TMICYTMICYOTC
Loading
Mahendra Negi: [Interpreted] This is Negi speaking. And using this slide, I would like to give you the overview of the fourth quarter and the full year result. And this is a summary of the fourth quarter. And the revenue, we have seen a 5% increase and operating profit has increased by 50% and OP margin is 18%. We are seeing the 2 years in a row of improvement. And this will be talked about later on. However, pre-GAAP numbers may look low. However, a year ago, in 2024 fourth quarter, the pre-GAAP growth was extremely high, it's at 20%. So in that respect, this is starting from a very high level. And this is the changes from a year ago. Revenue, not changes, but operating income, the blue line, this is the result of the fiscal year 2025 as you can see that there is a very big increase from -- in the operating income. And as I have mentioned earlier, due to the decrease in the stock price, the stock option-related cost has decreased and which pushed up the operating profit. And this -- and thanks to the yen depreciation, excluding the impact of the currency, the gap is minus 4%. And as mentioned earlier, a year ago, fourth quarter, this was very high. So that's the reason why this year, it was minus 4%. But in Japan, the Windows 10 termination was one of the factor that happened which sort of made people to refrain from making a purchase. And pre-GAAP, as you can see, this is a year ago. Pre-GAAP profit has increased. This is ARR. Going forward, rather than the pre-GAAP, we are going to be explaining our forecast the results based on ARR. And ARR, this has slowed down a little bit, 2% in the fourth quarter a year ago, it was 7% but it dropped to 2%. But this will be explained in Eva's explanation as how we will be planning to lift this ARR. So please wait until her explanation. And cash flow, this is moving very stably. And employees, not much difference, sideways mostly. And expenses, as you can see $8.8 billion of the cloud expenses in Vision One service has been expanding and the cloud service is being used there. So there -- that is increasing cost. And this is based in U.S. dollars. And if we translate that into Japan, there's some impact. In yellow, this is the salary and benefit. It looks as if that it has dropped from a year ago. But the major reason is that the fourth quarter 2024, the pre-GAAP growth was extremely high. And in tandem with that, this salary is included here. In ARR, in the post -- profit will be the basis for this variable comprehension -- compensation. And so we are going to be focusing more on ARR. So highlight is that the fourth quarter, we have achieved a record high net sales. And in the full year terms, we have seen a record high revenue and also the operating profit. And this is the full year number. Maybe you are very much interest in this dividend per share. In the previous year, it was JPY 184 and we are expecting to pay JPY 185 per share. But after this general shareholders' meeting in March, the final number will be determined, but we are expecting to pay out JPY 185. And this is the 2026 guidance. Yen depreciation is progressing from a year ago. And based on that, this is our guidance, 9% increase in revenue; and operating profit, minus 2%. Reason as -- Eva is going to be talking about this, there are 2 reasons here. One is with the development of AI, the new business expansion opportunity will be there. So we are going to be spending on this business and also the in-house start-up cost, in-house start-up is growing at the moment. So at the very beginning, it will post the negative profit. So this is the factors. And we are expecting to see the 6% increase, excluding in a constant currency basis, 6% increase in revenue.
Eva Chen: I think before I dive into the future strategy of Trend Micro, I'd like to spend a little bit time talking about software value in the GenAI era. Since Trend Micro is one of the large software company that originated from Asia, of course, this affects Trend Micro a lot. Software at the end, the value usually generated by doing 3 things. First, collect the data; second, organize the data so that customers can see the data and generate business intelligence for customers. But in the GenAI era, these all 3 steps will be changed. First, if your data is just very standard external defined data, then certainly, GenAI can do it much better. And also with the unstructured data that can be consumed by GenAI, I think the traditional entering way of collecting data will be obsoleted, of course. The second thing, organize the data. Of course, GenAI with flatten all the data, break all the data silo, connect them all together can generate or organize the intelligence much better than traditional way. And the third layer, if you are just providing the business intelligence, intelligence is not anymore. The most important thing because it can be generated by the AI. And therefore, I think in the future, the value of a software company really defined by all these 3 things. First, the data you are collecting must be specifically about the customer fit into the customer's special environment and special need, such as for Trend Micro security data. We need to collect all the -- have the sensor and collect all the desktop telemetry, server telemetry, network telemetry. All of these are especially about the customers' special data. Those internal data collection is most important. And secondly, you need to organize it so that the customer can easily assess it with natural language or natural interface that customer can understand their own data better. And lastly, the most important part is your data, your information is support for the customer to make the best decision. And best decision is different from each of the customer. It's not necessarily there's a universal best decision for all the customer. And therefore, the value of the software is specialized in customers' data collection, data organization and specialize in helping customers to make the best decision for themselves, and that is the value of the future. As you know, Trend Micro as a cybersecurity company, we actually has been moving to AI security, AI as our platform to develop the best business support decision for cybersecurity. And that, the fundamental of that, as you can see in this page, this is -- we call it the digital twin for cybersecurity. Customers or the sensor collecting all those cybersecurity-related specific data for the customer, organizing into -- can be simulated into a customer's information flow digital twin and customers. Therefore, imagine that when they need to do pen test, they need to know their cybersecurity exposure then they can use this digital twin to simulate the attach and seeing what is the real response on the digital twin, how their cybersecurity posture is and therefore, can proactively provide the best security for their real environment that kept on changing. And those cybersecurity decision, best decision for finance sector or for manufacturer sector are quite different. And therefore, we believe cybersecurity is going to be dominant and very important software value that is going to be -- exist and even more important in the GenAI area. So that's our view of cybersecurity software value in the GenAI area. Now I'd like to take a little bit time to talk about more of Trend Micro. Since Trend Micro last year, we already see that need for specialized in different areas to create that specialized customer cybersecurity decision support. That's why we reorganized our company into Enterprise segment that is TrendAI that specialized in enterprise cybersecurity. TrendLife will be specialized in consumer and so forth business. And then we also have [ B1 ], which is specialized in the physical AI security. And lastly, we also work with Winstron to establish a new company called Magna AI that would help customers to establish their AI operation securely and more starting to rewrite their AI application. So I'd like to go into this financial report by all these 3 areas that we are focusing on. So first of all, TrendAI, I believe the Enterprise business, as I say, our competitive edge is that we can use digital twin for cybersecurity to personalize or customize for the customer environment. And then we use our specialized cybersecurity intelligence to create the Cybertron asset or -- and specialized language model. Together with the agentic AI, we can help customers make the best cybersecurity decision and going forward, can also help them automate and save their efforts on their cybersecurity practice. So for Trend Micro, I would say we take not only we redesigned our product platform, but also we are reorganizing our GTM, go-to-market strategy. So there's 3 big things that we are doing in our go-to-market. First is our fragmented platform and product need to be organized and because this type of point product sales create a lot of product silo and also very heavy price competition. And therefore, we believe we need to reorganize this into a new go-to-market strategy, which is lead with Vision One as an AI security platform and integrate with agentic SIEM, vulnerability management, exposure management into a unified platform go-to-market strategy. That we will start very focused on executing that starting 2026. And actually, the platform way of selling, we're already starting. And right now, our Vision One platform sales already about 38% of our total revenue. Into 2026, we believe we will continue to grow our Vision One platform strategy and platforms way of selling. And early quarter-to-date, we've seen that already our Vision One is already about 41% of our total trend AI ARR. So that is the first one. First of all, lead with the Vision One platform way of selling. That's the first change in our GTM. The second one, in 2025 and before -- I think our biggest challenge is that in our go-to-market organization, our incentive structure is tied to the gross sales. Gross sales means total gross sales or post the whole gross sales margin. And that's why our sales force are diluting their focus on the platform-driven growth. Going into 2026, our go-to-market strategy will change to adjust our incentive to prioritize our annualized year 1 sales and reducing our unnecessary discount and creating more durable revenue and managing core value of the platform. So the indicator we are using is that we want to make sure that our total multiyear product sales are focusing on the year 1 value because before, because of the gross sales when multiple year deal was supersized the deal, but also taking heavy discount. But now by changing this type of compensation strategy, we believe we will correct our sales behavior. And early quarter today, the progress is that our multiyear impact is starting to decline and now it's at 17%. Before in 2025, that impact is about 38%. But now we're already seeing that we are correcting all of this sales compensation and getting more healthy in our sales behavior. So that's the second one. The third one is very important is before Trend Micro is selling by license-based pricing. The license pricing is driving deep discount and also have a lot of procurement friction. Customer has -- whenever they want to buy a new module from Vision One, they will need to go through all this procurement again. And therefore, I think it's a very important thing that starting 2026, we totally changed our Vision One. The Vision One product strategy is going into the Flex program, which means that they buy a total amount we call it credits, the credits they can use. And then whenever they want to deploy, they consume all these credits by allocating them to specific products or modules they want to use. This way, we believe TrendAI Flex program will drive predictable spending for customers and scalable consumption and also reduce the procurement friction in customers. So that is a very important change, and we believe that will help whole Trend Micro's go-to-market much more smooth and have much more predictable spending. So early quarter today, the progress we're seeing that is Vision One average ARR already, we've seen this average ARR continue to grow. And for Vision One, that is our per customer average ARR, before was $35,100 and now already grown to $35,500 in the early this quarter. And compared with non-Vision One, the average ARR is $5,400. As you can see, the difference, customer value is much more different than what before. Those are the 3 very important change, go-to-market change, and we believe we are on the right pace and TrendAI will be using all of this new platform and new platform way of selling to progress and produce more value for our customers. So that's TrendAI. Moving to consumer, which now we call it TrendLife. TrendLife before, the challenge is that the softening because our original product mainly focused on antivirus for consumer business, but softening in PC sales leading to less security need, and therefore, our value was diminishing. But starting last year and progressing to 2026, we're seeing there's a new need such as customers' Digital Life Protection, including anti-spam, not anti-spam scam, which is a biggest money loss from consumers' business and also the usage of AI and how to use AI safely to help their digital life quality. I think those are the new area that we -- the TrendLife will be focusing on. Therefore, now we're already seeing that 2025, our Digital Life Protection increased now to 36% of our total sales. So we are starting to migrate our revenue to Digital Life Protection rather than pure antivirus protection. So the ARPU for this Digital Life Protection is 2x higher than the antivirus PC attachment type of revenue. So TrendLife is also early quarter today, the progress we see is that Digital Life Protection continue to grow and now is at about 45% of our total TrendLife sales already. That's TrendLife. Another TrendLife's go-to-market, a very important thing is that we are moving on to more of the customer -- we try to manage the customer trend and reduce the trend by focusing on Digital Life Protection and increased auto renew, auto renew opt-in. We're starting to see auto renew has 2x the renewal rate than the manual renewal. And therefore, new customer in auto renew is increasing 11% since Q4 2025. So early quarter today, also renewal rate also improving and it's now sitting at 73% of the renewal rate. So on TrendLife, I think all this auto renewal opt-in and also the Digital Life Protection value is going to make TrendLife revenue continue to grow. Now move to our newest -- the newest start-up, I would call, the one that we cooperate with Winstron and with utilizing a lot of NVIDIA's technology, we established a company called Magna AI. Magna AI is focusing on help countries, government, big enterprise globally when they want to utilize, establish the AI application, and we help them to establish all this AI application, AI infrastructure safely, securely. Because this is a very different sales motion. When customers are setting up this sovereign AI and AI new application, it's not about buying a software and install it like before all this cybersecurity is you need to design your data flow, your architecture, everything securely. And that's why we're starting to -- we take the chance to work with Winstron, one of the big AI infrastructure provider and working with NVIDIA and other [ NCP ] player to form this Magna AI. Early indicator, we already have several very big MOU that was signed by the -- at Riyadh and at Malaysia. And also, we are working in Taiwan, a lot of this type of a big deal. So those are the big initiative, but Trend Micro is using this chance to make sure that we can provide secure AI infrastructure and secure AI application for our customers. That's Magna AI. And VicOne is established 3 years ago. And now it's focusing on not just the vehicle security, but also all the robots or the physical AI cybersecurity. We -- in 2023 to 2025, the problem solution fit is the major focus. But in 2026, big one is going to get into growth and expansion. So we're already seeing we have the secure robotic solution and working with all the vehicle company and also the robotic company to provide the embedded cybersecurity into all of these new AI robots and AI-driven car vehicles. That's a big one. So overall, these are Trend Micro that we are working on. 2025 -- 2026, our growth target for the overall Trend Micro is we want to have ARR, 13% growth; net sales, 9% growth and our operating income will decline by 2%. But as you can see, where do we spend the money? First, in TrendAI because we believe this transition and this is a great growth area. And therefore, we spend more time, more money on to TrendAI enterprise sales. And TrendLife, actually, we are optimizing and we believe we can increase the operation income by 1%, but a lot all those investment and cost increase is mainly on VicOne and Magna AI, where we are investing on new market. And that's why in 2026, we believe Trend Micro is going into the growth and we will deliver the best cybersecurity value for our overall different type of enterprise, consumer and the new AI infrastructure, sovereign AI and robotic AI, all those security coverage for all our customers. So looking forward to a good year in 2026. Thank you.
Kevin Simzer: Hi, everyone. My name is Kevin Simzer, and I'm the Chief Operating Officer for Trend Micro. I'm here to give you an update on our Q4 and full year 2025 business performance. If you've been following us at all in the media, you will have seen a number of announcements with a common theme of all things AI, whether that's us partnering with NVIDIA in order to introduce new safeguards, guardrails to protect those next-generation AI factories or whether it's Trend leveraging AI in order to incorporate new capabilities into our platform to protect customers enterprises from threat actors. 2025 business performance. Actually, we are quite pleased with the performance of the business as a whole. Net sales totally across the company, up 5% for the quarter, that's 1% for the year, while improving the overall operating margin to finish the year at 21%. The growth in the business certainly came from the enterprise part of the business. Net sales up 8% for Q4, that's 4% for the year. And that is all on the back of customers adopting this Vision One platform. In the consumer business, you're well aware of the issues that we faced early on in the year as a result of the bankruptcy of our e-commerce provider, Digital River. We're pleased to say that we've worked our way through that now, and we're poised to actually start to see that business back to growing in 2026. But during that period, we stayed very focused in on beyond device protection and continue to drive that expanded addressable market that we've been going after in our consumer business. From a total company recurring revenue standpoint, we sit at a very healthy $1.7 billion. That's up 1% year-over-year. Of course, that growth came from both large and small enterprise. Speaking of enterprise, this is the flagship platform that we're leading with, a single AI security platform, the most comprehensive unified platform on the planet. Our platform, it's not just us saying great things about our platform. It's these world-recognized industry analysts. And in the last quarter alone, Gartner highlighted us once again for endpoint security, Forrester for a leader in network analytics and visibility, IDC in both extended detection and response and cloud security. And then finally, Omdia, who continues to rank us #1 in public vulnerability disclosure, those zero-day vulnerabilities that gives us a head start on threat actors and what they've discovered. Now from a regional performance standpoint, global enterprise growth. This is net sales. It's in a constant currency, so you get an idea of the performance across the 4 different regions. And you can see the global enterprise growth of 4%. AMEA and Japan performing quite strong, Europe and the Americas, somewhat less so. But where you really start to see some of the global headwinds that we started to hit was in this chart here. This is our pre-GAAP performance, global enterprise growth sitting at minus 4% year-over-year. You can see that as a result of us finishing the go-to-market transformation in Japan, we're really starting to see the fruits of that labor that we put in, in 2024 and in 2025. And you're going to see us adopt the exact same framework as we go into 2026 for the rest of the regions. In particular, I wanted to highlight in the Americas and Europe, we definitely saw challenges with global government. Tariff uncertainty has certainly caused a number of enterprises and governments to actually pull back some of their spend. We're also starting to see a movement, and you're going to see as we start to talk about 2026, as we move to much, much more of an ARR model. We really want to drive that first year performance. So you're going to see these pre-GAAP numbers are not going to be the best indicator of the performance of the business. We are going to be moving more and more towards an ARR model. Enterprise recurring revenue sitting at $1.3 billion, that's up 2%. And I think the highlight here is actually the $229 million in small enterprise. We're starting to see growth coming back in that small enterprise segment. We had had several years of declining performance. And now with small enterprise, we're starting to see that lift off. Well, why is that? Well, that's specifically as a result of us introducing Trend Vision One for MSP partners. That's a category of partners that offer a set of services to small enterprise. We have over 6,000 small -- of those MSP partners, and we now have 190 of them who have adopted Vision One. The nice thing about that is that when they adopt it, they can offer more powerful capabilities for protecting those small enterprises, and they can charge more for that. And we're seeing that, and that's what's starting to fuel our growth. In the large enterprise segment, this is really the -- it tends to be the priority. We have over 25,000 large enterprise customers today. And we're fixated on making sure that we get the Vision One platform attached to all of these. Once we attach, we know that we can expand based on the breadth of our overall platform. Why are we so fixated on that? When we calculate the addressable market that exists in our installed base, we can see that there's approximately USD 7.3 billion of incremental ARR opportunity just from our existing trend customers. We do that by landing the Vision One platform. And you can see relative to the overall recurring revenue for the Enterprise business, the red box in the bottom right for Q4 2025, $467 million, growing at 58%. So we are fixated on landing more Vision One and expanding more Vision One within our installed base. Now as we go into 2026, you're going to see actually us start to emphasize quite a bit around new logos. We honestly feel we can -- we now have the strength and the tailwind behind us from a platform perspective that we can start going after new logos. Specifically around existing customers, we're sitting at 11,500 of our existing customers that have adopted Vision One. That's a 48% attachment rate. And like I said, we know that once we get Vision One attached, the average ARR per customer is substantially higher at 3.6x. Now once we get the platform attached, we know that we are focused in on solution adoption. As customers adopt more and more solutions, the retention rate increases and so too does the impact on the ARR where the ARR increases. Solution growth with Vision One, we now sit at an average of 4.9 solutions deployed in Vision One. So that's a great testament to customers that like the breadth of the portfolio. We know there's one solution in particular, this cyber risk exposure management that's sitting at 4,700 customers today that once this solution is deployed, this solution actually allows an enterprise or a government to get a complete visibility across their enterprise and find out where the exposure is deployed. All that to say, the NRR, the net revenue retention for the Vision One platform still sits at a very market-leading 130%, and we continue to stay focused in on that expansion. If you look across the globe, here's the 4 major regions, all with 4 expansion opportunities that we've won in Q4 across verticals like multimedia, technology, insurance and food services. And you can see a common theme across all of these, which is customers are looking for a platform, and that's how we're winning this business. Switching gears to consumer. From a consumer standpoint, as I mentioned earlier, we now have this e-commerce vendor, Digital River behind us. We've completely replaced all of that technology and gone over to a different set of vendors now with a backup. And we've stayed focused in on driving the business forward around beyond device protection. $32 million, up 11% year-over-year. So that's going to continue to be a common theme here. Yes, we're still doing endpoint protection for consumers, but we are expanding our addressable market beyond that. In fact, it was really nice to be recognized in this broader portfolio in consumer Digital Life Protection by IDC, where we hit the leaders quadrant. So truly getting the recognition of our broader platform targeting those consumers. Now we've been using this terminology called Road to for some time now. And this is kind of our internal North Star to give you an idea. And you can see that out in 2028, we are fixated on driving sort of healthy high single digits to double-digit growth. That is our plan. We want to do that while improving the margin. And in 2025, we did get some growth, and we did, in fact, improve the margin quite substantially by 3 percentage points. So we did accomplish what we had set out to do at the start of the year. That said, we are going to be pressing more heavily on growth. And we've divided the business up into these 4 different categories. In order to have a good, healthy business, you need to be thinking about things holistically. So we've got things in a hypergrowth category with 2 companies that we are incubating, one around automotive and robotic security and the other around IT consulting and systems integration. And we see those as hyper growth, small, require investment right now, but those definitely are areas for hyper growth. TrendAI, that is our Enterprise business. We are fixated on a compounded annual growth rate of around 8%. And then in the medium growth category, TrendLife, our consumer business, up 5%, sort of healthy single digits. But like any healthy business, you also need to be exiting things, and we will be exiting our legacy SaaS offerings. And that is what is creating some of the downward pressure on our overall performance. However, if we look at 2026 growth targets, now this is our internal management P&L, just to give you some insight across these different areas. We are fixated on growing ARR double digits. And we do see that growth largely coming from our Enterprise business, TrendAI. We are targeting 15% year-over-year growth in ARR for 2026. In TrendLife, our consumer business, we are targeting 6% ARR growth for 2026. And in our hypergrowth area, these are quite small from an ARR perspective, but we're looking at substantial increases in overall ARR, but this will require some investment. In fact, all of these are going to require some investment. And that's why you're seeing that our operating income for 2026 will decline ever so slightly. We see that as a short-term thing that we need to do in order to get the top line growth fueled and in particular, to put the go-to-market changes in place that we need and to fuel this growth. Finally, we think that we're structured well for growth. We have all of our businesses completely focused in on this AI market opportunity. We're either finished or in flight with our transformed go-to-market strategies, and we're investing a little bit in order to drive that top line growth, but in particular, with ARR. Thank you, everyone.
Akihiko Omikawa: [Interpreted] So now I would like to give you an overview of the fourth quarter full year 2025 Japan region business update. So first, the domestic Enterprise business, fourth quarter results highlight. First, the overall revenue for the Enterprise business has grown by 22% year-on-year, especially the public business and the multiyear comprehensive contracts. The new large-scale business, we have had many of them. And this has grown by [ 24% ] year-on-year. This is driving this good result. And the Trend Vision One revenue has increased by 25%, especially Trend Vision One endpoint security revenue has surged. And the Trend Vision One a number of customers, it has surged as well. And continuing, especially CREM customer numbers are growing fast. So the customers are trying to put the proactive risk management measures in place, and we are seeing increasing number of such customers. So when it comes to the lowlight, Japan has a very big customer basis via partners. So overall, relatively speaking versus the global, the Vision One attach rate is low. But -- just focusing on where the global is focusing, it is almost on par with the global. And next is the domestic SME business. The revenue has grown by 16% year-on-year, especially the UTM solution sales has increased rapidly. And number of customers every quarter, it is growing. So it's growing constantly. And the SaaS type endpoint security customer numbers are growing steadily as well. But on the other hand, as was being talked about, this managed service provider partner, the ARR result via the managed service provider partners are growing as well. And the lowlight, we are covering quite a wide range of the market in Japan. So the partners around the nation, their sales with the small-sized businesses has been decreasing from the past. And for the full year, I hope that you would take a look at this at the leisure time. And for the next fiscal year, everyone already has touched upon this, so I'm going to skip this as well. And 2025 fourth quarter progress of the consumer business. Highlight is the beyond device security sales ratio has increased to 35%. And the Fraud Buster download, it's not growing robustly, but on a quarter-on-quarter basis, we have seen 85,000 to 86,000 downloads. So the number is growing. So as I have been saying, the issue is how we can upgrade them to the full fee services. In the global, there was a mention about the third party evaluation of the global basis. But here in Japan, we've been assessed that we have this strength of providing security technology in both enterprise and consumers. And also at the same time, the U.K.'s fraud prevention service, Cifas, we have started collaborating with them. And they have this mobile app called JustMe, and we have started to provide our functionalities there. And at least in quarter 4, we were able to complete covering the 47 prefectures. We have been expanding the collaboration with the police agencies. And now we are collaborating with all the 47 prefectural police authorities, and of which 70 of the fraud prevention promotion leaflets, our [ logo ] names are mentioned there. So in other words, if the company or the people are thinking of doing something, they are sort of putting our names as a recommendation and they are sort of promoting to download our products. And regional governments, we partner with 12 municipalities. And for their citizens, the Fraud Buster is being recommended to those citizens as well. In a new initiative, we are currently trying to solicit the monitors. But together with Japan Post, we are participating as the anti-scam specific companies in this new post office visit service for seniors. And for the lowlight, DOCOMO and other mobile carriers, they have started to promote their own security products. So sometimes they are they are competing directly with our products. But by demonstrating our value add per customers' spend has been increasing. And this is the full year. So I'm going to skip this. And this is IDC MarketScape's evaluation, we are selected as a leader in 4 areas. So we are the only company in the world that caters -- that has security technology for both consumers and enterprises. So this ends my presentation. Thank you.
Matthew Henderson: [Interpreted] JPMorgan, my name is Henderson. I have 3 questions. First of all, consumer performance guidance, sales growth 9%. My impression is that you are quite bullish, but ARR growth is expected at 13%. Q4 increase was only 2%, which was quite slow. Based on that understanding, from the first quarter to the fourth quarter of 2026, what will be the pace of growth or acceleration that you're expecting? That's my first question.
Unknown Executive: [Interpreted] I would like to respond to this question. For ARR, unfortunately, we do not provide outlook on a quarter-by-quarter basis. And Kevin's slides numbers is basically the management's numbers. This is our idea or what we're thinking about. So this is not directly translated into the GAAP numbers that I present. I cannot really give you that number. Now ARR and also the net sales for accounting, I will be explaining that in the future, but this 13% does not necessarily directly translate to the 13% for the full year.
Matthew Henderson: [Interpreted] I see. A follow-up question. Full year landing performance, absence for the remuneration for last year, I understand that. But if the sales doesn't grow according to guidance, if it's slower, in that case, would you try to save the cost so that the full year operating profit can be committed to? So if the scenario goes negatively, how would you respond? What is your plan?
Unknown Executive: [Interpreted] We want to focus on the sales growth. As Eva has explained, we have many opportunities in front of us. So we will be taking some risks. And OPM improvement, we have been making efforts in the last 2 years. And this year, we want to prioritize sales growth.
Matthew Henderson: [Interpreted] I see. And one last question. Well, it's not really a question, but more like a proposal advice. Now IT shares have been sold off because of AI concerns. And in next year, PER, 20x or less, in that case, if the shareholder return is 100%, is 70%, I think the investors will provide a stronger support to your company. So JPY 5 billion buyback was announced. And also in the second half, you may have planned to execute the rest of the share buyback. So what are your thoughts on this?
Unknown Executive: [Interpreted] 70%, this is a payout ratio. And 100% of the interest is returned to the shareholders. We have already declared that. We didn't have time today, but my presentation material actually includes information about the 100% return. 70% dividend plus share buyback. And also we have another year as well. So the remaining amount will be returned as well. So 100% shareholder return.
Matthew Henderson: [Interpreted] I see. I understand. So payout ratio, you don't have a plan to increase it to 100%?
Unknown Executive: Well, that's 70% dividend and the rest is share buyback. And according to the shareholders, they'd rather receive this not 100% in dividend, but split between dividend and the share buyback. So that's what we do.
Unknown Executive: [Interpreted] So once again, we go back to that original who raised the hand at the very beginning. Kikuchi-san, are you ready? Seems like we are not getting Kikuchi-san's voice. Can everyone else hear Kikuchi-san's voice? Maybe not. Kikuchi-san may have some problem with the PC. Is it possible for Kikuchi-san to send the question in text? It seems like he or she is going to exit from this meeting once and then coming back.
Satoru Kikuchi: [Interpreted] Yes. This is Kikuchi speaking. Can you hear me?
Unknown Executive: Yes. Now I can hear.
Satoru Kikuchi: So pre-GAAP ARR, I have a question in this area. And I have 2 extra questions. The fourth quarter, pre-GAAP last year was very good. So I was expecting to see the somewhat tough number in the fourth quarter. So -- but at the end of the day, it was better than expected. So fourth quarter Y-o-Y, 2% increase. But last year, I think this was declining quarter-on-quarter. So quarter-based ARR, you mentioned that you're not going to provide us with a breakdown. But already ARR is already showing the momentum for the growth. But put aside the numbers, but second and third quarters, last year, it was declining quarter-to-quarter. But this year, can we expect that this ARR will grow from the fourth quarter last year and grow going forward until the end of the year? That's my question.
Unknown Executive: [Interpreted] Yes, yes, that's right. In the first quarter, we are not expecting to see ARR to jump up. We are expecting to see the gradual increase over the course of the year.
Satoru Kikuchi: [Interpreted] So breakdown by region, U.S., it seems like you're a little bit cautious, but which area are you expecting to see the growth?
Unknown Executive: [Interpreted] So if you take a look at this in the full year, that is in accordance with our guidance. But Europe, Asia, we expect those regions to grow first and then later catch up by the U.S.
Satoru Kikuchi: [Interpreted] So according to your guidance page, Americas and Europe, 2% [ place ] within you, is your guidance. And Americas in the second half, are you expecting to see that it will recover sharply in the second half?
Unknown Executive: [Interpreted] Yes, because last year, it was declining. So we are expecting to see a higher growth rate this year.
Satoru Kikuchi: [Interpreted] And last year, the consumer has halved and it was a very big impact. But by recovery in the consumer, are you expecting to see the increase in revenue?
Unknown Executive: [Interpreted] Exactly. That's my scenario.
Satoru Kikuchi: [Interpreted] And my second question, nonoperating profit and loss and also the impact of the Magna is my question. So Magna, it will start with loss, but how much of the loss are you expecting? And also for the nonoperating, Magna is not relevant. But nonoperating items, there was the loss from the currency. And there is [ uptick ] across in the recurring profit. So if there is a loss from the exchange was not there, then you must have enjoyed the positives. But what is the mix this time around for the nonoperating? So it seems like you're not expecting to see the loss from the currency, but it seems like this number here is somewhat small. Any special reason for this?
Unknown Executive: [Interpreted] Magna is 100% subsidiary. So it's not -- is included in the expenses. So your question, Kikuchi-san, is not the fourth quarter, but our projection, right?
Satoru Kikuchi: [Interpreted] Yes.
Unknown Executive: [Interpreted] So as Negi-san mentioned, Magna AI is our subsidiary. So it is included in the operating profit and loss line. So it will not affect to the nonoperating items. So what is included here is that equity method company, TXOne, it still is making a loss. So the loss of to be recovered requires a slight time. So that's the reason why this is included. And the cash and others, we already have returned to the shareholders, so it doesn't have much cash left. So the interest income is very small. So nonoperating loss and the profit is almost 0. So the only thing that we factor in here is the loss from the investment.
Satoru Kikuchi: [Interpreted] So the previous year, the loss from the exchange, you had JPY 6.2 billion. About interest income is JPY 3.5 billion. It has increased by JPY 100 million from the previous year. So it sounds like you incur some of that, but you're not expecting that to happen?
Unknown Executive: [Interpreted] So we cannot expect that to happen because this loss from the exchange this year, we didn't expect much. But even if there is some interest income, it may sort of cancel off this loss from the foreign exchange. That's what we think. And the last year, nonoperating line was very rough.
Satoru Kikuchi: [Interpreted] So equity method comparing it against the last year and the year before that, so the loss has dropped from JPY 2.6 billion to JPY 1 billion. Are you expecting to see that loss to grow?
Unknown Executive: [Interpreted] Well, so it still is going to be loss, but this magnitude of loss will be reduced because the book value of this equity method is -- has come down.
Satoru Kikuchi: [Interpreted] So if the book price comes down, then it is almost 0. So the loss is continuing. But in terms of the book value, it will not make any changes. So if there isn't any foreign exchange loss, it seems like it is going to be flat, right?
Unknown Executive: [Interpreted] Yes.
Makoto Ueno: [Interpreted] This is Ueno, Daiwa Securities. Can you hear me?
Unknown Executive: [Interpreted] Yes, we can.
Makoto Ueno: [Interpreted] Going back to the proposal made earlier, well, short-term share buyback, I think, is a waste. And we see shift they hurried and the share buyback, but it only impacts demand and supply. It doesn't really affect the share price. Now AI share prices are coming down, as you can see in the newspaper. Because AI will be taking away replacing all the software work or SaaS-related tasks. But TrendAI is trying to utilize AI with agentic AI, still cybersecurity is a very unique domain. So if it's database or platform SaaS or security SaaS, I think you will be one of the companies that will be providing such security using AI. That's how I see the future. So I think you should explain logically how you can gain advantage from AI. That would help push up the share prices.
Unknown Executive: [Interpreted] And of course, I will try to explain this in my report for the investors. But anyway, I just wanted to share this thought with you.
Makoto Ueno: [Interpreted] Now next, I have a question. In the briefing material by the CEO, Page 12, there's a mention about TrendAI. And I'm sorry, I don't have a full understanding of this. License-based pricing and the big discount, is this discount on the purchasing price? Is that a correct understanding?
Unknown Executive: [Interpreted] You're talking about Eva's presentation material, right? Yes, Page 12. Well, Eva is here. So of course, she can respond, but the intention of this is that when we sell single product, point product, we have to provide bigger discount. And salespeople are only focused on increasing sales and single point product, multiple year contract has the highest discount rate. But if we try to sell in a different way, we can apply a different perspective. If we try to sell multiple products to one customer, we try to discount too much.
Makoto Ueno: [Interpreted] I see. So sales approach, there's going to be a volume discount if point products are sold in large volume?
Unknown Executive: [Interpreted] Yes, that's correct.
Eva Chen: Right. And just like you suggested, because Vision One now is using agentic AI to provide cybersecurity, which is a big differentiator. And therefore, we can utilizing our platform way of selling and have a better control of our price.
Hideshige Watanabe: [Interpreted] This is Watanabe speaking, DS Asset. I have a question about employees. 400 people were going to be hired for the year that just concluded, but there is a slight decrease. So what is the hiring plan and the headcount plan to the end of the fiscal year? JPY 1.5 billion of extraordinary loss was also incurred for the retirement benefits. Can you please explain that as well? And you are trying to drive a sales increase and you needed to hire people. That is why you wanted to increase the headcount. But in order to make sure that you can increase sales for this coming fiscal year, how important is headcount? Well, in the fiscal year that was just concluded, you didn't have to increase the headcount, but there is maybe a net increase. Can you please comment?
Unknown Executive: [Interpreted] Well, I'll try to comment 50% and the rest will be responded by Eva. Retirement benefit payment. Well, platform sales requires a completely different skill sets. This is why we need to refresh the skill sets of employees, which means that the old approach. Well, employees who have the old approach maybe will graduate from the company and the new people will be joining us and we will be actively hiring. So this is one point. Eva, would you like to add?
Eva Chen: Yes, that's exactly why we are talking about the go-to-market transformation in TrendAI because in selling platform and Vision One type of products, we cannot continue to use the old license or SaaS license selling way. That's why last year, we did have a big refresh of our sales and marketing personnel. So you see some people left, but we didn't increase the headcount. That is because we're refreshing. Going into 2026, once we have this new go-to-market foundation firm, we know what type of new people we need to hire, and we have better training program to make sure that our onboarding of the new capability people and we will start to hire more people gradually, not too much, but we will increase our salespeople, especially in U.S., U.S. and Europe, we do have a few countries that we need to increase our sales personnel.
Hideaki Tanaka: [Interpreted] I'm from BofA Securities. My name is Tanaka. I have 2 questions. So the first one is that this fiscal year's guidance on operating expenses, you are expecting to see about JPY 27 billion increase. What are the items that you are expecting to increase and decrease? Can you give me the specific items?
Unknown Executive: [Interpreted] Operating expenses, so it is JPY 24 billion, JPY 25.1 billion.
Hideaki Tanaka: [Interpreted] In cloud, how much of the cloud are you expecting to have in stock option expenses, if you had any assumption, we would like -- I would like to know that. And about the variable compensation, you are basing your sales to pre-GAAP operating profit? But you mentioned that you're going to be changing it to ARR. Then the 13% increase ARR, I know this is internal number. And if this is a gradual increase, and then I'm expecting that the personnel costs may come down as well. So can you give me the idea what are the operating expenses?
Unknown Executive: [Interpreted] Habara-san, do we disclose any such items? So as you can see here, this time, we are expecting to see the decrease in profit. And so cost side, we tend to describe in detail than usual. So what Tanaka-san mentioned -- excuse me, to address Takaka-san's question, we are not planning to give you the breakdown of the details. So we would like to see the increase in the sales personnel. So R&D as well as sales and marketing department, we expect increase in number of headcounts and personnel costs. And TrendAI and TrendLife in the consumer business, we have done the rebranding and starting from this year. So including rebranding expense, that's marketing cost and also to acquire more of the regional customers. This is on our Enterprise business side. So to do so, we are planning to do the various events and do the activities to acquire the companies. So the marketing cost will increase there as well. So the personnel costs and the marketing costs are the major ticket items. And there might be some increase in decrease in the smaller items, but those are the 2 major items.
Eva Chen: I think we do disclose that in our new start-up like Magna AI, we just started, and therefore, we will hire both R&D, sales and marketing people. So those are the increased costs included in this forecast.
Hideaki Tanaka: [Interpreted] If possible, when you have a new start-up company like this, we would like to know its performance. So if you could show us numerically how much it's grown, that's going to be very helpful for us.
Unknown Executive: [Interpreted] Moving on to the next question.
Yusuke Hori: [Interpreted] This is Hori, Mizuho Securities. I have 2 simple questions. One, about your thinking for share buyback. There was no announcement in the first half last year until November, there was no announcement. And I think you mentioned that including cash repatriation from subsidiaries, you don't really know until the midpoint has passed. So share buyback announcements tend to happen during the second half. Well, that was my understanding anyway, my interpretation that you have announced JPY 5 billion of share buyback. Now -- maybe your concept has changed, maybe you have a better idea about the cash position and you don't have to wait for the midpoint for the fiscal year. And in the press release, there's no mention about the share price, but maybe the share price is low and you can do JPY 5 billion right now, and that is why you're doing this. I just want to understand whether your policy has changed?
Unknown Executive: [Interpreted] The policy has not changed. But JPY 5 billion, considering how much profit we can for the fiscal year, this is doable. And also thinking about the current market environment, we will be excluded from BCI Index and also software companies impacted by AI. There are some uncertainties in the market. So for now, as a shareholder return, we can do this share buyback. We heard [ Kawa-san's ] opinion today, but we believe that this is an appropriate timing to do share buyback. Basic policy has not changed, 100% return and also to what extent can we do this. So we try to split it into 2 we don't necessarily split into 2. That's not part of the policy.
Yusuke Hori: [Interpreted] I see. Second question is about legacy SaaS unwinding. And once that's completed, what about the new acquisition? What is the current status of progress? And when can we see the momentum really change? What is the recent status? What can you share with us?
Unknown Executive: [Interpreted] Kevin, do you have any comments on this?
Eva Chen: I think on that part, in my presentation, I already disclosed talking about this indicator of the non-Vision One sales as the percentage and the Vision One sales as a percentage. And it's at the end of Q4 last year, it was sitting at -- Vision One was sitting at 38% but up until now is progressing to 41% of the ARR contributed by Trend Vision One. And we will continue to monitor this, and this is the indicator that we will be announcing and tracking.
Kevin Simzer: And I would just add that the other thing that we did to encourage this to accelerate is at the end of 2025, we have end-of-life the ability to purchase those specific licenses. So customers when the renewal comes up, will have to renew on to the new platform. So we will see a great deal of movement in 2026.
Eva Chen: And since the new platform has a lot of greater capability to deal with today's threat landscape, I think the upgrading rate should be quite significant because they will need this new technology to deal with the new threats. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]