CROSS CAT CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

In addition to higher revenue, the emergence of operating leverage resulted in significant increases in Operating Income and Ordinary Income; however, Net Income growth was relatively limited due to the absence of a one-time gain recorded in the previous year and a higher tax burden. Revenue was ¥46.5B (+17.4% YoY), Operating Income was ¥4.8B (+41.6%), and Ordinary Income was ¥5.2B (+40.7%). Meanwhile, Net Income attributable to owners of the parent remained at ¥3.3B (+7.5%), resulting in a disparity in growth rates. The primary factors were the absence in the current period of the ¥0.8B gain on the sale of investment securities (one-time factor) recorded in the same period of the previous year, and an increase in the effective tax rate from 32.9% to 37.4%.

Factors Affecting Results

【Revenue】Although segment-level disclosure is not available because the company operates as a single Information Services Business segment, Revenue was ¥46.5B, representing an increase of +17.4% from ¥39.6B in the same period of the previous year.

【Profit and Loss】Gross profit was ¥11.4B, and the gross profit margin improved slightly to 24.5% (24.3% in the previous year, +0.2pt). SG&A expenses were ¥6.5B, and the SG&A ratio declined to 14.1% (15.6% in the previous year, -1.5pt). The increase in expenses was contained relative to revenue growth, resulting in operating leverage. Operating Income was ¥4.8B (+41.6%), with an Operating Income margin of 10.4% (8.6% in the previous year, +1.8pt). Ordinary Income was ¥5.2B (+40.7%), partly supported by ¥0.4B in dividend income, with an Ordinary Income margin of 11.2% (9.3% in the previous year, +1.9pt). Although special gains and losses were zero in the current period, the same period of the previous year included a ¥0.8B gain on the sale of investment securities (one-time factor). As a result of this reversal effect and the increase in the effective tax rate (37.4%, compared with 32.9% in the previous year), Net Income attributable to owners of the parent was ¥3.3B (+7.5%), and the Net Income margin was 7.0% (7.6% in the previous year, -0.6pt). In conclusion, the company achieved higher revenue and higher profit.

Key Financial Indicators

【Profitability】The Operating Income margin was 10.4% (8.6% in the previous year), the Ordinary Income margin was 11.2% (9.3% in the previous year), and the Net Income margin was 7.0% (7.6% in the previous year). Thus, profitability improved at the operating and ordinary income levels, while the Net Income margin declined slightly.【Cash Flow Quality】Accounts receivable were ¥35.8B, down -25.9% from ¥48.2B in the previous year. The collection period converted into days sales outstanding (DSO) against quarterly Revenue also shortened from approximately 111 days in the previous year to approximately 70 days in the current period, indicating an improving collection efficiency trend.【Investment Efficiency】ROE was 5.0% (4.5% in the previous year) and can be decomposed into a Net Income margin of 7.0% × total asset turnover of 0.49 (0.37 in the previous year) × financial leverage of 1.47 (1.63 in the previous year). The improvement in asset efficiency more than offset the decline in leverage. 【Financial Soundness】The Equity Ratio rose to 68.3% (61.4% in the previous year, +6.9pt), while ¥7.0B in short-term borrowings was fully repaid and reduced to zero. Total assets were ¥94.6B (¥108.5B in the previous year, -12.7%), and net assets were ¥64.6B (¥66.6B in the previous year, -3.0%). The decline in net assets was modest relative to the contraction in assets, and the financial foundation remains solid.

Cash Flow Analysis

Because individual figures from the statement of cash flows are not included in the disclosed data, cash trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥30.8B, down -6.7% from ¥33.0B in the same period of the previous year. Accounts receivable declined -25.9% from ¥48.2B to ¥35.8B, suggesting that progress in collections contributed to the reduction of working capital. Meanwhile, short-term borrowings declined from ¥7.0B to zero, indicating that a portion of funds may have been allocated to reducing interest-bearing debt. The decreases in the provision for bonuses (¥4.4B→¥2.1B) and income taxes payable, etc. (¥4.1B→¥1.6B) also acted as temporary sources of cash outflow associated with seasonality. Overall, the company continued prudent cash management, reducing interest-bearing debt while increasing the Equity Ratio to 68.3%, supported by its ability to generate cash through operating activities.

Earnings Quality

Profit growth in the current period was primarily driven by recurring factors, namely the improvement in the gross profit margin (+0.2pt) and the decline in the SG&A ratio (-1.5pt), with limited reliance on one-time factors. The main component of ¥0.4B in non-operating income was ¥0.35B in dividend income, equivalent to only 0.8% of Revenue, indicating limited non-recurring volatility. The ¥0.8B gain on the sale of investment securities (special gain, one-time factor) recorded in the same period of the previous year did not recur in the current period. This reversal effect was one factor suppressing the Net Income growth rate relative to the Operating Income growth rate. Special gains and losses were zero in the current period, and Profit Before Tax and Ordinary Income were almost identical. Compared with the previous year, reliance on one-time gains declined, resulting in a profit structure more strongly based on operating factors. Comprehensive income was ¥3.2B, almost the same level as Net Income attributable to owners of the parent of ¥3.3B. The effects of valuation differences on other securities and adjustments for retirement benefits were minor, and the divergence from Net Income was small.

Earnings Forecast and Guidance

Progress against the Full-Year forecast was 25.9% for Revenue, at ¥46.5B/¥179.0B; 22.5% for Operating Income, at ¥4.8B/¥21.5B; 23.7% for Ordinary Income, at ¥5.2B/¥21.9B; and 21.1% for Net Income attributable to owners of the parent, at ¥3.3B/¥15.4B. Revenue is progressing slightly above the quarterly straight-line allocation rate (25%), while profit progress is slightly below this level. Given the tendency for the Information Services Business to record projects disproportionately in the second half, caution is warranted when assessing the likelihood of achieving the Full-Year plan based solely on the current progress rates. There were no revisions to the earnings forecast or dividend forecast during Q1.

Shareholder Returns

The Full-Year dividend forecast is ¥39.00 per share, implying a Payout Ratio of 35.4% against Full-Year forecast EPS of ¥110.03. There was no revision to the dividend forecast during Q1. Given the financial foundation represented by an Equity Ratio of 68.3% and cash and deposits of ¥30.8B, this dividend level is considered sustainable.

Risk Factors

1. Accounts Receivable Collection and Working Capital Risk: Accounts receivable and notes receivable were ¥35.8B, representing 37.8% of total assets. Although they declined -25.9% from the previous year, their weighting in the asset composition remains high. Monitoring is necessary because trends in the collection cycle affect working capital efficiency.

2. Earnings Seasonality Risk: Due to the characteristics of the Information Services Business, projects tend to be recorded disproportionately in the second half. As of Q1, progress rates for Operating Income and Ordinary Income were 22.5% and 23.7%, respectively. Achievement of the Full-Year plan will depend on the progress of project execution in the second half.

3. Reversal Risk from Non-Recurring Income: The ¥0.8B gain on the sale of investment securities recorded in the same period of the previous year did not recur in the current period. This reversal effect suppressed the Net Income growth rate (+7.5%) relative to the Operating Income growth rate (+41.6%). Asset retirement obligations of ¥2.0B account for 6.7% of total liabilities and will require expenditure planning in connection with future facility upgrades and removals.

Industry Benchmark (For Reference; Company Analysis)

Profitability and Returns

The company’s Operating Income margin and Net Income margin both exceed the industry median, placing its profitability relatively high within the industry.

Growth and Capital Efficiency

The Revenue growth rate significantly exceeds the industry median and represents a high growth rate within the industry.

※Source: Company compilation

Key Points from the Financial Results

1. The Operating Income margin improved to 10.4% (8.6% in the previous year), and the Ordinary Income margin improved to 11.2% (9.3% in the previous year). The emergence of operating leverage from containing the increase in SG&A expenses relative to revenue growth (SG&A ratio of 14.1%, compared with 15.6% in the previous year) has been confirmed.

2. The Net Income growth rate (+7.5%) was significantly below the Operating Income growth rate (+41.6%). This was largely due to apparent factors, namely the reversal of the ¥0.8B gain on the sale of investment securities recorded in the same period of the previous year and the increase in the effective tax rate (32.9%→37.4%). Underlying operating earnings power itself is on an improving trend.

3. The Equity Ratio rose to 68.3% (61.4% in the previous year), and interest-bearing debt was reduced to almost zero following the full repayment of ¥7.0B in short-term borrowings. The conservatism of the financial foundation has strengthened further.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly available data using a residual income model (Ohlson-type model with an explicit 5-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥665–¥704 at ±1% in the cost of equity, and ¥678–¥693 at ±0.1 in ω.

Notes:

• Net assets as of the end of the quarter are used (there is a timing difference from the Full-Year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual income model / Interest rate reference month: 2026-07 / This value does not forecast or guarantee the future share price)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. Industry benchmarks are reference information compiled by the company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility and, where necessary, after consulting with a professional.