True Data Inc. Q2 FY2026 earnings call

• Core Business & Competitive Advantage

  • True Data builds custom retail data platforms to help retailers and consumer goods manufacturers maximize revenue via data- and AI-driven DX, with a core differentiator being its compliant, cleaned, AI-Ready retail data infrastructure that is difficult to replicate.
  • 90% of total revenue is recurring stock-type revenue, creating a stable profit base, with a 15.5% 4-year CAGR for gross profit from 2021 to 2025, with room for margin improvement as scale grows.
  • For Eagle Eye, customer success efforts have reduced churn to 0.29%, creating a very high retention service. Shopping Scan currently covers 5.5 trillion yen of retail purchase data out of a total 27.3 trillion yen addressable market across home centers, drugstores, and supermarkets.

• Strategic Growth Priorities

  • Horizontal expansion of core marketing SaaS offerings to large, mid-sized, and small retailers and consumer goods manufacturers, shifting from pure direct sales to industry-specific partnerships with major distributors: Itochu for food, Alfresa Healthcare for OTC pharmaceuticals, to expand access to supermarkets and drugstores.
  • Vertical upselling and cross-selling: Combine cleaned retail data with AI to deliver new value to existing clients, starting with large enterprise clients first.
  • Defensive DX for productivity improvement: Help clients use POS/ID-POS data to reduce operational waste, freeing up capital for clients' growth marketing, creating a two-pronged growth strategy.

• Recent Operational Updates

  • Announced a new partnership with Mitsui's MBK Digital in retail media, combining True Data's purchase segment data with MBK's POS Impact Ads to enable offline/online attribution and purchasing-based ad targeting across major platforms like Amazon Ads, with revenue share for True Data on each sale.
  • Inquiries for generative AI and AI agent projects increased significantly in Q2.
  • The large retail DX project was fully released across Q1 and Q2, with initial spot revenue split between the two quarters, and service is now live. The client requested an additional process of refining on-site operations to accelerate long-term growth, which will delay full-scale launch but create larger long-term upside.
  • A 30 million yen increase in capital contributions is for strategic investments in AI-focused venture capital to access AI startup innovation and prepare for the data x AI era, with M&A also on the table to accelerate growth.

1. Eagle Eye (stock-type, for consumer goods manufacturers): Grew 1.4% quarter-over-quarter and 10.5% year-over-year, currently serves ~160 clients with an average annual contract value of 5 million yen per client. It contributes approximately 35-40% of total stock revenue, which accounts for 90% of True Data's total revenue. 2. Shopping Scan and other retail solutions (mix of stock and revenue share): Grew 34.7% quarter-over-quarter after the large retail DX project launched service in the quarter, following the termination of a large low-margin project in the prior year that offset much of the new growth. Post-launch, this segment is expected to add more than 10 million yen per month in new revenue starting from Q3, with further revenue share upside after full-scale launch. 3. Spot-type revenue: All remaining initial spot revenue from the large-scale retail DX project was recognized in Q2, resulting in total Q2 revenue of 456 million yen (18% year-over-year increase), with operating profit of 31 million yen (1.9x year-over-year increase).

• Full-year (FY2026 ending March 2026) guidance is maintained at 2.0 billion yen in total revenue and 160 million yen in operating profit, unchanged from prior announcements.
  • Cumulative progress through Q2 is 43.4% for revenue and 26.8% for operating profit, below the 50% 6-month benchmark, which is expected due to the company's stock-revenue focused, second-half heavy business model, and overall progress remains roughly on plan.
  • The new mid-term management plan starting from FY2027 (ending March 2027) will be published before the full FY2026 earnings announcement, as originally planned; publication is delayed from the Q2 earnings date due to additional time needed to review expansion opportunities from ongoing partnership projects.
  • Post full-scale launch of the large retail DX project (expected after Q4 2026), the project is expected to be a major driver of short- and medium-term earnings growth.

• The large retail DX project's client-side operational refinement delay means full-scale launch is pushed back 3-5 months, so stock-type recurring revenue will not accumulate as planned in the second half of FY2026, creating downside risk to full-year earnings.
  • Additional upfront operating and cloud costs for the large retail DX project will continue into the second half of FY2026, leading to temporarily lower gross margin (56.1% in Q2, down 4.1pp from prior quarter) before full-scale launch.
  • While new generative AI/AI agent spot projects are seeing increasing inquiry volumes and have some signed contracts, the amount of revenue that can be recognized in FY2026 remains uncertain.
  • Selling, general and administrative expenses will increase moderately in H2 FY2026 due to planned talent investment and organizational strengthening, though all increases are within original plan guidance.

Q: What does "on-site operation refinement" for the large retail DX project entail, and how long will the delay last? / A: The client requested to go beyond basic solution implementation to build out internal operational structure and automate end-to-end workflows to accelerate long-term growth. True Data views this as a positive strategic move that will increase both parties' long-term revenue via revenue share, but it delays full-scale launch by 3-5 months, with additional upfront costs in the interim. The work is expected to finish in Q4, with full launch to follow after that. The project's business model relies on increasing revenue proportional to the number of consumer goods manufacturers using the platform, so better automation will allow the client to handle far more manufacturers and drive much larger long-term revenue. It is possible long-term revenue will exceed the original conservative projection, even with short-term cost pressure.

Q: What monthly recurring revenue can be expected from this large retail project once it launches, and when will it contribute to profit? / A: Service started in late Q2, and the project is expected to add more than 10 million yen per month in new revenue starting from Q3, with potential for further growth after that. Full profit contribution will only come after full-scale launch, as the project requires significant ongoing cloud, security, and AI operating costs that are incurred upfront before revenue share ramps up.

Q: Can consumers experience the new DX service in retail stores today? / A: The project includes multiple services; some are behind the scenes between manufacturers and retail buyers and are not visible to consumers, but consumer-facing services already exist. The most common visible experience is personalized coupons: the solution uses AI to analyze individual purchase history to deliver personalized coupons at the right frequency via receipts, apps, or email, and automates coupon condition management for manufacturers. No other solution in Japan currently supports personalized omnichannel coupon distribution at this scale, so consumers may receive tailored coupons powered by the solution without explicit notice.

Q: What is the outlook for selling, general and administrative expenses after Q3? / A: Moderate increases driven by higher personnel and outsourcing costs are expected, as the company has strengthened its advisory board and executive team with AI, organizational, cloud, and finance experts to prepare for AI-era growth and post-M&A integration. All planned increases are within the original full-year budget, so no major unplanned SG&A increase is expected.