Startia Holdings (3393) FY2027 Q1 Earnings Report

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Executive Summary

The quarter delivered higher revenue and earnings, resulting in a high-quality financial performance in which Operating Income outpaced revenue growth due to improved cost efficiency. Revenue was ¥6.04B (+7.2% YoY), Operating Income was ¥0.70B (+18.9%), Ordinary Income was ¥0.71B (+19.8%), and Net Income was ¥0.51B (+23.4%). The primary drivers of earnings growth were a decline in the SG&A ratio and an improved segment mix resulting from the expansion of the high-margin DX Solutions Business.

Factors Affecting Performance

【Revenue】Revenue was ¥6.04B, up +7.2% YoY. By segment, the core IT Infrastructure-Related Business generated ¥4.76B (78.7% of total, +8.1% YoY), while the DX Solutions-Related Business generated ¥1.29B (21.3% of total, +4.0% YoY), with both businesses posting revenue growth. IT Infrastructure was the primary driver of revenue growth, although its high revenue concentration warrants attention.

【Profit and Loss】Operating Income was ¥0.70B (+18.9% YoY), and the Operating Margin improved to 11.7% from the previous year. The gross margin was broadly flat at 44.5%, while the SG&A ratio declined to 32.8% (approximately 33.9% in the previous year), resulting in operating leverage. The DX Solutions segment had a high segment margin of 19.6%, significantly exceeding the 8.4% margin of IT Infrastructure, and the improved mix is lifting the Company-wide margin. Ordinary Income was ¥0.71B (+19.8% YoY), with non-operating income and expenses remaining minimal. Net Income was ¥0.51B (+23.4% YoY), and earnings growth was secured despite reduced dependence on the gain on the sale of investment securities (extraordinary income) recorded in the previous year. Both revenue and earnings increased.

Segment Analysis

The IT Infrastructure-Related Business generated revenue of ¥4.76B (+8.1% YoY) and Operating Income of ¥0.40B (+16.0% YoY), with a margin of 8.4%, making it the core business and accounting for 78.7% of Company-wide revenue. The DX Solutions-Related Business generated revenue of ¥1.29B (+4.0% YoY) and Operating Income of ¥0.25B (+21.3% YoY), with a margin of 19.6%. Although revenue growth was moderate, its high earnings growth rate means that it is driving the Company-wide margin as a highly profitable business. The margin gap between the two businesses reached approximately 11.2pt, indicating further potential for improvement in the Company-wide margin if DX’s revenue mix continues to expand. The CVC-Related Business continues to post a small loss. In addition, beginning this quarter, the WEB Solutions Business was reclassified from the IT Infrastructure-Related Business to the DX Solutions-Related Business; previous-year period figures have also been reclassified for comparison.

Key Financial Indicators

【Profitability】The Operating Margin improved to 11.7% from the previous year, while the Net Margin rose to 8.3% (7.1% in the previous year). The gross margin of 44.5% was broadly in line with the previous year, and the decline in the SG&A ratio to 32.8% contributed to earnings growth. 【Cash Quality】Cash and deposits totaled ¥6.72B, accounting for 48.6% of total assets. Non-operating income and expenses were minimal, indicating limited dependence on one-off gains and losses. 【Capital Efficiency】ROE was 6.3%, while the effective tax rate, calculated from Pretax Income of ¥0.71B and income taxes of ¥0.20B, was 27.9%, a standard level. 【Financial Soundness】The Equity Ratio rose to 58.9% (54.0% in the previous year), and liquidity was ample, with current assets of ¥11.53B compared with current liabilities of ¥4.73B. Long-term borrowings were ¥0.95B, and the Company was in a net cash position, with cash substantially exceeding interest-bearing debt, indicating a conservative financial foundation.

Cash Flow Analysis

Although detailed disclosure of the statement of cash flows is unavailable, an examination of funding trends based on changes in the balance sheet shows that cash and deposits totaled ¥6.72B, slightly down from ¥6.77B in the previous year. Total assets contracted to ¥13.82B from ¥15.55B in the previous year, while income taxes payable declined substantially YoY, suggesting that payment of the tax burden recorded in the previous period was one factor behind the cash outflow. Accounts receivable and notes receivable remained high at ¥3.48B, and trends in the collection cycle relative to revenue growth will be a factor affecting future cash generation. Long-term borrowings declined from the previous year, and the balance sheet as a whole is becoming leaner alongside the reduction in liabilities.

Quality of Earnings

The quarter’s earnings were primarily derived from operating activities, and earnings quality appears sound. Non-operating income was ¥0.01B, comprising small items such as dividend income and foreign exchange gains, while non-operating expenses were also ¥0.01B, primarily interest expenses. Both remained limited at approximately 0.2% of revenue. The difference between Ordinary Income and Operating Income was nearly zero, indicating that the impact of financial income and expenses on performance was limited. Although the previous-year period included extraordinary income from the sale of investment securities, no such one-off factors were present in the current period. The fact that Net Income growth (+23.4% YoY) was driven by improved underlying earning power is therefore favorable. Comprehensive Income was ¥0.50B, broadly in line with Net Income attributable to owners of the parent of ¥0.50B. Other valuation differences on available-for-sale securities changed only slightly (-¥0.01B), resulting in a small divergence between Net Income and Comprehensive Income.

Earnings Forecast and Guidance

The full-year forecast calls for Revenue of ¥26.00B (+9.3% YoY), Operating Income of ¥3.55B (+9.5% YoY), and Ordinary Income of ¥3.55B (+7.8% YoY). There were no revisions to the earnings forecast or dividend forecast for the quarter. Progress rates for the quarter were 23.3% for Revenue, 19.9% for Operating Income, and 20.0% for Ordinary Income, indicating that Operating Income and Ordinary Income were slightly behind the simple one-quarter benchmark of 25%. This appears to reflect the business characteristics of high-margin DX projects and maintenance-renewal revenue being weighted toward the second half. The Company’s decision to maintain its forecasts suggests a certain degree of visibility regarding project execution in the second half. The pace of progress from the next quarter onward will be a key focus in assessing the likelihood of achieving the full-year plan.

Shareholder Returns

There was no dividend payment in Q1, and the full-year dividend forecast remains unchanged at ¥145 per share. The Payout Ratio, calculated based on the full-year Net Income forecast of ¥2.34B and the assumed total dividend amount based on the average number of shares outstanding during the period, is approximately 58%. Although the Payout Ratio is somewhat high, the Company’s net cash financial position—with limited interest-bearing debt relative to cash and deposits of ¥6.72B—provides sufficient capacity to support dividend sustainability.

Risk Factors

1. Revenue concentration risk: The core IT Infrastructure-Related Business accounts for 78.7% of Company-wide revenue, meaning that demand trends in this business, including the IT investment cycle of small and medium-sized enterprises, have a significant impact on overall performance.

2. Working capital efficiency: Accounts receivable and notes receivable totaled ¥3.48B, a large amount relative to the asset base. A lengthening collection cycle could create volatility in the timing of Operating Cash Flow.

3. Delayed full-year progress: Progress rates for Operating Income and Ordinary Income were below the one-quarter benchmark of 25%. Because the earnings structure is premised on a second-half weighting, the pace of project execution in the second half will be critical to achieving the plan.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (trading)

Profitability and Returns

The Company’s Operating Margin and Net Margin both substantially exceed the industry median, indicating a superior level of profitability within the industry.

Growth and Capital Efficiency

The Revenue Growth Rate also exceeds the industry median, although it remains below the upper limit of the industry IQR (11.7%), placing the Company’s growth among the higher levels within the industry.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. The Operating Margin improved from the previous year, and the Company achieved earnings growth (+18.9%) exceeding its revenue growth rate (+7.2%). The expansion of the high-margin DX Solutions Business, with a margin of 19.6%, is confirmed to be driving Company-wide profitability.

2. Earnings increased despite the absence of the extraordinary income from the gain on the sale of investment securities recorded in the previous-year period. The fact that Net Income growth was supported by improved underlying earning power is noteworthy from the perspective of earnings quality.

3. The Equity Ratio rose to 58.9%, and the Company maintained a net cash financial foundation in which cash and deposits exceeded interest-bearing debt. However, progress rates against the full-year forecast for both Operating Income and Ordinary Income were below the one-quarter benchmark, making the pace of earnings recognition in the second half a key point for confirming achievement of the full-year plan.

Theoretical Share Price (Reference Value)

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

Sensitivity: ¥1,322–¥1,396 at ±1% for the Cost of Equity, and ¥1,347–¥1,375 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).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat high.

(Calculation model: Residual Income Model / Interest-rate reference month: 2026-07 / This value does not predict 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 summary data. It does not recommend investment in any specific security. The 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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AI Financial Analysis

Executive Summary

FY2027 Q1 was a strong start, with profit growth materially exceeding revenue growth. Revenue increased 7.2% year on year to ¥6.041bn. Operating income rose 18.9% to ¥705m. Ordinary income increased 19.8% to ¥706m. Profit attributable to owners of parent rose 25.0% to ¥502m. The operating margin expanded by 116bp year on year to 11.7%, from 10.5%. Gross margin was broadly stable at 44.5%, improving by approximately 5bp. This indicates that the operating-margin improvement was principally driven by SG&A leverage rather than gross-margin expansion. SG&A expenses increased only 3.7%, substantially below the 7.2% revenue-growth rate. IT Infrastructure remained the core business by segment profit contribution, generating ¥398m of segment profit. DX Solutions delivered the strongest margin improvement, with segment margin rising to 19.7% from 16.9%. Revenue recognized over time increased 12.4% to ¥3.012bn, faster than revenue recognized at a point in time, which grew 2.4% to ¥3.029bn. This mix shift is constructive because it increases the contribution from ongoing service and solution delivery. Net margin improved 118bp to 8.3%, supported by operating leverage and a relatively normal 27.9% effective tax rate. The current quarter contained no reported extraordinary gain, whereas the comparable quarter included a ¥10.9m gain on sales of investment securities, supporting the underlying character of the earnings improvement. Annualized ROE was 24.7%, an excellent level, although it is supported in part by a 1.70x financial-leverage factor. Liquidity is very strong, with a 243.7% current ratio, ¥6.716bn of cash, and cash equal to 16.79x short-term borrowings. Q1 revenue and operating-income progress against full-year guidance were 23.2% and 19.9%, respectively, modestly below a standard 25% first-quarter run rate but not outside the 10 percentage-point threshold. Management maintained both earnings and dividend forecasts. The full-year plan implies continued growth of 9.3% in revenue and 9.5% in operating income. The key forward implication is that sustaining SG&A discipline and the higher-growth recurring/period-based revenue mix would support delivery toward the full-year operating-income target of ¥3.550bn.

Profitability Analysis

Annualized DuPont ROE is 24.7%, decomposed into an 8.3% net profit margin, 1.749x asset turnover, and 1.70x financial leverage. The principal quarter-on-quarter operating improvement evident in the available data is the margin expansion: operating margin rose 116bp to 11.7%, while gross margin was nearly unchanged at 44.5%. Accordingly, lower relative SG&A intensity was the main driver of earnings leverage, as SG&A increased 3.7% against revenue growth of 7.2%. The 8.3% net margin is within the good benchmark range and was supported by limited financing drag: the interest burden was 1.002 and interest coverage was 70.70x. The tax burden of 0.711 is also normal, corresponding to a 27.9% effective tax rate. IT Infrastructure is the core business by operating-profit contribution, producing ¥398m of segment profit, up 16.0% year on year, on revenue growth of 8.0%; its segment margin improved 58bp to 8.4%. DX Solutions generated ¥253m of segment profit, up 21.3%, on 4.0% revenue growth; its segment margin expanded 281bp to 19.7%, making it the more profitable reporting segment. The faster growth in period-based revenue, up 12.4%, versus point-in-time revenue growth of 2.4% supports the quality and potential resilience of the sales mix. The segment reclassification was retrospectively reflected in the prior-year comparison, preserving the comparability of segment growth rates. JGAAP goodwill of ¥301m is modest at 3.7% of equity, so the current reported profitability is not meaningfully exposed to a high goodwill-amortization burden.

Growth Assessment

Revenue growth of 7.2% was balanced across the two reporting segments, with IT Infrastructure up 8.0% and DX Solutions up 4.0%. The higher 12.4% growth in revenue recognized over time is a positive mix development relative to the 2.4% increase in point-in-time revenue. IT Infrastructure accounted for approximately 78.7% of reporting-segment revenue and remains the primary scale driver. DX Solutions accounted for approximately 38.8% of reporting-segment profit before segment eliminations and provides a disproportionately high-margin growth engine. Consolidated operating income grew 18.9%, more than twice the revenue-growth rate, demonstrating favorable operating leverage. The maintained full-year forecast calls for revenue of ¥26.000bn, up 9.3%, and operating income of ¥3.550bn, up 9.5%. Q1 revenue progress is 23.2% of the full-year forecast, 1.8 percentage points below the standard 25% first-quarter pace. Q1 operating-income progress is 19.9%, 5.1 percentage points below the standard pace, while profit attributable to owners progress is 21.4% of the ¥2.343bn target. These progress rates do not constitute a material deviation from the standard quarterly benchmark. Earnings quality at the P&L level improved because current-period net profit did not rely on an extraordinary investment-security sale gain recorded in the comparable period. Sustained growth will depend on continued IT investment by corporate customers, conversion of DX demand into recurring delivery revenue, and retention of current SG&A discipline.

Financial Health

The balance sheet is conservatively positioned. The current ratio is 243.7% and the quick ratio is 232.4%, indicating substantial near-term liquidity coverage. Working capital is ¥6.797bn. Cash and deposits of ¥6.716bn exceed interest-bearing debt of ¥1.349bn by approximately ¥5.367bn. The debt-to-equity ratio is 0.70x, below the 1.0x conservative benchmark, and debt represents 14.2% of total capital. Short-term borrowings are ¥400m, while cash is 16.79x short-term debt, limiting refinancing and maturity-mismatch risk. Interest coverage of 70.70x indicates that current operating income provides ample coverage of interest expense. Equity totals ¥8.137bn, equal to 58.9% of assets, and the capital adequacy ratio is 58.3%. Goodwill is ¥301m, equal to 2.2% of assets and 3.7% of equity, which limits balance-sheet dependence on acquired-business valuation retention. Intangible assets total ¥1.147bn, or 8.3% of assets, a balanced level for a technology and solution provider. No current-ratio or leverage warning threshold is breached.

Notable B/S Changes

Total assets: -¥1.728bn (-11.1%) to ¥13.819bn, principally reflecting lower current-asset balances and a more compact balance sheet. Cash and deposits: -¥955m (-12.5%) to ¥6.716bn; liquidity nevertheless remains substantial relative to ¥1.349bn of interest-bearing debt. Current liabilities: -¥1.191bn (-20.1%) to ¥4.730bn, strengthening the current ratio to 243.7%. Total liabilities: -¥1.375bn (-19.5%) to ¥5.682bn, reducing balance-sheet leverage. Income taxes payable: -¥709m (-93.0%) to ¥54m, a major driver of the reduction in current liabilities. Provision for bonuses: -¥197m (-51.8%) to ¥184m, contributing to lower current liabilities. Total equity: -¥353m (-4.2%) to ¥8.137bn, with retained earnings down ¥465m (-4.8%) to ¥7.306bn; this movement should be assessed alongside capital-return activity and future profit retention.

Cash Flow Quality

Dividend Sustainability

The Q1 dividend per share is ¥0, consistent with a year-end-oriented dividend structure. The maintained full-year dividend forecast is ¥145 per share. Against forecast EPS of ¥250.60, the implied dividend payout ratio is approximately 57.9%. This is below the 60% sustainability benchmark, leaving a modest earnings retention buffer. Forecast profit attributable to owners of ¥2.343bn supports an implied annual ordinary dividend commitment of approximately ¥1.356bn based on 9.352m average shares. The substantial net cash position and low debt burden provide additional balance-sheet support for the planned shareholder distribution. Treasury shares total 847,607, representing a meaningful reduction in the effective share base and supporting per-share earnings and dividend capacity. The dividend outlook is therefore aligned with the maintained full-year earnings plan and current capital structure.

Risk Assessment

Business risks include Corporate IT infrastructure and DX spending could weaken if small- and medium-sized customers defer system, cloud, network, or security investment amid a softer domestic business environment., The IT Infrastructure segment is the core earnings contributor; slower sales growth, pricing pressure, or execution issues in this segment would have the largest effect on consolidated profit., Competition for cloud, network, cybersecurity, web, and digital-transformation solutions may pressure pricing and require continued spending on personnel, software capabilities, and customer acquisition., The increasing contribution of revenue recognized over time improves revenue continuity but requires sustained service quality, customer retention, and delivery capacity..

Financial risks include Interest-bearing debt is manageable at ¥1.349bn and cash exceeds debt, but interest expense increased to ¥100m from ¥67m year on year; further rate increases would raise the financing burden., Receivables of ¥3.481bn represent 25.2% of total assets, making collection discipline and customer credit quality relevant to liquidity preservation., Total equity declined 4.2% year on year to ¥8.137bn despite quarterly profit generation, while retained earnings declined 4.8%; capital returns and balance-sheet movements should be monitored alongside earnings growth..

Key concerns include Q1 operating-income progress of 19.9% is below the standard 25% first-quarter run rate, making the pace of profit conversion through subsequent quarters an important execution measure., The operating-margin improvement rests mainly on SG&A leverage rather than gross-margin expansion; a reacceleration in personnel or selling costs above revenue growth could reverse part of the 116bp margin gain., DX Solutions' 19.7% segment margin is materially above IT Infrastructure's 8.4%; preserving the high-margin segment's delivery economics is important for consolidated-margin resilience..

Investment Implications

Key takeaways include Revenue grew 7.2%, while operating income and profit attributable to owners increased 18.9% and 25.0%, respectively, demonstrating favorable earnings leverage., Operating margin improved 116bp to 11.7% because SG&A growth of 3.7% remained below sales growth and gross margin held broadly stable., IT Infrastructure is the core profit contributor, while DX Solutions provides the higher-margin earnings stream with a 19.7% segment margin., The balance sheet carries substantial liquidity, low debt-capital intensity, strong interest coverage, and a net cash position., The maintained ¥145 full-year DPS implies a 57.9% dividend payout ratio based on forecast EPS, consistent with the stated earnings plan..

Metrics to watch include Full-year forecast progress, particularly the movement from Q1 operating-income progress of 19.9% toward the ¥3.550bn full-year target., Consolidated operating margin and the relationship between revenue growth and SG&A growth., IT Infrastructure revenue growth and segment margin, given its leading contribution to segment profit., DX Solutions segment margin and its mix contribution to consolidated operating income., Growth in revenue recognized over time, customer retention, and receivables collection relative to sales., Interest expense and interest-bearing debt as domestic financing rates evolve..

Regarding relative positioning, The company combines good-level operating and net margins with excellent annualized ROE, strong liquidity, modest balance-sheet leverage, and limited goodwill exposure. Its financial profile is stronger than that of a highly leveraged IT-services consolidator, while the segment mix provides a balance between the scale of IT Infrastructure and the superior profitability of DX Solutions.