Key Positives From The Full-Year Results
Revenue was only JPY 5,722M (+1.0% YoY), but operating income swung back into the black at JPY 170M (prior year: JPY -522M). Two drivers accounted for most of the improvement. Better deal flow in AI Integration lifted gross profit, and the GPU Server business overhauled its cost structure. According to the company, the AI Solutions business posted record full-year revenue and operating income.
- Gross profit margin improved to 33.2% (+3.0pt YoY), while SG&A fell to JPY 1,784M (-10.0% YoY). Both gross-margin gains and cost cuts contributed to the return to profitability.
- Average monthly revenue per employee in AI Integration rose from JPY 1,478K to JPY 1,641K (vs. prior-year 4Q). Business-partner gross margin also rose from 15.3% to 18.5%, so the deal-flow restructuring is now showing up in the numbers.
- AI Lab/Consulting revenue grew for a fourth consecutive quarter, reaching JPY 86M in 4Q (prior-year 4Q: JPY 39M). The company has established a model of winning successive orders from PoC through full development and into subsequent phases.
- GPU Server gross margin rose to 62.7% (prior year: 50.2%), and SG&A fell from JPY 835M to JPY 590M. Combined 3Q–4Q operating income of JPY 63M confirms an improvement in business value ahead of the sale.
- Gross profit per employee was JPY 4,347K (+12.7% YoY, our estimate). Productivity rose even as headcount declined from 449 to 437.
Key Concerns From The Full-Year Results
Revenue growth of +1.0% reflects contraction in legacy areas offsetting gains in growth areas, so top-line expansion remains a work in progress. Operating CF was negative at JPY -64M, indicating a lag in converting profit to cash. In addition, a lawsuit (claim amount: JPY 250M) has arisen over the acquisition of Zero Field shares. This uncertainty is large relative to the company's profit level.
- Engineering revenue fell to JPY 1,581M (-10.0% YoY) and GPU Server revenue to JPY 912M (-13.3% YoY). Sales to key customer Toyota Boshoku also declined to JPY 596M (-21.9% YoY).
- Operating CF of JPY -64M reflected a JPY -318M decrease in contract liabilities and a JPY -134M increase in trade receivables. Investing CF of JPY +215M came from the sale of intangible assets (JPY 109M) and the withdrawal of time deposits (JPY 160M), both one-off factors.
- Finance costs were JPY 78M (+76.9% YoY). Of this, JPY 38M was a provision for doubtful accounts on uncollected receivables related to defective inventory purchased from a Taiwanese company. A JPY 21M deferred tax benefit booked in 4Q supported net income.
- A former Zero Field shareholder (Mr. Murata) is seeking JPY 250M in damages and other relief from the company and two of its directors. This is more than twice net income of JPY 100M, and the impact on earnings has yet to be determined (company disclosure). Separately, TRIPLEIZE CO.,LTD. has filed a suit seeking approx. JPY 460M in damages from the former largest shareholder, alleging misrepresentation during due diligence.
- FY08/27 consolidated guidance has not been disclosed. With the timing and price of the Zero Field transfer still undetermined, the range of the potential gain or loss on transfer is also unclear.
Focus Areas / Items To Monitor Going Forward
- On the transfer of all Zero Field shares, we want to confirm when terms will be finalized and whether the unit qualifies for classification as a discontinued operation under IFRS 5. We also want to confirm the timing of consolidated guidance and the impact of any transfer gain or loss on net income.
- The achievability of the FY08/27 AI Solutions reference outlook (revenue of JPY 5,030M, operating income of JPY 190M). The outlook assumes gross profit margin improves from 27.8% to 31.3% (our estimate), so progress on price increases and prime-contractor deal expansion will be key.
- The recovery in Engineering headcount (5 mid-career hires joining in September 2026, 16 new graduates scheduled for April 2027) and progress on AI Product ARR growth from JPY 142M to JPY 161M. We also want to track development of the automotive design AI product, targeted for commercialization from FY08/28 onward.
- The envisaged scheme and timing of the Zero Field transfer, and the outlook for a gain or loss on transfer relative to book value
- The points of contention in the Murata lawsuit, its relationship to the suit the company filed in July 2026, and the criteria for booking a provision
- The breakdown of the roughly JPY 202M widening in the gap between gross profit and operating income in the FY08/27 reference outlook (year-end bonuses, sales-capability investment, automotive design AI investment)
- The segment breakdown of the JPY 319M decrease in contract liabilities, and the expected timing of an operating CF recovery
- The reasons for lower sales to Toyota Boshoku, and the outlook for recovery in Engineering utilization rates and billing rates
Key Financial Highlights
| Item | Value | YoY |
|---|---|---|
| Revenue | JPY 5,722M | +1.0% |
| Cost of Goods Sold | JPY 3,822M | -3.4% |
| Gross Profit | JPY 1,899M | +11.1% |
| Gross Profit Margin | 33.2% | +3.0pt |
| SG&A | JPY 1,784M | -10.0% |
| Other Income | JPY 81M | -19.3% |
| Other Expenses | JPY 27M | -92.3% |
| Operating Income | JPY 170M | Turned profitable (prior year: JPY -522M) |
| Operating Income Margin | 3.0% | +12.2pt |
| Finance Costs | JPY 78M | +76.9% |
| Net Income before tax | JPY 97M | Turned profitable (prior year: JPY -546M) |
| Income Tax Expense | JPY -2M | Prior year: JPY -78M |
| Net Income Attributable to Owners of Parent Company | JPY 100M | Turned profitable (prior year: JPY -467M) |
| Basic EPS | JPY 11.99 | Prior year: JPY -56.08 |
| Comprehensive Income | JPY 135M | Prior year: JPY -445M |
- The company voluntarily adopted IFRS from FY08/26. Prior-year figures have been restated to IFRS, which has no recurring profit line.
- The prior-year operating loss widened from JPY -61M under J-GAAP to JPY -522M under IFRS. This was mainly because a JPY 319M inventory write-down in the GPU Server business (an extraordinary loss under J-GAAP) was reclassified into operating income (company disclosure).
- In the current year, a JPY 29M inventory valuation loss was booked in cost of goods sold. Finance costs include a JPY 38M provision for doubtful accounts (company disclosure).
- Quarterly operating income was JPY 61M in 1Q, JPY 8M in 2Q, JPY 73M in 3Q and JPY 26M in 4Q. 4Q was weighed down by an additional JPY 33M in year-end bonuses in AI Solutions.
Performance By Business Segment
The AI Solutions business led profit growth on double-digit revenue growth in AI Integration + AI Products and improved gross margins, absorbing the revenue decline in Engineering. The GPU Server business has completed its shift from mining machines to GPU servers for AI development, and returned to profitability despite lower revenue.
Segment Performance Table
| Segment | Revenue | YoY | Operating Income | YoY | Margin |
|---|---|---|---|---|---|
| AI Solutions | JPY 4,822M | +4.2% | JPY 159M | +190.0% | 3.3% |
| └AI Integration + AI Products | JPY 3,262M | +12.8% | - | - | - |
| └Engineering | JPY 1,581M | -10.0% | - | - | - |
| GPU Servers | JPY 912M | -13.3% | JPY 10M | Turned profitable (prior year: JPY -577M) | 1.2% |
| Adjustments | JPY -12M | - | - | - | - |
| Consolidated | JPY 5,722M | +1.0% | JPY 170M | Turned profitable | 3.0% |
(Segment revenue is on a gross basis including intersegment sales. Sub-segment figures are IFRS-based values from the earnings presentation; the difference between their sum and the segment total reflects consolidation eliminations.)
- AI Integration: Combined revenue with AI Products rose +12.8% YoY. Growing demand for generative AI development increased AI Lab and AI development contracts, and pre-sales efforts targeting large listed companies expanded new and repeat orders. Average monthly revenue per employee rose to JPY 1,641K, and AI Integration gross profit reached JPY 755M.
- AI Products: Web advertising drove more inquiries for the facial-recognition attendance app "Aruroku for LINE WORKS," accelerating growth in contracted IDs. Alongside orders from large customers such as a major pharmaceutical company and car dealers, orders via API integrations with Money Forward and Kinjiro also grew. ARR reached JPY 142M.
- GPU Servers (Profitability): Expanded collaboration with a specific distributor boosted sales of GPU servers for AI development, lifting segment gross profit to JPY 571M (+8.4% YoY). 4Q revenue was JPY 321M (+58.9% vs. 3Q), and 4Q operating income was JPY 39M. Full-year operating income before the inventory valuation loss was JPY 40M (company disclosure).
- Engineering: The lingering impact of headcount attrition in the prior year drove a -10.0% YoY revenue decline. During the year, attrition stabilized and contract man-hours rose. Strengthened sales efforts in the Tokai region, through secondments and on-site placements at BEX, won AI development projects for manufacturers.
- GPU Servers (Revenue): Following the FY2025 (Reiwa 7) tax reform, the core product shifted from mining machines to AI GPU servers, resulting in a -13.3% YoY revenue decline. Inventory- and asset-related losses also continued, including a JPY 23M crypto-asset impairment in 2Q and a JPY 29M inventory valuation loss in 4Q.
- AI Solutions (4Q Standalone): Personnel and training costs for 39 new graduates, plus an additional JPY 33M in year-end bonuses, resulted in a 4Q operating loss of JPY -12M. Full-year profit still grew, but quarterly expense recognition is highly uneven.
Progress Versus Full-Year Guidance
FY08/27 consolidated guidance has not been disclosed. In place of a progress rate, we therefore compare current-year results with the company's reference outlook for the AI Solutions business (continuing operations basis). The outlook assumes gross margin improvement, with gross profit up +17.3% against revenue growth of +4.3%. Operating income growth is only +19.5%, however, as much of the gross profit gain is earmarked for year-end bonuses, sales-capability investment and automotive design AI investment.
| Item | Value (FY08/26 Full Year) | FY08/27 Reference Outlook | Outlook YoY |
|---|---|---|---|
| Revenue (AI Solutions) | JPY 4,822M | JPY 5,030M | +4.3% |
| └AI Integration / AI Products | JPY 3,262M | JPY 3,400M | +4.2% |
| └Engineering (BEX) | JPY 1,581M | JPY 1,650M | +4.4% |
| Gross Profit | JPY 1,339M | JPY 1,572M | +17.3% |
| Gross Profit Margin (Our Estimate) | 27.8% | 31.3% | +3.5pt |
| Operating Income | JPY 159M | JPY 190M | +19.5% |
| Net Income | JPY 99M | TBD | - |
Changes To Guidance
The company has withheld FY08/27 consolidated guidance. Efforts to sell all shares of consolidated subsidiary Zero Field are underway, but the completion date and transfer price have not been finalized. The company says it will disclose guidance promptly once the transfer terms are set and a reasonable estimate becomes possible. Until then, the AI Solutions reference outlook serves as the benchmark for assessing performance.
Commentary On Shareholder Returns
The annual dividend for FY08/26 was JPY 0.00, and the FY08/27 forecast is also JPY 0.00 (no dividend). There was no share buyback and no change in policy. Retained earnings remain negative at JPY -661M, and the company is at a stage of prioritizing growth investment and rebuilding its financial base.
Financial Position
The company reduced interest-bearing debt by approx. JPY 384M, and the ratio of equity attributable to owners of the parent improved to 31.5% (prior year-end: 25.2%). Excluding lease liabilities, bonds and borrowings are below cash, leaving the company effectively net cash. However, goodwill of JPY 650M accounts for 44.5% of total equity (our estimate), and retained earnings remain negative. Building a thicker capital base will depend on accumulating future profits.
- Key Figures
- Leverage Metrics
| Item | Value | Additional Information |
|---|---|---|
| Cash and Cash Equivalents | JPY 1,474M | -23.0% vs. prior year-end (balance sheet basis). Change per CF statement: JPY -279M |
| Trade and Other Receivables | JPY 839M | +13.0% vs. prior year-end |
| Inventories | JPY 39M | -73.0% vs. prior year-end |
| Goodwill | JPY 650M | Unchanged from prior year-end |
| Shareholders' Equity (Equity Attributable to Owners of Parent) | JPY 1,462M | +9.5% vs. prior year-end |
| Interest-Bearing Debt (Bonds and Borrowings + Lease Liabilities) | JPY 1,742M | -18.0% vs. prior year-end |
| └Bonds and Borrowings | JPY 1,334M | -17.6% vs. prior year-end (current: JPY 550M, non-current: JPY 784M) |
| └Lease Liabilities | JPY 407M | -19.5% vs. prior year-end |
| Contract Liabilities | JPY 117M | -73.0% vs. prior year-end |
| EBITDA | JPY 395M | Operating income of JPY 170M + D&A of JPY 225M (our estimate). Prior year: JPY -48M |
| Metric | Value | Notes |
|---|---|---|
| Net Debt/EBITDA | 0.7x | Based on net interest-bearing debt of JPY 267M including lease liabilities (our estimate). Bonds and borrowings alone imply effective net cash of JPY 139M. Prior-year EBITDA was negative |
| Debt/Equity | 1.19x | Including lease liabilities. Prior year-end: 1.59x. Bonds and borrowings only: 0.91x (our estimate) |
| Interest Coverage Ratio | 5.4x | Operating income ÷ interest paid of JPY 31M (CF statement), our estimate |
| Equity Ratio | 31.5% | Ratio of equity attributable to owners of parent (company disclosure). Prior year-end: 25.2% |
Disclosures Released Alongside The Earnings Announcement
- 2026/10/15Disclosure explaining the variance from prior-year results. It details one-off items, including a JPY 29M inventory valuation loss, a JPY 38M provision for doubtful accounts and a JPY 21M deferred tax benefit
- 2026/10/15Earnings presentation released. It presents the AI Solutions reference outlook (operating income of JPY 190M) assuming Zero Field is classified as a discontinued operation, along with gross profit plans by sub-segment
Major Announcements During The Quarter
- 2026/07/23Active IDs for "Aruroku for LINE WORKS" rose 501% over the past year, underscoring growth in AI Product recurring revenue
- 2026/07/29The facial-recognition AI began integrating with CROSS CAT's "CC-BizMate," broadening API-based sales channels
- 2026/09/01One senior executive officer and one executive officer were appointed, strengthening the enterprise sales organization
- 2026/09/07Mr. Hitoshi Sato was appointed Representative Director of Zero Field. The share-transfer policy remains unchanged
- 2026/10/09A former Zero Field shareholder filed a lawsuit (claim amount: JPY 250M) against the company and its directors. The company intends to argue that the claim has no merit
Large-Shareholding Filings / Material Proposals Over The Past Year
- None
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