3921.T

• Overall Financial Performance

  • The 2026 January period delivered strong top- and bottom-line results, with both revenue and profit exceeding upward revised initial plans. Advertising expenses were spent in line with the initial budget, while other cost increases were controlled, resulting in an overall ~28% year-over-year increase in all profit metrics, delivering significant profit growth.
  • The company is on track to achieve its original medium-term operating profit target one year ahead of schedule, so a new 3-year medium-term target was announced alongside this earnings release.
  • The balance sheet remains strong: equity ratio rose to 69.9%, and ROE improved further to 26.3% driven by sharp profit growth.
  • The company ran a marketing campaign in Q4 featuring Eiko Noguchi and Ken Noguchi, with elevator ads and 8 related YouTube videos that have accumulated over 10 million views including ad impressions. The company plans to strengthen brand awareness initiatives in the 2027 January period.

• Core Growth Strategy: Domestic Core Business Growth

  • desknet's NEO Expansion Strategy: The company has committed to continuing support for on-premises versions of desknet's NEO, as many vendors have exited on-premises support but a large number of customers cannot migrate to cloud for security and other reasons. Inquiries about replacement from sales partners have increased since the commitment was announced, and the company aims to become the leading on-premises groupware provider by capturing this demand. For cloud offerings, the company sells a competitive Standard Plan bundling desknet's NEO and AppSuite at 800 yen per user per month, which offers strong value as a no-code groupware that allows unlimited custom function expansion, and will continue to drive growth leveraging its usability and cost competitiveness.
  • AI Implementation for desknet's NEO: The company is prioritizing AI-powered feature enhancements. It plans to release a major version upgrade that delivers a groupware that allows any user to use AI safely. Since desknet's NEO and AppSuite are already embedded in customer business workflows and store large volumes of business data, adding an AI agent function will dramatically improve productivity. The company is focusing on delivering the high quality, security, permission management and audit capabilities required for enterprise business use, and aims to become the leading provider of enterprise-ready AI-integrated groupware.
  • AppSuite Cross-Sell Strategy: The company launched the AppSuite AWARD program in the 2026 January period to reward outstanding customer-built custom apps, which helps users and sales partners build clearer usage use cases to drive adoption. It is also running a focused promotion as a "no-code tool integrated groupware" to drive company-wide adoption. The company has expanded its partner ecosystem, growing the number of certified AppSuite Integrator partners, and will continue to drive expansion through partner-led implementation support and sales proposals. The company targets increasing the AppSuite adoption rate among desknet's NEO users to over 30%.

• Core Growth Strategy: Overseas Business Expansion

  • The company shifted from independent operations across its three ASEAN sales subsidiaries to a unified One Team operating model in the second half of the 2026 January period, with collaborative work across marketing, website management, human resources and service operations to accelerate growth. The company targets reaching 10,000 cloud service users in the 2027 January period, and achieving profitability for the overseas business by the 2029 January period.

• Core Growth Strategy: New Business: LiveX AI Sales Expansion

  • LiveX AI is an AI agent product developed by US-based LIVEX AI, in which NEOJAPAN holds an equity stake. It supports sales and customer support use cases across over 140 languages, and has achieved over 90% self-service resolution rate for inquiries in customer case studies. NEOJAPAN already uses the product on its own corporate website. Sales launched in October 2025, and the product has received strong feedback for its realistic avatar-powered physical AI capabilities, with multiple customers already confirmed for proof-of-concept trials. The company is initially targeting the digital signage market to drive sales expansion.

• Full-year 2027 January period consolidated guidance projects continued revenue and profit growth. Cloud services are expected to grow approximately 9% year-over-year in monthly revenue after the one-time impact of the 2024 price revision concludes, with AppSuite cloud revenue leading growth at over 30% year-over-year.
• Technology development revenue in the software business is expected to decline by approximately 0.1 billion yen year-over-year due to the wind-down of existing ongoing projects. The system development service business is expected to recover to the same revenue level as the 2025 January period.
• The company expects higher expenses driven by increases in personnel costs, software amortization, R&D investment, and advertising expenses. The full-year 2027 January period operating profit margin is targeted at 31.1%, which would be an increase from the 2026 January period's 30.3%.
• The company raised its 2026 January period ending dividend forecast from 29 yen per share to 31 yen per share, continuing its streak of dividend increases since listing. For the 2027 January period, the company guidance calls for a 27 yen per share interim dividend and 27 yen per share ending dividend, for a full-year annual dividend forecast of 54 yen per share. The company maintains a progressive dividend policy with a target payout ratio of 40%, and plans to continue increasing dividends every year since listing.
• The company's new 3-year medium-term target calls for reaching 10 billion yen in total revenue by the 2029 January period, one year ahead of the original 2030 January target, representing an average annual growth rate of 7.0% based on steady growth of existing domestic business. The operating profit target for the 2029 January period is approximately 3.1 billion yen, representing an average annual growth rate of 8.0%.

NEOJAPAN operates three business segments: 1. Software Business: This is the core profit-driving segment, accounting for the majority of total profit. Total revenue for the segment grew 19% year-over-year, outperforming the initial plan. Within the segment, cloud service revenue grew 15.2% year-over-year, supported by price revision effects and increased adoption of bundled plans. Product revenue (including license sales and customization) also exceeded year-ago levels, driven by steady growth in supporting service revenue. Stock (recurring) revenue for the software business grew 14.3% year-over-year for cloud services and 8.7% year-over-year for product supporting services, reaching a stock revenue ratio of 81.9%. Annual Recurring Revenue (ARR) increased 12.5% year-over-year. For the flagship product desknet's NEO, which accounts for over 70% of standalone software revenue, total product sales grew 2.6% year-over-year, cloud user count grew 3.9% year-over-year. Cloud service revenue for desknet's NEO grew 11.5% year-over-year, and product revenue grew 7.4% year-over-year. The Q4 2026 cloud churn rate hit a post-price-revision low of 0.27%. For the second product AppSuite, cumulative product sales grew 11.7% year-over-year, cloud user count grew 37.5% year-over-year. Cloud service revenue grew 43.2% year-over-year, and product revenue grew 13.2% year-over-year. Average Revenue Per User (ARPU) grew 10.2% year-over-year, driven by price revision effects and cross-sell expansion. Approximately 20% of desknet's NEO users now use AppSuite. The operating profit margin for the entire software business reached 40%. 2. System Development Service Business: Total revenue came in below the prior year level, but the segment achieved profit growth and saw improved profitability. Revenue has been on a recovery trajectory since June 2025. 3. Overseas Business: Revenue expanded 2.1x year-over-year to 76 million yen, an increase of 40 million yen from the prior year. AppSuite has high adoption, with approximately 90% of users using it as a bundled offering. Consolidated overall results: Total consolidated revenue was 8.23 billion yen, up 13.3% year-over-year. Consolidated operating profit margin was 30.3%. The company achieved 14 consecutive years of revenue growth, and operating profit has nearly doubled over the past two years, partially due to the September 2024 cloud service price revision. Q4 2026 consolidated revenue was 2.142 billion yen, a new all-time high for a single quarter.

No explicit discussion of material risks or operational failures was included in the available transcript.

Q: We have seen the concept of the "death of SaaS" discussed more widely recently. What impact do you expect the advancement of AI to have on your business?

A: While some argue that AI advancement will eliminate demand for SaaS, AI has actually been very helpful for our internal development operations. We already use AI in areas including basic design, system design, detailed design, and product development work. AI can now generate a baseline of product components, but there are still areas that AI cannot easily anticipate, including high-level design work and the creation of test plans for all levels of testing. We plan to continue leveraging AI effectively in these areas while advancing our development roadmap.

Some commentators argue that groupware is also at risk of being replaced by AI and will eventually become obsolete, but in practice groupware usage varies greatly across industries, business sectors, and company sizes, and we do not believe AI can fully replace all of these varied use cases. Instead, we see an exciting future for groupware that coexists with AI.

We are already integrating AI into our groupware products to evolve their functionality: for example, many manual repetitive tasks like manual schedule entry and creating workflow application forms will be eliminated. AI will automatically find available meeting rooms and open time slots, eliminating the need for manual schedule management. We expect voice input to become the primary input method on mobile, with automatic updates built into the platform. For workflows, AI will automatically propose and create approval routes based on organizational rules, and processes can move forward automatically with AI proposals when there are no issues.

We plan to roll out these AI-powered groupware enhancements between this year and early next year, with a long-term goal of delivering a fully voice-operated groupware that requires no manual input. Groupware also serves as a critical database foundation for AI agents, as continued use accumulates business and industry-specific data that can be incorporated into AI agents to deliver increasingly tailored solutions for different sectors. We believe that rather than being eliminated by AI advancement, groupware will evolve to become even more useful and user-centric with AI integration.