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.

Provide 'RPA Robo-Pat DX' and 'Smart Boarding' to maximize human capital.

FCE <9564> is advancing in the DX (Digital Transformation: social and lifestyle transformation through digitalization) business. It sells domestically produced RPA (Robotic Process Automation: software robot technology that automates PC office tasks) software 'RPA Robo-Pat DX'. In mainland education and training business, it sells its own platform for job changers to become 'immediately effective' and supports the improvement of children's 'independence' with the high school business notebook 'Foresight' based on the globally bestselling 'The 7 Habits' program and training programs. It features thorough support, one-stop service, and high-profit stock-based income. Its mission is to contribute to maximizing human capital for Japanese companies facing a declining population through 'Human' x 'Tech'.

Its greatest strength is the detailed 'accompanying type sales' that provides support until mastery.

The company's strength lies in the design concept of 'RPA Robo-Pat DX' as a 'Personal RPA' that business experts can master themselves, and 'Smart Boarding' as a 'immediate contribution platform' that focuses on the differences in the growth speed of each job changer. Moreover, their greatest strength is the meticulous 'accompanying sales' support, starting with a free trial, which helps users master the products until they are fully utilized. Furthermore, the reinforcement of the sales force, along with the ease of cross-business synergy due to the elimination of the pure holding company system, can also be considered as strengths. As a result, the cancellation rate of the company's products is low, at around 1%, and both customer popularity and industry recognition are high. They have won various awards, including being ranked No.1 in customer satisfaction for 8 consecutive periods in the 'RPA Tool Category Report 2024 Summer' on ITreview, the largest IT product and SaaS review site in Japan.

The progress of the medium-term management plan is swift, and it is expected to achieve sales revenue a year earlier for the September 2024 fiscal year.

The company has formulated a three-year medium-term management plan (September 2023 to September 2025) aiming for sales revenue of 49,150 million yen and operating profit of 8,850 million yen by the September 2025 fiscal year. 'Robo-Pat DX', 'Smart Boarding', and the app version of Foresight notebook 'Foresight App' are positioned as strategic products. It is promoting growth through cross-selling, expanding partner programs, and various collaborations. Due to strong performance, the progress of the plan is swift, with sales revenue expected to be achieved one year earlier for the September 2024 fiscal year, and operating profit also within reach. Performance contributions include the acquisition of subsidiary (株) Japan Cosmotopia and the full-scale deployment of new business 'FCE Prompt Gate' conducted after the announcement of the medium-term management plan, as well as the capital business alliance with Link and Motivation <2170>, which are likely to boost growth.

New initiatives are also successful, potentially leading to an upward deviation in growth trends.

Performance for the third quarter of the fiscal year ending September 2024 showed significant growth, with revenue of 36.8 billion yen (+17.0% year-on-year) and operating profit of 7.28 billion yen (+25.3% year-on-year). The main products, 'RPA Robo-Pat DX' and 'Smart Boarding,' both performed well, increasing the number of implementing companies and the average revenue per user (ARPU), resulting in double-digit revenue growth. Despite increased costs mainly in personnel expenses such as performance bonuses, profitability improved with the expansion of sales in a high-profit stock business, leading to operating profit growth surpassing revenue growth. Consequently, the performance forecast for the fiscal year ending September 2024 was revised upward due to the initiation of new initiatives to boost growth, which may potentially cause the long-term growth trend to deviate positively. Expectations are high for the next medium-term management plan.

■Key Points

- Both the DX Promotion Business and the Educational Training Business receive favorable reviews for their strong support and one-stop service.

- 'Robo-Pat DX' and 'Smart Boarding' performing well led to an upward revision of the performance forecast for the fiscal year ending September 2024.

- Strong performance coupled with successful new initiatives driving growth. The medium to long-term growth trend might also deviate positively.

(Author: FISCO guest analyst Nobumitsu Miyata)