PCA CORPORATION Q4 FY2025 earnings call

Corporate Purpose Refresh

• PCA revised its corporate framework to formalize a new purpose, vision, mission, and values (PMVV):
  • Purpose: Create new value for work and deliver enriched time and opportunity for all people
  • Vision: Rapidly capture social changes, support working people, and solve their problems
  • Mission: Remain a "Management Support Company" focused on delivering core business software for advanced automation to support smooth corporate operations
  • Core values: Professional, Customer First, As One

Previous Mid-Term Plan Review

• The 2021-2025 mid-term plan met all core financial targets two years ahead of schedule:
  • Hit 16.2 billion yen in total revenue (exceeded the 15 billion yen+ target) and 13 billion yen in stock revenue (met target)
  • Hit 2.6 billion yen in operating profit (exceeded the 2.5 billion yen+ target), with 16.2% operating margin (exceeded the 16%+ target)
  • ROE failed to hit the 10%+ target, so PCA revised its dividend policy to a 100% payout ratio until ROE hits 10% and EVA spread turns positive, resulting in a 100.2% payout ratio and 9.2% DOE (vs 2.5% target) in FY2025
  • Key completed initiatives included: establishing a cloud-focused revenue base, launching the PCA Hub line to expand into adjacent product areas, strengthening product development aligned to upcoming regulatory changes, and building a sustainable high-margin operating base including earning Certified Healthy Enterprise designation

Current Operational Progress & New Initiatives

• Adopted ARR, churn rate, and ARPU as core KPIs for the new recurring revenue model:
  • Churn rate hit 0.24%, down from 0.26% YoY, an extremely low level for cloud services
  • ARPU fell slightly to 279 thousand yen from 298 thousand yen YoY, which is intentional as PCA adds lower-priced PCA Hub and PCA Subscription products to grow overall ARR
• Group subsidiary updates:
  • Chronos: Released updates to comply with the revised Child Care and Nursing Care Leave Act and revised Construction Industry Act
  • Dream Hop: Launched the Dream Hop Psychological Correlation Diagram for talent assessment and the Res-Q pulse survey system for employee attrition prediction; expects strong tailwinds from the upcoming mandated stress check requirement for all workplaces including those with fewer than 50 employees
• AI initiatives: Launched the PCA AI Chatbot for customer support center use in March 2025; is currently testing the paid PCA AI Assistant (provisional name) for core business automation
• New investments: Established a new corporate venture capital (CVC) fund Iidabashi Cross Partners to invest in innovation and non-linear growth for the PCA group
• Regulatory tailwinds: PCA is positioned to capture new demand from multiple upcoming regulatory changes including the 2025 revised Public Interest Corporation System, new lease accounting standards, and the Windows 10 support end in October 2025

For the 2025 March fiscal year (FY2025):

1. Cloud: 25.6% YoY revenue growth; nearly hit plan at 99.1% of target, driving overall stock revenue growth. PCA Cloud alone had 24,570 corporate customers as of period end, up 1,671 YoY. Combined paid billing contracts across PCA and subsidiary Chronos reached 35,000, up 25% YoY.
2. Maintenance: Unexpectedly grew 144 million yen YoY (0.89 billion yen total) due to last-minute demand following end-of-life for on-premise package sales at end-FY2024, beating initial projections.
3. Package product sales: Fell more than 50% YoY, which was in line with plan, as PCA ended its own package sales in March 2024; remaining sales are primarily from Chronos.
4. Solutions and other: Decreased 9.1% YoY as instructor fee revenue fell more than expected alongside declining product sales, marking a remaining area for improvement.

Total consolidated revenue was 16.237 billion yen, with combined cloud + maintenance stock revenue accounting for 80.6% of total revenue, up from 73.5% in the prior year. ARR (annual recurring revenue, excluding on-premise maintenance fees) hit 9.89 billion yen, up 18% YoY.

• 2026 March Fiscal Year (FY2026) Guidance: 17.689 billion yen in consolidated revenue (+8.9% YoY), 2.824 billion yen in operating profit (+7.1% YoY), 2.865 billion yen in ordinary profit (+6.6% YoY), and 1.897 billion yen in net income attributable to parent shareholders (+9.0% YoY). Stock revenue (cloud + maintenance) will target an 80.9% share of total revenue, up slightly from FY2025. The dividend is planned at 95 yen per share (up from 87 yen in FY2025), maintaining the 100% payout ratio.
• New 2025-2028 Mid-Term Plan Targets: For the final fiscal year ending March 2028, targets are 22 billion yen+ in consolidated revenue, 18 billion yen+ in stock revenue, 4 billion yen+ in operating profit, and 18%+ operating margin. ARR will grow to 11.68 billion yen in FY2026, 17.09 billion yen by FY2027, and hit a 1.46x (nearly 1.5x) growth over the three-year plan period.
• Capital Policy & Dividend Guidance: Maintain the 100% payout ratio until ROE hits 10%; after ROE reaches 10%, PCA will maintain a progressive dividend policy (no dividend cuts) as a baseline.

• The ARPU declined YoY as PCA adds lower-priced products to grow overall ARR, which could pressure near-term margins if customer acquisition does not offset lower average contract values.
• Solution and other revenue declined more than expected, creating a need to recover this revenue stream that has not yet been addressed.
• ROE has consistently missed the 10% target, requiring continued adjustments to capital allocation and dividend policy.
• Cloud customer growth for PCA standalone was slower than some stakeholders expected, though combined growth with subsidiaries remains on track.
• Revenue missed the original FY2025 plan by 270 million yen, indicating some execution risk in achieving the new mid-term plan growth targets.

No question and answer section was included in the provided transcript.