Aeria Inc.

Business Details

IT Services consists of two pillars: the Data Services business, which includes managed hosting operated by Airnet Co., Ltd., and the Affiliate Platform business specializing in online electronic publishing operated by First Penguin Inc. This segment is positioned as the core business of the entire group, and strengthening a stable earnings base is explicitly stated as a management policy. The mid- to long-term strategy is to secure stable revenue by strengthening relationships with existing customers and developing new customers.

Recent Overview

First Penguin's revenue decline continued, resulting in a significant year-on-year decrease in both net sales and operating profit.

In the first quarter of FY2026 (ending December 2026) (January to March 2026), IT Services net sales were ¥410 million (down 8.2% year on year) and operating profit was ¥9 million (down 49.2% year on year). While Airnet's Data Services business continued to generate stable revenue, the decline in payment processing agency revenue and affiliate advertising revenue at First Penguin continued, pushing down overall segment sales and profit. Note that starting this quarter, the basis for allocating company-wide expenses has been changed to more appropriately reflect actual segment profit and loss.

Key Products

Growth Drivers

• Stable revenue generation from the Data Services business operated by Airnet Co., Ltd.
• Improvement in the earnings structure through reduction of fixed costs such as labor costs and rent
• Maintaining stable revenue by strengthening relationships with existing customers
• Promoting new customer development leveraging synergies within the group

Risks

• Risk of continued decline in payment processing agency revenue and affiliate advertising revenue at First Penguin Inc.
• Intensifying competition among companies for user acquisition in the internet-related market
• Cost increase pressure from development expenses, personnel costs, etc.
• Deterioration of the business environment due to macroeconomic risks such as rising prices and fluctuations in financial and capital markets

Business Details

This segment handles the development, distribution, and operation of games for smartphones and tablets, as well as the sale of Drama CDs, Voice CDs, and Character Merchandise. The games adopt a freemium model (free-to-play with in-app purchases), focusing mainly on niche markets targeting women. Apple Inc. and Google Inc. are the main payment processing agents. As of the first quarter of FY2026 (ending March 2026), this segment accounted for approximately 40% of group net sales.

Recent Overview

Net sales and operating profit deteriorated significantly due to declining revenue from existing content and merchandise sales

In the first quarter of FY2026 (ending December 2026), net sales were ¥1,875 million (down 21.3% year on year) and operating profit was ¥6 million (down 92.5% year on year), representing a significant decline in profit. The main cause was declining revenue from existing content and merchandise sales. While group-wide net sales increased 16.4% year on year, the Content segment contracted in the opposite direction, resulting in a lower contribution to overall profit.

Key Products

Growth Drivers

• Continued growth of the mobile content market driven by the spread of smartphones and tablets
• Expansion of the market size through diversification of content services
• A strategy of deepening engagement through concentrated targeting of niche markets for women
• Policy of expanding into new markets such as overseas markets and online casinos (mid- to long-term strategy)

Risks

• Pressure to increase advertising and development expenses due to intensifying competition for user acquisition
• Rising development costs and personnel expenses due to increasingly complex and sophisticated services
• Dependence on Apple Inc. and Google Inc. for payment processing (together accounting for approximately 28% of net sales)
• Risk of continued decline in revenue from existing content and merchandise sales
• Intensifying competition with rival companies in the mobile game market

Business Details

This segment engages in real estate rental and sales as well as investment in domestic and overseas companies. In the first quarter of FY2026 (ending December 2026), net sales increased significantly as the completion and settlement of properties for sale progressed smoothly. The business focuses mainly on smaller-scale income-producing real estate with shorter holding periods, and is operated cautiously while controlling business risk. Even in an environment where investment property prices remain high and yields are declining, profitability is maintained through the selective sale of properties.

Recent Overview

Completion and settlement of properties for sale progressed smoothly, roughly doubling net sales year on year

In the first quarter of FY2026 (ending December 2026), net sales reached ¥2,390 million (up 99.9% year on year), a significant increase, as the completion and settlement of properties for sale progressed smoothly. On the other hand, operating profit was slightly lower at ¥205 million (down 2.0% year on year), and the operating margin declined (from 17.5% to 8.6%) relative to the sharp increase in net sales. Epoch In Shinsaibashi Co., Ltd. was newly added to the scope of consolidation starting this quarter. There is no change to the full-year earnings forecast, and the company intends to continue operating the business cautiously.

Key Products

Growth Drivers

• Improved profitability through selective sales of relatively high-margin investment real estate
• Expansion of net sales through the smooth progress of completion and settlement of properties for sale
• Business expansion through the new addition of Epoch In Shinsaibashi Co., Ltd. to the scope of consolidation
• Promotion of joint development of income-producing real estate leveraging group synergies (IT know-how and networks)
• Efforts to create new markets, such as a real estate investment platform utilizing crowdfunding

Risks

• Continued shortage of appropriate investment opportunities as investment property prices remain high and yields decline
• Risk of fluctuation in net sales due to delays in the completion of investment properties for sale (significant fluctuation in net sales became apparent in the first quarter)
• Cost structure risk in which operating margin declines relative to a sharp increase in net sales
• Risk of deteriorating fundraising environment due to changes in financial institutions' lending stance
• Impact on real estate market conditions from accelerating inflation and policy rate hikes both domestically and abroad
• Risk of fluctuations in real estate market prices and in financial and capital markets