Broadleaf Co.,Ltd. FY2026 Q2 Earnings Report

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Executive Summary

The cumulative results for Q2 of the fiscal year ending December 2026 represented a significant increase in earnings, as operating leverage from improved gross profit margins and restrained SG&A expenses supplemented revenue growth. Revenue was ¥107.8B (+9.8% YoY), Operating Income was ¥14.8B (+91.5%), Profit Before Tax was ¥13.9B (+132.1%), and Net Income attributable to owners of the parent was ¥10.0B (+140.3%). While the gross profit margin expanded to 68.6% from 64.9% in the same period last year, SG&A expenses increased by only +5.9%, below the rate of revenue growth, which was the primary driver of the earnings increase. However, progress toward the full-year company forecast of ¥48.0B in Operating Income remained limited at 30.8%, and further improvement in profitability will be required to achieve the back-end-loaded plan.

Factors Affecting Results

【Revenue】Revenue increased 9.8% YoY to ¥107.8B. Progress toward the full-year forecast of ¥238.0B was 45.3%, slightly below the standard progress rate of 50%. Contract liabilities were ¥86.4B, equivalent to 80.1% of revenue, indicating that the deferred revenue base will support revenue recognition to a certain extent from the second half onward.

【Profitability】Operating Income was ¥14.8B (+91.5%), and the Operating Income margin expanded to 13.7% from 7.9% in the same period last year, an improvement of 584bp. Gross profit increased 16.0% YoY to ¥73.9B, outpacing revenue growth, while SG&A expenses remained limited to ¥59.3B (+5.9%), with the absorption of fixed costs associated with higher revenue contributing to margin expansion. Profit Before Tax was ¥13.9B (+132.1%), and Net Income attributable to owners of the parent was ¥10.0B (+140.3%), indicating that earnings growth at the operating level largely flowed through to the bottom line. Financial expenses were ¥0.9B, equivalent to 0.9% of revenue, and remained limited; therefore, the contribution from non-operating factors to the earnings increase was not significant. In conclusion, the Company achieved both revenue and earnings growth, primarily driven by improved gross profit margins and SG&A expense control, which generated operating leverage.

Key Financial Metrics

【Profitability】The Operating Income margin improved to 13.7% from 7.9% in the same period last year, an improvement of 584bp, while the Net Income margin also expanded to 9.3% from 4.2%. The gross profit margin improved by 366bp to 68.6% from 64.9% in the same period last year, indicating that the improvement in profitability was accompanied by structural changes in the core business. 【Cash Flow Quality】Operating Cash Flow (OCF) was ¥30.6B, equivalent to 3.0 times Net Income attributable to owners of the parent of ¥10.0B, indicating cash generation exceeding accounting earnings. However, working capital factors, including an increase in contract liabilities and decreases in trade receivables and inventories, boosted OCF; these factors should therefore be evaluated separately from normalized cash-generating capacity. 【Investment Efficiency】Annualized ROE was 7.8%. While the improvement in the Net Income margin contributed to ROE, total asset turnover remained low. Of total assets of ¥430.1B, intangible assets accounted for ¥194.9B, or 45.3%, and goodwill accounted for ¥111.7B, or 26.0%. Improving asset efficiency will therefore depend on monetizing these investments. 【Financial Soundness】The Equity Ratio remained high at 58.5%, compared with 58.6% in the same period last year. However, current liabilities are estimated at approximately ¥154.8B against current assets of ¥81.2B, resulting in a current ratio of approximately 52.5%. Although contract liabilities account for a significant portion of current liabilities and are different in nature from financial debt repayment pressure, short-term funding conditions require monitoring.

Cash Flow Analysis

Operating Cash Flow (OCF) increased 43.7% YoY to ¥30.6B, representing cash generation substantially exceeding Net Income attributable to owners of the parent of ¥10.0B. The increase in contract liabilities of ¥2.5B and cash inflows from decreases in trade receivables and inventories contributed to OCF; accordingly, it should be noted that OCF benefited to a certain extent from favorable working capital movements. Investing Cash Flow was an outflow of ¥22.5B, primarily due to the acquisition of intangible assets of ¥22.3B, indicating continued investment in software and platforms. Financing Cash Flow was an outflow of ¥11.6B. The main outflows were repayments of long-term borrowings of ¥14.1B and dividend payments of ¥3.2B, while short-term borrowings increased by ¥10.0B. As a result, Free Cash Flow (OCF + Investing Cash Flow) remained positive at ¥8.0B, indicating that investment expenditures were covered by operating activities at this point. However, cash and cash equivalents decreased by ¥3.6B during the period to ¥37.6B.

Earnings Quality

The earnings increase for the period was primarily recurring in nature, driven by operating leverage from improved gross profit margins and SG&A expense control, with limited dependence on one-time factors such as extraordinary gains or losses. Non-operating income and expenses were relatively small, comprising financial income of ¥0.1B and financial expenses of ¥0.9B, and had a limited impact on Profit Before Tax of ¥13.9B. OCF was ¥30.6B, or 3.0 times Net Income attributable to owners of the parent of ¥10.0B, indicating low accruals and strong cash backing for earnings. Nevertheless, the strength of OCF includes contributions from working capital changes, such as the increase in contract liabilities and decreases in inventories and trade receivables. Continuously verifying normalized cash-generating capacity excluding these factors is important when assessing earnings quality.

Earnings Forecast and Guidance

The full-year company forecast is Revenue of ¥238.0B, Operating Income of ¥48.0B (+132.7% YoY), and EPS of ¥17.68. Cumulative Q2 progress rates were 45.3% for Revenue and 30.8% for Operating Income, both below the standard progress rate of 50%. Achieving the Operating Income forecast will require approximately ¥33.2B in the second half, implying an Operating Income margin in the approximately 25% range and requiring profitability substantially above the 13.7% Operating Income margin recorded in cumulative Q2. The Company has disclosed that its earnings forecast was revised during the quarter, and the extent to which revenue expansion and margin improvement are achieved in the second half will be the focus going forward.

Shareholder Returns

The dividend at the end of Q2 was ¥7.5 per share. The Payout Ratio (total dividends ÷ Net Income attributable to owners of the parent) was 146.7%, indicating that dividends could not be funded solely by current-period earnings. However, dividend payments of ¥3.2B were within OCF of ¥30.6B, indicating sufficient payment capacity on a cash flow basis. On July 1, 2026, the Company conducted a 2-for-1 stock split of its common shares, and the full-year projected annual dividend on a pre-split basis is ¥15.50. No change in the dividend policy has been disclosed, but if the Payout Ratio remains above 100%, it will be important to confirm sustainability supported by earnings growth.

Risk Factors

1. Risk of Failure to Achieve the Full-Year Plan: Cumulative Q2 progress toward the full-year Operating Income forecast of ¥48.0B was limited to 30.8%, requiring an Operating Income margin in the approximately 25% range in the second half. There is a possibility that second-half revenue recognition and profitability improvements may fall short of plan.

2. Risk of Concentration in Intangible Assets and Goodwill: Intangible fixed assets of ¥194.9B and goodwill of ¥111.7B together account for 71.3% of total assets. As goodwill is not amortized periodically under IFRS, if monetization of the investments is delayed, an impairment charge could have a significant temporary impact on earnings and net assets.

3. Short-Term Liquidity Risk: Current liabilities are approximately ¥154.8B against current assets of ¥81.2B, resulting in a current ratio of approximately 52.5%, below 100%. Although contract liabilities account for a significant portion of current liabilities and differ in nature from financial debt, the refinancing environment for short-term interest-bearing debt and cash levels require monitoring.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

The Company's profitability is below the industry median, although the degree of improvement from the same period last year was substantial.

Growth and Capital Efficiency

The Revenue growth rate was below the industry median, indicating relatively moderate revenue growth within the industry.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. Against revenue growth of 9.8%, Operating Income increased +91.5% and Net Income attributable to owners of the parent increased +140.3%, representing significant earnings growth. Operating leverage from a 366bp improvement in the gross profit margin and SG&A expense control has become evident.

2. OCF reached 3.0 times Net Income attributable to owners of the parent, and Free Cash Flow was secured at ¥8.0B, indicating strong cash backing for current-period earnings.

3. Operating Income progress toward the full-year company forecast was 30.8%, below the standard level, and the plan requires substantial profitability improvement in the second half. This is a notable point identifiable from the financial results data.

Theoretical Share Price (For Reference)

Sensitivity: ¥149–¥158 at Cost of Equity ±1%, and ¥153–¥154 at ω±0.1.

Notes:

• The proportion of goodwill to net assets is high, and the assumptions would change significantly if impairment were recognized.
• Net assets as of the end of the quarter are used; there is a timing difference from the full-year forecast.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated values based solely on publicly disclosed data; these are not forecasts of the market share price or recommendations for specific investment actions, and do not predict or guarantee future share prices.)

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This report is an automatically generated earnings analysis document in which AI analyzed XBRL earnings release data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed financial results data. Investment decisions should be made at your own responsibility, after consulting with a professional as necessary.

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