HEROZ, Inc. Full-Year Earnings Preview

Full-year net income revised sharply upward from JPY 50M to JPY 376M on Strategit divestiture gain and tax effects, confirming return to profitability. Focus shifts to earnings quality and the outlook for next fiscal year.

PublishedJune 10, 2026 at 15:37 GMT+9

Summary

Following the 3Q earnings release, HEROZ announced in April 2026 the simultaneous full acquisition of Variosecure through a share exchange and the divestiture of Strategit shares, marking a fundamental restructuring of its group portfolio. On June 8, the company revised its full-year guidance, driven primarily by a JPY 311M gain on the sale of Strategit shares and a JPY 99M credit from deferred tax asset recognition, resulting in a significant upward revision of net income attributable to owners of parent company from JPY 50M to JPY 376M (EPS JPY 24.75). A return to profitability from the prior year's loss of JPY 177M is now all but certain. That said, the operating income revision was a modest +4.6%, and recurring profit was the only line item revised downward—primarily due to a JPY 30M loss on crypto asset valuation—indicating that the earnings improvement is driven by extraordinary gains and tax effects rather than core operations. The focal point of the full-year results has shifted from whether profitability would be achieved to the quality of earnings growth and the post-restructuring earnings structure and capital policy for FY2027/4.

Key Points for Next Quarter

Key Points & Focus	Implications
Details of Full-Year Upward RevisionBreakdown of Net Income Revision and Earnings Quality	Net income revised from JPY 50M to JPY 376M (+652.1%). Breakdown: divestiture gain +JPY 311M, tax effects +JPY 99M, transaction costs -JPY 115M, valuation losses -JPY 30M. Operating income revised up only +4.6%, indicating non-recurring items and tax effects are driving the improvement
Confirmed Return to Profitability and 4Q Underlying Performance4Q Standalone P&L Levels	Return to profitability from prior year's JPY -177M loss is confirmed. 4Q standalone requires JPY +425M in net income; the build-up at the operating and recurring profit level is key to assessing underlying earnings power
Finalized P&L Impact of Group RestructuringDivestiture Gain, Transaction Costs, AKM Consolidation Timing	Strategit divestiture gain of JPY 311M booked in current period is confirmed. AKM subsidiary (70% stake) was acquired on May 1, 2026 and will be consolidated from next fiscal year, with no contribution this period. Timing of Variosecure share exchange effective date and elimination of minority interests to be confirmed
Next-Year Guidance & Capital PolicyFY2027/4 Plan and Dividend Policy	With net income already pre-announced, the main event at earnings shifts to next-year guidance reflecting the full consolidation of Variosecure, AKM consolidation, and Strategit deconsolidation. Whether dividend payments (from JPY 0.00) will commence is also a focus
HEROZ ASK Growth MetricsARR, Number of Clients, Post-MCP User IDs	ARR of JPY 130M and 300+ client deployments as of January 2026. Monitor whether MCP integration enabling external tool connectivity drives new contracts and upsell in 4Q
AI Security Segment ProfitabilityVariosecure Segment Margin Trend	3Q cumulative segment profit of JPY 737M (margin 34.8%), up from JPY 609M (margin 30.3%) in the prior-year period. Post-full-acquisition cost structure and integration synergies warrant close attention
Capital Efficiency & Financial SoundnessEquity Ratio, Share Exchange Impact	Equity ratio at 56.3% as of 3Q-end. Short-term borrowings at JPY 350M (vs. JPY 200M at prior year-end), long-term borrowings reduced to JPY 948M. Balance sheet impact from the share exchange on capital structure and deferred tax asset recognition to be confirmed

Key Issues from Previous Results (FY2026/4 3Q Results and June 8 Guidance Revision)

On a 3Q cumulative basis, the company posted revenue of JPY 4,687M (+7.8%) and operating income of JPY 358M (+126.4%), achieving top- and bottom-line growth. On June 8, HEROZ revised full-year net income upward from JPY 50M to JPY 376M. The Strategit divestiture gain of JPY 311M and a JPY 99M credit from deferred tax asset recognition were the key drivers, making a return to profitability virtually certain. However, the operating income revision was only +4.6%, and recurring profit was revised down -2.8% primarily due to BTC valuation losses, indicating limited improvement on a core-business basis. For the full-year results, the key debate is no longer whether profitability will be achieved, but rather the quality of earnings growth and next year's earnings structure.

1. Details of Full-Year Upward Revision and 4Q Underlying Performance

Prior Period
: 3Q cumulative revenue of JPY 4,687M (vs. original full-year guidance of JPY 6,400M; 73.2% achievement rate), operating income of JPY 358M
Current Confirmation
: June 8 revision sets full-year targets at revenue JPY 6,424M / operating income JPY 523M / recurring profit JPY 408M / net income JPY 376M. Implied 4Q standalone requirements: revenue JPY 1,737M / operating income JPY 165M / recurring profit JPY 143M / net income JPY 425M. Approximately +10% vs. prior-year 4Q revenue (estimated at ~JPY 1,583M)
Key Metrics
: 4Q standalone operating and recurring profit (underlying performance excluding extraordinary items), EBITDA (revised full-year JPY 1,025M; 3Q cumulative JPY 719M)

2. Confirmed Return to Profitability and Earnings Quality

Prior Period
: 3Q cumulative net loss attributable to owners of parent of JPY -49M. Non-controlling interest income of JPY 185M was a drag on profit allocation
Current Confirmation
: Full-year net income revised from JPY 50M to JPY 376M. Breakdown: divestiture gain +JPY 311M (extraordinary income), deferred tax asset recognition credit +JPY 99M, transaction-related costs -JPY 115M, crypto asset valuation loss -JPY 30M. Assessing recurring earnings power excluding non-recurring items is the key debate
Key Metrics
: Final extraordinary items balance, net income before tax, changes in non-controlling interests (timing of Variosecure share exchange effective date)

3. AIX Segment Margins and Strategit Deconsolidation

Prior Period
: AIX segment profit on a 3Q cumulative basis of JPY 467M (vs. JPY 493M in prior-year period; -5.3%). Revenue grew to JPY 2,568M (+9.8%), but margins declined due to upfront investment in HEROZ ASK and JOINT, as well as higher personnel costs
Current Confirmation
: Impact of Strategit deconsolidation (JOINT iPaaS business) following full divestiture to GMO GlobalSign Holdings. AKM consolidation begins next fiscal year with no contribution in the current period. Profit contribution from large-scale BtoB projects
Key Metrics
: AIX segment margin on a 4Q standalone basis, HEROZ ASK ARR growth rate, order trends for AI agent-related projects

4. AI Security Growth Sustainability and Variosecure Full Acquisition

Prior Period
: AI Security segment posted 3Q cumulative revenue of JPY 2,118M (+5.5%) and segment profit of JPY 737M (+21.0%). Expansion of Vario Ultimate Zero and SG&A efficiency drove margin improvement. SoftBank commencing sales was an additional positive
Current Confirmation
: Variosecure's medium-term management plan (FY2024/2–FY2026/2) final-year results and next-phase direction. Structural benefit to net income attributable to owners of parent from the share exchange effective date and elimination of minority interests
Key Metrics
: AI Security 4Q segment margin, Vario Ultimate Zero contract count trends, accounting treatment for the full subsidiary consolidation

5. AI BPaaS Strategy Execution Phase and M&A Investment Payback Outlook

Prior Period
: Under the HEROZ 3.0 banner of "AI BPaaS," the company laid groundwork through the AKM Consulting acquisition, investment in JPYC (fintech), and a business alliance with KSA International (export controls). Goodwill balance stood at JPY 1,817M (22.4% of total assets)
Current Confirmation
: AKM acquisition closed on May 1, 2026, with consolidation beginning in FY2027/4. No goodwill additions or amortization impact in the current period; the revenue/profit contribution and goodwill impact from next fiscal year onward are the key issues. Management's resource reallocation strategy following the Strategit divestiture
Key Metrics
: Changes in consolidated goodwill balance, convergence of one-time costs after JPY 115M transaction-related expense booking, AI BPaaS-related order pipeline

Timely Disclosure & Industry Trends

2026/06/08
Full-Year Guidance Revision — Net income attributable to owners of parent revised upward from JPY 50M to JPY 376M (+652.1%). Primarily driven by JPY 311M gain on Strategit share sale and JPY 99M credit from deferred tax asset recognition. Recurring profit revised downward to JPY 408M, mainly due to JPY 30M BTC valuation loss; JPY 115M in transaction-related costs also booked. Notice Regarding Revision of Full-Year Consolidated Earnings Forecast
2026/05/27
Pokémon Battle Scope Deployed at PJCS2026 — Ongoing collaboration with The Pokémon Company. Contributes to brand value enhancement as a use case for AI analytics technology in the BtoC/entertainment domain. Pokémon Battle Scope to Be Deployed at PJCS2026!
2026/05/13
HEROZ ASK MCP Integration Launch — Enables external tool connectivity with Notion, Box, Slack, and others. A feature enhancement expected to promote cross-functional AI agent adoption and drive ARPU uplift across the 300+ client base. HEROZ ASK Launches MCP Integration
2026/04/20
AKM Consulting Acquisition — Acquired 70% stake in a back-office BPO company. M&A to internalize domain expertise in accounting, HR, and other functions. Acquisition closed on May 1, 2026, with consolidation from FY2027/4; limited impact on current-period earnings. Notice Regarding Acquisition of Shares of AKM Consulting Co., Ltd.
2026/04/20
Strategit Share Divestiture — Full divestiture of consolidated subsidiary Strategit (JOINT iPaaS business) shares to GMO GlobalSign Holdings. JPY 311M gain on subsidiary share sale expected to be booked in the current period, driving the full-year upward revision. Notice of Conclusion of Share Transfer Agreement Regarding Shares of Our Subsidiary
2026/04/14
Variosecure Full Acquisition — Full acquisition of Variosecure through share exchange. A major capital action aimed at resolving the parent-subsidiary dual listing and enabling integrated operation of the AI BPaaS and AI Security businesses. Elimination of minority interests expected to structurally improve net income attributable to owners of parent. Notice Regarding the Management Integration of HEROZ Inc. and Variosecure Inc.

Previous Quarter Results (FY2026/4 3Q Results)

HEROZ is an AI technology company with the mission of "creating the future through an AI revolution." Built on its AI technology foundation developed through the shogi AI app "Shogi Wars," the company operates two segments: the AIX business, which provides BtoB AI solutions and the generative AI SaaS platform "HEROZ ASK," and the AI Security business, operated through subsidiary Variosecure. Under its HEROZ 3.0 vision of "AI BPaaS," the company is leveraging AI agent technology to pivot from SaaS tool delivery to delivering the value of Work (business operations themselves). On a 3Q cumulative basis, the company achieved revenue and operating income growth, with operating income surging +126.4% YoY, clearly demonstrating a recovery trajectory.

Item	Amount	YoY	vs. Company Guidance	Notes
Revenue	JPY 4,687M	+7.8%	73.2% Achievement Rate	AIX +9.8%, AI Security +5.5%
Operating Income	JPY 358M	+126.4%	71.7% Achievement Rate	JPY -97M reduction in SG&A contributed
Recurring Profit	JPY 265M	+189.8%	63.2% Achievement Rate	JPY 26M crypto asset valuation loss and other non-operating items (full-year estimate JPY 30M)
Net Income Attributable to Owners of Parent Company	JPY -49M	-	-	JPY 185M in non-controlling interest income weighed on profit allocation
EPS	JPY -3.25	-	-	Full-year EPS revised to JPY 24.75 on June 8 (prior guidance JPY 3.29)

3Q Cumulative Guidance Achievement Rate vs. Original Full-Year Plan: Revenue 73.2%, Operating Income 71.7%, Recurring Profit 63.2% (see Issue #1 for revised full-year guidance).