Management Voices Conviction in Nationwide Rollout of On-Site AX; 13 New AI Solutions Launched; Insurance Agency Acquisition Extends Reach into Predictive and Preventive Insurance

Summary

Recurring revenue continued to drive top-line growth in 3Q, supported by an expanding enterprise solutions lineup. Adjusted operating income returned to QoQ growth. Management said both the revenue and profit targets in the full-year plan remain achievable, citing 4Q seasonal demand and a growing pipeline. The call centered on on-site AX (AI transformation), which combines video and audio with AI. Management outlined plans to roll out AI agents, Safie AI Studio and new compact cameras. It also presented a nationwide rollout, including Kansai and Kyushu, and expansion into monitoring and insurance as the pillars of its medium-term growth story.

Key Points (Earnings Takeaways and Growth Initiatives)

• Management Strategy and Market View
  • On-site AX became the company's business concept this year. From this quarter, management frames growth along three axes: solutions, customers and business expansion.
  • The Kanto region generated about 60% of January–September revenue (59.2%). Management sees significant room to expand nationwide, including Kyushu, Nagoya and Hokkaido.
  • Safie chose an acquisition to enter insurance because agencies own the customer base. Partnerships with insurers are already underway.
  • The CEO stated that the company has entered a phase of growing revenue and profit simultaneously. He also referenced global expansion, including Thailand and Vietnam.
• Current Business Progress and Drivers
  • Retail drove solutions revenue growth. POS-linked fraud investigation, customer attribute analysis and solutions for labor-saving stores performed strongly.
  • At a major fashion accessories chain, use of people-counting AI is expanding to analyze proactive customer engagement and measure promotional effectiveness.
  • Safie GO/Pocket was designed for construction but won new labor-saving demand at a major retail chain, where Pocket2 monitors employees working alone.
  • Spot gross margin was 22.1% (vs. 25.9% in the prior quarter). The decline reflected a shift in the enterprise product mix, which the COO described as temporary.
  • Gross profit per employee was JPY 17.3M, as accelerated hiring outpaced gross profit growth. The COO aims to restore the metric through gross profit expansion from 4Q onward.
• Key Strategic Initiatives and Inflection Points
  • Safie is rolling out Safie Report Agent, which auto-generates reports from video and audio. A beta began testing in live operations in September ahead of the official launch.
  • Turning Safie AI Studio into a platform increased the number of AI solutions from 2 in 2025 to 13 in 2026.
  • Safie launched generative AI-based custom detection. Users can detect headcounts, waste volumes and more simply by describing conditions in text.
  • The compact Safie UNICAM camera launched on November 12, and Safie CUBE is slated for spring 2027. These products expand coverage from single points to entire areas. Safie will drive on-site AX using video data collected and accumulated across entire sites.

Outlook and Strategy

• Full-year guidance was maintained. As in the prior year, management expects 4Q to be the peak revenue quarter. It said both revenue and profit targets are achievable, citing the growing pipeline.
• Adjusted operating income is expected to turn positive for the full year, even as the company keeps investing ahead for growth from FY2027 onward.
• The Kansai branch surpassed JPY 1B in annual revenue three and a half years after opening. Safie will use its Umekita showroom as a hub to accelerate on-site AX sales.
• In insurance, Safie envisions preventive policies for stores, construction sites and restaurants. Premiums would fall as prevention efforts increase, similar to dashcam riders in auto insurance.
• The acquisition price for Sadoshima Shoji was JPY 235M. Management called the deal strategically significant but expects only a minor impact on consolidated results this fiscal year.
• The CEO said his view that on-site AX can scale has turned into conviction. The company also plans to step up IR communications via note and LINE.

Positive Factors

• Safie holds the No. 1 share in cloud video recording services at 54.3% (2025, third-party survey). Management highlighted its exclusive access to primary on-site data as a key strength.
• 3Q recurring gross margin was 62.2%, remaining high and edging up QoQ.
• SG&A grew more slowly than revenue. The S&M ratio fell to 25.2% and the R&D ratio to 14.5%, both down QoQ.
• Enterprise deals are spreading nationwide. Annual revenue in Kansai topped JPY 1B, led by large corporates, and Safie was deployed at TRIAL GO in Kyushu.
• A combined offering of safety detection and nighttime security for construction is taking shape. Drivers include the investment in Ailytics, which accelerates rollout of unsafe-behavior detection AI, and AI camera adoption by construction companies.

Concerns and Risks

• Adjusted operating income declined YoY. Achieving the full-year plan relies heavily on 4Q seasonal demand.
• Merchandise inventory rose from JPY 874,412K to JPY 2,232,670K, while cash and deposits fell to JPY 4,654,926K (both end-December 2025 → end-September 2026). Inventory sell-through warrants monitoring.
• Mix risk: a rising enterprise share tends to lower both spot gross margin and company-wide gross margin.
• Headcount growth is outpacing gross profit growth. The timing of a productivity recovery will set the pace of margin improvement.
• The Sadoshima Shoji acquisition is a related-party transaction, as the CEO owns a 20% stake. A special committee reviewed the deal, but delivering insurance synergies remains to be proven.
• Most insurance and AI agent initiatives are still in development or PoC, and no monetization timeline has been given.

Performance Highlights

3Q (July–September) revenue was JPY 5,831M (+22.7% YoY), and gross profit was JPY 2,952M (+23.7% YoY). Gross profit margin fell to 50.6% from 52.1% in the prior quarter. Operating income was JPY 60M, a turnaround from a loss of JPY 23M a year earlier. Nine-month cumulative revenue was JPY 16,249M (+20.7% YoY, our estimate).

Segment Performance

• ARR: JPY 16,990M (+24.1% YoY)
• Billed Cameras: 403K units (+21.0% YoY)
• Of Which Safie PRO Direct Sales: 178K units (+30.9% YoY)
• Of Which Safie PRO Wholesale: 164K units (+13.1% YoY)
• Of Which Safie GO/Pocket: 60K units (+17.6% YoY)
• Solutions Revenue: JPY 279M (+42% YoY)
• ARPC: JPY 42.0K (+2.2% YoY, our estimate)
• Safie PRO 12-Month Average Churn Rate (Company-Wide): 0.7% (-0.1pt YoY)
• Adjusted Operating Income: JPY 93M (-27.3% YoY, our estimate)

Q&A List

• Q

  Regarding the full-year outlook, do you expect to meet the plan for adjusted operating income?

  A

  As in the prior year, we expect 4Q to generate substantial revenue, and our pipeline has been building steadily. We therefore believe the plan is achievable, and we intend to deliver on both revenue and profit.

• Q

  What is driving the strong solutions revenue? Please cover the leading solutions, customer case studies and the outlook for rollout to other locations.

  A

  Solutions revenue is growing as our accumulated investments in and partnerships with startups pay off and our AI platform matures. Safie AI Studio, which lets us deploy AI on-site immediately, has been a major contributor. It allows us to sell solutions while implementing AI for enterprise customers. We believe this breadth of extensibility is unique to Safie. Our approach of proposing video combined with audio, in other words communication plus video, is also distinctive, and we want to keep growing our customer base and case studies. Retail is currently the fastest-growing area. Shoplifting prevention, attribute-based marketing detection and solutions for the growing number of labor-saving stores are performing very well. We feel the outlook has broadened further.

• Q

  On Sadoshima Shoji joining the group, why did you acquire an insurance agency to enter the insurance industry rather than partner with a major insurer?

  A

  Partnerships with insurers are already underway, including work on disaster resilience and new insurance product development. We acquired an agency because insurance agencies hold by far the largest customer bases. We want to gain insurance know-how and offer new risk solutions and risk consulting, including insurance sales, to that customer base. Given those goals, we concluded that acquiring an agency was the right approach. The acquisition also gives us a foothold to deepen ties with insurers. We made the acquisition to capture these synergies and develop new, customer-focused solutions.