Appirits Inc. Q2 FY2026 earnings call

• Corporate Overview & Long-Term Strategy

  • Appirits was founded in 2000, currently has 878 consolidated employees with 60% aged in their 20s. It operates 3 core business segments.
  • Long-term target of 20 billion yen in revenue and 1,700 employees by 2030, with a strategy combining organic growth of existing businesses and 1-2 small-to-medium M&As per year, prioritizing top-line growth and scale expansion. Has completed 6 M&As since listing.
  • Recent organizational changes: Absorbed Moving Crew Inc. in June, added JUT JOY Inc. in May, spun off the former online game segment into Appirits Fan Culture Partner Inc. in August, and will add Vietnam-based Bunbu Joint Stock Company to consolidation starting November.

• Segment Operational Updates

  • Web Solution Segment: Provides one-stop DX development services, including large-scale system development, smartphone app development, digital marketing, AI-related services, and security services. Recent client wins include Capcom, Satofuru, Lotte, Infonet, and TRUSTDOCK. Inquiry volume remains strong, with growth in large projects over 50 million yen and over 200 million yen. Launched new AI services covering generative AI reskilling, operational efficiency improvement, and existing product enhancement.
  • Digital Human Resource Development and Dispatch Segment: Provides engineer dispatch and corporate engineer training with proprietary curricula and a dedicated training team. Recently launched new lab-type development service that offers flexible development teams tailored to client needs to optimize development speed and cost.
  • Oshi Culture & Game Segment: Operates 3 core businesses: smartphone game operation transfer/contract development, entertainment fan club site development/operation, and game-specific talent dispatch. Currently operates 8 active titles including UNI'S ON AIR, Nogizaka Fractal, and Ikkitousen Extra Burst, with growth driven by a newly transferred project from the first quarter. Is rolling out in-app off-platform payment to improve profitability.

• Capital Deployment & Shareholder Returns

  • Completed acquisition of Vietnamese IT developer Bunbu Joint Stock Company to secure skilled IT talent, optimize costs, and improve development productivity; the acquisition has strong synergies as 90% of the target's revenue comes from Japanese clients and its CEO is a Japanese-speaking Japanese-educated engineer.
  • Made a strategic investment in SportsTech Japan to co-develop AI solutions addressing coach shortages in school and community sports, contributing to upstream engineering to pursue social impact and long-term returns.
  • Maintained full-year dividend guidance at 28 yen per share (14 yen for the first half, 14 yen for the second half), consistent with the initial plan to ensure stable shareholder returns despite the half-year operating loss, adhering to the target payout ratio of 30%.

For the 2026 January Term Second Quarter:

1. Web Solution Segment: Revenue of 977 million yen (124% year-over-year), cost of 832 million yen, operating profit of 68 million yen, and segment profit margin of 5.6%. It contributes approximately 36.4% of total consolidated second quarter revenue.
2. Digital Human Resource Development and Dispatch Segment: Revenue of 499 million yen (139.3% year-over-year), cost of 376 million yen, operating profit of 28 million yen (38 million yen for core subsidiary Y's alone after excluding intergroup transactions and goodwill amortization). It contributes approximately 18.6% of total consolidated second quarter revenue.
3. Oshi Culture & Game Segment (renamed from Online Game Segment): Revenue of 1.225 billion yen (159.7% year-over-year, a segment record), cost of 1.075 billion yen, operating profit of 99 million yen, and segment profit margin of 7.4% (305.8% year-over-year). It contributes approximately 45.7% of total consolidated second quarter revenue. Total consolidated second quarter revenue is 2.681 billion yen (128.6% year-over-year).

• The company revised full-year earnings guidance after the first half, driven by the unprofitable project issue in the Web Solution segment; while the issue is expected to resolve gradually, some lingering impact on the second half is factored into the revised guidance.
• Oshi Culture & Game Segment full-year guidance is provided as a range due to varying rollout timelines and adoption rates for off-platform payment across titles.
• The company's full-year revenue target for the current fiscal year is 10.4 billion yen.
• A gradual recovery in Web Solution Segment profit margin is expected through the second half, and the Oshi Culture & Game Segment expects revenue and profit growth in the third and fourth quarters driven by anniversary events for existing operating titles.

• The Web Solution Segment has faced recurring unprofitable large-scale projects, driven by two core internal issues: insufficient senior design talent capable of handling large complex projects, and inadequate process checkpoints that lead to late detection of issues, resulting in costly rework that compressed segment and consolidated profitability in the first half.
• Persistent industry-wide engineer shortages amid a shrinking labor force remain a structural growth constraint, even with the adoption of AI development tools, and demand for engineering services remains strong but talent supply limits growth potential.
• Off-platform payment rollout across game titles faces uncertain adoption and timing, which creates revenue and profit visibility risks for the Oshi Culture & Game Segment.

No formal Q&A section is included in the provided earnings call transcript.