Intelligent Wave FY2026 Earnings Analysis: Record-Breaking Performance and a Sustainable Growth Strategy Driven by AI and Strategic Investment

1. FY2026 Full-Year Earnings Highlights

Intelligent Wave Inc. (Securities Code: 4847) delivered strong results for the fiscal year ended June 2026, as system renewal projects for key clients progressed smoothly. The company achieved record highs across all profit metrics: net sales, operating profit, ordinary profit, and net income.

Specifically, net sales reached 17,247 million yen (+10.6% YoY) , operating profit 2,076 million yen (+12.3% YoY) , ordinary profit 2,129 million yen (+12.6% YoY) , and net income 1,487 million yen (+10.2% YoY) . These figures surpassed the revised forecasts announced in May 2026, with net sales at 100.3%, operating profit at 103.8%, ordinary profit at 103.9%, and net income at 104.7% of the projected targets.

As shown in the performance summary above, the impact of quality-related issues experienced with certain clients in the previous fiscal year was resolved during this period. Profitability showed a clear recovery trend, particularly from the second half onward. Although the gross profit margin was 28.7% (-1.2 pt YoY), the steady increase in net sales drove overall profit expansion.

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2. Sales Trends by Business Segment and Product Category

Looking at sales by business segment, the core Payment segment reached 14,285 million yen (+12.0% YoY) , serving as the primary driver of overall growth. Within the Payment segment, the FEP (Front-End Processing) field , which provides network connectivity for credit card processing, grew to 6,315 million yen (+14.3% YoY) , while the fraud detection field surged to 3,467 million yen (+33.1% YoY) . The acquiring field, which handles merchant management, stood at 2,693 million yen (-5.6% YoY). The primary driver for the overall segment increase was the full-scale launch of system renewal projects for major clients.

In other areas, the Security segment (2,067 million yen, +2.2% YoY) and the Data Communication & Analysis Infrastructure segment (894 million yen, +9.4% YoY) both performed steadily.

Trends by product category are as follows:

• System Development : 6,187 million yen (-9.5% YoY) . While the first half saw a reactionary decline following the completion of large-scale projects, the segment recovered in the second half as system renewals for major clients gained momentum.
• Third-Party Products (Hardware, etc.) : 2,214 million yen (+103.7% YoY) . Sales surged due to equipment sales associated with FEP system renewals for major clients.
• Cloud Services : 4,293 million yen (+23.4% YoY) . This has become a robust pillar of recurring revenue, supported by an increase in user numbers and additional functionality requested by existing users.
• In-house Products/Services : 807 million yen (+47.3% YoY) .

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3. Analysis of Operating Profit Fluctuations

Operating profit increased from 1,848 million yen in the previous fiscal year to 2,076 million yen (+227 million yen, +12.3% YoY) .

The main factors for the change are as follows:

• Profit boost from increased sales : +533 million yen
• Impact of lower gross profit margin : -252 million yen (While gross profit margins in system development improved, changes in the product mix in the security segment and ongoing quality-related costs from the beginning of the year had an impact)
• Increase in SG&A expenses : -53 million yen (Due to increases in personnel costs, recruitment/training expenses, and facility maintenance costs)

The quality-related issues that persisted from the start of the year were resolved during the period, and profitability improved significantly from the third quarter onward. In the fourth quarter (4Q) alone, the company recorded an operating profit of 749 million yen and an operating profit margin of 15.0%, demonstrating a strong recovery in earning power.

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4. Trends in Orders Received and Backlog, and Business Robustness

Orders received for FY2026 were 15,365 million yen (-20.5% YoY) , and the order backlog was 18,429 million yen (-9.3% YoY) . While these figures represent a year-on-year decline due to the reactionary effect of large multi-year contracts secured in the previous year for cloud services and security, demand for system development from major clients remains at a high level.

The slide above shows the long-term trend of the order backlog. It confirms that the business scale has expanded steadily over the long term, growing from 4,434 million yen in FY2018 to the current 18,429 million yen. Notably, the stock-type order backlog (15,820 million yen) , consisting of cloud services and maintenance, accounts for approximately 86% of the total, supporting extremely high predictability for future performance and a robust revenue base.

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5. Progress of the Medium-Term Management Plan

Regarding the ongoing medium-term management plan, net sales reached 17,247 million yen (99.1% of the plan), showing progress almost in line with targets, driven by the payment segment. Conversely, the security and data communication/analysis infrastructure segments are slightly behind schedule. Operating profit reached 2,076 million yen against a target of 2,400 million yen (86.5% achievement rate), but ROE (Return on Equity) reached 15.2% , indicating steady improvement in capital efficiency.

For the final year of the medium-term plan (FY2027), the company aims to achieve net sales of 19,000 million yen , operating profit of 2,850 million yen (15.0% operating margin) , and ROE of 17.0% or higher by strengthening its business foundation and driving productivity reforms through AI implementation.

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6. FY2027 Key Initiatives and Strengthening the Management Foundation with AI

Key growth strategies and initiatives for FY2027 include:

1. Strengthening the Payment Segment : Enhancing and embedding quality management systems, training engineers capable of cloud-based FEP system support, and consolidating/streamlining infrastructure operations.
2. Business Model Transformation in Security : Advancing functional expansion (AI application) of the internal information leakage prevention solution "CWAT" and shifting from simple product sales to a "product x service" recurring model.
3. New Developments in Data Communication/Analysis : Accelerating the creation of new solutions by leveraging the company's core ultra-high-speed processing technology (e.g., FPGA).
4. AI-Driven Development and Management Innovation :
   • Promoting "AI-driven development" by fully integrating AI into in-house development and quality assurance processes, with a plan to boost the gross profit margin by 1.9% through productivity gains.
   • Enhancing the added value of existing products, such as improving fraud detection, increasing the usability of CWAT, and utilizing AI agents.
   • Laying the groundwork for new markets, such as anomaly detection in financial/capital markets and next-generation payment areas anticipating the digital currency era.

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7. FY2027 Earnings Forecast and Growth Outlook

For the full fiscal year ending June 2027, the company expects further growth in both sales and profit, supported by robust IT investment demand from credit card companies and payment service providers.

Key earnings forecasts for FY2027 are as follows:

• Net Sales : 17,700 million yen (+2.6% YoY)
• Gross Profit : 5,350 million yen (+8.1% YoY)
• Operating Profit : 2,200 million yen (+6.0% YoY)
• Ordinary Profit : 2,240 million yen (+5.2% YoY)
• Net Income : 1,530 million yen (+2.9% YoY)

By category, system development is expected to reach 6,320 million yen (+2.1% YoY) and cloud services 4,550 million yen (+6.0% YoY) , showing stable growth. While sales of third-party products (hardware), which saw a significant increase last year, are expected to remain flat (2,180 million yen, -1.6% YoY) due to a reactionary decline, the company plans to improve its operating profit margin to 12.4% (+0.4 pt) while aggressively investing in growth areas such as AI utilization and infrastructure development.

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8. Shareholder Return Policy and Dividend Plan

Regarding shareholder returns, the company maintains a basic policy of "stable dividends with a target payout ratio of 50%."

• FY2026 Dividend : As initially forecasted, a year-end dividend of 20 yen per share is planned (annual dividend of 37 yen, including a 17 yen interim dividend; payout ratio of 65.2%).
• FY2027 Dividend (Forecast) : An annual dividend of 37 yen is planned, consisting of a 17 yen interim dividend and a 20 yen year-end dividend (forecasted payout ratio of 63.6%).

The company has consistently maintained a stance of stable dividend maintenance and increases over the long term, clearly demonstrating a commitment to shareholder returns linked to business expansion.