| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥52.6B | ¥54.7B | -3.8% |
| Operating Income / Operating Profit | ¥14.3B | ¥17.3B | -17.3% |
| Ordinary Income | ¥14.7B | ¥18.0B | -18.4% |
| Net Income / Net Profit | ¥10.3B | ¥12.5B | -17.9% |
| ROE | 13.9% | 17.0% | - |
The fiscal year ended March 2026 reported Revenue ¥52.6B (YoY -¥2.1B -3.8%), Operating Income ¥14.3B (YoY -¥3.0B -17.3%), Ordinary Income ¥14.7B (YoY -¥3.3B -18.4%), and Net Income ¥10.3B (YoY -¥2.2B -17.9%), indicating declines in both revenue and profit. Operating margin remained high at 27.2% but decreased 450bp from 31.7% a year earlier. The core EBASE Business slowed with Revenue -9.4%, eroding the high-margin mix, while the EBASE-PLUS Business grew resiliently at Revenue +2.0% but is relatively lower margin and diluted consolidated profitability. ROE remained in a healthy range at 13.9% (prior year 17.5%). Financial soundness is very high with an Equity Ratio of 91.0% and cash of ¥49.5B. The plan for FY2027 (March 2027) forecasts Revenue ¥54.0B (+2.7%) and Operating Income ¥15.4B (+7.6%), suggesting a modest recovery.
[Revenue] Revenue was ¥52.6B (-3.8%). By segment, the EBASE Business declined to ¥25.9B (-9.4%), reducing its share to 49.2%. Within that business, package software fell from ¥5.5B to ¥3.3B (-38.9%) and customization declined from ¥9.4B to ¥7.9B (-16.1%), largely attributed to a lull in large projects. Conversely, License & Support rose from ¥9.2B to ¥9.4B (+2.4%) and Cloud Services increased from ¥3.6B to ¥4.1B (+13.4%), indicating steady growth in recurring revenue. The EBASE-PLUS Business recorded Revenue ¥26.8B (+2.0%), accounting for 50.8%, with IT development outsourcing at ¥26.1B→¥26.7B (+2.3%) showing resilience. Gross profit was ¥27.2B (¥-2.0B) and gross margin declined to 51.7% (prior year 53.4%, -170bp), likely due to mix deterioration from declines in high-margin package and customization.
[Profitability] Operating Income was ¥14.3B (-17.3%), and Operating Margin worsened to 27.2% (-450bp). SG&A was ¥12.9B (prior year ¥11.9B, +8.4%), raising the SG&A ratio to 24.5% (+280bp); increases in salaries and allowances from ¥5.9B to ¥6.6B (+11.5%) and executive compensation from ¥1.5B to ¥1.6B (+3.3%) were the main drivers. R&D expenses rose to ¥0.6B (1.1% of Revenue) from ¥0.4B but remain modest. Ordinary Income declined to ¥14.7B (-18.4%), exceeding the operating income decline, driven by a reduction in non-operating income from ¥0.7B to ¥0.4B. Interest income doubled from ¥0.09B to ¥0.18B, but gains from investment partnerships fell from ¥0.40B to ¥0.16B, offsetting the benefit. A special loss of ¥0.2B for valuation loss on available-for-sale securities was recorded, leaving Pre-tax Income at ¥14.7B and Net Income at ¥10.3B after ¥4.4B in income taxes (effective tax rate 30.0%). Comprehensive income was ¥10.6B, slightly above net income, aided by a ¥0.3B increase in valuation differences on available-for-sale securities. Segment profit (on an ordinary income basis) was ¥10.6B for EBASE (prior year ¥14.1B, -24.4%) and ¥4.1B for EBASE-PLUS (prior year ¥3.9B, +3.4%), with the substantial decline at EBASE the bottleneck. In summary, the company experienced revenue and profit declines.
The EBASE Business recorded Revenue ¥25.9B (-9.4%), Segment Profit ¥10.6B (-24.4%), and maintained a high Segment Profit Margin of 41.0%, but declines in package software (-38.9%) and customization (-16.1%) weighed on performance. License & Support (+2.4%) and Cloud Services (+13.4%) showed stable growth, advancing the shift toward stock-style revenue. The EBASE-PLUS Business delivered Revenue ¥26.8B (+2.0%), Segment Profit ¥4.1B (+3.4%), and a Segment Profit Margin of 15.2%, supported by steady contract work in IT development outsourcing. Revenue composition is nearly balanced at EBASE-PLUS 50.8% vs EBASE 49.2%, but profit contribution is concentrated in EBASE at 72%, preserving its position as the core business. Recovery of EBASE profitability is key to restoring consolidated performance.
[Profitability] Operating margin was 27.2%, down 450bp YoY but remains high. Gross margin at 51.7% (-170bp) was impacted by mix deterioration, and SG&A ratio rose to 24.5% (+280bp) due to higher personnel costs. ROE stood at 13.9% (prior year 17.5%), comprised of a Net Profit Margin of 19.5% (-340bp), Total Asset Turnover of 0.649x (prior year 0.674x), and Financial Leverage of 1.10x (prior year 1.10x). ROA declined to 18.1% (prior year 22.6%) but remains high. [Cash Quality] Operating Cash Flow (OCF) / Net Income was a healthy 1.04x, but OCF/EBITDA (Operating Income + Depreciation) was 0.71x, in a borderline area, and Receivables DSO is around 60 days, indicating room to improve cash conversion efficiency. Free Cash Flow (OCF + Investing CF) was ¥5.6B, covering dividends of ¥6.2B at a coverage ratio of 0.89x—slightly short but coverable with abundant cash balances. [Investment Efficiency] Capital expenditure was very restrained at ¥0.05B (7% of Depreciation ¥0.7B), and intangible investment was limited to ¥1.0B. R&D was ¥0.6B (1.1% of Revenue), up from ¥0.4B but still modest. [Financial Soundness] Equity Ratio was 91.0%, Current Ratio 868%, and D/E ratio 0.10x, indicating an extremely healthy, effectively debt-free balance sheet. Cash and deposits of ¥49.5B plus short-term investment securities ¥1.3B produced ¥50.8B in liquid assets, far exceeding current liabilities of ¥7.0B, minimizing liquidity risk.
Operating Cash Flow was ¥10.7B (prior year ¥11.7B, -8.4%). With Pre-tax Income ¥14.7B, OCF/Net Income remained high at 1.04x. Subtotal (before working capital changes) was ¥15.9B, and cash generation was constrained primarily by tax payments of -¥5.4B. Working capital movements were nearly neutral with Accounts Receivable change +¥0.4B and Accounts Payable change +¥0.1B; Contract Assets decreased from ¥1.6B to ¥0.7B, indicating earlier collections. Investing Cash Flow was -¥5.1B (prior year +¥0.9B), mainly due to acquisition of investment securities -¥4.0B and acquisition of intangible fixed assets -¥1.0B. Capital expenditure was minimal at -¥0.05B. Free Cash Flow fell to ¥5.6B (prior year ¥12.5B), less than dividends of ¥6.2B. Financing Cash Flow was -¥10.5B, with dividends -¥6.2B and buybacks -¥4.4B as primary outflows. Total shareholder returns were ¥10.6B, substantially exceeding FCF. Cash and cash equivalents decreased from ¥54.2B at the beginning of the period to ¥49.3B at the end (-¥4.9B) but remain ample.
Current period earnings are primarily operating in nature; non-operating income ¥0.4B represents 0.7% of Revenue, indicating low dependence. Breakdown of non-operating income: interest income ¥0.2B and investment partnership gains ¥0.2B, both of which are recurring in nature. The special loss of ¥0.2B (valuation loss on available-for-sale securities) is temporary and does not affect the recurring earnings structure. The difference between Ordinary Income ¥14.7B and Net Income ¥10.3B is mainly income taxes of ¥4.4B, with an effective tax rate of 30.0%, which is standard. Comprehensive income ¥10.6B slightly exceeded net income, aided by a ¥0.3B increase in valuation differences on available-for-sale securities; impact on revenue recognition is minor. OCF ¥10.7B versus Net Income ¥10.3B yields OCF/Net Income of 1.04x, indicating good cash backing of profits. However, OCF/EBITDA (¥14.3B+¥0.7B=¥15.0B) at 0.71x is borderline, and Receivables DSO around 60 days suggests room to improve cash conversion. The accrual ratio ((Net Income - OCF)/Total Assets) is approximately -0.5%, low, indicating no excessive accounting profit buildup; overall, earnings quality is generally good.
The company's plan for FY2027 (March 2027) projects Revenue ¥54.0B (+2.7% YoY), Operating Income ¥15.4B (+7.6%), Ordinary Income ¥16.0B (+9.0%), and Net Income ¥10.7B (+4.3%), implying a modest recovery. An improvement in Operating Margin to 28.5% (+130bp) is assumed, driven by recovery in EBASE profitability and cost optimization. Sales progress ratio is 52.6B/Full Year Plan 54.0B = 97.4%, high, making further contributions in the second half important. Contract liabilities increased from ¥2.0B to ¥2.8B, suggesting buildup of deferred revenue that may provide some support. However, quantitative disclosure of order backlog is not provided, limiting the certainty of the outlook. Dividend is planned at ¥15.2 per share at year-end (ordinary dividend ¥12.2 + 25th anniversary commemorative dividend ¥3.0), and the payout ratio is expected to rise slightly from 50.2% (based on current period).
Year-end dividend is ¥15.2 per share, with a payout ratio of 50.2% (Dividends ¥6.2B ÷ Net Income ¥10.3B), a standard level. Share buybacks of ¥4.4B were executed (per the cash flow statement), increasing treasury stock from ¥9.0B to ¥13.2B. Total return ratio ((Dividends + Buybacks)/Net Income) is approximately 103%, substantially exceeding FCF ¥5.6B, financed by drawing down surplus cash. Dividend coverage by FCF is 0.89x, slightly short, but ample cash and deposits of ¥49.5B support short-term sustainability. For FY2027, an ordinary dividend of ¥12.2 plus a ¥3.0 commemorative dividend for the 25th anniversary is planned, reflecting a continued shareholder-return stance. In the medium-to-long term, strengthening the FCF backing for total returns—through recovery in EBASE profitability and improvement in OCF/EBITDA—will be a priority.
Product Mix Deterioration Risk: The EBASE Business (high margin, Segment Profit Margin 41.0%) decelerated with Revenue -9.4%, while the lower-margin EBASE-PLUS Business (Segment Profit Margin 15.2%) increased its share to 50.8%. Gross margin fell 170bp from 53.4% to 51.7%, and operating margin deteriorated 450bp from 31.7% to 27.2%. If recovery in EBASE package and customization revenues is delayed, dilution of consolidated margins could persist.
Growth Impairment Risk from Investment Curtailment: Capital expenditure was only 7% of Depreciation, and R&D is modest at 1.1% of Revenue. While this supports short-term margins, delayed new product development or weakening of technological foundations could undermine medium-to-long-term competitiveness and result in lost growth opportunities.
Cash Conversion Efficiency Risk: OCF/EBITDA is 0.71x, a borderline level, and Receivables DSO at about 60 days is high, delaying cash conversion. If working capital increases during a revenue expansion, FCF could be pressured and the sustainability of dividends and buybacks could be affected.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 27.2% | 8.1% (3.6%–16.0%) | +19.1pt |
| Net Profit Margin | 19.5% | 5.8% (1.2%–11.6%) | +13.7pt |
Profitability is highly advantaged within the industry, with both Operating Margin and Net Profit Margin substantially above the median.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -3.8% | 10.1% (1.7%–20.2%) | -13.9pt |
Growth lags the industry, in a revenue decline phase below the median two-digit growth.
※ Source: Company aggregation
Coexistence of high profitability / net-debt-free profile and growth slowdown: Defensive financial characteristics remain with Operating Margin 27.2%, Equity Ratio 91.0%, and cash ¥49.5B, but the company faced Revenue decline of -3.8%, well below the industry median +10.1% growth. Declines in EBASE package and customization were the primary cause; License & Support (+2.4%) and Cloud (+13.4%) growth did not fully offset the weakness. The FY2027 plan anticipates modest recovery of +2.7% in Revenue, and the increase in contract liabilities (+41%) suggests buildup of deferred revenue, signaling some improvement in order conditions.
Trade-off between margin decline and suppressed investment: Operating Margin fell 450bp from 31.7% to 27.2%, driven by gross margin -170bp (mix deterioration) and SG&A ratio +280bp (higher personnel costs), but not structural impairment of earning power. CapEx is 7% of Depreciation and R&D is 1.1% of Revenue—very restrained—supporting short-term margins but posing a risk for securing mid-term growth drivers. The FY2027 plan assumes a 130bp improvement to 28.5% Operating Margin, contingent on recovery of high-margin EBASE projects and re-expansion of CapEx/R&D.
Total returns exceeding FCF and drawdown of cash: Total returns Dividends ¥6.2B + Buybacks ¥4.4B = ¥10.6B vs FCF ¥5.6B yields coverage of 0.53x, indicating a shortfall. While surplus cash (¥50.8B) can cover this, sustaining the policy requires expansion of OCF and improvement in OCF/EBITDA (current 0.71x → target 0.9x+). Receivables DSO of approx. 60 days is relatively long; shortening collection cycles to improve cash conversion is key to mid-term sustainability of returns.
This report is an AI-generated financial analysis based on XBRL earnings release data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference data compiled by the company from public financial statements. Investment decisions should be made at your own responsibility and, if necessary, after consulting a professional advisor.