Trend Micro Incorporated (4704) Earnings Call Transcript & Summary

[Interpreted] This is Negi speaking. This is the Q3 results [indiscernible] and the total operating expenses down by 1% and the result in operating income was up by 8%. Well, Operating expenses was down which can be explained by a major factor, which I will explain later. [indiscernible] prices resulted in lower cost related to stock options that [indiscernible]. Operating income was down by about 1%, [ excluding that adjustment. ] And then total net income is up 51% [indiscernible] of FX loss in the third quarter of prior year. And this year, we have FX gain. And net income grew by 48%. Pre-GAAP grew by 5% and pre-GAAP operating income was up by 31%. [indiscernible] as you may remember consumer [ was at 6% his pre-GAAP and ] excluding FX impact [indiscernible] there's a big difference. [indiscernible] As you remember, consumer was a minus 6% this is precap, and we're excluding FX impact compared to 6% in the business [indiscernible] there's a big difference which can explain by digital consumer, digital settlement outsourcing company in the United States [indiscernible] this year. [indiscernible] also had to be postponed in the first and second quarter so they have much impact. But now we have reached different landowners. And we see increasing revenues because the vehicles that could not take place in the first and second quarters. In Japan [indiscernible] high impact [indiscernible] higher level of [indiscernible] sales. So when the retail [indiscernible] since we have a higher net revenue. Our Enterprise business, plus 2%. In the prior year, this was negative, but now we have a positive number. I have just explained on [ sheet ] prices resulted in lower related costs. And if you exclude this adjustment and you can see that the operating income of the adjustment is minus 1%. This is a progress of the performance. Revenue on the left-hand side, which is more or less in line. This is JPY 274 billion [indiscernible] income. We're doing better than the plan. We still have another quarter to go, but we believe that this is going to be according to the expectation. This is pre-GAAP of the last 6 quarters. In this fiscal year, you can see that the pre-GAAP revenue and profit were suppressed down because of the impact of the consumer business, but now we have made a recovery. As was pointed out by some of the investors, this slide may look like a concern. Enterprise ARR growth is slowing down. Kevin Simzer will talk about more details later related to this point. Vision One sales is strong [indiscernible] and the Cloud One SaaS. These important products and solutions are now seeing lower sales. We are urging the customers to switch to Vision One and as we continue to get revenues from Vision One, ARR growth is expected to recover. This is the cash flow. [indiscernible] We have seen a major improvement against the prior year. Headcounts, headcounts is basically flat slightly [indiscernible]. As I said in the previous quarter, AI technology has been produced and it improves the productivity and efficiency of the company. So sales revenue are increasing without hiring too many people. This is cost slide. I don't have anything specific to comment. Second from the top, this is also contemplated. And as you can see, this is JPY 600 million. On average, it's about JPY 2 billion. So this time because of lower stock prices, this is much smaller. Q3 highlights. Highest ever operating income for the quarter and highest ever ordinary income as well. '25 guidance has not changed. As I said earlier, we expect to achieve these targets. That's all from me, and I would like to provide some explanation later on during Q&A.

Thanks, Mahendra. Hi, everyone. My name is Kevin Simzer, and I'm the Chief Operating Officer for Trend Micro. I'm here to give you a Q3 2025 business update. If you've been following us all in the media, you will have seen a lot of things around us building momentum in and around AI, whether it's in the Enterprise business with us announcing this new fundamentally innovative capability to create a digital twin environment of your IT infrastructure. We'll be showcasing that in Q4 with Trend Micro as the [indiscernible] as the first customer running on that. We announced an expansion to our addressable market into the SIEM space with our Agentic SIEM capabilities, super excited, already won some very impressive wins with that or whether it's in our consumer business, where we've taken AI technology and really attack this issue around deep fakes. And we partnered recently with a U.K. consortium in order to combat identity fraud online or perhaps it's in our physical security business unit called VicOne, which specializes in all things security around the automotive industry and robotics, where we partnered with a very big OEM partner that will be incorporating our technology and making that available into smart vehicles. So lots of stuff in and around AI, and that's been our theme. From a Q3 performance standpoint, the Enterprise business grew at 4% year-over-year on the back of some very nice growth with customers adopting our Vision One platform, which has been our strategy. In the consumer business for Q3, we declined at minus 9% year-over-year. We've telegraphed this that this has been something that we're working our way through and as of Q3, we have worked our way through this issue that we had with our e-commerce vendor, Digital River that went bankrupt, and we needed to switch over to a new merchant of record, and we've now done that. We finished up the final piece of work in Q3 with now our PayPal transactions are now flowing through this new merchant of record. So we should have this issue behind us. But really, the star of the show has been our continued focus in and around making sure that we're driving our operating margin up and really nice to see it up at 23% year-over-year. Yes, we did get some tailwind as a result of our share price. But fundamentally, we've been doing a really, really nice job of keeping track of those operating expenses. From a recurring revenue standpoint, the largest chunk of our recurring revenue exists in large enterprise, and that grew by 3% year-over-year. In small enterprise, we're starting to get some lift off from the strategy of getting MSP partners to adopt our Vision One platform. So that's really nice to see. And then consumer, not surprisingly, declined by 5% as a result of this working our way through the Digital River bankruptcy issues. From a road to 2027 standpoint, I just wanted to highlight, if you look at -- from a gross margin perspective, we're doing a nice job of keeping our COGS in line. Our operating expenses are performing better than 2024 in terms of how much we spend and the operating margin being plus 3% year-over-year year-to-date with an increase of 13% operating income year-to-date. So it's sort of demonstrating that we are really doing a nice job of managing the bottom line as we transform the business. We're transforming the business all around our Vision One platform. This is our big priority to get as many of our customers as possible running on this unified cybersecurity platform with AI built in. It's not just us saying great things about us. It's actually world-leading industry analysts. Gartner recently recognized us for the 20th year in a row as a leader in endpoint protection. Forrester recently published a network analysis and visibility wave. And this was the first time, and we appeared in it in the leaders quadrant, attack surface management from Forrester. Also new is from an IDC perspective, extended detection and response, the fact that we were in the leaders quadrant from a cloud security standpoint, leader. And definitely, what we're really known for is our threat detection capability. So the fact that Omdia recognized us as the #1 ranked company around vulnerability disclosures at 73%. That's up from the 60%. So we are the dominant force in terms of companies that are finding these zero-day vulnerabilities. From a regional standpoint, this is net sales in a common currency across the regions. And you can see it was kind of -- and you'll see it in the pre-GAAP numbers as well. It's kind of an East and West dynamic going on. Japan and the EMEA region continue to perform very well. And we faced some headwind in the West around Americas and Europe. You can see it even more acutely in the pre-GAAP numbers where Japan, as a result of our restructuring that we did in Japan at the start of the year, we're really seeing this as a couple of quarters in a row of high single-digit and double-digit growth. So Japan, we seem to have really righted things and in a good spot. EMEA has been a strong double-digit grower for many quarters in a row, and it continues to perform well. And in the Americas and Europe -- in particular, our largest vertical is government, and we continue to see slowdowns and slow procurements happening in and around governments. We are not seeing losses. We are seeing just governments trying to figure out how to make procurements happen. We also sell a lot to midsized enterprise. And in the Americas, in particular, we were seeing some slowdown in midsized enterprises. So you see that the Americas and Europe declining from a pre-GAAP perspective. From an enterprise recurring revenue standpoint, large enterprise at JPY 1.1 billion, up 3% and small enterprise at JPY 227 million, up 1% year-over-year. In the small enterprise, I alluded to this earlier, and we are really fixated on -- we have around 6,200 MSP partners today. We've identified the most strategic of those MSP partners, and we're fixated on getting them to migrate from the current offering that they're running over to our Vision One platform, which now supports MSPs. We have over 140 of them now running. And that's really nice because we know that once they start running the Vision One platform, they get a lot more value and they can offer a lot more value to their end customers, including cyber risk exposure management, and that drives the ARR per partner and per customer up substantially. So we're really fixated on that, and that's something where we will continue to see our small enterprise business get traction and grow. The largest chunk of our Enterprise business is large enterprise, and that's these 25,000 large enterprise customers that we have. We're going out to each one of those 25,000 and identifying them as are they ripe and ready for an attachment of our Vision One platform and it's 11 modules and how we can get it attached. The reason why we're fixated on it is whenever we calculate the addressable market, it's sitting at $7.3 billion of addressable market inside our own existing accounts today. That's up fairly significantly now that we've added the SIEM cybersecurity addressable market into our portfolio. So that actually makes even more opportunity addressable inside our installed base set of accounts. From a large enterprise recurring revenue standpoint, one of the dynamics that has been -- that we've been working our way through quite nicely, but it's been a journey that we've been on is to move many of our customers away from these perpetual licenses and on to subscription and moving them off of some of our legacy offerings and on to our flagship Vision One platform. That is the bright red at the bottom, $412 million, up 74% year-over-year. That's the primary financial motivation that we have is to drive customers to adopt Vision One. We're sitting at around 11,200 Vision One customers right now. So of the 25,000, large enterprise customers that we have today, we have 11,200 that are running Vision One. That's a 46% attach rate. We're actually running even better than the KPIs that we have set for ourselves. So we're doing a nice job of attaching. And we're attaching for the right reasons. We deliver more value, more value means the customers are willing to adopt even more and more of our platform. When they adopt more of our platform, they consume more of our modules, and we know that the retention rate increases and the ARR also increases. We're sitting at 4.9 average modules deployed on all those Vision One customers that we have. So we're doing a nice job of just gradually increasing the average number of modules that customers are consuming. We've identified one module in particular, which is really exciting, and that's this cyber risk exposure management module. This module is unique in that it contains a lot of our incredible AI technology. We vacuum up the entire attack surface. We sprinkle over top of it our threat intelligence. We run our AI attack path prediction technology. And we serve up for customers what are the assets that they should care about the most and what compensating controls should you put in place. And when this module is deployed, we know that we actually drive more consumption of the platform. In fact, up from 4.9 average modules to 6.4. So we're very fixated on attaching Vision One and getting this module in particular, adopted. All that nets out to an NRR, a net revenue retention of 136%. That's why we are so fixated on getting Vision One adopted, and that's been our mission and continues to be our mission, and we continue to find more aggressive ways of getting customers to realize how incredible our Vision One platform is. Here's 4 quick examples in the Americas, a really nice win where we replaced Sumo Logic. This is a SIEM win. So we replaced a SIEM. They realized the power of our platform and how we can offer incredible value. So we ended up winning that. In the second one, it's a European win and a landing of a brand-new logo. This was one that was currently being serviced by SecureWorks and Sophos. We ended up winning that because the MSP -- MSSP SecureWorks wanted them to deploy Sophos and the customer said, no, they want trend. So we ended up winning the business. This next one is in the AMEA region. It's an expansion and a really nice win. We replaced Microsoft and typical of what we end up seeing where it's a consolidation story and a lot of need for automation and compliance and making sure that we're responsive to a very small team of professionals in the technology vertical. And then finally, in Japan, in food services, a really nice win Palo Alto Networks had a very big issue with their cloud security offering. The customer was very upset. They ended up evaluating alternatives, and we ended up winning that cloud security offering. So several examples of us landing and expanding. In the consumer business, like I said, you can't judge a book by the cover. We have been working our way through the Digital River bankruptcy, and we've done that now. In Q2, we migrated the credit card transactions. In Q3, we finished up with the PayPal transactions. But what we've been -- we have not been distracted. We've been focused in on this beyond device protection. Yes, we do endpoint protection of consumer devices. But we've been looking more and more about this increasing threat that consumers are facing in and around scams and deep fakes and what we can do to help them. And you can see that we've been growing that dramatically, up 38% year-over-year to $32 million. So we've been really expanding our addressable market outside the more traditional cybersecurity budgets and really addressing a pain point that customers have today. It's not just us saying great things about it. It's IDC. This is actually recently published. So this is like hot off the press, Trend Micro recognized as a leader in the entire consumer digital life protection. This is evidence that we are doing good things beyond traditional endpoint protection. Finally, I want to use this as an opportunity as a public service announcement. We've got our Investor Day coming up. We will be talking at length about our strategy for 2026 and beyond and giving you an update on where we're headed relative to our road to 2028 and beyond. So I just put this out there, and please make sure you get an opportunity to get this on your calendar so that you can attend. Thank you, everyone.

[Interpreted] Now I would like to give you an update on the Japan wages business update for the third quarter of fiscal year 2025. I'm having a little bit of difficulty in moving on to the next page. So this first slide is what we have been sharing all the time. So we are going to be doing the Vision One. This is something that I have been repeating a number of times. So let me give you an update on this. And the first point is about this, the domestic enterprise business. So the highlight of this business segment is that the overall enterprise revenue has increased 7% year-on-year. And what is notable here is that multiyear comprehensive contract, a large-sized deal has been growing. This is grown -- increased by 112%. Now we are seeing the increasing number of such kind of big deal like Amazon and AWS usage. There are number of customers for having this multiple year comprehensive contract. This is a good trend for us. Using our product for multiple years, they are actually committing to that. And underneath that, if we are seeing increasing use of the Vision One and then we will be able to continue proposing how to use our products. So as I mentioned earlier, we can actually grow our product offering from one to multiple. There is opportunity for that when the customer has this multiple year contract with us. And also the ASP, the spend by customer can increase during this contracted period. So this is a good thing. And the second point, the revenue of the Trend Vision One, it has grown by 51% year-on-year. So we call it the legacy of the existing users. We are seeing the accelerated rate of migration from the existing customers' legacy product to the new one. And from next year and onward, we are expecting to see that further acceleration speed up to happen. And there is a trend of Vision credit. This is the new scheme that we have from selling a product one by one, but we are going to be counting with a service usage. So this is more like a consumption kind of a thing. And this is growing nicely as well and to buy a certain product and then to consume them. And that kind of users are growing by 66% from the previous year and this is going to be a revenue for the future. And the number of the customers of the Trend Vision One, this number is growing as well, up by 30% from the last year. And CREM, customer numbers is growing also. So visualization [indiscernible] operation, those mindset has increased. And so this customer number has grown by 107% from the previous year. On the other hand, [indiscernible] is sluggish. What I mean here is that comparing against the global market, Japan looks low. However, we are having a lot of customers on an enterprise basis through our partners. So large-sized companies implementation rate [indiscernible]. Japan market has such kind of customers. So the migration of that part of the customer is still low, they will be coming over and migrating. It's not as if that we are losing our customers, but we are expecting to see this attach rate to go up in the future. And next is domestic SMEs. The highlight here is that the overall revenue has grown by 11% from the last year, especially [indiscernible] partners are growing their business and [indiscernible] growing too. So with the UTM alone, we are seeing the 50% growth from the previous year. In our large-sized partners, they are leading the business and the number of the customers has grown by 2% too. It is consist growing, but the [indiscernible] type of endpoint security customer number has grown by 5%, too. And the managed service provider partners XDR service customer numbers, this business has started from 2 years ago, but it is growing nicely, and it has increased by 105% from the previous year. And the number of [indiscernible] partners is growing too, grown by 15% from the previous year. And [ low light ] so the small amount of business deal, what I mean here is below JPY 500,000. In Japan, this kind of a smaller size deal is quite a lot in Japan, but we have to make sure that our relationship with the partners to recover so that we will be able to catch up on this small amount of businesses. So we have seen a slight decline from the previous year. So we would like to make sure that we can increase our base customers. And so we consider this to be low light. And lastly, this is a consumer business. In 2025, [indiscernible] business. We are trying to expand this. And as a result of that, the third quarter results [indiscernible] device security area. As Kevin mentioned earlier, we are following the global trend. We have seen the sales ratio of the [indiscernible] device security rate to be 32%. And we are seeing an increasing number of the customers for using the anti-fraud measures. And the number of customers have [ 1.3x ] of the previous quarter. And this [indiscernible] faster, the number of downloads is growing too. And there are types of the [indiscernible] case a short story of the drama available on YouTube. We are recreating the actual work cases that happened in this drama, and we are distributing this on YouTube. And there are quite an amount of young people for watching this. And as mentioned by [indiscernible], there is end of life for the Windows 10. And with that, we have started to see the increase in the sales of the PC in accordance with that, the other products of ours that is selling together with the PC has seen the increase of 65% from the previous year. And this will contribute to that anti-fraud products as well. But we have been doing this enlightenment activities on security. So out of the 47 prefectures in Japan, we already have collaborated with 46 perpetual policies. So we think that we'll be able to cover all the 47 prefectures by end of the year. And notable thing is that there are 6 cases, police, they do not [indiscernible] not mentioned the number of other companies, but just saying that people need to be on alert against the fraud, but that will not prevent the people to fall a victim of these fraud cases. So what the police has been doing is that they are allowing us to have this trial coupon for the Trend Micro's fraud buster. And in [indiscernible] city in its application, they are introducing Mr. Trend Micro's Fraud Buster and they are distributing this trial coupon. And collaboration with the JCB, we announced that using the JCB application, our products has been used to identify the fraudulent messages coming in via mail, SMS and SNS. So many of the people recognize this fraud busters and they are trying to promote that together with us. But the low light, the number of the downloads has increased. However, the conversion to the paid business is still low. And so how we will be able to let the people to become the paid user is the key. So we would like to communicate the value of using this fraud -- anti-fraud product. So our challenge is to increase the conversion rate. And the smartphone carriers, proprietary security, NTT, DOCOMO and [indiscernible], they do have these security products of their own, and they are trying to sell their own products and promoting their agencies to sell their products. So against this backdrop, how can we sell our value of our products? We try to communicate the true value of our products so that the user will be willing to purchase our products. So this is the low light for us. So that concludes my presentation or update on the Japanese market.

Daiwa Securities, Ueno.

[Interpreted] Vision One is growing strongly, as you have explained, Kevin, but total ARR is flat for the enterprise. Why is this happening? Vision One's current strategy, well, existing costumers are switching to Vision One and maybe not getting a lot of new business. Is that the correct conclusion? Do you have any specific numbers you can share with us about new versus existing customers for Vision One? How many of them are switching from existing customers? Or how many are brand new customers coming on to Vision One? That's my first question.

Yes. Yes. Thanks. I'll start and perhaps Mahendra or [indiscernible] will also jump in and add color. From a strategy perspective, we already laid out, and I hope you're seeing it, but maybe I'm not doing a good job. The entire company is rallying around our Vision One platform. And it's not just us saying good things about it. It's all these industry analysts. So we think we have something very special in this platform, and we are fixated on driving both new business but also upgrading existing customers onto the Vision One platform. We're seeing the results with 74% year-over-year growth, so it continues to grow at very high double-digit levels. And we're doing it for the right reasons, not only because our customers get more value out of the platform, but the NRR is substantially higher at 136%. The GRR on the Vision One platform is several percentage points better. So for all those reasons, that's why we have the strategy in place. But in order to get a customer to upgrade, sometimes we have to do certain things around making the deal size acceptable to the customers. So we are offering up in some cases, some aggressive discounts. We are encouraging multiyear transactions. Our multiyear transaction count is up, percentage is up very substantially. So we are, in fact, doing things in order to get customers there that are not helping with our ARR. So we're taking the long-term approach, and we think that this is the right thing for us to be doing for our customers is to get them upgraded onto the Vision One platform with all different means possible. Another one that we didn't talk about on this call, but we did talk about on the previous call is -- on the Q2 call is that we've even been so bold as we are end of sale, the SKUs, the license SKUs for our non-Vision One SaaS offering. So another mechanism that we put in place, those end -- that end of sale happens on December 31 of this year, and that is another mechanism that we're using in order to convince customers that they ought to be moving on to this flagship unified cybersecurity platform with AI built in. So we have a number of different things that we're doing.

[indiscernible]

[Interpreted] But you're not disclosing the number for the new logos, but you're getting new logos, is that right?

[Interpreted] Well, the most important for us right now is to make sure that the existing users upgrade. So this is why we have smaller numbers for new logos [indiscernible]. We have already shared some examples, as you could see, right? [indiscernible] discontinued end of January -- end of December. So we are going to see a trend in January and February to see whether some of the conventional customers will not switch out to your competitor, but just go to Vision One.

So I would like to load the next person to ask questions.

[Interpreted] From SMBC Nikko Securities. My name is Kikuchi. I have 2 questions. U.S. government shutdown impact, how significant was it? So you may not be able to identify directly how much the impact was [indiscernible] if you could share that, that will be appreciated. And how is that going to be going forward? So right now, it seems that the government is about to reopen, but how do you see this? This is my first question. And also in addition to that the global consumer [indiscernible] I think that you have completed this work, but the pre-GAAP is growing is what you have mentioned, but from when do you think that is post-GAAP will grow?

Kevin, can you take the first question?

Yes. Yes. So yes, you specifically mentioned the U.S. government, but overall, I was highlighting that we've seen government procurements in the West overall. We've seen sales cycles extended. We've seen just procurements just taking a lot longer. And the reasons are the ones you cited. We've seen the impact at the start of the year from DOGE. The U.S. government still does not have a CISO. There's just so many open vacancies and people changes that has made procurements just that much slower across the U.S. government. We've seen the impact of tariffs as a result of that. And then more recently with the shutdown, it's too early to tell what the impact is of the shutdown specifically. We have our fingers crossed that it does, in fact, open up and that things resume fairly quickly within Q4. The U.S. government overall within our business is within the Americas, it's around 10%. So it's not a huge amount. But if it does go on in a protracted way where we can't, in fact, do any U.S. government business, then we'll see, but we're not envisioning that.

[Interpreted] Your second question is whether post-GAAP, when will that be reflected? I think that is your question. So this is 100% deferred. So the pre-GAAP, even if it grows, it's not going to 100% post-GAAP in the next year. So the [indiscernible] will be recovered. So gradual impact.

[Interpreted] Understood. But -- so what is recovering is only a part. So for the fourth quarter and next fiscal year, the pre-GAAP -- can I expect that the pre-GAAP will come back in the consumer business?

[Interpreted] Well, for the consumer business, well, in the first half, [indiscernible] should be [indiscernible] but because of this destruction, it was postponed and it will be deferred and it will happen in the fourth quarter. The first regular one -- regular business and new business in case of Japan, [indiscernible] benefit is what the Japan is experiencing, but it will not continue forever. So the new issue will remain in [indiscernible] mentioned earlier. The fraud buster [indiscernible] challenge for us to further increase this new business.

[Interpreted] So what I would like to check with you is that when is it going to be coming back? So I was also thinking that even if the decrease in consumer will not affect your overall business, but if that decreased by 30%, 15%, it is not going to be negligible. That's what I have learned from this time. So if it's not the number of the customers [indiscernible], then I'm sure that the special impact is happening in the non-Japanese areas. So when will that come back?

[Interpreted] So in case of Japan, the population is decreasing and the number of users is decreasing because of that. And the next market that is [indiscernible] market, if we can capture the business here, then we will be able to once again see the rebound in the number of users. [indiscernible] is an opportunity as was mentioned, Kevin [indiscernible] that we are partnered within U.K. consulting to tackle this fraud, there is a possibility for that. So I think it is possible to increase the number of users overseas [indiscernible] Japan because of the demographic situation. We need to put a further effort in trying to increase the number of the customers.

And the second question is for you, Negi-san, about the cost. So when you revised plan the other day, you mentioned that there's a very big impact from the foreign exchange, but it has come back this time. On the cost side, I was expecting not to [indiscernible], a number that you showed with the third quarter [indiscernible] than what I have anticipated, including the stock option and thinking that the cost is not that [indiscernible] So fourth quarter [indiscernible] grow because of seasonability. But with this earnings results, if that bonus will not grow as what we have seen in last year and is there any cost side in that is going to grow from the third quarter -- in fourth quarter? So you mentioned that it is as expected. But on the cost side, is there any special cost items that may see increase in the fourth quarter?

[Interpreted] Well, one is the personnel cost. We are doing some adjustment on the full year. So that's one thing. And the second thing is that about the cloud cost as Kevin mentioned, but we are seeing increase in the number of additional users. And if that realized, then the cloud cost may go up. So Kikuchi-san mentioned that we may not pay bonus, but [indiscernible], we would like to remunerate our staff with a bonus if their performance is up to that level. But pre-GAAP or the ARR growth will determine the amount of the bonus. If we have paid the bonus, there must be some increase in revenue. For the third quarter pre-GAAP, you really have to work extremely hard in the fourth quarter. Otherwise, the pre-GAAP will go up.

[Interpreted] It's Henderson, JPMorgan. I have 2 questions. First one, you have announced share buyback [indiscernible]. And you made this announcement in the third quarter. Can you please explain why this timing? I think we should plan this to do this before the end of the year anyway, but you shift this timing of buyback announcement. And my impression is that usually do the buyback in the beginning of the fiscal year. So how does it affect the timing of share buyback of next fiscal year? Can you please explain why the timing is different this year? And does it have an impact next year?

[Interpreted] Share buyback is one of the measures of shareholder return. As we have already communicated, we have a policy and the results of a policy. So this has not really changed. And it will be the same next fiscal year as well. As far as timing is concerned, it's not like we are trying to respond to the share price, but [indiscernible] this year and what is the profit for this fiscal year. We need to take a look at those numbers. So I believe that share buyback will provide [indiscernible] in the second half of the year rather than the first. After the March AGM, dividend will be paid out. So considering that, I think it's better to separate them. We don't do everything at once.

[Interpreted] Second question. In Q2, you communicated to us that [indiscernible] services will be discontinued in September for new sales and also the renewal would be turned in December. And I think you're communicating to with the customers and also venders about this. How are they responding? How are the customers responding, especially the users and vendors will be in Japan. Are they responding differently from overseas users and vendors? And is this [indiscernible] surprised? Are you resisting to this change? So the [indiscernible] that you announced in the second quarter, how are customers and is responding can right now. Can you please share that information with us.

Kevin that's for you, I think.

From a platform perspective, the -- it's actually quite a nice story that we get to tell to customers whenever we approach them about upgrading onto the Vision One platform. Our Vision One platform actually has all of the same functionality that the non-Vision One platform has and a lot more. So it's an easy story for us to be able to tell. So it really comes down to a question of -- on a customer-by-customer basis, whether they have the bandwidth to go through the upgrade process. We've automated the upgrade process in a very innovative way. So we make it quite easy for them, but it's still something that a customer will have to go through and some training on the new platform. But so far, the customers that we get to engage with, they have really embraced it. And you see that in the ARR growth numbers. So customers are, in fact, upgrading onto the platform. We're sitting at 46% attachment rate of our 25,000. So the fact that we have that many, we have a plan that we're methodically walking through with each one of those non-Vision One customers and our customer success teams are working them through that upgrade process.

[Interpreted] Enterprise, can I ask a follow-up question? Even If this is successful in Japan, but when I listen to the system integrators, I understand there is a very strong demand for security. That's true. But what the system integrators are implementing basically [indiscernible] basically selecting multiple services for a customer. I think this is still a strong practice in Japan. And maybe the platform adoption is different from one region to another. Maybe some regions are lagging behind and some regions maybe leading in terms of adoption. Would that be true? Because if I listen to Japanese system integrators, they don't implement a lot of platforms. They are still doing best-of-breed collection of different products and services. So what is the current status of that platform adoption?

Yes. We definitely see different geographies have different levels of platform adoption. That's a true statement. Perhaps in the West, it's much higher, but we're having a lot of success in Japan itself. And I wouldn't want you to just believe me, but you can just listen to the latest Gartner 2026. So industry analyst firm, Gartner, they have their 2026 technology road map laid out for CISOs. And one of the top things that they talk about is costumers being advised to adopt a platform approach. So it is happening. We're having a lot of success. We're seeing the success in the Japan market specifically. We had a bit of a slow start, but it's really coming on quite strong right now. And that's really what has been helping us drive the higher growth rates that we've been getting in the Japan market and enterprise. I'll add one footnote just -- and I don't want to speak global systems integrators are big partners of ours. So we are working with sort of the top 10, 2 of them being Japanese global SIs, and they're definitely doing projects with our Vision One platform. So yes, we are seeing success across the globe and in Japan about adopting our platform.

[Interpreted] And I would add. It varies depending on the size of the customer and also industry. And there is strong interest in our CREM. So there are some POC projects that are going on right now. Whatever they have in their environment, they want to be able to use one single monitor to look at everything and also proactively understand the risks. And this is what we can provide and they appreciate. So we have unique features of the platform, and that can be incorporated what they're doing. And the system integrators -- well, actually Vision One is being sourced to midsized companies as well and [indiscernible] strong in this midsized segment. And in that case, I know that it's more efficient implement the whole platform rather than trying to do a combination of different services. So we are beginning to see more partners pushing for the platform approach. So industry by industry, there are supply chain risk that can be evaluated and there's some guidance coming from the top and some of the vendors actually trying to fit our proposal to that situation as well. So depending on the type of the customer, the type of partner that is strong in the segment is different for midsized market. I think they find it easier to make a platform proposal. And larger system integrators tend to have a bigger portfolio of offering. So how can they use our platform to increase the efficiency of their services, that would be the interest. So the way our solution is used is different from one segment to another. But anyway, it's appreciated in various ways, and we are seeing growth. That's a fact. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]