| Metric | Current Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥725.7B | ¥654.4B | +10.9% |
| Operating Income / Operating Profit | ¥92.9B | ¥68.2B | +36.3% |
| Ordinary Income | ¥100.9B | ¥76.4B | +32.1% |
| Net Income | ¥87.7B | ¥52.1B | +68.5% |
| ROE | 9.9% | 6.4% | - |
For the cumulative results through Q2 of the fiscal year ending March 2026, Revenue was ¥725.7B (YoY +¥71.3B +10.9%), Operating Income was ¥92.9B (YoY +¥24.7B +36.3%), Ordinary Income was ¥100.9B (YoY +¥24.5B +32.1%), and Interim Net Income attributable to owners of the parent was ¥84.7B (YoY +¥32.6B +68.5%), achieving revenue growth and significant profit increases. Operating margin improved to 12.8% (prior year 10.4%), a 2.4pt improvement, and net margin improved to 11.7% (prior year 7.5%), a 4.2pt improvement, indicating a substantial enhancement in profitability. Progress toward the full-year plan is 58.1% for Revenue, 110.6% for Operating Income, 106.3% for Ordinary Income, and 128.3% for Net Income, representing significant overperformance on the profit front.
[Revenue] Revenue was ¥725.7B (YoY +10.9%), marking growth. By segment, the Think Tank & Consulting Services segment achieved ¥336.9B (YoY +16.4%) maintaining high growth, while IT Services recorded ¥397.8B (YoY +6.9%) and remained steady. Revenue composition has IT Services at 54.8% and Think Tank & Consulting at 46.4%; the former provides top-line volume while the latter is the main profit contributor. Gross profit was ¥192.8B (YoY +17.3%), and gross margin improved to 26.6% (prior year 25.1%), a 1.5pt improvement, supported by a higher proportion of high value-added projects and the penetration of price revisions.
[Profitability] Operating Income was ¥92.9B (YoY +36.3%), growing substantially faster than revenue. SG&A was ¥99.8B (prior year ¥96.2B), a 3.8% increase, below the revenue growth rate, resulting in an SG&A ratio of 13.8% (prior year 14.7%), a 0.9pt improvement. Ordinary Income was ¥100.9B (YoY +32.1%), with non-operating income of ¥8.2B (including dividend income ¥0.9B and equity-method income ¥6.2B) and non-operating expenses ¥0.2B, resulting in net non-operating income contribution of ¥8.0B. Extraordinary items net contributed ¥11.8B, lifted by gains on sale of investment securities ¥12.5B while impairment losses ¥5.9B were a compressing factor. Profit before income taxes was ¥112.8B; after deducting corporate taxes of ¥25.0B and non-controlling interests of ¥3.0B, Net Income attributable to owners of the parent was ¥84.7B (YoY +68.5%), concluding with revenue growth and significant profit increase.
Think Tank & Consulting Services recorded Revenue of ¥336.9B (YoY +16.4%) and segment profit of ¥84.3B (YoY +49.3%), maintaining a high segment profit margin of approximately 25.0%. IT Services recorded Revenue of ¥397.8B (YoY +6.9%) and segment profit of ¥16.7B (YoY -16.7%), leaving a segment profit margin of approximately 4.2%. The primary profit contributor is Think Tank & Consulting, accounting for about 83% of segment profits. IT Services has a large revenue scale but low margins, and the company-wide margin continues to depend on the project mix from Think Tank & Consulting.
[Profitability] Operating margin 12.8% (prior year 10.4%) and net margin 11.7% (prior year 7.5%) show significant improvement. ROE is 9.9%, above prior-year levels. Gross margin 26.6% improved by 1.5pt, aided by a higher share of high value-added projects and price revisions. [Cash Quality] Operating CF / Net Income ratio is -1.37x, a low level; an increase in trade receivables of ¥239.6B is the main cause of Operating CF of -¥119.9B. OCF/EBITDA (Operating CF ÷ EBITDA ¥110.7B) is -1.08x, indicating high accruals and weak conversion of profits to cash. [Investment Efficiency] Total asset turnover is 0.52x (prior year 0.51x), roughly flat. CapEx / Depreciation ratio is 0.68x, indicating restrained capital expenditure. The provision for contract loss reserves of ¥8.1B suggests risk in fixed-price contracts. [Financial Soundness] Equity Ratio is 63.1% (prior year 63.5%), current ratio 233.0%, quick ratio 232.3%, indicating ample liquidity. Interest coverage is 1,032x, showing negligible interest burden. Debt-to-equity ratio is 0.59x, maintaining a conservative capital structure.
Operating CF was -¥119.9B (prior year -¥115.7B), representing -1.37x relative to Net Income of ¥84.7B, indicating low cash quality. The main causes were an increase in trade receivables of ¥239.6B (order growth and timing shifts in acceptance) and a decrease in bonus reserves of ¥28.7B (payments in H1), partially offset by an increase in accounts payable of ¥64.5B. Operating CF subtotal (before working capital changes) was -¥102.2B, and corporate tax payments of ¥21.4B also had an impact. Investing CF was -¥3.0B, with capital expenditures ¥12.1B and intangible asset investment ¥9.7B offset by proceeds from sale of investment securities ¥16.5B, etc. Financing CF was -¥18.5B, mainly due to dividend payments ¥13.7B and lease liability repayments ¥1.3B. Free CF was -¥123.0B, and FCF coverage of H1 dividends ¥13.7B was -9.0x, a low level. Cash and deposits were ¥156.7B, halving from ¥303.1B a year earlier, reflecting significant outflows due to working capital absorption. DSO is 336 days and CCC is 261 days, both extended; progress on receivables collection in H2 is key to normalizing liquidity.
Recurring earnings consist of Operating Income ¥92.9B, equity-method income ¥6.2B, dividend income ¥0.9B, and interest income ¥0.1B, indicating high sustainability. A one-off item—extraordinary gain of ¥12.5B (gain on sale of investment securities)—pushed up Net Income, while extraordinary losses of ¥0.6B (impairment losses ¥5.9B, loss on retirement of fixed assets ¥0.2B) were recorded. The gain on sale of investment securities is non-recurring; the improvement at the operating level (Operating margin +2.4pt) reflects the underlying earning power. Non-operating income is small at 1.1% of sales, limiting dependency. Comprehensive income was ¥88.6B versus Net Income ¥87.7B, a difference of ¥0.9B affected by valuation differences on securities ¥0.3B and deferred hedge gains/losses ¥0.4B, etc. Accrual quality is concerning with Operating CF / Net Income at -1.37x, where increases in trade receivables are inhibiting cash realization of profits. If receivables collection progress is confirmed for the full year, there is substantial room to improve quality assessment.
The full-year plan calls for Revenue ¥1,250.0B (YoY +2.9%), Operating Income ¥84.0B (YoY +4.9%), Ordinary Income ¥95.0B (YoY -2.4%), and Net Income ¥66.0B. Progress in H1 is 58.1% for Revenue (standard 50% +8.1pt), 110.6% for Operating Income (+60.6pt), 106.3% for Ordinary Income (+56.3pt), and 128.3% for Net Income (+78.3pt), indicating significant overperformance on profits. H1 Net Income includes a one-off gain on sale of investment securities ¥12.5B, but Operating Income also exceeded plan, confirming improvement in core business. Unless there are large expense charges or impairments in H2, the full-year plan is considered conservative. The earnings forecast was revised this quarter, and there is the possibility of an upward revision based on H1 results.
The interim dividend was ¥80 per share; with interim Net Income per share of ¥537.68, the payout ratio was 14.9%, a conservative level. Full-year dividend forecast is ¥85 (prior year ¥80), maintaining a policy of dividend increase. Total dividend amount is approximately ¥13.7B; against H1 Free CF of -¥123.0B, FCF coverage is -9.0x and low, but this largely reflects seasonal factors from increased receivables. Cash and deposits ¥156.7B and current ratio 233.0% indicate ample liquidity, so there is no short-term issue in dividend payment capacity. Treasury stock is 280M shares (0.9% of total assets) and no share buyback was confirmed; shareholder returns are dividend-focused. If Operating CF recovers and receivables normalize over the full year, dividend cash coverage is expected to improve materially, and dividend continuity is assessed as high.
Working capital expansion risk: Trade receivables increased to ¥668.7B (47.6% of total assets), up ¥239.6B YoY, with DSO 336 days and CCC 261 days, extending collection periods. This is the primary cause of Operating CF -¥119.9B; if collection delays persist, on-hand liquidity may be strained. Dependence on acceptance timing of public and large-scale projects remains a structural factor.
Segment margin disparity: Think Tank & Consulting has a segment margin of about 25.0% whereas IT Services is about 4.2%; company-wide margins depend on project mix. If IT Services margin improvement lags, revenue growth may not translate to margin expansion.
Recognition of contract loss provision: The provision for contract loss of ¥8.1B suggests cost-overrun risk in fixed-price contracts. If labor cost inflation or scope changes causing schedule extensions persist, gross margin pressure and additional provisions could materialize.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 12.8% | 14.0% (3.8%–18.5%) | -1.1pt |
| Net Margin | 12.1% | 9.2% (1.1%–14.0%) | +2.9pt |
Operating margin is 1.1pt below the industry median, but net margin is 2.9pt above the median, indicating a relatively large contribution from non-operating and extraordinary items.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 10.9% | 21.0% (15.5%–26.8%) | -10.1pt |
Revenue growth rate is 10.1pt below the industry median; within the IT & Communications sector, the growth pace is relatively moderate.
※Source: Company compilation
In H1, Revenue +10.9% and Operating Income +36.3% achieved revenue growth and significant profit increase, with Operating margin at 12.8% (prior year 10.4%), a 2.4pt improvement. Progress toward the full-year plan shows significant overperformance on profits (Operating Income 110.6%, Net Income 128.3%); even accounting for the H1 extraordinary gain ¥12.5B, improvement at the operating level is confirmed, making an upside to the plan likely.
Working capital expansion (Trade receivables +¥239.6B, DSO 336 days, CCC 261 days) has driven Operating CF to -¥119.9B, and converting profits to cash is a challenge. Progress on receivables collection in H2 and the seasonal drop-off in bonuses and tax payments will be focal points for normalizing Operating CF and evaluating cash flow quality.
Think Tank & Consulting is the main profit engine (segment margin ~25.0%), while IT Services has large revenue scale but a margin of ~4.2%. The company-wide margin remains dependent on a mix skewed to high value-added projects, and improving IT Services profitability is key to sustainable earnings improvement.
This report is an earnings analysis document automatically generated by AI analyzing XBRL earnings summary data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the company based on publicly disclosed financial statements. Investment decisions should be made at your own responsibility and, if necessary, after consulting a professional.