TIS (3626) FY2026 Q3 Earnings Report

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Executive Summary

The key takeaway from these results is that revenue and profit both increased, with operating income growing faster than revenue and thereby improving profitability. Revenue was ¥4,362.5B (+4.7% YoY), operating income was ¥548.0B (+12.1%), ordinary income was ¥557.1B (+10.1%), and net income attributable to owners of the parent was ¥396.5B (net income is presented on a consolidated basis, while the portion attributable to owners of the parent is separately stated as ¥381.96B). The fact that the profit growth rate significantly exceeded the revenue growth rate reflects the effects of operating leverage resulting from an improved gross margin and restrained growth in SG&A expenses.

Factors Affecting Business Performance

【Revenue】Revenue increased 4.7% YoY to ¥4,362.5B. Major segments, including Industrial IT, Wide-Area IT Solutions, and Offering Services, generally contributed to the revenue increase, driven by the capture of customer demand for IT investment. In contrast, Financial IT revenue declined 1.7% due to the peak-out of large-scale development projects in the previous fiscal year and the completion of operations-related work.

【Profit and Loss】Operating income increased 12.1% YoY to ¥548.0B. In addition to the gross profit margin improving by 0.2pt to 28.0%, SG&A expenses were ¥672.6B (+0.8% YoY), with growth successfully restrained. As a result, the operating margin expanded to 12.6% from 11.7% in the previous year. Ordinary income increased 10.1% YoY to ¥557.1B, supported by non-operating income such as dividend income and foreign exchange gains. Profit before tax included extraordinary income of ¥39.4B, including a ¥32.0B gain on the sale of investment securities, and extraordinary losses of ¥27.0B, including an impairment loss of ¥13.9B. However, the net contribution was limited to ¥12.5B, and the increase in net income was primarily attributable to higher operating income. In conclusion, both revenue and profit increased.

Segment Analysis

The Wide-Area IT Solutions segment had the largest revenue composition, at ¥1,335.6B, or 30.6% of total revenue, and is positioned as the core business. The segment recorded operating income of ¥155.8B (+11.3% YoY). Despite deteriorating profitability in public-sector projects, it secured higher revenue and profit through expanded IT investment in the healthcare and industrial sectors and a decrease in one-time expenses.

Industrial IT had the highest margin at 17.0%, with operating income of ¥166.3B (+17.7% YoY), making a significant contribution to company-wide profit growth. BPM also maintained a high margin of 14.2% and posted substantial profit growth, with operating income of ¥46.3B (+23.1%). Despite a 1.7% decline in revenue, Financial IT achieved operating income growth of 5.3% to ¥95.9B, as a shift toward high-value-added businesses such as modernization supported profit growth despite lower revenue. All segments recorded either revenue growth or profit growth, indicating that the improvement in profitability is a company-wide trend.

Key Financial Indicators

Profitability: ROE 15.5% (annualized), operating margin 12.6% (11.7% in the previous year)
Equity Ratio: 65.1% (61.5% in the previous year)
Per-Share Indicators: EPS ¥167.05 (¥148.13 in the previous year, +12.8%)
Liquidity: Current assets of ¥2,733.4B versus current liabilities of ¥1,319.3B; cash and deposits of ¥802.5B
Intangible Assets and Goodwill: Goodwill of ¥81.6B remains low at 2.4% of net assets

Cash Flow Analysis

The materials for these results do not provide specific figures for the cash flow statement, including Operating Cash Flow (OCF), investing cash flow, and financing cash flow. Cash and deposits declined to ¥802.5B from ¥840.1B in the previous year, while treasury stock increased by ¥406.4B, suggesting that cash expenditures related to shareholder returns may have affected the cash balance.

Earnings Quality

Ordinary income was ¥557.1B, ¥9.0B higher than operating income of ¥548.0B, with the difference limited to 1.6%. Non-operating income of ¥23.0B represented 0.5% of revenue, with dividend income of ¥9.5B and foreign exchange gains of ¥4.8B as the primary components. Profit before tax of ¥569.5B exceeded ordinary income by ¥12.5B. This represented the net amount of extraordinary income of ¥39.4B, including a ¥32.0B gain on the sale of investment securities, and extraordinary losses of ¥27.0B, including an impairment loss of ¥13.9B, and is classified as a temporary factor. The gap between ordinary income and net income attributable to owners of the parent was 31.4%, primarily due to income taxes of ¥173.1B and net income attributable to non-controlling interests of ¥14.5B.

Earnings Forecast and Guidance

Progress toward the full-year forecast—revenue of ¥5,880.0B, operating income of ¥750.0B, and ordinary income of ¥750.0B—was 74.2% for revenue, 73.1% for operating income, and 74.3% for ordinary income. Compared with the standard progress rate of 75%, operating income was slightly below pace, although the deviation remained within 10pt. The company maintained its full-year plan without revision. Required revenue in the second half is approximately ¥1,517B, and required operating income is approximately ¥202B. These levels are considered achievable, as they are slightly above the results for the second half of the previous year. Orders received increased moderately to ¥3,911B cumulatively for the current period (+2.1% YoY), while the order backlog declined YoY, indicating a slight decrease in future revenue visibility.

Shareholder Returns

The Q2 dividend was ¥38.00 per share, and the full-year forecast dividend is ¥76.00 per share. Based on forecast EPS of ¥220.70, the forecast Payout Ratio is approximately 34.4%. Treasury stock increased by ¥406.4B, from ¥119.6B in the same period of the previous year to ¥526.0B, indicating efforts to strengthen capital returns in addition to dividends. However, because details of the treasury stock acquisition amount have not been provided, the figure is described as the “Payout Ratio” based on dividends only.

Catalysts

【Short Term】Progress toward achieving the Q4 plan of approximately ¥1,517B in revenue and approximately ¥202B in operating income, as well as trends in orders received and the order backlog.

【Long Term】Order wins in the payments and enterprise fields, progress in shifting toward high-value-added businesses such as modernization, and the ability to balance growth investment—including investment in human resources—with the maintenance of profitability.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

The company has a profitability level significantly above the industry median and ranks among the higher-performing companies in the IT and communications industry.

Growth and Capital Efficiency

Revenue growth is below the industry median, indicating a relatively moderate level of growth.

※Source: Compiled by the company

Risk Factors

1. Prolonged collection period for trade receivables: Trade receivables and notes receivable were ¥1,329.0B, down from ¥1,513.1B in the previous year. However, DSO is considered to remain high, and the risk of prolonged acceptance and billing cycles—characteristic of project-based IT services—requires continued monitoring.

2. Demand fluctuations by segment: Financial IT revenue declined due to the peak-out of large-scale development projects in the previous fiscal year and the completion of operations-related work. Other factors dependent on project composition include the completion of the system replacement cycle for accounting firms and deteriorating profitability in public-sector projects.

3. Decline in the order backlog: While orders received increased 2.1% YoY, the order backlog declined YoY, making it an item to monitor when assessing future revenue-generating capacity.

Key Points from the Results

1. The operating margin improved by 82bp to 12.6%, clearly reflecting the effects of operating leverage from improved gross margins and restrained SG&A expenses. The decline in unprofitable projects, with a positive impact of ¥10.9B, contributed to this improvement and is notable as a structural factor supporting enhanced profitability.

2. Extraordinary gains and losses included both a gain on the sale of investment securities and impairment losses, resulting in a limited net contribution. Accordingly, the increase in net income can be interpreted as primarily attributable to improved operating income from the core business.

3. The decline in the order backlog contrasts with the moderate increase in orders received, making its trend important to monitor as a leading indicator of future revenue.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,741–¥1,844 at ±1% for the cost of equity, and ¥1,785–¥1,801 at ±0.1 for ω.

Notes:

• Net assets as of the end of the quarter are used (there is a timing difference relative to the full-year forecast).
• Because 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 / This is a mechanically calculated value based solely on publicly disclosed data; it 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 automatically generated earnings analysis prepared by an AI through an integrated analysis of XBRL earnings summary data and PDF earnings presentation materials. 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 a professional as necessary.

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