9698.T

• Overall Consolidated 2Q Results

  • Consolidated revenue was 7.05 billion yen, up 1.4% year-over-year; operating profit was 450 million yen, up 40.2% year-over-year; net income was 290 million yen, up 40.8% year-over-year. Results beat plan by 40 million yen on revenue and 100 million yen on operating profit, with profit significantly exceeding forecasts.
  • The primary growth driver was the build-up of recurring revenue from in-house SaaS and hosting stock services in the Solution Service business, with utilization fee increases starting in April, plus growth from the System Operation & Service business.
  • Operating cash flow was positive 600 million yen; ending cash position remained 5.6 billion yen, unchanged from the start of the period with no large balance sheet changes.

• Long-Term Strategic Framework

  • Mid-term management plan targets 18 billion yen in revenue and 1.5 billion yen in operating profit by rebuilding new growth foundations; VISION2030 targets 25 billion yen in revenue and operating margin of 10.0% or higher.
  • Growth strategy focuses on targeting the mid-sized market with core Solution Service products to acquire customers, then deepening relationships and expanding share of wallet through cross-selling across all business segments, and building stable revenue through strong co-creation partnerships with key clients Amano, Fujitsu, and LINE Yahoo.

• Core Strategic Initiatives for Group Integration

  • 1. Build new growth foundations for customer value creation: Restructure product/service offerings to align with DX demand trends, reorganize core ERP products (ZeeM payroll/accounting, TimePro-VG attendance, Toramil purchasing) combined with expanded cloud/AI front-end services and cloud BI (Tableau, Success MarK) to create an end-to-end data visualization solution. Integrate existing fragmented product brands under the new unified master brand "SmartStage" to improve customer clarity and drive cross-selling/upselling.
  • 1. Sales reform focused on integrated "fusion" proposals: Consolidated sales organizations into a single company-wide unit starting in the second half of the fiscal year, shifting from product-specific, business-unit siloed sales to cross-selling focused, solution-oriented sales that proposes end-to-end value rather than individual products.
  • 1. New cross-group organizational structure: Established the Group Strategy Promotion Office in April, led by the CEO with participation from group company leadership, to drive top-down accelerated decision-making for technology and product investment focused on cloud and AI. Also created the DX Promotion Department to lead company-wide DX, internal AI adoption, and new business model development, with progress tracked against clear KPIs.
  • 1. Investment in human capital: Strengthened succession planning for next-generation executive leadership amid generational turnover, revised personnel systems and built rotation programs to improve workforce mobility to address labor shortages, and expanded upskilling support and structured continuous learning for AI and digital skills. AI is already being used to improve product help desk efficiency for ZeeM customers, added as an AI search feature to BIZ PLATFORM, and tested for design document creation in development to reduce IT team workload.

• Full-year 2026 March fiscal year guidance is unchanged from the May announcement: targets 15.1 billion yen in consolidated revenue, 1.14 billion yen in operating profit, and 740 million yen in net income, aiming to achieve record full-year operating profit and other performance metrics.
• While segment progress through the first half has varied slightly, the core Solution Service business is tracking above prior year levels, so overall performance remains on track to meet plan.
• Shareholder return guidance is unchanged: maintains target of 9 consecutive years of dividend increases, with a full-year dividend target of 52 yen per share.
• Share repurchase is currently undecided for the current year, but management will implement it flexibly if timing is appropriate.

1. Solution Service Business: Revenue increased 7.4% year-over-year, segment profit increased 25.4% year-over-year. Growth was driven by rising cloud service usage fees, achieving both revenue and profit growth. No absolute revenue/profit values are provided in the transcript. Revenue contribution was not explicitly stated.
2. Contract Development: Revenue decreased 10.5% year-over-year, while segment profit increased 5.9% year-over-year, in line with plan. Revenue decline came from shifting some resources to the Solution Service business; profit growth came from the absence of high-cost strategic projects that weighed on results in the prior period.
3. System Operation & Service Business: Revenue increased 13.8% year-over-year, segment profit increased 20.3% year-over-year. Growth came from steadily rising orders from group companies of major clients starting in the second half of the prior fiscal year, combined with unit price increases in the current period.
4. Support Service Business: Revenue decreased 2.7% year-over-year, segment profit decreased 10.0% year-over-year. The segment has been impacted by increased in-house operations after a major client merger, and has not yet recovered despite outreach to new clients.

• Support Service business faces continued headwinds from a major client's shift to in-house operations after a merger, with new customer acquisition efforts not yet delivering results to offset the decline.
• The company is operating in a persistent labor shortage environment, with difficult conditions for mid-career hiring.
• No other material operational risks or failures were discussed in the available transcript.

The full Q&A content is hosted separately on the company's website, and no Q&A exchanges are included in the provided transcript.