LECIP HOLDINGS CORPORATION Q4 FY2025 earnings call

Core Full-Year Financial Performance

• Full-year consolidated net sales increased 14.3% year-over-year to 25.931 billion yen, with operating profit of 3.531 billion yen, ordinary profit of 3.483 billion yen, and net profit attributable to parent company shareholders of 2.255 billion yen. The strong results were primarily driven by surging demand for new banknote compatibility modifications and upgrades from bus and rail operator clients, with many clients requesting accelerated project timelines that the company fulfilled successfully.
• Post-first half of the fiscal year, recovering travel demand lifted client capital investment appetite, driving higher sales of color LED destination displays and IC card readers/writers. Steady progress on New York City subway product deliveries also contributed to full-year results.

Capital and Shareholder Focus Strategy

• Current ROE came in at 26.6%, well above the estimated 7-8% cost of equity, but the stock trades below a P/B ratio of 1x. Management identifies high historical earnings volatility leading to unstable market valuation of profitability and growth as a core challenge, and plans to address this by delivering stable growth and enhancing disclosure of the company's growth strategy.
• The three-pillar strategy to improve market valuation includes: transforming the business portfolio, strengthening shareholder returns, and expanding IR activities.
• For the 3-year cumulative RT2026 mid-term management plan, management allocates approximately 5 billion yen in operating cash flow: 2.5 billion yen for growth investment (overseas business expansion, new sector growth, M&A) and 2.5 billion yen for competitiveness enhancement (new factory construction, IT infrastructure, equipment updates). Shareholder returns are planned at 800 million yen, targeting a 2% DOE payout ratio with opportunistic share repurchases.
• For FY2025, the company paid a total dividend of 20 yen per share (11.5 yen regular + 8.5 yen special), and has set a new dividend policy of maintaining a 2%+ DOE. The planned FY2026 dividend is 13.5 yen per share, with a projected rising regular dividend trend as net worth increases.

Overseas Business Progress

• The company secured two large orders for bus automatic fare collection (AFC) systems from US public transit operators: Orange County Transportation Authority (California) and Collier Area Transit (Florida). The combined order includes 600 fare boxes and full system deployment, won based on the company's track record, project management structure, and product quality.
• The US route bus AFC market is estimated at 65,000 total units, with the company currently holding ~3% share. Management targets 10% market share by 2030, differentiating from dominant competitor Genfare through high product reliability and flexible customer support.

New Sector Expansion

• The company successfully delivered and launched the Mt. Fuji climbing pre-registration system for Shizuoka Prefecture, a tourism DX project addressing overtourism, environmental impact, and climber safety challenges. The system is built on the company's existing LECIP CMP platform, supports 7 languages, includes pre-climbing safety training functionality, and enables end-to-end online registration and payment.
• Management plans to expand this tourism DX solution to other popular tourist destinations across Japan and integrate it with broader MaaS initiatives.

"Hardware + Services" Business Transformation

• The company launched MoveLe, an integrated solution for public transport operators that combines the company's leading market share position in bus hardware with software and services to drive operational efficiency, revenue improvement, and better rider experience.
• The total Japanese bus industry IT solution market is projected to reach 41.5 billion yen by 2030, with an addressable market of 16.6 billion yen for the company, and a target 30% share (5 billion yen in annual revenue) over the medium term.
• Two initial solution deployments have delivered strong client results: the income aggregation system cuts manual aggregation time to 1/10 of original levels and reduces labor costs by 90%, while the diagram scheduling system improves work efficiency for timetable revisions and reduces data update burden.

1. Transportation Equipment Segment: The segment delivered revenue growth, driven by increases in the bus and rail markets that offset a decline in the automotive market. In the bus market, revenue grew significantly from new banknote-related orders for fare box modifications, software updates, and new fare box purchases. In the rail market, steady deliveries of lighting fixtures for New York City subway vehicles contributed strongly to revenue growth. The automotive market saw a revenue decline from lower sales of automotive LED lighting. On the profit side, higher revenue and a lower cost ratio from product mix changes resulted in a net profit for the segment. This segment contributed approximately 95% of total company revenue excluding the new MoveLe solution portfolio.

2. Industrial Equipment Segment (Energy Management Systems Business): The segment reported a year-over-year revenue decline, following the divestment of the high-voltage transformer business completed in March 2024. While demand for battery-powered forklift chargers in the power solutions market remained steady and automotive PCB assembly sales grew in the EMS market, the loss of high-voltage transformer revenue drove the overall segment decline. On the profit side, lower revenue and rising raw material prices led to a year-over-year profit decline. MoveLe integrated solutions for public transport, currently in early rollout, accounted for approximately 5% of total company revenue in FY2025.

• For FY2026 March full year, management projects a 7.4% year-over-year decline in net sales to 24 billion yen, with operating profit of 1.1 billion yen, ordinary profit of 1.1 billion yen, and net profit attributable to parent company shareholders of 0.8 billion yen. The projected decline is driven by the expected post-boom unwind of one-time new banknote compatibility demand in the domestic market.
• Large AFC orders from the US North American subsidiary are expected to contribute meaningfully to FY2026 results, but will not fully offset the loss of domestic new bankmine-related revenue. Higher cost ratios from changes in product and service mix are also projected to drive a year-over-year profit decline.
• Management reaffirms commitment to achieving the mid-term RT2026 management plan, with growth centered on two core pillars: expanding new business sectors domestically and growing market share in the US market overseas. Management plans 650 million yen in R&D investment for FY2026 (focused on cashless, tourism DX, and digital signage development) and 700 million yen in capital expenditure (continued investment in LECIP Electronics machinery and core system updates).

• High historical earnings volatility has led to unstable market perception of the company's profitability and long-term growth prospects, resulting in a P/B ratio below 1x despite strong recent ROE performance.
• The domestic public transport market faces structural headwinds from population decline and challenges maintaining regional transport networks.
• Rising raw material prices pressure margins in the industrial equipment segment.
• The company faces established competition in the US AFC market, where incumbent player Genfare holds a dominant market position.

Q: What impact will Trump-era tariffs have on the company's US business and cost structure? / A: The full summary transcript provided only notes this question was asked, and does not include management's full answer. The topic is identified as a key area of investor interest related to the company's expanding US operations.

Q: When will the recently secured large US AFC orders be reflected in the company's consolidated financial results? / A: The full summary transcript provided only notes this question was asked, and does not include management's full answer. This question addresses timing of revenue recognition for high-impact new overseas business.