Mid-Term Plan 2028 explicitly targets JPY 10B in annual revenue from AI-automated response (with upside potential); a transformative three-year period aiming for a JPY 30B BPO platform through BPR consulting × AI agents

Summary

FY2025 closed with revenue of JPY 145.8B (+1.5% YoY) and operating income of JPY 12.7B (+9.2% YoY), delivering top- and bottom-line growth. Operating income exceeded the plan at 105.4% achievement, though revenue fell short (97.2%) partly due to selectivity in M&A deals and execution delays from misaligned terms. The new Mid-Term Plan 2028, built around the "Hybrid Intelligence" concept, envisions JPY 10B in annual revenue by FY2028 from contact center automation via HOL (Hybrid Operation Loop), with gross margins roughly double current levels—and upside to revenue if initiatives scale faster than expected. The plan earmarks JPY 25B in strategic growth investment over three years, targeting FY2028 revenue of JPY 175B and operating income of JPY 16B (OPM 9.1%), positioning this as a waypoint toward a medium- to long-term growth scenario of JPY 250B in revenue and JPY 25B in operating income by FY2030.

Key Points (Earnings Highlights And Growth Actions)

• Management Strategy And Market Assessment
  • Management explicitly stated that AI represents an opportunity, not a threat, for contact center operators
  • The domestic BPO market exceeds JPY 5T, of which the company's addressable market is JPY 1.6T (growing at 2.5% annually); still-low domestic BPO adoption rates point to a significant untapped market
  • As more companies hit the limits of in-house contact centers, the company aims to capture dual demand drivers: outsourcing and non-core business divestitures
• Near-Term Business Progress And Drivers
  • Revenue shortfall primarily attributable to misaligned M&A terms under the roll-up strategy, preventing deal execution
  • Gross Profit Margin improved from 17.7% to 18.9% (+1.2pt), driven by a trifecta of billing rate increases, site consolidation, and operational efficiency gains
  • Continued shift away from temporary staffing toward direct hires; approximately 5,000 temporary workers currently on the books, to be gradually reduced
  • Absorbed gross profit decline from CTC's reclassification from consolidated subsidiary to equity-method affiliate, as well as AI-related development costs, while still delivering profit growth
• Strategic Initiatives And Inflection Points
  • HOL (AI-automated response) rollout: knowledge base construction begins spring 2026, STEP 2 (text-based answer presentation) launches fall 2026, STEP 3 (fully automated response) goes live spring 2027
  • Established JV BA Intelligence with AVILEN (51% ownership), combining BPR consulting and AI agent development to deliver high-margin BPO
  • Partnered with Alfresa to launch "D-REACH," a medical information outreach support service for pharmaceutical companies, with full-scale rollout planned for April 2027
  • VOC marketing support has existing engagements with 7 clients, with plans to expand to 30+ by FY2028

Outlook And Strategy

• FY2026 full-year guidance: revenue JPY 152B (+4.2%), operating income JPY 13B (+2.7%), net income JPY 8.5B (+3.9%), projecting continued top- and bottom-line growth
• Mid-Term Plan 2028 final-year (FY2028) targets: revenue JPY 175B, operating income JPY 16B (OPM 9.1%), after-tax profit JPY 10B+α
• SC (Smart Contact Center) operations plan JPY 20B in incremental revenue over three years: JPY 5B organic growth + JPY 5B roll-up + JPY 10B from AI automation/VOC monetization
• SB (Smart Business Support) operations plan JPY 10B in incremental revenue over three years: JPY 5B from M&A + JPY 5B from BPR consulting/AI agents, targeting a JPY 30B run-rate
• Of the JPY 25B in strategic growth investment over three years, approximately JPY 20B is allocated to M&A and business investment (JPY 10B for SC + JPY 10B for SB)
• Explicitly positioned as a transformative period toward the medium- to long-term growth scenario of FY2030 (revenue JPY 250B, OPM 10%+)

Positive Factors

• HOL's AI-automated response has already achieved answer accuracy of 95%+; as of April 2026, engagements are underway with 5 clients, reaching the commercialization phase
• HOL's gross margin is expected at roughly double that of conventional contact center operations (~40%), structurally reducing labor costs that account for 80%+ of COGS
• ~90% of revenue is recurring-revenue, stock-type business, providing a highly stable earnings base
• Collaboration with ITOCHU Group has generated 17B+ in revenue, with expanding partnerships involving ITOCHU-invested companies
• In addition to a 2.3% CAGR in core operations (over the prior mid-term plan period), the company plans to expand its client base from 1,700 to 2,000+
• BPR consultants to be doubled from 200 to 400, reinforcing the front-end strategy for BPO market expansion

Concerns And Risks

• The prior mid-term plan fell materially short of its JPY 180B revenue target at JPY 145.8B, leaving lingering uncertainty around M&A execution capability
• HOL adoption pace is contingent on client decision-making; the key question is how quickly the contact center industry can shift its mindset from human-dependent operations to generative AI utilization
• In-housing risk from tech-forward companies leveraging AI is estimated at roughly 10% of the market, though developments at major telecom carriers warrant close monitoring
• Rising market interest rates continue to drive up borrowing costs (JPY -740M in FY2025 → JPY -940M expected in FY2026)
• The JPY 640M gain on content business divestiture in FY2025 creates a YoY headwind to FY2026 operating income
• Persistent wage inflation, rising prices, and increasing cybersecurity costs are structurally pushing up SG&A

Performance Highlights

FY2025 (fiscal year ending February 2026) delivered growth across all P&L lines: revenue JPY 145.8B (+1.5%), operating income JPY 12.7B (+9.2%), and net income JPY 8.2B (+2.2%). Operating income achieved 105.4% of the JPY 12B plan, benefiting from billing rate increases, site consolidation, and other profitability improvement initiatives. Revenue, however, reached only 97.2% of the JPY 150B plan, partly due to selectivity in M&A deals and execution delays from misaligned terms.

• Gross Profit Margin: 18.9% (prior year 17.7%, +1.2pt)
• Operating Income Margin: 8.7% (prior year 8.1%, +0.6pt)
• Guidance Achievement Rate (Operating Income): 105.4%
• Dividend Per Share: JPY 60 (payout ratio 54.4%)
• Core Operations CAGR: 2.3% (over the prior three-year mid-term plan period)