PKSHA <3993> provides solutions and software products to large enterprises focusing on improving business efficiency, enhancing the value of services and products, and realizing innovative service models support. The business is conducted around two axes: AI Research & Solution business (58.9% of sales revenue in the third quarter of FY2023) and AI SaaS business (41.1%).

In the AI Research & Solution business, they achieve individual business sophistication primarily for a wide range of industries focusing on large enterprises through research and development, with the majority of customer acquisitions being inbound. The AI Solution has business characteristics of 'high retention rate' and 'cumulative model revenue structure', with 80% of existing customers staying for over 1 year and 20% being new customers. Recently, AI projects in the contact center area have been increasing mainly in the financial and automobile industries, with Mizuho Bank fully adopting PKSHA AI Suites for CC, a combination of multiple AI SaaS. It seems that they supported the overall design and development related to AI including quality improvement in manned responses and sophistication of management tasks, not only automation. Additionally, they acquired Aitec, the parking equipment manufacturer expanding lockless parking lots using image recognition technology in June 2019.

In the AI SaaS business, competitive AI SaaS products are operating in over 2,900 companies. The customer revenue composition ratio shows that the top 10 companies account for 9%, the next 11-50 companies for 17%, and the rest 73% are wide-ranging companies where AI SaaS is deployed. Particularly strong in the areas of intelligent contact centers and support operations under labor shortages, they develop products with strengths in natural language processing and voice technology. Among them, PKSHA holds the No. 1 market share position with three key products: Chatbot (19.5% market share in FY2022), Voicebot (31.6%), and FAQ (57.9%).

The cumulative sales revenue for the third quarter of FY2024 was 123.02 billion yen (21.3% increase from the same period last year), and the adjusted EBITDA landed at 30.47 billion yen (21.2% increase). Both AI Research & Solution and AI SaaS businesses are performing well, with steady demand for solution projects in the AI Research & Solution business. There seems to be an improved investment appetite towards new parking lot openings by parking management companies in the Mobility business, leading to an increase in the sales of parking equipment compared to the same quarter last year. The ARR of AI SaaS has been steadily expanding at an annual growth rate of 16.7% and has grown to 6.4 billion yen. They are expecting annual sales revenue of 168 billion yen and adjusted EBITDA of 39 billion yen.

The company was established in 2012, before the recent resurgence of significant attention towards AI. With accumulated years of research and development, they possess unique strengths in natural language processing, image recognition, and machine/deep learning technologies. They have a strong relationship and technological capabilities with top-class clients in Japan. Their business model involves building value on the customer base cultivated in AI SaaS through AI Solution. Considering the current status of the AI market being still in its early stages in terms of potential scale, especially in Japan where there are concerns about the aging population and declining workforce, the importance of solving social issues through AI is expected to increase further. With a substantial net cash exceeding 12 billion yen, the company is poised for further growth. Their outlook is most deserving of attention as they quickly grasp the trend of solving challenges through technological innovation and software.