| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥324.6B | ¥293.2B | +10.7% |
| Operating Income / Operating Profit | ¥39.1B | ¥31.9B | +22.7% |
| Ordinary Income | ¥40.2B | ¥32.6B | +23.1% |
| Net Income / Net Profit | ¥31.8B | ¥26.9B | +18.2% |
| ROE | 18.9% | 18.1% | - |
For the full year ending March 2026, Revenue was ¥324.6B (YoY +¥31.4B +10.7%), Operating Income was ¥39.1B (YoY +¥7.2B +22.7%), Ordinary Income was ¥40.2B (YoY +¥7.5B +23.1%), and Net Income attributable to owners of the parent was ¥26.2B (YoY +¥1.8B +6.9%). The DX & SI Business and the Package Business drove double-digit revenue growth, and the operating margin improved to 12.0% from 10.9% a year earlier (+1.1pt). The Package Business achieved an operating margin of 33.3%, up from 23.3% (+10.0pt), contributing significantly to company-wide profitability improvement. Conversely, the Global Business deteriorated with revenue -17.6% and an operating loss of ¥4.0B, and impairment losses of ¥3.0B were recorded, which limited Net Income growth despite a large operating-level profit increase. Operating Cash Flow (OCF) rose sharply to ¥30.3B (YoY +72.3%), generating Free Cash Flow (FCF) of ¥30.8B and achieving healthy cash circulation sufficient to cover dividends and capital expenditures.
[Revenue] Revenue of ¥324.6B (YoY +10.7%) was driven by the core DX & SI Business expanding to ¥198.2B (+12.8%) and the Package Business maintaining high growth at ¥69.0B (+17.2%). The Medical Big Data Business also delivered double-digit growth at ¥35.1B (+11.4%). Domestic revenue rose to ¥302.0B (prior year ¥265.7B), an increase of ¥36.3B, with significant growth to major client NTT DOCOMO Solutions of ¥39.8B (prior year ¥30.0B, +33.1%). The Global Business contracted to ¥23.3B (prior year ¥28.3B, -17.6%), and overseas revenue declined to ¥22.6B (prior year ¥27.6B). Gross margin improved to 29.5% from 28.2% (+1.3pt), and gross profit increased to ¥95.6B (prior year ¥82.7B, +15.6%), outpacing revenue growth.
[Profitability] Operating Income of ¥39.1B (YoY +22.7%) reflected revenue growth, gross margin improvement, and effective fixed-cost control as SG&A ratio only marginally rose to 17.4% from 17.3% (absolute SG&A decreased from ¥56.5B to ¥50.8B). By segment, the DX & SI Business produced Operating Income of ¥31.9B (+12.3%, margin 16.1%), remaining a stable core earnings source. The Package Business expanded Operating Income to ¥22.9B (+46.6%, margin 33.3%) from ¥15.6B the prior year, with a more profitable product mix lifting company margins. The Medical Big Data Business also delivered high results at ¥8.9B (+33.9%, margin 25.3%). In contrast, the Global Business recorded an operating loss of ¥4.0B (prior year operating loss of ¥0.6B), detracting from consolidated operating income after company-wide cost adjustments. Ordinary Income of ¥40.2B included net non-operating income of ¥1.1B (non-operating income ¥1.2B — interest income ¥0.4B, dividend income ¥0.1B, foreign exchange gains ¥0.1B, etc.; non-operating expenses ¥0.1B — interest expense ¥0.1B), representing a +2.8% uplift from operating level. Extraordinary losses of ¥3.2B were mainly impairment losses of ¥3.0B in the Global Business (goodwill ¥0.2B, customer-related assets, tangible fixed assets, software, etc.), leaving profit before tax at ¥36.9B. Income taxes amounted to ¥10.6B (effective tax rate 28.7%). After non-controlling interests of ¥0.1B, profit attributable to owners of the parent was ¥26.2B. Net profit margin was 8.1%, down 1.1pt from 9.2% the prior year, primarily due to the one-off extraordinary losses. In conclusion, growth of high-margin segments and improvement in core operating margins are clear drivers; excluding extraordinary losses, the trend of higher revenue and profit is evident.
The DX & SI Business recorded Revenue of ¥198.2B (prior year ¥175.7B, +12.8%) and Operating Income of ¥31.9B (prior year ¥28.4B, +12.3%), with a margin of 16.1% essentially flat from 16.2% a year earlier. Projects for major clients drove sales, maintaining a stable revenue base. The Package Business posted Revenue of ¥69.0B (prior year ¥58.8B, +17.2%) and Operating Income of ¥22.9B (prior year ¥15.6B, +46.6%), with margin improving to 33.3% from 26.6% (+6.7pt). Expansion of high-margin products and fixed-cost leverage made it the most profitable business company-wide. The Medical Big Data Business achieved Revenue of ¥35.1B (prior year ¥31.5B, +11.4%) and Operating Income of ¥8.9B (prior year ¥6.6B, +33.9%), with margin improving to 25.3% from 21.0% (+4.3pt), combining double-digit growth with high margins through differentiation in a specialized field. The Global Business saw Revenue of ¥23.3B (prior year ¥28.3B, -17.6%) and an operating loss of ¥4.0B (prior year operating loss ¥0.6B), with margin deteriorating to -17.2%. Impairment losses of ¥3.0B were recorded, clarifying the need for business restructuring. Company-wide adjustments were -¥20.5B (prior year -¥18.1B), mainly corporate-level G&A not attributable to reporting segments, bringing the sum of segment profits of ¥59.7B down to consolidated Operating Income of ¥39.1B.
[Profitability] Operating margin 12.0% (prior year 10.9%, +1.1pt), Net margin 8.1% (prior year 9.2%, -1.1pt), Gross margin 29.5% (prior year 28.2%, +1.3pt) — operating-level profitability clearly improved. ROE 18.9% maintained high shareholder capital efficiency. EBITDA margin 12.7% is close to operating margin, and low depreciation of ¥2.1B indicates low capital intensity. [Cash Quality] OCF ¥30.3B is 0.95x of Net Income ¥31.8B (before attribution to parent), generally favorable, but OCF/EBITDA ratio 0.73x suggests working capital retention. DSO 102 days (Accounts receivable ¥91.0B ÷ Daily sales ¥0.89B), inventory turnover period 1.3 days indicates very high inventory efficiency; however, Work-in-Progress (WIP) of ¥2.2B is more than double inventory of ¥1.1B (in absolute terms WIP ¥2.2B vs. FG+RM ~¥0.3B), suggesting cash tied up in ongoing projects. Contract liabilities stood at ¥5.1B, down ¥2.2B from ¥7.3B, indicating a slowdown in the buildup of advance-receipt-type revenue. [Investment Efficiency] CapEx ¥0.6B is 0.29x of depreciation ¥2.1B, low and indicating ample room for growth investment. FCF ¥30.8B covers dividends ¥9.4B and CapEx ¥0.6B more than three times, indicating sufficient liquidity. [Financial Health] Equity Ratio 66.5% (prior year 64.7%, +1.8pt), Current Ratio 305%, Quick Ratio 303% — extremely solid. Interest-bearing debt ¥0.5B (short-term borrowings ¥0.02B + long-term borrowings ¥0.4B, excluding lease liabilities) is effectively net cash, Debt/EBITDA 0.01x and EBITDA interest coverage 506x show no solvency concerns. Cash and deposits ¥91.1B plus short-term investments ¥1.0B result in liquidity of ¥92.1B, far exceeding interest-bearing debt. Asset retirement obligations increased to ¥5.7B from ¥2.9B (+¥2.8B), requiring monitoring as a future cash outflow factor.
OCF was ¥30.3B, up ¥12.7B from ¥17.6B a year earlier (+72.3%). Operating cash flow subtotal (before working capital changes) was ¥40.3B, up ¥13.6B from ¥26.7B, demonstrating strengthened cash generation from core operations. In working capital, accounts receivable increased by ¥2.7B (cash outflow), inventories decreased by ¥0.2B, accounts payable increased by ¥0.6B, and contract liabilities decreased by ¥2.2B. Income taxes paid were ¥10.4B, up from ¥9.3B, reflecting growth in pre-tax income. Investing cash flow was a positive ¥0.5B: while CapEx was -¥0.6B, net decrease in time deposits +¥1.0B and recovery of long-term loans exceeded outflows. The prior year investing CF was -¥19.8B due to acquisition of investment securities -¥11.4B, so large investments have cycled through this period. Financing cash flow was -¥10.4B, including dividend payments -¥9.4B, share buybacks -¥0.6B, lease liability repayments -¥0.2B, and long-term borrowings repayments -¥0.1B. Cash outflows widened from -¥6.0B in the prior year mainly due to higher dividends (prior year total dividends ¥6.7B vs. this period approximate total midterm+year-end ¥9.4B). FCF improved significantly to ¥30.8B from -¥2.2B in the prior year and covers dividends and CapEx totaling ¥10.0B by 3.08x. Cash and cash equivalents at period-end were ¥88.1B, up ¥20.7B from ¥67.4B at the beginning of the period, strengthening liquidity.
Of Ordinary Income ¥40.2B, Operating Income ¥39.1B accounts for 97.3%, indicating earnings are primarily from core operations. Non-operating income ¥1.2B (0.4% of sales) comprises interest income ¥0.4B, dividend income ¥0.1B, foreign exchange gains ¥0.1B, etc., and are recurring in nature. Non-operating expenses ¥0.1B (interest expense ¥0.1B) are minimal. Extraordinary losses ¥3.2B were mainly impairment losses ¥3.0B in the Global Business (goodwill ¥0.2B, customer-related assets, tangible fixed assets, software, etc.) and are one-off in nature. Because extraordinary losses are deducted at the stage from Ordinary Income to profit before tax, Ordinary Income ¥40.2B and profit before tax ¥36.9B show a -8.2% divergence. OCF ¥30.3B is 0.95x of Net Income ¥31.8B (before attribution to parent), broadly matching and indicating good accrual quality. Comprehensive income ¥29.9B is ¥1.9B lower than Net Income ¥31.8B; the composition of other comprehensive income -¥1.9B is: foreign currency translation adjustments ¥1.2B, valuation difference on available-for-sale securities ¥0.0B, retirement benefit adjustments -¥3.1B — pension asset performance temporarily pressured equity, though it did not affect profit or loss. Effective tax rate 28.7% aligns with statutory effective rates, with no apparent tax distortions. In conclusion, operating-level profits are high-quality and sustainable, and after the Global Business impairment cycles through, sustained improvement in Net Income levels is expected.
The full-year company forecast is Revenue ¥343.0B (YoY +5.7%), Operating Income ¥41.5B (YoY +6.1%), Ordinary Income ¥42.0B (YoY +4.5%), and Net Income attributable to owners of the parent ¥29.5B (EPS ¥119.34). Achievement rates against this period’s results are: Revenue 94.6%, Operating Income 94.2%, Ordinary Income 95.7%, Net Income 88.9% (¥26.2B ÷ ¥29.5B). The gap in Net Income is mainly due to the ¥3.0B impairment loss recorded in the Global Business this period; the reversal of this extraordinary loss is expected to improve alignment with forecasts next year. Revenue and Operating Income slightly missed initial assumptions, but continued high growth in the Package and Medical Big Data businesses, combined with progress on Global Business restructuring, increases the likelihood of meeting forecasts. Dividend guidance is ¥15 (year-end basis), and because next year’s dividend policy is not specified, continuity judgment is pending.
Annual dividend was ¥45 (interim ¥11, year-end ¥34), with payout ratio 42.4% (total dividends ¥11.1B ÷ profit attributable to owners of the parent ¥26.2B; however, since dividend databases record total dividends as ¥9.4B, the effective payout is around 36%). FCF ¥30.8B covers dividend payments ¥9.4B by 3.3x, indicating very high dividend sustainability. Share buybacks were small at ¥0.6B (on the CF statement), indicating a dividend-centric shareholder return policy. Total Return Ratio (dividends + buybacks) total ¥10.0B ÷ Net Income ¥26.2B = 38.2%, a conservative level; given cash on hand ¥91.1B and an effectively debt-free balance sheet, there is ample room for further increases in dividends or additional returns. The dividend forecast ¥15 appears to be a year-end-only figure; while next year’s annual policy is unclear, considering this period’s payout level and earnings outlook, continuation of stable dividends is considered reasonable.
Structural losses and additional impairment risk in the Global Business: The Global Business worsened to Revenue ¥23.3B (YoY -17.6%) and an operating loss ¥4.0B (prior year operating loss ¥0.6B), with impairment losses of ¥3.0B recorded this period. Goodwill balance ¥1.6B declined from ¥2.3B a year ago but is entirely attributable to the Medical Big Data Business; goodwill in the Global segment has been fully impaired. Depending on future restructuring or exit decisions, additional extraordinary loss risk remains. Since Global Business revenue accounts for 7.2% of company revenue, delayed mitigation of losses could hinder sustained company-level margin improvement.
Decline in cash conversion due to working capital retention: DSO 102 days and WIP ¥2.2B (more than double inventories ¥1.1B) indicate notable cash tied up in ongoing projects. OCF/EBITDA 0.73x is low relative to peers (≥0.9x), suggesting delays in acceptance and billing cycles are suppressing cash generation efficiency. Contract liabilities declined from ¥7.3B to ¥5.1B (-¥2.2B), indicating contraction of advance-receipt business models and a risk of slower short-term cash inflows. If working capital demand rises with larger project sizes, OCF growth may lag profit growth.
Customer and business concentration and sustainability of growth: Sales to major client NTT DOCOMO Solutions of ¥39.8B account for 12.3% of company revenue, up from 11.4% a year earlier, indicating increased concentration. The DX & SI Business accounts for 61.0% of revenue and 81.5% of operating profit (pre-adjustment), reflecting high business concentration. While high-growth, high-margin Package and Medical Big Data businesses are driving company margin improvement, competition or technological obsolescence could slow growth and sharply reduce company profit growth. CapEx is only ¥0.6B (0.29x depreciation ¥2.1B), and insufficient ongoing product development and talent investment could jeopardize medium- to long-term competitiveness.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 12.0% | 8.1% (3.6%–16.0%) | +3.9pt |
| Net Margin | 9.8% | 5.8% (1.2%–11.6%) | +4.0pt |
Both operating margin and net margin exceed the industry median by about 4pt, securing top-tier profitability within the IT & Communications sector.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 10.7% | 10.1% (1.7%–20.2%) | +0.6pt |
Revenue growth is in line with the industry median, maintaining the IT & Communications sector growth pace.
※ Source: Company compilation
High-margin growth in the Package and Medical Big Data businesses is driving company margin expansion; monitoring the sustainability of growth in these two segments is critical. Package margin 33.3% improved from 26.6% (+6.7pt), reflecting higher product mix quality and fixed-cost leverage. Medical Big Data margin remains high at 25.3%, with differentiation in specialized domains serving as the source of competitive advantage. Order renewal rates and expansion of product lineups in these segments will determine company earnings quality going forward.
Urgent need to restructure the business portfolio in light of Global Business losses and impairments. Although the ¥3.0B impairment recognized this period fully impaired goodwill in the Global segment, continued operating losses of ¥4.0B would limit room for company-wide margin improvement. Overseas sales ratio declined to 7.0% (prior year 9.4%); early decisions on exit or restructuring could allow reallocation of management resources to high-margin domestic Package and Medical BD businesses, supporting sustainable improvements in ROE and operating margin. The sharp increase in asset retirement obligations (+¥2.8B) may be associated with site reorganizations, and disclosure of concrete restructuring plans could be an inflection point for revaluation.
Improvement in working capital efficiency is key to the next stage of cash generation growth. OCF/EBITDA 0.73x, DSO 102 days, and high WIP ratio suggest larger projects and elongated acceptance cycles. The decline in contract liabilities (-¥2.2B) signals a reduction in advance-receipt business models, risking near-term slowing of cash inflows. However, OCF has already increased to ¥30.3B, and if working capital improvement materializes, further expansion of FCF and potential increases in shareholder returns could follow. Shortening DSO to around 90 days and stabilizing contract liabilities could raise OCF/EBITDA above 1.0x, enhancing capital efficiency assessments.
This report is an AI-generated earnings analysis based on XBRL financial statement data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company from public financial statements. Investment decisions are your responsibility; consult a professional as necessary.