Rococo Co. Ltd. (5868) — Company information | ENVALITH

Business

Roco Co., Ltd. is an IT services company founded in 1994, built on two core pillars: the ITO & BPO Business (IT Service Management, call centers, Event Service Business, and solutions) and the Cloud Solution Business (ServiceNow, HR solutions, and system solutions). The company provides long-term, continuous IT outsourcing services under prime contractor arrangements primarily to large enterprise clients in manufacturing, financial institutions, and retail (accounting for approximately 80% of sales), centered mainly in the Kanto and Kansai regions. It operates offshore and R&D bases in China, the Philippines, and Poland, and listed on the Tokyo Stock Exchange Standard Market in December 2023. Consolidated net sales for FY2025 (ending December 2025) were ¥9,190 million.

Business Model

The company acts as a prime contractor for client companies' IT operations, building a stable revenue base through long-term continuous contracts (annual customer churn rate of approximately 4.5%). In addition to labor-intensive services such as IT Service Management and BPO, it combines high-value-added products and services—ServiceNow Implementation Support & Maintenance, its proprietary attendance management system "RocoTime," and the facial recognition system "AUTH" Series—to expand revenue through cross-selling to existing customers. Cost efficiency through the use of offshore bases also supports profitability.

Company Strengths

Companies with capital of ¥100 million or more, or listed companies and other large enterprises, account for approximately 80% of net sales, while the annual customer churn rate remains at a low level of around 4.5%. By insisting on prime contracts, the company builds close relationships with clients, achieving an outsourcing model with high transaction continuity.

The company participated from the early days of ServiceNow's expansion into Japan and has obtained the top-tier "Elite" partner certification in both the Reseller and Consulting & Implementation segments. It has also received Japan's first "Validated Practice" certification in the Human Resources product category, achieving differentiation from competitors.

In FY2025 (ending December 2025), actual net sales of ¥9,190 million exceeded the plan of ¥8,611 million by 6.7%, and actual operating profit of ¥525 million exceeded the plan of ¥497 million by 5.7%. New client acquisition, increased staffing and unit price increases for existing clients, and higher equipment sales contributed in combination, resulting in year-on-year growth of +17.8% in net sales and +23.0% in operating profit.

ENVALITH's Perspective

In Q1 of FY2026 (ending December 2026), revenue reached ¥2,389 million (up 12.8% year on year), securing revenue growth, while operating profit came to ¥93 million (down 52.6% year on year), a sharp decline. Against the full-year operating profit forecast of ¥610 million, the Q1 progress rate remained at only about 15.3%, requiring a recovery over the remaining three quarters. The main cause was a surge in SG&A expenses (¥762 million, up 31.4% year on year), and attention should be paid to the risk of the investment phase being prolonged.

Goodwill amortization related to a subsidiary acquired in the previous fiscal year (cumulative ¥20 million in Q1, roughly 7 times the amount in the same period of the prior year), expenses at the Poland R&D base, and increased recruitment and training costs combined to more than halve operating profit despite an increase in gross profit (from ¥778 million to ¥856 million). The Generative AI Business subsidiary has not yet achieved stable profitability, and the timing of the emergence of M&A synergies holds the key to a recovery in performance.

In terms of the market environment, DX investment expansion driven by the declining working population and the need for operational efficiency continues, contributing to new order acquisitions in the ITO & BPO Business (such as a large-scale facial recognition project). On the other hand, as an external factor, a foreign exchange loss of ¥6 million due to currency fluctuations was recorded as a non-operating expense, and rising personnel costs at overseas subsidiaries also contributed to the increase in expenses. The impact of heightened tensions in Iran on domestic and international demand also remains an uncertain factor going forward.

Performance Trend

Revenue increased for three consecutive periods, from ¥7,175 million in FY2023 to ¥7,803 million in FY2024 to ¥9,190 million in FY2025. The first quarter of FY2026 (ending December 2026) also maintained a growth trend at ¥2,389 million (up 12.8% year-on-year), with progress toward the full-year forecast of ¥10,304 million (up 12.1% year-on-year) generally on track. On the profit side, however, a sharp increase in SG&A expenses (up 31.4% year-on-year) led to a significant decline in profits, with operating profit of ¥93 million (down 52.6% year-on-year) and net profit attributable to owners of the parent of ¥43 million (down 69.5% year-on-year). This was compounded by a sharp increase in goodwill amortization expenses (roughly 7 times year-on-year), higher R&D and recruitment costs, and foreign exchange losses in overseas operations. Achieving the full-year operating profit forecast of ¥610 million (up 16.3% year-on-year) will require cost control in the latter half of the year and monetization of the Generative AI Business. The equity ratio stood at 59.9%, indicating that financial soundness has been maintained.

Growth Strategy

Growth driven by two pillars: deepening existing businesses and strengthening cross-selling, alongside new service development centered on AI and facial recognition technology

Promoting new customer acquisition and spot project orders across the IT Service Management Business, Customer Communication Business, and Event Service Business. Achieved revenue of ¥1,623 million (up 18.7% year on year) in Q1 of FY2026 (ending March 2026), and secured a large-scale facial recognition project for concert admission.

The Generative AI Business subsidiary acquired in the previous fiscal year is contributing to revenue growth, but has not yet achieved stable profit generation and carries a heavy goodwill amortization burden. New customer acquisition in the HR Solution Business continues, and recovery of new development projects in the ServiceNow business is key to profit improvement.

Accelerating research and development at the Poland R&D base established in January 2025. Overseas operations recorded intra-group revenue of ¥92 million (up 25.2% year on year), reflecting expanding internal transactions. Revenue from external customers declined, making expansion of external sales a future challenge.

Launched a user community aimed at further revenue expansion, and increased investment in recruitment activities and training costs. Also advancing the development of human resources and organizational infrastructure, including the opening of Roco Farm, a workplace facility for people with disabilities. While this is a factor increasing SG&A expenses in the short term, it is positioned as a foundation for mid- to long-term growth.

Rococo Co. Ltd.

Business

Business Model

Company Strengths

ENVALITH's Perspective

Revenue growth continued, but with costs front-loaded, profit fell sharply—1Q progress rate stayed at about 15% of the full-year forecast

Increases in goodwill amortization, R&D expenses, and recruitment costs have emerged as structural factors squeezing profit

External tailwinds from DX demand continue, but foreign exchange losses and rising personnel costs in overseas operations have emerged as new risks

Performance Trend

Growth Strategy

Disclaimer

Rococo Co. Ltd.

Business

Business Model

Company Strengths

Large-enterprise client ratio of roughly 80% and low churn rate provide a stable revenue base

Competitive advantage from ServiceNow "Elite" partner certification

Both sales and operating profit exceeded plan in FY2025 (ending December 2025)

ENVALITH's Perspective

Revenue growth continued, but with costs front-loaded, profit fell sharply—1Q progress rate stayed at about 15% of the full-year forecast

Increases in goodwill amortization, R&D expenses, and recruitment costs have emerged as structural factors squeezing profit

External tailwinds from DX demand continue, but foreign exchange losses and rising personnel costs in overseas operations have emerged as new risks

Performance Trend

Growth Strategy

Expanding new customer and project acquisition in the ITO & BPO Business

Monetizing the Generative AI subsidiary and improving profitability in the Cloud Solution Business

Strengthening the Poland R&D base and overseas operations

Building a mid- to long-term growth foundation through the launch of a user community, recruitment, and enhanced training

Disclaimer