HEROZ ASK Reaches ARR of JPY 150M; New Pricing Plan and Kishin Chat Launch Accelerate AI BPaaS Strategy

Summary

Cumulative 3Q revenue reached JPY 4,687M (+7.8% YoY) with operating income of JPY 358M (+126.4% YoY), delivering top- and bottom-line growth. HEROZ ASK revenue grew +37.9% QoQ, while JOINT revenue expanded +53.3% QoQ, signaling an inflection point where prior-period upfront investments are beginning to convert into earnings. On the call, management repeatedly emphasized confidence in driving enterprise-wide adoption through HEROZ ASK's new unlimited-use pricing plan and achieving monthly-level breakeven within the current fiscal year. The business and capital alliance with JPYC Inc. was also presented as a new growth theme, marking entry into the stablecoin × AI space.

Key Takeaways (Earnings Highlights And Growth Initiatives)

• Management Strategy And Market View
  • Proprietary definition of AI Agent 2.0 (Meta Agent) established, advancing an AI BPaaS model with a vision toward fully autonomous AI
  • Domestic AI systems market projected to expand from JPY 1.3T in 2024 to JPY 4.2T by 2029; this market has been designated as the core target
  • Strategic pivot from conventional AI tool offerings to AI BPaaS—where HEROZ assumes business processes themselves—positioned as the central pillar of company-wide strategy
• Near-Term Business Progress And Drivers
  • AIX segment profit declined -30.7% YoY, primarily driven by front-loaded hiring costs and transitional expenses from Tifana Inc.'s shift toward AI-centric operations
  • AI Security delivered revenue growth of +7.0% YoY and segment profit growth of +26.2% YoY, with continued margin improvement driven by pricing revisions
  • SG&A decreased -4.2% YoY, with the SG&A-to-revenue ratio improving from 41.5% to 37.9%, reflecting a reallocation of advertising spend toward high-ROI initiatives such as trade exhibitions
• Strategic Initiatives And Inflection Points
  • HEROZ ASK transitioned in January from per-user-ID billing to an unlimited-use (usage-based) model, simultaneously driving ARPA expansion and enterprise-wide deployment
  • Business and capital alliance executed with JPYC Inc. (Series B1 preferred share subscription; voting rights below 10%), pioneering a new stablecoin × AI domain
  • Launched Kishin Chat, a new service leveraging a shogi-specialized LLM; debuted in collaboration with The Asahi Shimbun Company at the A-class league ranking tournament

Outlook And Strategy

• Revised full-year guidance calls for revenue of JPY 6,400M (+7.9% YoY) and operating income of JPY 500M (+63.2% YoY); tracking to plan given the 4Q-heavy earnings structure
• HEROZ ASK targeted to achieve monthly-level breakeven within the current fiscal year, with plans to develop it into a core profit growth driver from the next fiscal year onward
• BtoB pipeline exceeds prior-year levels; focused on delivering full-year BtoB revenue growth of +15.6% YoY
• Pursuing expansion into call centers, security, and recruitment outsourcing through an AI BPaaS model refresh powered by AI agent capabilities
• Continuing PMI execution across group companies acquired through M&A and lateral deployment of AI technology expertise

Positive Factors

• HEROZ ASK churn rate dropped sharply to 0.40% (from 2.62% at prior fiscal year-end), indicating strong product stickiness
• AI Security churn rate at 0.65%, maintaining sub-1% for 27 consecutive quarters, forming a stable recurring revenue base
• ARR of JPY 4,569M (+11.3% YoY) with recurring revenue ratio at 70.2% (+4.7pt YoY), reinforcing the shift toward a stock-based revenue structure
• HEROZ ASK MRR expanding at a net pace of approximately JPY 1M per month, reaching ARR of approximately JPY 150M as of end-February
• Shogi Wars premium user count at all-time highs, with cumulative games played surpassing 1.1 billion
• AI Sakura-san's AI recurring revenue grew +37.6% YoY, with adoption expanding into new verticals including fitness and municipal government

Concerns / Risks

• Full-year guidance revised downward by JPY 300M from initial forecasts (both revenue and operating income), primarily due to underperformance at Vario Secure Inc.
• AIX segment profit declined -30.7% YoY, with uncertainty remaining around the timing of payback on upfront investments
• 4Q-heavy earnings structure persists in the BtoB business, leaving period-end deal closure risk
• Net income attributable to owners of parent company was negative JPY 49M on a cumulative 3Q basis, with ongoing amortization burden on JPY 1.8B of goodwill
• Whether the transition to HEROZ ASK's unlimited-use plan will translate into ARPA uplift as expected remains under validation
• Approximately JPY 100M in Bitcoin holdings (held since 2Q for AI-driven investment purposes), with cryptocurrency price volatility posing potential balance sheet risk

Earnings Highlights

Cumulative 3Q consolidated revenue was JPY 4,687M (+7.8% YoY) with operating income of JPY 358M (+126.4% YoY), delivering both top- and bottom-line growth. SG&A compression (-5.4% YoY) contributed to margin improvement, with EBITDA reaching JPY 719M (+46.1% YoY). Net income attributable to owners of parent company remained in the red at negative JPY 49M, but improved from negative JPY 180M in the year-ago period.

• ARR (Annual Recurring Revenue): JPY 4,569M (+11.3% YoY)
• Recurring Revenue Ratio: 70.2% (+4.7pt YoY)
• Recurring Churn Rate (AI Security): 0.7% (-0.1pt vs. end of the same period last year)
• Recurring Churn Rate (HEROZ ASK): 0.4% (-2.2pt vs. end of the same period last year)
• HEROZ ASK Cumulative Contracted Customers: Approximately 350 companies (as of end-January 2026)
• HEROZ ASK ARR: Approximately JPY 150M (as of end-February 2026)
• EBITDA: JPY 719M (+46.1% YoY)