Operating income surged +126.4% YoY, signaling a sharp profitability turnaround; HEROZ ASK reaching JPY 150M in ARR and the full-scale rollout of the AI agent strategy are accelerating growth

Key Positives From The Results

Operating income of JPY 358M (+126.4% YoY) and EBITDA of JPY 719M (+46.1% YoY) underscore a marked improvement in profitability. The SG&A-to-revenue ratio declined from 41.5% to 37.9% (standalone 3Q basis), confirming the company's ability to maintain cost discipline while delivering top-line growth.

• Operating Income JPY 358M (+126.4% YoY), EBITDA JPY 719M (+46.1% YoY):
  SG&A declined 5.4%, with cost containment directly contributing to earnings uplift
• HEROZ ASK ARR Reached ~JPY 150M
  as of end-February, with revenue up +37.9% QoQ. Churn rate fell to 0.40%, confirming increasing stickiness of the SaaS product
• AI Security Segment Income Of JPY 737M (+21.0% YoY):
  Pricing revision impact flowed through for the full period; churn rate held steady at 0.65%, consistently below 1%
• Recurring Revenue Mix Rose To 70.2% (+4.7pt YoY), ARR JPY 4,569M (+11.3% YoY):
  Expanding annuity-based revenue foundation
• JOINT iPaaS For SaaS License + Initial Revenue Up +53.3% QoQ:
  Accelerating traction as a SaaS integration platform

Key Concerns From The Results

Net loss attributable to owners of the parent company persisted at JPY -49M, making the path to full-year consolidated net profitability the biggest hurdle for achieving the full-year plan (JPY 50M). Structural profit leakage to non-controlling interests (Vario Secure, etc.) remains an unresolved issue.

• Net Loss Attributable To Owners Of Parent Company Of JPY -49M Persists On A 3Q Cumulative Basis:
  Non-controlling interest profit of JPY 185M accounts for the majority of consolidated net income of JPY 136M, leaving limited profit attribution to the parent
• AIX Segment Income Of JPY 467M (−5.3% YoY) Declined:
  Transitional cost inflation from front-loaded hiring and Tifana's pivot toward AI business weighed on profitability
• COGS Ratio Rose To 55.5% (+1.6pt YoY, Standalone 3Q Basis):
  Continued increases in labor costs and depreciation warrant close monitoring relative to top-line growth trajectory
• Non-Operating Expenses Of JPY 96M Pressured Recurring Profit:
  Includes JPY 26M in crypto asset valuation losses and JPY 11M in investment securities losses; mark-to-market risk is inherent with ~JPY 74M in crypto asset holdings
• Full-Year Guidance Was Already Revised Downward In December
  (revenue JPY 6,700M → JPY 6,400M, operating income JPY 800M → JPY 500M). The magnitude of deviation from the original plan merits attention

Focus Areas / Items To Monitor Going Forward

• Timing of HEROZ ASK reaching monthly breakeven and ARPA trends following the transition to the new unlimited-use pricing plan. Whether breakeven this fiscal year can serve as a profit growth driver next fiscal year
• Whether BtoB revenue can achieve the targeted +15.6% full-year growth given the 4Q-heavy structure. Management states the pipeline exceeds prior year, but confirming the revenue scale required from 4Q alone is critical
• Controlling tax adjustments and non-operating items in 4Q to achieve JPY 50M in net income attributable to owners of the parent (full-year plan). Scrutiny of how corporate tax adjustments could swing the bottom line

Key Financial Highlights

Gross profit margin was 44.3% (−1.1pt YoY), a marginal decline. The primary driver was rising COGS (labor costs +11.0%, higher depreciation), though SG&A compression lifted OPM to 7.6% (vs. 3.6% prior year).

Performance By Business Segment

Progress Versus Full-Year Guidance

Against the revised full-year plan, revenue stands at 73.2%, operating income at 71.7%, and EBITDA at 72.0% — broadly tracking the plan. The company has a structurally 4Q-heavy revenue profile (concentration of large BtoB project acceptances in 4Q), and prior years have exhibited the same pattern, so the current progress rate is assessed as within achievable range. However, net income attributable to owners of the parent is JPY -49M on a 3Q cumulative basis, requiring a significant 4Q swing of +JPY 99M to meet the full-year target of JPY 50M.

• The BtoB business continues to exhibit a 4Q-heavy structure, with large project acceptances concentrated in 4Q (February–April). Prior years followed the same pattern for full-year results, with a significant 4Q step-up in revenue and profit as the baseline assumption

Changes To Guidance

No guidance revision was announced at the time of this 3Q earnings release. The current full-year forecast retains the figures revised on December 12, 2025 (revenue JPY 6,400M, operating income JPY 500M).

• Revision History:
  Original forecast (revenue JPY 6,700M, operating income JPY 800M) → Revised (revenue JPY 6,400M, operating income JPY 500M)
• Reason For Revision:
  Group-wide reassessment triggered by Vario Secure's full-year earnings revision. Operating income was reduced by JPY 165M for the AIX business and JPY 135M for the AI Security business

Commentary On Shareholder Returns

The dividend forecast for FY04/2026 remains unchanged at JPY 0.00 per share (no dividend). No dividend was paid in the prior fiscal year (FY04/2025) either. No share buyback or other shareholder return initiatives have been announced at this time.

Financial Position

Repayment of long-term borrowings is progressing and interest-bearing debt is on a declining trend, though goodwill of JPY 1.8B from M&A constitutes the majority of intangible fixed assets. The equity ratio remains at a stable 56.3%.

News Released Alongside The Earnings Announcement

Major Announcements During The Quarter

Large-Shareholding Filings / Material Proposals Over The Past Year

None