TECHMATRIX CORPORATION FY2027 Q1 Earnings Report

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Executive Summary

Revenue and profit increased, primarily due to the expansion of the Information Infrastructure Business (security and network areas), while the operating margin also improved. Revenue was ¥188.9B (+19.0% YoY), Operating Income was ¥16.1B (+26.4%), and Profit Before Tax was ¥16.2B (+26.9%). Quarterly profit on a consolidated basis, including non-controlling interests, was ¥11.0B (+24.4%), of which quarterly Net Income attributable to owners of the parent was ¥10.6B (+24.3%). The operating margin was 8.5%, improving by +0.5pt from 8.0% in the same period of the previous year, driven by a decline in the SG&A ratio accompanying revenue growth.

Factors Affecting Performance

【Revenue】Revenue of ¥188.9B increased +19.0% YoY. By segment, the Information Infrastructure Business was the largest growth driver at ¥139.1B (73.6% of total revenue, +20.9%), while the Applications and Services Business generated ¥25.7B (+11.8%) and the Medical Systems Business generated ¥24.1B (+16.7%), with all three businesses achieving revenue growth.

【Profit and Loss】Operating Income was ¥16.1B (+26.4%), and the operating margin was 8.5%, improving by +0.5pt from 8.0% in the same period of the previous year. The gross margin was 29.4%, down -1.7pt from 31.1% in the same period of the previous year, apparently reflecting a change in the sales mix resulting from the higher proportion of product sales, including hardware, in the Information Infrastructure Business. Meanwhile, the SG&A ratio improved by -2.1pt to 21.0% (23.1% in the previous year), with the dilution of fixed costs accompanying revenue growth absorbing the decline in the gross margin. Net financial income was a positive contribution of +¥0.2B, comprising financial income of ¥0.5B and financial expenses of ¥0.3B. Following Profit Before Tax of ¥16.2B (+26.9%) and an effective tax rate of 31.9% (30.5% in the previous year), Net Income attributable to owners of the parent was ¥10.6B (+24.3%). Both revenue and profit increased.

Segment Analysis

The Information Infrastructure Business generated revenue of ¥139.1B (73.6% of total revenue, +20.9%) and Operating Income of ¥14.9B (+19.1%), with a profit margin of 10.7%. It is the core business, accounting for 92.9% of total-company Operating Income (¥16.1B). The Applications and Services Business achieved a return to profitability, moving from an Operating Loss of △¥0.4B in the same period of the previous year to Operating Income of ¥0.5B, against revenue of ¥25.7B (+11.8%), with its profit margin improving to 1.8%. The Medical Systems Business generated revenue of ¥24.1B (+16.7%) and Operating Income of ¥0.7B (+6.2%), with a profit margin of 2.8%; profit growth was modest relative to its revenue growth. While all three businesses secured revenue growth, the Company’s profitability remains highly dependent on the Information Infrastructure Business.

Key Financial Indicators

【Profitability】Both the operating margin, at 8.5% (8.0% in the same period of the previous year), and the net profit margin attributable to owners of the parent, at 5.6% (5.4% in the same period of the previous year), improved. Although the gross margin declined to 29.4% (31.1% in the previous year), the improvement in the SG&A ratio to 21.0% (23.1% in the previous year) offset the decline, resulting in an improved operating-level profit margin.【Cash Flow Quality】Cash and cash equivalents were ¥310.8B, down -13.2% from the beginning of the period (¥358.0B). Contract liabilities remained substantial at ¥720.2B (+2.3% from the beginning of the period), supporting continued revenue visibility from advance payments.【Investment Efficiency】ROE was 3.4% (based on net assets including quarterly profit and non-controlling interests), while asset turnover efficiency on a quarterly basis remained limited.【Financial Soundness】The Equity Ratio was 21.4%, down -0.3pt from 21.7% at the beginning of the period. Total liabilities were approximately 2.75 times equity, but interest-bearing debt (total borrowings) was small at ¥17.2B. Against financial expenses of ¥0.3B, Operating Income was ¥16.1B, indicating a limited interest burden.

Cash Flow Analysis

Cash and cash equivalents stood at ¥310.8B at the end of the quarter, down -¥47.2B (-13.2%) from the beginning of the period (¥358.0B at the end of the previous period). On the asset side, advances increased to ¥45.2B (more than +¥29.2B versus ¥45.1B at the beginning of the period), while inventories increased to ¥6.8B (+43.1% versus ¥4.8B at the beginning of the period), placing pressure on working capital as procurement and inventory held prior to delivery accumulated alongside order growth. Goodwill increased to ¥71.7B, up +58.9% (+¥26.6B) from the beginning of the period, apparently reflecting cash expenditures associated with the acquisition of one newly consolidated subsidiary. On the liabilities side, income taxes payable declined -55.1% from ¥15.9B at the beginning of the period to ¥6.7B, indicating cash outflows for tax payments. Meanwhile, contract liabilities increased to ¥720.2B (+2.3% from the beginning of the period, +¥15.8B), with cash inflows from advance payments providing support. Cash levels remained substantial at ¥310.8B, maintaining sufficient capacity to absorb near-term working capital fluctuations.

Earnings Quality

Recurring earnings form the core of profitability, while nonrecurring gains and losses are limited. Non-operating items were all small in scale: financial income of ¥0.5B, financial expenses of ¥0.3B, other income of ¥0.3B, other expenses of less than ¥0.1B, and share of profit or loss of equity-method investments of △¥0.1B. Each remained below 1% of revenue. Against Profit Before Tax of ¥16.2B, income taxes of ¥5.2B resulted in an effective tax rate of 31.9% (30.5% in the previous year), a normal level. The gap between Profit Before Tax and Net Income attributable to owners of the parent was attributable to the tax burden and non-controlling interests (¥0.4B), with no special factors identified. Comprehensive income was ¥12.5B, exceeding quarterly Net Income attributable to owners of the parent of ¥10.6B, supported by other comprehensive income of +¥1.5B, including valuation differences on other securities (+¥0.8B) and foreign currency translation adjustments for foreign operations (+¥0.5B). The difference between earned profit and comprehensive income was primarily attributable to OCI items, and no significant concerns were identified regarding earnings quality from an accrual perspective.

Earnings Forecast and Guidance

Progress against the full-year forecast was 23.1% for Revenue (¥188.9B/¥818.0B), 19.6% for Operating Income (¥16.1B/¥82.0B), and 19.7% for Net Income attributable to owners of the parent (¥10.6B/¥53.8B). Compared with a simple one-quarter benchmark of 25%, Operating Income and Net Income were somewhat below pace; however, no revisions were made to the earnings forecast or dividend forecast during the quarter. Given the business characteristics, under which final inspections and maintenance-renewal contracts tend to be concentrated in the second half of the fiscal year, the slower progress is considered to be largely attributable to seasonality.

Shareholder Returns

The full-year dividend forecast is ¥54.00 per share, implying a Payout Ratio of approximately 40.3% against the full-year EPS forecast of ¥133.88. No revision was made to the dividend forecast as of the current quarter. Compared with the dividend level disclosed for the same period of the previous year (¥21.00 per share), the Company plans to increase its dividend, indicating a shareholder-return policy that reflects earnings growth. No new information regarding share repurchases has been disclosed.

Risk Factors

1. Business segment concentration: The Information Infrastructure Business accounts for 73.6% of Revenue (¥139.1B) and 92.9% of Operating Income (¥14.9B/¥16.1B), meaning that demand fluctuations in this business could have a significant impact on total-company performance.

2. Gross margin mix fluctuations: The gross margin was 29.4%, down -1.7pt from 31.1% in the same period of the previous year. The margin is susceptible to changes in the sales mix, including a higher proportion of product sales, which may cause quarter-to-quarter fluctuations in profitability.

3. Goodwill impairment monitoring: Goodwill was ¥71.7B, up +58.9% from ¥45.1B at the beginning of the period. This increase resulted from the addition of a newly consolidated subsidiary. The expansion in asset scale, together with intangible assets of ¥43.7B, implies a broader scope for future impairment testing.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

Profitability was broadly in line with the industry median. The operating margin was slightly above the median, while the net profit margin remained almost at the same level.

Growth and Capital Efficiency

The Revenue growth rate was significantly above the industry median and showed strong growth exceeding the upper end of the IQR.

Source: Compiled by the Company

Key Takeaways from the Financial Results

1. Despite revenue and profit growth, the gross margin declined -1.7pt and was absorbed by a -2.1pt improvement in the SG&A ratio. Medium-term profitability will depend on the balance between product-mix management and economies of scale.

2. Contract liabilities were ¥720.2B, equivalent to approximately 3.8 times current-quarter Revenue, indicating high earnings visibility from the maintenance and advance-payment-based businesses.

3. Goodwill increased sharply by +58.9% from the beginning of the period. While this indicates progress in investments for business expansion, the results of future impairment tests will remain an ongoing point of focus as a potential factor affecting financial metrics.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson-type model with an explicit five-year fade period). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥864–¥916 at ±1% for the cost of equity, and ¥884–¥898 at ±0.1 for ω.

Notes:

• Net assets as of the end of the quarter are used (there is a timing gap relative to the full-year forecast).

(Model: Residual Income Model / Interest Rate Reference Month: 2026-06 / This value does not predict or guarantee the future share price)

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This report is an earnings analysis document automatically generated by AI through analysis of XBRL financial results 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 financial results data. Investment decisions should be made at your own responsibility, after consulting with a professional adviser as necessary.

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