3916.T

• Overall Financial Results

  • DIT achieved 15 consecutive years of revenue and profit growth, with all-time record high total revenue of 24.159 billion yen (+21.5% YoY) and operating profit of 3.013 billion yen (+24.3% YoY). Operating margin improved 0.3pp to 12.5%, exceeding management's prior upwardly revised guidance.
  • Two newly acquired consolidated subsidiaries contributed materially to overall results, and increased operating expenses from investment, M&A goodwill amortization, and higher labor costs were fully absorbed by gross profit growth.

• Operational Initiatives

  • Expanded domestic nearshore (regional) development hubs: The existing 80-person Matsuyama, Ehime hub was joined by a new same-scale hub in Hakodate's Oshima region to address talent shortages, with plans to expand local customer development and replicate the model across Western Japan, Chubu, and Kyushu.
  • Launched new ransomware security solution SentinelARGUS, which combines existing WebARGUS data recovery capabilities with a new function to freeze data to block unauthorized ransomware activity.
  • Maintained the 2030 Vision "50・50・50" strategic target unchanged, continuing to prioritize expanding the business base and growing proprietary product revenue to improve long-term profitability.

• Segment Strategic Priorities for 2026 June Fiscal Year

  • Business Solution: Restructure the core staff dispatch model to a partnership consulting model leveraging AI, low-code, and agile development; build a specialized financial services professional team; maximize M&A synergy with System Product Co.; expand local nearshore development for regional clients; improve estimation accuracy and project management.
  • Embedded Solution: Expand beyond automotive into IoT and semiconductors; prioritize growth in automotive SDV and functional safety; capture demand from new EU CRA and Japanese JC-STAR cybersecurity regulations; expand new customer development in Chubu's automotive cluster; expand automated testing to non-automotive sectors; grow North American local verification operations via DIT America LLC.
  • Product Solution: Grow DIT Security Platform (DSP) recurring revenue, expand SentinelARGUS sales, invest 100 million yen to develop an IoT-compatible version of WebARGUS; expand xoBlos productivity product adoption via low-cost entry packages and AI-aided development; shift Jungle Inc. to focus on B2B products after discontinuing low-margin Fude GuruMe nengajo software, targeting double-digit profit growth for Jungle despite lower total revenue.
  • System Sales: Prioritize customer retention and replacement sales at the newly acquired Hokuriku hub; expand cross-selling of non-core products; build a new product pipeline to reduce reliance on the Rakuichi core product.

• For the 2026 June fiscal year, management is guiding for flat year-over-year operating profit driven by 300 million yen in planned strategic investments, with slight revenue growth to achieve 16 consecutive years of top and bottom line expansion. The 300 million yen investment breaks down to 100 million yen for IoT security product development, 100 million yen for AI capability building, and 100 million yen for internal system upgrades and employee upskilling.
• Segment revenue guidance: Business Solution at 14.4 billion yen (+9.1% YoY), Embedded Solution at 8.4 billion yen (+7.5% YoY), Product Solution at 2.3 billion yen (+1.0% YoY), System Sales at 900 million yen (+3.9% YoY).
• First half (first two quarters) guidance shows a year-over-year profit decline, which is explained by three transitory factors: 1) profit from Jungle Inc.'s Fude GuruMe is spread evenly across half-year periods instead of being concentrated in the second quarter as in 2025, reducing first half profit by ~100 million yen; 2) 2026 splits 300 million yen in planned investment evenly between the two half-years, increasing first half investment by 150 million yen vs 2025 when all extra investment was booked in the fourth quarter; 3) 2025 first half benefited from a one-off 50 million yen profit from an unusual large project that does not repeat in 2026.
• The 2027 June fiscal year (mid-term plan final year) target is currently maintained unchanged (kept as-is, not revised) as management assesses the timing of returns from current strategic investments and the impact of US trade policy on automotive client spending. Management will review the target after assessing first half 2026 performance.
• Shareholder return guidance: 2025 full-year dividend is set at 72 yen per share (increased due to better-than-expected net income), 2026 full-year dividend is guided at 75 yen per share, and management continues to prioritize active shareholder returns including opportunistic share repurchases.

For the 2025 June fiscal year:

1. Business Solution Segment: Total revenue of 13.198 billion yen, representing a 18.2% year-over-year increase. Revenue contribution is ~54.6% of total consolidated revenue. The 854 million yen revenue contribution from newly acquired System Product Co. drove growth, with solid gains across financial and public sector development projects and cloud infrastructure operations support.
2. Embedded Solution Segment: Total revenue of 7.816 billion yen, a 13.3% year-over-year increase. Revenue contribution is ~32.3% of total consolidated revenue. Growth was driven by large vehicle-mounted IVI verification projects and integrated development-verification automotive engagements, offsetting mild softness in semiconductor and mobile-related development.
3. Product Solution Segment: Total revenue of 2.277 billion yen, a 107.8% year-over-year increase. Revenue contribution is ~9.4% of total consolidated revenue, up from 5% prior year following the acquisition of Jungle Inc., which contributed 708 million yen in revenue. Growth came from strong demand for DD-CONNECT electronic contract services and expanded license sales for existing security and productivity products.
4. System Sales Segment: Total revenue of 866 million yen, an 18.9% year-over-year increase. Revenue contribution is ~3.6% of total consolidated revenue. Growth followed the successful succession of a former large regional agency's customer base in Hokuriku, exceeding expectations after the post-electronic invoicing regulation demand rush faded.

• Near-term softness in automotive client IT spending: US trade policy has led to temporary budget tightening by domestic completed vehicle manufacturers, which creates pressure on near-term Embedded Solution segment results.
• Project execution risk: High-impact delays or failures in large financial system projects at peer firms highlight the need for heightened scrutiny of project management, though DIT has no history of major comparable issues.
• AI technology uncertainty: Rapid change in AI technology means it is unclear which frameworks will become the long-term industry standard, requiring continuous testing and risk mitigation.
• Fude GuruMe product discontinuation: While management expects Jungle Inc. to offset the lost low-margin revenue with higher-margin B2B product growth, the transition carries execution risk.
• Nearshore talent acquisition risk: Expanding regional hubs to solve national talent shortages depends on successful local recruitment, which may take longer than expected.

Q: Why is 2026 operating profit expected to be flat, what is the breakdown of planned investments, and will there be another large salary increase this year? / A: The flat profit outlook fully reflects 300 million yen in planned strategic investments, split evenly as 100 million yen for IoT security development, 100 million yen for AI initiatives, and 100 million yen for internal systems and human capital investment. Salary increases will normalize from last year's ~9-10% hike to ~4% this year, so salary increases have only a minor impact on the 2026 profit outlook.

Q: Did DIT know Jungle Inc. would discontinue Fude GuruMe when it acquired the firm, and can Jungle offset the lost revenue with profit growth from other products? / A: DIT did not anticipate the 2025 discontinuation when it acquired Jungle, but the supplier notified Jungle that rising raw material costs would push the product below its break-even point, so management decided to reallocate Jungle's sales resources to higher-margin B2B products. Jungle has a formal plan to grow profit by more than 10% year-over-year even with lower total revenue, so management sees no material profit risk from the discontinuation.

Q: How does DIT view recent project delays at other firms' large financial sector projects, and what is DIT's exposure? / A: Large financial system projects carry extreme risk because problems have very wide ripple effects across the client's business. DIT has never experienced a major critical failure on its own projects, but management takes note of peer issues and will continue to exercise extreme caution in project management and execution to avoid similar incidents.

Q: What is DIT's current approach to keeping up with rapid changes in AI technology? / A: AI technology is changing very quickly, and it is still unclear which tools will become the long-term industry standard. DIT's R&D team continuously monitors and tests new tools to compare performance against existing options, while development teams are accumulating know-how for integrating Python and AI into standard project workflows. DIT's internal company structure allows different business units to test different AI tools, which creates natural risk diversification and lets DIT adapt quickly if a specific technology becomes the dominant standard.