AVILEN Inc.

Business Details

Under the purpose of "Enriching humanity through data and algorithms," the company operates two services: AI software development and implementation (AI Software Unit) and organizational and talent development support for AI adoption (Build-up Unit). It provides broad-ranging support—from issue identification through PoC, development, and operational maintenance—primarily to large corporate clients, including listed companies in manufacturing, finance, real estate, and information and communications. The group operates including its consolidated subsidiary LangCore Inc. (a team of engineers specializing in generative AI).

Recent Overview

Revenue rose 8.2% year on year, while operating profit fell sharply by 44.5% due to increased SG&A expenses

In Q1 FY2026 (ending December 2026) (January to March 2026), revenue increased to ¥442 million (up 8.2% year on year), but cost of sales rose from ¥111 million to ¥155 million, causing gross profit to decline from ¥297 million to ¥287 million. In addition, selling, general and administrative expenses increased substantially from ¥177 million to ¥221 million, resulting in operating profit falling 44.5% from ¥119 million to ¥66 million. In March 2026, the company established a joint venture, BA Intelligence Inc., with Bellsystem24 Holdings, Inc., and added it as an equity-method affiliate. Cash and deposits decreased from ¥642 million to ¥492 million due to cash outflows of ¥73 million for the acquisition of shares in the affiliated company associated with the joint venture establishment, as well as tax payments. The depreciation method for tangible fixed assets was changed from the declining-balance method to the straight-line method (the impact on the current period is minor). There is no change to the full-year earnings forecast (revenue of ¥2,141 million, operating profit of ¥356 million).

Key Products

Growth Drivers

• Increasing demand for AI software driven by the rapid expansion of the generative AI market (the global AI market is projected to reach USD 826.7 billion by 2030)
• Steady increases in the number of clients and projects in both the AI Software Unit and Build-up Unit
• Synergy creation through the consolidation of LangCore Inc. (a team of engineers specializing in generative AI) as a subsidiary
• Expansion of the customer base through deepening collaboration with capital and business alliance partners such as Otsuka Corporation
• Establishment of the joint venture BA Intelligence Inc. with Bellsystem24 Holdings, Inc., building a cost-efficient AI utilization support framework by integrating "development" and "operations"
• Stable recruitment of excellent talent and reduced recruitment costs through AVILEN DS-Hub
• Acquisition of new clients through the development of new packages of cutting-edge generative AI solutions such as the AI Document Processing Agent "Choraku"
• Strengthened initiatives to maximize LTV of existing clients

Risks

• Risk of intensified recruitment competition and rising personnel costs due to a widening supply-demand gap for AI talent (already manifesting as SG&A expenses rose 24.6% year on year)
• Risk of delayed response to technology trends amid the rapid evolution of generative AI technology
• Risk of declining gross margin due to increased cost of sales (up 38.9% year on year) (72.7% in the same period last year versus 65.0% in the current period)
• Revenue volatility risk due to a primarily flow-based revenue model
• Goodwill amortization burden associated with M&A and capital/business alliances (goodwill amortization of ¥12 million in Q1) and investment recovery risk
• Cash outflow and liquidity risk from investments such as the establishment of the joint venture BA Intelligence Inc.
• Customer concentration risk due to increasing reliance on specific major clients
• Credit risk related to accounts receivable and contract assets, for which an allowance for doubtful accounts of ¥75 million has been recorded