5036.T

• Overall 2025 Performance: The company achieved record-high full-year revenue, outperforming the revised 2025 May guidance. Net profit increased 271.6% year-over-year, partially driven by a large prior-year impairment charge and tax savings from the wage increase tax scheme this year. After three years of strategic shift, the company has started seeing clear results from its push into high-value cloud-focused business.
• Strategic Business Portfolio Transformation: The company is shifting its revenue mix from the current 70:30 split between License & Products and engineering-focused cloud services to a 60:40 split by the 2028 September fiscal year, expanding higher-margin cloud engineering businesses. It has redefined its operations into five core growth-oriented business domains:
  1. License & Products: Shift from pure resale to value-added recurring services, leveraging the company's large domestic cloud customer base to offer value-added utilization services, Microsoft Copilot running services, AI PC support, and license management portals, while optimizing operational costs via internal AI adoption.
  2. Cloud Technology Services (core): Address market demand for resolving siloed fragmented cloud environments and cloud security gaps. Build on existing ID management strengths to expand end-to-end IT infrastructure support, including multi-cloud connectivity starting from Azure, covering AWS and GCP, and strengthen capabilities for AI Ready Data infrastructure to support customer generative AI adoption.
  3. Cloud Global Services (strategic): Expand one-stop support for Japanese enterprise clients expanding overseas, offering Japan-quality multilingual support across North America and Asia, including 24/365 helpdesk, cloud cost optimization, cross-border ID integration, and IT governance. A new global delivery center based in Japan has been launched this fiscal year to unify end-to-end support.
  4. AI Services (strategic): Meet growing client demand for practical generative AI utilization by offering Microsoft Copilot implementation and utilization support, AI talent training, and acting as a bridge between enterprise clients and AI venture startups to integrate innovative AI technology into existing enterprise IT environments. Leverage the company's internal AI adoption experience to deliver practical, high-value services, with ongoing company-wide AI skill development and internal agent AI development for future commercialization.
  5. Cloud Business Services (strategic): Focus on resolving fragmented application silos in client organizations to accelerate DX, offering combined AI co-development and high-quality UI/UX application development that connects core client systems directly to business operations, leveraging existing strengths in consumer-facing UI/UX and partnerships with external consultancies and startups.
• Competitive Advantage: As an independent cloud-focused prime system integrator, the company differentiates itself through a co-creation partnership model that works closely with client business leaders to iteratively develop solutions aligned with business outcomes, and acts as a communication hub connecting all project stakeholders with a focus on in-person collaboration, which drives repeat client business. The company already covers 72% of TOPIX-listed enterprise clients, providing a strong established customer base for future expansion.

• 2026 September full-year consolidated guidance:
  • Total revenue of 176.5 billion yen, 2.3% year-over-year increase.
  • Operating profit of 8.4 billion yen, 10.6% year-over-year increase.
  • Ordinary profit of 8.2 billion yen, 11.2% year-over-year increase.
  • Net profit attributable to parent shareholders of 5.8 billion yen, 3.9% year-over-year increase. The slower net profit growth reflects the absence of the 2025 wage increase tax scheme benefit, with guidance based on a standard effective tax rate.
• 2026 segment guidance:
  • Cloud Integration: Revenue 32 billion yen (+15.4% YoY), segment profit 5.82 billion yen (+15.6% YoY).
  • Cloud Service: Revenue 24.5 billion yen (+11.9% YoY), segment profit 4.48 billion yen (+36.2% YoY).
  • License & Products: Revenue 120 billion yen (-2.4% YoY), segment profit 2.15 billion yen (-24.3% YoY), reflecting the strategic shift away from low-margin pure resale.
• Dividend guidance: 2025 full-year end-of-period dividend is 23 yen per share including a 5 yen commemorative dividend. 2026 full-year annual dividend is planned to increase to 45 yen per share (22 yen interim, 23 yen end-of-period), with a planned payout ratio of 36.8% and ROE of 19.1%.
• Mid-term 2028 September target: Total revenue of 190 billion yen, operating profit of 12 billion yen, targeting a 17% compound annual growth rate for operating profit while executing the portfolio shift to higher-margin cloud services.

1. Cloud Integration Business: Revenue of 27.7 billion yen, up 17.6% year-over-year; segment profit of 5 billion yen, up 68.7% year-over-year. Revenue contribution share is ~16.1% of total consolidated revenue. 2. Cloud Service Business: Revenue of 21.8 billion yen, up 15.7% year-over-year; segment profit of 3.2 billion yen, up 15.3% year-over-year. Revenue contribution share is ~12.6% of total consolidated revenue. 3. License & Products Business: Revenue of 122.9 billion yen, up 25.0% year-over-year; segment profit of 2.8 billion yen, up 17.6% year-over-year. Revenue contribution share is ~71.3% of total consolidated revenue. All three segments achieved double-digit year-over-year revenue growth, with Cloud Integration leading overall profit growth.

The provided transcript does not contain explicit discussion of material business risks, operational failures, or unexpected downside risks. All disclosed challenges are framed as market demand opportunities for the company's services, including: fragmented siloed cloud infrastructure at clients, client uncertainty over effective generative AI utilization, and client demand for cross-border cloud support that is currently underserved by existing providers.

Q: Is the projected 2026 decline in License & Products revenue mostly driven by post-PC special demand hangover from 2025, and what is driving the strong projected growth for cloud services? / A: While 2025 did have exceptional PC replacement demand from the Windows 10 end of support, the projected decline is mostly intentional: the company will not chase low-margin deals that erode profit, and is instead focusing on expanding high-margin engineering services to the existing customer base built through license sales, so it does not plan for large revenue growth in this segment. The growth of cloud services reflects the company's strategic shift to offer end-to-end support across integration, implementation, operation, and utilization, as the line between implementation and ongoing operation continues to blur. The company has already shifted to an integrated sales and delivery organization to support this full-lifecycle service model, aligned with the broader shift to recurring revenue that focuses on delivering sustained value to clients rather than one-time project revenue.

Q: How large is the planned net hiring increase for 2026, and what is driving the large projected increase in personnel costs? / A: The company plans to hire approximately 300 total employees in 2026, with a net increase of around 150 employees from the prior year-end. The personnel cost increase also reflects a revised personnel system that implements stronger pay for performance, which will increase total personnel costs if performance targets are achieved.

Q: How will the 2026 segment operating margin for License & Products change, and what caused the change after the recent organizational restructuring? / A: Starting October 2025, the company implemented an organizational change that created dedicated teams for License & Products, and all costs for these teams are now directly allocated to the segment. This is an internal reporting adjustment with no impact on total company profit. The segment operating margin is projected to increase from 4.4% in 2025 to 4.8% in 2026 as a result of this internal reallocation.

Q: What is the projected segment contribution to the 2028 mid-term target of 190 billion yen revenue and 12 billion yen operating profit? / A: By 2028, the company expects the 60:40 revenue split: 60% from License & Products, and 40% from the combined cloud integration and cloud service engineering businesses. For profit, the company expects to continue expanding the profit margin for each segment incrementally, and will monitor and update the progress of this shift over time.