On an effectively standalone basis, 1H revenue rose +42.1% and the company swung to an operating profit. Both AI Products and AI Solutions delivered top-line growth.

Key Positives From The 2Q Results

On an effectively standalone basis (prior to P&L consolidation of Collabo Techno), revenue came in at JPY 624M (+42.1% YoY per company disclosure), landing at 102.1% of the 1H plan of JPY 611,870k. The company swung from an operating loss in the year-ago period to operating income of JPY 13M and recurring profit of JPY 16M, with gross margin improving to 45.8%. Contributions from upstream talent acquired through the business transfer, together with higher unit pricing in AI Products, drove the improvement in the earnings structure.

• Revenue of JPY 624M (+42.1% YoY), 102.1% of the 1H plan. AI Solutions at JPY 388M (+44.4% YoY) led the growth
• Gross profit margin of 45.8% (vs. 35.7% in the year-ago period, +10.1pt on our estimates). Improvements in the cost and SG&A structure from the introduction of FD-X and NaNa, plus a higher mix of high-value-added FDE projects, contributed
• Swing to profitability with operating income of JPY 13M and recurring profit of JPY 16M (both losses of JPY -36M in the year-ago period). EBITDA of JPY 41,956k also turned positive (company disclosure)
• Average revenue per account in AI Products of JPY 7.2M (+53% YoY), with 32 accounts, pointing to a recovery trend. The pricing-focused strategy is bearing fruit
• Equity ratio of 82.5%; effectively debt-free with JPY 1,098M in cash versus JPY 66M of interest-bearing debt. This secures ample capacity to fund the JPY 100M–300M annual strategic investment budget from internal resources

Key Concerns From The 2Q Results

An interim net loss attributable to owners of the parent of JPY -6M means the company remains loss-making at the bottom line. Against full-year operating income guidance of JPY 101M, 1H progress was just 13.7%, making this a heavily 2H-weighted plan; achievement hinges on the consolidation of Collabo Techno (from 3Q) and the ramp-up of FDE projects. Goodwill of JPY 357M represents 17.7% of total assets (our estimate), so amortization burden and PMI progress warrant monitoring.

• Total income taxes of JPY 22,455k (including deferred income taxes of JPY 16,973k) meant that despite pre-tax income of JPY 15,927k, the company posted an interim net loss of JPY -6,527k
• 1H operating income of JPY 13M against full-year guidance of JPY 101M (13.7% progress). The plan requires JPY 87M of operating income to be generated in 2H
• Goodwill balance of JPY 357M. With Collabo Techno consolidated from 3Q, goodwill amortization will rise, weighing on operating-level profit
• Investing cash flow of JPY -283M (including contingent consideration for the business transfer of JPY 258,027k) left cash and cash equivalents at JPY 1,098M, down JPY 219M from the start of the year
• The AI Products mix of 37.8% remains far from the medium-term target of 70%

Focus Areas / Items To Monitor Going Forward

• The P&L contribution from Collabo Techno, consolidated from 3Q, and whether incremental operating income/EBITDA can exceed goodwill amortization
• Order backing for the 2H plan (revenue of JPY 825M, operating income of JPY 87M, OPM of 10.6%). The speed at which the joint-proposal pipeline converts into bookings
• The path to lifting the AI Products mix. Account accumulation for Terry2 mini and FAST-D, and visibility into recurring revenue (ARR)
• Progress in shifting to an ARR-based revenue model under the VAAP strategy. Whether this drives a multiple re-rating as a platform company is the key medium-term focus

Key Financial Highlights

(FY12/2026 interim is the first period for which consolidated financial statements are prepared, so YoY comparisons are not disclosed in the tanshin. YoY figures are standalone-basis comparisons disclosed by the company in its earnings presentation.)

Gross profit margin of 45.8% improved from 35.7% in the year-ago period (our estimates; year-ago figure on a standalone basis). Total income taxes of JPY 22,455k — comprising income taxes of JPY 5,481k plus deferred income taxes of JPY 16,973k — meant that pre-tax interim income of JPY 15,927k translated into an interim net loss of JPY -6,527k.

Performance By Business Segment

As the company operates a single segment, the "AI × Sound" science business, segment disclosure is omitted in the tanshin. The company does disclose a revenue breakdown between AI Products and AI Solutions in its earnings presentation, with both categories growing YoY. Collabo Techno has a deemed acquisition date of June 30, 2026, so only its balance sheet is consolidated in this interim period (P&L contribution from 3Q onward).

Segment Performance Table

Progress Versus Full-Year Guidance

1H revenue reached 43.1% of the full-year plan of JPY 1,450M, tracking in line with company guidance, but operating income progress was just 13.7% and recurring profit 16.4% — a heavily 2H-weighted profile. The company assumes the consolidation of Collabo Techno and a full ramp-up of the FDE business in 2H, guiding to 2H revenue of JPY 825M and operating income of JPY 87M (OPM of 10.6%). Achievement is premised on PMI synergies materializing early.

• Company guidance is 2H-weighted, allocating revenue of JPY 825M and operating income of JPY 87M to 2H for a full-year OPM of 7.0%
• P&L consolidation of Collabo Techno starts in 3Q, so the scope of consolidation differs between 1H and 2H

Changes To Guidance

Following the acquisition of Collabo Techno as a subsidiary, the standalone full-year guidance announced on February 13, 2026 was revised to a consolidated basis. Revenue and all profit lines were revised upward, with EBITDA guided to JPY 167M (+104.4% YoY).

• Revenue: previously JPY 1,373M → now JPY 1,450M
• Operating Income: previously JPY 56M → now JPY 101M
• Recurring Profit: previously JPY 45M → now JPY 100M
• Net Income: previously JPY 22M → now JPY 31M (EPS of JPY 7.92)
• Rationale: shift to consolidated guidance following the acquisition of Collabo Techno as a consolidated subsidiary. 2H incorporates revenue of JPY 825M driven by the expansion of the FDE business

Commentary On Shareholder Returns

FY12/2026 dividend guidance is JPY 0.00 for both interim and year-end (JPY 0.00 annual), unchanged from the most recent guidance. The company also paid no dividend in FY12/2025. Treasury shares stood at 64,000 at period-end, unchanged from the prior year-end. Management has indicated a capital allocation policy of deploying cash on hand into its strategic investment budget (JPY 100M–300M p.a.).

Financial Position

The company remains effectively debt-free with JPY 1,098M in cash versus JPY 66M of interest-bearing debt, and the equity ratio is a high 82.5%. That said, M&A and business transfers have added JPY 357M of goodwill to non-current assets, shifting the asset mix toward intangibles.

Disclosures Released Alongside The Earnings Announcement

Major Announcements During The Quarter

Large-Shareholding Filings / Material Proposals Over The Past Year

• Koji Mitsumoto (joint holder: Tomomi Mitsumoto): 35.55% → 34.31% (2025/11/28, Change Report No. 1) — Koji Mitsumoto is the founder and a director, holding shares for participation in management and as a stable shareholder; Tomomi Mitsumoto holds shares as a stable shareholder. The change reflects an amendment to a material contract in connection with pledging 300,000 shares as collateral to a securities firm. No material proposal actions applicable
• Koji Mitsumoto (joint holder: Tomomi Mitsumoto): post-correction, Koji Mitsumoto 30.44% and Tomomi Mitsumoto 3.90% (2025/12/05, Amended Report) — Purpose of holding is the same as above (participation in management / stable shareholding)