eBASE (3835) FY2026 Q3 Earnings Report

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Executive Summary

For the cumulative Q3 period of the fiscal year ending March 2026, revenue and earnings declined, with the reversal of operating leverage caused by higher SG&A expenses being the primary factor behind the decline in profit margins. Revenue was ¥36.1B (¥37.0B in the same period of the previous year, YoY -2.2%), Operating Income was ¥7.8B (¥9.4B, YoY -16.8%), Ordinary Income was ¥8.0B (¥9.8B, YoY -17.6%), and Net Income was ¥5.5B (¥6.5B, YoY -16.0%). A significant decline in package software sales in the core eBASE Business, together with an 8.3% year-on-year increase in SG&A expenses, expanded the decline in earnings. The Operating Margin of 21.6% remains high within the industry, although it has declined from 25.4% in the same period of the previous year.

Factors Affecting Results

【Revenue】Revenue was ¥36.1B, down 2.2% year on year. Revenue from the eBASE Business was ¥16.5B (YoY -5.2%), as declines in package software (-29.8%) and customization (-8.5%) had a negative impact, while license & support (+2.2%) and cloud services (+10.2%) continued to post revenue growth. Revenue from the eBASE-PLUS Business was ¥19.7B (YoY +0.4%), essentially flat. Although the expansion of recurring revenue is positive, it has not been sufficient to offset the decline in package software revenue.

【Profit and Loss】Gross profit was ¥17.5B, with a gross margin of 48.4%, down from 49.6% in the same period of the previous year. SG&A expenses were ¥9.7B, increasing 8.3% despite the decline in revenue, while the SG&A ratio rose 260bp to 26.7%. As a result, Operating Income was ¥7.8B (YoY -16.8%) and Ordinary Income was ¥8.0B (YoY -17.6%). Non-operating income was ¥0.2B, a small amount that does not distort the evaluation of core business performance. Net Income was ¥5.5B (YoY -16.0%), reflecting an effective tax rate of 32.0%. Revenue and earnings declined, and expense growth exceeding the decline in revenue was the structural factor behind the deterioration in profit margins.

Segment Analysis

The eBASE Business recorded revenue of ¥16.5B (45.5% of total, YoY -5.2%), segment profit of ¥5.0B (YoY -23.5%), and a margin of 30.5% (down -725bp from 37.8% in the same period of the previous year). As the core business accounting for 62.5% of consolidated segment profit, the decline in package software revenue was the primary driver of the decline in its profit margin. The eBASE-PLUS Business recorded revenue of ¥19.7B (54.5% of total, YoY +0.4%), segment profit of ¥3.0B (YoY -5.5%), and a margin of 15.3% (down -102bp from 16.3% in the previous year). Although revenue was maintained, centered on IT development outsourcing, pressure on profitability was evident. Neither business achieved both revenue and profit growth, and the ongoing decline in profit margins is weighing on consolidated results.

Key Financial Indicators

【Profitability】The Operating Margin of 21.6% (25.4% in the same period of the previous year) and Net Profit Margin of 15.1% (16.8% in the same period of the previous year) both declined year on year, but remain high in absolute terms.【Cash Flow Quality】Non-operating income of ¥0.2B was primarily composed of interest income and dividend income and was not large enough to materially distort the evaluation of core operating profit; earnings quality therefore remains dependent on the core business (Operating Income).【Investment Efficiency】Annualized ROE was 10.3%, decomposed into a Net Profit Margin of 15.1%, an annualized total asset turnover ratio of 0.633x, and financial leverage of 1.07x, indicating that double-digit ROE was secured under low leverage.【Financial Soundness】With an Equity Ratio of 93.1%, cash and deposits of ¥45.6B, and a debt-to-equity ratio of 0.07x, the company has an extremely conservative financial structure, and short-term funding constraints are limited.

Cash Flow Analysis

Although the cash flow statement is not disclosed separately, analysis of fund movements based on changes in the balance sheet shows that cash and deposits declined from ¥53.5B in the same period of the previous year to ¥45.6B. Meanwhile, investment securities increased from ¥13.4B to ¥16.3B, indicating a partial shift from cash to securities. Accounts receivable decreased by ¥2.7B from ¥9.8B to ¥7.1B, representing a reduction in receivables exceeding the decline in revenue and indicating that the amount of working capital tied up is easing. Treasury stock increased from ¥9.0B to ¥11.3B, suggesting that funds may have flowed out of the company through shareholder returns and capital policy measures, contributing to the decline in cash. Overall, while the company’s capacity to generate funds from its business remains strong, the pattern indicates that funds are being directed toward investment and shareholder returns.

Earnings Quality

Current-period earnings were generated almost entirely by the core business, with no extraordinary gains or losses recorded. Non-operating income was limited to ¥0.2B (including ¥0.1B of interest income and dividend income, among other items), while non-operating expenses were also minimal at ¥0.0B. Accordingly, the difference between Ordinary Income and Operating Income was very small, with no increase or decrease in earnings attributable to temporary factors. Against pre-tax income of ¥8.0B, corporate income taxes of ¥2.6B resulted in an effective tax rate of 32.0%, representing a standard conversion to Net Income. Comprehensive income was ¥5.8B, broadly in line with Net Income of ¥5.5B, with a small change in the valuation difference on other securities of ¥0.4B reflected. The divergence between Net Income and comprehensive income was small, and earnings quality can be assessed as sound.

Earnings Forecast and Guidance

Progress against the full-year forecast was 72.3% for revenue, 59.0% for Operating Income, 59.6% for Ordinary Income, and 59.3% for Net Income. Revenue progress is close to the standard 75% level, but Operating Income progress is 16.0 points below this level, highlighting a delay in profitability. To achieve the full-year forecast (revenue of ¥50.0B and Operating Income of ¥13.3B), Q4 would require revenue of ¥13.9B and Operating Income of ¥5.4B (a margin of approximately 39.2%), substantially above the cumulative Operating Margin of 21.6%. The company has neither revised nor withdrawn its earnings forecast, but improvement in Q4 profitability will be the key to achieving it.

Shareholder Returns

The full-year dividend forecast is ¥15.2 per share, implying a Payout Ratio of approximately 74% based on the full-year forecast EPS of ¥20.51. This figure is the Payout Ratio based solely on dividends and is not the Total Return Ratio including share repurchases. The Q2 dividend was ¥0, indicating a policy of concentrating dividends at the fiscal year-end. With the Payout Ratio exceeding 70%, achievement of the full-year earnings forecast is also important from the perspective of dividend capacity. The conservative financial foundation of ¥45.6B in cash and deposits and a debt-to-equity ratio of 0.07x supports the company’s ability to pay dividends. At the same time, treasury stock has increased to ¥11.3B, and attention will focus on capital allocation trends combining dividends and share repurchases.

Risk Factors

1. Declining profitability in the core business: Package software sales in the eBASE Business declined 29.8% year on year, while segment profit declined 23.5%, causing the segment profit margin to fall to 30.5% (37.8% in the previous year). The extent of recovery in this business, which accounts for 62.5% of consolidated segment profit, will determine consolidated performance.

2. Burden of achieving the full-year forecast: Against the full-year Operating Income forecast of ¥13.3B, cumulative progress was only 59.0%, requiring an Operating Margin of approximately 39.2% in Q4, substantially above the cumulative actual result of 21.6%. If the target is not achieved, the Payout Ratio may rise further.

3. Deterioration in the profitability of the eBASE-PLUS Business: Although revenue was maintained, the segment profit margin declined to 15.3% (16.3% in the previous year). Rising IT personnel costs and outsourcing unit prices may affect profitability.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Both the Operating Margin and Net Profit Margin are substantially above the industry median, placing the company among the industry’s top performers.

Growth and Capital Efficiency

The Revenue Growth Rate is substantially below the industry median, indicating an underperformance in growth relative to the industry.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. The Operating Margin of 21.6%, Net Profit Margin of 15.1%, and annualized ROE of 10.3% are high compared with the industry, but all declined year on year, warranting close monitoring as a potential inflection point in the trend of profitability.

2. The decline in package software revenue in the eBASE Business and the increase in SG&A expenses were the central factors behind the decline in consolidated earnings. The extent to which revenue growth in license & support and cloud services contributes to stabilizing recurring revenue will be the key focus.

3. Financial resilience is extremely high, with cash and deposits of ¥45.6B, an Equity Ratio of 93.1%, and a debt-to-equity ratio of 0.07x. However, substantial improvement in Q4 profit margins is required to achieve the full-year Operating Income forecast, making it important to monitor progress.

Theoretical Share Price (Reference Value)

Sensitivity: ¥171–¥180 at Cost of Equity ±1%, and ¥175–¥176 at ω±0.1.

Notes:

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

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; it does not constitute a forecast of the market share price or a recommendation of any specific investment action, and does 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 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 with professionals as necessary.

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