TIS Inc. FY2027 Q1 Earnings Report

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Executive Summary

All reported segments posted revenue growth during the quarter, resulting in higher revenue and higher earnings, with Operating Income growth exceeding Revenue growth and profitability improving. Revenue was ¥1501.1B (+7.0% year on year), Operating Income was ¥183.5B (+12.2%), Ordinary Income was ¥184.2B (+8.0%), and consolidated Net Income was ¥148.3B (+14.1%; of which Net Income attributable to owners of the parent was ¥144.1B, +15.1%). The Operating Income margin improved to 12.2% (11.6% in the previous year), primarily due to growth in high-margin businesses such as Industrial IT and Financial IT, as well as a decline in the SG&A ratio. In addition, Net Income growth benefited from ¥28.5B in extraordinary income, mainly gains on the sale of investment securities.

Factors Affecting Results

【Revenue】All reported segments posted revenue growth, bringing the top line to ¥1501.1B (+7.0% year on year). Based on the total of the segments, the revenue composition was led by Wide-Area IT Solutions at ¥458.6B (+4.7%), followed by Offering Services at ¥398.3B (+9.9%), Industrial IT at ¥340.8B (+5.3%), Financial IT at ¥258.0B (+9.2%), and BPM at ¥110.5B (+3.4%). Financial IT and Offering Services recorded relatively high growth rates and drove overall revenue growth.

【Profit and Loss】Operating Income increased by 12.2% to ¥183.5B, exceeding the revenue growth rate, and the Operating Income margin improved to 12.2% (11.6% in the previous year). While the gross margin was broadly flat at 27.6% (+0.1pt), the SG&A ratio declined to 15.4% (-0.5pt), with improved cost efficiency contributing to earnings growth. By segment, Industrial IT (Operating Income of ¥62.0B, +21.4%, margin of 18.2%) and Financial IT (¥35.3B, +18.4%, margin of 13.7%) led earnings growth through their high margins, while Wide-Area IT Solutions (¥52.7B, +9.0%) also posted higher earnings. In contrast, despite revenue growth of +9.9%, Offering Services recorded Operating Income of ¥16.4B (-5.0%), representing a decline in earnings, and its margin decreased to 4.1%. Ordinary Income was ¥184.2B (+8.0%), while Profit Before Tax increased to ¥210.8B, boosted by ¥28.5B in extraordinary income, mainly including ¥24.9B in gains on the sale of investment securities. Consolidated Net Income was ¥148.3B (+14.1%), of which ¥144.1B (+15.1%) was attributable to owners of the parent. Revenue and earnings both increased.

Segment Analysis

Industrial IT recorded Revenue of ¥340.8B (+5.3%), Operating Income of ¥62.0B (+21.4%), and a margin of 18.2%, the highest profitability among all segments, making it the primary driver of company-wide earnings growth. Wide-Area IT Solutions had the largest revenue scale at ¥458.6B (+4.7%), with Operating Income of ¥52.7B (+9.0%) and a margin of 11.5%. Financial IT recorded Revenue of ¥258.0B (+9.2%), Operating Income of ¥35.3B (+18.4%), and a margin of 13.7%, representing relatively high growth in both revenue and earnings. Offering Services had the second-largest revenue scale at ¥398.3B (+9.9%), but Operating Income declined to ¥16.4B (-5.0%) and the margin was 4.1%, the lowest among all segments, resulting in higher revenue but lower earnings. BPM was broadly flat, with Revenue of ¥110.5B (+3.4%), Operating Income of ¥14.4B (+1.0%), and a margin of 13.0%. Expansion of the high-margin Industrial IT and Financial IT businesses offset the decline in Offering Services’ profitability, leading to an improvement in the company-wide Operating Income margin.

Key Financial Metrics

【Profitability】The Operating Income margin improved by +0.6pt to 12.2% (11.6% in the previous year), while the Ordinary Income margin was broadly flat at 12.3% (12.2%). The Net Income margin, based on income attributable to owners of the parent, improved by +0.7pt to 9.6% (8.9% in the previous year). ROE (Net Income attributable to owners of the parent ÷ equity at period-end) rose to 4.9% (3.9% in the previous year); however, this is a quarterly result and should not be interpreted as an annualized figure. 【Cash Quality】Trade receivables were ¥1212.6B, down -15.9% from ¥1441.1B in the previous year. Annualized DSO shortened to approximately 74 days (approximately 94 days in the previous year), and CCC, taking inventories and trade payables into account, also improved to approximately 55 days (approximately 72 days in the previous year), indicating improved working capital efficiency year on year. 【Investment Efficiency】Total assets were ¥5246.6B (¥5515.1B in the previous year, -4.9%), while net assets were ¥3042.3B (¥3377.3B in the previous year, -9.9%). Progress in share repurchases is considered the primary factor behind the decline in net assets. 【Financial Soundness】The Equity Ratio declined by 3.2pt to 55.7% (58.9% in the previous year), while the current ratio remained at 151.5%. Cash and deposits of ¥820.6B exceeded total interest-bearing debt of ¥594.1B (short-term ¥513.1B + long-term ¥83.0B), and no significant near-term funding concerns are apparent.

Cash Flow Analysis

Cash and deposits were ¥820.6B, down -5.9% from ¥872.4B in the previous year. The ¥228.5B reduction in trade receivables from the previous year was a source of cash generation. Meanwhile, short-term borrowings increased by +¥299.8B to ¥513.1B (¥213.3B in the previous year), and treasury shares at book value increased by +¥357.4B to ¥670.2B (¥312.8B in the previous year). This suggests that funding needs associated with capital policies, including share repurchases, may have affected the cash balance. Long-term borrowings decreased to ¥83.0B (¥135.0B in the previous year), indicating a shift in the composition of interest-bearing debt toward greater reliance on short-term funding.

Quality of Earnings

The recurring earnings base is centered on Operating Income, while non-operating income and expenses were broadly balanced at income of ¥10.9B and expenses of ¥10.1B, representing only 0.7% of Revenue. Profit Before Tax of ¥210.8B included ¥28.5B in extraordinary income, primarily comprising ¥24.9B in gains on the sale of investment securities. After deducting ¥2.0B in extraordinary losses, the net amount of ¥26.5B represented a temporary factor accounting for 12.6% of Profit Before Tax. The effective tax rate was 29.6%, a standard level. Comprehensive Income was ¥131.4B (¥127.4B attributable to owners of the parent), representing a -¥16.7B gap from Net Income of ¥144.1B attributable to owners of the parent. The primary factors were negative other comprehensive income (OCI), including valuation differences on securities of -¥14.2B and adjustments related to retirement benefits of -¥3.6B. Comprehensive Income declined -13.4% year on year, moving in the opposite direction from Net Income growth of +15.1%. It should be noted that temporary factors, including gains on the sale of investment securities, made a meaningful contribution to earnings growth during the period.

Earnings Forecast and Guidance

Q1 progress against the full-year plan (Revenue of ¥6200B, Operating Income of ¥810B, Ordinary Income of ¥810B, and Net Income attributable to owners of the parent of ¥570B) was 24.2% for Revenue, 22.7% for Operating Income, 22.8% for Ordinary Income, and 25.3% for Net Income. Compared with standard progress (Q1 = 25%), Revenue, Operating Income, and Ordinary Income were slightly below the expected pace, while Net Income was broadly in line with the plan. The company has made no revisions to either its earnings forecast or dividend forecast.

Shareholder Returns

The company’s full-year dividend plan is ¥45, representing an increase of +18.4% from the previous year’s actual dividend of ¥38. The Payout Ratio against forecast EPS of ¥271.7 is 16.6%. Treasury shares increased by ¥357.4B to ¥670.2B (¥312.8B in the previous year), suggesting the use of share repurchases as part of shareholder returns; however, the acquisition amount during the period, on a flow basis, cannot be determined from the available data. Given cash and deposits of ¥820.6B and interest-bearing debt of ¥594.1B, the company appears to have ample capacity to fund dividends.

Risk Factors

1. Change in short-term funding composition: Short-term borrowings were ¥513.1B, up +140.5% from ¥213.3B in the previous year, and accounted for 86.4% of total interest-bearing debt of ¥594.1B. Although cash and deposits of ¥820.6B exceed interest-bearing debt, monitoring is required regarding the concentration of refinancing maturities and the impact of interest-rate fluctuations.

2. Variability in segment profitability: Offering Services recorded Operating Income of ¥16.4B, down -5.0%, with a margin of 4.1%, substantially below the company-wide Operating Income margin of 12.2%. Profitability declined despite revenue growth of +9.9%, and the impact of changes in the earnings mix on the company-wide margin requires close monitoring.

3. Quality of earnings: Of Profit Before Tax of ¥210.8B, extraordinary income, net of extraordinary losses, amounted to ¥26.5B, primarily comprising gains on the sale of investment securities of ¥24.9B, and accounted for 12.6%. Comprehensive Income declined -13.4% year on year, contrary to Net Income growth, and valuation fluctuations in securities and other assets may become a factor affecting future earnings volatility.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Both the Operating Income margin and Net Income margin exceeded the industry median, indicating relatively high profitability within the industry.

Growth and Capital Efficiency

The Revenue growth rate was slightly below the industry median, placing the company at a middle level within the industry in terms of growth.

※Source: Compiled by the company

Key Points in the Earnings Results

1. The Operating Income margin improved to 12.2% (11.6% in the previous year), driven by the expansion of high-margin businesses such as Industrial IT (margin of 18.2%) and Financial IT (13.7%), as well as a decline in the SG&A ratio (15.4%, -0.5pt).

2. Trade receivables declined -15.9% year on year, and annualized DSO shortened to approximately 74 days (approximately 94 days in the previous year), indicating improved working capital efficiency. Meanwhile, the Equity Ratio declined to 55.7% (58.9% in the previous year), making the balance between progress in share repurchases and financial soundness an area for future monitoring.

3. Net Income benefited from extraordinary income, including gains on the sale of investment securities of ¥24.9B, while Comprehensive Income declined -13.4% year on year, moving differently from Net Income growth. Separating recurring earnings power from temporary factors is important for understanding the quality of the results.

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 5-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥1,885–¥2,002 at ±1% for the cost of equity capital, and ¥1,929–¥1,963 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 higher.

(Calculation model: Residual income model / Interest rate reference month: 2026-06 / 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 a professional as necessary.

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