Summary: RIZAP Group<2928>The comprehensive enterprise, which is committed to proving that "people can change" as its unique management philosophy, develops a variety of businesses in the three areas of health creation, health care / beauty, lifestyle, and investment. Under the vision of "Global No.1 in the self-investment industry", it has achieved remarkable growth by actively utilizing M&A under the holding company structure and has grown to include 68 group companies, including 5 listed subsidiaries, and 4,606 consolidated employees. Listed on the Sapporo Stock Exchange's Ambitious Market in 2006, it formulated a medium-term management plan in September 2022, but revised it in February 2024 to achieve an operating profit of ¥400 million (fiscal year ending March 2027) by aggressively expanding the new business "chocoZAP". The fiscal 2024 performance was sales revenue of ¥16,629.8 million (+7.6% YoY), operating loss of ¥594 million (compared to a loss of ¥4948 million in the same period of the previous year), pre-tax loss of ¥4524 million (compared to a loss of ¥7,031 million in the same period of the previous year), and net loss attributable to the owners of the parent of ¥4,300 million (compared to a loss of ¥12,673 million in the same period of the previous year). Due to the black ink conversion of the chocoZAP business, it achieved a black ink of ¥417.5 million on an operating profit basis in the fourth quarter alone. As for sales revenue, the RIZAP-related business (including the chocoZAP business) significantly increased its revenue (+¥201 million) by focusing on expanding the convenience gym "chocoZAP". In existing businesses, there was an increase in revenue, including Antiroza Co., Ltd. (+¥419.8 million), while there was a decrease in revenue due to store structure reform in REXT Co., Ltd., etc. (-¥599.8 million) and the impact of selling the Sikata business under the subsidiary BRUNO<3140>at the end of the previous year (-¥511.1 million). As for operating loss, the group as a whole improved due to the transition of the chocoZAP business to the investment recovery period and the success of business portfolio reform such as REXT.

Beex <4270> is expanding its cloud solution business focusing on two areas: DX (Digital Transformation) and multi-cloud. It is a group of professionals specializing in cloud technology to migrate core system infrastructure of companies from on-premises to the cloud. In February 2024, its past performance as an AWS partner was recognized, and it obtained the highest level of certification as an 'AWS Premier Service Partner' in the AWS Partner Network (APN).

1. Deployment of cloud environment construction and migration, cloud license resale, monitoring, and maintenance operations.

The company classifies its services as multi-cloud consulting, cloud integration focusing on SAP systems for cloud environment construction and migration, cloud license procurement and sales (monthly billing) for AWS, Azure, etc., and managed services (MSP) such as monitoring and maintenance of virtual servers and networks after cloud migration. The increase in orders for cloud integration in the planning, design, and construction phases leads to an increase in orders for cloud license resale and MSP in the operation phase, transitioning from flow business to stock business to establish long-term relationships with customers. The composition ratio of stock type sales (cloud license resale + MSP) is about 70%. The company's strengths include obtaining various certifications that enable service provision in multi-cloud, expanding business as cloud technology specialists, establishing a strong customer base mainly with major companies, and building long-term relationships with customers.

2. The first half of the 2025 fiscal year ended with a significant increase in revenue and profit, reaching a record high.

The performance of the first half of the 2025 fiscal year (non-consolidated) showed an increase in revenue by 24.9% year-on-year to 4478 million yen, operating profit increased by 21.4% to 387 million yen, ordinary profit increased by 19.9% to 396 million yen, and net income increased by 21.0% to 275 million yen. The proactive marketing efforts such as events and campaigns led to steady expansion of each service, resulting in a significant increase in revenue and profit, reaching a record high. While gross profit increased by 20.6%, the gross profit margin decreased by 0.7 points to 19.9%. This was due to the recoil from high-profit cloud integration projects in the previous year, as well as a temporary factor related to the implementation of a first-month free campaign for acquiring new customers in the second quarter. Selling and administrative expenses increased by 20.0% due to factors such as increased personnel costs, but the expense ratio decreased by 0.5 points to 11.2%. This was achieved by suppressing recruitment costs such as referral fees to recruitment agencies due to an increase in employee referrals and direct applications to the website. As a result, the operating profit margin decreased by 0.2 points to 8.7%. Although the operating profit margin slightly decreased compared to the same period of the previous year, we believe that there is no change in the high-growth trend.

3. The full-year forecast for the 2025 fiscal year shows a slight increase in profit, with the possibility of exceeding expectations.

The performance for the full year of the 2025 fiscal year (non-consolidated) is kept in line with the initial plan, expecting revenue to increase by 23.0% year-on-year to 9470 million yen, operating profit to increase by 8.5% to 650 million yen, ordinary profit to increase by 5.3% to 648 million yen, and net income to increase by 6.2% to 468 million yen. Revenue is expected to significantly increase due to steady expansion of each service, while profit is forecasted to slightly increase considering the increase in costs related to proactive marketing initiatives and recruitment and training of personnel. The revenue forecast by service is expected to increase by 14.3% to 2770 million yen for cloud integration, 29.8% to 5852 million yen for cloud license resale, and 10.6% to 847 million yen for MSP. The progress rates for the first half of the year compared to the full year forecast were 47.3% for revenue (broken down by service: 53.7% for cloud integration, 43.5% for cloud license resale, 52.1% for MSP), 59.5% for operating profit, 61.1% for ordinary profit, and 58.8% for net income. Although the progress rate for revenue of cloud license resale is slightly low, considering the accumulation of revenue towards the end of the period in the stock-type revenue structure and the expectation of revenue from customers acquired during the campaign in the second quarter starting to materialize in the fourth quarter, we believe that the full-year plan is achievable. Furthermore, considering the high progress rates for operating profit, ordinary profit, and net income, we expect room for exceeding the full-year forecast even when considering the increase in costs in the second half.

4. Promote expansion of contract partners and enhancement of high value-added services in a favorable business environment.

The DX and cloud-related markets are expected to expand. Furthermore, particularly favorable for the company is the prospect that the demand for cloud migration of SAP systems, which the company excels in, will intensify in the future. Revenue growth in cloud integration is expected not only due to the demand for cloud migration of large-scale systems including SAP but also the expected expansion of revenue in reselling cloud licenses and MSP, which will subsequently lead to stock-based revenue growth. Therefore, the business environment is considered favorable for the company. Although the company has not disclosed a medium-term management plan, it aims to achieve continuous revenue growth by promoting the expansion of existing service contract partners and enhancing high value-added new services.

5. Evaluate high growth.

Since its establishment in March 2016, the company has grown to achieve annual revenues of 7.7 billion yen and operating income/ordinary income of 0.6 billion yen by the end of the FY February 2024. Additionally, the company has obtained the top-level 'AWS Premier Consulting Partner' certification within the APN. Considering the favorable business environment and the succession of Terrace Sky's AWS business <3915>, we believe that the continuation of this high growth demonstrates the strength of the company as a professional group specialized in cloud technology. Challenges ahead include establishing a framework to respond to increased demand such as recruitment and development of personnel, as well as improving profit margins through the enhancement of high value-added services. The company has indicated a policy to consider M&A and alliances to achieve revenue expansion and we are closely monitoring the progress of the management strategy for sustaining high growth.

■Key Points

- Professional group of cloud technology.

- The first half of FY February 2025 is expected to achieve a significant increase in revenue and profit to a record high.

- For the full FY February 2025, the forecast remains for a slight increase in profit with room for an upward revision.

The market environment is favorable. The full-scale transition demand for the cloudification of SAP systems is also a tailwind.

Evaluation of high growth since establishment, attention to the progress of management strategy to continue growth.

(Authored by FISCO guest analyst Masanobu Mizuta)