INTELLIGENT WAVE INC.

Business Details

The company's main customers are financial institutions such as credit card companies, banks, and securities firms, and it operates across three business areas: payment solutions including FEP Systems, fraud detection, and merchant management; information security products focused primarily on internal information leak prevention; and high-speed, large-volume data communication and analytics platforms. The company supports both on-premises and cloud environments, providing high-value-added services based on its proprietary in-house developed packaged software. It is also expanding its customer base by leveraging collaboration with its parent company, the DNP Group.

Recent Overview

Revenue growth remained solid, but the full-year forecast was revised downward due to prolonged quality response costs

In the cumulative nine months of FY2026 (ending June 2026) (July 2025 to March 2026), the company secured revenue growth with sales of ¥12,497 million (up 8.4% year on year). However, gross margin declined due to prolonged quality response work on certain customer projects in the payment domain's cloud service and changes in product mix in the security domain, resulting in a decline in operating profit to ¥1,361 million (down 5.8% year on year). While the quality response projects are said to be moving toward resolution, the company revised its full-year earnings forecast downward (revenue of ¥17,200 million, operating profit of ¥2,000 million) in light of increased costs and delayed revenue opportunities. Order intake declined to ¥10,976 million (down 32.0% year on year) due to a reaction to multi-year stock-type project orders received in the same period of the prior year, and the order backlog also decreased to ¥18,790 million (down 11.3% year on year). On the other hand, cloud service revenue maintained high growth at ¥3,124 million (up 24.5% year on year), and the company expects to receive orders for new multi-year contract projects toward the start of the next fiscal year.

Key Products

Growth Drivers

• Continued demand from payment service providers for core system modernization and openization amid the expansion of domestic cashless payments (IT investment by card companies and payment service providers remains solid)
• Continued high growth of the Fraud Detection Cloud Service (cloud service revenue of ¥3,124 million in the cumulative nine months of FY2026, ending June 2026, up 24.5% year on year)
• Expansion of revenue in the FEP and fraud detection fields through multiple orders for system replacement projects from major customers
• Expansion of the stock-type revenue base through expected orders for new multi-year cloud service contract projects toward the start of the next fiscal year
• Transition to a service-oriented business model centered on proprietary products in the security domain, and overseas expansion primarily in Southeast Asia
• Increase in system development for securities firm customers in the data communication and analytics platform domain, and expansion of technology application to other industries
• Business diversification and establishment of a sustainable growth foundation through the three transformations of "business, technology, and human resources" under the medium-term management plan (from FY2025, ended June 2025)

Risks

• Increased costs and delayed revenue opportunities due to prolonged quality response work on certain customer cloud service projects (a factor behind the downward revision of the full-year earnings forecast; the company is currently reviewing its development processes and quality management processes)
• Uncertainty regarding the risk of recurrence of quality issues and the effectiveness of company-wide reforms to the development structure and quality management processes
• Risk of increased depreciation expenses due to the high balance of intangible fixed assets (software) (¥3,341 million as of the end of March 2026) (depreciation expenses for the cumulative nine months were ¥1,263 million, up 29.1% year on year)
• Pressure on profitability due to the continued increase in selling, general and administrative expenses, primarily driven by increases in personnel expenses
• Risk of fluctuation in order intake depending on the timing of large multi-year contract orders (order intake for the cumulative nine months of FY2026, ending June 2026, declined 32.0% year on year)
• Risk of gross margin decline due to changes in product mix in the security domain
• Risk of increased depreciation expenses in the event of a decline in expected sales revenue for market-sale-purpose software