| Indicator | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥3571.3B | ¥3451.6B | +3.5% |
| Operating Income / Operating Profit | ¥649.6B | ¥254.3B | +155.5% |
| Ordinary Income (Pre‑tax Profit) | ¥625.4B | ¥217.9B | +187.0% |
| Net Income / Net Profit | ¥432.1B | ¥90.3B | +378.3% |
| ROE | 9.0% | 2.0% | - |
For FY2026 Q1 (Jan–Mar 2026), Revenue was 3,571.3B yen (YoY +119.7B yen, +3.5%), Operating Income was 649.6B yen (YoY +395.3B yen, +155.5%), Ordinary Income was 670.4B yen (YoY +402.9B yen, +149.1%), and Net Income Attributable to Owners of Parent was 401.5B yen (YoY +338.8B yen, +540.5%). Operating margin improved materially to 18.2% from 7.4% a year earlier (+10.8pt). The profit increase was mainly driven by non‑recurring items: Gain on sale of fixed assets of 296.8B yen and Other income of 77.1B yen; on an adjusted basis Operating Income was 378.1B yen (YoY +38.9B yen, +11.4%). Gross profit was 2,950.6B yen (gross margin 82.6%), up 2.8% YoY. EPS was ¥154.68 (from ¥24.15, +540.5%). Goodwill was 3,228.2B yen, representing 67.6% of equity (high). Equity Ratio was 13.7%, and D/E ratio was 5.37x, indicating continued high leverage. Operating Cash Flow (OCF) was ▲324.6B yen (improved from ▲509.3B yen prior year), and Free Cash Flow was ▲185.5B yen (negative). By region, Japan reported Operating Income of 397.5B yen (+5.6%), EMEA 25.5B yen (+263.9%) with significant improvement, Americas slowed to 122.8B yen (▲9.2%), and APAC continued to be loss making at ▲31.7B yen. Progress against Full Year Operating Income guidance of 1,526.0B yen was 42.6%, a high level, but confirming sustainability of organic growth excluding one‑offs remains an issue.
[Revenue] Revenue was 3,571.3B yen (YoY +3.5%) reflecting modest growth. By segment: Japan 1,588.5B yen (YoY +0.2%), Americas 912.1B yen (▲2.5%), EMEA 812.9B yen (+19.3%), APAC 244.4B yen (+3.2%). Japan was broadly flat with a stable base; EMEA’s double‑digit growth reflects recovery in European markets. Americas is decelerating and APAC increased revenue but remains loss making, posing monetization challenges. Gross profit was 2,950.6B yen (gross margin 82.6%), roughly in line with prior year but slightly affected by pass‑through revenue mix and regional mix changes.
[Profitability] Operating Income was 649.6B yen (YoY +155.5%), with operating margin 18.2% (up 10.8pt from 7.4%). SG&A was 2,637.6B yen (SG&A ratio 73.9%), improving 1.2pt from 75.1% as cost efficiencies progressed. The large increase in Operating Income was mainly due to non‑recurring items: Gain on sale of fixed assets 296.8B yen (prior year ▲0.5B yen) and Other income 77.1B yen (prior year 5.2B yen). Adjusted Operating Income was 378.1B yen (YoY +11.4%), implying an organic operating margin around 10.6%. Net financial items were net expense of ▲45.6B yen (income 18.9B yen vs. expense 64.5B yen; improved from ▲52.2B yen prior year). Equity method income of 21.4B yen contributed to boosting Ordinary Income. For pre‑tax Ordinary Income of 625.4B yen, income taxes were 193.3B yen (effective tax rate 30.9%), resulting in Net Income of 432.1B yen (net profit margin 12.1%), of which Net Income Attributable to Owners of Parent was 401.5B yen. In conclusion, growth and profit increases were supported by one‑offs; on an adjusted basis growth was modest.
Adjusted segment Operating Income: Japan 397.5B yen (YoY +5.6%) showing stable growth with a margin of 25.1%; Americas 122.8B yen (▲9.2%) with margin down to 13.5%; EMEA 25.5B yen (+263.9%) improving to a 3.1% margin—recovery from prior losses though profitability still developing; APAC ▲31.7B yen (loss narrowed YoY by ▲1.6%) with margin ▲13.0% and ongoing structural reform. Americas’ profit decline reflects weaker market conditions and intensified competition; EMEA’s sharp rebound reflects European market recovery and effects of restructuring; APAC shows only modest improvement and has not yet returned to profitability. Japan contributes the bulk of group profits and regional dispersion is large. Adjusted consolidated items include ▲135.9B yen, resulting in Adjusted Operating Income of 378.1B yen; autonomous regional growth and APAC returning to profit are key to improving consolidated profitability.
[Profitability] Reported operating margin 18.2% (up +10.8pt from 7.4%) is materially affected by one‑offs; adjusted operating margin is estimated around 10.6%. Gross profit margin 82.6% (from 82.8%, ▲0.2pt) is broadly stable. ROE was 9.0% (above prior year) driven by net profit margin 12.1% and financial leverage of 6.37x. [Cash Quality] OCF / Net Income was ▲0.75x (OCF ▲324.6B yen / Net Income 432.1B yen), low due to temporary working capital movements: Accounts payable decrease ▲1,140.3B yen and inventories increase ▲147.7B yen were primary drivers. [Investment Efficiency] Total asset turnover 0.47x (annualized). Goodwill was 3,228.2B yen, 67.6% of equity—high and sensitive to impairments. [Financial Soundness] Equity Ratio 13.7% (up +2.0pt from 11.7%) remains low; D/E ratio 5.37x (interest‑bearing debt 4,519.2B yen / equity 4,778.5B yen) indicates high leverage and capital structure risk. Interest coverage about 10.1x (Operating Income 649.6B yen / finance costs 64.5B yen) is healthy, indicating no immediate short‑term interest burden issue.
OCF was ▲324.6B yen (improved from ▲509.3B yen), with OCF / Net Income ▲0.75x indicating low cash conversion. Main factors: Accounts payable decreased ▲1,140.3B yen (payment due to site changes), inventories increased ▲147.7B yen (project progress and production work‑in‑process), other current liabilities decreased ▲230.6B yen, and corporate tax payments ▲254.3B yen. Trade receivables recovery contributed +1,203.9B yen cash inflow. OCF before working capital movements was ▲28.6B yen, and adjusted for non‑cash items including gain on sale of fixed assets 296.8B yen, underlying operating cash generation remains weak. Investing cash flow was +139.1B yen, largely due to proceeds from sale of fixed assets 309.9B yen (presumably land sale in Minato‑ku, Tokyo), with fixed asset acquisitions ▲33.3B yen and subsidiary sale payments ▲138.5B yen. Financing cash flow was ▲381.0B yen, driven by debt repayments ▲151.9B yen, derivative settlements ▲80.8B yen, lease payments ▲90.9B yen, and non‑controlling interests dividends ▲36.4B yen. Free Cash Flow was ▲185.5B yen (negative), and cash and cash equivalents decreased to 2,558.9B yen (YoY ▲568.4B yen). While financing capacity exists, normalization of working capital and a reversal of OCF into positive are prerequisites for dividend sustainability.
Of current Net Income 432.1B yen, Gain on sale of fixed assets 296.8B yen and Other income 77.1B yen were non‑recurring, meaning recurring profit base is materially lower. Using Adjusted Operating Income 378.1B yen as a base, recurring pre‑tax profit including non‑operating income (equity method income 21.4B yen, finance income 18.9B yen) is estimated to be around 200B yen. Equity method income is expected to be a continuing contributor, but finance income and one‑offs should be separated out. Total comprehensive income was 453.8B yen (Net income attributable to owners of parent 422.6B yen), with Other comprehensive income +21.8B yen (cash flow hedges +26.2B yen, FX losses ▲12.6B yen). The accrual intensity is high: OCF / Net Income ▲0.75x, indicating a notable divergence between profit recognition and cash realization. Recurring non‑cash charges such as restructuring costs 35.8B yen and amortization of acquisition‑related intangibles 60.9B yen also affect earnings quality. Reversion to organic profit growth excluding one‑offs is the condition for improving earnings quality.
Full year guidance: Revenue 14,915.0B yen (YoY +3.9%), Operating Income 1,526.0B yen, Net Income Attributable to Owners of Parent 697.0B yen. Q1 progress against guidance: Revenue 23.9%, Operating Income 42.6%, Net Income 57.6%. Elevated progress in Operating Income and Net Income reflects the impact of one‑offs (Gain on sale of fixed assets 296.8B yen); on an adjusted Operating Income basis (378.1B yen / FY guidance 1,526.0B yen) progress is 24.8%, close to revenue progress and, accounting for seasonality, at a normal level. Full year operating margin is forecast 10.2% (Q1 adjusted basis ~10.6%), assuming structural reform effects accelerate in H2. Revenue is expected to grow modestly (+3.9%), with sustained EMEA recovery and improvements in Americas and APAC key to full year achievement. No guidance revisions. EPS guidance ¥268.50 vs Q1 ¥154.68 (57.6% progress); excluding one‑offs, underlying EPS is low and assumes stable H2 growth.
Q1 dividend payments were 181.1B yen (same as prior year with an initial dividend paid), and share buybacks were ¥1M (effectively zero). Full year dividend guidance is disclosed as ¥0, which is likely due to timing of interim dividend disclosure; year‑end dividend is expected to be disclosed separately. Prior year total dividends were effectively around 181.1B yen, implying a payout ratio of approximately 45% against Net Income Attributable to Owners of Parent 401.5B yen. Total shareholder returns focus on dividends with limited buybacks. Dividend sustainability depends on reversal of OCF; Q1 OCF ▲324.6B yen is negative but cash and cash equivalents of 2,558.9B yen provide a buffer. If working capital normalizes and OCF improves in H2, dividends are sustainable; continued negative OCF would reduce financial flexibility. Dividends have been paid from cash against Free Cash Flow ▲185.5B yen, so H2 cash generation is a condition for continued shareholder returns.
Operating Cash Flow volatility: OCF ▲324.6B yen driven by working capital movements (accounts payable decrease ▲1,140.3B yen, inventories increase ▲147.7B yen). Continued delays in site management and inventory efficiency would crystallize liquidity risk. OCF before working capital movements was weak at ▲28.6B yen; absent H2 improvement, balancing dividends and investment will be difficult.
High leverage and impairment risk: D/E ratio 5.37x and Equity Ratio 13.7% indicate capital structure risk; Goodwill 3,228.2B yen (67.6% of equity) is highly sensitive to impairments under economic downturns or rising rates. Continued profit deterioration in Americas/APAC could lower CGU cash flow forecasts and force impairment losses.
Regional performance disparity and dependence on one‑offs: Americas profit decline (▲9.2%) and APAC ongoing losses (▲31.7B yen) undermine diversification benefits. A large portion of Q1 Operating Income was from one‑offs (Gain on sale of fixed assets 296.8B yen); adjusted profit growth +11.4% is modest. Delays returning to organic growth would pressure full year guidance.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 18.2% | 6.2% (4.2%–17.2%) | +12.0pt |
| Net Profit Margin | 12.1% | 2.8% (0.6%–11.9%) | +9.3pt |
Both operating and net margins exceed industry medians materially, but adjusted margins excluding one‑offs are around 10.6%, consistent with top industry levels.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 3.5% | 20.9% (12.5%–25.8%) | -17.4pt |
Revenue growth lags industry median significantly, placing the company in a lower‑growth segment within IT & Communications.
※ Source: Company aggregation
Verification of one‑off sustainability: Of Q1 Operating Income 649.6B yen, Gain on sale of fixed assets 296.8B yen is non‑recurring; adjusted Operating Income 378.1B yen (+11.4%) reflects operating performance. Progress ratio to full year guidance (42.6%) includes one‑offs, so H2 profit accumulation pace and sustainability of organic growth are key points.
Realization of OCF reversal: Q1 OCF ▲324.6B yen driven by accounts payable decreases and inventory increases; normalization of sites and inventory efficiency in H2 are prerequisites for shareholder returns and financial flexibility. OCF before working capital movements ▲28.6B yen is weak; confirmation of an improving cash generation trend is necessary.
Rebalancing regional profit structure: Japan 397.5B yen supports consolidated profits, while Americas’ decline (▲9.2%) and APAC’s continued losses (▲31.7B yen) pose growth sustainability risks. EMEA recovery (+263.9%) is encouraging but scale is limited; Americas turnaround and APAC returning to profit are keys to medium‑term stability.
This report is an earnings analysis automatically generated by AI based on XBRL financial statement data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the Company based on public financial statements. Investment decisions are your responsibility; consult a professional advisor as needed.