| Metric | Current | Prior | YoY |
|---|---|---|---|
| Revenue | ¥82.3B | ¥72.6B | +13.3% |
| Operating Income | ¥25.0B | ¥19.5B | +28.0% |
| Ordinary Income | ¥26.1B | ¥20.5B | +27.3% |
| Net Income | ¥17.5B | ¥13.9B | +26.2% |
| ROE | 23.4% | 22.0% | - |
FY2026 results show revenue of 82.3B yen (YoY +13.3%), Operating Income of 25.0B yen (+28.0%), Ordinary Income of 26.1B yen (+27.3%), and Net Income attributable to owners of 17.5B yen (+26.2%). The company achieved strong profit growth outpacing revenue expansion, with operating margin improving to 30.3% from 26.9% in the prior year. Basic EPS increased 28.7% to 129.18 yen. Operating cash flow reached 22.4B yen (+8.9% YoY), representing 1.28 times net income, indicating healthy cash-backed earnings. Free cash flow of 17.2B yen provided ample coverage for dividend payments of 6.6B yen. Total assets grew to 106.9B yen from 92.4B yen, with cash and deposits reaching 64.3B yen. The equity ratio strengthened to 70.0% from 68.3%, reflecting solid financial health.
Revenue increased 13.3% to 82.3B yen, primarily driven by the Software segment which grew 19.5% to 62.3B yen and accounted for 75.3% of total sales. The Software segment benefited from strong demand for the company's flagship groupware product desknet's NEO through both cloud services and package license sales. Sales to the largest customer, Daiwa Bo Information System, increased to 12.0B yen from 10.2B yen. System Development Service segment revenue declined 3.5% to 19.6B yen due to project timing variations, while Overseas Operations segment revenue more than doubled to 0.8B yen from 0.4B yen, though from a small base. Gross profit reached 47.4B yen with a gross margin of 57.6%, up from 55.5% in the prior year, reflecting favorable product mix toward higher-margin Software business. SG&A expenses increased 7.6% to 22.4B yen but declined as a percentage of revenue to 27.2% from 28.6%, demonstrating operating leverage. Operating income surged 28.0% to 25.0B yen with operating margin expanding 3.4 percentage points to 30.3%. Non-operating income contributed 1.1B yen, including interest income of 0.7B yen from the company's substantial cash position and foreign exchange gains of 0.1B yen. Non-operating expenses were minimal at 0.0B yen. Ordinary income increased 27.3% to 26.1B yen. After income tax expense of 8.0B yen (effective tax rate of 30.7%), net income reached 17.5B yen, up 26.2% YoY. The gap between ordinary income and net income was 8.6B yen or 33% of ordinary income, driven entirely by normal tax charges with no extraordinary items. This represents a revenue up/profit up pattern with profit growth significantly outpacing revenue growth due to margin expansion and operating leverage.
Software segment generated revenue of 62.3B yen (+19.5% YoY) and operating income of 25.2B yen (+27.4% YoY) with an operating margin of 40.4%, representing the core business with 75.3% of total revenue. The segment's high profitability stems from recurring cloud subscription revenue and license sales of groupware products. System Development Service segment posted revenue of 19.6B yen (-3.5% YoY) and operating income of 0.7B yen (+12.2% YoY) with a margin of 3.8%. Despite revenue decline, profitability improved through project efficiency gains. Overseas Operations segment recorded revenue of 0.8B yen (+114.4% YoY) but remained loss-making with an operating loss of 0.9B yen (margin of -119.5%). While the segment showed strong revenue growth, the expansion phase continues to generate losses. The stark margin differential between Software (40.4%) and System Development Service (3.8%) highlights the company's heavy dependence on its high-margin Software business, with 100% of consolidated operating profit effectively derived from this segment after covering other segments' lower margins or losses.
[Profitability] ROE of 23.4% significantly exceeds the prior year's level and reflects strong profitability. Operating margin improved to 30.3% from 26.9% YoY, driven by the high-margin Software segment expansion and SG&A leverage. Net profit margin reached 21.3% compared to 19.1% in the prior period. DuPont analysis shows ROE of 24.2% derived from net profit margin of 22.0%, asset turnover of 0.77 times, and financial leverage of 1.43 times, with profitability as the primary driver. [Cash Quality] Cash and deposits of 64.3B yen provide 2.31 times coverage of current liabilities of 27.8B yen, indicating strong liquidity. Operating cash flow of 22.4B yen exceeded net income by 1.28 times, confirming cash-backed earnings quality. Free cash flow of 17.2B yen demonstrates robust cash generation capability. [Investment Efficiency] Asset turnover of 0.77 times reflects the capital-light nature of the software business. CapEx to depreciation ratio of 0.40 times indicates reinvestment below depreciation levels, warranting monitoring for sustained competitiveness. Total asset ROA of 26.2% based on ordinary income demonstrates efficient asset utilization. [Financial Health] Equity ratio of 70.0% improved from 68.3% YoY, reflecting strong financial stability. Current ratio of 278.9% and minimal interest-bearing debt result in a conservative debt-to-equity position. Net defined benefit liability of 4.1B yen represents the only material long-term liability. Contract liabilities of 14.0B yen increased 7.2% from 13.0B yen, indicating growing deferred revenue from subscription and advance payments.
Operating cash flow of 22.4B yen represents 1.28 times net income, confirming strong cash-backed earnings quality. The subtotal before working capital changes reached 29.6B yen, with income taxes paid of 7.8B yen. Working capital movements included a decrease in trade receivables providing 0.9B yen and an increase in contract liabilities contributing 0.9B yen to cash flow. Interest and dividends received totaled 0.6B yen while interest paid was negligible at 0.0B yen, reflecting the company's net cash position. Investing cash flow of -5.3B yen consisted primarily of CapEx of 1.3B yen, intangible asset purchases of 2.5B yen (largely software development), and investment securities purchases of 1.5B yen partially offset by proceeds from securities sales of 4.7B yen. Free cash flow of 17.2B yen (operating CF plus investing CF) demonstrates strong cash generation after all investment activities. Financing cash flow of -6.6B yen reflected dividend payments of 6.6B yen with minimal share repurchases of 0.0B yen. The net result was a cash increase of 10.5B yen, bringing cash and deposits to 64.3B yen from 54.0B yen, representing 60.1% of total assets and providing substantial financial flexibility.
Ordinary income of 26.1B yen versus operating income of 25.0B yen shows a positive non-operating net contribution of approximately 1.1B yen, or 4.2% of operating income. The primary components include interest income of 0.7B yen from the company's substantial cash holdings and foreign exchange gains of 0.1B yen. Non-operating income totaled 1.1B yen, consisting of interest and dividend income of 0.7B yen, FX gains of 0.1B yen, and other minor items. Non-operating expenses were minimal at 0.0B yen. The non-operating contribution represents 1.3% of revenue, reflecting primarily financial income from cash management rather than core operations. Operating cash flow of 22.4B yen exceeded net income of 17.5B yen by 28%, indicating healthy earnings quality with strong cash conversion. The accrual ratio of -4.1% (negative accruals as percentage of total assets) suggests conservative accounting with earnings backed by cash generation rather than accounting accruals. Comprehensive income of 18.1B yen compared to net income of 17.5B yen shows a minor positive variance of 0.6B yen, primarily from valuation differences on securities of 0.2B yen, with no material unrealized gains or losses distorting reported earnings.
Full-year guidance projects revenue of 86.2B yen (+4.7% YoY) and operating income of 26.8B yen (+7.3% YoY). Against these targets, actual FY2026 results show revenue of 82.3B yen representing 95.5% progress and operating income of 25.0B yen representing 93.3% progress. These progress rates align closely with fiscal year completion, suggesting the company is on track to meet or potentially exceed guidance. The guidance implies fourth-quarter revenue of approximately 3.9B yen and operating income of 1.8B yen. Ordinary income guidance of 27.4B yen (+5.1% YoY) versus actual 26.1B yen shows 95.3% progress. The company's forecast assumptions note that projections are based on currently available information and may vary due to various factors. No specific guidance revision was announced during the period. The operating margin implied by full-year guidance of 31.1% is slightly above the current actual margin of 30.3%, suggesting expectations for continued margin improvement in the remaining period. While no explicit order backlog data is disclosed for forward revenue visibility calculation, the contract liabilities of 14.0B yen (representing approximately 17% of annual revenue) provide some indication of deferred revenue base supporting near-term revenue recognition.
Annual dividend per share totals 52.00 yen, comprised of an interim dividend of 21.00 yen and a year-end dividend of 31.00 yen, compared to 14.00 yen in the prior year, representing a significant increase. Full-year forecast indicates a dividend of 27.00 yen per share. The payout ratio calculated against actual net income attributable to owners of 17.5B yen and average shares outstanding of 14,008 thousand shares yields approximately 40%, compared to the company-reported payout ratio of 39.8%. Dividend payments totaled 6.6B yen for the period. Share repurchases were minimal at 0.0B yen during the fiscal year. The total shareholder return ratio (dividends plus buybacks divided by net income) stands at approximately 40%, consisting entirely of dividends with negligible buyback contribution. Free cash flow of 17.2B yen provides 2.61 times coverage of dividend payments, indicating strong dividend sustainability. The substantial cash position of 64.3B yen and operating cash flow generation further support the dividend policy. The company maintains a conservative payout approach while retaining sufficient earnings for reinvestment and financial flexibility.
Business concentration risk from Software segment representing 75.3% of revenue and effectively 100% of operating profit creates vulnerability to product competition or market disruption in the groupware and cloud services space. Technological obsolescence and intensifying competition in cloud-based collaboration tools from both domestic and international players could pressure pricing and market share. Insufficient capital reinvestment evidenced by CapEx to depreciation ratio of 0.40 times may compromise long-term competitive positioning and product development capabilities if sustained. Customer concentration with the largest customer Daiwa Bo Information System accounting for 14.6% of revenue (12.0B yen of 82.3B yen total) creates revenue dependency risk. Overseas expansion challenges reflected in persistent Overseas Operations segment losses of 0.9B yen despite revenue growth indicate execution risks in international market development. Foreign exchange exposure exists through overseas subsidiaries and transactions, though the impact has been relatively modest at 0.1B yen FX gains. Limited service business diversification with System Development Service segment declining 3.5% suggests challenges in expanding beyond core Software products.
[Industry Position] (Reference - Proprietary Analysis)
Profitability: ROE 23.4% significantly exceeds the IT & Telecom industry median of 10.1% (IQR: 2.2%-17.8%), ranking in the top quartile. Operating margin of 30.3% substantially outperforms the industry median of 8.1% (IQR: 3.6%-16.0%), reflecting the company's high-margin Software business model. Net profit margin of 21.3% far exceeds the industry median of 5.8% (IQR: 1.2%-11.6%), positioning Neojapan among the most profitable companies in the sector.
Financial Health: Equity ratio of 70.0% exceeds the industry median of 59.2% (IQR: 40.8%-72.9%), indicating superior financial stability. Current ratio of 278.9% substantially exceeds the industry median of 2.43x (IQR: 1.72x-3.53x), reflecting exceptional liquidity.
Efficiency: Asset turnover of 0.77 times is below the industry median of 0.89 (IQR: 0.64-1.29), consistent with a capital-light software business model with high cash holdings. Operating working capital turnover cannot be directly compared due to negative working capital position from strong contract liabilities.
Growth: Revenue growth of 13.3% YoY exceeds the industry median of 10.1% (IQR: 1.7%-20.2%). EPS growth of 28.7% significantly outperforms the industry median of 19% (IQR: -20%-81%), ranking in the upper quartile.
Investment: CapEx to depreciation ratio of 0.40 times is near the industry median of 0.42 (IQR: 0.13-0.97), though below full replacement level. Cash conversion ratio of 1.28 times aligns with the industry median of 1.28 (IQR: 0.68-1.95).
Shareholder Returns: Dividend payout ratio of approximately 40% exceeds the industry median of 32% (IQR: 20%-47%). FCF yield of 17.2B yen FCF on market capitalization basis would require market cap data for comparison to industry median of 7%.
(Industry: IT & Telecom, Sample: approximately 319 companies, Period: FY2025, Source: Proprietary analysis)
Exceptional profitability profile with ROE of 23.4% and operating margin of 30.3% places Neojapan in the top tier of the IT & Telecom sector, driven by the high-margin recurring revenue model of the Software segment. Strong cash generation with operating cash flow representing 1.28 times net income and free cash flow of 17.2B yen demonstrates business model quality and provides financial flexibility for shareholder returns and investment. Business concentration represents a structural characteristic with Software segment contributing 75.3% of revenue and effectively all operating profit, creating both a strength through high margins and a vulnerability to segment-specific risks. Capital reinvestment below depreciation levels at a CapEx to depreciation ratio of 0.40 times warrants monitoring for potential implications on long-term competitive positioning and product innovation capability. Contract liabilities of 14.0B yen growing at 7.2% YoY indicate expanding deferred revenue base supporting recurring revenue visibility. Overseas expansion remains in investment phase with persistent losses in Overseas Operations segment despite strong revenue growth of 114.4%, requiring continued monitoring of international strategy execution and path to profitability.
This report was automatically generated by AI analyzing XBRL earnings data as an earnings analysis tool. This is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled from publicly available earnings data. Please make investment decisions at your own responsibility and consult professionals as needed.