istyle Inc. FY2026 FY Earnings Report

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Executive Summary

The results clearly reflect increases in both revenue and earnings, with Operating Income, Ordinary Income, and Net Income all posting double-digit growth, primarily driven by top-line expansion. Revenue was ¥818.1B (¥687.7B in the previous year, +19.0%), Operating Income was ¥40.9B (¥31.6B, +29.1%), Ordinary Income was ¥42.4B (¥33.1B, +28.2%), and Net Income attributable to owners of the parent was ¥30.1B (¥23.3B, +29.4%). The earnings growth rate exceeding the revenue growth rate was attributable to the expansion of the high-margin Marketing Solutions Business and the absorption of SG&A expenses through economies of scale in the Retail Business.

Factors Affecting Performance

【Revenue】Revenue was ¥818.1B, representing a year-on-year increase of +19.0%. By segment, the Retail Business accounted for the largest share of revenue at ¥621.7B (76.0% of total, +16.0%), followed by the Marketing Solutions Business at ¥139.8B (17.1%, +23.6%) and the Global Business at ¥57.9B (7.1%, +38.5%). All three businesses recorded revenue growth. The Global Business posted the highest growth rate, indicating continued expansion in business scale.

【Profit and Loss】Operating Income was ¥40.9B (+29.1%) and Ordinary Income was ¥42.4B (+28.2%), with earnings growth exceeding revenue growth. The primary factor driving Operating Income was the growth in profit from the high-margin Marketing Solutions Business, which has a margin of 25.1% and increased profit to ¥35.2B (+24.6%). The Retail Business also steadily increased profit to ¥36.0B (+15.5%, margin of 5.8%) in line with scale expansion. Meanwhile, revenue growth in the Global Business preceded profitability, and its operating loss widened to ¥3.6B year on year. The gap between Ordinary Income and Net Income attributable to owners of the parent (¥42.4B → ¥30.1B) was primarily due to the ¥12.6B burden of corporate income taxes and other taxes, while extraordinary income and expenses were limited in scale, with net extraordinary income of ¥0.4B. Overall, the results represent increases in both revenue and earnings, with an improved earnings mix driving profit growth.

Segment Analysis

The Retail Business generated revenue of ¥621.7B (76.0% of total, +16.0%) and Operating Income of ¥36.0B (+15.5%), with a profit margin of 5.8%. It is the largest business by revenue, but its profit margin is relatively low. The Marketing Solutions Business generated revenue of ¥139.8B (17.1% of total, +23.6%) and Operating Income of ¥35.2B (+24.6%), resulting in a high profit margin of 25.1% and effectively driving more than half of consolidated Operating Income. The Global Business posted the highest growth rate, with revenue of ¥57.9B (7.1% of total, +38.5%), but recorded an operating loss of ¥3.6B, with the loss widening year on year. Scale expansion has preceded monetization. Other Businesses generated revenue of ¥23.5B (+54.2%) and Operating Income of ¥1.9B (profit margin of 8.1%). The revenue mix shows a high dependence on the low-margin Retail Business, while the profit mix is characterized by the significant contribution of the high-margin Marketing Solutions Business, resulting in an asymmetric structure.

Key Financial Metrics

【Profitability】The Operating Income margin was 5.0%, improving by +0.4pt from 4.6% in the previous year. The Ordinary Income margin was 5.2% (4.8% in the previous year), while the Net Income margin attributable to owners of the parent was 3.7% (3.4% in the previous year). Each metric improved, indicating a gradual upward trend in profitability.【Cash Quality】Operating Cash Flow (OCF) of ¥59.6B reached approximately twice consolidated Net Income for the current period, indicating strong cash-generation capacity.【Investment Efficiency】ROE was 12.7%, with the high total asset turnover ratio—Revenue of ¥818.1B against total assets of ¥403.9B—supporting returns alongside the profit margin.【Financial Soundness】The Equity Ratio was 58.9%. Net assets expanded to ¥237.8B from the previous year’s level based on net assets of ¥170.1B and total assets of ¥346.0B, strengthening the financial base. Liquidity also remains ample, with current assets of ¥247.5B against current liabilities of ¥114.6B.

Cash Flow Analysis

Operating Cash Flow was ¥59.6B, a substantial increase from the equivalent of ¥31.4B in the previous year. Investing Cash Flow was negative ¥33.2B, including capital expenditures of ¥16.2B. As a result, Free Cash Flow (Operating Cash Flow + Investing Cash Flow) was positive at ¥26.4B. Financing Cash Flow was slightly negative at ¥1.2B, primarily reflecting repayments of long-term borrowings and related items. In terms of working capital, inventories increased by ¥9.9B and trade receivables increased by ¥5.1B, absorbing cash, while the ¥7.1B increase in trade payables partially offset this impact. Inventory and receivables continued to build in line with business growth. Cash and deposits accumulated to ¥97.5B, securing financial flexibility for investment and shareholder returns.

Quality of Earnings

Current-period earnings were primarily generated by recurring business activities. Extraordinary income was ¥0.4B, while extraordinary losses were immaterial, indicating limited impact from non-recurring factors. Non-operating income of ¥2.6B was diversified among foreign exchange gains of ¥0.7B, dividend income of ¥0.1B, and other items, with no dependence on a single temporary factor. The gap between Ordinary Income of ¥42.4B and Net Income attributable to owners of the parent of ¥30.1B (approximately 29%) was primarily due to the ¥12.6B burden of corporate income taxes and other taxes and is within a range explainable by the effective tax rate. The fact that OCF has remained above Net Income suggests that reported earnings reflect underlying economic activity accompanied by cash generation.

Earnings Forecast and Guidance

Progress against the full-year forecast was 90.9% for Revenue (¥818.1B / ¥900.0B), 81.7% for Operating Income (¥40.9B / ¥50.0B), and 83.2% for Ordinary Income (¥42.4B / ¥51.0B). In contrast, Net Income substantially exceeded the full-year forecast of ¥14.0B, reaching actual results of ¥30.1B attributable to owners of the parent, representing progress of more than 200%. The fact that progress in Revenue, Operating Income, and Ordinary Income is relatively low compared with the forecasts, while Net Income substantially exceeds its forecast, may indicate a significant variance between the tax burden and non-operating factors assumed when the full-year forecast was prepared and the actual results.

Shareholder Returns

The year-end dividend was ¥1, and the Payout Ratio remained low at 3.3%, suggesting a policy that prioritizes retained earnings. Against OCF of ¥59.6B and Free Cash Flow of ¥26.4B, total dividends were small at ¥0.9B, resulting in substantial cash-flow coverage of dividends. Given the sizable cash and deposits balance of ¥97.5B, the current dividend level is not considered to impose financial constraints on sustainability.

Risk Factors

1. Dependence on the Retail Business for Revenue: The Retail Business accounts for 76.0% of total Revenue, meaning that demand trends in this business have a significant impact on consolidated performance. Its profit margin is relatively low at 5.8%, and fluctuations in promotional expenses and inventory policies may cause volatility in results.

2. Monetization of the Global Business: The Global Business is growing rapidly, with revenue of ¥57.9B (+38.5%), but its operating loss widened year on year to ¥3.6B (margin of -6.1%). The timeline for monetization relative to scale expansion will be subject to monitoring.

3. Build-Up of Working Capital: Inventories increased to ¥74.4B (up ¥9.9B during the current period), while trade receivables increased to ¥60.6B (up ¥5.1B during the current period). Attention should be paid to the potential for funds to become tied up in growth investments, as well as margin deterioration caused by inventory obsolescence and pricing pressure.

Industry Benchmark (For Reference; Based on Company Research)

Industry Benchmark (it_telecom)

Profitability and Returns

Compared with the industry median, both the Operating Income margin and Net Income margin are lower, placing profitability relatively low within the industry.

Growth and Capital Efficiency

The Revenue growth rate significantly exceeds the industry median, placing the company among the industry leaders in terms of growth.

※Source: Company research

Key Takeaways from the Financial Results

1. The earnings growth rate (Operating Income +29.1%) exceeding the revenue growth rate (+19.0%) reflects an improved earnings mix resulting from the expansion of the high-margin Marketing Solutions Business. Compared with the industry, the Operating Income margin and Net Income margin are below the median, while the Revenue growth rate significantly exceeds the median.

2. Progress against the full-year forecast is relatively moderate at 90.9% for Revenue and 81.7% for Operating Income. However, Net Income substantially exceeds the forecast, and consistency with the full-year outlook, including the tax burden and non-operating factors, will require continued monitoring.

3. While the Global Business posted high revenue growth (+38.5%), its operating loss expanded. Progress toward a turnaround in the business’s profitability will be a structural factor affecting consolidated profitability from the next period onward and therefore warrants attention.

Theoretical Share Price (Reference Value)

Sensitivity: ¥205–¥217 at ±1% for the cost of equity, and ¥211–¥212 at ±0.1 for ω.

Notes:

• Goodwill amortization of ¥2.1 per share has been added back to earnings (due to its non-cash nature and to improve comparability with IFRS companies).
• Net Income is substantially compressed relative to Operating Income (Net Income ÷ Operating Income: 28%) due to the tax burden, acquisition-related expenses, non-controlling interests, and other factors. This value reflects that compression at face value; if these factors are temporary, the underlying earnings power may be higher.
• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated solely from publicly disclosed data; this does not constitute a forecast of the market share price or a recommendation of any specific investment action, nor does it predict or guarantee the future share price.)

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This report is an earnings analysis document automatically generated by AI through analysis of 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 discretion and responsibility, after consulting with professionals as necessary.

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