eBASE (3835) FY2026 FY Earnings Report

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Executive Summary

For the fiscal year ended March 2026, the Company shifted from a growth trend to lower revenue and lower profit as a decline in the core eBASE Business coincided with an increased fixed-cost burden resulting from higher personnel expenses. Revenue was ¥5.26B (¥5.47B in the previous year, YoY -3.8%), while operating income was ¥1.43B (¥1.73B, YoY -17.3%), representing a decline exceeding the rate of revenue contraction. Ordinary income was ¥1.47B (¥1.80B, YoY -18.4%), and net income was ¥1.03B (¥1.25B, YoY -17.9%); both declined by double digits. The primary cause of the decline in profit margins was an 8.4% increase in SG&A expenses despite a 3.8% decrease in revenue.

Factors Affecting Financial Performance

【Revenue】Revenue was ¥5.26B, down 3.8% year on year. Revenue from the eBASE Business was ¥2.59B (down 9.4%), with the contraction of high-margin packaged software (¥0.33B, -38.9%) and customization (¥0.79B, -16.1%) serving as the primary drivers of the Company-wide revenue decline. Meanwhile, licenses & support (¥0.94B, +2.4%) and cloud services (¥0.41B, +13.4%) maintained revenue growth, with recurring revenue providing support. The eBASEPLUS Business, centered on IT development outsourcing, generated ¥2.67B (+2.3%), accounting for 50.7% of consolidated revenue and functioning as a growth segment.

【Profit and Loss】Operating income was ¥1.43B (YoY -17.3%), ordinary income was ¥1.47B (YoY -18.4%), and net income was ¥1.03B (YoY -17.9%). The gross margin declined to 51.7% (53.4% in the previous year), while the SG&A ratio rose to 24.5% (21.7% in the previous year). The primary factor was the 11.5% increase in salaries and allowances to ¥0.66B. Segment profit (on an ordinary-income basis) was ¥1.06B for eBASE (-24.4%, margin 41.0%) and ¥0.41B for eBASEPLUS (+3.4%, margin 15.2%), with the contraction of the highly profitable eBASE Business weighing on the Company-wide margin. Non-operating income of ¥0.04B made only a minor positive contribution. In conclusion, the Company reported lower revenue and lower profit.

Segment Analysis

The eBASE Business generated revenue of ¥2.59B (down 9.4% year on year) and segment profit (on an ordinary-income basis) of ¥1.06B (down 24.4%), with a profit margin of 41.0%; although highly profitable, the segment is trending downward. The eBASEPLUS Business generated revenue of ¥2.67B (up 2.3%), segment profit of ¥0.41B (up 3.4%), and a profit margin of 15.2%; although it achieved higher revenue and higher profit, its margin is relatively low. The revenue mix of the two businesses has shifted from eBASE dominance in the previous year to eBASEPLUS dominance (50.7%). The simultaneous contraction of the high-margin business and expansion of the low-margin business has led to a decline in the Company-wide operating margin (from 31.7% in the previous year to 27.2% in the current period, approximately -450bp).

Key Financial Indicators

【Profitability】The operating margin was 27.2%, down from 31.7% in the previous year, while the net profit margin was 19.5%, down from 22.9%. The gross margin was 51.7% (53.4% in the previous year), and the SG&A ratio was 24.5% (21.7% in the previous year), indicating that deterioration in the cost structure directly led to lower profit margins. 【Cash Quality】Operating cash flow (OCF) was ¥1.07B, exceeding net income of ¥1.03B, indicating favorable cash conversion of earnings. OCF/EBITDA was approximately 0.7x, with payment of ¥0.54B in corporate income taxes and other taxes weighing on the cash conversion rate. 【Investment Efficiency】ROE was 13.9%, while ROA was approximately in the 13% range; both declined from the previous year (ROE 17.5%). Total assets were ¥8.10B, broadly unchanged from the previous year, so changes in asset efficiency were primarily attributable to the decline in profit margins. R&D expenses were ¥0.06B, a low 1.1% of revenue. 【Financial Soundness】The equity ratio was 91.0%, and cash and deposits of ¥4.95B accounted for 61.1% of total assets, greatly exceeding current liabilities of ¥0.70B. The financial foundation is extremely conservative and highly resilient to fluctuations in business performance.

Cash Flow Analysis

Operating cash flow was ¥1.07B, down 8.4% from ¥1.17B in the previous year, but exceeded net income of ¥1.03B, indicating favorable cash conversion of earnings. Investing cash flow was negative ¥0.51B, primarily due to the acquisition of investment securities and investments in intangible assets such as software; capital expenditures themselves were small at ¥0.005B, below depreciation and amortization of ¥0.07B. Financing cash flow was negative ¥1.05B, with share repurchases of ¥0.44B and dividend payments of ¥0.62B as the main sources of cash outflow. Free cash flow (operating cash flow + investing cash flow) remained positive at ¥0.56B, but dividends totaling ¥0.67B were not fully covered by FCF alone. Cash and deposits were ample at ¥4.95B, providing sufficient capacity for shareholder returns and investment funding in the near term.

Quality of Earnings

The change in profit during the current period was not attributable to temporary extraordinary gains or losses, but rather to recurring business factors, namely order intake and sales trends in the eBASE Business. Non-operating income was small at ¥0.04B, consisting primarily of gains on investment business partnerships and other items, and had a limited impact on ordinary income. As operating cash flow exceeded net income, accruals—the divergence between accounting profit and cash—were small, and earnings quality can generally be considered favorable. However, payment of ¥0.54B in corporate income taxes and other taxes constrained the growth of operating cash flow, leaving room to improve cash conversion efficiency after tax payments. Comprehensive income was ¥1.06B, nearly equivalent to net income of ¥1.03B, and the divergence attributable to valuation differences on other securities (+¥0.03B) was small.

Earnings Forecasts and Guidance

For the fiscal year ending March 2027, the Company forecasts revenue of ¥5.40B (+2.7% year on year), operating income of ¥1.54B (+7.6%), and ordinary income of ¥1.60B (+9.0%), planning a recovery from lower revenue and lower profit in the current period to higher revenue and higher profit. The forecast operating margin is approximately 28.5%, assuming an improvement from 27.2% in the current period. Forecast EPS is ¥24.34, expected to increase from actual EPS of ¥22.98, although forecast net income (¥1.07B, +4.2%) is expected to grow more slowly than operating income, with limited growth at the tax and below-operating-income levels. Achieving the forecast will depend on a recovery in eBASE Business revenue and simultaneous cost management capable of absorbing higher personnel expenses.

Shareholder Returns

The annual dividend is ¥15.20 per share (¥0 interim dividend and year-end dividend only), with a payout ratio of 66.1%. Total dividends are approximately ¥0.67B; including ¥0.44B in share repurchases, total shareholder returns amount to approximately ¥1.10B, resulting in a total return ratio exceeding 100% of net income of ¥1.03B. Dividend coverage by free cash flow of ¥0.56B is below 1x, meaning that shareholder returns in the current period partly depended on cash on hand and financial capacity. The forecast dividend for the fiscal year ending March 2027 remains unchanged at ¥15.20, comprising an ordinary dividend of ¥12.20 and a ¥3.00 commemorative dividend for the 25th anniversary of the Company’s founding; the commemorative dividend should be viewed separately as a temporary item.

Risk Factors

1. Risk of continued revenue declines in the core business: The eBASE Business generated revenue of ¥2.59B (down 9.4% year on year) and segment profit of ¥1.06B (down 24.4%), as the contraction of high-margin packaged software and customization continues. Since the segment’s profit margin of 41.0% is significantly above the Company-wide average, any delay in recovery would directly affect the Company-wide margin.

2. Risk of margin dilution due to changes in the business mix: While the eBASEPLUS Business, with a profit margin of 15.2%, has expanded to 50.7% of the revenue mix, the eBASE Business, with a profit margin of 41.0%, has contracted. Accordingly, expansion of the growing segment has not necessarily translated into an improvement in the Company-wide profit margin.

3. Risks related to rising costs and the sustainability of shareholder returns: As salaries and allowances increased 11.5% year on year, the total return ratio combining dividends and share repurchases exceeded net income. Ample cash of ¥4.95B provides a buffer, but continued profit declines could reduce the flexibility of shareholder returns.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

Profitability is significantly above the industry median and ranks at a high level even within the IT and telecommunications industry.

Growth and Capital Efficiency

Revenue growth was significantly below the industry median. The revenue decline, while peer companies generally secured revenue growth, stands out within the industry.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. SG&A expenses increased 8.4% against a 3.8% decline in revenue during the current period, causing the operating margin to fall from 31.7% in the previous year to 27.2%. This reversal of operating leverage was central to the deterioration in performance, making a review of the cost structure a key focus going forward.

2. The business mix is changing, with the high-margin eBASE Business contracting and the relatively low-margin eBASEPLUS Business expanding. Trends in the revenue mix will serve as a leading indicator of the Company-wide profit margin.

3. While the total return ratio exceeds net income, dividend coverage by FCF is below 1x. The ample equity ratio of 91.0% and cash of ¥4.95B currently support the Company’s ability to make payments, but the sustainability of its shareholder return policy will depend on future trends in the recovery of earnings and operating cash flow.

Theoretical Share Price (Reference Value)

Sensitivity: ¥188–¥199 at cost of equity ±1%; ¥193–¥194 at ω±0.1.

(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 prices or recommendations of any specific investment action and do not predict or guarantee future share 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 issue. The industry benchmark is reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting with a professional advisor as necessary.

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