| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥717.3B | ¥648.8B | +10.6% |
| Operating Income | ¥77.6B | ¥66.6B | +16.5% |
| Profit Before Tax | ¥78.6B | ¥64.2B | +22.5% |
| Net Income | ¥56.7B | ¥45.0B | +25.9% |
| ROE | 17.3% | 15.0% | - |
For the fiscal year ended March 2026, Revenue was ¥717.3B (YoY +¥68.5B, +10.6%), Operating Income was ¥77.6B (YoY +¥11.0B, +16.5%), Ordinary Income was ¥58.0B (YoY +¥8.5B, +17.0%), and Net Income attributable to owners of the parent was ¥51.8B (YoY +¥11.2B, +27.7%), achieving revenue and profit growth. Operating margin improved by 0.5pt to 10.8% (prior year 10.3%), and net margin rose by 1.0pt to 7.2% (prior year 6.2%), indicating enhanced profitability. The core Information Infrastructure Business drove double-digit growth with Revenue of ¥516.2B (+13.2%) and Operating Income of ¥65.8B (+24.9%), while the Application & Services Business swung to an operating loss of ¥1.5B (prior year operating profit ¥1.4B), highlighting a clear profit disparity among segments. Operating Cash Flow was ¥131.4B (YoY +92.3%), Free Cash Flow was ¥120.2B, demonstrating strong cash generation, and Contract Liabilities accumulated to ¥704.3B ( +¥127.0B), strengthening the future revenue recognition base.
[Revenue] Revenue of ¥717.3B (YoY +10.6%) was led by the Information Infrastructure Business with ¥516.2B ( +13.2%). This business provides network and security product sales, integration, and maintenance/operation services; increases in high-margin projects and accumulation of maintenance stock revenue supported growth. The Application & Services Business recorded ¥98.8B (+7.7%) revenue, while the Medical Systems Business posted ¥102.3B (+1.1%) with modest growth. Japan remains the primary market; non-current assets of Asian subsidiaries increased to ¥56.2B (prior year ¥49.7B), indicating overseas expansion. The thickness of Contract Liabilities at ¥704.3B (98% of Revenue) demonstrates high revenue visibility due to recurring structures accompanied by advance payments and prepaid maintenance fees.
[Profitability] Gross profit was ¥225.8B (gross margin 31.5%, -0.2pt from 31.7% prior year), showing slight mix changes from scale expansion. SG&A was ¥148.3B (SG&A ratio 20.7%, -0.2pt from 20.9% prior year), growing +9.4% which is below revenue growth (+10.6%), thereby delivering operating leverage. Operating Income of ¥77.6B (operating margin 10.8%) rose +16.5% YoY, outpacing revenue growth, driven by the Information Infrastructure Business which generated ¥65.8B (margin 12.7%, +1.2pt from 11.5% prior year). Conversely, the Application & Services Business turned to an operating loss of ¥1.5B (margin -1.5%) from a ¥1.4B operating profit the prior year. The Medical Systems Business remained stable at ¥13.3B operating income (margin 13.0%, +0.6pt from 12.4% prior year). Non-operating income was minor at ¥0.6B (including interest income ¥0.4B and financial income ¥1.1B noted within aggregate), non-operating expenses were ¥0.5B (including interest expense ¥0.3B), and equity in earnings of affiliates improved to a profit of ¥0.6B (prior year loss ¥2.9B). Extraordinary losses included valuation losses on investment securities ¥5.2B and impairment losses ¥3.3B, totaling ¥5.2B, down from ¥6.7B prior year. Income taxes amounted to ¥21.9B (effective tax rate 27.9%), within normal range, resulting in Net Income attributable to owners of the parent of ¥51.8B (YoY +27.7%).
The Information Infrastructure Business achieved Revenue ¥516.2B (YoY +13.2%) and Operating Income ¥65.8B (YoY +24.9%, margin 12.7%), supported by demand for security and network renewals and expansion of maintenance/operation services. Margin improved 1.2pt from 11.5% due to a higher mix of high-margin projects. The Application & Services Business recorded Revenue ¥98.8B (+7.7%) but moved to an operating loss of ¥1.5B (margin -1.5%, prior year operating profit ¥1.4B). Although it provides system development, SaaS, and testing value-added services, rising personnel costs and deteriorating project profitability pressured results. The Medical Systems Business posted Revenue ¥102.3B (+1.1%) and Operating Income ¥13.3B (+6.1%, margin 13.0%), improving 0.6pt from 12.4% prior year and remaining stable. The Information Infrastructure Business accounts for over 85% of consolidated operating income, while the Application & Services Business’s shift to loss constrains upside to consolidated margins.
[Profitability] ROE improved to 20.5% (prior year 17.7%, +2.8pt), Operating Margin 10.8% (prior year 10.3%), and Net Margin 7.2% (prior year 6.2%), indicating enhanced profitability. EBITDA margin was 14.7% (Operating Income ¥77.6B + Depreciation ¥28.0B = ¥105.6B / Revenue ¥717.3B), reflecting strong cash-based earnings power. The Information Infrastructure Business margin of 12.7% drove consolidated results, while the Application & Services Business’s loss represents room for improvement. [Cash Quality] Operating CF / Net Income ratio was 2.54x (¥131.4B / ¥51.8B), and OCF / EBITDA ratio was 1.24x (¥131.4B / ¥105.6B), both at high levels, with a Contract Liabilities increase (+¥126.6B) driving improvements in working capital. The accrual ratio was -6.5% ((Operating CF ¥131.4B - Net Income ¥56.7B) / Total Assets ¥1215.3B), negative, indicating high-quality earnings. [Investment Efficiency] Total asset turnover was 0.59x (Revenue ¥717.3B / Total Assets ¥1215.3B), in line with prior year. Inventory turnover days were 2.4 days (Inventory ¥4.8B / Cost of Goods Sold ¥491.6B × 365), extremely short, reflecting an SI project-centric business model. Capital expenditures were ¥11.1B (capex ratio 1.5% of Revenue); with Depreciation at ¥28.0B, the Investment/Depreciation ratio was 0.40x, indicating a focus on maintenance capex. [Financial Soundness] Equity Ratio was 21.7% (prior year 22.9%, -1.2pt), and D/E ratio was 2.72x (interest-bearing debt ¥17.5B / Equity ¥263.3B) which appears high but interest-bearing debt is very small, so practical leverage risk is low. Debt/EBITDA was 0.17x (interest-bearing debt ¥17.5B / EBITDA ¥105.6B), and interest coverage was 280x (Operating CF ¥131.4B / interest paid ¥0.5B), both indicating very safe levels. Current ratio was 138.5% (Current Assets ¥1014.1B / Current Liabilities ¥732.4B), slightly below the 150% benchmark, but quick ratio 137.8% and Cash and Deposits ¥225.8B / Short-term Borrowings ¥2.0B = 113x indicate no liquidity concerns. Goodwill was ¥45.1B (13.8% of net assets), and Goodwill/EBITDA was 0.43x, showing no excessive M&A dependency and maintained impairment resilience.
Operating CF was ¥131.4B (YoY +92.3%). Adding depreciation ¥28.0B to Profit Before Tax ¥78.6B, an increase in Contract Liabilities of ¥126.6B was the main driver of working capital improvement. Trade receivables decreased ¥7.1B, inventory increased ¥1.8B, and trade payables increased ¥5.0B, indicating overall working capital improvement. Advance payments and prepaid maintenance fees increased by ¥64.0B, which are of a settlement nature accompanying project progress; considering the relationship with Contract Liabilities, actual cash outflows are limited. After corporate tax payments ¥22.4B, interest payments ¥0.5B, and lease payments ¥7.6B, OCF remained ¥131.4B, with OCF/Net Income ratio 2.54x and OCF/EBITDA ratio 1.24x, demonstrating very high-quality cash generation. Investing CF was -¥11.3B, primarily capital expenditures ¥11.1B and intangible investments ¥1.7B, partially offset by proceeds from sale of investment securities ¥1.3B. Free Cash Flow was ¥120.2B (Operating CF ¥131.4B + Investing CF -¥11.3B), reaching 2.3x Net Income and sufficiently covering internal growth and shareholder returns. Financing CF was -¥36.3B, mainly dividend payments ¥17.3B, short-term borrowings repayments ¥2.1B, long-term borrowings repayments ¥3.0B, and lease liability repayments ¥7.6B; share buybacks were negligible (-¥0.0B). Cash and cash equivalents increased to ¥358.0B (prior year ¥273.3B, +¥84.8B), with foreign exchange effects of ¥0.9B, materially improving year-end liquidity. While the thickness of Contract Liabilities supports future revenue recognition and OCF smoothing, attention is needed for potential normalization of OCF as advance receipts are recognized upon fulfillment progress.
Earnings quality is high. Against Operating Income of ¥77.6B, extraordinary losses of ¥5.2B (valuation loss on investment securities ¥5.2B, impairment losses ¥3.3B included) were recorded, but these decreased from ¥6.7B prior year, limiting one-off impacts. Non-operating income of ¥0.6B included interest income ¥0.4B, foreign exchange gains ¥0.1B, and equity in earnings of affiliates ¥0.6B; non-operating expenses were minor at ¥0.5B (including interest expense ¥0.3B), and Ordinary Income of ¥58.0B indicates a sustainable earnings structure based on operating results. Comprehensive income was ¥62.0B (attributable to owners of the parent ¥56.4B), exceeding Net Income ¥56.7B (attributable to owners of the parent ¥51.8B), with Other Comprehensive Income contributing ¥5.3B (foreign currency translation adjustments ¥8.4B, remeasurement of defined benefit plans ¥0.9B, FVTOCI financial assets -¥4.0B, cash flow hedges ¥0.1B). OCF/Net Income ratio 2.54x and accrual ratio -6.5% indicate that profit recognition is well backed by cash. The Contract Liabilities increase of ¥126.6B is a working capital improvement based on advance receipts and reflects timing differences between accounting revenue recognition and cash receipt, but requires ongoing monitoring because it entails future performance obligations. Excluding extraordinary items, recurring earning power is solid, with the Information Infrastructure Business’s high-margin project mix supporting core revenue sustainability.
Full-year guidance forecasts Revenue ¥818.0B (YoY +15.4%), Operating Income ¥82.0B (YoY +5.7%), Ordinary Income ¥65.2B (YoY +12.5%), Net Income attributable to owners of the parent ¥44.6B (YoY +3.9%), and EPS ¥133.88. Progress against the current year results stands at 87.7% for Revenue and 94.6% for Operating Income, generally on track. The gap between Revenue growth 15.4% and Operating Income growth 5.7% indicates that top-line expansion is not fully translating into profit, likely reflecting continued losses in the Application & Services Business and rising personnel costs. Ordinary Income growth rate of 12.5% exceeding Operating Income growth may be attributed to improvements in non-operating items (e.g., equity in earnings of affiliates turning positive). The thickness of Contract Liabilities at ¥704.3B supports future revenue recognition and enhances revenue visibility; however, achieving the full-year plan depends on converting the Application & Services Business to profitability and maintaining high margins in the Information Infrastructure Business. Dividend forecast is ¥22 per share annually, a significant decrease from ¥52 this period, possibly reflecting fiscal year changes or dividend policy adjustments. Forecast EPS ¥133.88 exceeds current period EPS ¥128.88, indicating management expects continued growth in earnings per share.
Annual dividend was ¥52 (interim ¥21, year-end ¥31), giving a payout ratio of 40.3% (Dividend ¥52 / EPS ¥128.88). Prior year annual dividend was ¥12, so this period saw a 4.3x substantial increase, demonstrating a proactive stance on returning profits to shareholders. Total dividend amount was ¥17.4B (statement of changes in equity basis), which is 14.5% of FCF ¥120.2B, and FCF coverage is 6.9x, indicating ample coverage. Share buybacks were negligible at -¥0.0B, leaving Total Return Ratio roughly in line with the payout ratio at 40.3%. Full-year forecast dividend of ¥22 represents a reduction from ¥52, which likely reflects adjustments in payout ratio level or fiscal year changes. Given cash and deposits ¥225.8B and Operating CF generation ¥131.4B, dividend sustainability is high and there remains scope for future dividend increases. DOE (Dividend on Equity) was 1.7% (Total dividends ¥17.4B / Ending Net Assets ¥1215.3B), low, suggesting a policy that prioritizes internal reserves for growth investment and balance sheet strengthening while gradually expanding shareholder returns.
Widening profit disparity among segments: The Information Infrastructure Business accounts for 72% of Revenue and over 85% of Operating Income, while the Application & Services Business has moved to an operating loss of ¥1.5B. If profitability recovery in that business is delayed, consolidated operating margin improvement may stagnate and constrain ROE enhancement. Effectiveness of measures for talent acquisition, utilization rate management, and pricing will be critical.
Working capital structure reliant on Contract Liabilities: While the thickness of Contract Liabilities ¥704.3B (98% of Revenue) strongly supports Operating CF, there is a risk that OCF will normalize or decline as advance receipts are recognized upon fulfillment progress. If the pace of new contract orders or accumulation of advance receipts slows, working capital could reverse and cash generation may temporarily weaken.
Technology obsolescence and project execution risk: Shortening technology refresh cycles in security and network domains require continuous investment in technology and talent development. Quality or schedule delays in large SI projects could lead to additional costs or impairment risk. Prior period impairment losses ¥3.3B and current period valuation losses on investment securities ¥5.2B have been recorded, underscoring the need for rigorous asset valuation and project governance.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Return on Equity | 20.5% | 10.1% (2.2%–17.8%) | +10.4pt |
| Operating Margin | 10.8% | 8.1% (3.6%–16.0%) | +2.7pt |
| Net Margin | 7.9% | 5.8% (1.2%–11.6%) | +2.1pt |
Profitability substantially exceeds the industry median, with ROE, Operating Margin, and Net Margin all in the upper quartile.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 10.6% | 10.1% (1.7%–20.2%) | +0.5pt |
Revenue growth is roughly in line with the industry median, maintaining a stable growth pace.
※Source: Company aggregation
Continued high-margin growth in Information Infrastructure Business: Revenue ¥516.2B (+13.2%), Operating Income ¥65.8B (+24.9%, margin 12.7%), achieving double-digit growth and high margins. Demand for security and network renewals and accumulation of maintenance stock revenue drove consolidated profits. Contract Liabilities ¥704.3B strengthen the future revenue recognition base, and recurring structures increase revenue visibility. Operating margin 10.8% and ROE 20.5% substantially exceed industry medians, and cash generation is strong with Operating CF ¥131.4B and OCF/Net Income ratio 2.54x.
Application & Services turned to loss but has improvement potential: Despite Revenue ¥98.8B (+7.7%), the segment moved to an operating loss of ¥1.5B (prior year operating profit ¥1.4B), constraining consolidated margin upside. Rising personnel costs and deteriorating project profitability are drivers; effective measures to restore profitability (utilization improvement, price adjustments, stronger project management) will be key catalysts for mid-term margin recovery. Given the Information Infrastructure Business concentration (over 85% of operating income), correcting profitability in this segment is important for portfolio balance and sustainable growth.
Robust financial base and scope to expand shareholder returns: Although D/E 2.72x appears high, interest-bearing debt is only ¥17.5B, Debt/EBITDA 0.17x, and interest coverage 280x, indicating minimal practical debt risk. With FCF ¥120.2B and dividends ¥17.4B (payout ratio 40.3%, FCF coverage 6.9x), there is ample room for further dividend increases. Cash and deposits ¥225.8B plus working capital improvement driven by Contract Liabilities provide financial flexibility to balance growth investments and shareholder returns. Full-year guidance of Revenue ¥818B (+15.4%) and Operating Income ¥82B (+5.7%) projects continued revenue and profit growth; progress in Application & Services profitability and maintenance of high margins in Information Infrastructure will be focal points.
This report was generated automatically by AI analyzing XBRL earnings disclosure data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company based on public financial statements. Investment decisions are your responsibility; consult a professional advisor as needed.