Revenue is up, but profit is tracking behind plan; assess recovery of upfront investment in FY2027-H1

Revenue for FY2027 February 1Q was ¥3,002 million, operating profit was ¥122 million, ordinary profit was ¥121 million, and net profit attributable to owners of the parent was ¥82 million. Revenue increased 18.3% from ¥2,538 million in the prior-year quarter, reaching a record high for a first quarter, while operating profit declined 18.7% from ¥150 million. The operating margin fell approximately 1.8 percentage points from approximately 5.9% in the prior-year quarter to 4.1%, indicating that revenue growth has not translated directly into profit growth.

Gross profit increased 11.8% year on year to ¥497 million, while SG&A expenses were ¥375 million. The company said that subcontracting expenses associated with the use of external development resources in cloud integration, procurement costs for AWS, Azure and other products accompanying the expansion of cloud license resale, and personnel and recruitment expenses in the sales division increased. However, because the increase attributable to each cost factor and the revenue and profit generated by the investments have not been disclosed, it is not yet possible to determine whether the decline in 1Q profit reflects temporary upfront investment or a deterioration in the earnings structure.

The full-year plan calls for revenue of ¥12,516 million, operating profit of ¥605 million, ordinary profit of ¥617 million and net profit of ¥454 million. As of 1Q, progress rates were 24.0%, 20.2%, 19.8% and 18.2%, respectively. Revenue had reached almost one-quarter of the annual plan, while profit was tracking below that level. The company says results are progressing within its initial assumptions and that profit is planned to improve in the second half, but it has not provided an H1 profit target or the profit amount and margin required in the second half.

Revenue in FY2026-H1 was ¥5,123.991 million and operating profit was ¥340.111 million. In FY2027-H1, it will be necessary to confirm not only whether revenue growth continues but also whether profit recovers to a level above the prior-year period. In particular, it is important to determine whether the increases in outsourcing, personnel, recruitment and service development expenses seen in 1Q will expand further in 2Q, or whether the fixed-cost burden will be diluted by revenue growth. The interim results should be reviewed together with the operating margin, the amounts attributable to each cost factor and whether the full-year forecast is revised.