License revenue rose 35.8% and now accounts for more than half of sales. The key focus is progress toward the plan to reach positive adjusted EBITDA in 2H.

Key Positives From The 2Q Results

Corporate licenses for AI applications grew, lifting license revenue to JPY 1,282M (+35.8% YoY). This growth offset the drop-off from North American mapping projects, keeping revenue flat YoY. The revenue mix is shifting toward the higher-contribution-margin license model. On a standalone 2Q basis, losses narrowed and operating CF turned positive.

• License Revenue Ratio
  : Rose to 52.2% from 38.5% a year earlier (our estimate). Revenue the company describes as "high contribution margin" now makes up the majority of sales.
• Standalone 2Q Revenue (Jul–Sep)
  : JPY 1,310M, up 32.1% YoY (our estimate) and up 14.2% QoQ.
• Standalone 2Q Operating Loss
  : Narrowed to -JPY 762M, from -JPY 999M in 1Q and -JPY 946M in 2Q of the prior year (our estimate).
• Operating CF
  : Swung to +JPY 347M from -JPY 592M a year earlier. Collection of trade receivables (JPY 1,123M) and a JPY 456M increase in contract liabilities drove the improvement.
• Contract Liabilities
  : Built up to JPY 1,658M (+44.2% vs. prior FY-end), providing a pipeline for future revenue recognition.

Key Concerns From The 2Q Results

Cost of goods sold swelled to JPY 2,876M (+28.3%), pushing 1H to a gross loss of -JPY 419M versus a gross profit of JPY 209M a year earlier. Follow-on projects have not fully replaced the lost North American project revenue. As a result, 1H earnings are running well below the full-year plan, and achieving guidance now depends on revenue recognition in 2H.

• Gross Profit Margin
  : -17.1% versus 8.5% a year earlier. Higher depreciation of JPY 595M (+35.5%) likely also inflated costs.
• Project Revenue
  : JPY 1,175M (-22.0%, our estimate). The drop-off following completion of new North American mapping projects persisted.
• Japan Segment
  : Revenue halved (-49.0%), and the operating loss widened to -JPY 794M from -JPY 464M a year earlier.
• Shareholders' Equity
  : JPY 5,665M (-21.4% vs. prior FY-end). Losses cut the equity ratio by 9.5pp.
• Adjusted EBITDA Gap
  : 1H came in at -JPY 1,063M against a full-year plan of JPY 50M. Hitting the target requires a JPY 1,113M improvement in 2H.

Focus Areas / Items To Monitor Going Forward

• 2H Revenue Recognition Pace
  : The biggest question is whether last year's 4Q profit pattern repeats and enables the adjusted EBITDA breakeven target.
• Sustainability of AI Corporate Licenses
  : Deals with customers such as a major semiconductor manufacturer may prove one-off or build into recurring revenue. Which way this goes will change the investment case.
• Survey Company Network Build-Out
  : Watch the earnings contribution from consolidating Rikanos and acquiring the business of Nihonkai Sokuryo Sekkei. Also watch when losses in the Japan business begin to narrow.

Key Financial Highlights

• Cost-Driven Loss
  : Revenue was flat YoY, but costs rose JPY 634M, widening the operating loss by JPY 619M. SG&A was flat, so the cost of sales was the main driver of the wider loss.
• Non-Operating and Extraordinary Items
  : Non-operating income included JPY 88M in subsidy income (prior year: JPY 126M). Extraordinary items comprised a JPY 20M gain on bargain purchase and a JPY 32M disaster loss related to the Kumamoto earthquake.

Performance By Business Segment

Overseas accounts for 86.5% of revenue (our estimate). Corporate licenses drove revenue growth overseas. Even so, losses widened in both segments due to the drop-off from large prior-year projects.

Segment Performance Table

(Margins are our estimates based on external customer revenue. Adjustments: revenue -JPY 84M, profit +JPY 4M)

Progress Versus Full-Year Guidance

1H revenue progress stands at 35.1%, below the 43.1% achieved a year earlier (our estimate). Meeting the full-year plan requires 2H revenue of JPY 4,543M, implying +40.4% growth over the prior-year 2H figure of JPY 3,235M (our estimate). License revenue progress is relatively strong at 42.7%. Adjusted EBITDA, however, must swing from -JPY 1,063M in 1H to JPY 50M for the full year. That requires both booking large projects in 2H and containing costs.

Changes To Guidance

Full-year guidance is unchanged. The company maintains its targets of revenue of JPY 7,000M (+23.1%), license revenue of JPY 3,000M (+15.6%), and adjusted EBITDA of JPY 50M. Because the plan assumes a 2H-weighted profile, tracking progress against it will be the key focus going forward.

Commentary On Shareholder Returns

The annual dividend forecast remains JPY 0.00, so the company stays non-dividend paying. No share buybacks were conducted. A capital reduction took effect on August 31, 2026, transferring JPY 96M of share capital to capital reserve.

Financial Position

The company holds cash and deposits of JPY 3,813M against interest-bearing debt of JPY 1,652M, maintaining a net cash position. Continued losses, however, reduced shareholders' equity by JPY 1,539M over the half. Rebuilding the capital base will require progress toward profitability.

Key Figures

• Investing CF
  : -JPY 320M (prior year: -JPY 882M). Purchases of intangible assets fell to JPY 130M (prior year: JPY 856M), bringing FCF to +JPY 27M (our estimate).
• Financing CF
  : +JPY 118M. New borrowings of JPY 810M exceeded repayments of JPY 677M, and the debt mix shifted from short-term to long-term.

Leverage Metrics

Disclosures Released Alongside The Earnings Announcement

Major Announcements During The Quarter

Large-Shareholding Filings / Material Proposals Over The Past Year

• Resona Asset Management: 5.1%→2.8% (2026/09/15) - Held for investment management under investment trusts and discretionary investment contracts
• Nomura Securities: 5.3%→4.2% (2026/04/30) - Held as inventory for securities business and as trust asset investment
• Nomura Securities: New→5.3% (2026/02/13) - Held as inventory for securities business and as trust asset investment
• Mitsubishi Electric: 6.6%→4.9% (2025/12/04) - Strategic investment