User Local, Inc. FY2026 Full-Year Earnings Analysis Report: 19 Consecutive Years of Revenue and Profit Growth and Accelerated Investment in Generative AI

User Local, Inc.'s FY2026 full-year financial results (July 1, 2025 – June 30, 2026) demonstrate robust expansion in its core SaaS business, marking 19 consecutive years of revenue and profit growth and the achievement of record-high financial performance . Furthermore, the company has seen a rapid increase in adoption within its "AI DX SaaS" segment, led by the enterprise generative AI service " User Local ChatAI ," signaling a clear commitment to aggressive upfront investment for the coming fiscal year.

This report provides a detailed analysis of the company's financial performance, business trends, shareholder returns, and future growth strategies, centered on 10 key topics derived from the earnings presentation materials.

---

1. FY2026 Earnings Highlights and Overview

The following slide provides an overview of the company's performance for the fiscal year ended June 2026.

Slide Commentary: Growth and High Profitability Reflected in Highlight Data

This slide summarizes the company's key financial and operational metrics for FY2026. It highlights high profitability, including 5.34 billion yen in net sales , an operating profit margin of 41.1% , and earnings per share (EPS) of 102.6 yen . Additionally, the total number of contracts across all products has surpassed 6,000 , confirming the company's streak of 19 consecutive years of revenue and profit growth since its founding. Dividends were also significantly increased to 24 yen per share annually , exceeding the initial forecast.

---

2. Analysis of Performance Against Forecasts and Profit Structure

The comparison between the initial full-year earnings forecast and the actual results is as follows.

Slide Commentary: Comparison of Forecasts and Actual Results

The slide above presents a table comparing FY2025 actuals, FY2026 actuals, year-on-year changes, and the achievement rate against initial forecasts. Net sales reached 5,343 million yen (+16.6% YoY) , achieving 101.1% of the company's forecast of 5,284 million yen. Regarding tiered profits, the company reported operating profit of 2,196 million yen (+11.4% YoY, 99.5% of forecast) , ordinary profit of 2,212 million yen (+12.1% YoY, 100.2% of forecast) , and net income of 1,634 million yen (+14.4% YoY, 107.3% of forecast) , marking a strong performance that exceeded expectations, particularly in net income.

Cost Structure Supporting Exceptional Profit Margins

A defining characteristic of the company is its exceptionally high profit margins, with an ordinary profit margin of 41.4% and a net income margin of 30.6% . The strength of its stock-based business model is clearly evident: as the company develops products in-house and maintains an efficient sales and marketing structure (low-cost operations), revenue growth directly translates into profit accumulation.

---

3. Business Segments and Key Product Trends

The company's business is broadly categorized into " Digital Marketing SaaS " and " AI DX SaaS ."

1. Digital Marketing SaaS Segment

   • User Insight : A comprehensive digital marketing tool featuring heatmaps, user behavior visualization, and generative AI-powered content creation and web customer service functions.
   • Social Insight : An operational support tool that streamlines the management of multiple SNS accounts, competitor analysis, and campaign execution.
   • These products continue to see stable usage among the existing customer base, forming a solid baseline.

2. AI DX SaaS Segment

   • User Local ChatAI : An enterprise generative AI platform that allows users to securely and safely utilize multiple generative AI models (Azure OpenAI Service, OpenAI, Gemini, Claude, Perplexity, etc.) simultaneously.
   • SupportChatbot : An AI chatbot that automates customer support and internal inquiries 24/7/365.
   • Background of Adoption Growth : The company's RAG (Retrieval-Augmented Generation) functionality , which links internal data (manuals, handwritten notes, audio/video, etc.) with generative AI, combined with high-level security, has been highly rated, leading to rapid adoption by major corporations, local governments, and universities (e.g., Kumamoto University, Hiroshima Electric Railway).

The growth in contracts to over 6,000 is supported by a cumulative business model where these new and existing products complement each other to expand the customer base.

---

4. Five Strengths Driving Growth and the Algorithmic Virtuous Cycle

The following five strengths are cited as factors maintaining the company's competitive advantage:

1. Timely Provision of In-Demand Services : Rapid product development realized through market needs analysis using the company's own tools.
2. Virtuous Cycle Strengthening Algorithms : A positive loop where increased users and data volume improve AI accuracy and analytical capabilities, which in turn attracts more users.
3. Securing Top-Tier Tech Talent : An agile organization with an average age of 28, featuring an R&D structure led by engineers with graduate degrees.
4. Continuous R&D in Big Data and AI : Promotion of prototyping and implementation of advanced new technologies such as Generative AI Checkers, PowerPoint-generating AI, and AI writers.
5. Stable Growth Based on High Profitability : Securing a financial foundation through low-cost operations and stock-based revenue.

---

5. Proactive Expansion of Shareholder Returns

In FY2026, the company significantly expanded its shareholder return measures in line with its business growth.

• Increase in Dividends per Share : Dividend increased from 14 yen in the previous fiscal year to 24 yen (10 yen interim, 14 yen year-end).
• Share Buybacks and Cancellation : Implemented a share buyback program of up to 1 billion yen between February and August 2026, and completed the cancellation of 100,000 shares (0.61% of total shares outstanding before cancellation) on May 29, 2026.
• Introduction of Shareholder Benefit Program : Established a new program providing 3,000 yen worth of digital gifts to shareholders holding 100 or more shares as of the end of June each year.

Through these measures, the company is working to enhance shareholder value via a multi-faceted approach of dividends, share buybacks, and benefits.

---

6. FY2027 Earnings Forecast and Mid-to-Long-Term Growth Strategy

Regarding the future outlook, the company's full-year earnings forecast for FY2027 is as shown in the slide below.

Slide Commentary: Continued Growth Investment and Revenue Increase Plan

The slide above presents the full-year plan for FY2027. The company expects continued double-digit revenue growth, with net sales projected at 6,081 million yen (+13.8% YoY) , aiming to set a new record for sales . Conversely, the company forecasts a slight decrease in profits, with operating profit at 2,149 million yen (-2.1% YoY) , ordinary profit at 2,179 million yen (-1.5% YoY) , and net income at 1,503 million yen (-8.0% YoY) .

Background of Profit Forecast and Accelerated Growth Investment

The temporary decline in profit is due to aggressive growth investment aimed at expanding market share in the rapidly growing generative AI-related services market . The plan incorporates increased marketing expenses, such as taxi advertisements, and higher AI-related costs and personnel expenses to enhance LLM (Large Language Model) and RAG capabilities. The strategy prioritizes establishing a long-term market position while surpassing the 6 billion yen revenue milestone and strengthening the business foundation.

Shareholder Return Stance via Consecutive Dividend Increases

Despite being in a phase of accelerated profit investment, the company plans to continue increasing dividends. The annual dividend per share for FY2027 is planned at 30.0 yen (15 yen interim, 15 yen year-end) , an increase of 6 yen from the previous year, with a projected dividend payout ratio of 31.4% . This clearly demonstrates a commitment to prioritizing shareholder returns while simultaneously driving growth investments.

---

7. Conclusion

User Local, Inc.'s FY2026 financial results were exceptionally solid, achieving 19 consecutive years of revenue and profit growth while maintaining high profitability with net sales of 5.34 billion yen and an operating profit margin of 41.1%. For FY2027, the company expects to further strengthen upfront investments to capture technological innovation and market needs in the generative AI sector, transitioning into a new growth phase with the goal of exceeding 6 billion yen in sales.