for Startups,Inc. Q4 FY2025 earnings call

• Overall Full-Year FY2025 March Results

  • Total company revenue hit 3.693 billion yen, up 8.1% year-over-year, marking the 8th consecutive year of revenue growth since founding.
  • Total operating profit hit 452 million yen, up 7% year-over-year; revenue missed the original full-year target, but cost containment (including lower-than-planned temporary expenses for head office relocation and unforeseen one-time cost savings) offset the revenue shortfall to deliver profit growth.
  • Combined Q4 order intake for the two core segments hit 1.175 billion yen, up more than 30% year-over-year, an all-time quarterly high.
  • Total employee count reached 230 at period end; hiring was temporarily paused in Q4 to focus on productivity, but the long-term growth hiring trend remains unchanged.

• New Business & Strategic Partnerships

  • Launched two new collaborative initiatives in late FY2025: a joint project with Sumitomo Mitsui Banking Corporation to expand diverse exit options for startups, combining SMBC's buyer network strength with Four Startups' startup deal flow to develop startup M&A and secondary market services, currently in active planning.
  • A second partnership with US decacorn Deel to build services that help Japanese startups access and utilize global talent to boost corporate value, with business model details still under discussion.
  • Multiple additional new initiatives including M&A and co-creation with portfolio startups are under review, with disclosure planned once terms are finalized.

• Mid-Term Strategic Direction

  • The company aims to evolve from its current startup HR focus to become a full "Growth Industry Support Platform". The three core priorities are: 1) achieve the number one startup HR business in Japan in both quality and volume; 2) expand startup support service offerings beyond existing core businesses; 3) grow scale via M&A and co-creation.
  • A 3-year milestone plan has been set: FY2026 March will focus on building growth foundation and launching new businesses; by FY2027 March (the company's 10th anniversary), the Growth Industry Support brand will be established; by FY2028 March (the final year of the Japanese government's 5-year startup development plan), full platform transformation will be completed.
  • Segment name change: The existing Talent Agency segment will be renamed Human Capital starting Q1 FY2026 March, to reflect the expanded scope covering broader talent (from entry-level to C-suite) and global talent, aligned with the platform strategy.
  • For the newly renamed Human Capital segment: Initiatives include strengthening external marketing to build broad national brand recognition, rolling out generative AI to improve scouting and overall productivity, and expanding hiring after productivity gains, with a focus on growing both senior-level and entry-level placement volume and expanding support to post-IPO listed startup clients via a newly formed dedicated enterprise team.
  • For the Open Innovation segment: Management will focus on cross-selling the three existing core services to grow scale, with the goal of building STARTUP DB into a leading innovation platform used by large domestic and global corporations, and will integrate the segment with the new startup exit initiative with SMBC to drive additional growth.
  • Mid-term financial target for existing core businesses: set annual revenue growth of 15% to 20%, and target an operating margin of 15% to 20%. VC exit gains and new business/M&A growth are excluded from these baseline targets.
  • Capital allocation plan: Operating cash flow generated from existing business growth will be prioritized for investment, followed by use of interest-bearing debt (the company confirms it has ample unused borrowing capacity with financial partners), then use of treasury shares for large M&A transactions.

• Human Capital Management

  • The company conducted an internal employee engagement survey using its proprietary "Kokorozashi Index" and identified key areas for improvement including unclear long-term career paths and higher voluntary turnover among employees who report not feeling aligned with the company's mission.
  • Management approved an increase in the employee stock ownership plan matching contribution from 20% to 50%, a top tier level among listed Japanese companies, to align employee and shareholder interests and improve retention.

1. Talent Agency (to be renamed Human Capital from Q1 FY2026 March): This is the company's core human resources business for startups. In FY2025 March, weaker Q3 order intake due to overprioritization of quality over volume negatively impacted full-year results, but Q4 KPIs improved significantly: new jobseeker interviews rose 26.4% quarter-over-quarter, March order volume hit an all-time high, and overall Q4 segment order intake grew 31.9% year-over-year. A slight decline in average transaction value was expected, driven by increased volume of lower annual salary placements as the business scales volume alongside quality. Exact full-year revenue was not segmented in the provided transcript.
2. Open Innovation: The segment includes three core services: Public Affairs, STARTUP DB, and conferences. Full-year revenue grew 4.7% year-over-year despite one-time revenue recognition timing shifts and a small decline from service line changes. The segment achieved its first full-year profitability in FY2025 March, with solid new client gains including wins in previously untapped regional markets. Exact full-year revenue was not segmented in the provided transcript.
3. Venture Capital: Two new investment deals were completed during the period, including an investment in space startup ArqEdge Space. No specific financial performance figures for the segment were provided.

• For FY2026 March (full year), management forecasts total company revenue of 4.3 billion yen, representing 16.4% year-over-year growth, and operating profit of 650 million yen, representing 43.5% year-over-year growth.
• This guidance only includes performance from existing core businesses (Talent Agency/Human Capital and Open Innovation), and excludes any potential impact from VC exits, new businesses, and M&A.
• The projected operating profit growth is supported by a smaller increase in SG&A, as the large one-time temporary expenses from FY2025 March head office relocation will not recur in FY2026 March.
• The company plans to grow total headcount to 260 by the end of FY2026 March, with flexible hiring adjustment based on order intake progress: higher first-half order intake would support faster second-half hiring expansion.
• Mid-term existing business guidance maintains a 15-20% annual revenue growth target and 15-20% operating margin target, with an increased focus on profit growth compared to prior plans.

• External industry risks: The Japanese government's 5-year startup development plan is progressing slightly slower than originally projected due to spillover impacts from the US startup funding downturn.
• Market structure risk: Planned reforms to the Tokyo Stock Exchange Growth Market may lead to a decline in the number of new startup IPOs, shifting more startups to pursue M&A/secondary market exits earlier than planned, requiring the company to adjust its service offerings to match this market shift.
• Strategic opportunity and risk: The fast-growing deep tech startup segment (a core focus of the Japanese government's startup plan) requires the company to adapt its services to this new market, creating a critical transition period for the business.
• Internal operational risk: The company missed its original FY2025 March revenue target because the core talent business overprioritized placement quality over volume, leading to lower-than-planned Q3 order intake.

Q: The FY2026 March sales plan calls for 16.4% year-over-year growth, which is much faster than the prior year's growth pace. Can you explain the background and the probability of hitting this target from the perspective of headcount and per-employee productivity?

A: The Q4 FY2025 results already show that after adjusting the balance of quality and volume, core talent business KPIs have recovered sharply, with order volume hitting an all-time high in the final quarter. This strong current order momentum provides a solid base to achieve the higher growth target for the new fiscal year. The guidance is built on realistic productivity improvements from operational changes (including AI adoption) and gradual planned headcount growth, which management views as achievable.