Expansion and growth based on the e-discovery legal business

「In the life sciences AI business, we will pursue further growth in the AI drug discovery and AI medical device fields using KIBIT, our equation-driven AI technology built on natural language processing. We plan to achieve profitability through growth in the drug discovery business and will pursue non-linear growth going forward.」

「In FY2025, we not only achieved a consolidated operating profit for the full year for the first time in 3 years, but also significantly exceeded our initial consolidated operating profit forecast after raising it twice. In addition, operating profit in the AI solutions business exceeded that of the legal technology AI business for the first time, making our growth drivers clearer. In particular, in the AI drug discovery field within life sciences AI, we steadily built up co-creation projects and concluded 7 agreements, substantially exceeding the KPI of 3. To achieve the Stage 4 medium-term management plan for the fiscal year ending March 2029, we have positioned life sciences AI as a core business and will continue to make proactive upfront investments.」

「The number of inquiries and orders from customer law firms and companies continued to increase steadily, and revenue remained on a recovery trend each quarter. However, performance was behind the initial plan, and both revenue and operating profit remained weak.」

「The measures to build our customer base increased the number of inquiries and maintained a recovery trend, but revenue was ¥3,322,665 thousand, down 23.0% year on year.」

「Although the rebuilding of our customer base increased the number of inquiries, revenue has not yet recovered. Revenue was ¥2,113,242 thousand, down 33.6% year on year.」

「In the legal technology AI business, revenue declined year on year because orders for major engagements in the e-discovery services business remained weak, in addition to the strategic reduction of non-AI businesses carried out in the previous fiscal year.」

「The legal technology AI business had accumulated relatively few major engagements, and revenue from the business in the third quarter was below the second-quarter level, resulting in weak performance.」

「At the US subsidiaries, we implemented structural reforms, including the reorganization and consolidation of offices and organizations, to accelerate the transition to an AI business and optimize the cost structure in response to declining revenue resulting from the strategic reduction of non-AI businesses.」

「During the consolidated fiscal year from 1 April 2021 to 31 March 2022, we continued to promote the portfolio transformation toward an AI-centered business model. During the first six months of the current consolidated fiscal year, revenue and profit increased year on year, driven mainly by the legal technology AI business. Operating profit in particular rose sharply to ¥1,206,079 thousand, an increase of ¥1,366,342 thousand.」

「During the consolidated fiscal year from 1 April 2021 to 31 March 2022, we continued to promote the transition to an AI-centered business model. During the first quarter of the current consolidated cumulative period, both the AI solutions business and the legal technology AI business performed strongly, resulting in year-on-year increases in revenue and profit. Operating profit in particular rose to ¥598,883 thousand, an increase of more than 14 times.」

「The group is currently pursuing a portfolio transformation toward an AI-centered business model, with the aim of becoming a true AI company.」

「Going forward, in the legal technology AI business, revenue from AI services is expected to grow as a result of the transition to an AI-centered business model implemented during the consolidated fiscal year, while the cost reductions from structural reform at the US subsidiaries are expected to contribute to earnings for the full fiscal year.」

「In the e-discovery services business, the transition to an AI-centered business model, including the steady accumulation of orders for reviews using the AI review tool KIBIT Automator, resulted in revenue of ¥2,294,026 thousand, up 7.8% year on year.」

「During the consolidated fiscal year, we promoted sales activities for this tool and worked to establish a sales foundation in both the Japanese and US markets. As a result, from the second half of the consolidated fiscal year, we steadily accumulated orders for reviews using KIBIT Automator.」

「To transition to a business model centered on AI technology, we strengthened these efforts during the second half of the current consolidated fiscal year, including redirecting resources following the delisting from the NASDAQ Global Market announced in January 2020. The plan is progressing as scheduled, with sales and marketing initiatives and workforce optimization due to be completed within the current consolidated fiscal year, in order to improve the likelihood of winning engagements and increase revenue going forward.」

「However, in addition to changes in the market environment, including the sales channels, we have been slow to respond to the transformation of our business model through sales and marketing initiatives and workforce optimization. As a result, we have not been able to win new major engagements as planned.」

「However, the measures to strengthen sales capabilities announced at the end of the previous fiscal year, particularly at the US subsidiaries, have taken time to complete and have not yet contributed to revenue.」

「These initiatives gradually deepened our network with major US law firms and produced certain results, including more opportunities to reach potential engagements. However, some engagements expected to form part of the major pipeline for the second half of the current consolidated fiscal year were lost or shifted into a different period, and their contribution to performance is taking longer than initially expected at the start of the fiscal year.」

「However, some of the engagements being tracked as major pipeline opportunities for the second half of the current consolidated fiscal year were lost or shifted into a different period, and their contribution to performance is taking longer than expected.」

「As the results of these strengthened sales activities began to emerge from the third quarter of the previous consolidated fiscal year, we steadily built up a pipeline of major engagements in Asia and, in the second quarter, won multiple large engagements from Asian companies, including major Japanese manufacturers.」

「As the results of these strengthened sales activities began to emerge from the third quarter of the previous consolidated fiscal year, we have been steadily building a pipeline of major engagements in Asia.」

「In addition to the effects of reforming the earnings structure of the legal technology business, stronger cross-border sales have led to a steady recovery in performance, and from the next fiscal year onward, both the legal technology business and the AI solutions business are moving into an offensive growth phase.」

「Against this backdrop, we are making the establishment of a cross-border sales structure to win engagements from Asian companies our top priority, using our proprietary e-discovery support system, Lit i View, to the fullest and leveraging our strength in Asian-language analysis, the efficiency enabled by artificial intelligence technology, and our ability to provide one-stop support throughout the entire process. In the third quarter, the results of these strengthened sales activities began to emerge, and revenue at our South Korean and Taiwanese bases performed strongly. In addition, as a result of the restructuring of the US business led by headquarters since the second quarter, together with thorough engagement management and cost-reduction efforts, we made significant progress toward achieving an operating profit for the full year.」

「Against this backdrop, we are making the restructuring of our US business our top priority, fully leveraging our proprietary e-discovery support system, Lit i View, together with our strength in Asian-language analysis, the efficiency enabled by artificial intelligence technology, and our ability to provide one-stop support throughout the entire process.」

「During the fiscal year, we have focused on winning major engagements from Asian companies by accelerating cross-border sales between our Asian bases, including Japan, South Korea and Taiwan, and the US.」

「In the legal business, we integrated 3 US subsidiaries in July 2016 and carried out organizational reforms to strengthen our internal structure. In addition, as a result of collaboration between the US subsidiaries and headquarters from the second half of the fiscal year, we won major engagements from Asian companies and achieved revenue growth for 3 consecutive periods.」

「In the legal business, we integrated 3 US subsidiaries in July 2016 and implemented various measures to improve operational efficiency and reduce operating costs. In addition, as we reached a certain level of resolution regarding the establishment of internal controls in the US, which had been an issue, we were able to focus on sales activities during the third quarter. As a result, new engagements won in the US recovered sharply, and monthly revenue reached a record high in December.」

「Going forward, we will accelerate initiatives to improve operational efficiency and reduce operating costs following the integration, while leveraging our sales capabilities and proprietary technology supporting Asian languages to further expand our market share in the US e-discovery industry.」

「This will enable us to improve operational efficiency and reduce operating costs, while leveraging our sales capabilities and proprietary technology supporting Asian languages to establish a foundation for further market share gains in the US e-discovery industry.」

「With the business structure for the e-discovery and legal business now in place, we view this as the period for full-scale growth and expansion.」