3970.T

• Corporate Mission and Strategic Direction

  • The company updated its mission from "transform sales" to "transform work", aiming to help working individuals achieve success and create an environment where businesspeople can fully leverage their capabilities, beyond just promoting digitalization and efficiency.
  • The current medium-term management plan is in its final year; a new plan is being developed for the next fiscal year, with no major changes to the core "transform work" concept. The new plan will focus on deepening customer engagement, building an end-to-end business service platform covering all stages of B2B customer lifecycle from marketing to post-sales maintenance.

• Post-Acquisition Group Restructuring

  • Shannon's ad tech business was transferred to Innovation & Co., the operator of ITtrend, to capture synergy with the online media segment, and will start contributing to the online media segment from Q3 onwards.
  • The company's existing IT solutions subsidiary Innovation X Solutions (holder of List Finder) is being transferred to become a subsidiary of Shannon, to integrate the two complementary MA tool businesses. Integration is on track to complete by the end of the calendar year, and is expected to expand total addressable market and increase market share.

• Online Media Business Transformation

  • The legacy SEO-driven matching fee business model has been disrupted by generative AI, as users increasingly shift from search engines to AI chat for information gathering, reducing inflow to ITtrend. Management is pursuing two core adaptation strategies:
  1. Adapt to the expected rise of ad-based monetization models for AI services (already being tested by 2 major AI providers): the company is positioning itself to capture renewed inflow from AI chat by filling the gap where AI does not handle direct outreach to vendors, and is investing to adapt its model for this shift.
  2. Transition to a membership-based business model to build an internal Innovation economic ecosystem: the goal is to double matching value per existing user to offset lower total inflow, with trials of the membership model currently underway.

• Management maintains the original full-year (fiscal 2026 ending March 2026) earnings and dividend guidance, with no upward or downward revisions. While management acknowledges that achieving the initial guidance is currently high difficulty, it believes the target remains achievable.
• The company has a historical pattern of stronger performance in the second half. Q3 onwards will not see additional one-time TOB-related costs, and Shannon has already moved to a steady black-ink base, so it will begin contributing positively to consolidated profit from the third quarter.
• Management is implementing cost controls to limit the negative earnings impact from generative AI disruption in the online media business, and expects earnings improvement in the second half.
• The company will begin moving to profit-focused structural reform from Q3 after completing upfront investment for business transformation, with the goal of returning to a solid profit profile.
• Post-MA integration of the two MA businesses is scheduled to complete by the end of December 2025, with expansion strategy to start in early 2026.

1. Online Media Business: Revenue declined year-over-year due to falling search/advertising-based user inflow from generative AI adoption. It operates the ITtrend comparison site, bizplay B2B video platform, and ITtrend EXPO online exhibition; ITtrend EXPO draws ~30,000 unique visitors per event and bizplay membership is growing with early-stage monetization underway. The segment is in the middle of a business model pivot, with operating profit pressured by upfront transformation investments.
2. IT Solutions Business: Revenue grew dramatically following the consolidation of Shannon Inc., which was acquired via TOB. The segment now holds two complementary marketing automation (MA) tools: List Finder for SMEs (monthly price ~70 thousand yen) and SHANON MARKETING PLATFORM for large enterprises (monthly price ~200 thousand yen), covering the entire customer spectrum from SMEs to enterprise clients. Segment profit is a small but expanding black ink; goodwill amortization of 0.1 billion yen in the first half pressured earnings. Management expects significant margin expansion after post-acquisition integration completes.
3. Financial Platform Business: Revenue halved year-over-year. This decline is intentional, resulting from the sale of the outsourced-contractor IFA business model as part of structural reform to focus on the in-house employee model. The segment remains in a significant net loss due to higher fixed SG&A per unit of revenue, and management aims to achieve monthly break-even within the current fiscal year.
4. VC Fund Business: The segment runs two funds with a total 2 billion yen investment commitment. It recorded a large impairment charge in Q2 from its first exited portfolio company GVA TECH, as the firm's listed share price was below the fund's cost basis at the end of June. The impairment negatively impacted Q2 operating profit, though share prices have partially recovered more recently.

• Generative AI adoption has caused an unexpected decline in traditional search engine inflow to the online media business, and new adaptation strategies will take time to deliver results, with continued pressure on earnings expected in the current and next fiscal year.
• The IT Solutions business is currently facing upfront costs from acquisition and integration, including 0.2 billion yen annual goodwill amortization that weighs on current earnings, even though the underlying business is profitable.
• The Financial Platform business's structural reform has not yet delivered the expected profit improvement, and the segment continues to run large losses, with uncertain timing for achieving monthly break-even.
• The VC fund business recorded a large impairment in Q2 from the first exited investment, while the final return on this position remains uncertain pending full exit.
• The shift to new business models across segments requires significant upfront investment that will pressure near-term consolidated profitability.

No question and answer section is included in the provided transcript.