TerraSky (3915) FY2027 Q1 Earnings Deep Dive Report

TerraSky Corporation (Securities Code: 3915) achieved a strong start in the first quarter of the fiscal year ending February 2027 (March 1, 2026 – May 31, 2026), setting new record highs for both sales and profits . Consolidated net sales increased by 20.3% year-on-year to 7.94 billion yen, and consolidated operating profit surged by 79.0% year-on-year to 560 million yen.

1. Consolidated Earnings Highlights and Full-Year Outlook

In the first quarter, consolidated net sales reached 7.94 billion yen, a 20.3% increase year-on-year , driven by strong performance from TerraSky and BeeX, as well as significant growth from subsidiaries. Consolidated operating profit saw a substantial increase of 79.0% year-on-year to 560 million yen , primarily due to reduced outsourcing costs, the product business turning profitable, and a shift towards TerraSky's in-house personnel. Ordinary profit also rose by 74.2% to 610 million yen, and quarterly net profit increased by 64.5% to 350 million yen, with EPS growing significantly to 27.16 yen.

Against the full-year forecast, the company achieved a 23.1% progress rate for net sales and 22.3% for operating profit, indicating a smooth start. The company aims to accumulate projects in the second half and further expand its business by focusing on accelerating collaboration with NTT Data and Mizuho Bank , initiating new ventures such as AI-driven development “BLADE” and BPaaS services , and continuing management efficiency improvements and cost control through group reorganization implemented in the previous fiscal year.

The following slide provides an overview of the current quarter's consolidated financial results, clearly showing specific figures for net sales, various profits, EPS, year-on-year comparisons, and progress against the full-year plan. Notably, both net sales and operating profit reached record highs for a first quarter.

2. Profitability Improvement and Contributing Factors

Profitability improvement was significant in the first quarter. The gross profit margin for the standalone quarter improved by 1.0 percentage point year-on-year, and the operating profit margin increased by 2.3 percentage points. This improvement is mainly attributed to the following factors:

• Restructuring of unprofitable inter-group businesses : Review of less profitable businesses progressed.
• Shift to TerraSky's in-house personnel : Led to a reduction in outsourcing costs and an improved cost structure.
• Product business turning profitable : The strong performance of the product business, discussed later, boosted overall profitability.
• Increased revenue from Thai subsidiary and Quemix : Growth in these businesses also contributed to profits.

These initiatives led to controlled selling, general, and administrative expenses, improving overall profitability. Particularly, the operating profit margin significantly improved from 4.8% in the previous year's first quarter to 7.1%, suggesting the effectiveness of management efficiency efforts .

The slide below illustrates the trend of profitability ratios over past quarters, providing a visual understanding of gross profit margin, SG&A ratio, and operating profit margin trends. It clearly shows a significant improvement in operating profit margin in FY2027 Q1, confirming that the aforementioned improvement factors are indeed having an effect.

3. Segment Performance: Solution Business

The Solution Business recorded first-quarter segment net sales of 7.35 billion yen, a 20.0% increase year-on-year , and segment profit of 920 million yen, a 24.2% increase year-on-year , setting new record highs for both sales and profit. TerraSky itself, along with almost all subsidiaries including BeeX, achieved double-digit year-on-year revenue growth.

This strong performance was primarily driven by increased profitability from accumulating large-scale projects and reduced outsourcing costs . Increased revenue from the Thai subsidiary and Quemix also contributed. On a quarterly basis, sales remained robust with a 2.3% increase quarter-on-quarter, and profits maintained a high level.

4. Segment Performance: Product Business

The Product Business achieved first-quarter segment net sales of 650 million yen, a 24.1% increase year-on-year , and turned a profit of 47 million yen (compared to a loss of 28 million yen in the previous year's first quarter). This was driven by increased demand for mitocoERP and AI-related mitoco products , as well as growth in subscription revenue .

In addition to higher-margin implementation sales due to increased product demand, the shift of an event held in the previous year's Q1 to Q2 this year also contributed to profitability by reducing event costs. On a quarterly basis, sales continued to grow by 7.5% quarter-on-quarter, and profits remained positive.

Notably, subscription revenue within the product business increased by 17.0% year-on-year across all products . By major product, mitoco X grew by 11.2%, mitoco by 28.6%, and CLOUDSIGN by 60.0%, showing high growth rates. The subscription ratio for the entire product business is high at 86.7%, indicating a stable revenue base .

The following slide illustrates the composition of subscription revenue in the product business and the year-on-year growth rates for key products. It shows that mitoco X and mitoco account for a large proportion, and CLOUDSIGN recorded a high growth rate. This data is crucial for understanding the quality of revenue and growth drivers in the product business.

5. Launch of AI-Driven Development “BLADE” and Pilot Case Study

TerraSky has launched its AI-driven development model “BLADE” . This is part of a “3+1 strategy” to drive evolution towards next-generation models by supporting AI-adopting companies, data companies, and platform companies. BLADE combines AI and CRM implementation, data integration and design, and proprietary product/asset provision to promote TerraSky's AI-driven development.

A pilot case study involves the revision of Mitsubishi Electric's international shipping freight bidding system . In this project, the period from requirements definition to test design was reduced from four months to two months , achieving precise structuring of potential business requirements. Visualizing the “correct answer” in the early stages of development minimized rework risk and delivered a significant business impact by maximizing ROI (Return on Investment). This demonstrates the concrete value that AI technology brings to the development process.

6. Business Alliance with Bridge International Group for BPaaS

TerraSky has commenced a business alliance with Bridge International Group for the joint development of Sales Engagement BPaaS (Business Process as a Service) . This alliance merges TerraSky's extensive customer base in the Salesforce business with Bridge International Group's expertise and track record in inside sales outsourcing.

The joint development will proceed in three phases, aiming for a business scale of 1 billion yen in three years. Specifically, they will collaboratively offer Salesforce platform construction, operation and inside sales support, data utilization and RevOps support, and functional expansion and additional development. This alliance is expected to support customers in optimizing their overall sales activities and improving results , becoming a new revenue stream.

7. Group Headcount Trends and Human Resources Strategy

As of the end of the first quarter, the group headcount increased by 131 from the previous quarter to 1,745 employees . The number of new graduates hired in April 2026 was 104 across the group, and the planned group employee count for FY2027 is 1,871 . The engineer ratio remains high at 76.2%, indicating a focus on strengthening technical capabilities .

For its human resources strategy, TerraSky is promoting the construction of a talent ecosystem through the “ Discover × Develop × Retain/Engage ” cycle. Specifically, it aims to expand local channels, form awareness through educational support, build a practical education foundation for direct on-site skill development, accelerate early career readiness, and enhance engagement through creating a rewarding workplace. Notably, the company has been certified as a “Great Place to Work” for three consecutive years , demonstrating its commitment to employee retention and engagement.

8. Quemix's Joint Research and Development Achievements

Quemix, a subsidiary specializing in quantum computing-related technologies, announced joint research and development achievements with six companies . These include density functional theory with Honda R&D, material simulation with Mitsui Kinzoku, measurement reduction technology with SCSK, aerodynamic simulation with Nissan Motor, quantum chemistry calculations with Toyota Motor, and conceptual verification of quantum computation and integration with Denso. These efforts are advancing the practical application of quantum computing technology across diverse fields , indicating investment and achievements in future growth drivers .

9. Shareholder Returns

Regarding shareholder returns, the company plans to pay a dividend of 17 yen per share (record date February 28, 2027), maintaining a policy of stable shareholder returns .

Summary

TerraSky's first-quarter results for the fiscal year ending February 2027 represent a very strong start, achieving record-high sales and profits . The robust growth in the solution business, coupled with the product business turning profitable, significantly improved overall profitability. New growth strategies , such as AI-driven development “BLADE” and the BPaaS alliance with Bridge International Group, are also progressing concretely , indicating a steady strengthening of the foundation for future business expansion. In its human resources strategy, the company is focused on securing and developing engineers and creating a rewarding work environment to support sustainable growth. These initiatives are likely to have a positive impact on future performance.