HEROZ,Inc. Q1 FY2026 earnings call

Overall Financial Results

• The company achieved 1.514 billion yen in total revenue (7.9% YoY growth), 228 million yen in EBITDA (37.3% YoY growth), and 117 million yen in operating profit (58.3% YoY growth), with top-line and bottom-line growth driven by all three segments, partially offset by the B2B revenue timing shift.
• Annual Recurring Revenue (ARR) reached 4.227 billion yen, up 15.6% YoY; recurring revenue share increased 4.5 percentage points YoY, with core recurring revenue segments maintaining very low churn: 0.71% for security BPO services, 1.11% for HEROZ ASK.
• Cost of goods sold increased 9.7% YoY due to expanded hiring of development and business personnel, while SG&A decreased 7.5% YoY, and SG&A as a share of revenue fell ~5 percentage points, showing successful cost control.

New SaaS Product Progress

• HEROZ ASK: Revenue increased 77.6% quarter-over-quarter, reaching ~300 total contracted customers as of end-August; new features including OCR, image generation, and code interpreter have been launched to support cross-industry workflow efficiency; the company targets monthly break-even within the current fiscal year.
• JOINT: Revenue increased 25.9% quarter-over-quarter, with further growth expected from Q2 onward.

Strategic Direction

• The company is advancing an AI BPaaS model that directly undertakes client business operations using generative AI, shifting from traditional AI tool provision to end-to-end business service delivery to address clients' low AI utilization issues.
• The company targets fully autonomous Meta Agent (AI Agent 2.0) development, which can independently complete task decomposition, goal setting, and execution, expanding the addressable user base for AI solutions.
• The global AI system market is projected to grow from 1.3 trillion yen in 2024 to 4.2 trillion yen in 2029, which the company targets for long-term growth.

Segment-specific Operational Updates

• B2C (shogi business): Hosted multiple events to expand the global shogi population, including a European tournament in Poland and VTuber collaboration events; premium user count reached a new record high, with full-year 5% growth targeted.
• B2B: HEROZ's real estate price estimation AI is now used in Propally's new free AI-based property appraisal service, which delivers appraisals in as little as 60 seconds; the company targets 10,000 users for the service within this fiscal year. AI Sakura-san, the internal/government AI chat service, was registered to Japan's Digital Agency Digital Marketplace, and cumulative contracted users continue to grow steadily.

1. AIX Business - B2C: Achieved a quarter-over-quarter record high revenue, with 0.5% year-over-year growth; quarterly game matches exceeded 3 million for 2 consecutive quarters. No absolute revenue amount is disclosed. 2. AIX Business - B2B: Achieved 17.7% year-over-year revenue growth; 65 million yen of planned 1Q revenue was shifted to 2Q, and the overall sales pipeline is larger than the prior year level. 3. AI Security Business: Achieved a quarter-over-quarter record high revenue and segment profit, with 4.9% year-over-year revenue growth; price adjustments have been implemented and are expected to contribute to full-year profitability improvement. Revenue contribution percentages for individual segments are not disclosed in the transcript.

• Overall full-year 2026 April fiscal year: Maintain expectations for revenue and profit growth, with prior-year large upfront investments for new SaaS products starting to deliver incremental returns from this fiscal year, and larger profit contributions expected from Q2 onward.
• B2C business: Target 5% full-year revenue growth compared to the prior fiscal year.
• B2B business: Expect full-year growth exceeding 20%; 1Q performance was slightly behind plan due to 65 million yen of revenue shifting to Q2, so Q2 is expected to deliver ~49% YoY growth with a large improvement in progress against plan; full-year growth expectations are maintained. HEROZ ASK targets monthly break-even within the current fiscal year.
• AI Security business: Expect full-year profitability improvement from recent price adjustments.
• The company will continue to actively pursue M&A to advance its AI BPaaS strategy, following the acquisition of VOIQ in the prior fiscal year.

No explicit material operational risks or failures were discussed in the provided transcript. The only near-term headwind noted is the temporary 65 million yen revenue shift from 1Q to 2Q in the B2B segment, which is not expected to impact full-year results.

Q: What is the full-year outlook for HEROZ's B2B business for the 2026 April fiscal year?

A: While the prior fourth quarter missed plan slightly due to revenue timing shifts, the company maintains a full-year growth target of approximately 20% YoY, supported by growing project volume and strong pipeline carryover. For HEROZ ASK specifically, after heavy upfront personnel investment in the prior year, sales and customer success operations have matured, and the company targets reaching monthly break-even within this fiscal year.

Q: What is HEROZ's strategy for future M&A activity?

A: HEROZ will continue to actively pursue M&A as part of its AI BPaaS strategy. The company most recently acquired VOIQ in the prior fiscal year to add AI-powered sales outsourcing capabilities, which aligns with its goal of expanding end-to-end AI-enabled business services.

Q: What is the outlook for B2B performance in the second quarter after the 1Q revenue shift?

A: After the 65 million yen revenue timing shift from 1Q to 2Q, management expects B2B to deliver approximately 49% YoY growth in the second quarter, which will represent a major improvement in progress against the full-year plan. Active project count remains on an increasing trend, with first half operating projects expected to exceed the prior period's level.