Broadleaf Co.,Ltd. FY2026 Q2 Earnings Report

Quick View

Executive Summary

For the second quarter of the fiscal year ending December 2026, Broadleaf reported higher revenue and significantly higher operating income and net income, resulting in a strong increase in both revenue and profit. Revenue was ¥10.78B (¥9.82B in the previous year, YoY +9.8%), operating income was ¥1.48B (¥0.77B in the previous year, YoY +91.5%), profit before tax was ¥1.39B (¥0.60B in the previous year, YoY +132.1%), and net income attributable to owners of the parent was ¥1.00B (¥0.42B in the previous year, YoY +140.3%). The primary drivers of profit growth were an improvement in the gross profit margin (68.6%, +3.6pt from 65.0% in the previous year) and selling, general and administrative expense control at a pace below revenue growth. As the Company applies IFRS, it does not use the concept of “ordinary income”; therefore, profit before tax is presented.

Factors Affecting Performance

【Revenue】Revenue increased 9.8% year on year to ¥10.78B. Contract liabilities (deferred revenue) increased 3.0% year on year to ¥8.64B, with the accumulation of recurring revenue providing support for revenue growth. As no segment-level disclosure is available, the analysis is based on the Company as a whole.

【Profit and Loss】Cost of sales remained broadly flat at ¥3.39B (¥3.45B in the previous year), and the absence of an increase in costs amid revenue growth directly contributed to the improvement in the gross profit margin to 68.6% (65.0% in the previous year). Selling, general and administrative expenses increased to ¥5.93B (¥5.60B in the previous year, +5.9%), but remained below the pace of revenue growth (+9.8%), resulting in operating leverage. Consequently, operating income increased to ¥1.48B (YoY +91.5%), profit before tax to ¥1.39B (YoY +132.1%), and net income attributable to owners of the parent to ¥1.00B (YoY +140.3%), with the profit growth rate expanding progressively. In conclusion, the Company achieved higher revenue and profit, with the quality of earnings growth supported by both gross margin improvement and greater expense efficiency.

Key Financial Indicators

【Profitability】The operating margin improved significantly to 13.7% (7.9% in the previous year), while the net profit margin also rose to 9.3% (4.2% in the previous year). The improvement in the gross profit margin to 68.6% (65.0% in the previous year) was the primary upstream contributor to the improvement. 【Cash Flow Quality】Operating cash flow (OCF) was ¥3.06B, approximately 3.1 times consolidated net income of ¥0.98B, indicating favorable cash conversion. 【Investment Efficiency】ROE was 3.9%; although the improvement in the net profit margin was the primary driver, total asset turnover remained low at approximately 0.25 times, and the high proportion of intangible assets and goodwill in the asset structure constrained capital efficiency. 【Financial Soundness】The equity ratio remained broadly unchanged at 58.5% (58.6% in the previous year), indicating an adequate capital base. Meanwhile, cash and cash equivalents of ¥3.76B compared with interest-bearing debt of ¥3.09B in short-term debt and ¥1.98B in long-term debt resulted in net interest-bearing debt remaining slightly positive.

Cash Flow Analysis

Operating cash flow was generated at ¥3.06B (up +43.7% year on year), exceeding net income, indicating favorable cash conversion. From a working capital perspective, a decrease in accounts receivable (+¥0.14B contribution to cash flow), a decrease in inventories (+¥0.12B), and an increase in contract liabilities (+¥0.25B) all contributed to higher OCF. Investing cash flow was -¥2.25B, the majority of which comprised intangible asset acquisitions (-¥2.23B). Investment in property, plant and equipment (capital expenditures of -¥0.01B) was limited, with investment focused primarily on products and platform-related assets. Financing cash flow was -¥1.16B, mainly reflecting dividend payments (-¥0.32B), lease payments (-¥0.42B), and changes related to borrowings. As a result, free cash flow (OCF + investing cash flow) remained positive at ¥0.80B, demonstrating that the Company maintained its ability to generate cash internally while continuing to invest in intangible assets.

Quality of Earnings

The current profit growth was not attributable to temporary extraordinary gains or losses, but was supported by recurring factors, namely an improved gross profit margin and relative restraint in selling, general and administrative expenses. In non-operating items, financial income of ¥0.01B and financial expenses of ¥0.09B were recorded, with the resulting difference slightly reducing profit before tax; however, the amounts were small and their impact on earnings was limited. The effective tax rate was approximately 29.5% (income taxes of ¥0.41B / profit before tax of ¥1.39B), with no significant change from the previous year and no special factors evident in the tax burden. From an accruals perspective, OCF reached approximately 3.1 times consolidated net income of ¥0.98B. Given that decreases in trade receivables and inventories and an increase in contract liabilities supported cash generation, overall earnings quality can be assessed as favorable. Total comprehensive income was ¥0.99B, compared with ¥1.01B attributable to owners of the parent; the divergence from net income attributable to owners of the parent of ¥1.00B was very small, and no significant distortion from other comprehensive income items, such as foreign currency translation gains or losses, was observed.

Earnings Forecast and Guidance

Progress toward the full-year earnings forecast was 45.3% for revenue, at ¥10.78B / ¥23.80B, representing a generally appropriate level for the first half. Meanwhile, progress was 30.8% for operating income, at ¥1.48B / ¥4.80B, and 31.3% for net income, at ¥1.00B / ¥3.20B, both below the simple time-based benchmark of 50%. This suggests that the plan is weighted toward the second half, with a greater proportion of revenue and profit expected to be recorded in the latter half. Achievement of the full-year forecasts (operating income YoY +132.7%, net income YoY +158.0%) will therefore depend on maintaining the pace of revenue growth in the second half and sustaining the expense efficiencies observed in the first half. The earnings forecast was revised during the current quarter, resulting in an outlook that reflects recent business trends.

Shareholder Returns

The dividend per share at the end of Q2 was ¥7.5 (¥2.5 in the previous year), representing an effective dividend increase after taking into account the impact of the 2-for-1 stock split effective July 1, 2026. On a pre-split basis, the full-year forecast consists of a year-end dividend of ¥8.00 and total annual dividends of ¥15.50. Total dividend payments were ¥0.32B, representing a payout ratio of approximately 32.1% against consolidated net income of ¥0.98B, while dividends accounted for approximately 39% of free cash flow of ¥0.80B. The Company is paying dividends within the scope of its current cash-generating capacity. No disclosure regarding share buybacks was provided, and shareholder returns are centered on dividends.

Risk Factors

1. Low capital efficiency: ROE was 3.9% and total asset turnover remained at approximately 0.25 times. The asset structure, which is concentrated in intangible assets (45.3% of total assets) and goodwill (26.0%), is a constraint on capital efficiency.

2. Second-half weighting of full-year progress: Progress rates for both operating income and net income were in the low 30% range, below the simple time-based benchmark of 50%, making acceleration in revenue and profit growth in the second half a prerequisite for achieving the full-year forecasts.

3. Sensitivity to impairment of goodwill and intangible assets: Goodwill of ¥11.17B and intangible assets of ¥19.49B together account for approximately 71% of total assets of ¥43.01B, incorporating impairment risk in the event of changes in the business environment.

Industry Benchmark (For Reference; Company Analysis)

Industry Benchmark (it_telecom)

Profitability and Returns

The Company’s profitability was below the industry median for both metrics, with its operating margin and net profit margin remaining at mid-tier levels within the industry.

Growth and Capital Efficiency

The revenue growth rate was substantially below the industry median, placing the Company at a disadvantage in terms of growth speed within the IT and telecommunications industry.

※Source: Company analysis

Key Takeaways from the Earnings Results

1. In the first half, both operating income and net income increased significantly, supported by an improved gross profit margin (68.6%, compared with 65.0% in the previous year) and relative restraint in selling, general and administrative expenses. The primary driver of profit growth was not a temporary factor but an improvement in the recurring earnings structure.

2. Progress toward the full-year forecast was 45.3% for revenue, compared with the low 30% range for operating income and net income, indicating a plan weighted toward the second half. The accumulation of contract liabilities of ¥8.64B improves the visibility of future revenue, while the degree of achievement of the second-half plan remains the key focus.

3. Intangible assets and goodwill account for approximately 71% of total assets. Alongside potential improvement in capital efficiency (ROE of 3.9%), monitoring asset quality and impairment sensitivity is considered useful.

Theoretical Share Price (Reference Value)

Sensitivity: ¥149–¥158 at cost of equity ±1%; ¥153–¥154 at ω±0.1.

Notes:

• The proportion of goodwill relative to net assets is high, and the assumptions would change significantly if impairment were recognized.
• Net assets as of the quarter-end are used (there is a timing difference 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 values based solely on publicly disclosed data; these are not forecasts of market share prices or recommendations of any specific investment action, and do not predict or guarantee future share prices.)

---

This report is an earnings analysis document automatically generated by AI based on 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 earnings data. Investment decisions should be made at your own responsibility, after consulting with a professional advisor as necessary.

---End of Report---