Atlas Technologies Corporation Q4 FY2024 earnings call

Overall Business Summary

• The company executed aggressive investments in client base building and consultant team expansion in FY2024, and remains on track to achieve full-year net profitability in FY2025 as guided in its August 2024 mid-term plan.
• Full-year FY2024 results missed revenue guidance and included a goodwill impairment charge, leading to year-over-year lower revenue and profitability, but the core domestic business remained resilient.

Client Base Progress

• Total clients reached 15 in Q4 FY2024, with 4 new clients added in the quarter. Retained clients contribute 90.1% of full-year revenue, showing high retention stability.
• Revenue share excluding major client NTT Docomo increased 14.0% year-over-year, and retained client revenue share excluding NTT Docomo increased 10.3% year-over-year, showing progress in diversifying the client base.
• Q4 FY2024 operating margin improved 6.5% from the prior quarter due to disciplined SG&A management.

2025 Strategic Initiatives

• Service Strategy: Expand the service portfolio beyond core payments to banking/securities/insurance (full launch in 2025), plus add new IT risk management and PMO support services to cover all major financial segment needs. Push for higher value-added services across all lines.
• Client Strategy: Pursue project acquisition via three core channels: independent needs discovery and up-selling/cross-selling to existing clients, cross-selling to group/affiliated companies of existing clients via referrals, and co-development and referral partnerships with business partners including SIers. Capture new demand across core payments, new financial segments, PMO, and IT risk.
• Human Resources Strategy: Expand consultant headcount via enhanced recruitment channels (employee referrals, direct recruiting, agency recruiting), improve retention by building a more engaging work environment, and boost service value via in-house training, external development opportunities, and on-the-job learning. Consultant headcount grew from 36 in FY2023 to 62 in FY2024, completing core hiring for new service segments.

1. Domestic Core (Payments Consulting): The legacy core payments consulting segment continued to be the primary revenue contributor, driving 5.7% year-over-year revenue growth in Q4 FY2024. It maintains steady, robust demand and remains the base of the company's revenue. 2. Domestic New (Banking, Securities, Insurance): Project pipelines grew substantially in FY2024, but revenue monetization was delayed to FY2025, which was the main cause of full-year FY2024 revenue missing guidance at 93.8% of target. Multiple large client projects were secured for delivery starting in FY2025, when this segment is expected to begin full revenue contribution. 3. Domestic New (IT Risk & PMO Support): New dedicated teams will launch in January 2025, with initial project orders already secured. 4. Overseas (Kapronasia Singapore): While it secured some project wins including cross-border engagements with Japan, it missed acquisition-era performance targets due to market downturn, resulting in multiple project losses and delays. FY2024 results included a 483 million yen special loss from goodwill impairment, leading to a full-year net loss of 852 million yen.

• FY2025 Full-Year: Maintain the target of full-year profitability. Guidance calls for 2.378 billion yen in total revenue (12.1% year-over-year growth) and 30 million yen in operating profit (412 million yen year-over-year improvement), driven by revenue expansion from core domestic payments and full contribution from new banking/securities/insurance segments.
• Mid-Term Plan (FY2025-FY2028): No changes to financial targets. The plan aims to achieve full-year profitability in FY2025, and reach 5 billion yen+ in consolidated revenue and 15%+ operating margin by FY2028.
• Goodwill impairment reduces annual goodwill amortization expense by approximately 70 million yen starting in FY2025, which will directly improve net income.

• Overseas consulting market downturn in Singapore has led to sustained underperformance of acquired subsidiary Kapronasia, resulting in a 483 million yen special impairment charge in FY2024.
• Revenue monetization of newly launched banking/securities/insurance services was delayed from FY2024 to FY2025, causing FY2024 revenue to miss guidance.
• Aggressive consultant hiring to support new service expansion increases near-term fixed costs, which could pressure profitability if new revenue growth does not materialize as expected.

Q: You rate client acquisition progress for the new banking/securities/insurance segment 4 out of 5 stars in the mid-term plan. What is the current concrete progress? / A: The company built a large pipeline of projects in this segment through FY2024 activities. Multiple projects have already been confirmed for order and will start generating revenue in FY2025. The 4-out-of-5 rating reflects this updated progress since the mid-term plan was released in August 2024.

Q: What led to the full goodwill impairment of Kapronasia, and does this change the mid-term plan or the company's overseas strategy? / A: The impairment stemmed from sustained underperformance vs. the original acquisition plan, caused primarily by a downturn in the Singapore consulting market that led to project losses and delays. After careful re-evaluation with the auditor, the impairment decision was made. There is no change to the medium-term strategy of continuing overseas business centered on Singapore, and no changes to mid-term plan financial targets. The impairment actually reduces future amortization costs and lowers uncertainty for achieving the FY2025 profitability target.

Q: What is the planned consultant hiring volume for FY2025? / A: The firm grew consultant headcount from 36 to 62 in FY2024, almost all of this growth to build teams for the new banking/securities/insurance segments. The company believes additional headcount expansion is needed to support FY2025 monetization of these new segments. It will target a hiring volume similar to FY2024, adjusting based on ongoing financial performance to maintain financial discipline.