3627.T

Overall 8-Year Strategic Reflection

• After the 2018 acquisition of JENESIS, the company grew rapidly pre-COVID, reaching over 10 billion yen in revenue and 852 million yen in ordinary income by 2019.
• The three-year COVID period severely disrupted the IoT & Devices business due to lost inbound demand and shipment delays, but entry into the game business allowed the company to maintain overall profit despite lower revenue.
• The past three years post-COVID focused on aggressive investment in new businesses including aiwa, HealthTech, HRTech, medical technology, and AI, and these prior investments have now reached profitability, putting the company back on a growth trajectory starting FY2026.

AI & Cloud Business Initiatives

• SaaS Business: The OfficeBot RAG AI chat service now has over 500 cumulative client companies, and is well-regarded for its accessibility and strong performance. A new AI agent service OfficeAI Employee was launched in March 2026, adding memory, proactive questioning, and execution capabilities to cover both simple RAG use cases and more complex workflows.
• The cloud address book service now has 2,700 client companies, and is distributed successfully via KDDI's corporate channel. A new pro plan with full cloud storage was launched following OS evolution that enabled missed call notifications for cloud-synced contacts, and a new external information management option with granular access controls was added in March 2026 to drive further growth.
• Solution Business: A major internal organizational reform was implemented in March 2026, merging multiple siloed divisions into a single solution business headquarters to enable flexible project-based teaming and improve operational efficiency. The business is shifting to a hybrid model combining in-house and external agents to deliver small-to-medium scale AI implementation projects quickly and at lower cost, matching current cautious corporate demand for large-scale AI investment.

IoT & Devices Business Initiatives

• Products (aiwa) Business: The company plans to integrate its proprietary 8Way Audio spatial audio engine into aiwa products to differentiate from competitors, and shift focus to the less price-sensitive corporate customer segment away from consumer tablets to maintain margins amid component headwinds.
• Edge IoT Business: A new development center was established in Changsha, Hunan, China to expand development capacity, and additional engineer hiring is underway to support the two-center (Shenzhen + Changsha) development structure to grow IoT device order volume amid strong overall demand.

Life Design Business Initiatives

• Game Segment: A full reboot of the classic Cardcaptor series, Cardcaptor Begins, will launch in July 2026 for Nintendo Switch and Nintendo Switch 2, with a Steam release planned later. Pre-orders are already open and have received strong positive response from the long-established fanbase of the series.
• Kids Segment: The Kinolly kids content service was launched in March 2026, taking over the core content of NTT Docomo's discontinued dKids service, where the company was the leading content provider. The service now offers over 1,000 individual games accessible directly via app, with a unique market position in Japan, and the company plans to expand via alliances with other interested businesses.
• HealthTech Segment: The company is expanding into B2B licensing of its wellness app capabilities to other businesses, with multiple deployments launching in FY2027. The company is also rolling out its digital DX solutions for urban clinics (already proven to increase web booking volumes at Tsurukame Clinic) and continuing R&D collaboration with Kyoto University Hospital.
• HRTech Segment: The HABUKU automated recruitment media service is growing strongly, and an AI interview function will be added soon to enable partial automation of the screening process.
• FinTech Segment: The company has formed a business alliance with Toshiba Tec to add payment and promotion app capabilities for Toshiba Tec's self-checkout solutions for the retail industry. It has also invested in and formed an alliance with JPYC, Japan's only licensed stablecoin issuer, to explore stablecoin use cases in digital wallets.

Corporate Actions

• JENESIS canceled its planned IPO due to changed Tokyo Stock Exchange market conditions, and will be integrated into the group headquarters to reduce administrative costs. A 57 million yen special loss related to the upcoming office relocation was recorded in FY2026.
• The company will introduce an interim dividend starting in FY2027, maintaining a total annual dividend of 5 yen (2 yen interim, 3 yen final), with potential for a special dividend if results exceed plan.

• For the 2027 February fiscal year, the company guides consolidated revenue of 11 billion yen, ordinary income of 300 million yen (representing a 222% increase year-over-year from FY2026's 93 million yen), net income attributable to parent shareholders of 150 million yen, and adjusted EBITDA of over 1 billion yen. Revenue growth will come from AI & Cloud and Life Design, which will offset an expected decline in IoT & Devices revenue.
• Revenue is split 5 billion yen in H1 and 6 billion yen in H2. H1 ordinary income is expected to be a loss of 100 million yen due to pre-launch marketing expenses for the new July game and initial promotion for the newly launched Kinolly service, while H2 will deliver 400 million yen in ordinary income to hit the full-year 300 million yen target.
• The company targets over 400 million yen in profit from owned (non-contracted/outsource) businesses, which will become the primary driver of group profit, surpassing contracted service businesses.
• The 2023 mid-term management plan will be updated via a rolling refresh, with the new plan to be announced in October 2026.
• All segment guidance: AI & Cloud expects double-digit revenue growth, IoT & Devices expects a 10% revenue decline, Life Design expects ~1 billion yen in revenue growth.

For the 2026 February fiscal year:

1. AI & Cloud Business: Total segment profit increased year-over-year. The SaaS sub-segment achieved profitability ahead of schedule, with strong profit growth, while the solution sub-segment recorded a 100 million yen decrease in profit. Adjusted EBITDA increased in line with segment profit growth. It is expected to deliver double-digit revenue growth in the 2027 February fiscal year, with the SaaS sub-segment continuing to grow and the solution sub-segment expected to return to growth after hitting bottom.
2. IoT & Devices Business: The aiwa sub-segment achieved full-year profitability for the first time after three consecutive years of losses, and the ODM sub-segment delivered profit growth despite lower revenue driven by cost efficiency reforms. The segment delivered strong profit growth especially in Q4, driving overall group segment profit growth. For the 2027 February fiscal year, total segment revenue is expected to decrease by 10% to ~4.6 billion yen, with the aiwa Products sub-segment expected to return to a loss due to headwinds, while the Edge IoT (formerly ODM) sub-segment will offset this to maintain overall segment profit.
3. Life Design Business: Revenue decreased by ~500 million yen year-over-year due to no new game launches (revenue was boosted by new game initial shipments in the prior year). Adjusted EBITDA decreased by ~200 million yen to 350 million yen from 550 million yen in the prior year, and segment profit decreased due to the game segment impact, but the HealthTech and X-Tech sub-segments achieved profitability in H2, with Q3 and Q4 both delivering full segment black ink. For the 2027 February fiscal year, the segment targets ~1 billion yen of revenue growth driven by a major new game launch and new service rollouts.

Aggregate segment profit across all three business units increased by ~100 million yen to over 600 million yen from over 500 million yen in the prior year. Consolidated total revenue was 10.4 billion yen, exceeding the January 2026 revised forecast of 10.2 billion yen by ~200 million yen. Consolidated ordinary income was 93 million yen, three times the revised forecast of 30 million yen. Adjusted EBITDA totaled 613 million yen for the full fiscal year.

• Component Supply & Cost Risks for IoT & Devices: Strong demand for memory from AI data centers has led semiconductor manufacturers to shift production capacity to AI-focused memory, causing tight supply and price increases for general-purpose memory, which directly impacts the IoT & Devices business, especially the tablet-focused aiwa products segment.
• Foreign Exchange Risk: Most IoT & Devices design and manufacturing is based in China, and the combined impact of yen depreciation and renminbi appreciation has increased production costs by 25% compared to prior periods, pressuring margins.
• Slow Corporate AI Investment Demand: Large-scale corporate AI system investment demand has grown more slowly than expected, as companies are hesitant to commit to large projects due to rapid technology change that can make new implementations quickly obsolete, pressuring the AI & Cloud solution business.
• Underdeveloped Kids Content Market: The kids digital content market in Japan has not yet fully matured, creating near-term growth headwinds for the new Kinolly service.

No Q&A section was included in the provided earning call transcript.