Techno Mathematical (3787) FY2026 Q3 Earnings Report

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Executive Summary

The most significant point is the turnaround from an operating loss in the same period of the previous year to operating profitability, driven by rapid revenue expansion and improved fixed-cost absorption. Revenue was ¥5.4B (+94.4% YoY, compared with ¥2.8B in the previous year), Operating Income was ¥0.6B (compared with a ¥2.5B loss in the previous year), Ordinary Income was ¥0.8B (compared with a ¥2.4B loss in the previous year), and Net Income was ¥0.7B (compared with a ¥2.4B loss in the previous year). The primary driver of the return to profitability was a 10.6% decrease in selling, general and administrative expenses despite higher revenue; gains on the sale of securities and foreign exchange gains also contributed partially to Ordinary Income.

Factors Affecting Business Performance

【Revenue】Revenue expanded sharply to ¥5.4B, up +94.4% YoY. Although this includes a recovery from the low level recorded in the same period of the previous year, the increase in revenue amounted to ¥2.7B, representing a substantial recovery in business scale. Cost of sales remained at ¥0.3B, and the gross profit margin rose to 93.9% from 90.1% in the previous year.

【Profit and Loss】Selling, general and administrative expenses were ¥4.5B, down 10.6% YoY. As higher revenue and fixed-cost reductions progressed simultaneously, Operating Income turned positive at ¥0.6B, compared with a ¥2.5B loss in the previous year. Other operating income of ¥0.2B included a ¥0.16B gain on the sale of securities and a ¥0.07B foreign exchange gain, resulting in Ordinary Income of ¥0.8B, ¥0.2B above Operating Income. Net Income of ¥0.7B reflects an effective tax rate of 15.8% applied to Profit Before Tax of ¥0.8B. The company achieved both revenue and profit growth, although the quality of earnings improvement reflects a combination of operating leverage and non-recurring other operating income.

Key Financial Indicators

【Profitability】The Operating Income margin improved substantially to 10.8% from △90.7% in the previous year, while the Net Income margin improved to 12.3% from △87.1%, with both margins returning to profitable levels. The gross profit margin remained high at 93.9%, indicating a business structure with high contribution margins.【Cash Flow Quality】Accounts receivable increased to ¥3.1B (+86.7% YoY), while inventories remained broadly flat at ¥0.6B. A notable feature is that the company has not accumulated inventory despite the sharp increase in revenue. However, the collection period for accounts receivable has tended to lengthen, requiring confirmation of the conversion of earnings into cash.【Investment Efficiency】Annualized ROE was 4.9%, benefiting from the improvement in the Net Income margin. However, the asset composition—with ¥8.1B in investment securities against total assets of ¥19.5B—restrains total asset turnover.【Financial Soundness】The Equity Ratio was 94.3%, and current liabilities were ¥1.1B against current assets of ¥11.0B, indicating an extremely conservative financial base. Cash and deposits were ¥6.7B, down ¥0.7B from the previous year, but liquidity headroom remains substantial.

Cash Flow Analysis

As the company does not disclose a statement of cash flows, cash trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥6.7B, down ¥0.7B from ¥7.4B in the same period of the previous year, while investment securities increased by ¥0.2B to ¥8.1B, suggesting that some funds may have been allocated to financial assets. Accounts receivable increased by ¥1.4B to ¥3.1B, indicating that the increase in working capital accompanying revenue expansion is exerting pressure on cash. Inventories were ¥0.6B, broadly unchanged from the previous year, and cash tied up in inventory increases therefore remains limited. Current liabilities remained low at ¥1.1B, indicating that the company does not rely on debt financing. Overall, the decline in cash balances despite the return to profitability indicates that higher earnings have not translated directly into increased cash, and the collection status of trade receivables will influence future cash trends.

Earnings Quality

Ordinary Income of ¥0.8B exceeded Operating Income of ¥0.6B by ¥0.2B, reflecting a ¥0.16B gain on the sale of securities and a ¥0.07B foreign exchange gain recorded as other operating income. Because these gains are non-recurring in nature and depend on market conditions and disposal decisions, it is appropriate to evaluate sustainable earnings power based on Operating Income. Meanwhile, the 10.6% YoY decrease in selling, general and administrative expenses contributed to recurring earnings improvement through fixed-cost control during a period of revenue growth. The substantial 86.7% YoY increase in accounts receivable suggests a possible divergence between the timing of recognized revenue and cash collection, indicating a certain gap between accrual-based earnings and actual cash flow.

Earnings Forecasts and Guidance

Against the full-year company forecast, cumulative Q3 progress was 76.6% for Revenue (¥5.4B against the forecast of ¥7.1B), 107.3% for Operating Income (¥0.6B against the forecast of ¥0.6B), 105.3% for Ordinary Income (¥0.8B against the forecast of ¥0.8B), and 111.7% for Net Income (¥0.7B against the forecast of ¥0.6B). While revenue progress remains broadly standard for the Q3 stage, profit progress has already exceeded the full-year forecasts. Because the lead in profit progress includes contributions from other operating income, such as gains on the sale of securities and foreign exchange gains, Operating Income trends during the remaining quarter require close monitoring.

Shareholder Returns

The Q2 dividend was ¥0 per share, and the full-year company forecast for the annual dividend is also ¥0. As no dividends are being paid against Net Income of ¥0.7B, the Payout Ratio is 0%. In light of the Equity Ratio of 94.3% and cash and deposits of ¥6.7B, the absence of a dividend appears not to be due to funding constraints but rather to a prioritization of strengthening the financial base through retained earnings.

Risk Factors

1. Accounts Receivable Collection Risk: Accounts receivable increased to ¥3.1B (+86.7% YoY), representing 15.8% of total assets. The increase in working capital accompanying revenue growth could delay the conversion of earnings into cash.

2. Inventory Obsolescence Risk: Inventories were ¥0.6B, broadly unchanged from the previous year, but the holding period relative to the scale of revenue is reportedly lengthening. Demand fluctuations and specification changes could affect the saleability and valuation of inventory.

3. Volatility Risk in Other Operating Income and Expenses: Of Ordinary Income of ¥0.8B, ¥0.2B consisted of gains on the sale of securities and foreign exchange gains. Investment securities of ¥8.1B represent 41.3% of total assets, and market price fluctuations could affect future period earnings.

Industry Benchmark (For Reference; Company Analysis)

Industry Benchmark (it_telecom)

Profitability and Returns

The company's profitability exceeds the industry median for both metrics, with its Operating Income margin and Net Income margin both ranking in the upper tier of the industry.

Growth and Capital Efficiency

The Revenue Growth Rate substantially exceeds the industry median; however, it should be noted that this includes a rebound effect from the low level recorded in the same period of the previous year.

※Source: Company analysis

Key Takeaways from the Earnings Results

1. The combination of a 94.4% increase in Revenue and a 10.6% decrease in selling, general and administrative expenses resulted in a turnaround from an operating loss in the same period of the previous year to operating profitability. The Operating Income margin of 10.8% and Net Income margin of 12.3% exceed industry medians.

2. Against the full-year company forecasts, cumulative Q3 progress reached 107.3% for Operating Income and 111.7% for Net Income, meaning that full-year profit forecasts have already been exceeded. However, this excess includes contributions from other operating income.

3. While the Equity Ratio was 94.3% and the current ratio remained high, accounts receivable increased by +86.7% YoY. Working capital trends accompanying revenue expansion will be a key factor affecting future cash efficiency.

Theoretical Stock Price (Reference Value)

Sensitivity: ¥554–¥586 at ±1% for the cost of equity, and ¥565–¥573 at ±0.1 for ω.

Notes:

• Because Net Income progress against the full-year forecast (112%) exceeds the standard level (75%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies with progress ahead of schedule tend to outperform forecasts; adjustments may be excessive for businesses with strong seasonality).
• Because forecast ROE is below the cost of equity, the theoretical value is below Book Value per Share.
• Net assets as of the quarter-end have been 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: 2026-08 / Mechanically calculated value based solely on publicly disclosed data; this is not a forecast of the market stock price or a recommendation of any specific investment action, and does not predict or guarantee future stock prices.)

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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 experts as necessary.

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