TRIPLEIZE CO.,LTD. Q2 FY2026 earnings call

Company Overview and Background

• Triple Eyes is an engineering-first company with approximately 80% of employees being engineers, 250 non-consolidated employees and 465 consolidated employees. It has been listed on the Tokyo Stock Exchange Growth Market for 4 years, and the current CEO took office in November last year, with a 10-year track record of AI development starting from Go AI.
• The company's core technical lineage extends from Go AI to facial recognition AI, generative AI, and is now strategically shifting to the physical AI (robotics) field, and can apply accumulated image recognition, search optimization and vector search technology to new fields.

Core Business and Competitive Advantages

• AIZE (image recognition/facial recognition platform): It has been introduced by about 300 companies, 3,500 locations and 150,000 IDs, and has expanded to overseas markets such as the Philippines. It focuses on strict identity verification scenarios that cannot be covered by card or mobile phone authentication, such as alcohol testing compliance for white-licensed vehicles, CBT online exam identity verification, and anti-fraud in retail, and has advantages in flexible customization and cross-device seamless integration, with a four-year record of zero data leakage.
• AI Integration (AI Lab): It solves the problem that enterprises do not know how to use generative AI, provides accompanying consulting services, helps enterprises improve AI literacy, select appropriate AI solutions, and solves business problems. At present, it has accounted for 30-40% of the total gross profit, and 80% of its customers come from the manufacturing and printing industries, focusing on solving problems such as work personalization and quality control. It usually starts with a light proof of concept, and then gradually expands to large-scale system integration projects.
• Other products and services: Including PRISM cloud sales management system for pharmaceutical wholesale, which has been introduced by 40 companies across the country; the group also operates data centers that use surplus electric power for AI learning and mining, forming a layout covering AI software, GPU hardware and electric power infrastructure.

Strategic Priorities

• Organizational transformation to AI-native: The company plans to increase the proportion of employees who can master AI technology from the current 60% to 80% by the end of August this year, and reach 100% by the end of August 2027. It clarifies the division of labor between AI and humans: AI replaces routine development and testing work, while humans are responsible for security decision-making and core data architecture design.
• M&A strategy: It targets enterprises with synergy with AI solution business, sets valuation at 4-5 times EBITDA, and uses paid stock options for core executives of acquired enterprises to align strategic objectives through capital participation.
• Industry-university-government cooperation: It cooperates with Hokkaido University and Chiba University to cultivate future AI engineers and build a local talent ecosystem.

1. AI Solutions Business: The first half of the current fiscal year recorded a record high half-yearly revenue and operating profit in the company's history. It accounts for approximately 80% of the company's total revenue, and AI products and AI integration already hold the largest share in the revenue composition. Operating profit has improved significantly from the deficit in the same period last year, and has reached about 85% of the full-year plan as of the first half. 2. GPU Server Business: It accounts for approximately 20% of the company's total revenue. After the business model was adjusted from mining server sales to AI learning server sales due to tax reform, gross profit margin increased by more than 10% year-on-year year-over-year, and profitability has improved significantly. However, after recognizing an impairment loss of 23 million yen in February due to the crypto asset downturn, the segment still recorded a net deficit in the first half.

• Full-year revenue guidance for the current fiscal year is maintained at 5.83 billion yen, compared with 5.71 billion yen in the previous fiscal year.
• The company is transitioning from a revenue growth-focused phase to a profit creation-focused phase, and the first half operating profit has reached 85% of the full-year plan, which is higher than expected, indicating that the full-year profit target is likely to be exceeded.
• For proprietary products such as AIZE, management expects monthly recurring revenue (MRR) to continue to grow with the expansion of customer size; for AI integration projects, it expects the revenue per major customer to reach tens of millions to hundreds of millions of yen.
• Management expects AI-assisted productivity improvement to increase per-engineer output, because AI frees up engineers' time to solve higher-value problems, and the overall demand for engineers continues to increase.

• Biometric authentication such as facial recognition still faces strong competition from traditional ownership authentication (card authentication, mobile phone authentication), and market penetration is still insufficient, requiring continuous focused development on segmented high-demand scenarios.
• The GPU server business is still in the restructuring stage after pivoting from the mining business, and has not yet achieved profitability, and still faces uncertainty in business transformation.
• The crypto asset price downturn has led to asset impairment in the GPU server business, and continued volatility in the crypto market may bring further asset risks.
• The lack of AI literacy of enterprise customers has become a barrier to the promotion of AI solutions, requiring service providers to invest extra resources in education and accompanying services.

Q: What is the business model of AI Lab, and what is its current contribution to performance? / A: AI Lab generally provides hourly consulting support rather than on-site resident services. It first aligns customer understanding by educating customers on the applicability of old and new AI technologies, then jointly solves business problems. It currently accounts for 30-40% of gross profit, and the common model is to start with a light entry point and gradually expand to large-scale system integration projects after proof of concept. (317 characters)

Q: Will growth come from increasing customer count or increasing revenue per customer, and will AI increase per-employee revenue? / A: For proprietary products like AIZE, growth will come from expanding customer count, which drives MRR growth; for AI integration, growth will come from higher revenue per core customer, ranging from tens of millions to hundreds of millions of yen per customer. AI does not reduce engineer demand; instead, it automates simple tasks so engineers can focus on higher-level issues like technical debt and security, increasing overall productivity. The key skill for modern engineers is the ability to collaborate with AI. (439 characters)

Q: What is the company's positioning for M&A, and how does it align incentives after acquisition? / A: The company will continue to pursue M&A to drive top-line growth, targeting deals with a 4-5x EBITDA valuation that have synergy with the core AI solutions business. To align incentives, the company grants paid stock options to executive leaders of acquired companies to unify strategic direction through capital participation in the Triple Eyes group. (302 characters)