Bewith,Inc. Q3 FY2025 earnings call

• Leadership Transition

• BEWITH has appointed its first internal-born CEO, Iijima, who took office March 1, 2025.
• The stated goals of the leadership change are: 1) enable faster response to market environment changes; 2) rebuild the company's growth story and drive revenue expansion; 3) enable faster, bolder management decisions to accelerate innovation and move the company toward becoming an innovative industry leader. Management is focused on improving share price and maintaining Prime Market listing.

• Strategic Transformation: Beyond Contact Center & BPO

• The company's new long-term strategy leverages its two core capabilities: 1) High Touch service supported by skilled, experienced personnel built through its legacy contact center and BPO business; 2) High Tech AI-powered cloud platform Omnia LINK, the first of its kind in the industry.
• The combined goal is to build High Context business that creates new revenue streams beyond traditional contact center and BPO services, utilizing data and technology to meet new societal demand.
• The transformation follows two phases:
  1. Rebuild and Enhance: Leverage Omnia LINK to accelerate human-to-AI substitution in contact center operations and drive growth of the Omnia LINK platform. As of April 1, the Omnia LINK external sales team has already been doubled in size, reallocating the top performing legacy first sales team from the contact center/BPO business entirely to Omnia LINK sales.
  2. Transform and Evolve: Build the company into an innovative industry player that supports multiple sectors as AI replaces more traditional white-collar work, creating new sustainable revenue pillars.

• New Product Launch

• The company released Omnia LINK PILOTe, a new industry-specific function extension for the property and casualty insurance sector that addresses the 2025 fire insurance update problem, streamlines complex procedures and improves customer relationship management. The solution is already live at a major insurance agency.
• The company also launched a combined bundled offering: Omnia LINK system plus BPO services for fire insurance renewal, combining system and personnel capabilities to capture new market opportunity driven by widespread labor shortage.

1. Contact Center & BPO Segment: Cumulative revenue through the third quarter reached 269.7 billion yen, after accounting for a 2.46 billion yen decline in existing contracts partially offset by 0.76 billion yen in new contract gains and 0.05 billion yen from SPOT project increases. The quarter standalone revenue was 8.8 billion yen, down from the previous quarter, impacted by the end of year-end adjustment SPOT projects and continued contraction of legacy contracts. This segment has faced significant profit margin compression, driving the overall company's year-over-year decline in profitability.
2. Omnia LINK External Sales Segment: This segment delivered a quarter standalone revenue of 0.24 billion yen, a record high for a single quarter, representing a 0.13 billion yen increase year-over-year. Annual Recurring Revenue (ARR) currently stands at 0.88 billion yen. Total licenses count is 3,496, a decrease of ~200 licenses quarter-over-quarter due to planned customer reductions, with ARPU at 21 thousand yen. This segment contributes approximately 2.7% of total cumulative third quarter revenue.

• Against the full-year revised forecast released in January, the third quarter revenue progress rate is 73.3% and operating profit progress rate is 74.5%, with a slight revenue shortfall in the contact center/BPO segment vs internal plans.
• Management expects a record 900 licenses to be shipped in the fourth quarter, pushing total licenses to ~4,400 by full-year end, with 500-600 licenses already ordered for shipment in the next fiscal year.
• For the full year, the Omnia LINK external sales segment revenue target is 1.1 billion yen; management notes current trends point to a slightly lower outcome of ~1.0 billion yen, which is still a strong result for the segment.
• Fourth quarter revenue recovery is expected from March peak season projects and newly started April projects, but temporary one-time costs are also planned for shareholder benefits, new graduate hiring, and Shinjuku location expansion and layout changes.
• The annual dividend per share is maintained at the initially planned 77.0 yen, and shareholder benefits will be offered at the same level as last year.
• For the next fiscal year's rolling plan, management is not targeting double-digit top-line growth at all costs, and will set achievable targets after carefully accounting for remaining headwinds (the ongoing contraction of large-scale public sector contracts) and new growth opportunities (notably new financial sector projects and Omnia LINK sales gains).

• The company is currently facing three major concurrent headwinds (called the "triple hardship"): contraction of COVID-19 vaccine-related projects, contraction of a double-digit hundred million yen-scale public sector contract, and a post-boom demand decline in the life sciences sector, which have driven a year-over-year decline in revenue and profit. The contraction of the large public sector contract will remain a headwind in the near term.
• Fixed cost reduction has not kept pace with revenue declines, leading to higher fixed cost ratios and further profit pressure, with contact center/BPO segment profit margin declining significantly even as Omnia LINK revenue and profit grows.
• While there are no current expected delays for the fourth quarter 900 license shipment target, there is still some small risk of shipping timeline slippage for the large contracts included in this target.

Q: Will management use the leadership transition to reset capacity and reduce costs to restore operating profit, or will it wait for revenue growth while holding current costs? What does the profit recovery plan entail?

A: Management has already launched a short-term internal three-pillar plan launched in March that focuses on cutting excess fixed cost to streamline operations, growing revenue in high-potential winning segments, and expanding margin to increase operating profit. Excess capacity and excessive capital investment will be explicitly reviewed and cut over this fiscal and next fiscal year. The plan has not been publicly disclosed yet as it is still being implemented internally.

Q: How has the new CEO changed the speed and nature of management decision-making compared to previous leadership?

A: The new internal leadership enables far faster decision-making on operational adjustments, such as cost-cutting, site restructuring, and priority setting, as well as clearer strategic trade-offs. A key example is the decision to double the Omnia LINK sales force by reallocating the entire top legacy sales team from the core contact center business, which was done just one month after the CEO took office, a bold organizational change that would have taken far longer under prior leadership. This reorientation prioritizes high-growth potential segments over legacy business lines.

Q: Is the increase in the fourth quarter Omnia LINK license shipment target from 700 to 900 an upside surprise, and are the additional licenses from new clients or extensions of existing large clients? Will any of these be carried over to next fiscal year?

A: The 200 license increase is indeed an upside surprise driven by the addition of new large contracts to the order backlog, specifically 1 to 2 additional ~100 license large deals plus multiple smaller contracts. 100 license deals are considered large for the company's current Omnia LINK business, and the sales pipeline is now flowing more strongly with this size of deal. Any carry-over to next fiscal year will come from entirely separate new clients, not the clients included in this quarter's 900 license target, with only one client in the current target having a portion of their order scheduled for next fiscal shipment.