E-Guardian Inc. Q4 FY2025 earnings call

• Core Priorities for FY2026 September Period: The company has identified returning sales to growth and improving profitability as mandatory core priorities following two consecutive years of declining revenue and profit, with a key strategic goal of exiting labor-intensive operations via aggressive AI development investment.
• Organizational & Alliance Refresh: Clear accountability and delegated authority have been assigned to each business segment head to speed up decision-making and respond faster to fast-changing market conditions. Change Holdings Group executive Noda has been brought on to accelerate alliance collaboration, which has progressed slower than initially expected over the two years since the capital and business alliance was formed; one enterprise client deal was closed in Q4 FY2025.
• BPO Segment Strategy: The company is targeting growth across four quadrants of customer and service combinations: (1) Existing customers, existing services: Accelerate AI adoption for customer support and monitoring operations, and develop new ad review tools to boost efficiency and service value; (2) Existing customers, new services: Leverage AI to expand into inbound-related services for retail, food, travel and local government clients, and explore external sales of internally developed AI efficiency tools; (3) New customers, existing services: Prioritize risk management services (reputation monitoring, crisis prevention and response) for political parties and entertainment agencies, and offer AI tools to digitally underdeveloped industries; (4) New customers, new services: Explore new offerings leveraging 20 years of accumulated data and expertise, including illegal content detection systems and disaster/safety monitoring services.
• AI Development Roadmap: An AI-agent based customer support tool is on track to be completed within FY2026, which auto-generates inquiry responses that are reviewed by human operators, with continuous improvement via machine learning from reviewer feedback. The company aims to leverage its accumulated 20 years of Japanese internet content data to build low false-positive monitoring systems that can handle Japanese-specific slang and ambiguous context, and transition from project-based revenue to stable recurring subscription revenue from modular AI tool offerings.
• Cybersecurity Segment Strategy: Use accessible low-cost security education as an entry point to expand sales of higher-value services (vulnerability testing, WAF, consulting) to companies that have not previously invested in cybersecurity, after the segment returned to growth starting in Q4 FY2025.
• M&A Strategy: A dedicated M&A team was established in FY2025, which increased the pipeline of target opportunities by more than 10x via proactive direct sourcing. Target categories include: (1) Peer BPO companies to scale, where the company will implement its AI systems to improve profitability at AI-lagging targets; (2) Companies offering complementary services (e.g., outbound calling) that イー・ガーディアン does not currently provide, especially for new cybersecurity-related growth; (3) AI development companies to boost the group's internal technical capabilities and competitiveness.
• Shareholder Return: The company plans to increase the annual dividend from 35 yen per share to 38 yen per share, and switched shareholder benefits from physical QUO cards to multi-use digital gift cards in response to shareholder requests.

For the full year 2025 September period: 1. Social Support: Record-high full year revenue, with solid growth from flea market and fintech client segments; 2. Cybersecurity: Record-high full year revenue, up ~4% year-over-year. Revenue declined year-over-year in H1 2025 September period due to intense competition from low-cost tools, but rebounded strongly starting in Q4 driven by growth in consulting services and cloud-based WAF; 3. Game Support: Continued declining revenue trend from FY2023 September period, with a large home console game customer support project falling below projected revenue in FY2025; 4. Other (includes testing and debugging): Continued declining revenue trend from FY2023 September period. Total company revenue for FY2025 September period was 11.321 billion yen, 99.4% of the prior year's total, with operating profit of 1.504 billion yen, 88.2% of the prior year's total.

• Management maintains that returning sales to re-growth and restoring profitability are the mandatory top priorities for FY2026 September period.
• AI development investment will be actively expanded, with the AI-agent customer support tool scheduled for completion within FY2026; management expects AI to drive short-term profitability recovery and serve as a medium-to-long term growth engine.
• Management targets closing at least one M&A deal in FY2026, after building a 10x larger pipeline of opportunities compared to before the dedicated M&A team was launched.
• イー・ガーディアン frames FY2026 as a key turning point to transform from a labor-intensive outsourcing business to an AI-powered BPO company, with the goal of building a sustainable growth model via continued investment in AI talent and development.

• The company's contract structure for large projects naturally leads to sales decline after the initial launch phase as client operations stabilize and inquiry volumes drop; in FY2025, the sales decline for a large social support project was larger than management initially projected, dragging down full year revenue.
• Labor costs cannot be adjusted immediately in response to unexpected sales declines, which creates downward pressure on operating profit when revenue falls short of projections.
• H1 2025 profitability was dragged down by one-time costs: pre-launch hiring and training costs for a large new project, plus overlapping rent and payroll costs from the relocation of the Kumamoto center.
• The cybersecurity segment faces intense competition from low-cost automated tools that have pressured demand for the company's high-touch engineer-based vulnerability testing services, which led to a weak H1 2025 performance for the segment.
• Alliance collaboration with Change Holdings Group has progressed slower than initially expected in terms of deal flow and project size.

No formal Q&A section was included in the provided earning call transcript.