Full-year guidance maintained on JPY 1.5B AI server order backlog to be recognized in H2 and accelerating Lumitron PMI; dual-pillar strategy of Sales DX × M&A in focus

Summary

Cumulative H1 FY09/2026 revenue reached JPY 6,964M (+5.2% YoY), marking a record high for the second consecutive period. However, operating income came in at just JPY 26M (▲86.5% YoY), falling short of plan due to approximately JPY 120M in one-time M&A-related expenses. Management positioned adjusted operating income of JPY 146M as reflecting the true underlying business performance, and maintained full-year guidance of JPY 550M. For H2, management explicitly committed to an earnings recovery through recognition of the approximately JPY 1.5B AI server order backlog, PMI execution at Lumitron and Kawahara Jimu-ki, and full-scale commercialization of the AI agent business. In pursuit of the mid-term plan's final-year targets (FY09/2027) of 10% OPM and 20%+ ROE, the company outlined a policy to accelerate growth through a dual-pillar approach of Sales DX and M&A.

Key Points (Earnings Highlights And Growth Actions)

• Business Strategy And Market Assessment
  • Completed a five-site ASEAN footprint under the global specialty trading company vision; now pursuing local market development in earnest
  • Recognizes structurally expanding cybersecurity demand among SMEs as a growth opportunity
  • Characterizes AI server delivery delays due to semiconductor supply shortages as a transitory factor, expecting resolution in H2
• Current Business Progress And Drivers
  • Standalone Q2 adjusted operating income of JPY 216M was the highest since post-COVID, a sharp rebound from Q1's loss
  • Revenue from Japanese companies overseas declined ▲20% YoY, primarily due to slower-than-expected new customer acquisition and upselling progress on the sales front
  • Booked JPY 90M in human capital investment in H1 (+JPY 87M YoY), including recruitment of three senior executives and company-wide AI training
• Strategic Initiatives And Inflection Points
  • Consolidated Lumitron (Singapore, 80% stake) and Kawahara Jimu-ki (Iwate, 100% stake) in January
  • Japanese-language version of the AI agent platform launched for commercial sales in February, deploying agents across eight domains
  • Reorganized segments by integrating BPR and RDX into the DX segment to enhance transparency

Outlook And Strategy

• Full-year guidance maintained: revenue of JPY 14,800M (+13.1% YoY), operating income of JPY 550M (+34.8% YoY)
• Achieving H2 operating income of JPY 524M hinges on overseas contributing +JPY 418M, driven by AI server backlog recognition and full-period Lumitron contribution
• The overseas solutions business plan has been revised from the initial forecast, shifting to a structure where AI servers compensate for the DX segment shortfall
• AI agent business is in a post-launch order accumulation phase; management noted a setup period is required from contract signing to operational deployment
• Mid-term plan final-year targets (FY09/2027): 20%+ CAGR, 10%+ OPM, and 20%+ ROE
• Announced an aggressive M&A pipeline strategy extending beyond Malaysia and Singapore to other countries

Positive Factors

• AI server order backlog of approximately JPY 1.5B is at a record high; recognition in H2 is expected to drive overseas segment profit expansion
• Domestic UTM revenue grew +33% YoY, buoyed by structurally expanding ransomware protection demand
• LED revenue rose +16.1% YoY overseas, supported by Lumitron consolidation and strong sales at the Malaysian local subsidiary
• Domestic solutions segment profit reached JPY 162M (+118.9% YoY), with SG&A consolidation benefits materializing
• H1 M&A contribution from two newly acquired companies totaled JPY 79M; approximately JPY 120M in one-time M&A costs were front-loaded in H1 (none expected in H2)
• Invested JPY 74M in company-wide AI training, building a growth platform that reduces dependency on human resources through operational standardization and automation

Concerns / Risks

• H1 operating income progress toward the full-year target stands at just 4.7% (JPY 26M / JPY 550M); the heavily H2-weighted plan structure warrants caution
• Revenue from Japanese companies overseas declined ▲20% YoY; rebuilding the sales organization is a precondition for an H2 recovery
• Interest-bearing debt increased by JPY 1,566M and the equity ratio declined from 39.8% to 35.9%, reflecting continued financial leverage expansion
• Operating CF of ▲JPY 750M and a JPY 885M increase in inventories highlight working capital management as a key challenge
• DX segment revenue fell ▲23.2% YoY due to prior-period special demand reversal; timing of AI agent monetization remains unclear
• Risk that prolonged global semiconductor supply shortages could delay revenue recognition of the AI server order backlog

Performance Highlights

Cumulative H1 FY09/2026 revenue reached JPY 6,964M (+5.2% YoY), a record high for the second consecutive period. Operating income, inclusive of approximately JPY 120M in one-time M&A costs, came in at just JPY 26M (▲86.5% YoY), while adjusted operating income was JPY 146M (81.1% achievement vs. plan). Full-year guidance was maintained at revenue of JPY 14,800M and operating income of JPY 550M.

Segment Performance

• Revenue: JPY 6,964M (+5.2% YoY)
• Operating Income: JPY 26M (▲86.5% YoY)
• Adjusted Operating Income: JPY 146M (81.1% vs. plan)
• EBITDA: JPY 144M (▲50.2% YoY)
• Adjusted EBITDA: JPY 264M (106.5% vs. plan)
• AI Server Order Backlog: Approximately JPY 1.5B (record high)
• Overseas LED Revenue: JPY 1,798M (+16.1% YoY)
• Domestic UTM Revenue: JPY 229M (+34.7% YoY)
• Equity Ratio: 35.9% (▲3.9pt vs. prior FY-end)
• Dividend Forecast: JPY 1.2/share (based on 30% payout ratio)