JBCC Holdings Inc. Q4 FY2025 earnings call

Overall Financial Results

• 3 consecutive years of revenue and profit growth, with record high full-year results and a record high dividend. Reported consolidated revenue grew 7.2% YoY, and reported operating profit grew ~40% YoY.
• Excluding one-time factors: a 2 billion yen upper-than-planned system revenue beat in H1 and a change in expense provisioning for employee incentives, underlying growth is 4% for revenue and ~20% for operating profit.

Organizational Restructuring

• In April 2025, JB Advanced Technology, the group's original cloud-focused product development subsidiary, was merged into core operating company JBCC to simplify brand recognition and expand distribution via partner sales networks (Ricoh Japan, Otsuka Shokai), which has received positive feedback from partners.

Focus Business Progress

• Cloud: Revenue grew over 47% YoY, nearly 3x the 17% market growth rate, with strong growth in both IaaS and SaaS. Tailwinds from VMware price hikes increased customer inquiries, and the company's multi-cloud strategy (building optimal hybrid/multi-cloud environments for customers, plus regular cost optimization diagnostics) has earned strong customer satisfaction.
• Security: Revenue grew 35% YoY, 5x the 7% market growth rate. The company focuses on complementing customers' existing security investments rather than forcing full replacement, incrementally improving security levels over years, which is well-received by mid-market customers.
• Ultra-rapid Development: Returned to normal operating pace in Q4 after resolving earlier project delays. Current priority is delivering the 20 ongoing projects to production, with follow-on project inquiries already received after successful initial deliveries. Additional capacity for new large projects will not be available until sometime next year, as partner teams need more experience with the JB Agile methodology to match quality requirements.

Strategic Target Progress

• Stock business as a share of total revenue reached 46% in the first year of the mid-term plan, against a 47% target; adjusted for the one-time 2 billion yen revenue beat, the ratio would be 47.5%, putting the company on track to hit the 60% target by the end of the plan.

Human Resources Strategy

• Updated people strategy led by a newly hired external HR executive, focusing on hiring candidates that share the company's values rather than just targeting headcount numbers. Expanded referral program for experienced hires (paying over 1 million yen per successful hire, matching third-party recruiter fees) delivered 30+ experienced hires last year, with a target of 50 for the current year. Launched a recruiter program for new graduate hiring that has delivered positive secondary benefits through young employee engagement.

Governance Improvement

• Planning to separate supervision and execution at the board level, to be approved at the June 2025 general shareholder meeting, reducing the number of board members and cutting the number of internal directors that also hold executive roles to strengthen governance. Hired external HR and finance/accounting executives over the past year to build a cross-group CxO management system.

1. System Development (SI): 20 large-scale ultra-rapid development projects are ongoing; all required cost provisions for delayed projects were completed by Q3, and operations returned to normal speed in Q4. The segment also includes modernization (mainframe migration) projects, with multiple projects exceeding 2 billion yen in revenue each, and a full pipeline through mid-2027, plus a healthcare sub-segment delivering ~20 cloud electronic medical record updates/new installations annually. 2. Services: Growth is led by the focus areas of cloud and security, which outperformed plan significantly, while low-margin legacy services (manufacturer maintenance outsourcing, simple network reselling) are being actively phased out. 3. System and Product Development Manufacturing: System revenue declined 3%, a much slower drop than the planned 15% decline. Cloud-focused original products performed steadily, but the legacy impact printer business (with ~1 billion yen in annual revenue) continues to experience long-term decline, leading to potential moderate volatility in overall segment results.

• For FY2026 (March 2026), the company guided for a 10% YoY increase in operating profit. Excluding planned 0.8 billion yen of incremental expense for the new employee travel program and additional human capital investment, underlying operating profit growth is ~20% YoY, aligned with the company's strategy of moderate 2-3% annual revenue growth paired with 10-20% annual operating profit growth.
• The mid-term management plan CHALLENGE 2026 target was upwardly revised: total sales target raised from 72 billion yen to 74.5 billion yen, and target operating margin raised from 10% to 11% or higher.
• The 2025 full-year dividend after a 4-for-1 stock split is set at 35 yen per share (equivalent to 140 yen pre-split), representing a continued increase.

• Ultra-rapid development large projects remain high-risk: the 20 ongoing large projects all have unique technical difficulties, and while they are progressing per the revised schedule, there remains residual risk of further delays that will require ongoing close monitoring.
• Ultra-rapid development capacity constraints: existing capacity is fully allocated to ongoing projects through next year, and partner development teams require more project experience to deliver work matching JBCC's quality standards, limiting near-term new project intake despite strong customer demand.
• Cloud market competition is intensifying, leading to longer lead times for large new projects, which delays revenue recognition for large new contracts.

Q: What upside potential does AI create for JBCC, in terms of new business opportunities and internal productivity improvements? / A: Management is actively exploring AI use across all internal departments, as hands-on experimentation is required to generate new usable ideas. The company has started training AI systems engineers, and is experimenting with having AI ingest full project deliverables to create domain-specific expert AI tools for projects. Management states that the biggest AI opportunity for JBCC is combining AI technology with the specific business and operational needs of its core mid-market customer base (50 billion yen to 200 billion yen revenue companies) to support their growth and competitiveness, and launched a new customer innovation lab in April 2025 specifically to explore these use cases. (428 characters)

Q: Why has the 2026 FY growth guidance for cloud and security slowed from 2025 FY's very high growth rates, and is this slowdown due to underlying risks? / A: Management confirms that the slower projected growth rate is an expected normalization after several years of outpacing market growth by a large margin, rather than a sign of weakening demand or new risks. For cloud, intensifying competition has increased lead times from proposal to contract, especially for large new projects, which require lengthy migration preparation before revenue recognition starts, leading to a natural delay in revenue contribution. This dynamic also applies to security services, where even steady new order flow translates to slightly slower revenue recognition. (467 characters)