Key Positives From The 2Q Results
Recurring revenue rose +22.1% YoY to JPY 879M (our estimate). This offset timing slippage in spot revenue and lifted 1H revenue to JPY 980M (+13.0%). Converting retail clients to recurring contracts and building up manufacturer partnership agreements progressed in tandem, moving the earnings base to a structurally higher level. 2Q standalone Gross Profit Margin recovered to 53.3% (+2.1pt QoQ), above the 51.0% assumed in the full-year plan.
- Retail Solutions: 1H revenue reached JPY 225M, roughly 1.8x the JPY 125M in the prior-year period. Retail DX services and AI solutions for major retailers, launched last fiscal year, contributed for the full period.
- Manufacturer Solutions: Revenue of JPY 535M (+15.6%, our estimate). Partnership agreements with wholesalers built up faster than initially expected and were the main driver of 2Q profitability.
- Recurring Ratio: The 2Q standalone recurring ratio was 89.6% (our estimate). The company booked operating income of JPY 19M despite a -40.3% drop in spot revenue, demonstrating downside resilience.
- Tsuruha HD Win: Tsuruha HD decided to adopt SalesSensor, making it the second major drugstore chain after Welcia. The rollout model for the new-store sales forecasting AI has entered the validation stage.
- First M&A Deal: The company acquired Cosmonet, its first M&A deal under the medium-term plan (MTP). The company-estimated adjusted EV/EBITDA is approximately 3.2x. This is the first deal under the MTP's "+α" upside component.
Key Concerns From The 2Q Results
Cost of goods sold rose +28.8%, outpacing revenue growth. As a result, 1H Gross Profit Margin fell to 52.2% (-5.8pt YoY) and operating income declined to JPY 32M (-25.4%). Meeting the full-year operating income target of JPY 80M requires JPY 48M in 2H. The timing of slipped spot projects will continue to drive earnings volatility.
- System-Related Costs: 1H system-related costs rose +33.3% to JPY 232M from JPY 174M in the prior-year period (our estimate). Cloud price increases and the weaker yen weighed on gross margin.
- Spot Revenue: Spot revenue fell to JPY 99M (-31.7%, our estimate). Additional development for a major retailer (worth several tens of millions of JPY) slipped into 3Q, further increasing the 2H weighting.
- Manufacturer Client Count: Manufacturer clients totaled 197, down 4 QoQ due to a cancellation by a corporate group. Partnership contracts are on a revenue-share basis, which limits revenue per contract.
- Acquisition Costs: The company expects to book approximately JPY 28M in Cosmonet acquisition-related costs in 3Q. Management indicated that 3Q standalone operating income will not rise materially, even including the slipped revenue.
- Recurring Profit: Recurring profit fell -36.5%, a steeper decline than operating income. FX losses of JPY 2.9M and losses on investment partnerships of JPY 2.6M pushed up non-operating expenses.
Focus Areas / Items To Monitor Going Forward
- Actual 3Q booking of the spot development for a major retailer and the AI solution for a specific manufacturer, both of which slipped from 2Q. These will be key gauges of confidence in the plan to generate more than half of operating income in 4Q.
- A return to net growth in manufacturer clients, and progress on upselling and cross-selling after volume expansion through partnership agreements. Trends in unit pricing and gross margin should also be monitored.
- Disclosure on Cosmonet's earnings impact, with balance sheet consolidation from end-3Q and P&L consolidation from 4Q. Key points are the goodwill amount and whether guidance will be revised.
- Confidence in 3Q booking of the slipped spot development for a major retailer, and the expected revenue and gross profit scale
- Cosmonet's expected earnings contribution in its first year of consolidation, and the timeline for monetizing data provision to building materials and hardware manufacturers
- Trends in revenue and gross margin per contract for partnership-based contracts, and the profitability gap versus direct contracts
- Details of investment securities of JPY 199M and capital contributions of JPY 62M, and the investment policy, including FX risk
- The M&A pipeline for the remaining JPY 750M+ of the MTP investment budget, and the funding policy in light of loan covenants
- Progress in passing through rising system-related costs, and the 2H gross margin outlook
Key Financial Highlights
| Item | Value | YoY |
|---|---|---|
| Revenue | JPY 980M | +13.0% |
| └ Recurring (Sum of Company-Disclosed Quarterly Figures) | JPY 879M | +22.1% (our estimate) |
| └ Spot (Sum of Company-Disclosed Quarterly Figures) | JPY 99M | -31.7% (our estimate) |
| Cost of Goods Sold | JPY 468M | +28.8% |
| Gross Profit | JPY 512M | +1.7% |
| Gross Profit Margin | 52.2% | -5.8pt |
| SG&A | JPY 480M | +4.2% |
| Operating Income | JPY 32M | -25.4% |
| Operating Income Margin | 3.3% | -1.7pt |
| Recurring Profit | JPY 30M | -36.5% |
| Interim Net Income | JPY 21M | -42.8% |
| EPS | JPY 4.38 | -42.7% |
| 2Q Standalone Revenue | JPY 490M | +7.3% |
| 2Q Standalone Operating Income | JPY 19M | -38.7% |
- Higher cost of goods sold was the main driver of the profit decline. The 1H cost breakdown was system-related costs of JPY 232M (+33.3%) and labor and outsourcing costs of JPY 174M (+19.2%) (both our estimates).
- Within SG&A, personnel costs rose to JPY 335M (+6.7%). Other SG&A declined to JPY 143M (-1.4%), keeping total SG&A growth to +4.2% (our estimate).
- In the prior-year period, non-operating income was JPY 7.0M, including insurance proceeds of JPY 4.1M. This fell to JPY 3.9M in the current period, widening the decline at the recurring profit level.
Performance By Business Segment
The company operates a single segment, Data Marketing. Growth in recurring revenue drove the top line. However, revenue growth was not enough to absorb the decline in spot revenue and higher costs, resulting in lower profit.
- Segment Performance Table
- Revenue By Service (Company-Disclosed Quarterly Figures; 1H Cumulative Figures Are Our Estimates)
| Segment | Revenue | YoY | Operating Income | YoY | Margin |
|---|---|---|---|---|---|
| Data Marketing | JPY 980M | +13.0% | JPY 32M | -25.4% | 3.3% |
| Service | 1H Cumulative | YoY | 2Q Standalone | YoY |
|---|---|---|---|---|
| Manufacturer Solutions | JPY 535M | +15.6% | JPY 269M | +15.4% |
| Retail Solutions | JPY 225M | +80.0% | JPY 108M | +50.0% |
| Retail Media and Other | JPY 118M | -8.5% | JPY 62M | -6.4% |
| Spot | JPY 99M | -31.7% | JPY 50M | -40.3% |
- Retail Solutions: Retail DX and AI solutions for major retailers, launched last fiscal year, contributed for the full period, driving 2Q standalone growth of +50.0%. 2Q standalone revenue was down -7.5% QoQ but remained at a high level.
- Manufacturer Solutions: 2Q standalone revenue rose +0.9% QoQ. Partnership agreements with one of Japan's leading wholesalers continued to build, and client count rose +20.1%.
- Retail Media (2Q Standalone): Revenue rebounded +10.7% QoQ. Partnership revenue with a major domestic ad distribution company grew, and data integration partners expanded to include FreakOut and NEL.
- Spot: Revenue recognition for additional spot development for a major retailer (worth several tens of millions of JPY) slipped into 3Q, and 2Q standalone revenue fell -40.3%. Booking timing tends to fluctuate on a project-by-project basis.
- Retail Media and Other (Cumulative): 1H revenue fell -8.5%. The business is still recovering from the low level (JPY 53M) seen since 3Q FY3/26, and monetizing new partnerships remains a challenge.
- Manufacturer Client Count: Partnership agreements increased, but a corporate group that used the service across multiple companies cancelled, bringing the count to 197 (-4 QoQ). Retaining direct contracts is a challenge.
Progress Versus Full-Year Guidance
Progress stands at 44.6% for revenue and 40.0% for operating income. Both are slightly below the prior-year 1H share of full-year results (revenue 46.4%, operating income approximately 42%). The plan has been 2H-weighted from the outset, with more than half of operating income expected in 4Q. Required 2H revenue of JPY 1,220M implies +21.6% versus 2H of the prior year (our estimate). Achieving this hinges on booking the slipped spot projects and continued build-up of recurring revenue.
| Item | Value (1H Cumulative) | Full-Year Forecast | Progress Rate |
|---|---|---|---|
| Revenue | JPY 980M | JPY 2,200M | 44.6% |
| Gross Profit | JPY 512M | JPY 1,122M | 45.6% |
| Operating Income | JPY 32M | JPY 80M | 40.0% |
| Recurring Profit | JPY 30M | JPY 78M | 38.5% |
| Net Income | JPY 21M | JPY 63M | 33.6% |
*Progress rates are our estimates based on actual figures in JPY thousands.
Changes To Guidance
Full-year guidance is unchanged from the figures announced on May 15, 2026. Cosmonet acquisition-related costs of approximately JPY 28M will be absorbed within the strategic investment budget included in the initial plan. The earnings impact of consolidating Cosmonet is under review, and the company will disclose any revision if warranted.
Commentary On Shareholder Returns
The interim dividend is JPY 0.00, and the year-end forecast is JPY 0.00 (annual JPY 0.00), unchanged. Under the MTP, the company plans to begin shareholder returns once retained earnings carried forward (-JPY 397M at 1H-end) turn positive. In September 2026, it issued paid-in stock options (6th series stock acquisition rights, JPY 2.8M) to division-head-level employees.
Financial Position
The company was debt-free at 1H-end, and its equity ratio remained high at 81.1%. However, cash declined due to purchases of investment securities and capital contributions. In October, the company borrowed JPY 200M to fund the Cosmonet acquisition. It is now entering a phase of capital allocation premised on borrowings with financial covenants.
- Key Figures
- Leverage Metrics
| Item | Value | Additional Information |
|---|---|---|
| Cash and Deposits | JPY 721M | -25.7% vs. prior FY-end |
| Accounts Receivable | JPY 186M | -28.8% vs. prior FY-end; collections progressed |
| Investment Securities | JPY 196M | JPY 2M at prior FY-end; acquisition outlay of JPY 199M |
| Capital Contributions | JPY 117M | +112.0% vs. prior FY-end; payment outlay of JPY 62M |
| Total Assets | JPY 1,461M | -4.7% vs. prior FY-end |
| Shareholders' Equity | JPY 1,186M | +1.9% vs. prior FY-end |
| Interest-Bearing Debt | - | No balance at 1H-end; JPY 200M borrowed on 2026/10/9 |
| EBITDA | JPY 63M | Operating income + depreciation (our estimate); JPY 75M in prior-year period |
| Operating CF | JPY 41M | JPY 108M in prior-year period |
| Investing CF | -JPY 293M | FCF of -JPY 252M (our estimate) |
| Metric | Value | Notes |
|---|---|---|
| Net Debt/EBITDA | Net cash | Zero interest-bearing debt at 1H-end; cash and deposits of JPY 721M |
| Debt/Equity | 0.00x | 0.17x pro forma for the JPY 200M October borrowing (our estimate) |
| Equity Ratio | 81.1% | +5.2pt vs. prior FY-end (company disclosure) |
- The JPY 200M loan (MUFG Bank, unsecured, maturing October 2031) carries financial covenants. These require the company to post non-consolidated recurring profit in each fiscal year and to maintain a repayment-capacity benchmark of at least 1.20.
Disclosures Released Alongside The Earnings Announcement
Major Announcements During The Quarter
- 2026/08/17Tsuruha HD decided to adopt the new-store sales forecasting AI "SalesSensor." It is the second major drugstore chain after Welcia, with deployment planned by FY2/27
- 2026/08/26The company linked its advertising purchase data and Eagle Eye analytics to NEL's "Trade Lift Ads," expanding its partner base in retail media
- 2026/10/07The company acquired all shares of Cosmonet, provider of the "MUSASI" POS system for professional shops, for JPY 200M. This is the first deal under the MTP M&A budget and gives the company a data platform in the housing domain
- 2026/10/07Supplementary explanation of Cosmonet's earnings trends and the acquisition price level. The company outlined plans to monetize professional-market data for building materials and hardware manufacturers
- 2026/10/07The company borrowed JPY 200M from MUFG Bank to fund the acquisition. The loan carries financial covenants, including maintaining non-consolidated recurring profit
Large-Shareholding Filings / Material Proposals Over The Past Year
None
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