4389.T

• Core Cloud Service Performance and Initiatives

  • The company's core @property cloud service holds 44% market share in real estate asset management business systems, ranking 2nd only to Excel, maintaining this leading position. B2B cloud service churn fell to 1.25% in Q2 from 1.54% in Q1, remaining sustainably below 2% (the company's long-term historical average). Average monthly cloud service revenue per client is growing steadily, driven by increasing managed building counts without any price increases since the company's founding. The shift from a fragmented per-function pricing model to an integrated all-service pricing model for @property is progressing smoothly, and this shift is a key driver of ongoing cloud revenue growth, as it enables full enterprise business process reform for clients.

• New Product and Platform Development

  • The company is expanding the PDB-Platform, a new unified platform to integrate all group services, replacing the company's 25-year-old legacy system. Key new capabilities added include: expanded core functionality covering web invoicing and financial accounting, evolving the platform into a full real estate ERP; a cross-company/intra-company workflow approval capability that integrates with the @knowledge document management solution (which complies with Japan's electronic book storage law); a cross-organizational work order management capability that already has thousands to tens of thousands of active users; and an AI-powered BI dashboard for client-side data visualization and analysis, responding to growing client demand to leverage accumulated real estate data.
  • The company has already completed development for IFRS 16 compliance for the new lease accounting standard, with financial institution clients already live on the solution. Development for domestic Japanese GAAP new lease accounting compliance is ongoing, with contracts already secured from large enterprise clients. The market for this solution is estimated to cover approximately 23,400 eligible companies, representing an untapped demand opportunity for the company.

• Group Synergy and Subsidiary Updates

  • Property Data Technos, the group's document management subsidiary, is facing processing backlogs from high demand for digitalization services, and is currently expanding capacity to resolve this bottleneck. It has launched a new integrated offering that stores digitized documents on the group's @knowledge storage service to enable added-value client usage, and has established a joint sales collaboration structure with core Property Data Bank to drive cross-group sales.
  • Property Data Science, the group's data analytics subsidiary, has secured a new large analytics engagement from a major data center operator, to support efficient equipment maintenance amid the current boom in data center construction driven by AI adoption.
  • The company is integrating all newly acquired group businesses onto the PDB-Platform to capture cross-group synergy, as prior acquisitions were in non-core adjacent areas that have not yet been fully integrated.

• Management maintains the full-year 2026 March term guidance published previously, with no upward or downward revisions. Half-year progress is in line with planned expectations, with a 39.7% consolidated revenue progress rate (consistent with the company's historical pattern of higher second-half revenue for non-cloud businesses).
• Management plans to continue executing the four previously announced 2026 March term action plans with no changes to core strategy: 1) strengthen solution business and expand cloud revenue; 2) develop and sell new lease accounting standard compliance options; 3) expand PDB-Platform functionality; 4) strengthen cross-group synergy.
• The company's long-term roadmap has completed the phase of feature development and release, and is now entering the phase of establishing sales and marketing strategy to drive revenue and profit growth from these new platform investments.

Consolidated total revenue for the second quarter was 1.589 billion yen, up 1.7% year-over-year. Operating income was 375 million yen, down 12.7% YoY; ordinary income was 406 million yen, down 6% YoY; net income was 267 million yen, down 7.7% YoY. By segment: 1. Cloud Service (Property Data Bank core): 9.4% YoY revenue growth, represents the majority of consolidated revenue now, with 47.6% progress against full-year guidance at the half-year mark. 2. Solution Service: 25.7% YoY revenue decline, which management attributes to a high base effect from delayed large project revenue recognition in the prior year, and the segment has approximately 30% progress against full-year guidance (consistent with historical patterns of higher second-half revenue recognition), with 1.4 billion yen in total expected future revenue from phased large solution projects in backlog as of April 2025. 3. Property Data Technos: 22.8% YoY revenue decline, driven by the ongoing secular decline of its legacy printing business, partially offset by growth in its core digital real estate document management business. 4. Property Data Science: Positive YoY revenue growth, driven by contributions from the prior-year acquired Riboh Inc., which has secured strong large consulting project wins from major enterprise clients, in addition to new large data center analytics project wins. Revenue contribution share: Cloud services now account for over 50% of total consolidated revenue, having reversed the historical split where solution services represented 60-70% of revenue.

• Printing business at Property Data Technos continues to face secular industry decline, creating a drag on segment revenue growth while the higher-growth digital document management business scales.
• Increased depreciation expenses from prior years' platform development investments have pushed down near-term profitability, as development projects near completion and enter amortization.
• Workflow and workorder digital tools face adoption barriers, as Japanese businesses still rely heavily on email and phone for cross-organizational communication, slowing customer adoption of these new capabilities.

Q: What does the 1.4 billion yen large solution project backlog figure represent? / A: The company structures large solution projects in phases, with separate contract signing for each stage like design, development, and launch. Only the current phase value is recognized as revenue as the project progresses. The 1.4 billion yen figure represents total expected revenue from all confirmed phased projects if they progress to completion, not just the currently contracted near-term revenue. This backlog indicates healthy future revenue visibility for the solution segment.\n\nQ: What is the market size for the new lease accounting compliance solution, and who is the target market? / A: Industry estimates indicate roughly 23,400 companies are required to comply with the new Japanese and international lease accounting standards, covering listed firms and their affiliates and subsidiaries. All of these firms are potential targets for the company, with existing clients having the highest conversion probability. The new mandate forces companies to address lease management for their own leased properties, a need that was previously unaddressed, opening up a new revenue stream for the company.\n\nQ: Why is the company shifting @property from per-function pricing to an integrated all-in model? / A: The original per-function model let clients buy only what they needed, but it prevented full enterprise business transformation. The company's full set of end-to-end real estate management capabilities can drastically cut client headcount and improve efficiency when used together, but fragmented purchasing kept clients from realizing these full benefits. The integrated model enables full process reform across front, middle, and back office client teams, and is already driving higher average revenue per client.\n\nQ: What is unique about PDB-Platform's new workflow functionality compared to other existing workflow tools? / A: The original workflow tool was only built for cross-company approvals, with no support for detailed intra-company approval rules. After significant client requests, the company rebuilt it to support both intra-company and inter-company approvals. It natively integrates with the company's own @knowledge document management, which is compliant with Japanese electronic document regulations, and connects to all of the company's other applications on PDB-Platform, eliminating the need for separate disconnected approval tools.