Members said its own slow reading of generative AI, not only market conditions, lies behind the cut in full-year operating profit guidance to ¥200mn from ¥2.5bn. The digital-services group made the admission in a question-and-answer disclosure and a message from its president on October 9.
The president wrote that the company had been overconfident after its DX growth last year, when DX accounted for 54.2% of revenue and DX value-added sales rose 32.6%. Demand for large specialist teams is now falling faster than expected in certain skill areas, he said, and the delay in responding is "the fundamental factor" in the revision. Tokyo Brief's earlier article covered the September 30 revision itself.
The timing admission
Members held its guidance when it reported first-quarter results on July 31, then revised on September 30, the last day of the half year. Asked whether it had been late, management said it knew at the first-quarter stage that utilization was slipping because of exits from low-price work, client spending cuts and generative-AI-driven insourcing. It judged the plan still achievable on AX orders and price revisions. From August, AX deals took longer than expected to produce revenue and utilization ran below plan.
Management said it accepts the criticism that its judgment lagged and that it could not warn investors earlier. It promised monthly plan-versus-actual tracking and prompt disclosure, without waiting for quarterly results, once the gap reaches a set level. The disclosure does not state that level.
What the numbers show
Utilization across all digital creators was 74.2% in the first quarter and 74.9% in the second, or 74.6% for the half, against 77.3% a year earlier. It bottomed at 71.2% in May and reached 76.9% in September. The figures are preliminary and may differ from reported results.
Revenue per head was up 7.2% in cumulative terms through September. The revised plan assumes about 8% for the year and 75% utilization. Management said about half of the gain comes from dropping low-price work and half from price increases for existing clients. It expects pricing pressure to continue on projects that retain routine execution tasks such as coding and operations. The ¥200mn full-year profit guide is described as a conservative floor. It includes AX launch costs but assumes no extra AX orders or utilization.
The revised half-year forecast shows an operating loss of ¥430mn, against a previous forecast of a ¥320mn profit.
Workforce and dividend
Members has roughly 3,000 staff. It is training all of them in general AI skills and aims to produce 230 AX consultants and AX service engineers this fiscal year. It says not everyone will reach the same level. It plans no headcount reduction "at present" but will keep adjusting the scale of new hiring.
The April 2027 graduate intake goes ahead as planned. Intake from April 2028 will be reviewed against AX demand, and mid-career hiring is limited to AX specialists. Members now says it will manage to value-added sales per employee, not headcount.
The year-end dividend forecast stays at ¥35 per share, ¥2 above last year, against revised earnings of ¥11.73 per share. An investor question put the payout ratio near 300%. Management said funding is not a problem and that it does not expect such a ratio to persist across several years.
The president said progress will be reported quantitatively at each earnings release. The AI-driven demand erosion is management's own explanation, not an independently verified cause.