FY2027 Q1 profitability improved, but the focus is on the repeatability of earnings excluding the lower depreciation burden following impairment

Revenue in FY2027 Q1 was ¥166 million, down ¥2 million, or 0.9%, from ¥168 million in the year-earlier period. Operating profit was ¥37 million, ordinary profit was ¥27 million, and profit attributable to owners of the parent was ¥27 million, representing a substantial improvement from the year-earlier operating loss of ¥37 million, ordinary loss of ¥44 million and quarterly net loss of ¥43 million. The key feature to verify in the next results announcement is that earnings improved without a recovery in revenue.

The earnings improvement was affected by the fixed-asset impairment recorded in the previous fiscal year. In the fiscal year ended March 2026, the company recorded impairment losses of ¥767.298 million on Bplats® software and ¥5.207 million on shared assets, for a total of ¥772.505 million. The FY2027 Q1 explanatory materials state that the cessation of depreciation on fixed assets after the impairment reduced the cost of sales. Accordingly, the ¥37 million operating profit should not be viewed simply as an improvement in business earnings power. The benefit from lower depreciation expense must be separated from actual cash-cost reductions, such as lower communications infrastructure costs.

For the fiscal year ending March 2027, the company forecasts revenue of ¥698 million, operating profit of ¥62 million, ordinary profit of ¥43 million and profit attributable to owners of the parent of ¥42 million. Operating profit had reached approximately 59.7% of the full-year forecast by Q1, while revenue stood at approximately 23.8% of the forecast. Profit progress alone appears strong, but the revenue required in the second half is ¥532 million, approximately 3.2 times Q1 revenue. The next results announcement must therefore confirm not only whether profitability remains positive, but also whether spot revenue is being recognized from projects and recurring revenue is recovering.

The fiscal year ended March 2026 included depreciation expense of ¥272.289 million, whereas the reviewed explanatory materials for FY2027 Q1 identify a ¥73 million year-on-year decline in cost of sales as the main factor behind the improvement in operating profit. In FY2027 H1, the key issue will be whether depreciation expense, communications infrastructure costs, outsourcing costs and personnel expenses can at least be disclosed separately. Without these breakdowns, it will not be possible to adequately determine whether the ¥37 million operating profit resulted from price revisions and cost reductions or from the accounting-related reduction in the burden following the impairment.