NEOJAPAN Inc. FY2026 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥6.09B
• Operating Income: ¥1.89B
• Net Income: ¥984M
• EPS: ¥96.58

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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

NeoJapan (3921) delivered strong FY2026 Q3 year-to-date results under JGAAP on a consolidated basis, highlighted by double-digit top-line growth and outsized operating profit expansion. Revenue rose to 60.88 (100M JPY), up 15.2% YoY, indicating healthy demand for its software/groupware offerings and likely solid recurring revenue dynamics. Operating income increased to 18.85 (100M JPY), up 36.7% YoY, evidencing meaningful operating leverage. Ordinary income was 19.67 (100M JPY), up 35.1% YoY, supported by non-operating income of 0.81 (100M JPY), including 0.52 (100M JPY) of interest income on a sizable cash balance. Net income reached 13.52 (100M JPY), up 37.5% YoY, translating to a robust net margin of 22.2% and basic EPS of 96.58 JPY. DuPont analysis indicates ROE of 19.2% driven by a 22.2% net margin, 0.617x asset turnover, and modest 1.40x financial leverage—an attractive profile with limited balance-sheet risk. The balance sheet is conservative: total assets 98.67 (100M JPY), equity 70.44 (100M JPY), and liabilities 29.26 (100M JPY), implying an equity ratio of roughly 71% (our calculation) and a debt-to-equity ratio of 0.42x (liabilities to equity). Liquidity appears strong with current ratio 261% and cash and deposits of 53.97 (100M JPY) versus current liabilities of 25.15 (100M JPY). Notably, there is a sizable investment securities balance of 15.41 (100M JPY), which, together with positive OCI, suggests some exposure to market valuation fluctuations. There is a notable gap between ordinary income (19.67) and profit before tax (14.57), implying approximately 5.1 (100M JPY) of extraordinary losses that are not itemized; this is an important one-off to monitor. The effective tax rate is 32.5%, somewhat elevated; this may be influenced by the extraordinary item treatment. Reported gross margin of 48.3% conflicts with other line items (cost of sales, SG&A, and operating income), indicating internal inconsistencies in disclosed sub-totals; we prioritize operating and net margins for reliability. Cash flow statements were not disclosed, limiting assessment of earnings-to-cash conversion and free cash flow. Dividend information is largely unreported, but a calculated payout ratio of 41.7% suggests room for sustainable shareholder returns, contingent on cash flow alignment. Overall, profitability and capital efficiency are strong, balance sheet risk is low, and growth momentum is intact, albeit with data limitations around gross cost structure, extraordinary losses, and cash flows.

Profitability Analysis

ROE is 19.2%, decomposed into net margin 22.2%, asset turnover 0.617x, and financial leverage 1.40x, reflecting high profitability with modest leverage. Operating margin, inferred from operating income, is approximately 31.0% (18.85/60.88), demonstrating significant operating leverage versus revenue growth. Ordinary income margin is about 32.3% (19.67/60.88), supported by 0.81 (100M JPY) in non-operating income, notably 0.52 from interest income on cash. Reported gross margin is 48.3%, but it is inconsistent with the combination of reported cost of sales, SG&A, and operating income; therefore, we place greater weight on operating and net margins for assessing profitability. SG&A intensity is approximately 25.7% of revenue (15.62/60.88), indicating disciplined cost control relative to scale. The step-up from revenue growth (+15.2% YoY) to operating income growth (+36.7% YoY) evidences positive operating leverage, likely driven by recurring revenues, pricing power, and scale efficiencies. Net margin at 22.2% remains robust even after an apparent extraordinary loss that reduced profit before tax versus ordinary income. Interest burden is negligible (interest expense effectively zero), with a mechanically high interest coverage ratio, reinforcing that financing costs do not dilute margins. Overall margin quality appears solid at the operating level, though the presence and nature of extraordinary losses should be clarified to assess underlying steady-state profitability.

Growth Assessment

Revenue grew 15.2% YoY to 60.88 (100M JPY), signaling healthy demand and probable resilience in subscription/maintenance streams. Operating income grew 36.7% YoY to 18.85 (100M JPY), outpacing sales growth and confirming operating leverage. Ordinary income grew 35.1% YoY, aided by non-operating interest income, reflecting effective treasury management on a sizable cash balance. Net income grew 37.5% YoY to 13.52 (100M JPY), with net margin expansion to 22.2%. The gap between ordinary income (19.67) and profit before tax (14.57) indicates approximately 5.1 (100M JPY) of extraordinary losses; if non-recurring, underlying growth is stronger than pre-tax profit suggests. Total comprehensive income (13.69) modestly exceeds net income, implying positive OCI contributions, likely from investment securities valuation. Given the lack of segment/ARR disclosure, sustainability is inferred from breadth of margin expansion and recurring-like profile; however, absence of cash flow data limits confirmation of revenue quality (e.g., collections, deferred revenue trends). Outlook hinges on continued client adoption, cloud transition dynamics, and retention, with cost discipline sustaining elevated operating margins. Key watchpoints include the recurrence of extraordinary losses, hiring pace (R&D/SG&A) to support growth, and any pricing or competitive pressures in the enterprise groupware market.

Financial Health

Liquidity is strong: current ratio 261.3% and quick ratio 261.3%, with cash and deposits of 53.97 (100M JPY) covering current liabilities of 25.15 (100M JPY) by ~2.15x. Balance sheet is conservative: equity 70.44 vs. assets 98.67 (100M JPY), implying an equity ratio of ~71.4% (our calculation) and liabilities-to-equity of 0.42x. Interest-bearing debt is unreported, and interest expense is effectively zero, suggesting minimal to no financial debt and very low solvency risk. Working capital stands at 40.55 (100M JPY), providing ample buffer for operations and growth investments. Investment securities total 15.41 (100M JPY), introducing some market valuation risk but also contributing to non-operating income. Goodwill (0.65) and intangible assets (3.90) are modest, limiting impairment risk. Overall solvency and capital structure quality are high, with substantial net cash characteristics implied by the cash balance and negligible interest expense.

Cash Flow Quality

Operating, investing, and financing cash flows are unreported, preventing direct assessment of earnings-to-cash conversion and free cash flow. As such, OCF/Net Income and FCF cannot be calculated. The sizeable cash and deposits balance (53.97) relative to liabilities provides a cushion despite the lack of visibility into period cash generation. Working capital quality cannot be fully assessed because accounts receivable and inventories are unreported; however, the large cash position and strong current ratio indicate liquidity headroom. Non-operating interest income of 0.52 implies active cash management, but the lack of OCF data means we cannot confirm whether cash accruals align with earnings. Extraordinary losses reduced profit before tax; without cash flow disclosure, we cannot determine associated cash impacts. Overall, earnings quality appears solid at the operating level, but confirmation via cash flow statements is pending.

Dividend Sustainability

Dividend details (annual and quarterly DPS, total dividends paid) are unreported, but a calculated payout ratio of 41.7% suggests a moderate distribution level consistent with ongoing growth investment. Without OCF and FCF disclosure, FCF coverage of dividends cannot be assessed. Balance sheet strength (cash 53.97, high equity ratio) supports dividend capacity even absent cash flow data, assuming stable operating cash generation. The negligible interest burden reduces competing cash outflows. Policy outlook will depend on earnings visibility, potential one-off losses, and capex/R&D needs, none of which are disclosed; thus, we treat the 41.7% payout ratio as indicative rather than definitive.

Risk Assessment

Business Risks:

• Competitive pressure in enterprise groupware/software markets potentially impacting pricing and win rates
• Dependence on subscription/maintenance renewals and customer retention (ARR/churn not disclosed)
• Product roadmap execution and talent retention in engineering and sales amid expansion
• Cybersecurity and service availability risks given cloud-centric delivery
• Public sector and large enterprise procurement cyclicality
• Potential changes in IT spending due to macroeconomic conditions

Financial Risks:

• Extraordinary losses of approximately 5.1 (100M JPY) reducing PBT; recurrence risk unclear
• Valuation risk on investment securities (15.41), affecting OCI and non-operating results
• Lack of cash flow disclosure limits visibility into earnings-to-cash conversion
• Interest income sensitivity to interest rate changes
• Potential working capital swings (AR/deferred revenue unreported) affecting cash

Key Concerns:

• Internal inconsistencies between reported gross profit, cost of sales, SG&A, and operating income figures
• Unspecified extraordinary losses driving a gap between ordinary income and profit before tax
• Absence of cash flow statement data hindering FCF and payout capacity analysis

Investment Implications

Key Takeaways:

• Strong revenue growth (+15.2% YoY) with outsized operating profit growth (+36.7% YoY) indicates operating leverage
• ROE at 19.2% with modest leverage (1.40x) reflects high-quality profitability
• Balance sheet is robust with an estimated 71% equity ratio and substantial cash
• Non-operating income is supported by interest income on cash; financing costs are negligible
• Extraordinary loss (~5.1) is a swing factor between ordinary and pre-tax profits and needs clarification
• Reported gross margin appears inconsistent; operating margin (~31%) is the more reliable indicator
• Dividend payout ratio (calculated) of 41.7% seems manageable but unverified without FCF data

Metrics to Watch:

• OCF and FCF trends once disclosed (OCF/Net Income, FCF coverage of dividends)
• Extraordinary items detail and recurrence risk
• ARR/renewal rates, churn, and pricing to gauge sustainability of growth
• SG&A efficiency and hiring pace relative to revenue growth
• Investment securities valuation impacts on OCI and non-operating income
• Deferred revenue and accounts receivable (collection cycles) when disclosed

Relative Positioning: Profitability and balance-sheet strength appear above typical domestic software peers, with growth momentum solid; disclosure gaps (cash flow, extraordinary items) are the main differentiators to monitor.

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