ENECHANGE FY2027 Q1 Earnings Analysis: Growth in Core Business and New Growth Narrative via 'Field Operations × AI' M&A

ENECHANGE (Ticker: 4169) reported its financial results for the first quarter of the fiscal year ending March 2027 (FY26 Q1). The results highlighted several critical drivers for future growth, including the steady expansion of its core corporate electricity switching business, the promotion of capital allocation to enhance shareholder returns and capital efficiency, and the announcement of new M&A deals centered on "Field Operations × AI."

This report provides a multi-faceted analysis of the company's overall performance, growth strategy, financial policy, and segment trends, focusing on 10 key topics derived from the earnings presentation materials.

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1. FY26 Q1 Earnings Highlights and Progress Against Full-Year Targets

Consolidated results for the first quarter were JPY 1,345 million in revenue , JPY 78 million in adjusted EBITDA , and JPY 47 million in net income attributable to owners of the parent .

While top-line and profit figures appear to have declined compared to the same period last year (FY25 Q1), this is due to one-time factors (JPY 154 million) in the prior year, such as the concentration of SaaS delivery completions and temporary settlement adjustments. When excluding these one-time factors, adjusted EBITDA grew by 38% year-on-year (YoY) . Progress against the full-year adjusted EBITDA target of JPY 655 million is proceeding as planned, marking a solid start in line with the company's second-half-weighted earnings forecast.

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2. Drivers of Adjusted EBITDA Growth and Structural Analysis

The real growth in adjusted EBITDA was driven by the robust expansion of the corporate electricity switching business, discussed below.

[Slide 6 Explanation: EBITDA Growth Structure Excluding One-Time Factors]

This slide clearly illustrates the transition of adjusted EBITDA from FY25 Q1 to FY26 Q1 and the breakdown of the exclusion of one-time factors. The FY25 Q1 figure of JPY 211 million included JPY 154 million in one-time gains (JPY 146 million from SaaS contract completions and JPY 8 million from temporary settlements in the corporate electricity business). Excluding these, the normalized EBITDA for the same period last year was JPY 57 million. In contrast, the current quarter (FY26 Q1) generated JPY 78 million in adjusted EBITDA, representing a +JPY 21 million (YoY +38%) growth driven by existing businesses. This slide serves as a visual testament to the company's steadily strengthening core earning power, independent of one-time factors.

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3. Agile Shareholder Returns: Share Buyback of Up to JPY 1 Billion

A major highlight of this earnings release is the announcement of a share buyback program aimed at optimizing capital efficiency (ROE) . The company, deeming its current stock price undervalued, has authorized the repurchase of up to 4,000,000 shares (9.3% of total shares outstanding) for a total amount of up to JPY 1,000 million (Acquisition period: August 10, 2026, to June 30, 2027).

With an equity ratio of 69.1% as of the end of June 2026 and a highly stable financial base with approximately JPY 4.1 billion in cash and deposits, the company is leveraging its financial strength to optimize its capital allocation.

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4. Roadmap for ROE Improvement through Optimal Capital Allocation

Through share buybacks and the appropriate use of leverage, ENECHANGE aims to significantly improve its capital efficiency.

[Slide 10 Explanation: Changes in Capital Structure and ROE Projections]

This slide illustrates how utilizing financial capacity for funding and shareholder returns will impact the company's balance sheet and ROE (Return on Equity) . By financing M&A costs (approx. JPY 576 million) through external debt while preserving cash, and executing the JPY 1 billion share buyback, the company aims to compress equity while growing net income. Consequently, ROE, which stood at 2.8% in FY25, is projected to rise to approx. 11.5% through organic profit growth alone, and further to approx. 14.5% upon completion of the share buyback. This slide symbolizes management's strong commitment to maximizing shareholder value.

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5. Realizing the New Growth Strategy: "AI in Field Operations (Energy-Adjacent Sectors)"

A new medium-to-long-term growth pillar has been established: "AI utilization in field operations (energy-adjacent sectors)." By integrating "field maintenance and inspection services" and "AI software" into its existing base of approximately 18,000 corporate electricity switching clients, the company aims to drive cross-selling and expand its stable recurring revenue base .

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6. Strategic M&A Execution: Acquisition of Darwin and Partnership with Flight PILOT

Two major initiatives were announced to realize the "AI in Field Operations" strategy:

1. Full Acquisition of Darwin Co., Ltd.
   • A provider of mandatory annual inspections for emergency power generators under the Fire Service Act, offering uniform pricing and quality nationwide.
   • A high-profit business with strong recurring characteristics backed by fire safety regulations (FY26/3 results: JPY 315 million revenue, JPY 98 million operating profit, 31.1% operating margin).
2. Capital and Business Alliance with Flight PILOT Inc. (19.89% stake) and Acquisition of AI Inspection Software
   • A technology group developing and selling AI software that automatically detects equipment damage and degradation from drone and camera images.
   • This brings AI and analytical technology infrastructure for the automation and efficiency of infrastructure inspections into the group.

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7. Value Creation through M&A and the "Maintenance Roll-up" Model

Synergies are expected by combining Darwin's human resources, Flight PILOT's AI software, and ENECHANGE's customer base.

[Slide 16 Explanation: Mechanism of Value Creation through M&A]

This slide diagrams how these actions lead to corporate value enhancement. The combination of "Electricity switching customer base (18,000 locations)" × "AI/Software (Flight PILOT)" × "Mandatory inspection stock business (Darwin)" creates the following synergies:

• Customer Base × Cross-selling : Mutual proposals of generator inspections to electricity clients and vice versa (LTV maximization).
• Efficiency via AI/DX : Automating and streamlining infrastructure inspections through AI analysis.
• Platform for Business Succession : Promoting a roll-up (acquisition and consolidation) strategy to serve as a successor for small-to-medium-sized maintenance firms facing succession issues.

In Western markets, companies like APi Group (market cap approx. JPY 1.7 trillion) and Shermco (acquisition valuation approx. JPY 240 billion) have achieved rapid growth through roll-ups in the statutory maintenance and inspection sector. ENECHANGE positions this move as the first step toward becoming a "platform for infrastructure maintenance and inspection" in the Japanese market.

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8. Segment Trends: Strong Growth in Corporate Electricity Switching

Performance by segment shows that the corporate electricity switching business is performing very strongly :

• Revenue : YoY +13%
• Stock Revenue : YoY +27%
• Number of Continuing Locations : 18,333 (YoY +13%)
• Stock ARPU (Average Revenue Per User) : JPY 17,081 (YoY +13%)

Leveraging price competitiveness in the new power market to win large-scale contracts and optimizing commission rates for high-profit deals have resulted in a well-balanced increase in both the number of locations and unit prices .

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9. Segment Trends: Household Electricity Switching and SaaS/Development

• Household Electricity Switching Business Revenue remained flat as new power providers have become more cautious about acquiring new customers due to energy price volatility caused by Middle East tensions. However, as electricity bills for existing users have risen, Stock ARPU increased to JPY 614 (YoY +16%) , and Stock Revenue maintained a slight growth of YoY +4% (258,000 continuing users).

• SaaS/System Development Business Revenue decreased by YoY -10% (after excluding one-time factors). This is a strategic choice to prioritize development resources for the "CIS (Customer Information System)," a core system for new power providers scheduled for full-scale expansion in FY27, while maintaining the existing customer base (42 clients).

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10. Outlook and Summary

ENECHANGE's FY26 Q1 results not only demonstrated real operating profit growth but also presented two clear drivers: "significant ROE improvement through capital allocation" and "the acquisition of a new growth axis in field maintenance × AI."

To achieve the full-year target of JPY 655 million in adjusted EBITDA , the company expects growth in the existing electricity switching business in the second half, alongside upside contributions from the newly acquired Darwin business. These results indicate a significantly strengthened foundation for long-term corporate value enhancement.