Rococo Co.Ltd. Q4 FY2024 earnings call

• Company Overview & Core Strengths

  • Founded in 1994, Rokuko reached its 30th anniversary in 2024, and has grown steadily with M&A activity since 2014.
  • Core strengths: ~80% of revenue comes from listed or listed-equivalent large enterprises, annual customer churn is below 6%, stock-based revenue accounts for over 90% of total revenue, and engineer turnover is a low 7.6%.
  • The company operates 7 businesses across 2 core segments, offering end-to-end one-stop services from design to development and operation, mostly via direct contracts.

• FY2024 Full Year Operational Performance

  • Total revenue reached 7.803 billion yen, exceeding both the full-year forecast of 7.711 billion yen and the initial forecast of 7.793 billion yen, representing 8.7% YoY growth from 7.175 billion yen in the prior year.
  • Profit missed the initial forecast due to higher cost of sales and underperformance of contracted development (unexpected order shortfalls created idle staff that pressured margins), but results were in line with revised expectations. The company has since reallocated staff to reduce idle capacity and improve productivity.
  • The company maintains effectively debt-free operation, with total interest-bearing debt decreasing by approximately 0.6 billion yen YoY.
  • For shareholder returns, a total dividend of 30 yen per share was implemented, consisting of a 20 yen ordinary dividend plus a 10 yen 30th anniversary special dividend.

• Strategic Priorities

  • Build out full one-stop services from consulting to operation to meet growing enterprise demand for system overhaul driven by the "2025 Cliff" digital transformation issue.
  • Expand the ServiceNow business via existing account expansion and new customer acquisition, leveraging the company's high customer satisfaction score (4.42/5) and strong partner recognition from ServiceNow.
  • Improve service quality and productivity by promoting engineer certification acquisition, and secure/develop IT talent via early new graduate hiring and expanded internship programs to speed up new hire ramp-up.
  • Relocated face recognition product R&D to Łódź, Poland to combine Rokuko's existing technology with local technical expertise to develop more competitive products.

1. ITO&BPO Business: Revenue grew 7.5% year-over-year in 2024, but operating profit decreased 22.4% YoY due to rising personnel costs. The segment maintains overall growth momentum. 2. Cloud Solution Business: The ServiceNow sub-segment was the primary driver of both total company revenue and profit growth in FY2024, and is expected to continue delivering strong contribution to overall results in FY2025. The company also holds a face recognition system product within this segment, with development recently relocated to a new R&D base in Poland.

• For FY2025 (ending December 2025), Rokuko guides total revenue of 8.61 billion yen, ordinary profit of 0.49 billion yen, and an ordinary profit margin of 5.7%.
• Operating profit margin is guided to reach 5.8%, representing a 0.3 percentage point increase year-over-year.
• The company expects steady growth from both the ITO&BPO and Cloud Solution segments, with improvement in overall profit margins. The ServiceNow sub-segment within Cloud Solutions is expected to maintain its strong contribution to growth similar to FY2024.
• For FY2025 shareholder returns, the company currently guides an ordinary dividend of 25 yen per share.

• In FY2024, contracted development order shortfalls led to idle operational staff, which compressed overall segment and company profit margins.
  • The 2024 development relocation of the face recognition product to Poland created operational disruptions that negatively impacted FY2024 results.

No Q&A section is included in the provided transcript.