SOFTCREATE HOLDINGS (3371) FY2026 Q3 Earnings Report

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Executive Summary

The company continued to deliver higher revenue and higher profits, with operating leverage driving the improvement in profit margins. Revenue was ¥25.15B (+11.0% YoY), Operating Income was ¥4.56B (+15.8%), Ordinary Income was ¥4.89B (+18.3%), and Net Income attributable to owners of the parent was ¥2.93B (+14.9%). SG&A expense control, which increased by +6.8%, outpaced revenue growth and lifted the growth rate of Operating Income, while the expansion of non-operating income further supported growth in Ordinary Income.

Factors Affecting Business Performance

【Revenue】Revenue was ¥25.15B (+11.0% YoY). The EC Solutions Business generated ¥13.36B (+8.7%) and accounted for 53.1% of total revenue, making it the core business, while the IT Solutions Business generated ¥11.79B (+13.8%), exceeding it in terms of growth rate. By revenue category, revenue recognized over a certain period amounted to ¥20.85B, accounting for 82.9% of total revenue (+9.4% YoY), indicating expansion of a stable, recurring project-based revenue base.

【Profit and Loss】Operating Income was ¥4.56B (+15.8%), and the Operating Margin improved to 18.1% from 17.4% in the same period of the previous year, an improvement of 0.7pt. Although the gross margin edged down to 41.0% from 41.2% in the same period of the previous year, SG&A expenses amounted to ¥5.74B (+6.8%), below the rate of revenue growth, resulting in operating leverage. Ordinary Income was ¥4.89B (+18.3%), supported by the expansion of non-operating income to ¥0.34B, including ¥0.08B in dividend income and ¥0.17B in equity-method investment gain. Net Income was ¥2.93B (+14.9%). Extraordinary items were limited, comprising extraordinary income of ¥0.01B and extraordinary losses of ¥0.004B, indicating limited impact from one-time factors. Revenue and profits increased.

Segment Analysis

Segment profit is calculated on the basis of Ordinary Income, and it should be noted that its measurement basis differs from that of consolidated Operating Income. The EC Solutions Business generated revenue of ¥13.36B (+8.7%) and segment profit of ¥3.52B (+14.4%), maintaining high profitability with a margin of 26.3% and serving as a pillar of company-wide earnings. The IT Solutions Business generated revenue of ¥11.79B (+13.8%) and segment profit of ¥2.25B (+12.2%), with a margin of 19.1%; its revenue growth rate exceeded that of the EC Solutions Business. The segment adjustment, including company-wide expenses and other items, was negative ¥0.87B, narrowing from negative ¥0.94B in the same period of the previous year. The reduction in the company-wide cost burden also contributed to the improvement in the consolidated Ordinary Income margin. In the IT Solutions Business, goodwill of ¥0.09B was recognized in connection with the acquisition of System Works Japan Co., Ltd. as a subsidiary.

Key Financial Indicators

【Profitability】Margins improved at each level, with an Operating Margin of 18.1% (17.4% in the same period of the previous year), an Ordinary Income margin of 19.5% (18.3%), and a Net Income attributable to owners of the parent margin of 11.6% (11.2%). The gross margin was 41.0%, slightly lower than 41.2% in the same period of the previous year, indicating that the improvement in profit margins was primarily attributable to greater SG&A efficiency. 【Cash Quality】Cash and deposits increased by +11.1% YoY to ¥16.62B, while current liabilities remained at ¥8.23B against current assets of ¥24.87B. 【Investment Efficiency】ROE was 12.0%. Profitability is also reflected in capital efficiency through the combination of total asset turnover and financial leverage. Basic EPS was ¥117.41 (+15.3%).【Financial Soundness】The Equity Ratio was 60.8% (58.5% in the same period of the previous year), the current ratio was 302.4%, and the debt-to-equity ratio was 0.41x, all at high levels, indicating a conservative financial foundation.

Cash Flow Analysis

As the cash flow statement was not disclosed in this earnings release, changes in funding were assessed based on changes in the balance sheet. Cash and deposits increased by +¥1.66B YoY to ¥16.62B, approximately 2.0x current liabilities of ¥8.23B. Net assets increased by +¥2.76B to ¥27.35B, with an increase of +¥0.85B in valuation differences on available-for-sale securities, in addition to accumulated profits, pushing up equity. Investment securities increased by +¥1.46B to ¥8.81B, suggesting that a portion of surplus funds was allocated to securities investments. The structure in which current assets substantially exceed current liabilities indicates that cash generation from business activities is supporting available capacity for both investment and financing activities.

Earnings Quality

The majority of profit was generated from operating activities, while extraordinary income of ¥0.01B and extraordinary losses of ¥0.004B were both limited, indicating that performance is not materially dependent on one-time factors. Of non-operating income of ¥0.34B, dividend income of ¥0.08B and equity-method investment gain of ¥0.17B supported Ordinary Income. As this represented only 1.3% of revenue, the degree of dependence was limited. Meanwhile, against Profit Before Tax of ¥4.90B, after deducting corporate income taxes and other taxes of ¥1.63B and profit attributable to non-controlling interests of ¥0.34B, Net Income attributable to owners of the parent was ¥2.93B. The profit conversion rate (Net Income ÷ Profit Before Tax) was approximately 0.598, indicating a somewhat material impact from deduction items. Comprehensive Income was ¥4.15B (+25.4% YoY), of which ¥3.81B was attributable to owners of the parent, exceeding Net Income of ¥2.93B. The primary reason for the difference was the +¥0.85B increase in valuation differences on available-for-sale securities. The fact that unrealized gains accompanying market-price fluctuations increased Comprehensive Income separately from current-period profit is an important consideration when evaluating earnings quality.

Earnings Forecast and Guidance

The full-year company forecast is revenue of ¥33.50B (+8.2% YoY), Operating Income of ¥6.00B (+9.1%), and Ordinary Income of ¥6.20B (+7.6%), with no revisions to the earnings forecast or dividend forecast for the current quarter. The cumulative Q3 progress rates were 75.1% for revenue, 76.0% for Operating Income, 78.9% for Ordinary Income, and 77.4% for Net Income. All indicators are tracking slightly above plan relative to the standard 75% benchmark. The particularly high progress rate for Ordinary Income was attributable to the expansion of non-operating income.

Shareholder Returns

The Q2 dividend was ¥31.00 per share, and the full-year dividend forecast remains unchanged at ¥62.00. Assuming equal interim and year-end dividends of ¥31.00, the Payout Ratio against projected full-year EPS of ¥151.74 would be approximately 40.9%. This is a Payout Ratio calculated using dividends alone as the numerator and is not the Total Return Ratio, which includes share repurchases. At 40.9%, the ratio is below the 60% level generally considered a benchmark for sustainability. Financial capacity, including cash and deposits of ¥16.62B and a debt-to-equity ratio of 0.41x, also supports continued dividend payments.

Risk Factors

1. Business concentration risk: The EC Solutions Business accounts for 53.1% of revenue and serves as a pillar of company-wide profitability, with a segment profit margin of 26.3%. Consequently, fluctuations in demand for this business and changes in the competitive environment could have a significant impact on company-wide performance.

2. Accounts receivable collection risk: Trade receivables and notes receivable amounted to ¥5.99B, and the annualized accounts receivable turnover period was approximately 65 days, exceeding the 60-day level generally regarded as a warning threshold. Inspection and billing terms and receivables management during a period of revenue growth will be key factors in working capital efficiency.

3. Investment securities price volatility risk: Investment securities amounted to ¥8.81B, representing 22.9% of total assets, while valuation differences reached ¥3.21B. Fluctuations in the stock market may increase capital volatility through their impact on Other Comprehensive Income and net assets.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

Both the Operating Margin and Net Profit Margin were substantially above the industry median, placing the company in the upper tier of the industry.

Growth and Capital Efficiency

The revenue growth rate was broadly in line with the industry median and positioned around the middle of the IQR.

※Source: Compiled by the Company

Key Takeaways from the Earnings Results

1. Against revenue growth of 11.0%, SG&A expenses increased by only 6.8%, and the Operating Margin improved by 0.7pt YoY. The gross margin declined by 0.2pt, making the ability to maintain SG&A discipline a key focus for the sustainability of the profit margin trend.

2. Progress against the full-year plan was 76.0% for Operating Income and 77.4% for Net Income, slightly above the standard 75% level. The 78.9% progress rate for Ordinary Income reflects the increase in non-operating income.

3. While financial soundness remained high, with an Equity Ratio of 60.8% (58.5% in the same period of the previous year), a current ratio of 302.4%, and a debt-to-equity ratio of 0.41x, investment securities accounted for 22.9% of total assets, creating a structure in which market-price fluctuations may affect the volatility of net assets.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,210–¥1,280 at ±1% for the Cost of Equity, and ¥1,241–¥1,250 at ±0.1 for ω.

Notes:

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

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

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This report is an earnings analysis document automatically generated by AI through analysis of XBRL earnings release data. It does not recommend investment in any specific security. The industry benchmark is reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting professionals as necessary.

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