FY27 H1 is the first proving ground for the plan to turn operating profit positive

Revenue in Q1 of the fiscal year ending March 2027 was ¥369 million, down ¥70 million, or 15.9%, from ¥439 million in the same period a year earlier. Operating results also deteriorated by ¥22 million, from an operating loss of ¥106 million in the same period a year earlier to an operating loss of ¥128 million. The ordinary loss was ¥127 million and the net loss was ¥129 million. Since the starting point in Q1 alone is worse than a year earlier, the extent of the recovery in H1 will be the first indicator for assessing the basis of the plan to achieve full-year profitability.

The comparable cumulative results for Q2 of the fiscal year ended March 2026 were revenue of ¥1,029 million and operating profit of ¥4 million. To reach those cumulative results from Q1 of the fiscal year ending March 2027, which recorded revenue of ¥369 million and an operating loss of ¥128 million, Q2 alone would need to generate revenue of ¥660 million and operating profit of ¥132 million. This is not a target disclosed by the company, but a mechanical comparison line based on the previous year's H1 results. It indicates that the recovery required in Q2 is substantial.

The company attributed the Q1 decline in earnings mainly to the timing of recognition of a North American project worth around ¥40 million and upfront investments, including additional sales personnel. Accordingly, the entire loss may not have resulted from the disappearance of demand or deteriorating profitability. However, the Q1 materials do not provide sufficient figures on whether the project affected by the timing difference actually shifted into Q2, how much it contributed to revenue and operating profit if it did, or how much personnel expense was incurred from the additional hiring.

For the full year, the company plans to achieve an operating profit, but it has not yet disclosed specific forecasts for revenue or operating profit, the Q1 progress rate against the full-year forecast, or the numerical assumptions underlying its outlook. Since the company has indicated that it will announce its full-year plan when it reports Q2 results, the next earnings announcement will need to address more than simply achieving profitability. It should clarify the required revenue, operating profit, the amount dependent on H2, and the assumptions regarding project recognition timing.

The key question is not only whether cumulative H1 operating profit exceeds the ¥4 million recorded in the same period a year earlier. Q1 gross margin was 67.6%, down 1.8 percentage points year on year. If revenue recovers while gross margin remains low, it is unclear whether full-year profitability can be achieved through SG&A cuts alone. It will be important to assess the recognition of the North American project, the end of the domestic business's post-project decline, and the timing of recovering the investment in additional personnel through segment revenue and profit.