen allocated to scale expansion.
• The company targets 3 billion yen in EBITDA by 2030, achieved by multiplying quality improvement from business model transformation and volume growth from human capital investment.

Operational Milestones

• Ricksoft was named to the Financial Times' High-Growth Companies Asia-Pacific 2025 list for the 7th consecutive year.
• The company entered into a sales agency agreement with Miro Japan for the popular Miro collaboration platform, expanding its non-Atlassian product portfolio strategically.
• Profitability improvement efforts are already underway: selling, general and administrative expenses decreased in the fourth quarter after consistent quarterly increases, driven by the CEO-led organizational reform.
• Atlassian has become one of the top enterprise business applications globally, creating large untapped growth opportunities for the company in the Japanese market, which will support the company's new strategic positioning.

Total company revenue for the 2025 February period reached 9.043 billion yen, a 20.7% increase year-over-year. Operating income was 458 million yen, a 31.1% decrease year-over-year. Segment performance is as follows: 1. Atlassian License Products: Overall revenue grew more than 20% year-over-year. Cloud version revenue surpassed on-premise version revenue in the second half of the period, matching the company's long-term strategic goal of cloud migration transition. Contracted liability (deferred revenue) from cloud sales has steadily increased quarter-over-quarter, with a sustained upward trend projected for future periods. 2. SI (System Integration) Services: Revenue grew over 20% year-over-year, with a notable improvement in utilization starting December 2024 that beat initial forecasts. In the third and fourth quarters, quarterly revenue increased by 400 million yen and 500 million yen respectively from historical average levels, contributing to overall profit improvement. Separated support service revenue is classified under SI services, though uptake of standalone support services has not yet reached pre-separation levels. 3. Proprietary Software: Revenue grew over 20% year-over-year, outperforming initial forecasts and contributing to higher-than-expected overall operating profit. 4. Managed Services: Revenue declined 36.0% year-over-year to 168 million yen. This decline was entirely planned as the service has completed its core market role, and the contraction has been fully offset by growth in the other three segments.

• For the 2026 February period, the company guides 12.4% year-over-year revenue growth, and a 10% year-over-year decrease in operating profit. The expected profit decline reflects planned investments in growth and structural reform.
• Management expects the positive effects of the ongoing CEO-led structural reform to drive profit improvement starting from the fiscal year after next, after the 2026 February period.
• Contracted liability from cloud sales is expected to continue its steady upward trend, with expected continued growth in future revenue recognition.
• Operating profit margin is projected to remain around 5% in the near term, with the company targeting rapid improvement as soon as possible through organizational and structural changes.

• Intense price competition from other Atlassian partners has forced the company to separate support services from core license sales to maintain price competitiveness. This separation has led to lower license profit margins and slower-than-expected uptake of standalone separated support services, which has driven a rapid decline in overall operating profit margin starting from the second quarter of the 2025 February period.
• Many customers are facing their own top-line growth and margin pressure, leading to delayed investment decisions and a trend of customers forgoing renewal of Ricksoft's support services even when they purchase core licenses, further pressuring profitability.
• The company's revenue has inherent quarterly volatility, making short-term quarterly performance projections difficult, which may lead to unanticipated near-term performance deviations.

Only two core question topics are referenced in the available transcript, no full Q&A text is provided: 1.

Q: Can you provide more specific details on the two-part investment strategy for business model transformation and human capital investment, including priority rankings between the two areas?

A: No full answer included in the available transcript. 2.

Q: Why has the company selected EBITDA as a core performance metric, and what is the rationale for the 2030 3 billion yen EBITDA target?

A: No full answer included in the available transcript.