i Cubed Systems,Inc. Q4 FY2025 earnings call

Market Position & Core Business Updates

• CLOMO MDM, the company's flagship mobile device management product, achieved 14 consecutive years of No.1 market share in the Japanese domestic MDM market.
• The domestic MDM market is estimated at 21 billion yen as of 2025, and expands to 72.2 billion yen when including the adjacent PC asset management market, which the company is targeting for expansion driven by growing demand for managing both mobile and PC endpoints.

CLOMO Business Growth Strategy Execution

• Customer Base Expansion: OEM partnerships with NTT Docomo Group continued to drive strong steady new customer growth. The company actively pursued new customer acquisition in the high-growth government and healthcare verticals. CLOMO MDM was approved as an eligible tool for Japan's 2024 IT Introduction Subsidy, which is expected to lower adoption barriers for small and medium-sized customers going forward.
• ARPU Improvement: The company acquired ワンビ (Onebee) Co., Ltd., a provider of Windows PC endpoint security solutions with over 600,000 units of deployment experience and OEM relationships with PC manufacturers, to expand its optional service offerings. The company also added new features to its existing custom home screen app and held its first in-person user meeting for CLOMO MDM in 5 years to strengthen customer relationships and support cross-selling.
• Service Value Enhancement: The Onebee acquisition is expected to boost ARPU, strengthen development capacity, and expand the company's sales reach via Onebee's existing distribution trading partner network. The company launched a unique conditional access integration with Microsoft Intune, which is the only such integration available among Japanese domestic MDM products, strengthening the company's competitive advantage. CLOMO MDM was added to the Japanese government's ISMAP secure cloud service registry, enabling expansion into the public sector. The company launched a dedicated government pricing plan and increased marketing activities to win public sector clients. For the fast-growing healthcare market, the company increased marketing via event participation and case study publication, securing large-scale deployments at major Japanese hospitals including Tokyo Jikei University Hospital and Fukuoka Red Cross Hospital.

1. CLOMO Business: This is the company's core cloud-based software subscription segment. For the 2025 June full year, the parent entity standalone CLOMO business reported revenue of 3.267 billion yen, and operating profit of 0.938 billion yen. At the end of the period, total contracted companies reached 8,620, with a net increase of 1,910 companies over the full year, outpacing the prior period's growth rate. Customer retention held at a high 95.5%. Annual Recurring Revenue (ARR) hit 3.28 billion yen, growing 14% year-over-year, accelerating from 9.7% growth in the prior year, driven by strong new customer gains via OEM partnerships. ARPU continued a downward trend driven by growing adoption among smaller enterprise customers, but the rate of decline slowed due to upsell and cross-sell efforts. For Q4 2025 June, CLOMO revenue made up 100% of the quarter's 1.031 billion yen consolidated revenue, as the investment segment recorded no revenue in the quarter. 2. Investment Business: This segment runs venture capital and corporate venture capital investments in startups across industries. In the 2025 June full year, the segment recorded 0.12 billion yen in revenue from its first portfolio exit. A 29 million yen valuation impairment was recorded on prior investments, bringing the closing balance of operating investment securities to 0.216 billion yen. Two new investments were completed in the period, and a second exit is currently in progress. 3. Consolidated Full Year 2025 June: Total consolidated revenue was 3.749 billion yen (27.2% YoY growth), total consolidated operating profit was 0.905 billion yen (30.8% YoY growth), with an operating margin of 24.1%. CLOMO business accounts for approximately 96.8% of consolidated full-year revenue, and the investment business accounts for approximately 3.2% of consolidated full-year revenue.

• For the 2026 June full year, management guides consolidated revenue of 4.508 billion yen, representing 20.2% year-over-year growth, and consolidated operating profit of 1.113 billion yen, representing 23% year-over-year growth. The guidance reflects full-year consolidation of Onebee's results, continued steady growth of the CLOMO business, and expected additional revenue from an investment exit.
• Management expects cost of goods sold to decline slightly year-over-year, driven by lower depreciation expense after 2025's period of heavy incremental development for customer-driven minor product updates. Selling, general and administrative expenses are expected to increase due to new costs including shareholder benefit program expenses, higher goodwill amortization from the Onebee acquisition, and targeted advertising investments to support long-term CLOMO growth.
• The company's prior medium-term target of 50 billion yen in consolidated revenue for 2026 June is not expected to be met, with 45 billion yen now the realistic achievable target, but management remains committed to continuing strategic investments to eventually hit the 50 billion yen medium-term goal.
• The company introduced a new shareholder benefit program: 1,000 yen in digital gift for holders of 100+ shares, and 5,000 yen for holders of 300+ shares, distributed twice per year. Management guides a full-year dividend of 34 yen per share for 2026 June, with a payout ratio of 23.6%, maintaining the company's policy of balancing growth investment with shareholder returns.

• ARPU is expected to continue declining in the medium term due to the expected continued growth of smaller enterprise customers, even as the company pursues cross-selling initiatives to slow the rate of decline.
• The Q4 2025 June quarter saw a one-time spike in costs driven by concentrated advertising spending, goodwill amortization from the Onebee acquisition, and shareholder benefit accruals, which temporarily reduced net income attributable to parent shareholders, though management confirms this is a one-time effect that will not persist into future periods.
• Investment valuations are subject to downward adjustment, as seen with the 29 million yen valuation impairment recorded on prior investments in the 2025 period.

Q: What is the root cause of the continued ARPU decline for CLOMO, and how does management view this trend? / A: Management confirmed ARPU decline is primarily driven by the rapid growth of new small and medium enterprise customers, which have lower average contract values than the company's traditional large enterprise customer base. The decline is expected to continue as the company prioritizes expanding its overall customer base, but management does not view this trend as negative—it is a reflection of successful customer base expansion. The company is actively rolling out cross-selling and upselling of new optional services, including Onebee's Windows PC solutions, to slow the rate of ARPU decline over time.