Cumulative results for Q2 FY2026: Revenue ¥13.3B (YoY +¥1.2B, +10.5%), Operating Income ¥0.0B (improved by +¥0.4B from -¥0.4B in the prior-year period), Ordinary Income -¥0.1B (improved by +¥0.3B from -¥0.4B in the prior-year period), Net Income -¥0.3B (roughly flat vs. -¥0.3B in the prior-year period). As of October 1, 2025, Maze was made a subsidiary, expanding the System Development Business. While absorbing M&A-related expenses of ¥0.4B and goodwill amortization of ¥0.1B, core Operating Income reached a profit of ¥0.5B. The core business profitability is on a recovery trend, but losses continue at the ordinary level due to interest burden. Despite the revenue growth and a trend toward returning to profitability, bottom-line losses persist.
[Revenue] Revenue was ¥13.3B, up +10.5% YoY. The primary driver was the consolidation contribution starting at the beginning of Q2 from Maze. Standalone revenue saw a slight decline due to a temporary slowdown in short-duration projects; however, the mix shifted toward long-term, recurring-type to 63% (up from 17% in FY2022), improving the earnings structure. New services “AI wrapping,” “M&A BOOST,” and “DIGITAL BOOST” were launched, establishing an end-to-end model across Business Innovation and System Innovation. [Profit and loss] Gross profit was ¥4.6B (gross margin 34.2%), absorbing SG&A of ¥4.5B to post Operating Income of ¥0.0B (operating margin 0.2%). This marked a turnaround from an operating loss of ¥0.4B in the prior-year period. Stronger cost control and full-scale operation of a KPI management framework contributed. Meanwhile, M&A-related expenses of ¥0.4B (brokerage fees, etc.) and goodwill amortization of ¥0.1B weighed on Operating Income, with core Operating Income (pre-M&A-related costs and goodwill amortization) at ¥0.5B. Non-operating expenses included interest expense of ¥0.0B (interest burden coefficient -4.66, interest coverage 0.96x), resulting in Ordinary Income of -¥0.1B. After tax-effect adjustments, Net Income was -¥0.3B. [One-off factors] The ¥0.4B in M&A-related expenses and ¥0.1B in goodwill amortization were one-off costs related to the acquisition. The gap between Ordinary Income and Net Income (-¥0.1B vs. -¥0.3B) was mainly due to accounting adjustments stemming from a tax burden coefficient of 1.93. [Conclusion] While revenue grew and the operating stage turned profitable, bottom-line losses persisted due to acquisition-related costs and interest burden (higher revenue but lower profit).
Segment disclosure is limited, but the business consists of two areas: Business Innovation and System Innovation. Business Innovation provides business strategy formulation and customer behavior change initiatives based on data-informed customer understanding, and is shifting toward long-term, recurring-type. System Innovation builds adaptive mechanisms via the Adaptable Data System (ADS), and the acquisition of approximately 40 engineers through making Maze a subsidiary strengthened the organization. Maze (FY2024 revenue ¥7.1B, Operating Income ¥0.8B) contributed to the cumulative Q2 results and was the main driver of revenue growth. While standalone revenue temporarily stalled, the company plans a recovery in the second half by strengthening sales of successor projects to existing engagements and enhancing proposal capabilities for new clients. While the breakdown of Operating Income by segment is undisclosed, the progress of post-acquisition integration of Maze and expansion in the System Innovation area will be key to improving the future profit structure.
Profitability: ROE -1.5% (roughly flat from -1.6% in the prior year, calculated), operating margin 0.2% (improved by +3.5pt from -3.3% in the prior-year period), net margin -2.0% (improving trend from -2.5% in the prior-year period) Cash quality: Operating Cash Flow/Net Income -6.4x (despite a net loss, OCF was positive at ¥1.7B, driven by working capital improvement and non-cash expenses), FCF -¥1.2B (OCF ¥1.7B − investing CF ¥2.9B, mainly due to acquisition outflows) Investment efficiency: Capex/Depreciation 2.0x (of the ¥2.9B investing CF, approximately ¥2.9B was acquisition-related outflows, indicating a growth investment phase) Financial soundness: Equity Ratio 63.2% (down from 86.2% in the prior year but still at a healthy level), current ratio 411.2% (cash and deposits ¥14.9B, current assets ¥15.9B/current liabilities ¥3.9B), interest-bearing debt ¥3.9B (long-term borrowings, Debt/Equity ratio 0.22x)
Operating CF: ¥1.7B (-6.4x relative to Net Income of -¥0.3B. Despite the net loss, OCF was positive due to working capital improvement Decrease/Increase in trade receivables and contract assets +¥1.3B and the addition of non-cash expenses such as depreciation and goodwill amortization) Investing CF: -¥2.9B (primarily due to -¥2.9B for the acquisition of shares of a subsidiary. Outflows were related to the Maze acquisition; acquisition of property, plant and equipment was minimal) Financing CF: +¥4.3B (proceeds from long-term borrowings +¥5.1B, dividend payments -¥0.6B) FCF: -¥1.2B (OCF ¥1.7B − investing CF ¥2.9B, temporarily negative due to the acquisition) Cash generation assessment: Requires monitoring. While OCF is positive, continued net losses and negative FCF indicate the need for external financing to balance dividends and investments. With cash and deposits of ¥14.9B, short-term liquidity is secured, but the continued interest burden makes improving profitability an urgent task.
Ordinary Income -¥0.1B vs. Net Income -¥0.3B: The factor behind the expansion from an ordinary-level loss to a bottom-line loss was accounting adjustments driven by a tax burden coefficient of 1.93 (including the negative effect of the effective tax rate). Non-operating expenses included interest expense of ¥0.0B (interest coverage 0.96x), and the interest burden was the main cause of the ordinary loss. Non-operating income was limited at less than 5% of revenue. Accruals: Operating CF of ¥1.7B exceeded Net Income of -¥0.3B (quality alert). This was due to working capital improvements (decline in accounts receivable, etc. +¥1.3B) and non-cash expenses such as depreciation and goodwill amortization. While the positive OCF is commendable, the quality of earnings itself is still in the process of improvement given ongoing net losses. Considering core Operating Income of ¥0.5B excluding ¥0.4B in M&A-related expenses and ¥0.1B in goodwill amortization, the core business is profitable after excluding one-off costs, and the earnings structure is improving.
Full-year forecast: Revenue ¥35.0–¥40.0B (progress rate 33–38% vs. interim ¥13.3B, below the standard 50% progress), core Operating Income ¥2.4B (progress rate 21% with cumulative Q2 at ¥0.5B, significantly below the standard 50%). Despite a temporary pause in standalone revenue, the company expects achievement through a planned recovery in the second half. Forecast revisions: Full-year earnings and dividend forecasts are maintained. While Maze was consolidated at the beginning of Q2, the progress rate of revenue is low due to a greater-than-expected slowdown in standalone revenue. In the second half, the company aims to restore standalone revenue by strengthening sales for successor projects to existing engagements and enhancing proposal capabilities to new clients, targeting achievement of core Operating Income of ¥2.4B. Background to progress variance: Acquisition of short-duration projects in the standalone Business Innovation area was softer than expected, and the rise in the long-term, recurring-type ratio (63%) improved earnings quality at the expense of short-term revenue stagnation. Strengthening company-wide, cross-functional marketing and sales through the newly established Marketing & Sales Division in January 2026 and bolstering the consulting structure via changes in the scope of responsibility of Executive Officer Yabe are key to a second-half recovery.
Dividend policy: The plan for an interim dividend of ¥26.5 and a year-end dividend of ¥27.0 is maintained. The dividend policy is approximately ¥53.5 per year, equivalent to 5% of the IPO offering price of ¥1,070, and the three founders will decline receipt of dividends. Against Net Income of -¥0.3B, the total dividend is approximately ¥0.6B, with a payout ratio of -1109% (calculated), an unsustainable level on a profit basis. Dividend sustainability: With cash and deposits of ¥14.9B and a current ratio of 411.2%, short-term dividend payment capacity is secured; however, with FCF at -¥1.2B and continued net losses, dividends are being supported by surplus cash. With financing CF at +¥4.3B (proceeds from long-term borrowings +¥5.1B), funds are being raised to balance dividends and investment. If profit recovery does not follow, maintaining dividends in the future entails the risk of drawing down equity. Achieving full-year core Operating Income of ¥2.4B and maintaining core business profitability are prerequisites for sustaining dividends.
[Short term] Standalone revenue recovery in the second half (success of strengthening sales for successor projects to existing engagements and enhancing proposal capabilities to new clients; effects from the establishment of the Marketing & Sales Division), PMI progress at Maze (synergy creation in the System Innovation area and utilization status of approximately 40 engineers), and validation of the effectiveness of the KPI management framework toward achieving core Operating Income of ¥2.4B [Long term] Further increase in the ratio of long-term, recurring-type revenue (63% → target level) to improve the quality of the earnings structure; customer acquisition and revenue contribution from the new services “AI wrapping,” “M&A BOOST,” and “DIGITAL BOOST”; progress in sourcing additional M&A (six TOP meetings and one LOI in the cumulative Q2) and strengthening functional complementarity with target businesses; and staying on a growth path toward FY2028 financial targets (Revenue ¥80.0B, core Operating Income ¥9.3B or more, maintaining a 40% CAGR)
[Position within the industry] (Reference information; our research) We note the company’s positioning within the information services industry as reference information based on publicly available financial data. Profitability: Operating margin 0.2% (details of industry median are omitted due to limited comparables. In the company’s own historical trend, 2026 was 0.2%, improving on cost control) Growth: Revenue growth rate +10.5% (in the company’s own historical trend, +10.5% in 2026, reflecting a growth trajectory including M&A contribution) Soundness: Equity Ratio 63.2% (generally a high level in the industry; the company remains within a healthy range) Note: Industry benchmarks are reference information compiled by the company based on publicly available financial data. Due to limitations in the number of comparable companies and periods, detailed gaps relative to the industry median are not provided.
Two key takeaways stand out from the results. First, the return to profitability of core business earnings power and the progress of the business model shift. The achievement of core Operating Income of ¥0.5B and the increase in the recurring-type ratio to 63% have enhanced the quality and repeatability of the earnings structure. Excluding M&A-related expenses and goodwill amortization, the core business is on an improvement trajectory, and the KPI management framework and cost control have begun to function. Second, the rise in financial risk accompanying the M&A strategy and balance sheet expansion. Indicators such as goodwill and intangible assets of ¥6.5B, interest-bearing debt of ¥3.9B, interest coverage of 0.96x, and an abnormal payout ratio indicate reliance on external financing to balance growth investment and shareholder returns. While cash and deposits of ¥14.9B secure short-term liquidity, if profit recovery and acquisition synergies do not materialize, there is a risk that maintaining both dividends and financial stability will become more difficult. Going forward, standalone revenue recovery in the second half, integration progress at Maze, and contributions from new services toward achieving full-year core Operating Income of ¥2.4B will be important checkpoints in the financial data.
This report is an automatically generated earnings analysis document produced by AI that integrates XBRL earnings release data and PDF earnings presentation materials. It is not a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the company based on publicly available financial data. Investment decisions are your own responsibility; consult a professional as necessary.