Revenue increased, but the operating loss widened, making a turnaround in the consulting business's profitability the focus.

In the first quarter of the fiscal year ending March 2027, company-wide revenue was ¥224.9 million, up 22.4% from ¥183.8 million in the year-earlier period. However, the operating result was a ¥148.1 million loss, deteriorating by ¥17.0 million from the ¥131.1 million loss in the year-earlier period. While revenue growth has been confirmed, the operating deficit has not narrowed, making it difficult at this stage to conclude that higher revenue has translated into profit.

The year-on-year change in the operating result is explained by a ¥12.2 million improvement in the consulting business, a ¥11.3 million loss in the DAT business and a ¥17.9 million increase in corporate costs. The three factors total a ¥17.0 million deterioration, matching the increase in the operating loss from the year-earlier period. The first-half results should include a bridge showing changes in the same format, allowing investors to confirm whether the consulting improvement absorbed the other negative factors.

The consulting business generated revenue of ¥236.2 million, gross profit of ¥3.1 million, a gross margin of 1.3% and a segment loss of ¥46.6 million. Revenue rose 28.5% year on year, outpacing the company as a whole, but the gross margin remains low and the segment remains loss-making. Consulting revenue exceeded company-wide revenue of ¥224.9 million because DAT business revenue was recorded as a negative ¥11.3 million, so the results of each business must be viewed separately.

Company-wide costs increased by ¥17.9 million year on year, or 24.8%. The company cited shareholder administration costs, initial costs for public-sector bids and legal fees associated with building out the DAT structure as sources of the increase. It has not disclosed whether these are one-time costs or fixed costs that will continue into the first half and beyond. The next results should therefore be checked for the amount of company-wide costs, the year-on-year change and a breakdown between recurring and one-time costs.

For the first-half results, we will track not only the revenue growth rate but also whether the consulting business's gross margin improves from 1.3%, whether its ¥46.6 million segment loss narrows and whether the operating result improves year on year. In particular, the quality of revenue growth will depend on whether the consulting business's improvement expands beyond ¥12.2 million and whether the combined ¥29.2 million impact of the DAT loss and company-wide costs continues.