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Overall Financial Performance

• 5 core financial metrics hit all-time record highs for the 2026 February term: consolidated revenue was 17.529 billion yen, gross profit 8.809 billion yen, EBITDA 1.974 billion yen, operating profit 1.33 billion yen, ordinary profit 1.393 billion yen, net profit 713 million yen, and ROE reached 16.1%. All metrics outperformed the prior year, with EBITDA and operating profit growing faster than revenue.
• Consolidated gross margin improved 4.7pp to 50.3%, driven by productivity gains from prior human capital development investments and strong sales of new information security products. Selling, general and administrative expenses rose to 42.7% of revenue from 38.3% prior year, due to investments in human capital, higher shareholder benefit costs, goodwill amortization from M&A, and incremental costs from new consolidated subsidiaries.

Mid-term Plan (Evolution2027) Strategic Progress

• Key Strategic Priority 1: Strengthen management and business foundations, drive structural reform. The company rolled out an evaluation system integrated with human capital development plans, promoted group-wide talent mobility and operational efficiency, and upgraded core information systems including AI-OCR and generative AI projects. It launched new market segments including corporate mobile, new energy, BCP solutions, and IT infrastructure, and released strong-performing market-aligned new security products led by Arexson.
• Key Strategic Priority 2: Proactive investment for business area expansion. The co-developed BCP portable storage battery launched to strong demand, hitting 275 orders (far exceeding plan) in its first 3 months, with a staged expansion plan targeting local governments, education/medical institutions, and industrial sectors with larger models. The company actively pursued M&A focused on synergy creation and channel expansion, adding players in existing area expansion (office equipment dealers, solution providers) and new areas (system development, IT infrastructure). Acquired Arexson has delivered cumulative real operating profit of 4.971 billion yen, for a 26.0% return on invested capital, outperforming M&A investment. Newer acquired subsidiaries are in the pre-synergy investment phase with a 13.5% ROIC to date. M&A has expanded geographic coverage, adding ~4,000 existing customers in previously untapped regional areas with large cross-selling opportunities for security products. Combined the group now has 41,000 total corporate customers, with active cross-selling across the customer base of different subsidiaries to drive LTV growth.
• Key Strategic Priority 3: Stabilize revenue structure. Stable stock-based revenue grew 20.5% year-over-year (+458 million yen). The small 0.4pp decline in stock revenue share was due to the flow-focused revenue mix of newly consolidated subsidiaries. Stock revenue is led by No.1 Business Support (40.8%) and maintenance services (36.1%).
• Key Strategic Priority 4: Promote sustainability and human capital management. The company raised entry-level salaries, expanded student loan repayment support, improved benefits, introduced internal open recruiting and wellness initiatives, and advanced diversity promotion. As of 2026, male parental leave uptake hit 100% (exceeding 2027 target of 80%), 40% of 2026 new graduate hires are female, and per-employee training spend hit 65,000 yen (above 2027 target of 30,000 yen). Progress continues toward targets for 20% female manager ratio and 30% female employee share by 2027.

Capital Allocation and Shareholder Returns

• The company updated its shareholder return policy to target a minimum 50% payout ratio (up from 30% prior) and a 6% minimum DOE, maintaining a progressive dividend policy with semi-annual distributions. It plans 9 consecutive years of dividend increases, with a planned 1 yen increase to 79 yen per share for 2027 February term, for a 4.45% dividend yield as of the 2026 February end. The company will conduct opportunistic share buybacks under financial discipline, focused on improving ROE and capital efficiency.

• For the 2027 February term (final year of the Evolution2027 mid-term plan), management guidance is consolidated revenue of 21.2 billion yen, EBITDA of 2.488 billion yen, operating profit of 1.65 billion yen, and net profit of 1.0 billion yen, representing 20.9% revenue growth and 24.1% operating profit growth year-over-year. Operating profit is projected to come in below the initial Evolution2027 plan, as the company prioritizes front-loaded investment in human capital, AI initiatives, and post-M&A PMI.
• Management confirms the Vision 2030 long-term target of 24.0 billion yen in revenue, 3.4 billion yen in operating profit, and 300 billion yen in market capitalization. Revenue for 2027 February term will come close to the 2030 revenue target, so management will update the 2030 target after 2027 results are finalized.
• Key 2027 KPI targets include: 26,500 security devices sold by Arexson; 480 new contracts for No.1 Business Support with a 0.7% target churn rate; 9,500 energy sales and 19,300 DX product sales for newly added I Station.
• Dividend is planned to increase 1 yen year-over-year to 79 yen per share, supported by expected net profit even with lower operating profit guidance, due to tax reductions from business restructuring and elimination of the shareholder benefit program.

1. No.1 (Parent entity): Revenue grew 7.2% year-over-year, operating income grew 16.6% year-over-year to a record high. Gross margin improved 2.4pp to 51.5%. The service segment No.1 Business Support reached 5,188 total contracts (up 118 year-over-year), with an average customer price of 14,400 yen (up 2,000 yen year-over-year) and an average churn rate of 0.8%. It contributed 40.8% of total stock-based revenue. 2. Arexson (Information security device subsidiary): Sold 25,501 units, 102% of target, with revenue exceeding the prior year. Operating income came in below prior year as planned, due to strategic front-loaded human capital investment for future growth. 3. Newly consolidated subsidiaries (6 added in 2026 February term): 3 consolidated from the start of the year generated 719 million yen in revenue and 248 million yen in operating income. 3 consolidated from Q3/Q4 generated 141 million yen in operating income, though acquisition-related costs created a net negative impact on full-year 2026 consolidated results. All new subsidiaries combined delivered 197.4% year-over-year revenue growth and 505 million yen year-over-year operating income growth, contributing positively to group-wide results. Across the group, own-planned products (led by Arexson) accounted for 50.3% of flow sales; security products made up 46.2% of flow sales, followed by multifunction devices at 27.9%.

• Integration and front-loaded investment costs for newly acquired M&A subsidiaries weighed on 2026 consolidated results, and full synergy realization is still pending, with no guarantee of projected future earnings contributions from these acquisitions.
• Cross-selling of high-margin security products to customers of newly acquired regional dealerships has not yet delivered tangible results, and depends on successful talent alignment and operational integration.
• The company has not yet met its 2027 mid-term targets for female management ratio and female employee share, requiring ongoing sustained investment and hiring initiatives that may increase near-term costs.
• Shareholder return costs (including increased dividend payouts and share buybacks) and large M&A-related borrowing have increased leverage, resulting in a 31.2% tier 1 capital ratio as of 2026 February end, putting pressure on capital efficiency.

Q: What is the reasoning behind 2027 February term operating profit growth slowing to 24% after 28.1% growth in 2026? / A: The slower projected growth is intentional, as management prioritizes front-loaded investment in long-term growth drivers including human capital expansion, AI capability building, and post-M&A integration for newly acquired subsidiaries. These investments are expected to drive stronger sustained growth toward the 2030 Vision targets. Business restructuring and elimination of the shareholder benefit program will reduce tax burdens, protecting net income and dividend payout capacity even with lower near-term operating profit.

Q: What will be the earnings contribution from newly consolidated subsidiaries in 2027? / A: The three subsidiaries consolidated in the second half of 2026 will be fully consolidated for the full 2027 fiscal year, which will deliver a material positive contribution to group revenue and operating profit that was not reflected in full-year 2026 results. Cross-selling synergies across the combined 41,000 group customer base will also begin to contribute incremental earnings in 2027 as integration progresses.

Q: How is demand for Arexson's products tracking, and what is the plan for strategic human investment there? / A: Demand for Arexson's information security products remains strong, and the company hit its 2026 sales unit target at 102% of plan. The near-term decline in Arexson's operating profit is a planned strategic choice to invest in expanding the talent base to support future demand growth and product expansion, which will position the business for stronger long-term revenue and profit growth. Demand is expected to remain solid, with sales growth targeted to continue in 2027.