Full-year profitability remains the plan, but first-quarter revenue is behind schedule, making second-half conversion critical

Consolidated revenue in FY2027 Q1 was ¥88.811 million, down ¥45.959 million, or 34.1%, from ¥134.770 million in the same period of the previous year. The operating loss was ¥86.972 million, compared with a loss of ¥51.685 million in the same period of the previous year, indicating a wider loss. The full-year forecasts are revenue of ¥850 million, operating profit of ¥10 million, ordinary profit of ¥9 million and net income attributable to owners of the parent of ¥7 million, leaving first-quarter revenue progress at only 10.4% on a simple basis.

Meanwhile, the company assessed first-quarter progress as broadly in line with plan on an operating-profit basis in its earnings presentation. Revenue was delayed because a major recurring project was not renewed and the order timing for several projects shifted into the second half, while costs remained at planned levels to maintain the order-taking structure for the second half. The issue at this point is therefore not simply the first-quarter revenue decline, but whether projects that were lost can be distinguished from those delayed in timing, and whether the latter actually convert into second-half revenue and profit.

The company has consistently disclosed that both its HR and education businesses are affected by customer companies' and local governments' year-end acceptance procedures and budget execution, with revenue tending to be concentrated in the fourth quarter and in March. Given this seasonality, the company cannot be judged to miss its full-year target based solely on first-quarter revenue progress of 10.4%. However, revenue fell 34.1% year on year and the operating loss widened, so uncertainty around the assumptions underlying full-year profitability will increase if the timing of project orders and acceptance has not become concrete by H1.

To achieve full-year operating profit of ¥10 million, the company must generate approximately ¥96.972 million in operating profit over the remaining 3 quarters, calculated simply from the first-quarter operating loss of ¥86.972 million. The earnings presentation did not disclose the project value, order backlog or margins needed to achieve this recovery. At the next results announcement, the focus will be on cumulative H1 revenue and operating profit or loss, as well as the probability of winning delayed projects, contract renewal status, acceptance timing and whether the assumptions underlying the full-year forecasts have changed.