I'LL INC FY2026 FY Earnings Report

Quick View

Executive Summary

The Company reported higher revenue and higher profit, with profit growth outpacing revenue growth, indicating improved profitability. Revenue was ¥208.9B (+8.3% YoY), Operating Income was ¥55.6B (+15.5%), Ordinary Income was ¥56.1B (+17.6%), and Net Income was ¥41.8B (+19.5%). Improvement in the gross profit margin offset the increase in the SG&A expense ratio, resulting in an expansion of the Operating Income margin from the previous year.

Factors Affecting Financial Performance

【Revenue】Revenue increased 8.3% YoY to ¥208.9B. Although detailed disclosure by segment could not be confirmed, expansion of existing businesses appears to have driven the increase in revenue.

【Profit and Loss】Operating Income was ¥55.6B (+15.5% YoY), Ordinary Income was ¥56.1B (+17.6%), and Net Income was ¥41.8B (+19.5%), with all three showing growth exceeding the revenue growth rate. The gross profit margin improved to 57.4% from the previous year and absorbed the increase in the SG&A expense ratio (30.8% of revenue). Non-operating income and expenses resulted in a surplus of only ¥0.4B, and the increase in Ordinary Income was primarily attributable to growth in Operating Income. Extraordinary income and losses were virtually immaterial, indicating that the increase in Net Income was not dependent on one-time factors. In conclusion, the Company reported higher revenue and higher profit.

Key Financial Metrics

【Profitability】The Operating Income margin was 26.6%, improving from 25.0% in the previous year, while the Net Income margin expanded to 20.0% from 18.1%. The gross profit margin was 57.4%.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥34.5B, representing only 0.83x Net Income of ¥41.8B; the ¥4.9B increase in trade receivables and contract assets and ¥12.9B in corporate tax payments constrained cash conversion.【Investment Efficiency】ROE was 30.1%, and total assets increased 13.9% YoY to ¥179.6B.【Financial Soundness】The Equity Ratio was 77.2%. With current assets of ¥142.9B versus current liabilities of ¥32.4B, liquidity remained ample, while cash and deposits of ¥79.1B accounted for 44.0% of total assets.

Cash Flow Analysis

OCF was ¥34.5B, essentially flat at +2.6% YoY, indicating delayed cash conversion relative to the 19.5% growth in Net Income. Investing Cash Flow was -¥35.1B, including ¥4.0B in capital expenditures and ¥22.0B deposited into time deposits. Financing Cash Flow was -¥16.4B, primarily due to ¥16.8B in dividend payments and ¥0.9B in share repurchases. Free Cash Flow, defined as the sum of OCF and Investing Cash Flow, was -¥0.5B; excluding the placement into time deposits, however, the Company maintained substantive cash-generating capacity. Cash and cash equivalents decreased to ¥57.1B at period-end.

Earnings Quality

Non-operating income was ¥0.4B, while non-operating expenses were immaterial; the increase in Ordinary Income depended on growth in Operating Income, the core business profit. Both extraordinary income and extraordinary losses were approximately ¥0.0B, and one-time factors contributed virtually nothing to the increase in Net Income. OCF was ¥34.5B, only 0.83x Net Income of ¥41.8B, with the increase in trade receivables and contract assets contributing to the divergence between accrual-based earnings and cash flows. Comprehensive Income was ¥42.1B, broadly in line with Net Income of ¥41.8B. The impact of other comprehensive income items, including ¥0.4B in retirement benefit adjustments, was limited, and no factor that would materially distort earnings quality was identified.

Earnings Forecast and Guidance

The Company forecasts next-period Revenue of ¥228.0B (+9.1% YoY), while forecasting lower Operating Income of ¥50.0B (-10.2%) and Ordinary Income of ¥50.4B (-10.1%). The forecast Operating Income margin is 21.9%, premised on a decline from the current-period result of 26.6%; rebuilding profit margins while maintaining the revenue growth trend will be a key challenge. Forecast EPS is ¥141.67, below the current-period result of ¥167.01.

Shareholder Returns

The annual dividend is ¥67.00 (interim dividend of ¥32.00 and year-end dividend of ¥35.00), resulting in a Payout Ratio of 40.1%. The Company conducted ¥0.9B in share repurchases, bringing the Total Return Ratio, including dividends, to approximately 42%. OCF of ¥34.5B was approximately 2.1x total dividend payments of ¥16.8B, indicating that dividends were covered by OCF. The forecast dividend for the next period is ¥70.00, representing a planned ¥3 increase.

Risk Factors

1. Profit margin decline plan: Although the Company forecasts higher revenue for the next period, it expects Operating Income to decline by -10.2%, with the Operating Income margin projected to decrease by approximately 4.7pt from 26.6% in the current period. There is a risk that changes in project mix and increases in investment may exceed expectations.

2. Weak cash conversion: OCF was only 0.83x Net Income, while the ¥4.9B increase in trade receivables and contract assets constrained cash conversion. If profit growth continues not to translate into OCF growth, flexibility in capital allocation may decline.

3. Working capital and collection risk: Due to the characteristics of the project-based business, fluctuations in acceptance and collection timing may readily affect trade receivables and OCF, requiring continuous monitoring.

Industry Benchmark (For Reference; Based on Company Research)

Industry Benchmark (it_telecom)

Profitability and Return

The Company’s Operating Income margin and Net Income margin significantly exceed the industry median, placing its profitability at a high level within the industry.

Growth and Capital Efficiency

The Revenue growth rate is slightly below the industry median, leaving the Company’s growth pace at a mid-range level within the industry.

※Source: Company research

Key Takeaways from the Earnings Report

1. The Operating Income margin of 26.6%, Net Income margin of 20.0%, and ROE of 30.1% all significantly exceed the industry median, with improvement in the gross profit margin (approximately 2pt increase) driving the expansion in profitability.

2. The Company’s forecast for the next period calls for higher revenue but lower profit, premised on a decline in the Operating Income margin to 21.9%. Caution is warranted in assuming that the high profit margins achieved in the current period will continue as the future level.

3. OCF/Net Income was 0.83x, and cash and cash equivalents decreased to ¥57.1B at period-end. However, the financial foundation remains strong, with an Equity Ratio of 77.2% and a current ratio exceeding 440%, while dividends are sufficiently covered by OCF.

Theoretical Stock Price (Reference Value)

Sensitivity: ¥818–¥866 for a ±1% change in the cost of equity, and ¥834–¥852 for a ±0.1 change in ω.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-08 / Mechanically calculated solely from publicly disclosed data; this is not a forecast of the market price or a recommendation of any specific investment action, and does not predict or guarantee future stock prices.)

---

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 discretion and responsibility, after consulting professionals as necessary.

---End of Report---