| Metric | Current Period | Prior Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥161.0B | ¥82.5B | +39.4% |
| Operating Income / Operating Profit | ¥48.3B | ¥28.0B | +47.9% |
| Ordinary Income | ¥41.1B | ¥27.8B | +47.7% |
| Net Income / Net Profit | ¥33.8B | ¥16.2B | +90.9% |
| ROE | 42.0% | 27.6% | - |
For the fiscal year ended May 2026, Revenue was ¥161.0B (YoY +¥78.5B +95.1%), Operating Income was ¥48.3B (YoY +¥20.3B +72.5%), Ordinary Income was ¥41.1B (YoY +¥13.3B +47.7%), and Net Income was ¥33.8B (YoY +¥17.6B +108.6%), delivering strong double-digit growth across the income statement from top line to bottom line. Revenue nearly doubled with a YoY increase of +95.1%, and the Operating Margin remained high at 30.0% (down -3.9pt from 33.9% a year ago). The Consulting Business remained the core, with Revenue of ¥111.1B (share 95.3%) and Operating Income of ¥50.5B (margin 45.5%), while the AI Business posted rapid growth with Revenue of ¥5.5B (YoY +1189.5%) and Operating Income of ¥2.3B (margin 42.9%). ROE remained high at 42.0% (prior year 48.8%), supported by an improved Net Income Margin of 21.0% (up +1.4pt from 19.6%). Total assets expanded to ¥109.5B (YoY +¥21.8B +24.9%), and the Equity Ratio improved to 73.5% (up +7.9pt from 65.6%), reflecting stronger financial health. EPS was ¥118.55 (prior year ¥64.50, +83.8%), and BPS was ¥282.12 (prior year ¥200.22, +40.9%), with per-share metrics showing significant improvement.
[Revenue] Revenue of ¥161.0B increased YoY by +95.1%, nearly doubling. By segment, the Consulting Business remained the core at ¥111.1B (prior ¥82.1B, +35.2%), accounting for 68.9% of total Revenue. Growth in high-value JI-type consulting projects and creative/digital services by Avalanche Inc. contributed. By client, Toyota Motor Corporation was the single largest client at ¥23.1B, indicating continued revenue concentration. The AI Business rapidly expanded to ¥5.5B (prior ¥0.4B, +1189.5%), as standardized consulting know-how was commercialized into AI agents and AI-related products. Inter-segment Revenue including internal transactions amounted to ¥116.5B, with the AI Business recording ¥1.4B of internal sales, indicating progressing group collaboration. Domestic sales accounted for over 90%, with limited overseas expansion.
[Profitability] Gross profit was ¥77.4B (gross margin 48.1%), up ¥21.3B YoY, while gross margin declined -19.8pt from 67.9% a year ago. The decline was mainly due to higher Cost of Sales of ¥37.8B (prior ¥26.5B, +42.6%), driven by increased subcontracting and personnel costs associated with project expansion. SG&A was ¥35.9B (SG&A ratio 22.3%), up +28.2% from prior ¥28.0B, but grew slower than Revenue, producing operating leverage. SG&A including goodwill amortization of ¥1.1B (same as prior year) improved from 33.9% to 22.3% (-11.6pt), indicating economies of scale. Bonus provisions increased to ¥5.9B (prior ¥4.4B, +33.5%), reflecting higher performance-linked compensation accruals. Operating Income of ¥48.3B (Operating Margin 30.0%) rose +72.5% from ¥28.0B a year earlier, marking the second consecutive period of significant operating profit growth. After adding Operating Non-Operating Income of ¥0.2B (including interest income ¥0.1B) and subtracting Operating Non-Operating Expenses of ¥0.5B (including foreign exchange losses ¥0.1B), Ordinary Income was ¥41.1B (prior ¥27.8B, +47.7%). Extraordinary gains were ¥0.0B and extraordinary losses ¥0.0B (including impairment losses ¥1.1B, disposal of fixed assets ¥0.0B), resulting in Profit Before Tax of ¥48.3B (prior ¥27.4B, +76.3%). After deducting corporate taxes of ¥10.6B (effective tax rate 21.9%, improved -12.8pt from 34.7%), Net Income was ¥33.8B (Net Income Margin 21.0%), up +108.6% from ¥16.2B. Non-controlling interests were -¥0.0B, and Net Income Attributable to Owners of the Parent was ¥33.8B (prior ¥17.7B, +91.2%), concluding the year with both revenue and profit growth.
The Consulting Business reported Revenue of ¥111.1B (prior ¥82.1B, +35.2%), Operating Income of ¥50.5B (prior ¥37.5B, +34.6%), and an Operating Margin of 45.5% (down -0.2pt from 45.7%), maintaining high profitability. Growth was driven by hands-on promotion of client businesses through JI-type consulting and creative/digital services from Avalanche Inc. Segment assets expanded to ¥22.5B (prior ¥14.8B, +52.0%), reflecting increases in working capital due to business expansion. Depreciation was ¥0.8B (prior ¥0.3B), goodwill amortization ¥0.1B (same as prior), and increases in tangible/intangible fixed assets of ¥2.5B (prior ¥1.1B), indicating accelerated investment. The AI Business achieved Revenue of ¥5.5B (prior ¥0.4B, +1189.5%), Operating Income of ¥2.3B (turning profitable from prior loss of △¥1.0B), and an Operating Margin of 42.9%, successfully launching at high margins. Commercialization of consulting know-how into AI agents and AI-related products became full-scale, and inter-segment sales of ¥1.4B indicate progressing group collaboration. Segment assets were ¥4.8B (prior ¥3.2B, +51.6%), depreciation ¥0.3B (same as prior), and increases in tangible/intangible fixed assets ¥1.2B (prior ¥3.2B), suggesting a shift from prior large-scale investments to a steady investment phase. Corporate / unallocated expenses were △¥11.4B (prior △¥8.5B), increased mainly due to general administrative expenses not attributable to reporting segments.
[Profitability] Operating Margin of 30.0% declined -3.9pt from 33.9% but remains well above the industry median of 8.1%. Net Income Margin of 21.0% improved +1.4pt from 19.6%, aided by reduced tax burden. Gross Margin of 48.1% fell -19.8pt from 67.9%, likely due to increased subcontracting accompanying project expansion. SG&A ratio improved to 22.3% from 33.9% (-11.6pt), demonstrating economies of scale. ROE of 42.0% decreased -6.8pt from 48.8%, driven by composition of Net Income Margin 21.0% (prior 19.6%) × Total Asset Turnover 1.47x (prior 0.94x) × Financial Leverage 1.36x (prior 1.49x), with improvement in Total Asset Turnover contributing positively. ROA (based on Ordinary Income) was 41.7%, below prior year 49.0% but still at a high level. [Cash Quality] Operating Cash Flow (OCF) was ¥29.5B, or 0.87x of Net Income ¥33.8B, below the benchmark 1.0x, indicating some lag in cash realization of profits. EBITDA was ¥49.6B (Operating Income ¥48.3B + Depreciation ¥1.3B), and OCF/EBITDA ratio was 0.60x, depressed by an increase in contract assets of ¥11.0B and corporate tax payments of ¥15.5B which impeded cash conversion. Free Cash Flow (FCF) was ¥4.0B (OCF ¥29.5B - Investing Cash Flow ¥25.5B), down significantly from ¥31.0B prior year; the FCF coverage of dividends ¥4.6B was 0.86x, tight. [Investment Efficiency] Total Asset Turnover improved to 1.47x from 0.94x (+0.53x), indicating enhanced asset efficiency. CapEx was ¥2.2B versus Depreciation ¥1.3B, a ratio of 1.75x, reflecting continued growth investment. Contract assets increased to ¥11.0B from ¥6.7B (+63.8%), consistent with project progress. [Financial Soundness] Equity Ratio improved to 73.5% from 65.6% (+7.9pt), maintaining a conservative capital structure. Current ratio and Quick ratio were both 346%, indicating extremely strong liquidity, with cash and deposits of ¥76.9B against short-term liabilities of ¥26.8B. Debt-to-equity ratio was 0.36x, reflecting low leverage and effectively no interest-bearing debt.
OCF was ¥29.5B (YoY -4.7%), a slight decrease, while OCF subtotal (before working capital changes) increased to ¥44.9B (prior ¥32.0B, +40.3%), reflecting profit growth. Working capital changes included Accounts Receivable change of -¥2.1B (prior -¥5.2B), indicating improved collections, while build-up of contract assets and decrease in unpaid taxes limited cash inflows. Corporate tax payments of ¥15.5B (prior ¥1.0B) rose materially, revealing a cash tax burden from profit expansion. Cash impact from non-operating items including interest received ¥0.1B was minimal. Investing Cash Flow was -¥25.5B (prior -¥4.5B), a large outflow driven by CapEx ¥2.2B (prior ¥1.2B), intangible asset investments ¥1.0B (prior ¥3.2B), and deposits into time deposits of ¥20.0B. Excluding time deposits, effective investing CF was -¥5.5B, indicating continuing growth investments but moderated YoY. Financing Cash Flow was -¥13.3B (prior +¥25.7B), turning to an outflow due to ¥9.0B share buybacks and ¥4.6B dividend payments. Meanwhile, proceeds from share issuance of ¥22.0B (same as prior) and contributions from non-controlling interests of ¥3.9B (same as prior) provided inflows, demonstrating capital policy flexibility. Ending cash and deposits were ¥76.9B (prior ¥66.1B, +16.3%), ample and implying low short-term liquidity risk.
The gap between Ordinary Income ¥41.1B and Operating Income ¥48.3B was -¥7.2B, mainly due to Operating Non-Operating Expenses of ¥0.5B (including FX losses ¥0.1B). Extraordinary losses included impairment losses of ¥1.1B (same as prior). The difference between Profit Before Tax ¥48.3B and Ordinary Income ¥41.1B is minor, suggesting limited impact from one-off items. Comprehensive income was ¥30.8B, ¥3.0B below Net Income ¥33.8B; FX translation adjustments contributed +¥0.3B while other OCI items were negative contributors. The divergence between Parent shareholders’ comprehensive income ¥30.8B and Net Income ¥33.8B is minor, indicating good earnings quality. OCF ¥29.5B being 0.87x of Net Income ¥33.8B is mainly attributable to build-up of contract assets ¥11.0B (prior ¥6.7B, +¥4.3B) and higher corporate tax payments ¥15.5B (prior ¥1.0B, +¥14.5B), likely temporary in nature. Accrual (Net Income - OCF) was +¥4.3B, indicating accounting profit exceeded cash inflow; however, expected collection of contract assets should improve this in the next fiscal year.
A year-end dividend of ¥16.1 per share was implemented, with a Payout Ratio of 15.0% (based on EPS ¥118.55), reflecting a conservative stance. As there were no dividends in the prior year, this constitutes the first dividend. Total dividends amounted to ¥4.6B, equivalent to 13.6% of Net Income ¥33.8B, consistent with a capital policy prioritizing internal reserves. Share buybacks of ¥9.0B were executed, bringing total returns to shareholders to ¥13.6B, and the Total Return Ratio was 40.2% of Net Income. Total returns of ¥13.6B exceed FCF ¥4.0B by 3.4x, with dividend coverage by FCF at 0.86x and coverage including buybacks at 0.29x, reflecting shareholder returns funded from cash on hand. Cash and deposits of ¥76.9B are ample, supporting short-term sustainability, but medium- to long-term continuity of dividends depends on improvement in OCF. Payout Ratio of 15.0% is difficult to benchmark against the industry median (data not available) but represents a balance between growth investment and shareholder returns.
Business concentration risk: The Consulting Business accounts for 95.3% of Revenue, with the AI Business at 4.7%. High dependence on a single business line makes the company vulnerable to fluctuations in consulting demand and intensified competition. Toyota Motor Corporation is the largest single client at ¥23.1B (14.3% of Revenue), indicating high customer concentration. Contract cancellations or reductions could materially impact Revenue and profit.
Cash conversion efficiency risk: OCF ¥29.5B / Net Income ¥33.8B is 0.87x, and OCF/EBITDA is 0.60x, indicating delayed cash realization of profits. The build-up of contract assets ¥11.0B (YoY +63.8%) is the main driver. If project completion/acceptance delays or prolonged collection terms persist, working capital burden could expand and pressure cash flows. If total returns ¥13.6B continue to materially exceed FCF ¥4.0B, drawdown of cash reserves risk may materialize.
Personnel cost / recruitment cost increase risk: As indicated by an increase in bonus provisions to ¥5.9B (YoY +33.5%), performance-linked compensation and hiring pressures are rising. High-value consulting is labor-intensive; intensified competition for talent could increase SG&A ratio and reduce gross margins, making it difficult to sustain the current Operating Margin of 30.0%.
Profitability / Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 30.0% | 8.1% (3.6%–16.0%) | +21.9pt |
| Net Income Margin | 21.0% | 5.8% (1.2%–11.6%) | +15.2pt |
The company’s profitability substantially exceeds the industry median, with top-class Operating and Net Income margins.
Growth / Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 39.4% | 10.1% (1.7%–20.2%) | +29.3pt |
The company’s growth rate is approximately four times the industry median, driven by the AI business ramp and expansion of consulting.
※Source: Company compilation
Continuity of a high-profit, high-growth model: The company maintained top-class profitability with an Operating Margin of 30.0% and ROE of 42.0%, achieving significant growth for two consecutive periods (Revenue +95.1%, Net Income +108.6%). The AI Business launched at high margins (Operating Margin 42.9%) and has significant room to grow from a 4.7% share of total Revenue. The Consulting Business also sustained a high Operating Margin of 45.5%, supported by an increasing proportion of high-value JI-type projects. Inter-segment sales of ¥1.4B were recorded, with group synergies progressing.
Cash conversion improvement will determine sustainability of dividends and growth investment: OCF ¥29.5B is 0.87x of Net Income ¥33.8B, and OCF/EBITDA is 0.60x, indicating delayed cash realization. Build-up of contract assets ¥11.0B and increased corporate tax payments ¥15.5B are primary causes; project collections are expected to improve next fiscal year. FCF ¥4.0B versus total returns ¥13.6B equates to 3.4x, reflecting returns financed with cash on hand, but the Payout Ratio of 15.0% is conservative and leaves headroom. Ample cash and deposits of ¥76.9B secure short-term sustainability, but medium- to long-term sustainability of dividends and growth investment depends on expansion of OCF.
This report is an earnings analysis document automatically generated by AI 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 should be made at your own responsibility; consult professionals as necessary.