HEROZ, Inc. 3Q Earnings Preview

Key focus: HEROZ ASK ARR expansion, monetization progress of AI agent capabilities, and probability of achieving full-year targets following upward guidance revision

March 12, 2026 at 16:00 GMT+9

Summary

Cumulative 2Q operating income reached JPY 258M (51.7% progress vs. full-year guidance), clearing more than half of the full-year JPY 500M operating income target by the 2Q mark. Within the AIX segment, BtoB AI solutions delivered just under +20% YoY growth, while the flagship SaaS product "HEROZ ASK" surpassed JPY 100M in ARR. In 3Q, investors should watch whether expanding HEROZ ASK user IDs/ARR and the commercial rollout of the AI agent platform emerge as meaningful revenue drivers. The AI Security segment maintained high margins, supported by growing sales of the zero-trust service "Vario Ultimate Zero." This quarter will test the sustainability of profit growth across both segments and the progress of the HEROZ 3.0 "AI BPaaS" strategy in driving a medium- to long-term structural shift in the earnings mix.

Focus Areas For The Upcoming Quarter

Key Points & Focus	Implications
Revenue GrowthCumulative 3Q revenue progress vs. full-year guidance of JPY 6.4B	2Q progress of 48.4% is in line with historical norms. Achieving ~73-75% progress through 3Q would significantly increase confidence in full-year target attainment
AIX Segment ToplineYoY growth rate of BtoB AI solution-related revenue	Just under +20% YoY through 2Q. Securing large deals and building the active project pipeline in H2 is critical
HEROZ ASK MonetizationHEROZ ASK ARR trajectory and number of enterprise clients	ARR surpassed JPY 100M in October 2025. Key question is whether Box integration and credit plan adoption accelerate the pace of ARR expansion
OPMConsolidated OPM trajectory and SG&A discipline	Cumulative 2Q OPM of 8.3% (vs. 3.1% in the year-ago period). Monitor whether the company can sustain margin improvement while continuing to invest for growth
AI Security SegmentVariosecure segment margin trajectory	2Q segment profit of JPY 494M (margin: 34.8%). As the final year of the mid-term management plan, the balance between growth investment and margin sustainability is in focus
Capital EfficiencyROE and timing of return to profitability at the Net Income Attributable to Owners of Parent Company level	Full-year net income guidance of JPY 50M vs. cumulative 2Q loss of JPY 14M. Whether the company can absorb H2 goodwill amortization and turn profitable
AI Agent StrategyCommercialization progress of Meta Agent and AI Agent 2.0	As the AI agent market transitions from proof-of-concept to full-scale deployment, the degree to which a platform-based revenue model is established will be pivotal for medium-term growth

Key Issues Based On Prior Earnings (FY04/2026 2Q Results)

Cumulative 2Q revenue of JPY 3,098M (+9.6% YoY) and operating income of JPY 258M (+191.2% YoY) demonstrated solid top- and bottom-line growth. On the same day, the company revised full-year guidance upward to revenue of JPY 6.4B, operating income of JPY 500M, and EBITDA of JPY 1B. While both the AIX and AI Security segments expanded segment profits, net income attributable to owners of parent remained in the red at negative JPY 14M after goodwill amortization and minority interest deductions. Improving earnings "quality" is key to achieving full-year profitability.

1. HEROZ ASK ARR Expansion And Establishing A SaaS Recurring Revenue Model

Prior Quarter:
~1.5 years after the May 2024 full launch, the number of enterprise clients and user IDs expanded, with ARR surpassing JPY 100M in October 2025. New features including meeting minutes AI, OCR/image generation, and code interpreter were rolled out in rapid succession
This Quarter's Checkpoints:
ARR growth rate driven by Box integration (launched January 30, 2026) and credit plan introduction. Trends in per-ID pricing and churn rate
Key Metrics:
Quarterly ARR trajectory (our estimate targets ARR exceeding JPY 150M by 3Q-end), pace of new enterprise client additions

2. Growth Sustainability In The AIX Segment's BtoB Business

Prior Quarter:
AI solution-related revenue grew just under +20% YoY. Both active projects and sales pipeline expanded, with VOIQ's inside sales function contributing to improved sales productivity
This Quarter's Checkpoints:
Large-deal pipeline status and win rates. Whether AI agent functionality is driving upsell/cross-sell opportunities
Key Metrics:
AIX segment revenue YoY growth rate (whether cumulative 2Q growth of +14.0% can be maintained), segment margin trajectory

3. AI Security Segment — Balancing Growth Investment And Profitability

Prior Quarter:
Segment revenue of JPY 1,419M (+4.8% YoY), segment profit of JPY 494M (+18.6% YoY). Zero-trust security service "Vario Ultimate Zero" gained traction as the core growth driver
This Quarter's Checkpoints:
KPI achievement status in the final year of Variosecure's mid-term management plan (FY02/2024–FY02/2026). Results of the reinforced new business sales structure
Key Metrics:
Monthly recurring revenue trajectory for managed services, revenue mix contribution from new services such as EDR and VDaP

4. Goodwill Amortization Burden And Path To Net Income Profitability

Prior Quarter:
Consolidated interim net income was JPY 120M in the black, but after deducting JPY 135M attributable to non-controlling interests, Net Income Attributable to Owners of Parent Company was negative JPY 14M. Semi-annual goodwill amortization of JPY 83M weighed on profits
This Quarter's Checkpoints:
To achieve the full-year target of JPY 50M in net income attributable to owners of parent, the contribution from deferred tax asset recognition and tax effects in H2
Key Metrics:
Whether cumulative 3Q Net Income Attributable to Owners of Parent Company turns positive (achieving the EPS target of JPY 3.29 requires JPY 64M in H2 profit)

5. Corporate Cost Efficiency And ROI On Investments

Prior Quarter:
Segment profit totaled JPY 800M, against corporate expenses (adjustments) of negative JPY 541M — a JPY 47M improvement from negative JPY 589M in the year-ago period
This Quarter's Checkpoints:
Balance between personnel cost increases from stepped-up hiring and revenue expansion. Whether the SG&A ratio improvement trend continues
Key Metrics:
Corporate expenses (adjustments) as a percentage of revenue, YoY growth rate in SG&A

Major Announcements During The Quarter

2026/02/16
Entered into a business alliance with JPYC Inc. and resolved to subscribe to a third-party allocation of shares (acquisition of Series B1 preferred stock) issued by JPYC.
2026/02/16
HEROZ × Asahi Shimbun: Launched "Kishin Chat" on YouTube — a new service leveraging a shogi-specialized LLM to provide natural language commentary on top-level professional shogi matches. Contributes to enhanced BtoC product value and expanded media exposure. Notice Regarding HEROZ × Asahi Shimbun Kishin Chat YouTube Launch
2026/02/04
HEROZ ASK launched integration with cloud storage service "Box" — enabling customers using Box, in addition to Google Drive, to seamlessly leverage HEROZ ASK. A catalyst for enterprise client acquisition. Enterprise Generative AI SaaS "HEROZ ASK" Launches Box Cloud Storage Integration
2026/02/04
Enterprise generative AI SaaS "HEROZ ASK" launched Box cloud storage integration and revamped pricing to an unlimited-use model.
2026/01/21
HEROZ ASK added support for the latest image generation model "GPT Image 1.5" — as part of continuous feature enhancements. Strengthens competitive positioning through expanded multimodal capabilities. Enterprise Generative AI SaaS "HEROZ ASK" Now Supports "GPT Image 1.5"
2025/12/12
FY04/2026 full-year consolidated guidance revised upward — raised to revenue of JPY 6.4B, operating income of JPY 500M, and EBITDA of JPY 1B, reflecting strong 2Q performance. FY04/2026 2Q (Interim) Earnings Summary

Prior Quarter Results (FY04/2026 2Q Actuals)

HEROZ is an AI company operating two segments — the AIX business (formerly AI/DX) and the AI Security business — built around core AI technology. Under the HEROZ 3.0 banner of "AI BPaaS," the company is driving a business model transformation from SaaS tool provision to business process automation powered by generative AI and AI agents. Concurrent with 2Q earnings, the company revised full-year guidance upward to revenue of JPY 6.4B (+7.9% YoY), operating income of JPY 500M (+63.2% YoY), and EBITDA of JPY 1B. The AIX segment's BtoB business achieved just under +20% YoY growth, and HEROZ ASK's ARR surpassed JPY 100M, demonstrating steady progress in building SaaS recurring revenue.

Item	Amount	YoY	Vs. Company Plan	Notes
Revenue	JPY 3,098M	+9.6%	48.4% Progress	AIX +14.0%, AI Security +4.8%
Operating Income	JPY 258M	+191.2%	51.7% Progress	OPM 8.3% (vs. 3.1% year-ago period)
Recurring Profit	JPY 212M	+331.6%	50.5% Progress	Interest expense JPY 12M, shareholder benefit-related costs JPY 24M
Net Income	Negative JPY 14M	-	-	After deducting JPY 135M attributable to non-controlling interests
EPS	Negative JPY 0.94	-	-	Full-year EPS guidance: JPY 3.29

Progress Versus Full-Year Guidance: Revenue 48.4%, Operating Income 51.7%, Recurring Profit 50.5%