Deal pipeline remains solid; large-scale engagements launching from spring reaffirm the validity of the H2-weighted earnings plan

Executive Summary

Tsuji Hongo IT Consulting Inc. is entering a phase of accelerated growth investment following its IPO in December 2025. While 1Q profit progress stood at just 9.5% due to listing-related expenses and front-loaded hiring investments, management expressed confidence in achieving the full-year plan, citing on-track toss-up deal volume—the primary driver of revenue generation. Notably, through a capital and business alliance with the ITOCHU Group, the company is expanding its focus from the traditional SME segment into the back-office functions of large enterprises, where per-deal revenue contribution is expected to be in a fundamentally different league from SME engagements. Demand for accounting and payroll outsourcing services has exceeded supply to the point of generating a waitlist, signaling a transition into a phase where talent acquisition has become the key growth bottleneck.

Message from the Company

Key Discussion Points

• Expansion into Large Enterprise BPO via the ITOCHU Partnership

  The company is executing a strategy to leverage ITOCHU Group's client base and laterally deploy its SME-honed operational expertise into back-office support for large enterprises. From April onward, multiple hybrid consulting/BPO engagements involving 20–30 headcount are scheduled to launch, with per-deal revenue contribution expected to reach approximately 10x that of conventional SME engagements. This partnership synergy, which competitors lack, serves as a clear differentiator.

• Excess Demand in Accounting and Payroll Outsourcing and Capacity Expansion

  Demand for accounting and payroll outsourcing within the Operations Domain is so robust that a waitlist has formed, making capacity expansion the most pressing challenge. Full-time hiring has fallen short of plan and is being supplemented with temporary staff, temporarily pressuring the cost ratio—however, the flip side is that the margin improvement opportunity is substantial once permanent staffing catches up. The office expansion planned from May onward is positioned as a preemptive investment in anticipation of headcount growth.

• Building an External Accounting Firm Network via the with DX Platform

  The with DX Portal is scheduled for release in March 2026, with approximately 80 member firms already onboarded. The business model operates by receiving deal referrals from external accounting firms, with the company delivering the services and paying referral commissions. Compared to a conversion rate of approximately 20% within the Tsuji Hongo Group, external firm referrals remain in the single digits, making awareness improvement and conversion rate enhancement the near-term priorities. Drawing on the experience that penetration within the Tsuji Hongo Group itself took approximately six months, the company is conducting tailored training sessions for each partner firm.

Envalith's Perspectives

• 01.

  Large Enterprise BPO Could Transform the Revenue Structure

• 02.

  Excess Demand Underscores Strong Market Positioning

• 03.

  Probability of Achieving the H2-Weighted Earnings Plan

• 04.

  Risk Factors

Q&A Highlights

• Q

  Have listing-related expenses been fully recognized in 1Q, or will additional costs arise from 2Q onward?

  A

  The approximately JPY 29M booked in 1Q substantially completes the listing-related expenses. JPY 3–9M related to the over-allotment remain for 2Q, but that will be the final tranche of IPO-related costs.

• Q

  What is the expected quarterly profit trajectory toward the full-year operating income target of JPY 428M?

  A

  We expect operating income progress of approximately 15% at the 2Q mark and approximately 25% on an H1 cumulative basis. Through 2Q, hiring investments will continue to compress profits, but in 3Q and 4Q, we plan to curtail new hiring to lift margins and recoup the investment. Both revenue and operating income follow a staircase-like quarterly build pattern, and the H2-weighted profile is consistent with historical trends.

• Q

  What are the demand trends for accounting and payroll outsourcing, and what does the large-deal pipeline look like?

  A

  Accounting and payroll outsourcing is in a state of excess demand with an active waitlist. Large-scale BPO engagements sourced through ITOCHU are expected to be secured from April onward, with projects involving 20–30 headcount launching as hybrid engagements that start with consulting-led process optimization before converting to BPO contracts. SME-focused engagements at JPY 350K–400K per month also continue to accumulate.

• Q

  Does the proliferation of AI pose a negative impact on the company's business?

  A

  Among SMEs, paper-based processes remain the norm and there is a shortage of personnel capable of leveraging AI, so we have not experienced any downward pressure on pricing at this stage. We expect this situation to persist for several years. Internally, however, we are actively pursuing AI-driven operational efficiency and launched an AI consulting practice in January, positioning ourselves as the driver of AI adoption for Tsuji Hongo Tax Corporation. Demand for cybersecurity services is also trending upward in tandem with AI proliferation.

• Q

  What is the pricing structure and revenue model for the with DX platform?

  A

  The model works as follows: external accounting firms toss up engagements they cannot handle in-house, and the company delivers the services and pays referral commissions. Since the structure does not involve collecting fees from accounting firms, no per-member-firm ARPU metric is set. Compared to the approximately 20% conversion rate within the Tsuji Hongo Group, external firm referrals remain at single-digit levels; the company plans to pursue both expansion of toss-up volume and improvement in conversion rates in parallel.