[L is B] Q2 FY2026 Earnings Q&A Deep Dive: Unlocking the Next Growth Phase through Price Optimization and 'Field-Specialized AI'

L is B Co., Ltd. (Securities Code: 145A) is a SaaS company driving digital transformation (DX) in construction and infrastructure sectors, primarily through its field-oriented business chat tool, "direct." This report provides an in-depth analysis of the company's "Q2 FY2026 Earnings Q&A" disclosure, covering 10 key topics including performance trends, progress on price revisions, generative and physical AI strategies, scalability into adjacent markets, and group synergies.

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1. Performance and KPI Trends: Price Revisions and the Growth Mechanism of Existing Customer ARR

The business foundation, centered on the flagship "direct" service, remains robust, supported by strong DX investment appetite within the construction industry.

• Construction Industry Sentiment and Churn Resilience : The construction sector's current boom is fueling active DX investment, providing a strong tailwind for the company. Even in the event of an industry downturn, "direct" is deeply embedded as a daily operational infrastructure, resulting in extremely low churn risk .
• Balance Between New Acquisition and Existing Account Management : Due to the price revision of "direct" implemented this term, sales resources were temporarily concentrated on supporting existing customers and preventing churn. While new customer acquisition numbers appeared stable, lead generation at exhibitions and new orders in July and August were solid, pointing toward an acceleration in the second half.
• Drivers of Existing ARR Growth : Cross-selling of peripheral products such as "direct Apps" and "Knowledge Videos" continues to grow, creating a dual-growth structure bolstered by the effects of price revisions .
• Growth in Stock OEM Revenue : OEM services, primarily provided to local governments, recorded strong growth in Q2, driven by new and additional contracts following the start of the fiscal year in April.

The slides above (Q3–Q8) address the topics of greatest interest to investors: "drivers of existing customer ARR growth," "progress of price revision implementation," and the current state of field DX. The transition to new pricing for customers renewing in April has been completed successfully, and the new rates will be applied incrementally to other customers upon their annual renewal dates.

Furthermore, regarding the progress of DX at general contractor sites, the company estimates that "even at advanced sites, it is only at a level of 3 to 4 out of 10." With paper-based documents and inefficient reporting flows still prevalent, there is massive upside potential to drive further DX and upselling, using "direct" as the established foundation.

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2. AI and Technology Strategy: "direct Assistant" and the Potential of Field-Specialized AI

The company is implementing generative AI not merely for desk-work efficiency, but as a solution directly linked to field operations.

• Official Release and Billing Model for "direct Assistant" : Currently in trial, "direct Assistant" is scheduled for official release within this year . The billing structure is expected to be a plan-based/usage-based model rather than per-user, allowing for ARPU growth as usage scales.
• AI Features Solving Field-Specific Challenges : By integrating AI into "direct" token rooms, the system can automatically identify hazards from photos sent from the field. This provides unique value for "non-desk field workers" that differs significantly from standard office-oriented AI.
• Optimization of Multiple LLMs : The company tunes multiple leading generative AI models to meet strict field safety requirements and security standards, including measures against inappropriate content.
• Leaps in Internal Development Productivity : The company is fully utilizing generative AI within its own development department, maintaining and strengthening a high-quality development structure without significant headcount increases.

These slides (Q9–Q13) highlight the core of L is B's mid-to-long-term technological competitiveness . In the coming era of "Physical AI," the company aims to serve as the hub (foundation) that links the vast amount of "field data" accumulated daily through "direct," "Knowledge Videos," and "TagShot" with AI.

Since field workers do not sit at PCs, general-purpose AI focused on text summarization cannot solve their problems. The ability to provide field-ready AI that functions on a single smartphone during site inspections, safety patrols, and construction management is the company's powerful barrier to entry.

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3. Business Expansion Strategy: From Niche Dominance to Horizontal Expansion and Infrastructure

Leveraging its software design philosophy, the company is accelerating its expansion from the construction industry into adjacent sectors.

• "Niche Dominance" Philosophy : With roots in JustSystems, the company avoids spreading its resources too thin. It focuses on achieving an overwhelming top market share in the "field" domain before gradually expanding into peripheral areas.
• Expansion into Plant, Infrastructure, and Heavy Electric Industries : The company is actively capturing non-construction DX demand through exhibition participation and by addressing the automation needs of major plant operators. It employs a flexible approach using its diverse product lineup, such as introducing "Knowledge Videos" even at sites where smartphone use is restricted.
• Startup Investment and Partnerships : To address the diverse challenges of its customers, the company invests in and collaborates with startups that have strengths in specific domains, maximizing customer value and revenue opportunities. It maintains strong cooperative relationships with partners like SpiderPlus.

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4. Group Company Trends: Growth and Stabilization of IU BIM STUDIO

Structural reforms at the subsidiary "IU BIM STUDIO," which handles Building Information Modeling (BIM)—a critical area of construction DX—are progressing steadily.

As explained in the slides above (Q21–Q25), IU BIM STUDIO is undergoing a qualitative shift in its revenue structure. While the one-time demand related to the Osaka-Kansai Expo (shot revenue from pavilion design, etc.) has subsided, the company is now seeing steady growth in high-margin, stable "stock revenue from BIM staffing services."

To meet the growing demand in the BIM sector, the company added two employees in Q2 and plans to hire several more from Q3 onwards, steadily strengthening its business foundation.

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5. Organizational/HR Strategy and Capital Policy/IR Policy

• Strengthening Organizational Capabilities : The company increased its headcount by 7 compared to the end of the previous fiscal year across sales, marketing, and support departments. It has built a balanced organizational structure that includes PR and sales support, preparing for the next phase of sales expansion.
• Cost Outlook : Both cost of sales and SG&A expenses are within planned ranges. While advertising expenses for the annual private event "LUC (L is B User Conference)" and AI implementation costs will occur in the second half, they remain within the scope of the earnings forecast.
• Stance on Stock Price, IR, and Capital Policy : Regarding the valuation adjustment (lower PER) across the SaaS industry, the company maintains its policy of improving corporate value through steady earnings growth and diligent IR activities rather than relying on temporary measures. While it considers capital policies such as share buybacks as options, its current priority remains investing in business growth and scale expansion.

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Conclusion: Establishing Status as Field Infrastructure and the Second Growth Curve via AI

The Q&A session revealed that L is B is successfully evolving from a mere business chat tool vendor into a "platform company that aggregates field data and innovates field operations through AI." With a base of ARR growth driven by price revisions, and the official rollout of "direct Assistant" alongside horizontal expansion into BIM and infrastructure, the company is well-positioned to achieve both a solid revenue foundation and high mid-to-long-term growth.