A substantial buildup is still required in Q4 even after the downward revision

Nine-month cumulative revenue was ¥2,583 million, up 3.6% year on year, while operating profit was only ¥15 million, down 94.2% year on year. The Q3 results presentation stated that, against the initial full-year forecasts of revenue of ¥3,908 million and operating profit of ¥266 million, revenue progress was 66.1% and operating profit progress was 6.0%, indicating that progress against the initial plan was delayed.

The full-year forecasts were subsequently revised down to revenue of ¥3,438 million, operating profit of ¥132 million, and ordinary profit and consolidated net profit of ¥85 million. Compared with the previous forecasts, revenue was reduced by ¥470 million, or approximately 12%, and operating profit by ¥134 million, or approximately 50.4%. The company cited delays in winning new projects for large enterprises, smaller contract sizes, delays in expanding existing customers' use company-wide, and an inability to absorb fixed costs associated with strategic investment as factors behind the shortfall.

The simple difference between the nine-month cumulative results and the downwardly revised forecasts was ¥855 million for revenue and ¥117 million for operating profit. Accordingly, the company needs not only to add revenue in Q4, but also to secure operating profit of ¥117 million in Q4 alone. This corresponds to an operating margin of approximately 13.7% on the simple Q4 revenue difference, making not only the timing of project recognition but also contract size, implementation scope, the profitability of additional services, and the pace at which upfront investment costs are incurred important considerations.

The final results should be reviewed not only to determine whether the downwardly revised figures were achieved, but also whether the project delays were temporary decision-making delays or whether customers' cost-effectiveness reviews and smaller initial implementations remain structural issues. In particular, disclosure of the number of new contracts with large enterprises, average contract size, the number of customers moving to company-wide deployment, and the breakdown of Q4 revenue and operating profit will be important in assessing a recovery in growth next fiscal year.