| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥91.8B | ¥47.9B | +91.8% |
| Operating Income / Operating Profit | ¥14.5B | ¥2.3B | +541.2% |
| Ordinary Income | ¥14.2B | ¥2.4B | +482.6% |
| Net Income / Net Profit | ¥8.8B | ¥1.3B | +554.6% |
| ROE | 11.9% | 3.1% | - |
FY2026 Q1 results delivered Revenue ¥91.8B (vs. ¥47.9B prior year; +¥43.9B +91.8%), Operating Income ¥14.5B (vs. ¥2.3B; +¥12.2B +541.2%), Ordinary Income ¥14.2B (vs. ¥2.4B; +¥11.8B +482.6%), and Net Income ¥8.8B (vs. ¥1.3B; +¥7.5B +554.6%), achieving significant top-line and bottom-line growth. Operating margin reached 15.8%, improving 11.1pt from 4.7% in the prior year period, and net margin expanded to 9.6% from 2.8% (+6.8pt), indicating simultaneous quantitative growth and qualitative improvement. Progress against the full year plan stands at Revenue 30.6%, Operating Income 63.0%, Ordinary Income 61.7%, and Net Income 62.9%, substantially ahead of standard progress (25%) on the profit side.
[Revenue] Revenue of ¥91.8B recorded rapid growth of +91.8% from ¥47.9B in the prior year period. Segment disclosure is not provided because operations are a single business (IT Solutions Business), but gross profit margin improved to 26.8% from 23.7% in the prior year period (+3.1pt) as the increase in revenue outpaced the increase in cost of sales of ¥67.2B. Advance receipts (deferred revenue) rose to ¥84.7B from ¥67.6B (+25.3%), supporting the depth of backlog underlying the performance expansion. The sharp revenue increase is presumed to be driven by higher project volumes, a mix shift toward higher-margin projects, and an improvement in contract unit prices.
[Profitability] Operating Income ¥14.5B (+541.2%) materially outpaced revenue growth (+91.8%), reflecting strong operating leverage. SG&A was restrained at ¥10.1B (SG&A ratio 11.0%), an 8.0pt improvement from ¥9.1B (19.0%) in the prior year period. Non-operating income amounted to ¥0.2B and non-operating expenses ¥0.5B (of which interest expense ¥0.1B), with limited impact, so Ordinary Income ¥14.2B largely preserved operating profitability. The reduction from profit before tax ¥14.2B to Net Income ¥8.8B reflects corporate taxes and similar charges of ¥5.4B (effective tax rate 38.0%), indicating a somewhat high tax burden. Non-controlling interests were -¥0.0B (negligible), leaving Net Income attributable to owners of the parent at ¥8.8B. Comprehensive income was ¥9.3B, ¥0.5B higher than Net Income, driven by valuation gains on securities +¥0.7B and foreign currency translation adjustments -¥0.3B. In conclusion, the combination of rapid revenue growth, gross margin improvement, and substantial SG&A ratio compression produced significant revenue-driven profit growth.
[Profitability] Operating margin 15.8% and net margin 9.6% are at high levels, improving +11.1pt and +6.8pt YoY, respectively. ROE 11.9% is decomposed into net margin 9.6%, total asset turnover 0.40x (annualized 1.59x), and financial leverage 3.12x, with margin improvement being the primary driver of ROE enhancement. [Cash Quality] Days Sales Outstanding (DSO) is 146 days and Days Inventory Outstanding (DIO) is 113 days, which are somewhat long, indicating a sizable time lag to cash conversion of revenue. Interest coverage is Operating Income ¥14.5B / Interest Paid ¥0.1B = 127x, indicating minimal interest burden. [Investment Efficiency] Total asset turnover annualized is 1.59x; tangible fixed assets are ¥4.5B and light, reflecting an asset-efficient business model with low equipment dependence. [Financial Soundness] Equity Ratio 32.0%, Current Ratio 140.3%, and Quick Ratio 125.8% indicate healthy short-term liquidity. Interest-bearing debt totals ¥9.4B (short-term borrowings ¥0.9B + long-term borrowings ¥8.5B), which is very small compared with Cash and Deposits ¥102.6B; Debt/Equity ratio is low at 0.13x. However, Total Liabilities / Net Assets is 2.12x, and liabilities are largely composed of revenue-related liabilities such as advance receipts ¥84.7B.
Cash and deposits increased to ¥102.6B from ¥23.8B in the prior year period, an increase of +¥78.8B (+330.8%), materially strengthening liquidity. Short-term borrowings were reduced to ¥0.9B, a decrease of -¥21.7B (-95.8%), significantly lowering dependence on interest-bearing debt for funding. On the working capital side, DSO 146 days and DIO 113 days indicate long cycles, requiring time to convert sales to cash. Inventory was compressed to ¥20.7B from ¥39.1B in the prior year period (-¥18.4B, -47.0%), improving inventory efficiency. Accounts payable rose to ¥30.6B from ¥13.7B (+¥16.9B, +123.6%), reflecting increased procurement and subcontracting liabilities accompanying expanded business scale. Advance receipts ¥84.7B provide a working capital buffer via upfront collections, and the lead nature of cash inflows supports cash management. Overall, profits are driven by operating activities and are high quality, but improving receivables and inventory turnover is key to shortening the cash conversion cycle.
Earnings quality is high, with Operating Income being the main driver of profit growth. Non-operating income ¥0.2B (of which foreign exchange gains ¥0.1B, interest and dividend income ¥0.0B) and non-operating expenses ¥0.5B (of which interest expense ¥0.1B) indicate limited contribution from non-recurring factors, and Ordinary Income ¥14.2B largely reflects operating profitability. The reduction from profit before tax to Net Income is mainly due to corporate taxes and similar charges ¥5.4B (effective tax rate 38.0%), with no impact from one-off special gains or losses. Comprehensive income ¥9.3B exceeds Net Income ¥8.8B by ¥0.5B, aided by valuation gains on other securities +¥0.7B and offset by foreign currency translation adjustments -¥0.3B. From an accrual perspective, long turnover days (DSO 146, DIO 113) widen timing differences between profits and cash flows, so improving working capital management efficiency is necessary to synchronize profit growth and cash conversion.
Full Year forecast remains unchanged at Revenue ¥300.0B (vs. prior year +19.6%), Operating Income ¥23.0B (+24.0%), Ordinary Income ¥23.0B (+14.8%), and Net Income ¥14.0B. Progress at the end of Q1 is Revenue 30.6%, Operating Income 63.0%, Ordinary Income 61.7%, and Net Income 62.9%, substantially ahead of the standard progress (25%) on profit metrics. The high progress in Operating Income is presumed to reflect project front-loading, a high-margin mix, and timing delays in expenses; the high level of advance receipts ¥84.7B also indicates the depth of backlog. Although margin normalization is expected into H2 due to seasonality and rising personnel costs, current trends suggest upside potential to the full year plan.
At the end of Q1 the dividend forecast is unchanged at ¥9.00 per year (assumed ¥4.50 interim and ¥4.50 year-end). The payout ratio relative to FY EPS forecast ¥38.60 is approximately 23.3%, a conservative level, and given accumulated Net Income ¥8.8B and ample cash ¥102.6B, dividend sustainability is high. There is room for future dividend increases in line with profit growth, and improved transparency in capital policy and clarification of total return policy are expected.
Concentration risk from project concentration: Q1 progress of 63% on profits suggests significant front-loading from large projects or seasonality, implying potential upside skew to the first half. If projects normalize in H2, quarterly profit volatility may increase and margins could compress due to expense timing differences.
Risk of stagnation in working capital efficiency: With DSO 146 days and DIO 113 days, the long turnover cycle may cause cash conversion to lag revenue growth. Prolonged collection delays or inventory stagnation could degrade cash flow quality and increase working capital burden despite ample liquidity.
Margin compression risk from rising personnel and subcontracting costs: Competition for IT talent and rising subcontract rates could continue. Although SG&A ratio improved to 11.0% from 19.0% YoY, ramping hires or higher utilization could cause personnel costs to rise earlier, reversing operating leverage and compressing margins.
Profitability & Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 15.8% | 6.2% (4.2%–17.2%) | +9.6pt |
| Net Margin | 9.6% | 2.8% (0.6%–11.9%) | +6.8pt |
Both operating margin and net margin significantly exceed the industry median, securing top-tier profitability within the IT & Communications sector.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 91.8% | 20.9% (12.5%–25.8%) | +70.9pt |
Revenue growth rate exceeds the industry median by +70.9pt, indicating outstanding growth trajectory within the industry.
※ Source: Company compilation
Large advance progress against the full year forecast (Operating Income 63.0%, Net Income 62.9%) and high advance receipts ¥84.7B indicate a thick backlog and higher revenue visibility. Even accounting for H2 seasonality and cost increases, upside to the full year plan is suggested.
Operating margin 15.8% and net margin 9.6% represent substantial YoY improvement and well above the industry median, demonstrating strong profitability. SG&A ratio was contained at 11.0% despite rapid revenue growth, unleashing strong operating leverage. However, long receivables and inventory turnover days (DSO 146, DIO 113) mean improving cash conversion efficiency is a key issue for the next growth phase.
This report is a financial analysis document automatically generated by AI analyzing XBRL earnings release data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company based on public financial statements. Investment decisions are your responsibility; consult a professional as necessary before making any investment.