Temairazu (2477) FY2026 Q2 Earnings Report

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Executive Summary

The key point of this financial results period is that, while Revenue secured double-digit growth at ¥11.8B, the increase in SG&A expenses exceeded Revenue growth, causing Operating Income growth to slow. Revenue was ¥11.8B, up +10.3% YoY; Operating Income was ¥8.3B, up +6.5%; Ordinary Income was ¥8.4B, up +6.8%; and Net Income was ¥5.5B, up +6.5%. The Operating Margin remains exceptionally high at 70.8%, but declined compared with the same period last year, with the increase in SG&A expenses partially offsetting the effect of higher Revenue.

Factors Affecting Financial Performance

【Revenue】Revenue was ¥11.8B, an increase of +10.3% YoY. By segment, ApplicationService accounted for nearly all Revenue and maintained high profitability with an Operating Margin of 78.6%. Meanwhile, InternetMedia continued to generate minimal Revenue and an operating loss (Margin: ▲29.6%), making its contribution to earnings limited.

【Profit and Loss】Operating Income was ¥8.3B (+6.5% YoY), Ordinary Income was ¥8.4B (+6.8%), and Net Income was ¥5.5B (+6.5%), with all three securing earnings growth. However, SG&A expenses increased +26.8% YoY to ¥2.0B, exceeding the Revenue growth rate and causing the Operating Margin to decline. There were no significant one-time factors in non-operating or extraordinary gains and losses, and the gap between Ordinary Income and Net Income was within the range attributable to the corporate tax burden (effective tax rate of approximately 35%). In conclusion, the company achieved higher Revenue and earnings, but the earnings growth rate fell below the Revenue growth rate due to the increase in expenses.

Segment Analysis

ApplicationService was the core contributor to company-wide earnings, generating Revenue of ¥11.8B and Operating Income of ¥9.2B (Margin: 78.6%). InternetMedia generated Revenue of ¥0.03B and an operating loss of ¥0.01B (Margin: ▲29.6%); although its business scale is small, its impact on company-wide earnings is limited. The adjustment to segment profit (company-wide expenses) was ▲¥0.8B, recorded as general and administrative expenses not attributable to reportable segments.

Key Financial Indicators

【Profitability】The Operating Margin of 70.8% and Net Profit Margin of 46.4% both declined from the same period last year (73.3% and 48.0%, respectively), as the increase in SG&A expenses placed some pressure on profitability.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥5.4B, or 0.99x Net Income, indicating sound cash backing for earnings; however, the OCF/EBITDA ratio remained at 0.64x, as corporate tax payments of ¥2.99B reduced cash generation.【Investment Efficiency】Annualized ROE was 16.5%, while the Total Asset Turnover Ratio was 0.33x. Asset efficiency was relatively low, reflecting the substantial cash holdings, but this was offset by the high profit margin.【Financial Soundness】The Equity Ratio was 93.4%, the Current Ratio was approximately 1,486%, and the Debt-to-Equity Ratio was 0.07x, indicating an extremely conservative and highly secure financial foundation.

Cash Flow Analysis

Operating Cash Flow was ¥5.4B, an increase of +7.1% YoY, and its ratio to Net Income of ¥5.5B was 0.99x, indicating sound cash conversion of earnings. However, the subtotal of Operating Cash Flow before tax payments was ¥8.3B, and corporate income tax payments of ¥3.0B significantly compressed OCF, leaving the OCF/EBITDA ratio at 0.64x against EBITDA of ¥8.4B. Financing Cash Flow was ▲¥7.5B, of which share repurchases accounted for ▲¥5.5B, a scale nearly equivalent to Net Income. As a result, cash and cash equivalents decreased by ¥2.1B during the period, but cash and deposits stood at ¥63.8B, accounting for approximately 9割 of total assets, and liquidity remained ample.

Earnings Quality

No one-time factors were identified in non-operating or extraordinary gains and losses, and the difference between Ordinary Income and Net Income was broadly consistent with the corporate tax burden corresponding to an effective tax rate of approximately 35%; earnings quality can therefore be assessed as generally recurring in nature. Non-operating income of ¥0.1B consisted primarily of interest income and exceeded non-operating expenses of ¥0.02B, resulting in a slightly positive net financial balance. From an accrual perspective, OCF nearly covered Net Income, providing sound support for accounting earnings; however, the post-tax OCF/EBITDA ratio remained at 0.64x, indicating a slight divergence between the high accounting profit margin and actual cash-generation capacity. Accounts receivable increased +6.2% YoY, below the rate of Revenue growth, and concerns regarding the quality of revenue recognition are limited.

Earnings Forecasts and Guidance

Q2 progress against the full-year company forecast was 49.8% for Revenue, 50.9% for Operating Income, and 49.3% for Net Income, placing all three broadly on track near the standard half-year progress rate of 50%. The full-year forecast calls for Revenue growth of +8.2%, Operating Income growth of +1.9%, and Net Income growth of +3.8%. Compared with the first-half results (Operating Income growth of +6.5%), the company’s plan appears to incorporate a suppression of the profit margin in the second half. The ability to contain the increase in the SG&A ratio during the second half will determine full-year earnings progress.

Shareholder Returns

The interim dividend is ¥16.00 per share, and the full-year forecast dividend is ¥40.00. The Payout Ratio based on Net Income is approximately 19.0%, while the forecast Payout Ratio based on forecast EPS of ¥176.51 is approximately 22.7%; both are conservative relative to the earnings level. Meanwhile, the company conducted share repurchases of ¥5.5B, and the Total Return Ratio on a cash-payment basis, including dividend payments of ¥1.4B, reached approximately 126.6%. As share repurchases were nearly equal in scale to Net Income, shareholder returns during the period were funded by drawing down cash on hand. However, given the financial capacity indicated by cash and deposits of ¥63.8B and a Debt-to-Equity Ratio of 0.07x, the sustainability of shareholder returns themselves is considered high.

Risk Factors

1. Decline in Profitability Due to Higher SG&A Expenses: SG&A expenses increased +26.8% YoY, exceeding the Revenue growth rate of 10.3%, and the Operating Margin declined 250bp from the same period last year. If this trend continues, earnings growth may remain below Revenue growth even under the company’s high-margin business model.

2. Decline in Cash Conversion Efficiency: The OCF/EBITDA ratio was 0.64x, reduced by the impact of corporate tax payments of ¥2.99B. During periods of sustained high profitability, the tax burden may continue to suppress cash generation.

3. Relationship Between Large-Scale Shareholder Returns and Cash Balances: Share repurchases of ¥5.47B were nearly equal to Net Income, and the Total Return Ratio on a cash-payment basis, including dividends, reached approximately 126.6%. If this level becomes persistent, the pace of decline in cash and deposits will need to be monitored.

Industry Benchmark (For Reference; Company Analysis)

Industry Benchmark (it_telecom)

Profitability and Returns

Both the Operating Margin and Net Profit Margin substantially exceeded the industry median, indicating an exceptionally high level of profitability within the industry.

Growth and Capital Efficiency

The Revenue growth rate was below the industry median, indicating that the pace of growth is relatively moderate within the industry compared with the company’s high profitability.

※Source: Company compilation

Key Points from the Financial Results

1. While the company maintained a highly profitable business profile significantly above the industry average, with an Operating Margin of 70.8% and annualized ROE of 16.5%, the fact that the rate of increase in SG&A expenses exceeded the Revenue growth rate and that profitability has been declining from the same period last year is noteworthy as a potential sign of structural change.

2. Q2 progress against the full-year forecast was broadly on track, at 49.8% for Revenue and 50.9% for Operating Income, making control of SG&A expenses in the second half the key to full-year results.

3. Against an extremely conservative financial foundation consisting of cash and deposits of ¥63.8B and a Debt-to-Equity Ratio of 0.07x, the Total Return Ratio including share repurchases reached approximately 126.6%, making the status of capital allocation an ongoing area of observation.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,290–¥1,368 at Cost of Equity ±1%, and ¥1,322–¥1,337 at ω±0.1.

Notes:

• Net assets as of the quarter-end are used (there is a timing discrepancy with the full-year forecast).

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; it does not constitute a forecast of the market share price or a recommendation of any specific investment action, and does not forecast or guarantee future share prices.)

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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, after consulting with professionals as necessary.

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