HONYAKU Center Inc.

Business Details

The core business of the Group. With patent firms, pharmaceutical companies, automakers, and financial institutions as its main clients, the segment provides high-quality translation services across four fields: patents, pharmaceuticals, industrial localization, and financial/legal. The business is handled by the Company together with three consolidated subsidiaries (Media Research Institute, Inc., Panathea Inc., and Fukuyama Industrial Translation Center Co., Ltd.). The Company continues to strengthen its competitiveness by leveraging natural language processing technologies such as computer-assisted translation (CAT) tools, machine translation (MT), and large language models (LLM).

Recent Overview

Sharp declines in the industrial and financial fields led to an overall 4.8% year-on-year decrease in the Translation Business to ¥8,096 million.

Revenue from the Translation Business in FY2026 (ending March 2026) was ¥8,096 million (down 4.8% year on year), and segment operating profit was ¥545 million (down 29.7% year on year). The industrial/localization field declined 15.3% due to reduced orders from automotive-related companies amid uncertainty over U.S. trade policy and a decline from the prior-year large project comparison base, while the financial/legal field also declined sharply by 12.2% due in part to a decline from the prior-year large government project comparison base. The patent field increased 1.1% on the acquisition of new major clients, and the pharmaceutical field remained roughly flat year on year. An impairment loss of ¥37 million was also recorded in the Translation Business segment.

Key Products

Growth Drivers

• Acquisition of new major clients in the patent field and continued stable orders from patent firms
• Maintaining orders from foreign and domestic pharmaceutical companies in the pharmaceutical field and recovery in demand from CRO clients
• Expansion of IR-related document orders following the launch of a new service targeting timely disclosure information
• Strengthening service competitiveness through AI technologies such as MT and LLM, and promoting data-driven sales and marketing
• Operational efficiency improvements and service sophistication through AI and data utilization under the medium-term management plan (FY2026 (ending March 2026) through FY2028 (ending March 2028))

Risks

• Risk of declining orders from manufacturing clients such as automotive-related companies amid uncertainty over U.S. trade policy (already materializing as a 15.3% decline in the industrial/localization field)
• Structural changes in the translation market and intensifying price competition due to the spread of machine translation (MT) and generative AI
• Order volatility risk due to dependence on specific major clients (already materializing as declining orders from CRO clients and some major corporate IP department clients)
• Risk of margin decline due to increased selling, general and administrative expenses (¥4,448 million in FY2026, ending March 2026, up 0.5% year on year)
• Risk of future increases in depreciation and amortization associated with increased intangible fixed asset investment, centered on software in progress (¥306 million at the end of FY2026, ending March 2026)

Business Details

Operated by ISS Inc. This segment mainly involves dispatching translators to handle document translation work that, for confidentiality reasons, cannot be taken outside the client company, as well as dispatching interpreters to perform interpretation work within client companies. The business is built on solid demand for highly skilled language professionals and is one of the reportable segments alongside the Translation Business and Interpretation Business. Revenue accounts for just over 10% of consolidated total revenue.

Recent Overview

Revenue declined 4.4% year on year to ¥1,123 million, but segment profit improved

Revenue from the Staffing Business for the full year FY2026 (ending March 2026) decreased 4.4% year on year to ¥1,123 million. While placement fee income from recruitment placement trended above the same period of the previous year, reflecting solid demand for personnel with strong language skills, revenue declined due to sluggish growth in the number of regular employees. On the other hand, segment profit improved from ¥30 million to ¥36 million, and the profit margin improved from approximately 2.6% to approximately 3.3%.

Key Products

Growth Drivers

• Continued solid client demand for highly skilled language professionals
• Placement fee income from recruitment placement exceeding the same period of the previous year (full year FY2026, ending March 2026)
• Securing and expanding highly skilled language talent through collaboration with the Group's interpreter/translator training school, ISS Institute
• Expansion of the client base by broadening the scope of services in response to changing client needs

Risks

• Sluggish growth in the number of regular employees constrains the ceiling on revenue
• The need to respond to diversifying client demand and changing work styles among job seekers due to the spread of telework
• Impact on revenue if securing and retaining dispatched staff becomes difficult
• A revenue structure that remains susceptible to fluctuations in the Translation Business, as the segment accounts for just over 10% of consolidated revenue

Business Details

The Interpretation Business, operated by ISS Inc., provides interpretation services for in-house corporate meetings and small to medium-sized international conferences. Main clients include pharmaceutical-related companies, electrical/electronic component manufacturers, and information and communications-related companies. In addition to continued orders from existing clients, the segment secured multiple global conference projects and large spot projects, resulting in revenue of ¥1,323 million for FY2026 (ending March 2026), a new record high for the third consecutive fiscal year. The segment accounts for approximately 12.2% of consolidated revenue.

Recent Overview

Achieved a record high for the third consecutive fiscal year on the back of global conference and large spot project acquisitions

In the Interpretation Business for FY2026 (ending March 2026), in addition to continued orders from existing clients such as pharmaceutical-related companies, electrical/electronic component manufacturers, and information and communications-related companies, the segment secured multiple global conference projects and large spot projects, resulting in revenue of ¥1,323 million, up 11.4% year on year and a record high for the third consecutive fiscal year. Segment profit also increased to ¥114 million from ¥90 million in the prior year, with profitability improving as well. As the Translation Business and Staffing Business experienced revenue declines, the Interpretation Business's role in supporting overall Group performance has grown.

Key Products

Growth Drivers

• Continued orders from existing clients (pharmaceutical-related companies, electrical/electronic component manufacturers, information and communications-related companies, etc.)
• New acquisition of global conference projects and large spot projects
• Deepening client relationships through high-value-added service proposals combining interpretation work with related services
• Solid trends in interpretation demand accompanying the global expansion of corporate clients
• Diversification of the revenue base through an expanding client count

Risks

• Risk of a decline in the number of international conferences and in-house corporate meetings held due to economic downturn or reduced corporate activity
• Risk of substitution of on-site interpretation demand due to the spread of online meeting tools
• Human resource risk related to securing and maintaining the quality of registered interpreters
• Reduced corporate activity among clients due to geopolitical risks such as uncertainty over U.S. trade policy
• Seasonality and irregularity in revenue due to fluctuations in orders for large spot projects

Business Details

The Group's Other segment is centered around ISS Inc. and Citrus Japan Co., Ltd., among others, and provides the convention business (planning and management of events), language education (ISS Institute) for training interpreters and translators, foreign patent application support services (drafting of patent specifications for foreign filings through assistance with filing procedures), and data collection, analysis, and utilization support services. It is managed as a business segment not included in the reportable segments.

Recent Overview

Revenue declined due to contraction of the convention business, but segment profit/loss turned positive

In the Other segment for FY2026 (ending March 2026), revenue decreased 3.6% year on year to ¥328 million due to a decline in the convention business. On the other hand, segment profit turned positive, improving from −¥10 million in the prior year to ¥10 million. Additionally, Citrus Japan Co., Ltd. was consolidated as a subsidiary during the current fiscal year and added to the scope of consolidation. FIPAS Inc. merged with the Company effective October 1, 2025, and was removed from the scope of consolidation.

Key Products

Growth Drivers

• Expansion of the business domain through the consolidation of Citrus Japan Co., Ltd. as a subsidiary
• Capturing patent-related demand in the foreign patent application support business
• Expansion of data collection, analysis, and utilization support services (demand for data used in AI and LLMs)
• Improvement in segment profit/loss through fixed cost reductions accompanying the contraction of the convention business (from −¥10 million in the prior year to ¥10 million in the current year)
• Personnel supply coordination between the language education school (ISS Institute) and the Staffing/Interpretation businesses

Risks

• The structural contraction of the convention business continues, leaving limited room for revenue recovery
• The overall segment revenue scale remains small (¥328 million for the full year), limiting its contribution to Group performance
• The individual performance of services other than the convention business (language education, foreign patent application support, etc.) is not disclosed, resulting in low transparency of the earnings structure
• Risk that medium- to long-term enrollment demand at the language education school will change due to the spread of AI and machine translation
• Cost and operational risks associated with the business integration resulting from the merger with FIPAS Inc.