4478.T

• Organizational Change

  • To accelerate AI initiatives, co-founder and former CTO Takashi Yokoji moved to the position of Chief AI Officer (CAIO) to focus exclusively on driving AI-related transformation.

• Product Expansion by Industry

  • The company is actively expanding product features to meet needs of specific industries to efficiently grow its customer base, beyond its historical focus on IT-literate companies and project-based service industries.
  • Accounting functions for the medical and welfare industry, including industry-unique features like departmental balance sheet splitting that can be applied to other sectors, are on track to release this spring.
  • Construction industry job ledger functionality is now available via strengthened integration with third-party partner apps.
  • Enhanced fixed asset ledger functionality is scheduled for release soon, targeting demand from capital-intensive industries including manufacturing, construction, medical, and transportation. These improvements will improve sales and marketing investment efficiency.

• Payment Market Expansion

  • Launched new freee Transfer service, which enables users to initiate seamless transfer instructions directly from freee Accounting to debit the specified account, improving user experience compared to the prior workflow that required downloading a bank transfer file.
  • Domestic corporate payments are dominated by bank transfers, with checks and bills scheduled to be phased out by March 2027, and the corporate card market growing at ~20% annually. freee now serves both the large bank transfer segment and the growing corporate card segment to strengthen its approach to the total addressable payment market.

• AI Deployment Progress

  • Mahou Keihi Seisan (Magic Expense Settlement) was officially released in February; this AI feature automatically creates expense application requests based on a photo of a receipt and the company's internal rules, reducing application time to 1/15 of the original workflow and solves the problem of fatigue from verification work for accounting departments.
  • AI Year-End Adjustment, launched last year, is now used by more than 185,000 employees. The company also offers an AI-powered outsourced year-end adjustment service via freee HR, which has grown 2.8x year-over-year in the number of covered employees, reduced error rates by ~95%, and achieved significant operational efficiency, with positive user feedback on operational improvements.
  • Accelerated AI integration improves the ability to offer back-office outsourcing services, which addresses the growing challenge of talent shortages for small businesses and allows freee to target the large back-office labor cost market, supporting sustainable long-term growth.

• AI Strategy and Competitive Advantage

  • Management identifies a shift in customer value from "Done by You" (tools for people to use) to "Done for You" (AI completes work on behalf of users) in the AI agent era, and has redefined required capabilities for AI-native SaaS to four core requirements: completeness as an official system of record, an execution foundation for AI agents to complete end-to-end jobs, an audit trail foundation for human accountability, and accessibility in a multi-agent AI ecosystem.
  • freee already has built competitive advantage for the AI era: it has an established system of record for accounting, tax filing, and HR; it has API integrations with over 1,000 financial institutions to enable end-to-end completion of work from receipt capture to filing; it has an existing automation engine that can be adapted for AI agents; it has pre-built flexible permission management and audit logs for accountability, combined with a network of over 5,000 certified accounting firm advisors to deliver trusted accountability; and it has published open APIs since 2013, with existing integration for Anthropic Claude's MCP and Skills to enable new levels of work experience.
  • Launched two new core AI product concepts: 1) freee Cockpit: a tool for back-office professionals that allows setting custom business rules, incorporates Japanese local rules and historical completion data to enable accurate AI execution, and records full traceable audit trails for professional review and accountability. 2) freee Autopilot: a full end-to-end back-office service ecosystem that combines freee Cockpit with AI and professional support, handling everything from initial setup to automatic transaction reconciliation, allowing users to delegate full back-office operations with a single confirmation step to meet accountability requirements.

• Full year 2026 June fiscal year revenue guidance was upwardly revised from the previous range of 23% to 25% year-over-year growth to 26% year-over-year growth, reaching 41.93 billion yen. This revision is based on stronger-than-expected first half operating results.
• Adjusted operating profit margin, adjusted free cash flow, and all margin targets are maintained at their original forecast levels. The incremental revenue from the upward revision will be allocated to strategic investments for mid-to-long term growth from 2027 onward, focused on two core areas: strengthening accounting firm partnerships and AI-related investments including accelerated product development efficiency and expansion of AI-powered outsourcing services.
• In absolute terms, adjusted operating profit is still expected to grow 33.7% year-over-year as a result of higher revenue.
• Full year expense-to-revenue ratio forecasts for all categories remain unchanged from initial guidance, with no lopsided increase in investment to any single category, and results are still expected to land within the initially communicated ranges.
• Segment-level ARR growth forecasts for the corporate segment have not changed from the beginning of the fiscal year.
• Adjusted free cash flow for the first half came in at -5.479 billion yen, which is in line with expected seasonal factors including IT tool prepaid expenses. Full year adjusted free cash flow is still expected to land within the original guidance range, with expected increases in prepaid annual revenue from annual-billing users in the second half.
• Management maintains a policy of committing to achievable guidance that the company is certain to meet, consistent with its historical track record of meeting guidance, and there is potential for full year results to exceed the revised guidance if the second half grows stronger than expected.

1. Platform-wide: Total platform ARR is 39.151 billion yen, growing 26% year-over-year. Total paid user companies are 643,000, platform ARPU is 60,800 yen, growing 11.2% year-over-year. Q2 revenue is 10.197 billion yen, growing 29.5% year-over-year, marking the first time Q2 revenue exceeded 10 billion yen on a quarterly basis. 2. Corporate Segment: Corporate segment total ARR is 31.1 billion yen, growing 29.5% year-over-year. Corporate segment paid user count reached 256,000, with a net increase of 21,265 paid users in the first half, crossing the 250,000 cumulative user milestone. Corporate segment ARPU is 121,600 yen, growing 9.7% year-over-year. Within the corporate segment: Mid segment platform ARR is 14.77 billion yen, growing 28.2% year-over-year; Mid segment subscription ARR had a net increase of 758 million yen quarter-over-quarter, with accelerated growth driven by strong new customer acquisition and cross-selling centered on HR products, plus a positive impact from large deal wins. 3. Sole Proprietor Segment: Subscription ARR grew 13.9% year-over-year, ARPU grew 3.3% year-over-year. 4. Transaction ARR: Dominated by corporate credit card business, grew 81.3% year-over-year, continuing high growth alongside business expansion.

No specific material risks or operational failures were discussed in the available transcript excerpt.

Q: The upward revision to full year revenue and profit almost entirely reflects better first half results. Is it correct that this does not include potential upside from stronger second half growth?

A: We updated the full year forecast based on first half ARR accumulation. If the second half grows stronger than expected, it is entirely possible for full year results to exceed this revised guidance. We have a long-standing policy of issuing guidance that we are committed to achieving, so this revised number should be understood as a highly committed target.

Q: Does the management team see any areas where Q2 results could have been better, or where additional improvement is needed? Is the strong performance of the Small corporate segment continuing the trend from Q1?

A: Overall Q2 results were very good, generally exceeding initial plans, with the Mid segment growing steadily, and performance against our internal higher targets was also quite strong. In particular, the Small corporate segment performed very well, and this strong trend has continued unchanged from Q1.

Q: Are users already utilizing AI agents with freee's platform? Where is adoption expected to start, and are IT-related companies already seeing early adoption?

A: The most visible user-facing AI agent feature is Mahou Keihi Seisan, which is already used by corporate users. freee's open APIs can be called from Claude to access freee functionality, and many users (both individual and corporate) are already using freee via Claude in real-world operations, with many public examples shared on social media. We also offer combined AI agent and human support to handle initial onboarding setup for new users who struggle with this step, to deliver a working experience from day one. Our BPO business also incorporates AI agents for back-office work; while this is not visible externally, it delivers improved results to users via shorter lead times and lower costs. Our development approach allows us to quickly adopt new paradigm shifts internally that are not visible externally, which lets us run rapid improvement cycles.

Q: How widespread is AI agent adoption among end users currently?

A: AI-powered features like AI Year-End Adjustment are already widely adopted as a standard feature among freee HR users. However, cases where end users build their own custom AI agents to use with freee are still limited, with adoption just starting among a small group of advanced users including BPO providers and tax accounting firms. Our core focus is to deliver the AI agent experience directly to users ourselves via our two core concepts, freee Autopilot and freee Cockpit. We aim to deliver meaningful, accountable services to both professional users and end users by continuing to expand this type of offering.

Q: Can you share details on the large deals won in the Mid segment?

A: We won two large deals primarily in the HR space. The first was a large group company that adopted freee Accounting for all group companies as part of its shared services back-office operations. The second was a large employee count company that adopted our high average revenue per user HR outsourcing service. freee's core target is companies with fewer than 300 employees, and our product is designed to work comfortably for companies up to 1,000 employees, so we do not actively pursue very large enterprise deals. However, we do aim to continue winning deals in the shared services group company segment, as there are many cases where subsidiary companies fit our core target profile, and this segment is very similar to our existing partner-focused offering for accounting firms and BPO providers, so we plan to actively strengthen this area going forward.

Q: When will freee Autopilot and freee Cockpit start contributing to revenue, and how will they impact key KPIs like paid user count and ARPU, especially for large deals?

A: From a revenue contribution perspective, we expect to see growing customer acquisition via freee Cockpit for professional users starting from next fiscal year onward. The second channel is our existing HR outsourcing business, where AI adoption is already progressing rapidly, so more active expansion of this offering could lead to visible revenue contribution earlier. We do not plan to actively target very large enterprises; instead, our core target Small and Mid segments have strong unmet demand for full back-office outsourcing when there is no available back-office staff, or when existing staff leave and cannot be replaced. Capturing this strong demand will drive revenue contribution for these new offerings.

Q: What impact does AI Year-End Adjustment and its related outsourcing service have on ARPU?

A: AI Year-End Adjustment is included as a built-in feature of freee HR, so we do not charge extra for it currently. The outsourced year-end adjustment service is priced at 500 yen per employee, so revenue contribution comes from adoption of this outsourced service. The core revenue contribution of the built-in AI feature is that it improves customer experience, which drives higher direct and partner-assisted sales conversion.

Q: How many users use Mahou Keihi Seisan now, and what impact will it have on ARPU?

A: Mahou Keihi Seisan was previously offered as a closed beta to a limited group of users, and we will officially open it to all users starting from February 2026. We will share adoption penetration data as it grows going forward.