■Summary

Triple Eyes <5026> consists of two main businesses: the AI solution business, which includes the development of AI/systems, the provision of services equipped with AI, and design development for Auto Manufacturers, and the GPU server business, which involves the sales and maintenance services of GPU machines handled by Zero Field, which joined the group in September 2023. The AI solution business was composed of the SI (System Integration) department and AIZE department, but after BEX joined the group in July 2024, it is now divided into three sub-segments: AI integration, engineering, and AI products. AI integration conducts the development of AI/systems and consulting related to AI, while engineering primarily focuses on design development for Auto Manufacturers by BEX. Additionally, the AI products segment involves the provision of services equipped with AI and the development of devices and customer-specific customizations that arise from service provision. Furthermore, the GPU server business developed by Zero Field consists of two sub-segments: GPU servers/Data Centers and maintenance, offering services that encompass the sale of mining machines, sales of GPU servers optimized for AI applications, the provision of data servers, as well as the comprehensive undertaking of their maintenance and operations.

1. Overview of Financial Performance for the Fiscal Year Ending August 2024

The consolidated performance for the August 2024 fiscal year is projected to be revenue of 4,410 million yen (an increase of 88.0% compared to the previous period), operating profit of 38 million yen (compared to an operating loss of 269 million yen in the previous period), ordinary profit of 47 million yen (compared to an ordinary loss of 290 million yen in the same period last year), and net income attributable to shareholders of the parent company of 76 million yen (compared to a net loss of 825 million yen in the same period last year). This exceeded the initial announcement of revenue of 4,045 million yen and an operating loss of 96 million yen, as well as the subsequent upward revision of revenue to 4,341 million yen and operating profit to 3 million yen. It is believed that the mainly conservative initial projections for both the AI solution business and the GPU server business, along with the contribution from BEX, which became a wholly owned subsidiary, in July and August were significant factors that contributed to the upward revision in revenue. Additionally, the revenue from the AI solution business was 3,029 million yen (an increase of 29.1% compared to the previous period), with an operating profit of 1 million yen (compared to an operating loss of 269 million yen in the previous period), and the GPU server business generated revenue of 1,381 million yen (no comparison to the previous period as it was consolidated from September 2023), with an operating profit of 2 million yen (same). It is believed that the revenue from the AI solution business includes a new consolidation effect from BEX (approximately 300 million yen), and therefore, when excluded, the existing AI solution business generated approximately a 15% increase in revenue compared to the previous period.

2. Financial Outlook for the August 2025 Fiscal Year

For the August 2025 fiscal year, consolidated performance is projected to be revenue of 5,992 million yen (an increase of 35.9% compared to the previous period), operating profit of 111 million yen (an increase of 192.6%), ordinary profit of 98 million yen (an increase of 109.6%), and net income attributable to shareholders of the parent company of 30 million yen (a decrease of 59.6%). While detailed information about revenue and operating profit by business has not been disclosed, the revenue is expected to increase by approximately 1,600 million yen from the previous period, with around 1,500 million yen of that increase believed to come from BEX being fully consolidated for 12 months (BEX's previous period revenue was about 300 million yen for only 2 months, while it is estimated to be about 1,800 million yen for the August 2025 fiscal year). Thus, the projections for existing businesses, including the GPU server business, are consequently expected to remain nearly the same as the previous year. Moreover, the impact from BEX's full consolidation is expected to generate about 200 million yen in operating profit over the most recent 12 months, and even after accounting for goodwill amortization costs of 26 million yen (goodwill of 201 million yen, amortized over 10 years), it is considered to be an increase factor in operating profit of 170 to 180 million yen compared to the previous period. However, the anticipated operating profit is projected to increase by only 72 million yen from the previous period, indicating that the forecast appears to be more conservative than the revenue estimate. According to the company’s materials, estimates for the next fiscal year take into account the investments needed for research and development to create business synergies, the increasing rarity of engineers resulting in investments in human capital, and the business volatility associated with the GPU server business. There seems to be a possibility for an upward revision.

3. Medium to Long Term Growth Strategy

The company has identified uniqueness through the following four AI implementation strategies as its growth strategy: (1) Development of AI products and bespoke AI development, (2) AI implementation in legacy industries and the development of new services through capital and business partnerships or M&A, (3) Promotion of the GPU server business, and (4) Non-linear growth through M&A. Particularly notable in the past two years has been the expansion of business areas due to large-scale M&A involving Zero Field and BEX, as well as the implementation of a capital and business partnership with Gaming Card JOYY Holdings <6249> in September 2024, showcasing a proactive use of external management resources. Although the business contents of acquisition and partnership targets, such as BEX which handles auto design work and Gaming Card JOYY Holdings which provides card systems for pachinko and pachislo halls, may initially seem inconsistent, it serves as evidence that the company's AI technology demonstrates superiority across a wide array of industries. In the future, it is anticipated that utilizing these external resources will lead to meaningful business opportunities in legacy industries such as the automotive sector through AI implementation. Furthermore, while short-term sales trends of GPU machines for Cryptos may cause volatility in performance, long-term, there is hope for the fusion of Zero Field's high-performance GPU servers and the company's internally developed AI engine. Future quantitative assessments of both production and sales synergies as well as a disclosure of growth strategies are eagerly awaited.

■Key Points

・Expand system integration and the in-house image recognition platform "AIZE". Fully acquired Zero Field, which specializes in GPU machines, in September 2023, and BEX, which engages in automobile design operations, in July 2024.

・In the fiscal year ending August 2024, the AI solution business, which was conservatively estimated at the beginning of the period, has steadily progressed. Additionally, due to the new consolidation effect of BEX, which was acquired during the period, both revenue and operating profit significantly exceeded the initial forecasts.

・The company plan for the fiscal year ending August 2025 may have conservative revenue and operating profit estimates, considering the full performance contribution of BEX for twelve months.

(Author: Hiroki Nagao, FISCO guest analyst)