9629.T

• Corporate Purpose and Strategic Direction

  • PCA has established a corporate purpose of "Creating new value for work, providing rich time and opportunity for all people", and aligned its medium-term management plan and annual operating plan around this purpose.
  • The company is actively executing a business model transition to a cloud subscription business, and announced a major strategic shift in September 2025 to prioritize aggressive investment in AI and product development over short-term profit growth.

• Product and Development Updates

  • The new AI-integrated product line PCA Arch was launched ahead of schedule in November 2025. AI assistant functionality is already implemented, with full AI agent integration planned for full release in Q3 of the 2027 March fiscal year.
  • Ended sales of perpetual on-premise software packages in March 2024, and will continue to provide support for existing customers for 5 years, per the transition schedule.
  • Added two acquired companies to the group to strengthen capacity: Tyrell Systems (a development firm that increased development speed and improved cloud-native/UI/UX capabilities) and PRIMAS (a BPO service startup focused on public benefit corporations that expands the group's BPO service offerings).
  • The group is pursuing combined growth in the human resources (HR) space across subsidiaries: Chronos for attendance management, PCA for payroll and HR, and Dream Hop for mental health services, with long-term plans to expand into non-financial data visualization and disclosure.

• Organizational Changes

  • A leadership transition will take effect ahead of the 2027 March fiscal year: current Managing Director Tamai will become the new President, and the board of directors will be reformed to clearly separate management oversight and execution responsibilities, to accelerate transformation amid AI industry changes.

• Capital and Dividend Policy Updates

  • Abandoned the previous commitment to progressive dividends, as the policy was predicated on consistent profit growth which is being paused for medium-term investment.
  • Changed the core dividend policy to target a 4.5% return on equity (DOE), to balance flexible growth investment and stable long-term shareholder returns. Maintained the 2026 March fiscal year dividend commitment of 95 yen per share, consistent with prior guidance, with a total dividend payout of 1.9 billion yen. The 2027 March fiscal year dividend is planned at 40 yen per share, for a total payout of 0.8 billion yen.
  • Cash allocation: After setting aside required operating capital and customer prepayments (contract liabilities), PCA has approximately 120 billion yen in surplus cash, of which 100 billion yen is allocated as a strategic investment reserve for existing product enhancement, new product development, and potential M&A, delegated to the new leadership team to deploy.

• For the 2027 March fiscal year (the second year of the current medium-term management plan), PCA guides total consolidated net sales of 18.9 billion yen. Operating profit is guided at ~1.2 billion yen, and ordinary profit at ~1.3 billion yen, a large year-over-year decline driven by a planned 1.6 billion yen increase in investment in cloud transition and AI development.
• The company maintains the medium-term management plan final target (for the 2028 March fiscal year) of total net sales over 22.0 billion yen, consolidated operating profit over 4.0 billion yen, and an 18%+ consolidated operating margin. Management believes these targets are fully achievable if current development investments deliver expected results.
• Management expects 80% of total revenue to continue to come from recurring stock revenue, consistent with the current business mix, for the 2027 March fiscal year.
• The full AI agent-integrated version of PCA Arch is planned for launch in the third quarter of the 2027 March fiscal year, which management expects will drive future ARPU and ARR growth.

For the 2026 March fiscal year, PCA reported total consolidated net sales of 17.306 billion yen, a 6.6% increase year-over-year. Combined recurring revenue from cloud/subscription services and maintenance services accounts for 80% of total revenue. 1. Cloud/subscription services: Revenue grew 14.5% year-over-year, with annual recurring revenue (ARR) of 11.32 billion yen, a 14.4% increase year-over-year. Total paid subscription contracts reached 43,000, a 24.0% increase year-over-year. Churn rate was 0.26%, up 0.02 percentage points year-over-year but remaining at a very low level. ARPU (average revenue per user) decreased from 279,000 yen to 258,000 yen year-over-year, due to the company's expanded low-price product lineup to grow contract volume. 2. Maintenance services: Revenue is gradually decreasing as the company shifts customer contracts to cloud/subscription models. 3. Product sales: Limited to offerings from group company Chronos, with low absolute volume and no meaningful growth. 4. Commodity sales (physical forms such as tax withholding slips): Revenue is naturally declining as the company pushes for digitalization of documents. 5. Solutions (including data migration and implementation guidance): Revenue grew slightly after a period of temporary decline, driven by accelerating customer migration to cloud/subscription services. Operating profit fell 6.6% year-over-year, and ordinary profit fell 7.2% year-over-year, due to a 12.1% year-over-year increase in cost of sales and higher selling, general and administrative expenses driven by 1 billion yen in planned AI and development investments.

• Intensified cloud market competition: As cloud accounting software has become widely adopted after COVID-19, the number of pure-play cloud competitors has increased significantly, leading to a decline in PCA's cloud business growth rate from ~20% historically to ~15% currently, with slower-than-expected growth in the first half of the 2026 fiscal year, which raised management concerns about the business being outcompeted.
• AI industry disruption risk: As AI agents rise rapidly, there is a risk that traditional software companies could be displaced by AI agents, a trend already reflected in US software stock pricing. Without aggressive investment to integrate AI into PCA's products, the company could lose market position.
• Short-term profit decline: The deliberate shift away from consistent earnings growth to aggressive medium-term investment will result in material profit declines in the 2026 and 2027 fiscal years, which may impact investor sentiment and share price performance.

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