01 · THE RALLY The story of HENNGE's share price over the trailing two years begins quietly. From May 2024 the stock was around ¥1,000, on the older, narrower view of HENNGE as a Japan-only mid-market identity-and-email-security company. What changed through the back half of 2024 and the first half of 2025 was the visibility of the underlying compounding — not any single announcement, but a steady accumulation of evidence across three quarterly prints. FY24 results, published the previous December, had shown revenue up about a quarter and operating income up over seventy percent. The FY25 quarterly prints that followed kept extending the line: revenue tracking toward another thirty percent annual gain, ARR climbing through ¥10bn, the customer base cycling through a defined upgrade path from the entry-level HENNGE One Basic to the higher-priced HENNGE One Pro bundle (which includes the full identity, data-loss-prevention, and cybersecurity feature set). By the August peak, the customer logo count was around 3,500 enterprise customers and rising; gross margin had moved from 84.8% to 86.4% across the period; monthly gross-revenue churn was sitting at 0.26% — equivalent, on a theoretical basis, to a customer lifetime of roughly 25 years. None of this arrived as a step-change. It arrived as a steady acceleration that became more legible the longer it ran. The stock rose to ¥1,899 on August 14, 2025.

02 · THE REVERSAL The reversal began in early November 2025, when management published its FY25 full-year results and, with them, the plan for the fiscal year ahead. The reported FY25 numbers were strong — revenue +30.6%, operating income +71.4%, ARR through ¥10.4bn. The composition of the FY26 plan was the issue. Revenue guidance was set at +17.5%, healthy enough; operating margin guidance was set flat at 16.0%, against the FY25 actual of 16.4%. The reason was a sharp planned step-up in branding and marketing spend, intended to support several adjacent product launches: an EDR/MDR bundle (HENNGE Endpoint & Managed Security, which would launch in March 2026), a domain-protection module slated for the autumn of 2026, and the build-out of a small US joint venture established earlier in the year. By February's first-quarter FY26 print, the spend was visible in the margin and the ARR growth rate had stepped down to +15.5% year-on-year — well below the FY25 run-rate of around +30%. By May's second-quarter print, ARR growth had settled at +14.7% — confirming, four quarters into the new fiscal year, that the slower pace was not a one-quarter dip. The same Q2 disclosure carried two specific notes from management. The first: average users per contracted company had fallen, because the quarter's new wins were skewed toward smaller enterprises with lower seat counts. The second: a handful of larger existing customers had chosen single-feature plans (Identity-only or DLP-only) rather than the full Pro bundle — a quiet drag on average revenue per user that had not been visible at the August peak. The share price drifted lower for the six months that followed and found a floor at ¥913 on March 13, 2026. The drawdown, August peak to March trough, was just over half.

03 · WHERE WE STAND NOW Between the November plan and the May confirmation, management did move on the capital side. On November 21, 2025 the board authorised the repurchase of up to 700,000 shares — a little over two percent of the share count — within a ¥1.19bn ceiling. The buying ran from late November through the third week of December and was completed on December 22, with all 700,000 shares purchased for ¥909.988M, an average price of approximately ¥1,300. Management's stated rationale combined an explicit dilution-offset purpose (the shares would be available for the company's restricted-stock and stock-option programs, and for any future share-based M&A consideration) with a more general framing around capital allocation and the avoidance of share-count growth. The buyback did not interrupt the de-rating in a visible way; the share continued lower through the end of December and into the new year, and the March floor came roughly three months after the program closed. Today's ¥1,016, on the May 12, 2026 close, sits between the August high and the March low — a recovery off the floor, but well short of a re-rating. The operating-business quality has not deteriorated through any of this: ROCE on averaged capital employed remains around 48%, gross margin around 86.8% and still inching up, free-cash-flow yield at the current share price around 8%. What has not yet resolved is the multiple. ¥1,016 prices roughly 12.5x forward EV/EBIT — well above the trough but well below the August peak's roughly 22x. The next four quarters — and the three open debates the disclosure already implies — are what will determine whether the August high's expectations or the March low's were closer to right.