Broadleaf (3673) FY2026 Q1 Earnings Report

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Executive Summary

The Q1 of the fiscal year ending December 2026 produced higher revenue and profit, with a significant improvement in profit margins. Revenue was ¥5.52B (+15.9% YoY), Operating Income was ¥0.85B (+141.8%), Profit Before Tax was ¥0.83B (+180.0%), and quarterly profit attributable to owners of the parent was ¥0.54B (+175.1%). A key feature was that Operating Income expanded substantially faster than revenue, driven by an improvement in the gross profit margin and controlled growth in SG&A expenses.

Factors Affecting Performance

【Revenue】Revenue increased to ¥5.52B, up +15.9% YoY. As the Company operates a single IT Services Business, there is no breakdown by segment; growth across the business as a whole drove the top line.

【Profit and Loss】The cost of revenue ratio declined to 32.0% from 34.4% in the same period of the previous year, improving the gross profit margin to 68.0%, up +2.4pt YoY. SG&A expenses were ¥2.90B, increasing only +5.2% YoY and remaining substantially below the revenue growth rate; consequently, the SG&A ratio declined to 52.6% from 58.0%. As a result, Operating Income improved significantly to ¥0.85B (+141.8%), and the Operating Income margin rose to 15.5% from 7.4%. Profit Before Tax, after deducting ¥0.02B in finance costs, was ¥0.83B, while Net Income was ¥0.53B (+174.6%), resulting in higher revenue and profit.

Segment Analysis

As the Group operates in a single IT Services Business segment, segment-specific disclosures have been omitted.

Key Financial Indicators

【Profitability】The Operating Income margin was 15.5%, improving by +8.1pt from 7.4% in the same period of the previous year, while the Net Income margin also rose by +5.5pt to 9.6% from 4.1%. The gross profit margin improved to 68.0% from 65.6%, with efficiency improvements in both cost of revenue and SG&A expenses contributing to the result.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥1.24B, approximately 2.3 times Net Income of ¥0.53B. The reduction in trade receivables and inventories contributed to an improvement in working capital, indicating solid cash-generation capacity supporting earnings.【Investment Efficiency】Annualized ROE was 8.6%. The low total asset turnover, together with intangible assets of ¥19.02B (45.4% of total assets) and goodwill of ¥11.17B (26.6% of total assets), represents a structural constraint on asset efficiency.【Financial Soundness】The Equity Ratio was maintained at 58.6%, at the same level as in the same period of the previous year. Total interest-bearing debt was ¥5.17B, while current liabilities of ¥14.69B exceeded current assets of ¥7.52B, resulting in a current ratio of only 51.2%. However, contract liabilities, which represent deferred revenue, account for the majority of current liabilities at ¥8.53B; it should be noted that their cash outflow characteristics differ from those of ordinary financial debt.

Cash Flow Analysis

OCF was ¥1.24B, a substantial increase from ¥0.34B in the same period of the previous year, confirming cash generation exceeding Net Income of ¥0.53B. Collection of trade receivables of ¥0.29B and a ¥0.12B decrease in inventories contributed to the improvement in working capital, while a ¥0.27B decrease in trade payables and a ¥0.36B decrease in accrued employee bonuses partially offset these factors. Investing Cash Flow was an outflow of ¥1.12B, most of which consisted of ¥1.11B in intangible asset acquisitions, indicating continued growth investment. Financing Cash Flow was an outflow of ¥0.85B, primarily due to dividend payments of ¥0.32B, repayment of long-term borrowings of ¥0.30B, and repayment of lease liabilities of ¥0.21B. Free Cash Flow, calculated as OCF less Investing Cash Flow, was limited to a surplus of ¥0.12B, below the dividend payment of ¥0.32B for the quarter. Consequently, cash and cash equivalents declined from ¥4.12B at the beginning of the period to ¥3.39B, making it necessary to continue monitoring cash levels while investment and shareholder returns are being implemented simultaneously.

Quality of Earnings

The improvement in earnings during the quarter resulted from an improvement in the gross profit margin and greater SG&A efficiency in the core business, with no one-off factors such as extraordinary gains or losses identified. Non-operating items included finance income of ¥0.004B and finance costs of ¥0.023B, leaving Profit Before Tax only slightly below Operating Income; the source of earnings was therefore Operating Income. OCF was approximately 2.3 times Net Income, and the improvement in working capital resulting from reductions in trade receivables and inventories supported cash generation; accordingly, earnings enhancement from accruals—the accumulation of uncollected revenue—was limited. Comprehensive Income was ¥0.54B, almost equal to Net Income attributable to owners of the parent of ¥0.54B, indicating that the impact of other comprehensive income was minor. Nevertheless, it will be necessary to continue monitoring whether the improvement in working capital is recurring in subsequent quarters.

Earnings Forecast and Guidance

The full-year forecast remains unchanged at Revenue of ¥23.50B, Operating Income of ¥4.80B (+132.7% YoY), EPS of ¥35.35, and a dividend of ¥15.00. Progress in Q1 was 23.5% for Revenue and 17.8% for Operating Income (¥0.85B/¥4.80B). While revenue was broadly in line with the standard 25% progress rate, Operating Income remained 7.2pt below 25%. However, Q1 is susceptible to seasonal factors, and maintaining or improving profit margins from Q2 onward will be a challenge in achieving the full-year plan.

Shareholder Returns

The full-year dividend forecast is ¥15.00 per share, with no revision. Based on the average number of shares outstanding during the period of 90,255,873 shares, the annual total dividend is estimated at approximately ¥1.35B, implying an estimated Payout Ratio of approximately 42.3% against the full-year Net Income forecast of ¥3.20B. Dividend payments during the quarter were ¥0.32B (¥0.18B in the same period of the previous year, +76.7% YoY), suggesting a trend toward higher dividends. Although treasury shares were disposed of, no cash outflow from share repurchases has been identified; therefore, the Payout Ratio is the appropriate measure for evaluating shareholder returns.

Risk Factors

1. Risk of impairment of intangible assets and goodwill: Intangible assets of ¥19.02B (45.4% of total assets) and goodwill of ¥11.17B (26.6% of total assets and 45.4% of net assets) account for a significant portion of assets. If the competitiveness of the IT Services Business or the recovery of investments falls below plan, impairment could have a significant impact on earnings and net assets.

2. Short-term liquidity management: Current liabilities of ¥14.69B versus current assets of ¥7.52B result in a low current ratio of 51.2%. Although contract liabilities, representing deferred revenue, account for the majority of current liabilities at ¥8.53B, ongoing cash management is required to address short-term interest-bearing debt of ¥2.93B and trade payables of ¥2.45B.

3. Cash pressure from simultaneous investment and shareholder returns: Dividend payments of ¥0.32B exceeded quarterly Free Cash Flow of ¥0.12B, and cash and cash equivalents declined from ¥4.12B at the beginning of the period to ¥3.39B. With intangible asset acquisitions of ¥1.11B continuing, cash levels will remain a key area of focus.

Industry Benchmark (For Reference; Company Analysis)

Profitability and Returns

Growth and Capital Efficiency

※Source: Company analysis

Key Takeaways from the Results

1. Revenue increased +15.9%, while Operating Income rose +141.8%, expanding the Operating Income margin to 15.5%, up +8.1pt YoY. Operating leverage resulting from the improvement in the gross profit margin and controlled growth in SG&A expenses has been confirmed.

2. OCF was approximately 2.3 times Net Income, and the improvement in working capital further supported solid cash backing for earnings. On the other hand, Investing Cash Flow outflows were substantial, primarily due to intangible asset acquisitions, and Free Cash Flow fell below dividend payments, which is an important consideration in capital allocation.

3. Progress against the full-year plan was 23.5% for Revenue and 17.8% for Operating Income, with Operating Income progressing somewhat slowly. As intangible assets and goodwill account for 72.0% of total assets, the progress of investment recovery will determine the sustainability of future profitability and asset value.

Theoretical Share Price (Reference Value)

Sensitivity: ¥294–¥311 at Cost of Equity ±1%, and ¥301–¥303 at ω±0.1.

Notes:

• Goodwill represents a high proportion of net assets, and the assumptions may change significantly if impairment occurs.
• Net assets as of the quarter-end are used (there is a timing gap relative to the full-year forecast).

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated using only 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 future share prices.)

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This report is an automatically generated earnings analysis document produced 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 with a professional advisor as necessary.

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