WingArc1st Inc. Q1 FY2026 earnings call

• Overall Financial Result: The company achieved top-line revenue growth but lower profit year-over-year. This outcome is driven by two key factors: a pullback in on-premise software license revenue after exceptionally strong performance in the prior year, which weighed on overall growth; and increased costs from prior-year personnel expense hikes and incremental expenses from recently acquired subsidiaries. Cost control for other expense categories has kept non-personnel cost growth minimal.
• Completed Acquisition: The acquisition of all shares of WingArc NEX, which includes Smart Value's public sector cloud services (focused on the CMS domain), completed on June 30. The business will be consolidated into the Group starting in July.
• Product and Partnership Updates:
  1. Launched integration between MotionBoard and Box Japan's "Box" intelligent content management platform, enabling users to extract needed information directly from MotionBoard dashboards via chat using Box AI.
  2. Added automatic SQL parsing functionality to the previously released Dr.Sum Copilot, improving efficiency for engineers building information infrastructure with Dr.Sum via AI-powered tools.
• Public Sector Business Progress:
  1. The previously launched Govlong public sector service is expanding: for small- and medium-sized municipalities, the company is partnering with regional package vendors to OEM Govlong into their existing solution offerings; for large municipalities, the company is pursuing independent opportunities for business system standardization projects. These projects are expected to contribute to earnings starting in the second half of the current fiscal year.
  2. The newly developed Rakuriza municipal service has been selected for Yokohama City, Kanagawa Prefecture's facility reservation system. It is expected to contribute to earnings from the second half of the current fiscal year through the next fiscal year.
• Financial Health: The company's financial leverage and overall financial position remain healthy with no material changes.

Overall total sales revenue for the 1st quarter was 7.314 billion yen, a 2.7% increase year-over-year. Both core segments saw approximately 3% year-over-year revenue growth:

1. Business Document Solutions (BDS):
   • SVF: 4.5% year-over-year revenue decrease, driven by a pullback after strong large on-premise license deals in the prior year quarter. SVF Cloud grew nearly 20% year-over-year and has over 1,000 customer companies, with recurring subscription and maintenance revenue remaining solid.
   • invoiceAgent: Over 10% year-over-year revenue growth, with steady revenue gains across both cloud and on-premise offerings. Cloud and recurring revenue streams continue to accumulate steadily despite a slight slowdown in new customer acquisition growth.
   • Other BDS: Includes revenue from TriSERV, which was acquired in the prior year, so revenue is fully reflected in the current period.
2. Data Empowerment Solutions (DE):
   • Dr.Sum: On-premise license revenue declined year-over-year due to the prior year large deal pullback, but recurring maintenance and subscription revenue grew. Dr.Sum Cloud grew approximately 40% year-over-year, with strong demand for cloud-based data warehouse and data mart offerings.
   • MotionBoard: On-premise license revenue also saw quarterly volatility from the prior year large deal pullback. MotionBoard Cloud grew in the high single digits percentage terms, has over 1,000 customer companies, and remains on a steady upward growth trajectory.
   • Other DE (consulting and integration services): Over 20% year-over-year revenue growth, with continued strong customer demand. By contract type: Overall license/service revenue fell ~8% year-over-year, as an 18% decline in on-premise software license revenue was partially offset by a 20% increase in service revenue. Recurring revenue (comprising maintenance, cloud, and subscriptions) grew more than 10% year-over-year, maintaining double-digit growth. Overall cloud service revenue grew nearly 20% year-over-year, with slight overall growth slowdown but strong growth across individual key offerings.

• The company revised its full-year 2026 February term guidance upward to include the earnings contribution from the newly acquired WingArc NEX business. No other changes to core guidance were made.
• Previous guidance (published April 10) called for 30.3 billion yen in full-year sales and 6.36 billion yen in net profit. The updated guidance sets full-year sales at 31.2 billion yen (a 0.9 billion yen increase), EBITDA at 10.46 billion yen, and net profit at 6.4 billion yen (a slight net increase).
• Management maintains confidence in the core full-year earnings outlook despite the 1st quarter's lower profit result, and the upward revision solely adds the projected standalone earnings of WingArc NEX to the prior core forecast.

• On-premise software license revenue has inherent quarterly volatility due to the timing of large deal closures, creating uneven sequential and year-over-year quarterly results that can temporarily impact overall top-line and profit performance.
• Slight slowdown in new customer acquisition growth has been observed for some cloud offerings, though overall revenue growth for these offerings remains solid.

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