HEROZ, Inc.

Business Details

A segment aiming to promote AIX for each company and industry by providing AI-related solutions, leveraging the AI/SaaS-related technologies, know-how, and data accumulated within the Group. In BtoC, the segment secures stable revenue centered on the shogi app "Shogi Wars" (Shogi Wars, over 6 million members). In BtoB, the segment operates HEROZ ASK (a generative AI assistant SaaS), JOINT iPaaS for SaaS, AI Sakura-san, AI solutions for contact centers, and inside sales support (VOIQ), among others. Group companies include Strategit, AI Square, Tiffana.com, and VOIQ.

Recent Overview

Corrected a misclassification in the cash flow statement; operating CF revised to ¥648 million and investing CF to △¥21 million

In the financial results announcement for FY2026 (ending April 2026) disclosed on June 12, 2026, it was found that the payment of contingent consideration of ¥55,165 thousand related to the acquisition of Tiffana.com Co., Ltd. had been mistakenly recorded under "cash flow from operating activities." The correct classification is under "cash flow from investing activities," and following the correction, operating CF was revised to ¥647,991 thousand (approximately ¥648 million) and investing CF to △¥21,237 thousand (approximately △¥21 million). It is stated that there is no material impact on the consolidated balance sheet, income statement, statement of comprehensive income, or statement of changes in shareholders' equity. Note that this correction PDF does not include segment-specific performance figures, and the latest revenue and profit figures for the AIX Business segment alone cannot be determined from this document.

Key Products

Growth Drivers

• Increase in the number of BtoB projects and inquiries, and acquisition of large-scale projects, accompanying the shift from the pilot phase to full-scale adoption of generative AI/AI agent investment
• Growth in HEROZ ASK's ARR (surpassed ¥130 million as of January 2026) and continued increase in the number of client companies and IDs
• Significant year-on-year increase in the number of sales meetings and improved sales efficiency due to the establishment of VOIQ's inside sales function
• Increase in Shogi Wars' MAU and number of matches (effect of new services and content such as Sprint Mode and Season Pass)
• Continued expansion of recurring revenue from JOINT iPaaS for SaaS and AI Sakura-san

Risks

• Risk of delayed response to the rapid evolution of AI/SaaS-related technologies (intensifying technological competition with major domestic and overseas IT companies)
• Risk of impairment related to goodwill and software at group companies (e.g., Strategit); an impairment loss of ¥96,987 thousand was recorded on Strategit's software in FY2025 (ended April 2025)
• Risk of delayed revenue recognition progress in the BtoB domain due to timing discrepancies in contract commencement, among other factors
• Difficulty in securing talented AI/SaaS personnel (intensifying recruitment competition)
• Risk of fluctuation in shogi popularity and user engagement in BtoC services
• Risk of additional payments related to contingent consideration for Tiffana.com and others (fluctuations in M&A consideration)

Business Details

An internet security-related business provided by group company Variosecure Co., Ltd. Centered on its in-house developed network security appliance VSR, the company adopts a recurring business model providing one-stop services from equipment procurement and installation to 24/365 monitoring and operation. Its customers are primarily mid-sized and small/medium enterprises, and it operates managed security services across 7,670 locations (VSR installation sites) in all 47 prefectures nationwide. The proportion of revenue from managed security services reaches 87.9%, and the company achieves stable, accumulating revenue backed by a low churn rate (0.71%).

Recent Overview

Cumulative Q3 revenue grew +5.5% YoY, showing stable growth, with Vario Ultimate Zero becoming a core service

For the cumulative third quarter of FY2026 (ending April 2026) (May 2025 to January 2026), segment revenue was ¥2,118 million (versus ¥2,007 million in the same period of the previous year, +5.5% YoY), and segment profit was ¥738 million (versus ¥610 million in the same period of the previous year, +21.0% YoY). "Vario Ultimate Zero," a zero-trust security service for mid-sized and small/medium enterprises launched for sale in the previous fiscal year (full year FY2025 (ended April 2025)), is being steadily expanded in sales as a core service. Against the backdrop of increasing cyberattacks exploiting generative AI, the company is also working to strengthen security measures for AI-utilizing environments. For reference, full-year FY2025 (ended April 2025) segment revenue was ¥2,668 million and segment profit was ¥789 million.

Key Products

Growth Drivers

• Expansion of security investment by mid-sized and small/medium enterprises due to the sophistication and increase of ransomware and cyberattacks
• Steady sales expansion of Vario Ultimate Zero as a core service
• Continued high growth in Vario Managed EDR due to an increase in the number of licenses
• Stable, accumulating revenue backed by a low churn rate (0.71%) resulting from the recurring business model
• Expanding demand for addressing security risks associated with the increase in cyberattacks exploiting generative AI and AI adoption
• Increase in the number of sales meetings and improved sales efficiency through the strengthening of inside sales functions by VOIQ

Risks

• Delayed recovery in VCR (UTM for small/medium enterprises) sales volume and decline in revenue due to intensifying competitive environment
• Increase in personnel expenses due to strengthened hiring of sales and marketing personnel, and increase in communication and license costs due to rising prices
• Ongoing burden of service development and investment to address the sophistication and diversification of cyberattacks
• Increase in costs during the business investment phase under the medium-term management plan (FY2024 (ended February 2024) to FY2026 (ending February 2026))
• Risk of delayed response to the rapid evolution of security technology