Digital Information Technologies Corporation FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥6.25B
• Operating Income: ¥711M
• Net Income: ¥414M
• EPS: ¥31.81

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Digital Information Technology Co., Ltd. delivered solid top- and bottom-line growth in FY2026 Q1 under JGAAP on a consolidated basis. Revenue rose 10.9% year over year to ¥6.245bn, and operating income increased 10.9% to ¥711m, indicating that the company maintained operating discipline as it scaled. Net income grew 13.5% to ¥467m, outpacing sales growth and supporting an ROE of 5.76% via a DuPont profile of 7.48% net margin, 0.562x asset turnover, and 1.37x financial leverage. Gross margin was 21.6%, and operating margin was approximately 11.4%, reflecting a lean cost structure with SG&A estimated at about 10.2% of revenue. Ordinary income of ¥713m was slightly above operating income, and limited interest expense (¥0.697m) resulted in a very high interest coverage ratio of roughly 1,020x. Liquidity is robust with a current ratio of 339% and quick ratio of 339%, supported by current assets of ¥9.47bn against current liabilities of ¥2.79bn. Balance sheet strength is notable: total liabilities of ¥3.09bn versus equity of ¥8.11bn imply modest leverage of 0.38x liabilities-to-equity; the implied equity ratio is approximately 73% based on provided assets and equity. The effective tax rate, inferred from income tax expense of ¥232m on ordinary income of ¥713m, is about 32.6%, consistent with typical statutory ranges. Cash flow statements, D&A, and EBITDA are not disclosed in this dataset (zeros indicate non-disclosure), constraining assessment of earnings-to-cash conversion and capital intensity in the quarter. Nevertheless, the strong working capital position (¥6.68bn) and low financial leverage reduce near-term balance sheet risk. The durability of revenue growth appears favorable given the margin stability and operating income growth in line with sales, suggesting controlled operating leverage. Dividend information (DPS and payout) is not disclosed here; EPS was ¥31.81 for the quarter, but payout capacity cannot be assessed without cash flow data. Asset efficiency at 0.562x (for the quarter versus average assets) looks reasonable for an IT services profile; improvements in turnover could augment ROE given ample equity. Overall, the quarter shows healthy profitability, disciplined cost control, and strong liquidity, with the main analytical limitation being the absence of cash flow and capital expenditure data. Monitoring conversion of earnings to operating cash flow and any working capital swings across the fiscal year will be important to validate earnings quality. While the company’s capital structure affords resilience, sustained growth with stable margins will be key to sustaining ROE expansion. Caution is warranted in extrapolating quarterly figures due to potential seasonality, common in project-based businesses. The analysis below relies only on disclosed non-zero data points and derived ratios from them, acknowledging that several standard metrics are unavailable in this extract.

Profitability Analysis

ROE decomposes to 5.76% = 7.48% net margin × 0.562x asset turnover × 1.37x financial leverage, indicating that margin is the dominant driver given moderate turnover and low leverage. Operating margin is approximately 11.4% (¥711m / ¥6,245m), showing healthy operating efficiency for an IT services model. Gross margin is 21.6%, and the gross-to-operating spread (about 10.2% of sales) implies disciplined SG&A. Ordinary income slightly exceeds operating income, and de minimis interest expense results in negligible financial drag. The tax burden (net/pretax ≈ 65.5%) and interest burden (pretax/EBIT ≈ 1.00) suggest the main wedge between operating and net is tax, not financing. EBITDA is not disclosed due to zero D&A reporting; absent D&A details, we cannot assess non-cash margin lift or asset-lightness beyond inference from low leverage. Operating leverage appears controlled: operating income growth (+10.9% YoY) matched revenue growth, implying stable incremental margins rather than outsized fixed-cost absorption. The net margin of 7.48% is solid and consistent with ordinary income dynamics, with little evidence of non-operating volatility in the quarter.

Growth Assessment

Revenue grew 10.9% YoY to ¥6.245bn, a healthy pace for Q1. Operating income growth also at 10.9% suggests expansion was achieved without sacrificing core profitability. Net income grew 13.5%, benefiting from stable operating results and a normalizing tax profile. The consistency across revenue, operating income, and ordinary income indicates underlying demand strength rather than one-off items, based on available data. Without segment disclosures, the sustainability of growth across end markets cannot be parsed, but margin stability reduces execution risk. Asset turnover of 0.562x for the quarter is reasonable; improvements here would add to ROE if growth continues. Outlook-wise, the combination of strong liquidity and modest leverage supports ongoing investment in delivery capacity and potential hiring to meet demand. However, the lack of cash flow disclosure prevents verification of working capital intensity, which can be a swing factor in services businesses. Overall, growth quality appears sound on income statement evidence, with future sustainability hinging on backlog/booking trends and staffing utilization, which are not disclosed here.

Financial Health

Liquidity is strong: current assets ¥9,474m versus current liabilities ¥2,792m yields a current ratio of 339% and the same quick ratio given no inventories reported. Working capital stands at ¥6,683m, providing ample buffer for project timing and receivables cycles. Solvency is solid with total liabilities at ¥3,089m and equity at ¥8,105m, implying liabilities-to-equity of 0.38x and an implied equity ratio near 73%. Interest expense is minimal (¥0.697m), and interest coverage is extremely high (~1,020x), underscoring low financing risk. The capital structure is conservative, with capacity to absorb shocks without equity dilution or material refinancing. No cash and equivalents amount is disclosed in this extract, so absolute liquidity headroom in cash terms cannot be quantified from the provided data.

Cash Flow Quality

Cash flow data (operating, investing, financing) are not disclosed in this dataset; thus, OCF-to-net income, free cash flow, and working capital cash movements cannot be assessed. Reported OCF/NI of 0.00 and FCF of 0 in the metrics should be treated as unavailable rather than zeros. Earnings quality must therefore be inferred from the stability of margins and low reliance on non-operating income; both appear supportive this quarter. With significant working capital on the balance sheet and no inventory, receivables and other current assets likely dominate the cash conversion cycle; however, without the cash flow statement, we cannot verify timing effects. D&A is undisclosed, so the non-cash component of expenses cannot be quantified, and EBITDA-based cash proxies are not available. In sum, we need subsequent quarters’ CF disclosures to validate earnings-to-cash conversion and to assess capex needs.

Dividend Sustainability

Dividend data (DPS and payout) are not disclosed here, and the reported payout ratio of 0.0% should be treated as unavailable. EPS for the quarter was ¥31.81, but without OCF or FCF data, coverage cannot be evaluated. The strong balance sheet and low leverage would typically support dividend capacity, but sustainability assessment requires visibility on operating cash flow, capex, and any shareholder return policy guidance. Until cash flow data are available, dividend outlook commentary is limited to noting that earnings growth and liquidity are supportive, while cash conversion remains the key unknown.

Risk Assessment

Business Risks:

• Potential demand cyclicality in IT/project-based services leading to quarterly volatility
• Execution risk on large projects affecting margins and revenue recognition timing
• Talent acquisition and retention pressures potentially impacting utilization and wage costs
• Client concentration risk if top customers account for a significant share of revenue (not disclosed)
• Seasonality in Q1-Q4 deliveries affecting quarterly comparability

Financial Risks:

• Uncertain cash flow generation due to absent OCF and FCF disclosures in this dataset
• Working capital intensity risk if receivables collection extends during growth phases
• Tax rate variability (implied ~32.6%) impacting net income sensitivity
• Limited visibility on capex needs without D&A and investing cash flows

Key Concerns:

• Lack of cash flow and D&A disclosure prevents assessment of earnings-to-cash conversion
• Dependence on stable utilization and pricing to maintain an 11%+ operating margin
• Potential for margin pressure from wage inflation or subcontracting cost increases

Investment Implications

Key Takeaways:

• Double-digit YoY growth in revenue (+10.9%) and net income (+13.5%) with stable margins
• ROE of 5.76% primarily driven by margin, with moderate asset turnover and low leverage
• Very strong liquidity (current ratio ~339%) and conservative balance sheet (liabilities/equity 0.38x)
• Interest burden negligible; interest coverage over 1,000x
• Cash flow conversion and capex needs remain the key unknowns due to non-disclosure

Metrics to Watch:

• Operating cash flow and FCF trends versus net income in subsequent quarters
• Backlog/booking trends and utilization rates to gauge revenue sustainability
• Gross and operating margin trajectory amid cost inflation
• Receivables days and working capital turnover to assess cash conversion
• Tax rate stability relative to the implied ~32–33% level

Relative Positioning: Within the Japanese IT/services peer set, the company exhibits strong balance sheet quality and solid mid-teens operating efficiency (11% OPM) with double-digit growth; ROE is respectable but could improve further with better asset turnover or incremental leverage, while current disclosure gaps on cash flow limit comparability on earnings quality.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis