Hennge Aktie

Hi. I am Haruo Amano, Director of HENNGE. Thank you for watching our financial results video. Today, our CFO, Ryo Kobayashi, will explain our financial results for the third quarter of fiscal year 2026 and the progress against our full year forecast. Then I will explain our growth strategy.

Hi, I'm Ryo, CFO of HENNGE. First, let me explain the consolidated financial results for the third quarter of FY 2026. Our consolidated financial results for this quarter are progressing well against the full year forecast, which was disclosed on November 7, 2025. The net sales for HENNGE One business, which are recurring in nature, continued to grow steadily year-on-year. Gross profit also increased steadily year-on-year with the gross profit margin maintaining a high level.

Next, I will explain the breakdown of operating expenses. During this quarter, in conjunction with the launch of HENNGE One's new services October onwards, we proactively carried out marketing and branding activities to boost brand awareness. In addition, we started recognizing temporary expenses related to the headquarters relocation scheduled for April 2027. For the 9-month period, in accordance with our initial policy, we have been increasing headcount and taking active advertising initiatives in anticipation of future business expansion. Our quarterly trends for net sales and operating expenses are as presented on the slide.

Next, I will explain the headcount trends. During this quarter, in addition to welcoming 9 new graduates, there was a net increase of 40 employees compared to the end of the previous fiscal year, including sales personnel, which has been a key focus. Despite a challenging recruitment environment, we believe that the accumulated effect from various initiatives, such as strengthening the recruitment of young talent, has led to this result. To achieve our full year target of a net increase of 45 employees, we will continue our initiatives to strengthen selling capabilities through organizational development and active recruitment efforts.

Let's move on to business activities during this quarter. This is an overview of our business highlights. In April 2026, we hosted our own event, HENNGE Unveiled 2026, where we announced 3 new services for HENNGE One. These are: HENNGE Mesh Network to address network access challenges, HENNGE Password Manager to further reinforce the authentication infrastructure and HENNGE Domain Protection to tackle e-mail-based threats. These are scheduled to be launched in October 2026 onward.

Together with HENNGE Endpoint & Managed Security, which was launched in March 2026, we believe that adding these new services to the existing HENNGE One will provide the core foundation for our Zero Trust. Through these feature enhancements, HENNGE One's coverage area will expand across identity, devices and networks. We will continue to pursue our corporate philosophy, liberation of technology, to meet the expanding market and evolving customer needs. As for major marketing and branding activities in the third quarter, in addition to hosting HENNGE Unveiled and events for resellers, we actively participated in and presented at various events of all scales, creating opportunities for diverse targets to understand the new value of HENNGE One.

Our activity level remains high, particularly with a focus on in-person initiatives. Here, I would like to provide an update regarding our application for the market segment change to the Tokyo Stock Exchange Prime Market. On June 25, 2026, we applied for a market segment change to the TSE Prime Market. While we are not yet at the stage to share specific details such as the approval date, we will make timely announcements as further updates become available. We would highly appreciate your continued support.

Next, I would like to explain the results of our KPIs. The progress of HENNGE One KPIs compared with the end of the previous fiscal year is as presented on the slide. The year-on-year KPI results for HENNGE ONE are as presented on the slide. We believe the average monthly churn rate remains at a low level. Based on this, the theoretical average contract period is over 25 years. Regarding the number of contracted companies, the cumulative effect of various sales initiatives, along with the broadening of the market base, led to steady growth.

In addition, the number of contracted users grew significantly, mainly due to acquiring around 10 new contracts from companies exceeding our main target segment of 300 to 5,000 employees. As for ARPU, although both new and existing customers continued to adopt our top-tier plan, HENNGE One Pro ARPU decreased in this quarter. This has been largely impacted by multiple large new customers opting for single-featured plans. Among these factors, ARR for this quarter increased significantly, driven in particular by the substantial growth in the number of contracted users. HENNGE One Pro accounted for approximately 22% of total ARR as of the end of this quarter.

Next, I will touch on our full year outlook of FY 2026. As presented on the slide, in FY 2026, in pursuit of JPY 20 billion in ARR, we are focusing on strengthening our sales structure and accelerating new customer acquisition, along with enhancing additional service value. The historical trend in net sales by business and this quarter's progress against our full year forecast are as presented on the slide. Results for this quarter are progressing well in line with the full year forecast. Operating expenses for this quarter are also progressing in line with the full year forecast.

The total amount of full year operating expenses remains unchanged from our initial outlook. However, advertising expenses are expected to exceed the full year forecast of JPY 1.15 billion. This is due to additional investments in branding during the fourth quarter. Timed with the launch of new services scheduled for October 2026 onward, we intend to raise awareness of our company and services and to strengthen our future talent acquisition capabilities. On the other hand, operating expenses, excluding advertising expenses, are expected to be lower than the full year forecast of JPY 9.62 billion. This is mainly due to a decrease in recruitment-related expenses compared to initial estimates.

In addition, expenses related to the headquarters relocation scheduled for April 2027 have begun to be recognized from this quarter. We expect relocation-related expenses to continue to be incurred in the fourth quarter and into the next fiscal year. Therefore, there are no changes to the consolidated full year forecast disclosed on November 7, 2025. Based on this, operating profit for the fourth quarter is expected to be around JPY 200 million.

Finally, I would like to explain our growth strategy. Our corporate philosophy is liberation of technology. We believe in the power of technology. We love technology, and we strongly believe that technology will make our lives better. We want to deliver the power of technology to as many people as we can and to change the world to be a better place. We established HENNGE more than 25 years ago. And since then, we set our philosophy as liberation of technology, which we actually have demonstrated in various areas. From the experience we gained, we have come to believe that SaaS is the most fair and sophisticated approach to liberate technologies. This is one of the reasons why we're providing SaaS and why we want to support our customers' transformation through cloud utilization.

The total amount of technology that we provide to customers and the total amount of liberated technology are the measures to prove our progress toward our philosophy, and this is expressed as LTV. LTV, or lifetime value, is the total value arising from the current contracts with the customers. Our growth strategy is to maximize this LTV. By maximizing LTV, that is, seeking to maximize the total gross profit earned over the future, we would like to build a solid business model that enables us to stably increase profits even if we scale up the investments for further business growth.

Currently, our average contract period and gross profit margin are already at high levels. Therefore, to maximize LTV, it is essential to maximize ARR. We will actively engage in initiatives with a high expected return on investment and focus on accumulating as much ARR as possible. ARR can be broken down into 3 factors: the number of contracted companies, the average number of users per contracted company and average revenue per user. Among these, we currently aim to achieve ARR growth by focusing on increasing the number of contracted companies and ARPU.

The progress on these KPIs for HENNGE One is as presented on the slide. Including our main service, HENNGE One, our group mainly operates a subscription model business. Barring any cancellations, the contracts secured this year will continue to generate sales and become the foundational sales from next year onward. The figures on this slide demonstrate the robust and stable growth of ARR HENNGE One. We view FY 2026 as the beginning of a new value generation cycle, a vital preparation period for reaching our ARR target of JPY 20 billion.

We have introduced various new services to meet the expanding market and evolving customer demands. Moving forward, we will continue to generate added value and further expand the total amount of liberation of technology that we deliver to our customers. While maintaining our core focus on driving growth within our current business lines, we will be taking on various challenges to generate additional value, including geographical expansion outside of Japan and pursuing M&A opportunities. By continuously evolving our value generation cycle through these initiatives, we will increase the certainty of achieving our future vision.

Furthermore, rather than focusing excessively on short-term operating profit, we will proactively invest in maximizing future ARR to reinforce our business model that can deliver sustainable profit growth. We are committed to solidifying this robust business model to deliver sustainable growth and would sincerely appreciate your continued support from a mid- to long-term perspective.

This concludes our briefing on the third quarter of fiscal year 2026. Thank you very much for taking the time to watch our video.

Hi. I'm Haruo Amano, Director of HENNGE. Thank you for watching our financial results video for the second quarter of fiscal year 2026. Today, our CFO, Ryo Kobayashi, will explain our financial results for the second quarter of FY 2026 and the progress against our full year forecast. Then, I will explain our growth strategy. Following that, our Executive Officer in charge of product strategy, Takeru Imaizumi, will explain about the future vision of HENNGE One.

Hi, I'm Ryo, CFO of HENNGE. First, let me explain the financial results for the second quarter of FY 2026. This is the summary of our consolidated financial results. Results of the second quarter are progressing well against the full year forecast, which was disclosed on November 7, 2025. Our quarterly consolidated net sales are as presented on the slide.

Since the net sales of HENNGE One business is recurring in nature, it has been increasing throughout each quarter. Our year-on-year consolidated net sales are as presented on the slide. Our quarterly gross profit and gross profit margin are as presented on the slide. Our year-on-year gross profit and gross profit margin are as presented on the slide. Gross profit margin increased mainly due to higher ARPU, maintaining a high level.

The quarter-on-quarter breakdown of operating expenses is as presented on the slide. The year-on-year breakdown of operating expenses is as presented on the slide. In accordance with our policy for FY 2026, we have been increasing headcount and taking active advertising initiatives as a preparation for the future business expansion. Our quarterly net sales and operating expenses are as presented on the slide.

The trend in the number of employees is as presented on the slide. The recruitment environment for sales personnel remains challenging. We will continue our initiatives to strengthen selling capabilities through organizational development and active recruitment efforts. The status of our cash flow is as presented on the slide.

Let's move on to business activities during this quarter. This is an overview of our business highlights. As stated in our policy for FY 2026, we have taken active efforts, including engaging in over 55 events. In March 2026, we launched a new service, HENNGE Endpoint and Managed Security. By combining device protection with 24/7 fully managed MDR, we offer a full-scale service that consistently monitors and responses to external attacks. We also integrated vulnerability assessment features, which allows us to deliver a holistic solution covering not only endpoint devices, but also web-facing IT assets.

Next, I would like to explain the results of our KPIs. The progress of HENNGE One KPIs from the end of the last fiscal year is as presented on the slide. Year-on-year KPI results for HENNGE One are as presented on the slide. The churn rate of HENNGE One is as presented on the slide. We have maintained a low level of churn and the theoretical average contract period exceeds 25 years.

The number of contracted companies and users is as presented on the slide. During this quarter, we acquired multiple contracts from relatively large companies. In addition, we continue to achieve stable growth in the number of contracts with small to midsized companies through deepening relationships with resellers. The number of contracted users also increased steadily, supported by robust new contract acquisitions.

The quarterly trend of ARR and ARPU is as presented on the slide. During this quarter, several relatively large companies opted for single-featured plans. Nonetheless, both new and existing customers continued to choose HENNGE One Pro, our top-tier plan, which impacted the rise in ARPU. Furthermore, the proportion of HENNGE One Pro within the total ARR is approximately 20% as of the end of this quarter.

Next, I will touch on our full year outlook of FY 2026. In pursuit of JPY 20 billion in ARR, strengthen sales structure and accelerate new customer acquisition, along with enhancing additional service value, this is the policy stated for FY 2026 as shown on the slide. This slide shows our full year forecast for FY 2026. There is no change from the forecast, which was disclosed on November 7, 2025.

The historical trend and current progress of net sales by business are as presented on the slide. Results of the second quarter are progressing well against our full year forecast. The historical trend and current progress of advertising expenses and operating expenses, excluding advertising expenses, are as presented on the slide. We are carrying out various initiatives in line with our policy for FY 2026. Specifically, we are putting our resources into 2 key drivers for mid- to long-term growth, which are strengthening our organization and establishing a powerful HENNGE brand. To be more specific, we're prioritizing investments in hiring and recruitment as well as initiatives that boost HENNGE brand recognition and market presence.

Given our business model, even if we were to experience a current shortfall in recruitment, we expect the impact on the short-term business performance to be minor. However, to ensure mid- to long-term growth, it is essential for us to continuously recruit the right talent that our company needs. Furthermore, we strongly believe that strengthening the HENNGE brand is essential to expanding the value we generate, whether that's by accelerating our current businesses or taking on new challenges such as cultivating new markets and M&As.

We are convinced that strengthening our organization through recruitment and establishing our corporate branding will have a cumulative effect over time rather than showing immediate effects. Therefore, in addition to generating further value through the launch of new services, we are investing in activities to increase our visibility and help people understand us better.

Next, please let me explain our growth strategy. Our corporate philosophy is liberation of technology. We believe in the power of technology. We love technology, and we strongly believe that technology will make our lives better. We want to deliver the power of technology to as many people as we can and to change the world to be a better place.

We established HENNGE more than 25 years ago. And since then, we set our philosophy as liberation of technology, which we actually have demonstrated in various areas. From the experience we gained, we think that Software-as-a-Service is the most fair and sophisticated approach to liberate technologies. This is one of the reasons why we're providing Software-as-a-Service and why we want to support our customers' transformation through cloud utilization.

The total amount of technology that we provide to the customers and the total amount of liberated technology are the measures to prove our progress on our philosophy, and this is expressed as LTV. LTV or lifetime value is the total value arising from the current contracts with the customers. Our growth strategy is to maximize this LTV. Maximizing LTV, that is by seeking to maximize the total gross profit earned over the future, we would like to build a solid business model that can stably increase profits even if the investments for further business growth are increased.

Currently, our average contract period and gross profit margin are already in a high number. Therefore, in order to maximize LTV, we think that it is essential to maximize ARR. We will actively engage in activities with expected high return on investment and aim to accumulate ARR as much as possible. ARR can be broken into 3 factors: the number of contracted companies, average number of users per contracted company and average revenue per user. In these 3 factors, we aim to increase ARR by focusing on increasing the number of contracted companies and ARPU.

The KPIs for our growth strategy of HENNGE One are as presented on the slide. Including our main service, HENNGE One, our group mainly operates a subscription model business. Barring any cancellations, the contracts secured this year will continue to generate sales and become the foundational sales from next year onwards. The figures on this slide demonstrate the robust and stable growth of ARR of HENNGE One.

We view FY 2026 as the beginning of a new value generation cycle, a vital preparation period for reaching our target of JPY 20 billion in ARR. Let me take this opportunity to explain the value generation cycle, which is the very foundation of our growth. The cycle consists of 3 key steps: strengthening our framework for acquiring new customers, enhancing the added value of our services and ensuring that this value is clearly communicated and delivered to our clients. We have continuously repeated and refined this multiyear cycle. We are evolving this cycle and making solid progress toward the goal of achieving JPY 20 billion in ARR by the end of FY 2029. Even beyond that, we plan to continue evolving our cycle to establish an even more robust foundation for growth, further realizing our corporate philosophy, liberation of technology.

As you can see on the slide, we have introduced various new services to meet the expanding market and customer demands. Most recently, in March, we launched HENNGE Endpoint and Managed Security. We've also announced the plans to roll out several other new services. As Imaizumi will explain in more detail later, these are services within the concept of Zero Trust, which is one of the elements in our road map toward realizing the liberation of technology.

I believe this demonstrates substantial progress in enhancing the added value of our services step mentioned in the previous slide. We will focus on driving growth within our current business lines, while we will take on various challenges to generate additional value, including geographical expansion outside of Japan and pursuing M&A opportunities. By continuously evolving our value generation cycle through these initiatives, we will increase the certainty of achieving the future vision we are striving for.

I would like to reemphasize that this fiscal year marks the beginning of our next value generation cycle and a crucial year of preparation to achieve further growth. Rather than focusing too much on short-term operating profit, we will proactively invest in maximizing future ARR to reinforce our business model that can deliver consistent profit growth. We are committed to solidify this robust business model for delivering sustainable growth and would sincerely appreciate your continued support from a mid- to long-term perspective. This concludes our briefing on the second quarter of fiscal year 2026.

Next, Imaizumi, our Executive Officer in charge of Product Strategy, will explain about the future vision of HENNGE One.

Hi. I'm Takeru Imaizumi, Executive Officer in charge of Product Strategy at HENNGE. Let me explain the new service of HENNGE One announced on April 16 and the context behind their introduction.

Technological innovations, especially in AI, are currently evolving at an incredible pace. We believe innovations have the potential to fundamentally transform the behavior of companies. In reality, however, many companies face significant barriers triggered by these innovations, making it difficult to leverage their benefits. We aim to remove these barriers and create a world where companies can truly enjoy the benefits of technology.

New technologies often bring a fear of the unknown. Since our establishment, HENNGE's role has always been to act as a bridge, helping our customers to overcome this fear and securely step into new possibilities. HENNGE is more than just a security provider. We strive to be an engine for the liberation of technology, untangling the complexities of evolving technology so that everyone can fully utilize it safely, securely and with confidence.

Since our establishment, we have consistently demonstrated the liberation of technology by removing the barriers that emerge through innovations, including Linux, e-mails and the cloud or Software-as-a-Service. Today, as the world changes at an astonishing speed, implementing cybersecurity measures has become a critical requirement.

Technological innovations, including AI, should ideally act as possibilities that empower companies to accelerate their growth. In reality, however, they have empowered attackers with sophisticated attacking methods, turning those possibilities into serious threats. These threats are no longer limited to large enterprises. Today's cyberattacks are indiscriminate, targeting organizations regardless of their size. The mindset of we're too small to be a target is no longer valid. Essential security measures have shifted from being a nice to have to an absolute prerequisite for business continuity.

To address this, our mission is the democratization of Zero Trust. Although Zero Trust has become synonymous with recent security, we believe very few companies have actually implemented it fully. While this term has become popular, the reality lags behind. We believe the reason behind this gap is its overwhelming complexity. The concept itself is straightforward, trust nothing, verify everything. However, in practice, it requires procuring, integrating and managing multiple product categories.

When the cost and effort of protection begin to compromise the speed of business expansion, it becomes counterproductive. This high barrier has limited Zero Trust to only a handful of large enterprises and advanced adopters. We want to change this. We want to create a world where any company can easily enjoy essential security simply by using HENNGE One.

We are excited to announce our new services, HENNGE Mesh Network, HENNGE Password Manager and HENNGE Domain Protection, along with HENNGE Endpoint and Managed Security launched in March 2026. We believe that by integrating these new services into the existing HENNGE One, it will have core features to cover the Zero Trust concept. Through this service lineup, we aim to deliver essential security to companies that found Zero Trust out of reach.

I will touch on each of the 3 services as well. HENNGE Mesh Network is a next-generation network service that eliminates vulnerabilities of traditional VPNs and ensures secure remote access by controlling access based on who you are rather than where you are. It shields VPNs, which are frequent targets of attacks while providing an environment of secure access to only necessary resources without requiring complex infrastructure or system integrations.

HENNGE Password Manager is a service for the secure centralized management of credentials for non-SSO compatible systems and shared IDs. It minimizes the risk of information leaks by providing full visibility into logs of who and when shared passwords were accessed while utilizing an advanced architecture where decryption keys are never stored on the servers.

HENNGE Domain Protection is a service designed to protect corporate brands by preventing spoofed e-mails that exploit a company's domain. It seamlessly enables compliance with the e-mail authentication standard, DMARC, through visualization and simplification of DMARC's deployment and management. We are planning to roll out these services on and after October 2026.

We support our customer security across 3 areas with 3 service additions: the Identity Edition, DLP Edition and Cybersecurity Edition. All the products introduced today are positioned within this portfolio. HENNGE Mesh Network addresses network access challenges as part of the Identity Edition. HENNGE Password Manager further reinforces the authentication infrastructure within the Identity Edition. HENNGE Domain Protection tackles e-mail-based threats through the DLP Edition and HENNGE Endpoint and Managed Security protects devices within the Cybersecurity domain.

Our strength lies in the fact that these are not isolated features, but rather integrated features under the single umbrella of HENNGE ONE. We are convinced that this allows us to solve a wide range of security challenges for our customers. Through these expansions, our goal is to evolve toward a seamless and holistic defense as shown on the slide. HENNGE One used to be seen as a gatekeeper for cloud access. Today, we are redefining it to embrace the 3 essential elements of Zero Trust: Identity, the entry point; Devices, the access point; and the Network that connects them. This expansion is not about merely adding features. It's about liberating our customers from the complexity of managing fragmented technologies.

We want HENNGE One to be the foundation where anyone can utilize technology safely, securely and with confidence. On top of that, this expansion is about more than just Zero Trust. Our core lies in removing every barrier that stands in the way of adopting new technology. While security is our current focus, our scope should continue to expand further beyond in the years to come. We believe this expansion of value creates a solid foundation for HENNGE's long-term and sustainable growth, which is resilient to short-term market trends. We will continue to take substantial steps toward becoming an infrastructure that makes the rewards of technology accessible to every company.

Everything I have shared today represents vital steps of our value generation cycle, enhancing the added value of our services and ensuring that this value is clearly communicated and delivered to our clients. We will continue to generate value and liberate technology. Thank you very much for your time and for joining our presentation.

Hi. I'm Haruo Amano, Director of HENNGE. Thank you for watching our financial results video for the first quarter of fiscal year 2026.

Today, our CFO, Ryo Kobayashi, will explain our financial results for the first quarter of FY 2026 and the progress against our full year forecast. Then I will explain our growth strategy.

Hi, I'm Ryo Kobayashi, CFO of HENNGE. First, let me explain the financial results for the first quarter of FY 2026. This is the summary of our consolidated financial results. Results of the first quarter are progressing well against the full year forecast, which was disclosed on November 7, 2025. Our quarterly consolidated net sales are as presented on the slide.

Since the net sales of HENNGE One business is recurring in nature, it has been increasing throughout each quarter. Our year-on-year consolidated net sales are as presented on the slide. Our quarterly gross profit and gross profit margin are as presented on the slide. Our year-on-year gross profit and gross profit margin are as presented on the slide. Gross profit margin increased mainly due to higher ARPU, maintaining a high level. The quarter-on-quarter breakdown of operating expenses is as presented on the slide. The year-on-year breakdown of operating expenses is as presented on the slide. Our quarterly net sales and operating expenses are as presented on the slide. The trend in the number of employees is as presented on the slide. The recruitment environment for sales personnel remains challenging. We will continue our initiatives to strengthen selling capabilities through organizational development and active recruitment efforts.

Let's move on to business activities during this quarter. This is an overview of our business highlights. As stated in our policy of FY 2026, we have actively taken actions to expand a stable customer base. Especially, we have engaged in over 65 events in various regions across domestic and overseas markets with a focus on in-person events. We also continued our branding initiatives to raise awareness of HENNGE One, building on our initiatives from the previous quarter.

Next, I would like to explain the results of our KPIs. The progress of HENNGE One KPIs from the end of the last fiscal year is as presented on the slide. Year-on-year KPI results for HENNGE One are as presented on the slide. The churn rate of HENNGE One is as presented on the slide. We have maintained a low level of churn and the theoretical average contract period exceeds 25 years. The number of contracted companies and users is as presented on the slide. During this quarter, we acquired multiple contracts from relatively large companies. In addition, we continue to achieve stable growth in the number of contracts with small to midsized companies through deepening relationships with resellers. The number of contracted users also increased steadily, supported by robust new contract acquisitions.

The quarterly trend of ARR and ARPU is as presented on the slide. During this quarter, both new and existing customers continue to choose HENNGE One Pro, our top-tier plan. Nonetheless, as several relatively large companies opted for single feature plans, the overall increase in ARPU was limited. Furthermore, the proportion of HENNGE One Pro within the total ARR is approximately 18% as of the end of this quarter.

Next, I will touch on our full year outlook of FY 2026. In pursuit of JPY 20 billion in ARR, strengthen sales structure and accelerate new customer acquisition, along with enhancing additional service value. This is the policy stated for FY 2026 as shown on the slide. This slide shows our full year forecast for FY 2026. There is no change from the forecast, which was disclosed on November 7, 2025. The net sales by business are as presented on the slide. Results of the first quarter are in line with our full year forecast. The historical trend and current progress of advertising expenses and operating expenses, excluding advertising expenses, are as presented on the slide.

As stated in our policy of FY 2026, we remained focused on building a robust foundation for sustainable growth by enhancing the value of our services, building an organizational structure for future customer acquisition, along with continuing our investment in corporate branding. This quarter, we were able to continue active investments toward marketing and branding initiatives as we did in the previous year. We will continue to have proactive investments to generate new value toward our target of JPY 20 billion in ARR and beyond throughout FY 2026.

Finally, please let me explain our growth strategy. Our corporate philosophy is liberation of technology. We believe in the power of technology. We love technology, and we strongly believe that technology will make our lives better. We want to deliver the power of technology to as many people as we can and to change the world to be a better place. We established HENNGE more than 25 years ago. And since then, we set our philosophy as liberation of technology, which we actually have demonstrated in various areas.

From the experience we gained, we think that Software-as-a-Service is the most fair and sophisticated approach to liberate technologies. This is one of the reasons why we are providing Software as a Service and why we want to support our customers' transformation through Software-as-a-Service utilization. The total amount of technology that we provide to the customers and the total amount of liberated technology are the measures to prove our progress on our philosophy, and this is expressed as LTV. LTV or lifetime value is the total value arising from the current contracts with the customers.

Our growth strategy is to maximize this LTV. Maximizing LTV, that is by seeking to maximize the total gross profit earned over the future, we would like to build a solid business model that can stably increase profits even if the investments for further business growth are increased. Currently, our average contract period and gross profit margin are already in a high number. Therefore, in order to maximize LTV, we think that it is essential to maximize ARR. We will actively engage in activities with expected high return on investment and aim to accumulate ARR as much as possible.

ARR can be broken into 3 factors: the number of contracted companies, average number of users per contracted company and average revenue per user. In these 3 factors, we aim to increase ARR by focusing on increasing the number of contracted companies and ARPU. The KPIs for our growth strategy of HENNGE One are as presented on the slide, including our main service, HENNGE One, our group mainly operates a subscription model business. Barring any cancellations, the contracts secured this year will continue to generate sales and become the foundational sales from next year onwards.

The figures on this slide demonstrate the robust and stable growth of ARR of HENNGE One. We view FY 2026 as the beginning of a new value generation cycle and a vital preparation period for reaching our target of JPY 20 billion in ARR. It was mentioned in our previous earnings briefing. However, let me take this opportunity to reinforce the concept of the value generation cycle. In FY 2025, we achieved the target of JPY 10 billion in ARR, which we have been pursuing since 2021. The value generation cycle has been the core of this growth.

Over the past several years, we have continuously repeated the 3 key steps: strengthening our framework for acquiring new customers, enhancing the added value of our services and ensuring that this value is clearly communicated and delivered to our clients. We will build on this success and continuously improve the value generation cycle as we move toward our next target of reaching JPY 20 billion in ARR in FY 2029. Looking beyond the milestone of JPY 20 billion in ARR, we will continue to further evolve the value generation cycle to build a foundation for sustainable and robust growth. By doing so, we aim to further realize our corporate philosophy, liberation of technology.

To achieve this, we will focus on driving growth within our current business lines, while we will take on various challenges to generate additional value, including geographical expansion outside of Japan and pursuing M&A opportunities. By continuously evolving our value generation cycle through these initiatives, we will increase the certainty of achieving the future vision we are striving for. This concludes our briefing on the first quarter of fiscal year 2026. Thank you for your time and attention.

Hi. I am Haruo Amano, Director of HENNGE. Thank you for joining us today for our full year financial results briefing of FY 2025. Today, our CFO, Ryo Kobayashi, will explain our full year financial results. Then I will explain our full year forecast for FY 2026 and our growth strategy.

Hi, I'm Ryo Kobayashi, CFO of HENNGE. First, let me explain our full year financial results for FY 2025. This is the summary of our consolidated financial results.

The results were in line with the revised full year forecast disclosed on May 7, 2025. Our quarterly consolidated net sales are as presented on the slide. Since the net sales of HENNGE One business is recurring in nature, it has been increasing throughout each quarter. Our year-on-year consolidated net sales are as presented on the slide.

Our quarterly gross profit and gross profit margin are as presented on the slide. Our year-on-year gross profit and gross profit margin are as presented on the slide. Gross profit margin increased mainly due to higher ARPU, maintaining a high level.

The quarter-on-quarter breakdown of operating expenses is as presented on the slide. The year-on-year breakdown of operating expenses is as presented on the slide. Expenses increased mainly for strengthening recruitment capabilities, along with personnel expenses driven by a higher headcount and branding-related advertising expenses.

Our quarterly net sales and operating expenses are as presented on the slide. The trend in the number of employees is as presented on the slide. While the recruitment environment remains challenging, our various initiatives have yielded favorable results in hiring. In addition, the number of resignations was low, leading to a net increase of 79 employees, which was higher than the initial target of 40. That said, the recruitment of sales personnel fell behind our initial target and continues to be a challenge. The status of our cash flow is as presented on the slide.

Now I will explain our business activities during this quarter. This is an overview of our business highlights. Major advertising activities for the fourth quarter are as presented on the slide. We also focused on activities to raise awareness and strengthen our brand. Notably, from August, we have launched a campaign featuring 3 Ultra Heroes to boost recognition of HENNGE One.

Next, I would like to explain the results of our KPIs. The progress of HENNGE One KPIs from the end of the last fiscal year is as presented on the slide. Year-on-year KPI results for HENNGE One are as presented on the slide. The churn rate of HENNGE One is as presented on the slide. The theoretical average contract period exceeds 25 years.

The number of contracted companies and users is as presented on the slide. During this quarter, we acquired multiple contracts from relatively large companies. In addition, we continue to achieve stable growth in the number of contracts with small to mid-sized companies through deepening relationships with resellers. Despite cancellations from relatively large companies, the number of contracted users also increased steadily, supported by robust new contract acquisitions.

The quarterly trend of ARR and ARPU is as presented on the slide. During this quarter, the trend of choosing HENNGE One Pro has continued among both new and existing customers. At the same time, we also saw an increase in the number of new customers opting for single-feature plans such as DLP regardless of the company size. As a result, the overall increase in ARPU for this quarter was limited. Furthermore, the proportion of HENNGE One Pro within the total ARR has increased to approximately 17% as of the end of this quarter.

Next, I will touch on our full year outlook of FY 2026. At the end of 2021, we set a goal to reach JPY 10 billion in ARR by the end of FY 2025. Since then, we've been driving our business forward to make that goal a reality. In pursuing this goal, we focused on what we call our value generation cycle, which primarily consists of 3 steps: First, strengthening our capability to acquire new customers; second, enhancing the value of our services; and third, effectively communicating and delivering the value to our customers. By repeating and improving this cycle over the years, we successfully achieved the target of JPY 10 billion in ARR in FY 2025.

Now we're ready to leverage this success for the next phase of growth. We will evolve our value generation cycle and proceed toward the next goal of achieving JPY 20 billion in ARR by the end of FY 2029. Even beyond achieving the next milestone, we plan to continue evolving our value generation cycle and establish a foundation for sustainable and robust growth, which will further realize our corporate philosophy, liberation of technology.

This slide highlights some of our newly launched services that demonstrate the added value generated through our value-generation cycle. As you can see on the slide, we've introduced a variety of new services to meet the expanding market and customer demands. The launch of services has especially accelerated since the end of 2021, when we announced the goal to achieve JPY 10 billion in ARR.

FY 2025 marked the completion of one full round of our value-generation cycle. Thus, we see FY 2026 as the beginning of the next value-generation cycle and a crucial year of preparation to achieve our goal of JPY 20 billion in ARR. Specifically, for the HENNGE One business, our first focus will be on initiatives that enhance the value of our service.

At the same time, we will continue marketing efforts to further build the foundation of new customer acquisition. Furthermore, to ensure sustainable future growth, we will continue to invest in strengthening organizational structure and corporate branding.

The consolidated forecast is as presented on the slide. In FY 2026, we will generate additional value that contributes to achieve JPY 20 billion in ARR and plan to proactively invest to create future growth. Even with these ongoing initiatives, we anticipate an increase in each profits.

Finally, please let me explain our growth strategy. Our corporate philosophy is liberation of technology. We believe in the power of technology, we love technology and we strongly believe that technology will make our lives better. We want to deliver the power of technology to as many people as we can and to change the world to be a better place.

We established HENNGE more than 25 years ago. And since then, we set our philosophy as liberation of technology, which we actually have demonstrated in various areas. From the experience we gained, we think that Software-as-a-Service is the most fair and sophisticated approach to liberate technologies. This is one of the reasons why we are providing Software-as-a-Service, and we want to promote the use of cloud services among our customers as well.

The total amount of technology that we provide to the customers and the total amount of liberated technology are the measures to prove our progress on our philosophy, and this is expressed as LTV. LTV, or lifetime value, is the total value arising from the current contracts with the customers. Our growth strategy is to maximize this LTV.

Maximizing LTV, that is by seeking to maximize the total gross profit earned over the future, we would like to build a solid business model that can stably increase profits even if the investments for further business growth are increased. Currently, our average contract period and gross profit margin are already in a high number. Therefore, in order to maximize LTV, we think that it is essential to maximize ARR.

We will actively engage in activities with expected high return on investment and aim to accumulate ARR as much as possible. ARR can be broken into 3 factors: the number of contracted companies, average number of users per contracted company and average revenue per user. In these 3 factors, we aim to increase ARR by focusing on increasing the number of contracted companies and ARPU.

The KPIs for our growth strategy of HENNGE One are as presented on the slide. Including our main service, HENNGE One, our group mainly operates a subscription model business. Barring any cancellations, the contracts secured this year will continue to generate sales and become the foundational sales from next year onwards.

The figures on this slide demonstrate the robust and stable growth of ARR of HENNGE One. We will continue to pursue our corporate philosophy, liberation of technology, aiming first to achieve JPY 20 billion in ARR in FY 2029. The main driver for reaching this JPY 20 billion ARR milestone will be the growth of our existing business.

In addition to this, we believe it is crucial to take on further challenges, including geographical expansion and M&A to create an inflection point in our future ARR growth. Looking further ahead, our long-term ambition is to build a business model that would create JPY 100 billion in ARR and a potential operating profit margin of 50% by FY 2035 and FY 2037.

Achieving this target will require us to maintain an average annual ARR growth rate of 20% to 30% for over the next decade, which is not an easy path. That is why we will continue to evolve our value generation cycle by undertaking various challenges, including proactive exploration of new markets such as geographical expansion outside of Japan and the generation of additional value through methods, including M&A.

By sustainably carrying out these initiatives, we will increase the certainty of achieving the future vision we are striving for. We anticipate various hurdles in achieving these goals. We will overcome these difficulties and, as one team, drive our business forward to become a world-class IT company. In order to make this happen, establishment of a strong and robust HENNGE brand is essential. To establish a strong and robust HENNGE brand, we will continuously focus on brand-building activities to firm up our path toward achieving JPY 100 billion in ARR.

That concludes our overview of our full year financial results for FY 2025. Finally, we have an announcement from our CEO.

Hi. I'm Kazuhiro Ogura, the CEO of HENNGE. Today, as announced in our timely disclosure along with our financial results, our Board of Directors has resolved to proceed with preparations to apply for a change of our market segment to the Tokyo Stock Exchange Prime market.

This decision reflects our commitment to achieving further mid- to long-term growth and enhancing our corporate value, enhancing recognition, trust and credibility. This was the belief that we had as essential factors for our future growth. It has been 6 years since we were listed on the former TSE Mothers market in 2019, which marked the first step toward realizing this vision.

Since then, we have been grateful to have more customers and partners with us, and we feel that our trust, track record and credibility have steadily strengthened. As one of these efforts, we achieved JPY 10 billion in ARR during FY 2025. In addition, while continuing to make proactive growth investments, we were also able to, little by little, begin returning profits to shareholders by initiating our first dividend from FY 2024.

Currently, we are moving toward the next stage, aiming for JPY 20 billion in ARR and further ahead, JPY 100 billion. The major challenge for the next growth phase is brand enhancement. We have been always providing B2B service, which target corporate IT admins for most of the case. Within the target, we think that we have a certain level of recognition to us. However, the level of recognition and presence in the market is still not sufficient to realize our next stage of growth.

To address these challenges and to achieve sustainable growth, we intend to pursue a change of our market segment to the TSE prime market. While we are not yet in a position to share specific schedules or details at this stage, we will disclose once further information becomes available. I would like to take this opportunity to inform our investors of this decision and to express my sincere appreciation for your continued support.

Thank you for taking your time.