| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue | ¥647.4B | ¥609.5B | +6.2% |
| Operating Income | ¥67.9B | ¥63.4B | +7.1% |
| Ordinary Income | ¥87.2B | ¥83.6B | +4.4% |
| Net Income | ¥-224.5B | ¥65.5B | -15.7% |
| ROE | -84.0% | 13.8% | - |
For the fiscal year ended March 2026, Revenue was ¥647.4B (YoY +¥37.8B +6.2%), Operating Income was ¥67.9B (YoY +¥4.5B +7.1%), Ordinary Income was ¥87.2B (YoY +¥3.6B +4.4%), and a net loss of ¥224.5B (YoY -¥290.0B) was recorded. The company continued to achieve revenue and operating income growth, with an Operating Margin of 10.5%, improving 0.1pt from 10.4% a year earlier. Contribution from equity-method investment income of ¥21.6B supported growth in Ordinary Income. However, recognition of Special Losses of ¥231.6B (including Impairment Losses of ¥229.6B) produced a pre-tax loss of ¥144.3B, turning Net Income from a profit of ¥65.5B to a loss of ¥224.5B. The impairment mainly related to a revaluation of intangible fixed assets (including goodwill of ¥96.4B). Total Assets decreased ¥237.7B from ¥765.4B to ¥527.7B, and Net Assets declined ¥206.0B from ¥473.2B to ¥267.2B. Operating Cash Flow was ¥88.0B (YoY +51.6%), Free Cash Flow was ¥46.7B, indicating solid cash generation. The company executed total shareholder returns of ¥64.2B through a dividend of ¥29.5 per share and share buybacks of ¥40.0B.
Revenue of ¥647.4B represents a YoY increase of +6.2%. As a single-segment company (information infrastructure business serving an aging society), by region Revenue was Japan ¥558.8B (86.3% of total, YoY +8.4%) and Overseas ¥88.5B (13.7% of total, YoY -5.7%), driven by domestic expansion. Cost of Sales was ¥76.0B (11.7% of Revenue), resulting in Gross Profit of ¥571.3B and a Gross Margin of 88.3% (prior year 88.4%), remaining at a high level.
SG&A was ¥503.4B (YoY +5.9%), slightly below Revenue growth of +6.2%, containing expense growth and producing Operating Income of ¥67.9B (YoY +7.1%) and an Operating Margin of 10.5%, a slight improvement in profitability. Key expense items: Advertising and Promotion ¥139.7B (+11.5%) reflecting stepped-up growth investment; Salaries and Allowances ¥178.2B (+2.4%); Goodwill Amortization ¥9.7B (▲7.3%). Non-operating income was ¥22.9B (of which equity-method investment income ¥21.6B) and non-operating expenses were ¥3.6B (of which interest expense ¥1.3B and foreign exchange losses ¥2.1B), resulting in Ordinary Income of ¥87.2B (YoY +4.4%). The recognition of Special Losses of ¥231.6B (primarily Impairment Losses ¥229.6B) led to a pre-tax loss of ¥144.3B; after tax benefit of ¥1.1B, Net Loss was ¥224.5B. In conclusion, the operating business delivered revenue and operating profit growth, but the large one-off impairment caused the full-year result to show lower net profit (turning into a loss).
Profitability: Operating Margin 10.5% (prior year 10.4%), Ordinary Income Margin 13.5% (prior year 13.7%) — core business profitability remains within a stable range. Supported by a high-value-added model with Gross Margin 88.3%, the company increased growth investment with an Advertising & Promotion Ratio of 21.6% (prior year 20.5%) while still increasing absolute Operating Income. ROE was ▲84.0% (prior year 13.3%), ROA (on an Ordinary Income basis) 13.5% (prior year 11.2%). ROE deteriorated significantly due to the turn to a net loss, but asset efficiency at operating and ordinary levels is improving.
Cash Quality: Operating Cash Flow (OCF) was ¥88.0B versus a Net Loss of ¥224.5B, yielding an OCF/Net Income of ▲0.39x; excluding the non-cash Impairment Loss of ¥229.6B, cash generation is healthy. EBITDA (Operating Income ¥67.9B + Depreciation & Amortization ¥36.5B) was ¥104.4B, and the Operating Cash Flow to EBITDA ratio was 84.3%, somewhat soft, impacted by increases in working capital (Accounts Receivable +¥7.6B, Other Receivables +¥16.6B equivalent). Free Cash Flow of ¥46.7B absorbed Intangible Asset Investment of ¥37.6B and remains positive, maintaining the cash-generation base.
Investment Efficiency: Total Asset Turnover improved to 1.23x (prior year 0.80x) due to asset compression. Intangible Fixed Assets fell from ¥308.4B to ¥72.1B, and Goodwill declined substantially from ¥97.0B to ¥0.6B, lightening the asset base. Capital Expenditure was ¥1.4B versus Depreciation ¥36.5B, yielding a Capex/Depreciation ratio of 4.0% — capital expenditure is extremely light (business is intangible-investment centric).
Financial Soundness: Equity Ratio 50.6% (prior year 61.5%) declined due to the impairment-driven reduction in Net Assets, but remains within a healthy range. Current Ratio 156.2% (prior year 161.1%), Quick Ratio 156.2% (prior year 161.1%) — liquidity is ample. Interest-bearing debt is ¥70.5B (including short-term borrowings ¥46.0B, long-term borrowings ¥10.5B, and lease obligations), cash is ¥137.3B, yielding a net cash position of ¥66.8B. Debt/EBITDA is 0.68x, Interest Coverage is 67.7x (Operating CF / Interest Paid), indicating strong financial capacity, but the short-term debt ratio of 81.4% heightens the importance of refinance management.
Operating Cash Flow was ¥88.0B (YoY +51.6%). Despite a pre-tax loss of ¥144.3B, major adjustments included non-cash Impairment Losses of ¥229.6B and Goodwill Amortization ¥9.7B. Adjustments also included equity-method investment profit adjustment ▲¥9.9B, and working capital outflows such as increase in Accounts Receivable ▲¥7.6B, increase in Contract Liabilities +¥1.0B, and increase in Other Receivables ▲¥16.6B. After Corporate Taxes Paid ▲¥22.7B, Operating CF amounted to ¥88.0B. Investing Cash Flow was ▲¥41.3B, centered on acquisition of Intangible Assets ▲¥37.6B (mainly software investments); acquisition of Tangible Fixed Assets ▲¥1.4B was minor, resulting in Free Cash Flow of ¥46.7B. Financing Cash Flow was ▲¥73.5B: while net short-term borrowings increased +¥11.0B, repayments of long-term borrowings ▲¥19.0B, dividend payments ▲¥24.2B, and share buybacks ▲¥40.0B drove cash outflows. Cash declined from ¥153.0B at the beginning of the period to ¥125.5B at the end, a decrease of ▲¥27.1B. The Operating CF to EBITDA ratio of 84.3% is slightly below the benchmark (90%+), indicating room to improve working capital efficiency. With Depreciation ¥36.5B versus Capex ¥1.4B, there is depreciation overhang providing cash surplus, and even with ongoing intangible investments, the structure can sustain stable FCF generation.
Of Ordinary Income ¥87.2B, Operating Income ¥67.9B was earned from core operations, and Non-operating Income ¥22.9B (of which equity-method investment income ¥21.6B, interest income received ¥0.7B) contributed externally — approximately 75% of Ordinary Income stems from operations and ~25% from equity-method and other non-operating income. Equity-method investment income is being recognized continuously and can be considered a structural source of earnings. Special Losses of ¥231.6B (Impairment Losses ¥229.6B) are one-off in nature and have low likelihood of recurrence. The impairment targeted intangible fixed assets (including goodwill), which reduces future amortization burden and therefore presents upside for margin improvement from the next fiscal year onward. Comprehensive Income was ▲¥141.7B (Net Loss ▲¥224.5B + Other Comprehensive Income +¥82.8B equivalent); Other Comprehensive Income was limited (foreign currency translation adjustments ¥2.1B), so divergence between Net Income and Comprehensive Income is minor. The gap between Operating CF and Net Income (OCF ¥88.0B vs Net Loss ¥224.5B) is driven by non-cash impairments and does not indicate deterioration in accrual quality. The Advertising & Promotion increase of +11.5% exceeding Revenue growth of +6.2% suggests higher Customer Acquisition Cost (CAC); while LTV/CAC monitoring is essential, this is a short-term profit pressure.
Full-year guidance is Revenue ¥718.3B (YoY +11.0%), Operating Income ¥68.0B (YoY +0.2%), Ordinary Income ¥87.3B (YoY +0.1%), and EPS ¥75.11. Progress against guidance: Revenue progress rate 90.1% (¥647.4B/¥718.3B), Operating Income progress rate 99.9% (¥67.9B/¥68.0B), Ordinary Income progress rate 99.9% (¥87.2B/¥87.3B) — Operating and Ordinary levels have nearly met guidance. However, the occurrence of Special Losses of ¥231.6B created a large divergence at the Net Income level; it is likely the guidance did not incorporate a large impairment. Actual Revenue growth of +6.2% falls short of guided +11.0%, and management plans to accelerate growth in Q4, but to reach the full-year target would require monthly growth of roughly +20%+ in the final quarter. Achievement of Operating and Ordinary guidance indicates expense control effectiveness, but uncertainty remains regarding realization of the Revenue forecast.
A year-end dividend of ¥29.5 per share was paid, totaling Cash Dividends of ¥24.2B (prior year ¥17.4B, +39.1%). Calculating a Payout Ratio against a Net Loss of ¥224.5B is difficult, but on prior-year EPS of ¥70.96 the Payout Ratio would be about 41.6%, and on this fiscal year’s forecast EPS ¥75.11 it would be about 39.3%, reflecting maintenance of a mid-term dividend policy (around 40% payout). Dividend coverage relative to FCF (¥46.7B) is approximately 1.9x, a sustainable level. Share buybacks of ¥40.0B were executed, and total returns (Dividends ¥24.2B + Share Buybacks ¥40.0B) amounted to ¥64.2B, exceeding FCF by ¥17.5B. Total Return Ratio on an FCF basis is 137.5%, demonstrating an active shareholder return stance leveraging cash holdings of ¥137.3B. Treasury stock increased from ¥57.1B to ¥97.1B, with treasury stock representing 6.3% of outstanding shares. Going forward, assuming recovery of post-impairment earnings and continued cash generation, dividend maintenance appears feasible, but the pace of share buybacks is expected to be adjusted to balance with FCF levels.
Deterioration in cash conversion efficiency due to working capital increases: increases in Accounts Receivable +¥7.6B and Other Receivables +¥16.6B equivalent resulted in an Operating CF/EBITDA ratio of 84.3%, which is soft. Compared to Revenue growth +6.2%, Days Sales Outstanding may be lengthening, so optimizing the collection cycle is a challenge. Contract Liabilities (advance receipts) are ¥15.7B, a modest increase of +¥1.0B, so the scope for cashing in subscription-type revenues in advance is limited.
Refinancing risk due to short-term debt ratio of 81.4%: Short-term borrowings ¥46.0B, long-term borrowings maturing within one year ¥13.0B, and total current liabilities ¥245.8B include a high proportion of interest-bearing short-term debt. Cash of ¥137.3B can cover short-term liabilities, but concentration of maturities and an interest-rate upcycle could raise refinancing costs. Long-term borrowings have been reduced to ¥10.5B, so the debt maturity profile is skewed toward the short-term.
Variation in customer acquisition efficiency due to the pace of Advertising & Promotion increase (+11.5%): Advertising spend +11.5% versus Revenue growth +6.2% indicates signs of rising CAC. Although the high Gross Margin (88.3%) suggests high LTV, extended payback periods or rising churn could pressure Operating Margins. Single-segment dependence limits business diversification, so the customer acquisition efficiency of the core business will significantly affect overall company performance.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 10.5% | 8.1% (3.6%–16.0%) | +2.4pt |
| Net Margin | -34.7% | 5.8% (1.2%–11.6%) | -40.5pt |
Operating Margin exceeds the industry median by 2.4pt, demonstrating the advantage of a high value-added business model, while Net Margin underperforms the industry median by 40.5pt due to the impairment.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 6.2% | 10.1% (1.7%–20.2%) | -3.9pt |
Revenue growth lags the industry median by 3.9pt, indicating a somewhat modest growth pace within the IT & Communications sector.
※ Source: Company compilation
Large compression of intangible assets and goodwill (▲¥236.3B) reduces future amortization burden and creates scope for margin improvement from next fiscal year. Operating Margin of 10.5% remains above the industry median, and asset-light structure after the impairment has improved capital efficiency (Total Asset Turnover 1.23x). Continued generation of Operating CF ¥88.0B and FCF ¥46.7B supports the underlying cash-generating capacity.
Attention should be paid to working capital expansion (Accounts Receivable + Other Receivables total +¥24.2B equivalent) leading to an OCF/EBITDA ratio of 84.3% below the benchmark (90%), management of refinancing given a short-term debt ratio of 81.4%, and the Advertising & Promotion increase of +11.5% outpacing Revenue growth of +6.2% — each are focal points in balancing cash management and profitability. Continued contribution from equity-method investment income of ¥21.6B supports stability in Ordinary Income, but single-segment dependence means improving customer acquisition efficiency and working capital efficiency in the core business are critical for medium-term performance.
This report is an AI-generated earnings analysis document created by analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company based on public financial statements. Investment decisions are your own responsibility; please consult professionals as necessary.