4725.T

2025 Full-Year Consolidated Results

• Revenue: 50.588 billion yen, down 2.8% year-over-year, a 1.47 billion yen decrease driven by the specific customer's in-house transition, the conclusion of large-scale projects, and negative foreign exchange impacts, partially offset by new consolidation and growth in overseas business.
• Operating profit: 2.58 billion yen, down 24.0% year-over-year.
• Ordinary profit: 2.392 billion yen, down 28.8% year-over-year.
• Net income: 3.271 billion yen, up 5.7% year-over-year, driven by special gains from the sale of investment securities.
• Adjusted EBITDA: 3.813 billion yen, down 16.6% year-over-year (a 0.76 billion yen decrease), driven by lower revenue and growth-focused upfront investments.
• Orders received: 50.281 billion yen, down 5.1% year-over-year. Ending order backlog: 17.539 billion yen, down 2.1% year-over-year, holding roughly flat year-over-year.

CAC Vision 2030 Phase1 Retrospective

• Phase1's core goal was to build a foundation for the Product & Service business. The company built a system to generate new product and service offerings while earning stable profits from existing businesses, and overall initiatives progressed roughly as planned. However, new business growth was slower than initially projected, M&A did not reach the expected scale, and the contribution to financial results was limited. The original Phase1 targets of 58 billion yen in revenue and 5.5 billion yen in adjusted EBITDA for 2025 were not met, partially due to weak domestic existing business performance. The 5% DOE target has been consistently maintained since 2023.

CAC Vision 2030 Phase2 (2026-2030) Management Policy

• External & Internal Environment Recognition: The key external factors are the accelerating development of AI technology, changing customer needs, and growing global business risk from market fragmentation. Key internal challenges include the need to continuously improve M&A performance, and the need to build capabilities to scale new businesses from 1-to-10 and 10-to-100 after the 0-to-1 launch stage. Global business structural reform is complete, with previously underperforming overseas business achieving profitability after unprofitable business rationalization, and the segment is ready for expansion including M&A.
• New Management Stance: The company recognizes that a portfolio overly dependent on existing system development and operation business is a long-term risk amid AI development and accelerating customer in-house transition. The existing goal of diversifying the business portfolio and shifting to businesses that solve social issues (carried over from Phase1) remains unchanged. The new change from Phase1 is that management will prioritize flexible and rapid adaptation to environmental change, so only directional mid-long term guidance will be provided instead of fixed multi-year numerical targets.
• Core Strategic Priorities:
  • Expand the scope of social problem solving via portfolio diversification: Continue expanding into new vertical markets from existing IT problem-solving business, drive expansion into adjacent and non-contiguous areas via AI Transformation, new business expansion, and strategic M&A, and pursue co-creation with external partners (companies, universities) to address gaps in internal resources.
  • Shift from existing business via AI Transformation, split into three focus areas:
    1. Advance system development with AI: Use generative AI for programming, expand application of the company's proprietary AI agents, and actively adopt high-quality external AI agents to transition from labor-intensive system development to AI-enabled processes.
    2. Accelerate AI-driven automation for system and business operations: Combine multiple AI tools to pursue full automation of operations, building on prior RPA work.
    3. Develop AI platforms and AI-enabled products and services: Focus on scaling the proprietary AI-driven platform OCTOps, require AI integration for all new business development, and invest in ongoing product and service development to build internal capabilities.

2030 Cash Allocation Plan

• Total projected cash inflow through 2030: 30 billion yen, including 10 billion yen from external financing, 4 billion yen from compressing cross-held policy shares, and 16 billion yen from operating cash flow.
• Cash allocation: 13 billion yen for M&A, 2 billion yen for AI Transformation investment, 3 billion yen for organic new business development, 3 billion yen for human capital investment (shifting from Phase1's focus on headcount growth to Phase2's focus on employee capability development and engagement improvement), and 9 billion yen for shareholder returns over the 5-year period. The 5% DOE dividend policy will be maintained for the foreseeable future, with allocation adjusted based on market and business conditions.

New Value Metric: CAC Group Positive Index

• Management splits corporate value into short-term (focused on improving ROE as the core financial metric) and long-term. To address the lack of a standardized long-term corporate value metric, the company developed the proprietary CAC Group Positive Index, which incorporates factors with strong statistical correlation to long-term value creation. The index will be refined and updated over time as new products and solutions are developed, to clearly communicate the company's goal of generating positive social impact and attract aligned shareholders.

• 2026 Fiscal Year (Fiscal 2026): Revenue is projected at 51.5 billion yen, up 1.8% year-over-year; adjusted EBITDA is projected at 3.85 billion yen, up 1.0% year-over-year; ROE is projected at 7.5%; equity spread is projected at 0.5%. The projection is for existing business only, and does not include the two companies newly consolidated in November 2025. These will be added to guidance once PMI progress yields a clear forward outlook.
• Dividend Guidance for 2026: Management maintains the 5% DOE policy, and projects an annual dividend of 100 yen per share, considering current market and business conditions.
• Mid-long Term Guidance Change: Management has replaced the prior fixed multi-year mid-term management plan with directional mid-term management policy, and will no longer disclose fixed multi-year numerical targets (discontinuing the prior 800 billion yen revenue target) to maintain flexibility amid rapidly changing business conditions. Only annual numerical guidance will be disclosed going forward.
• Segment growth targets: Domestic IT business targets 6% annual growth (above industry average) through 2030, and new business targets 10 billion yen in revenue by 2030.

• P&S (Product & Service): Revenue reached 8.9 billion yen in 2025, showing steady growth as tracked through CAC Vision 2030 Phase1. Investment execution reached 83% of target for talent investment and 91% of target for business investment, which management considers roughly in line with initial expectations.
• Domestic IT Business: Despite contributions from new projects, negative impacts from a specific customer's in-house transition and the conclusion of a large-scale project led to a net overall negative impact on revenue. Management targets an average annual growth rate of 6% (above industry average) through 2030, via expansion of AI and high value-added services and co-creation to solve social issues.
• Overseas IT Business: Had a 0.3 billion yen negative impact from foreign exchange, but delivered a net 0.57 billion yen positive revenue increase for 2025. The segment completed structural reform, achieved profitability via unprofitable business divestment, and plans to focus expansion on the high-growth Indian and Indonesian markets while the Chinese market is not expected to perform strongly. R&D teams were recently consolidated at the holding company level to enable group-wide cross-selling synergy.
• New Business: Currently at a scale of several hundred million yen in revenue, with a target to reach 10 billion yen in revenue by 2030 by scaling solutions and products in non-contiguous areas and developing star businesses. Organic growth alone is insufficient, so strategic M&A will be pursued to accelerate expansion.

• Industry Risk: Accelerating customer in-house transition of IT services and rapid AI development create long-term risk to the revenue and profit base of the existing core system development and operation business. A portfolio overly dependent on existing business is explicitly recognized as a material future risk.
• Global Business Risk: Rising geopolitical fragmentation increases global business risk, and the Chinese market is currently experiencing unfavorable operating conditions.
• Internal Capability Risk: The company has not yet built sufficient capabilities to scale new businesses from the 1-to-10 and 10-to-100 stages after initial 0-to-1 launch. M&A performance to date has been below initial expectations, and sustained improvement in M&A and post-merger integration capabilities is required.
• Execution Risk: New business growth has been slower than originally projected in Phase1, and M&A contributions to financial results have been limited, which led to the company missing its Phase1 2025 numerical targets.

• Q: What is the background and reason for changing from a "mid-term management plan" to a "mid-term management policy" this time around? Was the previously disclosed 800 billion yen revenue target discontinued?

A: The biggest reason is that the pace of change in the company's operating environment is now faster than ever. Fixing detailed multi-year plans is no longer necessarily aligned with maximizing corporate value, and flexible adaptation to changing conditions is more important. Going forward, the company will prioritize communicating clear directional guidance on priorities and capital allocation, rather than focusing on fixed numerical targets, so multi-year numerical target disclosure has been discontinued.

• Q: Is the 2026 guidance conservative, or is it the upper limit of what is visible at this point?

A: It is neither conservative nor the upper limit; it is simply the aggregated cumulative forecast that can be projected at this point in time. The two newly consolidated companies acquired in November 2025 will be added to guidance once PMI progress yields a clear outlook.

• Q: How should investors use the CAC Group Positive Index for valuation? There is no clear evaluation standard for this proprietary index.

A: In the short term, improving traditional financial metrics (revenue, cash flow, ROE) remains the top priority. The index is intended to communicate the company's mid-long term vision of becoming a corporate group that continues to generate positive social impact. The company has observed a clear correlation between increasing positive social impact and market capitalization, so investors should use this index as a clear indicator of the company's strategic direction and long-term goals.

• Q: Why doesn't adding the expected adjustment items to the projected 2.6 billion yen operating profit add up to the projected 3.85 billion yen adjusted EBITDA for 2026?

A: Adjusted EBITDA is calculated by adding back non-cash expenses including depreciation, goodwill amortization, and stock-based compensation to operating profit. The projected 3.85 billion yen already accounts for expected goodwill amortization from the two newly acquired companies, which is why the total does not match a sum of existing business line items. The company is taking a cautious approach to the newly consolidated companies, following challenging PMI execution for prior Phase1 M&A, so results will only be added to guidance once a clear outlook is established after integration.

• Q: 2025 saw a revenue decrease, but 2026 is projected to return to growth. Can you restate the causes of the 2025 revenue decrease and how these will be resolved in 2026?

A: The biggest factor was the in-house transition by a specific customer, but the peak of this impact has already passed. Some residual impact will remain in early 2026, but this is recognized as a temporary impact. There was also a 0.32 billion yen negative foreign exchange impact, and a negative impact from the conclusion of a large-scale project for financial institution clients. The company has already secured new large and medium-sized projects recently, so a gradual recovery is expected. No large jump in growth is projected for 2026, but as all the negative temporary impacts fade, a modest revenue increase is expected.