4476.T

Group Restructuring and New Segment Launch

• In October 2025, AI CROSS acquired Lowp, an advertising agency, as a consolidated subsidiary, and added the independent Marketing Solutions segment to its reporting structure, transitioning from a single-segment to a multi-segment reporting framework.
• The acquisition aims to fill gaps in AI CROSS's in-house marketing upstream expertise, drive business synergy: Lowp's existing clients will be offered RCS services to grow recurring revenue, and mature RCS use cases developed with Lowp will be cross-sold to AI CROSS's existing 8,000+ client base. Hypothesis testing for synergies is currently ongoing, and clearer KPI disclosure will be considered based on progress.

Messaging Service and RCS Growth Strategy

• The core "Zettai Reach!" platform generates over 80% of revenue, primarily from pay-per-use SMS billing. The company will grow revenue by expanding into RCS, which supports rich media content (images, video) and enables new use cases in marketing and sales promotion that are not available with SMS.
• RCS enables open tracking and conversion rate measurement, which is not possible with standard SMS, allowing the company to move beyond simple message delivery to add high-margin consulting and AI-powered optimization services, leveraging synergy with the company's AI service division.
• KDDI has already added RCS support to the default iPhone messaging app, with other domestic carriers expected to follow gradually from 2026 onward. Currently 20% to 30% of domestic smartphones support RCS, and the company has completed platform preparation to capture this growth opportunity. RCS has a much higher per-message unit price (double-digit yen per message) compared to SMS, and the company is testing mixed pricing models including monthly fixed fees, pay-per-use, and success-based pricing to balance client satisfaction and profitability.

AI Service (Deep Predictor) Strategy

• The AI service division operates across two core lines: AI consulting and the Deep Predictor platform, a no-code tool for building custom prediction models. The highest demand is for demand forecasting for manufacturing clients, which eliminates waste from overstocking and reduces lost sales opportunities, while also improving operational efficiency by reducing reliance on veteran worker intuition.
• For FY2026, the company will prioritize two product plans: the fully custom plan (custom-built models for clients, with an initial setup fee of several million yen) and the assistant plan (no initial setup fee, clients answer guided questions to build a model, no on-site data scientist visit required). The assistant plan is scalable and can be sold through sales agencies even if the agency does not have in-house data scientists, so the company will prioritize expanding distribution of this plan in FY2026.
• PoC (proof of concept) orders are growing, primarily from manufacturing clients, and over 70% of PoCs convert to full paid contracts. Full contracts are annual terms with monthly pricing starting at 350 thousand yen, plus additional optional fees. The generative AI boom has increased client willingness to adopt AI solutions, greatly reducing the share of projects that stall after PoC.
• Deep Predictor creates natural synergy with messaging services: AI-powered targeting can predict which recipients are most likely to respond to an SMS/RCS message, improving campaign effectiveness for clients.

Marketing Solutions Segment Strategy

• Lowp's core competency is end-to-end marketing services from initial client consultation to full execution of advertising, marketing, and brand consulting strategies for large enterprise clients. The company is currently testing synergy, with the long-term goal of rolling out proven RCS marketing use cases to AI CROSS's existing client base.

Shareholder Update

• AI CROSS will discontinue its shareholder benefit program after the distribution based on the December 31, 2025 record date. The program previously offered digital gifts and QUO cards twice per year to shareholders holding 300+ shares. The annual cost of the program was just over 160 million yen, all recorded as selling, general and administrative expenses. The company decided to eliminate the program to free up capital for growth investment in RCS and AI, to capture the current market opportunity and deliver higher long-term returns to shareholders.

• For FY2026, AI CROSS guides consolidated revenue of 5.3 billion yen, operating profit of 600 million yen, ordinary profit of 590 million yen, and net profit of 360 million yen, representing steady revenue and profit growth from FY2025.
• The projected operating margin for FY2026 is 11.3%, up from 8.9% in FY2025. The largest driver of margin expansion is the elimination of 160+ million yen in annual shareholder benefit costs, followed by the expected move to profitability for the AI service segment (which was previously in an investment phase), and ongoing internal AX/DX initiatives to improve revenue per employee across the group, including at Lowp.
• For the mid-term management plan AIX2027, FY2026 original guidance was 5.5 billion yen revenue and 750 million yen operating profit; the revised guidance is 5.3 billion yen revenue and 600 million yen operating profit, which management expects to recover in future periods. The mid-term target of 1.8 billion yen in operating profit by the end of the plan remains in place, and management still believes the target is achievable with proper execution.
• SMS market growth is projected at 15% to 20% annually for the next 4 to 5 years, providing a solid growth baseline for the core business even if RCS penetration progresses slower than expected.

AI CROSS reorganized its business segments following the acquisition of Lowp as a consolidated subsidiary in 4Q FY2025, adding the new Marketing Solutions segment alongside its core Messaging Service and AI Service segments. For FY2025 full year (January 1 to December 31, 2025), total revenue was 4.151 billion yen, with operating profit of 370 million yen, ordinary profit of 366 million yen, and net profit of 165 million yen, all reaching all-time highs since listing. For 4Q FY2025 (October 1 to December 31, 2025), total revenue was 1.246 billion yen (also an all-time high since listing), operating profit was 97 million yen (including one-time M&A brokerage costs for the Lowp acquisition), ordinary profit was 90 million yen, and quarterly net profit was 44 million yen. Revenue contribution breakdown: approximately 90% of revenue comes from domestic Messaging Service clients, less than 10% from foreign enterprise clients, and the new Marketing Solutions segment contributes incremental revenue from Lowp's existing client base. The core Messaging Service segment has over 8,200 client companies, with quarterly SMS delivery volume of approximately 213 million messages (over 10% growth quarter-over-quarter), and ARPU of approximately 130 thousand yen (a slight year-over-year decrease driven by volume reduction from one overseas client).

• The biggest external risk to achieving the mid-term 1.8 billion yen operating profit target is slower-than-expected RCS penetration across domestic carriers: the timing of RCS rollout across all major Japanese carriers is outside of AI CROSS's control, creating uncertainty around adoption speed. However, management notes that even if full carrier rollout is delayed, RCS adoption is already growing from the existing client base, and the core SMS market is still growing fast enough to offset any delay.
• The negative impact of the one overseas client's volume reduction on overall ARPU is expected to gradually continue for another 1 to 2 years, as the company has no plans to pursue aggressive expansion of low-margin volume from overseas clients to protect unit pricing.
• Pure pay-per-use RCS delivery is not expected to deliver steady unit price growth, as clients will demand volume-based discounts similar to SMS, requiring the company to successfully implement mixed pricing models to maintain margin, which carries execution risk.

Q: What synergies do you expect from the Lowp acquisition, and how will it improve LTV and gross margin?

A: Lowp adds upstream marketing expertise that AI CROSS did not have in-house. The goal is not just incremental revenue, but mutual synergy: we will offer RCS to Lowp's clients to grow recurring revenue, and once proven RCS marketing use cases are developed, we will cross-sell them to our existing 8,000+ client base. We are currently in the hypothesis testing stage, and will consider clearer KPI disclosure as progress is made.

Q: How long will the negative impact from the overseas client on ARPU last?

A: This impact will gradually persist for another 1 to 2 years. We have a policy of not lowering our unit pricing below a certain threshold for overseas clients, so we are not pursuing aggressive expansion in this segment to offset the decline.

Q: Is it correct that new contracts have higher ARPU on more favorable terms for AI CROSS?

A: That is correct. SMS and RCS have completely different pricing structures: SMS is purely pay-per-use with declining unit prices at high volumes, but RCS already maintains double-digit yen per message unit prices, much higher than SMS, and we are adding new business model variations to drive higher average revenue.

Q: Is it correct that your strategy going forward will prioritize cross-selling RCS and AI-powered analytics to existing domestic clients?

A: That is correct. Effect measurement requires RCS, as SMS does not support open tracking. Clients that have switched to RCS are already reporting higher response rates than SMS, and most are willing to accept the higher price point because of the improved results, which we see as a very positive sign.

Q: What percentage of domestic smartphones currently support RCS?

A: Roughly 20% to 30%, as KDDI holds just under 30% domestic market share and RCS is being rolled out gradually to newer devices first.

Q: Will RCS unit prices keep rising over time, for example from 10 yen to 15 yen per message?

A: It is unlikely that pure delivery-only RCS unit prices will rise steadily, just like SMS, clients will demand volume discounts for large shipments. We are currently still adjusting our pricing strategy, since 100% penetration has not been reached, so we work with clients to set appropriate pricing on a case-by-case basis. We are testing mixed models combining monthly fixed fees, pay-per-use, and success-based pricing, which is more appropriate for the current AI era where traditional license models have limitations, to ensure both client satisfaction and profitability for AI CROSS.

Q: Do PoC projects ever come through agency sales channels, or are they all direct?

A: For new industries, most are direct, but for existing messaging clients like the churn prediction use case for infrastructure companies, we are seeing more cases where the PoC is arranged through an agency with our AI team joining the discussion, so that is growing.

Q: Do you already have cases where PoC converts to a full contract?

A: Yes, over 70% of PoCs convert to full contracts now. The generative AI boom has been a tailwind, as more companies are committed to adopting AI, so the share of projects that stall after PoC has dropped a lot.

Q: What is the average contract value and term for full contracts?

A: Contracts are annual with monthly billing, starting at 350 thousand yen per month, with additional fees for optional add-ons.

Q: Was the M&A cost for Lowp recorded in 4Q FY2025, and is it roughly 20 million to 30 million yen?

A: That is correct, the one-time M&A cost was recorded in 4Q FY2025 in that amount.

Q: How much annual cost savings and cash flow improvement will come from eliminating shareholder benefits?

A: Last year's cost was just over 160 million yen, which will be fully eliminated starting in FY2026. This cost was recorded in SG&A, so the full amount flows through to operating profit.

Q: Can you comment on the market reaction to the shareholder benefit elimination, and what is your plan for shareholder returns going forward?

A: We apologize for the inconvenience and negative impact this decision has had for shareholders, and we take the market reaction very seriously. However, we believe this is the right decision to free up capital to invest in RCS and AI to capture the current once-in-a-market opportunity, and we will focus on delivering strong operating results and growth to meet shareholder expectations over the medium to long term. For now, we will prioritize growth investment to build enterprise value, and deliver long-term returns to shareholders through that growth.

Q: What are the main channels for new customer acquisition for messaging and AI services?

A: For SMS, there is already sufficient market awareness, so most new inquiries are inbound from SEO and other digital channels, and most new business comes from converting these inbound inquiries. For RCS, awareness is still low, so we are focusing on outreach to existing clients and agency clients to educate the market. For AI services, we use a mix of inbound and outbound: half of inbound inquiries are for demand forecasting, and we also get a lot of leads from online seminars and trade shows.

Q: Which industries have the most clients, and what does demand for RCS look like going forward?

A: For existing SMS, the largest client industries are financial services (banks, credit card companies, insurance), human resources, and IT (SIers and platform companies that integrate SMS via API for authentication). For RCS, we expect the most demand from retail clients with physical stores and financial services. RCS has built-in verified sender authentication, which addresses the growing problem of SMS phishing: RCS requires strict sender verification, so end users can trust that messages are legitimate, which is highly valued by financial institutions. RCS also supports interactive content directly in-message, so you do not need to send users to an external URL, which improves response rates. RCS can also be used for use cases like payment reminders, so even for text-only use cases, more clients want to use RCS, so we expect the market to keep expanding. For AI services, manufacturing is by far the largest client industry, with other use cases spread across multiple industries.

Q: Why has AI CROSS been able to grow steadily in the domestic SMS market, which has many competitors? Is this growth from overall market growth, or market share gain?

A: First, the overall SMS market is a growing market. It also has very high barriers to entry: you need to pass strict connection tests with mobile carriers, and scaling up stable delivery for hundreds of millions of messages is very difficult for new entrants. We also have long-term commitments with carriers that let us offer lower prices than new entrants, so many players actually buy SMS capacity from us. Our key differentiation has been our early investment in AI, our strong support for sales agencies (which has given us a strong reputation with the agency channel), and our ability to offer complementary AI solutions in addition to core SMS, which competitors that only offer SMS cannot match.

Q: Do you have a policy of not supporting RCS for Android?

A: No, we have already supported Android for a long time. Google has been pushing RCS for years, the entire industry has been waiting for Apple to add RCS support for iPhone, which makes up more than half of the Japanese market, so that was the hold-up.

Q: What are the main risks that could prevent you from hitting the 1.8 billion yen mid-term operating profit target?

A: The biggest risk is the timing of RCS rollout across all domestic carriers, which we cannot control, so there is uncertainty around penetration speed from this external factor. However, even if all carriers do not roll out RCS on schedule, RCS is already growing from our existing client base, and the core SMS market is still growing strongly, so that can offset any delays. We still believe the 1.8 billion yen target is achievable and we are working toward that goal.