| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥280.6B | ¥247.1B | +13.5% |
| Operating Income / Operating Profit | ¥15.6B | ¥14.5B | +7.4% |
| Ordinary Income | ¥17.3B | ¥16.0B | +7.7% |
| Net Income / Net Profit | ¥9.1B | ¥5.9B | +54.7% |
| ROE | 6.1% | 4.6% | - |
For the fiscal year ended February 2026, revenue was ¥280.6B (YoY +¥33.5B +13.5%), Operating Income was ¥15.6B (YoY +¥1.1B +7.4%), Ordinary Income was ¥17.3B (YoY +¥1.2B +7.7%), and Net Income attributable to owners of the parent was ¥15.7B (YoY +¥5.5B +54.3%), achieving revenue and profit growth. Revenue recorded a second consecutive year of double-digit growth, led by the core Solution Business at ¥260.2B (+13.4% YoY). The operating margin was 5.6%, down 0.3pt from 5.9% in the prior year, while Net Income saw a large increase of 54.3% driven by special gains of ¥6.0B (gain on sale of investment securities ¥2.4B, step acquisition gains ¥3.4B). Non-operating income was ¥2.1B (0.7% of revenue), indicating low dependence on financial income and limited impact on core earnings. Operating Cash Flow (OCF) was ¥17.6B (YoY +13.2%), Free Cash Flow was ¥16.6B, providing ample coverage for dividends and growth investments.
Revenue of ¥280.6B (YoY +13.5%) showed solid growth. By segment, the Solution Business expanded to ¥260.2B (YoY +13.4%, revenue mix 92.7%) and continued to drive the company. Wins in cloud system building and implementation support projects advanced, and contract liabilities (deferred revenue equivalent to advances received) accumulated to ¥24.8B (prior year ¥22.5B, +10.4%). The Products Business grew to ¥22.5B (YoY +14.2%, mix 8.0%) but remains in an upfront investment phase with profit realization still in progress. Revenue growth of +13.5% exceeded the industry median (+10.1%) by 3.4pt, maintaining relatively high growth within the industry. Accounts receivable were ¥50.6B (prior year ¥44.9B, +¥5.6B), with DSO of 66 days indicating somewhat longer collection terms, but together with the increase in contract liabilities suggests an accumulation of orders.
Cost of sales was ¥205.8B (cost ratio 73.4%), yielding gross profit of ¥74.7B (gross margin 26.6%, down 0.4pt from 27.0% prior year). Selling, General & Administrative expenses (SG&A) were ¥59.1B (SG&A ratio 21.1%, flat from prior year) and increased by +13.2% versus revenue growth of +13.5%, indicating limited economies of scale. Goodwill amortization of ¥0.4B is included but had minimal impact overall. Operating Income was ¥15.6B (operating margin 5.6%, down 0.3pt) due to slight compression of gross margin and SG&A growth. By segment, Solution generated segment profit of ¥32.1B (margin 12.3%) with high profitability, while Products incurred a loss of ¥1.3B (widened from -¥0.7B prior year), diluting consolidated margins. Non-operating income was ¥2.1B (interest income ¥0.1B, foreign exchange gains ¥0.4B, equity-method investment income ¥0.4B, etc.), non-operating expenses ¥0.4B, resulting in Ordinary Income of ¥17.3B (ordinary income margin 6.2%). Special gains of ¥6.0B (gain on sale of investment securities ¥2.4B, step acquisition gains ¥3.4B) were recorded, bringing profit before tax to ¥23.2B. Income taxes were ¥6.0B (effective tax rate 25.8%), and after deducting non-controlling interests of ¥1.7B, Net Income attributable to owners of the parent was ¥15.7B (net margin 5.6%, improved +3.2pt from 2.4% prior year). The improvement in net margin was largely due to special gains; on an ordinary basis excluding one-offs, margins were roughly in line with the prior year. Comprehensive income was ¥15.9B (¥14.1B attributable to owners of the parent), reflecting other comprehensive income of -¥1.5B (valuation difference on available-for-sale securities -¥1.2B, foreign currency translation adjustments -¥0.3B). In summary, the company achieved revenue and profit growth driven by double-digit revenue increase, but operating margin slightly declined and the large increase in Net Income depended on special gains.
The Solution Business reported Revenue of ¥260.2B (YoY +13.4%) and Operating Income of ¥32.1B (YoY +9.7%, margin 12.3%), combining stable growth with high profitability as the core business. Expansion of cloud system construction and implementation support projects drove performance, and the build-up of contract liabilities suggests steady increases in backlog. Segment-level expenses before corporate allocation were reasonably controlled, maintaining a margin of 12.3%. The Products Business recorded Revenue of ¥22.5B (YoY +14.2%) but Operating Income of -¥1.3B (widened from -¥0.7B, margin -5.6%), failing to reach profitability. Upfront investment in development and sales of proprietary cloud services concentrated costs, with depreciation and amortization of ¥5.1B (prior year ¥3.4B, +51%) and amortization of intangible assets burdening profits. After allocating corporate expenses of ¥15.3B (prior year ¥14.1B) to both segments, consolidated Operating Income adjusted to ¥15.6B. Solution’s high margin offsets Products’ losses, but achieving profitability in Products is key to improving consolidated margins.
Profitability: Operating margin 5.6% (down 0.3pt from 5.9%) was driven by slight gross margin compression and flat SG&A ratio. ROE 6.1% (prior year 9.2%) declined somewhat, largely reflecting dilution due to expanded equity (Net Assets ¥149.7B, prior year ¥128.4B, +16.6%). Ordinary income margin 6.2% (prior year 6.5%) reflects a decline at the operating level partly offset by non-operating income. Net margin 5.6% (improved +3.2pt from 2.4%) was temporarily boosted by special gains of ¥6.0B; core ordinary earnings remain roughly unchanged. Cash quality: OCF ¥17.6B is 1.93x Net Income, Free Cash Flow ¥16.6B is 1.82x Net Income, indicating solid cash conversion. OCF/EBITDA (Operating Income + D&A ¥7.1B = ¥22.7B) was 0.77x, below the benchmark 0.9x, partly due to working capital absorption (accounts receivable increase ¥4.0B). Depreciation & amortization ¥7.1B (prior year ¥4.8B, +49%) reflects upfront investment in intangibles. Investment efficiency: Total asset turnover 1.26x (Revenue ¥280.6B ÷ Total Assets ¥222.1B) was in line with the prior year, indicating growth and asset expansion largely synchronized. Intangible fixed assets ¥17.1B (prior year ¥12.5B, +37%) show active software investment, and CapEx ¥1.2B / D&A ¥7.1B = 0.17x indicates restrained tangible investment. Financial soundness: Equity Ratio 67.4% (prior year 66.0%, +1.4pt), Current Ratio 242% (prior year 224%), and cash & deposits ¥82.7B far exceed short-term liabilities ¥64.3B, reflecting very strong liquidity. Debt/EBITDA 0.09x (interest-bearing debt ¥2.1B ÷ EBITDA ¥22.7B) and Interest Coverage 678x (Operating Income ¥15.6B ÷ Interest Expense ¥0.02B) indicate extremely low leverage and interest burden risk.
OCF was ¥17.6B (prior year ¥15.6B, +13.2%), representing 0.76x of profit before tax ¥23.2B. From OCF before working capital changes ¥23.9B, adjustments for increases in accounts receivable ¥4.0B, increases in contract liabilities ¥1.8B, increases in accounts payable ¥2.9B, etc., were made, and income taxes paid ¥6.8B were deducted to arrive at the figure. Investing Cash Flow was -¥1.1B (CapEx ¥1.2B, intangible asset investments ¥7.6B, purchase of investment securities ¥1.0B, proceeds from sales ¥3.9B, net of acquisitions/subsidiary-related payments ¥8.0B), yielding Free Cash Flow ¥16.6B (substantial improvement from prior year ¥5.5B). Proceeds from sale of investment securities and partial divestiture of subsidiary shares contributed to investing CF improvement. Financing Cash Flow was ¥0.9B (prior year ¥3.5B), including dividend payments ¥2.1B and capital contributions from non-controlling shareholders to subsidiaries ¥2.3B. OCF/EBITDA 0.77x suggests room to improve cash conversion, with DSO reduction (currently 66 days) and increased contract liabilities as levers to strengthen OCF. Cash and deposits were ¥82.7B (prior year ¥65.1B, +17.5%), with on-hand liquidity equal to 37.2% of total assets. Free Cash Flow ¥16.6B covers dividend payments ¥2.1B 8.0 times, with surplus to be allocated to growth investments and cash buildup, reflecting prudent capital allocation.
Ordinary Income ¥17.3B was largely composed of Operating Income ¥15.6B, and non-operating income ¥2.1B was only 0.7% of revenue, indicating limited exposure to financial income. Breakdown of non-operating income includes interest income ¥0.1B, foreign exchange gains ¥0.4B, equity-method investment income ¥0.4B, and gains from investment partnerships ¥0.1B, showing low dependence on financial income and a structure that generates stable profits from core operations. Special gains of ¥6.0B (gain on sale of investment securities ¥2.4B, step acquisition gains ¥3.4B) are one-off and require consideration of a possible decline in future periods. Comprehensive income ¥15.9B exceeded Net Income ¥9.1B, with the difference between comprehensive income attributable to owners of the parent ¥14.1B and Net Income attributable to owners of the parent ¥15.7B mainly due to Other Comprehensive Income -¥1.5B (valuation difference on available-for-sale securities -¥1.2B, etc.). OCF of ¥17.6B is 1.93x Net Income ¥9.1B and 1.12x Net Income attributable to owners of the parent ¥15.7B, and even accounting accruals (D&A ¥7.1B, accounts receivable increase ¥4.0B, contract liabilities increase ¥1.8B, etc.), cash backing of profits is generally solid. However, the reduction from OCF subtotal ¥23.9B to final ¥17.6B reflects working capital absorption, and extended DSO of 66 days due to increased receivables hampers cash generation. Overall, ordinary earnings are stably generated from operating activities, but the large increase in Net Income depends on special gains, and sustainable profit growth requires margin improvement at the operating level.
Full-year guidance projects Revenue ¥343.5B (YoY +22.4%), Operating Income ¥25.4B (YoY +62.9%), Ordinary Income ¥26.3B (YoY +52.2%), and Net Income ¥15.3B (YoY -2.9%), anticipating revenue and profit growth while assuming a slight decrease in Net Income due to the one-off special gains in this period. The Revenue target implies high growth of +22.4%, but the plan assumes a significant improvement in operating margin to 7.4% (up 1.8pt from 5.6%), contingent on achieving profitability in the Products Business and improving SG&A efficiency. Progress rates are Revenue 81.7%, Operating Income 61.4%, Ordinary Income 65.7%, Net Income 102.6%, assuming revenue and profit buildup in H2, while Net Income reflects a conservative plan below this period’s results due to the ¥6.0B special gains. Dividend forecast is ¥0 (compared with this period’s year-end dividend of ¥16 and payout ratio 13.3%), indicating prioritization of funds for growth investments. Achievement of the guidance depends on Solution Business order expansion, progress in monetizing the Products Business, and SG&A improvements—particularly the feasibility of H2 Operating Income increase of ¥9.8B (from H1 ¥15.6B to full-year ¥25.4B) is a focal point.
A year-end dividend of ¥16 (interim ¥0, annual ¥16) was paid. Based on Net Income attributable to owners of the parent ¥15.7B and weighted average shares outstanding of 12,909 thousand, EPS was ¥121.81, resulting in a payout ratio of 13.1%, a conservative level. Free Cash Flow ¥16.6B covers the total dividend amount ¥2.1B 8.0 times, indicating high dividend sustainability. With cash & deposits ¥82.7B, Equity Ratio 67.4%, and Debt/EBITDA 0.09x, financial capacity is ample, suggesting room to increase dividends; however, the full-year dividend forecast of ¥0 reflects a policy of prioritizing growth investments (notably upfront investment in the Products Business and intangible asset investments ¥7.6B). There were no share buybacks; shareholder returns are focused on dividends. BPS ¥972.86 (prior year ¥857.93, +13.4%) indicates accumulated equity and potential expansion of future dividend capacity. The payout ratio of 13.1% is low relative to industry average and consistent with a growth phase; after achieving profitability in the Products Business, raising the Total Return Ratio could be an option to strengthen shareholder returns.
Segment concentration risk: The Solution Business accounts for 92.7% of revenue and the majority of profit, resulting in high dependence on a single business. Order trends and project profitability in this segment directly affect consolidated performance; loss of major contracts or project delays could lead to downside risk. Contract liabilities of ¥24.8B (8.8% of revenue) partially reflect backlog, but the ratio to total revenue is limited; continuous order wins are a prerequisite to sustain growth.
Delay in monetization of the Products Business: The Products Business continues to be loss-making at an operating loss of ¥1.3B against revenue of ¥22.5B. High depreciation and amortization of ¥5.1B (prior year ¥3.4B, +51%) and upfront investment burdens could continue to dilute consolidated margins if profitability is delayed. Of intangible fixed assets ¥17.1B, amortization of software etc. may continue to pressure profits, and timing of monetization could slip depending on internal KPIs such as ARPU and churn.
Working capital and cash conversion risk: Accounts receivable ¥50.6B (DSO 66 days) and prolonged collection terms are reflected in the reduction from OCF subtotal ¥23.9B to final OCF ¥17.6B due to working capital absorption. Slower net increases in contract liabilities (prior year +¥3.9B → this period +¥1.8B) contribute, and OCF/EBITDA 0.77x is below the industry benchmark 0.9x. If order expansion does not coincide with increases in advance payments and improvements in accounts receivable collection efficiency, balancing growth and cash generation may become difficult, potentially leading to depletion of on-hand liquidity or the need for external financing.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 5.6% | 8.1% (3.6%–16.0%) | -2.5pt |
| Net Margin | 3.2% | 5.8% (1.2%–11.6%) | -2.6pt |
Both operating and net margins are below industry medians, placing profitability at mid-to-lower ranks in the sector. Continued losses in the Products Business and SG&A ratio are factors.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 13.5% | 10.1% (1.7%–20.2%) | +3.4pt |
Revenue growth outperformed the industry median by 3.4pt, showing above-average growth driven by Solution Business order expansion.
※ Source: Company compilation
Expansion of the core Solution Business and progress in monetizing the Products Business are key to expanding consolidated margins. The Solution Business maintains high profitability at 12.3% and the build-up of contract liabilities suggests steady backlog growth. Conversely, the Products Business continues to record an operating loss of ¥1.3B, with amortization burden of ¥5.1B pressing profits. Operating margin of 5.6% is 2.5pt below the industry median of 8.1%, so achieving profitability in the Products Business is critical to convergence toward industry-average margins. The full-year plan assumes improvement in Products in H2, making progress monitoring important.
Cash generation capability and balance sheet soundness are very strong, providing significant optionality for growth investments and dividends. Free Cash Flow ¥16.6B covers dividends ¥2.1B eightfold, and cash & deposits ¥82.7B, Equity Ratio 67.4%, and Debt/EBITDA 0.09x demonstrate substantial financial capacity. However, OCF/EBITDA 0.77x indicates room to improve cash conversion; shortening DSO from 66 days and strengthening contract liability accumulation are levers to expand OCF. The payout ratio of 13.1% is conservative, and after Products profitability is achieved, raising the Total Return Ratio could be an option to enhance shareholder returns. The full-year dividend forecast of ¥0 reflects a growth-investment-first policy, but given the financial capacity, continuation of dividends is financially sustainable.
This report is an earnings analysis document automatically generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the Company based on publicly disclosed financial statements. Investment decisions are your own responsibility; please consult a professional advisor as needed.