CELSYS,Inc. FY2026 Q2 Earnings Report

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Executive Summary

In Q2, the Company reported higher revenue and higher profits, with net income increasing substantially due to the absence of the extraordinary loss recorded in the previous year. The results showed clear improvements in both profitability and capital efficiency. Revenue was ¥5.56B (+17.4% YoY), Operating Income was ¥2.22B (+44.8% YoY), Ordinary Income was ¥2.24B (+46.4% YoY), and Net Income was ¥1.50B (+72.6% YoY), representing double-digit growth in both revenue and profit across all measures. The primary reasons why the profit growth rates significantly exceeded the revenue growth rate were an improvement in the gross margin accompanying a decline in the cost-of-sales ratio (69.6%, +9.5pt from 60.1% in the previous year) and the absence in the current period of the ¥0.48B impairment loss on investment securities recorded in the same period of the previous year.

Factors Affecting Performance

【Revenue】Revenue was ¥5.56B, representing a 17.4% YoY increase. Although segment-level disclosure is not available, advances received increased 22.2% YoY to ¥1.62B, suggesting that the accumulation of recurring revenue associated with contract renewals supported revenue growth. Cost of sales decreased 10.4% YoY to ¥1.69B, and the cost-of-sales ratio declined to 30.4% from 39.9% in the previous year.

【Profit and Loss】Operating Income was ¥2.22B (+44.8% YoY), Ordinary Income was ¥2.24B (+46.4% YoY), and Net Income was ¥1.50B (+72.6% YoY), with profit growth rates exceeding the revenue growth rate. The improvement in the gross margin absorbed the increase in the SG&A ratio (29.6%, +1.9pt from 27.7% in the previous year), expanding the operating margin to 39.9% (+7.5pt from 32.4% in the previous year). The ¥0.48B impairment loss on investment securities recorded in the same period of the previous year did not occur in the current period, eliminating a factor depressing results from Ordinary Income through Net Income and further boosting the Net Income growth rate. No extraordinary gains or losses were recorded in the current period, while temporary factors were concentrated in the previous year. In conclusion, the Company reported higher revenue and higher profits, with the results characterized by operating leverage, as the profit growth rate significantly exceeded the revenue growth rate.

Key Financial Metrics

【Profitability】The operating margin was 39.9%, improving by +7.5pt from 32.4% in the previous year, while the net profit margin was 27.0%, improving by +8.6pt from 18.4% in the previous year. The gross margin rose to 69.6% from 60.1% in the previous year, serving as the primary driver of the profitability improvement.【Cash Quality】Cash and deposits were ¥5.41B, accounting for 58.7% of total assets. Together with advances received of ¥1.62B, this indicates a structure characterized by upfront cash collection. Trade receivables were ¥0.41B, equivalent to only 7.4% of revenue, indicating a limited collection burden.【Investment Efficiency】ROE was 27.6%, which can be explained as the product of a 27.0% net profit margin, 0.60x total asset turnover, and 1.70x financial leverage. Total asset turnover is at a standard level for a deferred-revenue model.【Financial Soundness】The equity ratio was 59.0% (+5.0pt from 54.0% in the previous year). Current assets of ¥6.41B versus current liabilities of ¥3.23B resulted in a current ratio of approximately 198%, indicating strong short-term payment capacity.

Cash Flow Analysis

As no figures from the statement of cash flows indicating cash flow from operating activities are available, cash movements are reviewed based on changes in the balance sheet. Cash and deposits increased by ¥1.32B (+32.4%) from ¥4.09B in the previous year to ¥5.41B. Advances received increased 22.2% YoY to ¥1.62B, suggesting that early cash collection under contracts supported cash generation. Income taxes payable increased 70.0% YoY to ¥0.77B, reflecting the natural increase in tax payments accompanying higher profits and suggesting a timing difference in cash outflows. Property, plant and equipment was small at ¥0.15B, indicating a limited burden from capital investment and limited constraints on cash outflows for capital expenditures. Overall, the deferred-revenue model and low capital intensity supported the accumulation of cash in line with earnings growth.

Quality of Earnings

The difference between Ordinary Income and Net Income in the current period was primarily attributable to tax expenses, and no temporary factor such as the ¥0.48B impairment loss on investment securities recorded in the same period of the previous year was recognized in the current period. Non-operating income primarily consisted of dividends received of ¥0.03B and interest received of ¥0.01B, while non-operating expenses were limited to a foreign exchange loss of ¥0.01B, resulting in a small net non-operating gain of ¥0.02B. The valuation difference on other securities was ¥86.22M, down from ¥121.70M in the previous year, suggesting that comprehensive income may be slightly below Net Income for the current period. Extraordinary gains and losses were immaterial in both the current period and the previous year, and earnings for the current period consisted primarily of Operating Income generated by the core business, indicating an improvement in earnings quality compared with the previous year.

Earnings Forecast and Guidance

Full-year progress was 51.5% for Revenue, 55.5% for Operating Income, 56.0% for Ordinary Income, and 56.3% for Net Income, exceeding the simple 50% benchmark for the first half of the fiscal year. EPS was ¥50.70, representing 56.3% progress against the full-year forecast of ¥90.06. The Company has not announced any revisions to its earnings forecast or dividend forecast, and its full-year outlook remains unchanged. Progress in the first half was generally on track relative to the full-year forecast.

Shareholder Returns

The Company paid a first-half dividend of ¥20 per share, of which ¥10 was a commemorative dividend marking its listing on the Tokyo Stock Exchange Prime Market. The full-year dividend forecast is ¥50 per share, with the year-end dividend of ¥30 including a ¥10 commemorative dividend marking the Company’s 35th anniversary. Based on the Company’s EPS forecast of ¥90.06, the payout ratio is approximately 55.5%. Given the substantial cash balance of ¥5.41B and stable cash-generation capacity supported by deferred revenue, the sustainability of dividend payments remains at a sound level. No share repurchase program was disclosed.

Risk Factors

1. Front-loaded increase in SG&A expenses: SG&A expenses increased 25.4% YoY to ¥1.65B, exceeding the 17.4% growth in revenue. The SG&A ratio rose to 29.6% from 27.7% in the previous year, an increase of +1.9pt, indicating that investment is being front-loaded at a pace exceeding revenue growth.

2. Valuation fluctuations in investment securities: The valuation difference on other securities was ¥86.22M, down from ¥121.70M in the previous year. The Company recorded an impairment loss on investment securities of ¥0.48B in the same period of the previous year, and changes in the market value of its securities holdings may affect earnings.

3. Increasing dependence on advances received: Advances received increased 22.2% YoY to ¥1.62B, raising their share of current liabilities. Because this entails an increase in future service obligations, trends in costs and service-delivery expenses should be closely monitored.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Return

Both the operating margin and net profit margin substantially exceeded the industry median, placing the Company among the industry’s higher performers in terms of profitability.

Growth and Capital Efficiency

The revenue growth rate was slightly below the industry median, positioning the Company around the industry average to somewhat modest in terms of growth speed.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. The gross margin rose to 69.6% from 60.1% in the previous year, and the decline in the cost-of-sales ratio drove the expansion of the operating margin to 39.9% from 32.4% in the previous year. The sustainability of the gross margin in light of the product mix and pricing trends will be a key focus going forward.

2. The ¥0.48B impairment loss on investment securities recorded in the same period of the previous year did not occur in the current period, and the Net Income growth rate of +72.6% exceeded the Operating Income growth rate of +44.8%. Attention should be paid to divergences in growth rates caused by the presence or absence of extraordinary gain or loss factors.

3. Advances received accumulated to ¥1.62B (+22.2% YoY), indicating an expanding recurring revenue base and early cash collection. At the same time, SG&A expenses are increasing at a pace exceeding revenue growth, making the sustainability of operating leverage a key point of focus.

Theoretical Share Price (Reference Value)

This is a reference range mechanically calculated solely from publicly available 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 of any specific investment action.

Sensitivity: ¥422–¥447 at ±1% for the cost of equity, and ¥427–¥444 at ±0.1 for ω.

Notes:

• Because forecast ROE is high, ROE is capped at 50% for calculation purposes (the differences between scenarios may appear small).
• Net assets as of the quarter-end 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: 2026-06 / This value does not forecast 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 available earnings data. Investment decisions should be made at your own responsibility and, where necessary, after consulting with a professional.

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