IRRC Corporation Q4 FY2025 earnings call

Overall 2023-2025 Three-Year Plan Results

• Total consolidated revenue grew from 6.004 billion yen (2023) to 9.424 billion yen (2025), achieving a 21.9% compound annual growth rate (CAGR) that exceeded the 20% target, and all prior plan profit targets were met.
• Key accomplishments: Directly operated store count grew by 29 to 87 total; completed M&A of Life Assist (2023) and business transfer of 6 stores from Jinsei Design (2024); shifted advertising spend from mass media (TV) to digital web advertising; launched new products AS FiNDER and brox; achieved 57% three-year growth in new customer visits, with web share of total visits growing from 36.4% to 45.2%.
• Actual advertising spend came in below plan: 683 million yen year 1, 541 million yen year 2, 614 million yen year 3 (vs original plan of 673 million / 1.055 billion yen). While the 26% national awareness target was not met, 1 Tokyo 3 Prefecture awareness doubled from ~8% to 15.8%.

Shareholder Return Update

• 2025 June period dividend is 30 yen per share (25 yen regular + 5 yen commemorative for 25th anniversary of Hoken Clinic and 30th company anniversary), marking the third consecutive year of dividend increases.
• Starting 2026 June period, the company will shift to semi-annual dividends with a target payout ratio of 50% or higher, planning a total 32 yen per share annual dividend (16 yen per half-year).

Segment Restructuring for 2026

• The company will merge overlapping Hoken Clinic operations from Insurance Sales and Solution Business into a single Hoken Clinic Business segment.
• Merge Life Assist's visiting sales division and the original corporate division into a new FA (Financial Advisor) Business segment.
• Solution Business will now only include the AS sub-segment (FC operations moved to Hoken Clinic Business); System Business remains unchanged operated by Infodio. The restructuring is to unify profitability management for the Hoken Clinic brand.

2026 Segment Initiatives

• Hoken Clinic Business: Target 22.2% year-over-year revenue growth, focused on increasing direct store count and contracted policies, enhanced web advertising for efficient customer acquisition, improved contact center outreach for existing customer after-sales service. Will integrate the 11 stores acquired from Broadmind in July 2025, rebrand them to Hoken Clinic, and achieve early profitability via existing operating knowhow and the Hoken IQ System. Will continue scrap-and-build for underperforming stores and strengthen franchise recruitment and support.
• FA Business: Aims to expand offerings beyond insurance to include broader financial product solutions. For Life Assist, prioritize recruiting to fix understaffed locations and improve productivity via enhanced training.
• Solution Business: Launch the new AS Platform that provides free access for all insurance agents, expand sales of existing products (AS Series, AI-OCR, robo-advisor) to large financial institutions, develop a new comparison recommendation system for non-life insurance to capitalize on upcoming regulatory change, and deploy AI agents to optimize customer success and data utilization.
• System Business: Target continued growth of AI and cloud products via enhanced direct marketing and stronger alliance partnerships with major SIers, will continue product investment and organizational strengthening.

1. Insurance Sales Business: Revenue was 5.49 billion yen, with a 21.2% year-over-year increase. It accounts for approximately 58.3% of total consolidated revenue. Stock revenue makes up over 16% of the segment's total revenue. As of period end, the company operates 87 total stores (74 directly managed, 13 from Life Assist), with annual new customer visits exceeding 20,000 for the first time, repeat visits of 7,049, 16,270 contracted policies, and a 60% contract closing rate (improved year-over-year).
2. Solution Business: Total segment revenue saw a slight decline, with the AS (Application System) sub-segment posting a 1.9% year-over-year revenue decrease. AS sub-segment system usage fees (including initial registration and monthly fees) grew 10.5% year-over-year to 773 million yen, while OCR project revenue fell 47.2% year-over-year due to a large prior-year contract. Insurance consulting revenue for AS grew 27.4% year-over-year to 308 million yen. The FC (Franchise) sub-segment was strong overall: store usage fees grew 12.6% year-over-year to 408 million yen, FC-operated store insurance commissions grew 17.6% year-over-year, co-underwriting referral commissions grew 18.7% year-over-year, and royalty/other revenue grew 14.8% year-over-year. Stock revenue makes up over 75% of total AS revenue and over 30% of total FC revenue. There are 196 FC stores, bringing the total national store network (direct + FC + Life Assist) to 283 stores.
3. System Business (operated by subsidiary Infodio): Revenue grew 36.5% year-over-year, achieving record high performance. AI product and cloud service revenue grew strongly driven by increased sales headcount, with stock revenue holding at a high 73.6% of segment revenue. Non-AI custom development revenue fell 69.8% year-over-year as the company prioritized AI product growth. The segment's flagship product SmartOCR (AI-powered unstructured form OCR) saw strong new orders and increased existing user utilization; its technology is already used by the National Tax Agency for mobile tax return processing. New products DenHo (AI electronic book storage service compliant with new regulation) and brox (enterprise search for digitized paper documents) have growing demand, with two major enterprise groups already adopting brox. Infodio swung from a prior-year operating loss to 162 million yen in operating profit this period.

• 2026 June Full-Year Guidance: Revenue is expected to exceed 100 billion yen for the first time, reaching 11.288 billion yen, a 19.8% year-over-year increase. Operating profit is expected to be 844 million yen, a 13.9% year-over-year increase. The expected first-half (interim) profit decline is fully factored into the full-year target, and management expects to meet full-year guidance.
• New 2026-2028 Three-Year Mid-Term Plan Guidance:
  • Total consolidated revenue target: 15.205 billion yen (17% annual CAGR from 2025), operating profit target: 1.578 billion yen (more than doubling 2025's 741 million yen), with a target ROE of 20% or higher.
  • Segment-specific 2028 targets: Hoken Clinic Business: 8.046 billion yen revenue (18.9% CAGR), 1.051 billion yen operating profit; FA Business: 2.68 billion yen revenue (14.3% CAGR); Solution Business: 1.85 billion yen revenue (7.9% CAGR), 794 million yen operating profit; System Business: 2.628 billion yen revenue (24.3% CAGR), 324 million yen operating profit.
  • Growth investment allocation: 2.0 billion to 2.5 billion yen total over the three-year period, funded by operating cash flow, excess capital, and borrowings as needed. Management will maintain flexible allocation while continuing to grow dividends.
• Long-Term Hoken Clinic Store Target: 500 total stores by the 2031 June period, targeting ~20 new stores per year rising to 36 new stores in 2028 to hit the 6-year target.

• The recently acquired 11 stores from Broadmind will cause significantly higher costs in the first quarter of 2026 due to transition expenses, 35 transferring employees, goodwill amortization, and M&A-related transaction costs, which will lead to an expected interim (first-half) profit decline for 2026.
• Life Assist's visiting sales division has seen profit margin deterioration due to higher labor cost ratios and understaffed locations that reduce productivity.
• While the overall OCR and system solution business is growing, custom development work for non-core projects has had to be scaled back to prioritize high-demand AI product development, leading to a sharp year-over-year decline in that revenue line.
• Regulatory tightening around required comparison recommendation for non-life insurance will increase industry compliance requirements, though management views this as a net opportunity for the company due to its existing expertise in comparison systems.

Q: After the recent business transfer from Broadmind, does the company plan additional M&A/business transfers to grow direct store count, and are these plans included in the mid-term plan? / A: There are no publicly announceable deals at this time. The company will consider opportunities if they arise, but no potential deals are included in the current mid-term plan guidance.

Q: How does the company plan to hit the 10 billion yen market capitalization listing requirement? Is M&A the main strategy? / A: M&A is not the core strategy. There is still significant room for organic new store growth, and the company already has clear visibility for staffing and training. The core priority is to aggressively expand organic new store openings to hit the 1.5 billion yen operating profit target in three years, which will drive market capitalization to the required level.

Q: Why did the company reduce advertising spend over the past three years, and what is the future advertising plan? / A: The shift from TV to web advertising reduced total spend because TV CM improved awareness but did not drive measurable customer traffic, while targeted web advertising (including on connected TV platforms like TVer) successfully grew new visits at lower cost. Going forward, the company plans to increase advertising spend by ~20% year-over-year to continue growing web-driven customer acquisition.

Q: What is the timeline and market opportunity for the new non-life insurance comparison recommendation system? / A: The new insurance law requiring non-life comparison recommendation will go into effect in summer 2026, so the company is prioritizing fast development to meet the deadline. The addressable market is larger than life insurance: there are 1.8 million non-life insurance agents nationwide vs 1.1 million life insurance agents, with potential customers including banks, auto dealers, and independent agencies. This is a major long-term growth opportunity for the company's solution business.