INFONET Inc. Q1 FY2027 Earnings & Growth Strategy Deep Dive: Entering a Phase of Rapid Expansion via Strategic M&A and Holding Company Transition

INFONET Inc. (Securities Code: 4444) reported its Q1 financial results for the fiscal year ending March 2027. While the standalone and consolidated figures reflect a transitional period characterized by upfront infrastructure investment and a lull between large-scale projects, the company simultaneously announced the acquisition of Active Re-Tech Co., Ltd. as a wholly-owned subsidiary (effective July 1, 2026). Consequently, the company has implemented a significant upward revision to its full-year consolidated earnings forecast.

This report provides a deep dive into the shifts in the revenue structure behind the Q1 results, the impact of the M&A on performance, and the mid-to-long-term growth narrative driven by the new management structure and the transition to a holding company, based on data from the official disclosure materials.

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1. Q1 Earnings Overview and Revenue Structure Analysis

Performance Highlights and Second-Half Seasonality

Consolidated results for Q1 FY2027 were as follows: Net Sales of 369 million JPY (down 12.1% YoY) , EBITDA of -61 million JPY (down 39 million JPY YoY) , Operating Loss of 106 million JPY (compared to a 66 million JPY loss in the same period last year) , and Net Loss of 98 million JPY (compared to an 87 million JPY loss in the same period last year).

Due to the nature of the company’s business—driven by client budget execution cycles and delivery deadlines for web construction projects—the company inherently possesses a revenue structure skewed toward the second half of the fiscal year. In addition to this, Q1 saw a transitional decline in revenue as a major project in the Web Communication business, which existed in the previous year, reached completion.

Steady Expansion of Stock Revenue and Trends in Flow Revenue

To gain a more detailed understanding of the earnings summary, it is necessary to break down the revenue structure into "Stock Revenue" (recurring income such as monthly fees) and "Flow Revenue" (initial construction, contract development, etc.).

Significance and Background of the Above Slide (PAGE_10)

This slide is critical data that clearly demonstrates the soundness and cumulative structure of revenue in INFONET's business model. As the graph indicates, flow revenue in Q1 contracted significantly from 165 million JPY in the same period last year to 92 million JPY (down 44.2% YoY) . This was primarily due to the completion of large-scale projects coinciding with the lead-up period for new projects. However, stock revenue , centered on subscription-based services, steadily expanded from 254 million JPY to 277 million JPY (up 9.1% YoY).

The steady increase in base revenue, such as monthly fees, proves that the company's management foundation is becoming increasingly robust. As flow revenue recovers from Q2 onwards, the accumulated stock revenue is positioned to act as a lever to improve profit margins.

Analysis of Factors Behind the Q1 Operating Profit Decline

The primary factor for the 40 million JPY deterioration in operating profit compared to the previous year was the decrease in net sales (a 50 million JPY negative impact on profit). Meanwhile, the company positioned Q1 as a "period for building a solid foundation for a leap in the second half," focusing on infrastructure investments such as replacing high-cost servers and improving operational efficiency (server costs, etc., -8 million JPY). While partially offset by efficiencies in recruitment and training expenses (+14 million JPY) and the suppression of outsourcing costs (+12 million JPY), the results reflect a period of prioritized strategic investment.

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2. Major Upward Revision of Full-Year Forecast: The Full Scope of the Active Re-Tech M&A

Summary of Upward Revision to Consolidated Earnings Forecast

Although Q1 standalone results were driven by upfront investment, the company dramatically revised its full-year consolidated earnings forecast for the fiscal year ending March 2027 following the acquisition of Active Re-Tech Co., Ltd. as a wholly-owned subsidiary on July 1, 2026.

Significance and Background of the Above Slide (PAGE_17)

This slide highlights the greatest positive impact of this earnings announcement, clearly comparing the previous full-year plan with the revised one.

• Net Sales : Previous forecast 2,239 million JPY → Revised forecast 3,301 million JPY (+1,061 million JPY / +47.4%)
• EBITDA : 398 million JPY (disclosed for the first time)
• Operating Profit : Previous forecast 137 million JPY → Revised forecast 183 million JPY (+45 million JPY / +32.8%)
• Ordinary Profit : Previous forecast 129 million JPY → Revised forecast 174 million JPY (+44 million JPY / +34.3%)
• Net Income Attributable to Owners of Parent : Previous forecast 56 million JPY → Revised forecast 72 million JPY (+15 million JPY / +28.2%)

This is an impressive growth plan that expands net sales by approximately 1.5 times, demonstrating a dramatic expansion of business scale through M&A. While the progress rate against the full-year sales target at the end of Q1 stands at 11.2%, the inclusion of Active Re-Tech's performance from Q2 (starting July 2026) provides a clear basis for a dramatic recovery and expansion of results from Q2 onwards.

Financial and Revenue Structure Impact of the Subsidiary Acquisition

The company has disclosed more detailed analysis regarding the financial contribution of Active Re-Tech.

Significance and Background of the Above Slide (PAGE_18)

Slide (PAGE_18) visualizes the relationship between the earnings contribution of the newly consolidated Active Re-Tech and the associated accounting costs (M&A expenses, goodwill amortization, etc.).

Active Re-Tech is expected to generate 1,061 million JPY in net sales and 92 million JPY in operating profit for the period from July 2026 to March 2027 (9 months). Even after deducting temporary acquisition costs and goodwill amortization associated with the M&A ( -46 million JPY ), it will add +45 million JPY to the group's total operating profit (totaling 183 million JPY). This demonstrates a "high-quality M&A" that contributes significantly to both operating and net profit, even after accounting for non-cash expenses like goodwill amortization.

Active Re-Tech's Business and Group Synergies

Active Re-Tech is an advanced technology company specializing in 3DCG technology, XR application development utilizing VR/AR, digital twin business, and 3D scanner sales , all honed over more than 30 years. They hold strong positions in architectural CG, real estate, and the tourism industry.

By combining Active Re-Tech's high-quality 3DCG and digital twin technologies with the existing customer base of the INFONET Group—including web construction, CMS (LENSAhub), and AI solutions (i-act's Cogmo)—the group can provide integrated solutions that support corporate digital transformation (DX) in a one-stop manner. Synergies through mutual cross-selling are highly anticipated.

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3. Management Restructuring and Transition to a Holding Company

Alongside the dramatic expansion of business performance, the company is accelerating organizational reforms to strengthen group governance and management speed.

Appointment of New Representative Director and President

On June 29, 2026, Dai Toma was appointed as the new Representative Director and President. Mr. Toma possesses extensive management experience and expertise in business development within the IT and web industry. He is expected to provide the leadership necessary to consolidate the diverse strengths of the group companies, drive post-merger integration (PMI), and lead business growth.

Transition to a "Holding Company Structure" from October 2026

The company has decided to transition to a holding company structure centered on " INFONET GROUP Inc. " starting in October 2026. The structure will place INFONET (the core web content entity), Brand Design, and i-MediX, alongside i-act (AI/Innovation) and the newly added Active Re-Tech, on a flat level. This will strengthen the group's management strategy functions while enhancing the autonomy and decision-making speed of each operating company, creating a structure capable of flexibly pursuing aggressive M&A and alliances.

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4. Latest Topics in Key Products and AI Business

Within the group's existing businesses, advanced product development is underway to enhance competitiveness.

① Adoption of RAG-based Generative AI "Cogmo Enterprise" by Local Governments

The "Cogmo" series of AI search and chatbot services, developed by group company i-act, continues to build a solid track record. On July 31, 2026, the AI search and RAG-based generative AI "Cogmo" was implemented on the official website of Chuo City, Tokyo. The system aggregates accurate information to answer inquiries in natural language, contributing to improved convenience for residents and operational efficiency for administrative offices. This initiative highlights the company's ability to capture high-precision AI search needs among local governments and large enterprises.

② Evolution of the Next-Generation No-Code CMS "LENSAhub"

In July 2026, the company released a "Recruitment Site Dedicated Package" for its proprietary no-code CMS, "LENSAhub." This service provides templates condensed with know-how from 24 years of web production and over 1,300 sites, allowing for the launch of high-quality recruitment sites while keeping initial construction costs low. Offered as a fixed-price subscription model at 20,000 JPY per month including maintenance and server costs, it is expected to be a new driver for accumulating stock revenue.

③ Improved Convenience for Shareholder Benefit Program (Shift to Digital Gifts)

Regarding shareholder returns, the company changed its benefit items from "QUO cards" to "Digital Gifts" effective from the record date of September 30, 2026. Shareholders can now freely choose their preferred electronic money or points, such as Amazon Gift Cards, PayPay Money Lite, or Rakuten Points, significantly improving convenience (a total of 13,000 JPY per year for those holding 300 shares or more).

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5. Summary and Future Points of Focus

While INFONET's Q1 FY2027 results may appear to be in a transitional period of upfront investment, the company has achieved major transformations behind the scenes: the completion of server replacements to enhance future profitability , steady expansion of stock revenue (+9.1% YoY) , and the explosive expansion of business scale through the acquisition of Active Re-Tech.

Key points to watch moving forward include:

1. The trajectory of the earnings recovery from Q2 onwards : Whether the inclusion of Active Re-Tech (planned contribution of 1.061 billion JPY in sales and 92 million JPY in operating profit) and the recovery of existing flow projects proceed as planned.
2. Materialization of M&A synergies : How quickly cross-selling proposals combining 3DCG/XR technology with web construction and AI (Cogmo) will accelerate.
3. PMI and momentum of the holding company structure (from Oct 2026) : Whether group management efficiency and further strategic investments will accelerate under the new president.

We will continue to closely monitor the company's development as it transforms from a mere web production company into a comprehensive digital communication enterprise covering "Web x AI x 3DCG/XR."