| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥230.4B | ¥201.8B | +14.2% |
| Operating Income / Operating Profit | ¥24.1B | ¥19.3B | +24.5% |
| Ordinary Income | ¥24.4B | ¥19.5B | +24.9% |
| Net Income / Net Profit | ¥15.3B | ¥12.6B | +21.2% |
| ROE | 22.4% | 21.0% | - |
For the cumulative Q3 results of FY2026, Revenue was ¥230.4B (YoY +¥28.6B +14.2%), Operating Income was ¥24.1B (YoY +¥4.7B +24.5%), Ordinary Income was ¥24.4B (YoY +¥4.9B +24.9%), and Net Income was ¥15.3B (YoY +¥2.7B +21.2%), achieving double-digit increases across all four indicators. With profit growth outpacing revenue growth, the Operating Margin improved by 86bp to 10.4% (prior 9.6%), and the Net Margin rose by 39bp to 6.6% (prior 6.3%). Cloud Integration led with Revenue of ¥85.7B (+19.9%) and Operating Income of ¥12.8B (+23.4%), while System Integration also showed marked margin improvement with Revenue of ¥113.5B (+11.5%) and Operating Income of ¥7.2B (+39.4%). Gross Profit Margin expanded by 146bp to 29.4% (prior 27.9%), primarily driven by a higher share of high-margin segments and improved business mix.
[Revenue] Revenue growth to ¥230.4B (YoY +¥28.6B +14.2%) was primarily contributed by Cloud Integration at ¥85.7B (+19.9%), which increased ¥14.3B, followed by System Integration at ¥113.5B (+11.5%), which increased ¥11.7B. Product revenue was ¥9.0B (+29.5%) with the highest growth rate but small scale; Outsourcing was ¥18.8B (+3.9%) showing slower growth; Overseas was ¥4.5B (+0.8%) with marginal increase. Cloud increased its share to 37.2% of total revenue (prior 35.4%), indicating a shift toward high-growth segments. Product’s rapid growth appears to be driven by new contract wins and expanded product sales.
[Profitability] Cost of goods sold was ¥162.6B (70.6% of Revenue), increasing by ¥127.1B YoY, but Gross Profit Margin improved by 146bp to 29.4%. SG&A was ¥43.7B (19.0% of Revenue), up ¥6.6B YoY and about 60bp higher as a share of revenue compared with ~18.4% prior year, yet the improvement in gross margin absorbed the SG&A increase, resulting in Operating Income of ¥24.1B (Operating Margin 10.4%), up 86bp. Non-operating income was ¥0.8B (interest income ¥0.1B, foreign exchange gains ¥0.2B, etc.), non-operating expenses were ¥0.4B (interest expense ¥0.4B), yielding a net non-operating amount of +¥0.3B, hence Ordinary Income of ¥24.4B remained roughly in line with Operating Income. After corporate taxes of ¥9.1B (effective tax rate 37.3%), Net Income was ¥15.3B, improving Net Margin by 39bp to 6.6%. No material extraordinary items were identified; the increase in revenue and profit is centered on recurring business performance.
Cloud Integration delivered Revenue of ¥85.7B (+19.9%), Operating Income of ¥12.8B (+23.4%), and a margin of 14.9%, making it the most profitable core business and accounting for 53.1% of consolidated Operating Income. System Integration reported Revenue of ¥113.5B (+11.5%), Operating Income of ¥7.2B (+39.4%), and a margin of 6.4%; the +39.4% increase in Operating Income was the highest among five segments, reflecting improved project profitability and cost efficiency. Outsourcing recorded Revenue of ¥18.8B (+3.9%), Operating Income of ¥2.8B (-8.1%), and a margin of 14.7%; despite revenue growth, the profit decline appears influenced by higher personnel costs and adverse project mix. Product reported Revenue of ¥9.0B (+29.5%), Operating Income of ¥1.7B (+39.3%), and a margin of 19.1%, the highest margin, with product sales expansion boosting overall profitability. Overseas posted Revenue of ¥4.5B (+0.8%) and an Operating Loss of ¥0.1B (improvement of +54.9% from prior-year loss of ¥0.1B), margin -1.2%; still loss-making but showing improvement.
[Profitability] Operating Margin of 10.4% improved by 86bp from 9.6%, mainly driven by Gross Profit Margin expansion to 29.4% (prior 27.9%, +146bp). ROE of 22.4% reflects a combination of Net Margin 6.6% × Total Asset Turnover 1.51x × Financial Leverage 2.24x, representing a level well above industry averages. Interest coverage was 63.4x (Operating Income ¥24.1B ÷ Interest Expense ¥0.4B), indicating minimal interest burden.
[Cash Quality] Trade receivables of ¥46.2B (prior ¥41.4B, +11.6%) imply DSO of about 73 days; receivables rose with revenue growth and collection periods have somewhat lengthened. Inventories were ¥1.2B (prior ¥0.2B, +370%), but only 0.8% of total assets, so inventory risk is limited.
[Investment Efficiency] Total Asset Turnover was 1.51x (Revenue ¥230.4B ÷ Total Assets ¥152.7B), slightly up from 1.48x prior year. Goodwill of ¥6.0B (prior ¥4.2B, +43%) and intangible assets ¥10.1B (prior ¥5.3B, +93%) reflect M&A and in-house development investments; Goodwill/Net Assets ratio of 8.8% is within a healthy range.
[Financial Soundness] Equity Ratio was 44.7% (prior 44.1%), Current Ratio 176% (Current Assets ¥113.5B ÷ Current Liabilities ¥64.3B), and Quick Ratio 175%, indicating good liquidity. Cash of ¥59.8B versus Short-term Borrowings of ¥16.7B yields a Cash/Short-term Debt ratio of 3.59x, providing ample cushion. Long-term Borrowings were ¥10.4B and Total Interest-bearing Debt was ¥27.7B (Short-term ¥16.7B + Long-term ¥10.4B + Bonds ¥0.1B + Leases ¥1.3B), implying D/E of about 1.24x and Net Debt/Equity around -0.47x, i.e., a net cash position.
Non-operating income of ¥0.8B (interest income ¥0.1B, forex gains ¥0.2B, etc.) and non-operating expenses of ¥0.4B (interest expense ¥0.4B) produced a net non-operating amount of +¥0.3B, indicating most profit stems from core operations. Trade receivables increased to ¥46.2B (↑¥4.8B, +11.6%), with DSO about 73 days, reflecting working capital demand from revenue growth. Short-term Borrowings increased to ¥16.7B (↑¥9.5B, +132%), likely to flexibly support growth investment and working capital needs; however, short-term liabilities account for 61.5% of total liabilities (Short-term Liabilities ¥64.3B ÷ Total Liabilities ¥84.4B), indicating high short-term dependency. Cash remained stable at ¥59.8B (prior ¥58.4B, +¥1.4B), preserving a buffer for dividends and growth investments. Comprehensive Income of ¥15.4B was nearly identical to Net Income of ¥15.3B, with FX translation adjustment of ¥0.1B having limited impact. Inventory increase to ¥1.2B (0.8% of total assets) does not substantially raise inventory-related cash stagnation risk; normalization of receivables collection will be key for future cash generation.
Non-operating income ¥0.8B (0.3% of Revenue), non-operating expenses ¥0.4B (0.2% of Revenue), with net non-operating amount of ¥0.3B, indicating earnings rely on recurring business activity. Breakdown of non-operating income includes interest income ¥0.1B, forex gains ¥0.2B, subsidy income ¥0.3B, etc.; no large one-off items were identified. The gap between Ordinary Income ¥24.4B and Net Income ¥15.3B is primarily due to corporate taxes ¥9.1B (effective tax rate 37.3%), with no structural distortions observed. No special gains or losses were disclosed; Net Income reflects recurring earning power. Difference between Comprehensive Income ¥15.4B and Net Income ¥15.3B is only FX translation adjustment ¥0.1B (Other Comprehensive Income ¥0.1B), with no material valuation gaps. Operating Income ¥24.1B, Ordinary Income ¥24.4B, and Net Income ¥15.3B show stable margins across stages, indicating high quality of earnings.
Full Year (FY) forecast: Revenue ¥320.6B (YoY +19.0%), Operating Income ¥28.4B (YoY +28.1%), Ordinary Income ¥28.8B (YoY +28.4%), Net Income ¥18.3B, EPS ¥88.53. Cumulative Q3 progress rates: Revenue 71.9% (standard 75%: -3.1pt), Operating Income 84.7% (standard +9.7pt), Ordinary Income 84.7% (standard +9.7pt), Net Income 83.5% (standard +8.5pt), indicating front-loaded profit progression. Operating Margin of 10.4% is higher than the full-year forecast margin of 8.9% (¥28.4B ÷ ¥320.6B), driven by gross margin improvement and growth in high-margin segments. Revenue progress is broadly within expectations assuming concentration of recognitions/deliveries in Q4; profit front-loading leaves upside potential if project smoothing toward year-end or additional cost efficiencies materialize. No forecast revisions were made this quarter; the company maintains a cautious outlook.
At the end of Q2, the interim dividend was ¥32 per share, and the full-year dividend forecast is ¥15 (year-end dividend, post-share-split). A 1-for-2 share split (1 share → 2 shares) was implemented on 2026-01-01, and pre-split full-year dividend would be ¥62 (interim ¥32 + year-end ¥30). Using cumulative Q3 Net Income ¥15.3B, shares outstanding 20,800 thousand shares (excluding treasury stock 195 thousand shares), and average shares 20,700 thousand, EPS of ¥73.91 is calculated; the payout ratio against the cumulative dividend of ¥32 is about 43.3%. Versus the full-year EPS forecast ¥88.53, a pre-split annual dividend of ¥62 implies a payout ratio of about 70%, but attention should be paid to consistency when assuming post-split year-end dividend of ¥15. Cash of ¥59.8B minus Short-term Borrowings ¥16.7B still provides sufficient dividend funding, and treasury stock increased to ¥1.9B (prior ¥0.6B), indicating a somewhat more proactive total return posture. Dividend policy remains at a level balancing profit growth and financial soundness.
Outsourcing Segment Profitability Decline: While revenue grew +3.9%, Operating Income declined -8.1%, suggesting profit deterioration possibly due to rising personnel costs and adverse project mix. The segment’s scale is limited at ¥18.8B (8.2% of consolidated revenue), but further margin erosion from 14.7% could dilute consolidated margins. Progress on price revisions and cost optimization will be watched.
Short-term Liability Dependency and Working Capital Pressure: Short-term Liabilities ratio 61.5%, Short-term Borrowings ¥16.7B (prior ¥7.2B, +132%) indicate increasing reliance on short-term funding. DSO of about 73 days reflects lengthening receivable collection periods, and expanding working capital needs with revenue growth could delay cash conversion. Although cash of ¥59.8B secures near-term liquidity, extending borrowing tenors and stabilizing receivable collections remain challenges.
Continued Overseas Segment Losses: Overseas revenue ¥4.5B (2.0% of consolidated), Operating Loss ¥0.1B; scale is small but cumulative Q3 losses persist. While loss magnitude narrowed YoY (from -¥0.1B to -¥0.05B), no clear path to profitability is evident; risks include inefficient resource allocation or costs associated with exit. Strategic selection and concentration of regional efforts will affect consolidated profitability.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 10.4% | 8.2% (3.6%–18.0%) | +2.3pt |
| Net Margin | 6.6% | 6.0% (2.2%–12.7%) | +0.7pt |
The company’s Operating Margin 10.4% and Net Margin 6.6% both exceed industry medians, maintaining strong profitability within the IT & Communications sector.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 14.2% | 10.4% (-1.1%–19.5%) | +3.8pt |
The company’s Revenue Growth Rate of 14.2% surpasses the industry median 10.4%, driven by expansion in Cloud Integration and System Integration.
※ Source: Company compilation
Continued profitability improvement driven by high growth and high margin in Cloud and Product segments, sustaining Operating Margin at 10.4% (+86bp) and ROE at 22.4%, ranking high within the industry. With profit progress at 84.7% of the full-year forecast (standard 75%: +9.7pt), if gross margin improvement and higher shares of high-margin projects persist, there is upside to full-year results.
Short-term Liabilities ratio 61.5%, increase in Short-term Borrowings of ¥9.5B, and DSO ~73 days alongside longer receivable collection are monitoring points for working capital and liquidity. Cash ¥59.8B secures liquidity for now, but stabilizing receivables collection and lengthening borrowing tenors are key to sustaining cash generation and financial resilience.
Outsourcing’s -8.1% operating income change and continued overseas losses constrain consolidated margin expansion. Although Outsourcing (8.2% of revenue) and Overseas (2.0%) are limited in scale, improvements through price adjustments, cost optimization, and strategic regional focus could raise consolidated Operating Margin into the high teens.
This report is an AI-generated earnings analysis derived from XBRL earnings release data. It does not constitute a recommendation to invest in any specific security. Industry benchmark figures are compiled by the company based on publicly disclosed financial statements and are provided for reference only. Investment decisions are your own responsibility; please consult a professional advisor as needed.