9343.T

• Overall Full-Year 2025 Results:
  • Total consolidated revenue reached 5 billion yen, up 8.2% YoY, slightly missing the full-year plan of 5.02 billion yen (99.6% plan attainment).
  • Operating profit reached 1.2 billion yen, up 4.0% YoY, exceeding the full-year plan of 1.17 billion yen (102.2% plan attainment).
  • Net income attributable to parent company shareholders reached 840 million yen, up 1.2% YoY, exceeding the full-year plan of 810 million yen (103.7% plan attainment).
  • For the 4th quarter of FY2025/12: Total revenue grew 20.5% YoY to 1.36 billion yen, operating profit grew 17.4% YoY to 350 million yen, with both metrics achieving double-digit YoY growth.
  • App billing revenue including subscription exceeded app advertising revenue for the first time in a full year. Subscription billing revenue grew 74.9% YoY to 1.2 billion yen, exceeding plan at 107.8% attainment. ibisPaint subscription contracts reached 397,600, up 71.4% YoY, exceeding plan at 116.2% attainment.
• ibisPaint Key Achievements and Positioning:
  • ibisPaint has held the No.1 rank for 7 consecutive years in the App Store Graphics & Design category global active user ranking. It has 40.07 million monthly active users (MAU), 90.5% of which are international users, over 520 million cumulative downloads, and holds an 88.7% active user share among competing apps targeting users under 25.
  • The business uses a freemium model focused on mobile, with an average monthly revenue per user of 321.4 yen for subscribers, 17.1x higher than the 18.7 yen average for app advertising, driving the company's strategic shift from advertising to subscriptions.
• Strategic Priorities:
  1. Mobile Segment Growth: Leverage the 40 million+ active user base to drive conversion to subscription, targeting an increase in MAU subscription conversion rate from 0.99% to 5%, with a target CAGR of 59.1% for subscription contracts. Expand pro-use offerings with Windows and Mac versions to boost brand power among professional creators, and develop new AI-powered features and the usage-based 'Smart Credit' billing model. Cross-promote VoiSona to ibisPaint users, and develop new AI creation tools and music video production tools to spread Japanese otaku culture globally.
  2. Solution Segment Growth: Continue to increase the proportion of high-margin contract development relative to IT dispatching, and evaluate potential M&A opportunities; the company has announced an absorption merger of Zeroichi Start scheduled for April 1, 2026.
  3. AI Vocal Synthesis Segment Growth: Develop cross-promotion synergy with ibisPaint, with VoiSona as the flagship product, and prepare for global expansion.

• FY2026/12 Full Year Guidance:
  • Total consolidated revenue is projected to grow 9% YoY to 5.454 billion yen.
  • Operating profit is projected to grow 12.8% YoY to 1.355 billion yen, with an expected operating margin of 24.9%.
  • Subscription billing revenue is projected to grow 44.1% YoY to 1.731 billion yen, with subscription contract growth projected at 37.7% YoY.
  • Segment-level revenue growth projections: 9% YoY for Mobile, 6.8% YoY for Solution, 46.3% YoY for AI Vocal Synthesis.
  • The full-year dividend per share is planned to increase from 10 yen to 12 yen, with a target payout ratio of 20% to 25%.
• 3-Year Medium-Term Targets (2026-2028):
  • Subscription billing revenue is targeted to reach 2.79 billion yen by FY2028/12, 2.3x the FY2025/12 actual result.
  • Operating profit growth is targeted to exceed 20% starting from FY2027/12, with projected growth of 12.1% in FY2026/12, 20.6% in FY2027/12, and 21.6% in FY2028/12.
  • Long-term target to 2035: 15 billion yen total revenue, 2 million subscription contracts, and 5% MAU subscription conversion rate.
• Management also notes that the 2026 subscription growth guidance is somewhat conservative, with upside potential relative to the plan, and management has high confidence that the medium-term plan will be achieved, with additional upside from subscription.

1. Mobile Segment: Revenue grew 8.4% YoY, accounting for 56.5% of total company revenue. Within the segment, subscription billing revenue grew 71.6% YoY, while app advertising revenue declined 5.3% YoY. Segment profit grew 29.0% YoY, with strong growth driven by subscription expansion that offset higher costs. 2. Solution Segment: Revenue grew 2.1% YoY, accounting for 41.1% of total company revenue. Within the segment, contract development revenue grew 47.9% YoY, while IT technician dispatching revenue declined 3.6% YoY. Segment profit declined 37.8% YoY, largely due to temporary M&A-related costs and prior period investment adjustments. 3. AI Vocal Synthesis Segment: The newly added segment generated 118 million yen in revenue, accounting for 2.4% of total company revenue. Including goodwill amortization, the segment posted a net loss of 62 million yen, and is currently in an investment phase.

• App advertising revenue missed the full-year plan for FY2025/12, and while management expects advertising revenue has bottomed out, there is continued uncertainty around advertising market conditions that could lead to continued underperformance.
  • Rising adoption of AI programming tools lowers barriers to entry in the IT industry, which could increase competitive pressure for the Solution segment.
  • Non-engineer led development still faces unresolved security and maintenance challenges that create uncertainty for long-term demand shifts for the Solution segment.
  • While management expects the recent stock price decline is temporary driven by off-exchange off-hours offering, the stock is currently trading at a low PER relative to the IT industry average, driven in part by insufficient communication of the company's growth strategy to investors.
  • Full detailed disclosure of conversion optimization tactics could reveal competitive sensitive information to rivals, limiting transparency and potentially leading to undervaluation.
  • The AI Vocal Synthesis segment is still in an investment phase and is currently unprofitable, and there is uncertainty around how long it will take to achieve profitability.

Q: Compared to the 3rd quarter, 4th quarter operating margin increased significantly to 25.9% — is this driven by the ibisPaint price increase, and can the high 20% operating margin range be sustained next year?

A: The 3.8 point increase in operating margin from 22.1% in Q3 to 25.9% in Q4 is primarily driven by strong subscription performance. Management projects 24.9% operating margin for next year, and the company's strategy is to maintain operating margin broadly at current levels while growing top-line revenue. Even with a stable margin, operating profit can still achieve 20% growth.

Q: App advertising revenue appears to have recovered in the 4th quarter — what is management's view?

A: App advertising revenue was 354 million yen in Q2, 308 million yen in Q3, and 332 million yen in Q4, matching the observation that it likely bottomed out.

Q: App advertising missed even an extremely conservative plan — is this due to intentional tightening of advertising, or market environment factors?

A: Management apologizes for missing the plan, but the company did not intentionally restrict advertising, and implemented all possible measures to maximize revenue. The miss is most likely attributable to advertising market environment factors, but it is difficult to clearly split the contribution of market factors versus ad network algorithm changes at this time.

Q: What growth trajectory should be expected for subscription billing revenue going forward — will 40%+ annual growth continue, or will it shift to steady 500 million yen annual increases?

A: The trajectory is closer to steady 500 million yen annual absolute increases. Early growth was driven by rapid optimization of conversion funnels and subscription features that delivered accelerating growth, but as optimization matures, moving from 30/100 to 90/100 optimization is much easier than improving from 90/100 to 95/100, so growth will gradually slow and approach linear growth over time.

Q: The guidance calls for steady linear growth in subscription — is this a conservative estimate?

A: It is somewhat conservative, and there is visible upside potential for outperformance relative to the current plan.

Q: What is the existential purpose of the company's paint app amid the rise of generative AI illustration, and what risks does generative AI pose?

A: Generative AI is mostly used by users who want to quickly generate art to save time. Most of ibisPaint's users draw for enjoyment and want to improve their own drawing skills, so the app's purpose remains to support that enjoyment. Generative AI can help speed up repetitive tasks like background drawing, flat coloring, and adding effect lines, and the company is already adding AI features to ibisPaint to enable these time-saving benefits for users, and is preparing to maintain the company's value as AI adoption grows.

Q: What advantages does ibisPaint have compared to competitors like CLIP STUDIO PAINT for PC, and what advantages does the mobile version have?

A: For PC, CLIP STUDIO PAINT is currently more popular and has more mature functionality, and ibisPaint still has room to improve features. However, ibisPaint already has a very large existing active mobile user base that drives organic adoption of the PC version, so the company expects to gradually gain market share over time. For mobile, ibisPaint is designed from the ground up for smartphone use, and has a large active user base that drives strong word-of-mouth recommendation, which is its core advantage — it is the default recommendation for new users who want to try drawing on mobile.

Q: Does the company use AI programming tools like Claude Code, what is your view on the current and future impact of this technology, especially for the Solution segment?

A: The company does use these tools, and they have already delivered large productivity improvements. Competitors also benefit from higher productivity, and lower barriers to entry speed up the overall pace of the industry, which is already accelerating faster than ever, so the company must keep up with this pace to remain competitive. New products can now be developed much faster, but all competitors get this benefit, so competition will intensify, which aligns with the company's core value of prioritizing speed in decision-making. For the Solution segment, while there is discussion that higher productivity will allow clients to internalize development, non-engineer led development still has many open issues around maintenance and security, so large scale shift is not imminent. However, higher productivity does allow the company to take on larger development projects, which creates upside for the segment.

Q: What is the outlook for new business lines like storage and meeting minute services, can these be profitable given competition from large players?

A: Profit contribution is still far in the future, but management sees positive early traction. AI meeting minutes is a relatively new market, and compared to ibisPaint's competition with global giants like Adobe, this segment is focused on granular domestic demand, and there is no existing strong oligopoly dominated by large players, and the market is growing as large companies push for AI-enabled efficiency, so the opportunity is positive.

Q: What are the pros and cons of the company's upcoming off-exchange off-hours offering?

A: The offering is to prepare to meet the Prime Market listing requirement of 10 billion yen in circulating market capitalization, and to reduce the CEO's excessively high shareholding ratio to improve governance from a regulatory perspective. The main downside is the temporary negative impact on the stock price, which management apologizes for.

Q: Are you exposed to exchange rate fluctuations for euro-denominated sales?

A: There is indirect potential impact, similar to the existing exposure to USD via Google's internal exchange rate conversion that management has previously disclosed, so euro exchange rate movements can have similar indirect impacts.

Q: What is the goodwill amortization period for the Zeroichi Start acquisition?

A: The company is tentatively planning a 7-year amortization period. A final decision will be made at the end of the current fiscal period after completing purchase price allocation, so 7 years is the current working assumption.

Q: Is the understanding that app advertising has bottomed correct, and is the plan for advertising next year conservative? Is there upside for subscription relative to plan?

A: Advertising was stronger in the first half of last year, so if the current bottom level holds flat, full-year advertising will be down year-over-year, which is already reflected in the plan, and the plan is not intentionally conservative. For subscription, management agrees that the plan is somewhat conservative, and upside is possible.

Q: How confident are you in achieving the medium-term plan, and where is the upside potential?

A: Management sees high probability of achieving the medium-term plan, and there is clear upside potential, especially for subscription billing revenue, as the company has multiple ongoing initiatives that could deliver better-than-expected results if any of them succeed.

Q: The company's long-term vision is centered on illustration-related services, and VoiSona is the new business — what is your long-term vision?

A: Management wants to build a platform that enables collaboration between creators to make music videos, building on the existing Vocaloid culture that emerged from online creator collaboration centered on Japanese anime and otaku culture, which has strong global tailwinds, and the company wants to expand this culture globally.

Q: Why is subscription growth accelerating quarter-over-quarter, is this due to favorable market conditions?

A: The acceleration is driven by the company's ongoing work optimizing conversion funnels, developing new subscription-only features, and viral promotion of new features to the 40 million existing free users via in-app promotion, rather than broad market conditions. These efforts are directly driving the faster growth.

Q: Why was the release of the earnings presentation materials delayed?

A: The delay was due to a full redesign of materials and the creation of the new Investor Digest section, which created unexpected additional work. Management commits that starting from the first quarter of next fiscal year, materials will be released simultaneously with earnings results as before.

Q: What is the status of the rollout of out-of-app payment systems?

A: The company is currently preparing out-of-app payment systems, but does not expect this to become a large share of total payments. App store payments have multiple advantages: unified global operations, the app store handles tax and VAT remittance, and users prefer the familiar experience with saved payment information, so app store payments will remain the primary method.

Q: What are the core subscription initiatives in the medium-term plan?

A: Most initiatives are a continuation of past work: continued optimization of conversion funnels. The biggest new priority is adding more pro-focused subscription features, and management also expects that some of the experimental new initiatives the company has in development could deliver unexpected positive growth.

Q: When will VoiSona become profitable?

A: For Technospeach the standalone subsidiary, the target is to achieve profitability within 3 years. For the consolidated AI Vocal Synthesis segment including amortization, the target is profitability within 5 years.

Q: Can you give more concrete details on how you will raise the subscription rate from 0.99% to 5%, and improve investor communication? The current low PER suggests the market does not understand the growth story.

A: The core strategy is to continue the existing approach of ongoing conversion funnel optimization and adding new subscription features, which has delivered consistent growth in subscription conversion over the past 5 years along the current trend. If this trend continues, the 5% target will be achieved. Management acknowledges that investor communication needs improvement, and will work to make disclosure more clear and compelling going forward. The company already runs hundreds of parallel A/B tests on different conversion funnels, analyzed by a dedicated analytics team, and this process has delivered the existing growth trend, which will continue. The company cannot disclose full granular details of individual tests because this would reveal sensitive information to competitors, but management will work to find a balance between transparency and competitive secrecy to improve investor confidence.