G-NEXT Inc. Q2 FY2026 earnings call

• Company Overview & Strategy
  • Gnext provides customer inquiry management systems for contact centers, operating across software, solutions, and hardware segments, with a mission to eliminate information fragmentation and solve business and consumer problems.
  • New management team has led corporate restructuring since September 2024, pursuing dual goals of operational turnaround and non-continuous growth through new business.
  • Mid-term vision: Transform from a CRM developer to a "problem-solving group" combining technology and real business, build a multi-faceted business portfolio, and target a market cap of over 10 billion yen after 2030, with an immediate target share price stability above 500 yen to meet the Tokyo Exchange Growth Market requirement.
• Operational Progress
  • Discoveriez orders are recovering, with strong demand for Discoveriez AI, which provides call transcript summarization and automatic inquiry classification leveraging the company's existing compatibility with CTI/voice recognition technology. Approximately 30% of clients have already adopted or committed to the product as an add-on option.
  • Cross-selling of Japan Spark is ongoing to both new and existing clients, and the new live commerce service VoX Live is under preparation, focused on regional revitalization and connected to Japan Spark's inbound business.
  • Cost management: Fixed cost reduction and revision of labor cost calculation processes improved project profitability. Price increases for communication costs (the largest cost component) plus per-project cost optimization and security upgrades have been implemented. Pre-investment for future revenue growth was completed in the first half, and the company has shifted focus to new order acquisition.
  • Price increases for existing services are ongoing after 6 years of frozen pricing, with realized price increases of 10% to 20% varying by client, and the churn impact has stayed below planned levels.
  • A new stricter personnel evaluation system will be introduced to strengthen talent investment, and the company expects over 115 million yen in additional revenue from next fiscal year onward.

1. Software (core product Discoveriez): Revenue grew YoY, with gross profit up 80.8% YoY due to improved cost management. Total stock revenue for the half-year was 227 million yen, accounting for 64.7% of total revenue. Cloud cumulative MRR grew 14.7% YoY, average monthly churn over 12 months was 0.65%, maintaining a low level vs target. New orders, cloud migrations, and upsells performed well, with zero lost orders due to credit risk in Q2. 2. Solutions (SRM Design Lab): Revenue was driven by new business building support projects and cross-selling of partner products to existing customers. 3. Hardware: Inquiries are steady, contributing to overall revenue growth; a new subsidiary VoX Technology launched October 1. 4. New acquired business Japan Spark: Won an inbound marketing project from Tochigi Prefectural Government, with growing public sector transactions and realized synergy from the acquisition. Total company Q2 revenue grew 38.0% YoY, gross profit grew 115.4% YoY, with 83 million yen in revenue growth and 28 million yen in operating profit growth YoY.

• Full-year FY2026 performance targets are maintained with no revision; management remains committed to achieving full-year profitability and continues to push forward with efforts after achieving September monthly profitability on an operating basis.
• 3-year mid-term targets (FY2026-FY2028) are maintained: 2.5 billion yen in total revenue and over 90 million yen in operating profit by FY2028, with a focus on building a stable low-volatility revenue base centered on growing stock sales.
• Management prioritizes immediate profitability improvement before accelerating new growth investment in partnership with major shareholder Maika.

• The company needs to complete restructuring of the legacy Discoveriez business, overall corporate turnaround, and build new profitable business pillars simultaneously, quickly and boldly, which management acknowledges is not an easy task.
• Price increases for existing services do cause some customer churn, though the level remains below planned expectations.
• The company must meet the Tokyo Stock Exchange Growth Market requirement of sustained market cap above 10 billion yen, which creates pressure for growth and corporate value improvement.

Q: What average price increase is the company targeting for existing services? / A: Price increases vary by client, with current realized increases ranging from 10% to 20%. The company continues to roll out price adjustment proposals to clients. This follows 6 years of frozen pricing despite sustained cost increases from ongoing feature releases and service upgrades.

Q: What is the commercial progress of Discoveriez AI, and is it offered as an optional add-on? / A: Discoveriez AI is offered as an optional add-on to the core Discoveriez platform. Approximately 30% of clients have already placed orders or expressed strong interest, and the product is gradually contributing to revenue and profit. The product leverages strong market demand for AI-powered call transcription and inquiry classification, which aligns with the company's legacy expertise in contact center CRM and voice technology integration.

Q: What is the business focus and revenue model for Japan Spark? / A: Japan Spark is a foreign monitor panel service acquired in June, supporting inbound marketing research and overseas sales channel expansion for clients. It earns revenue from market research projects and sales development support, with strong demand from clients targeting Southeast Asia, Europe, and North America. The company is currently cross-selling the service to its existing client base to capture synergy.

Q: What initiatives is the company implementing to achieve full-year profitability? / A: The company is implementing selective focus through improvement of resource allocation, organizational structure, and cost structure. It is exiting unprofitable projects to strengthen existing business profitability, while accelerating growth of already expanding stock revenue. It is also improving core Discoveriez quality, migrating clients from older legacy packages to the current platform, and investing aggressively in high-demand Discoveriez AI, which addresses clear market pain points. Frontline employees are driving grassroots cost and labor improvements, and the company is also strengthening talent recruitment, development, and organizational renewal to retain staff. A combination of quantitative and qualitative initiatives is being used to advance the profitability goal.