System Support Holdings Inc. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥7.52B
• Operating Income: ¥572M
• Net Income: ¥248M
• EPS: ¥34.14

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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

System Support Holdings (43960) delivered a strong FY2026 Q1 with broad-based profit growth and signs of positive operating leverage. Revenue rose 22.1% YoY to ¥7.52bn, while operating income grew 31.3% YoY to ¥0.57bn, outpacing top-line growth and lifting operating margin to roughly 7.6%. Net income increased 42.7% YoY to ¥0.35bn, taking net margin to 4.7%, about +0.7ppt improvement YoY by our back-calculation. Gross margin is reported at 21.9%; this, together with the stronger operating margin, suggests better mix, utilization, or pricing, and/or effective SG&A control. DuPont metrics indicate a 4.70% net margin, 0.536x asset turnover, and 2.30x financial leverage, yielding a calculated ROE of 5.78% for the quarter; annualized, that would be materially higher if sustained, but quarterly ROE should be interpreted cautiously. Liquidity remains comfortable with a current ratio of 176.5% and minimal inventory (¥25m), consistent with an IT services model and low working-capital tied in stocks. Leverage is moderate with total liabilities-to-equity at 1.25x; the equity ratio (calculated) is around 43.5% despite a 0.0% reported figure, which appears to reflect disclosure formatting rather than capital weakness. Interest expense is small (¥7.28m) and coverage is strong at ~78.6x based on operating income, reducing financial risk. Cash flow statements (OCF/ICF/FCF) are unreported in this dataset, limiting assessment of earnings-to-cash conversion this quarter. Likewise, depreciation and EBITDA are undisclosed, so we focus on operating income margins for profitability trends. Dividend data are not disclosed here (DPS and payout ratio show as zero by convention), so payout policy cannot be evaluated from this release alone. Overall, Q1 indicates healthy demand and margin progression, with balance sheet resilience, but confirmation via cash flow and order/backlog visibility would strengthen conviction in sustainability. We also note a numerical discrepancy between the presented cost of sales and gross profit figures; given the provided gross margin metric aligns with gross profit, we rely on the reported margin for analysis. Key watchpoints include headcount/utilization, subcontractor cost inflation, pricing, and receivables collection.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 4.70% (NI ¥353m / Revenue ¥7,517m)
• asset_turnover: 0.536x (Revenue ¥7,517m / Assets ¥14,026m; quarterly point-in-time, not annualized)
• financial_leverage: 2.30x (Assets ¥14,026m / Equity ¥6,108m)
• calculated_ROE: 5.78% for the quarter; caution on quarter-based ROE vs annual margin_quality:
• gross_margin: 21.9% (per provided metric; consistent with gross profit ¥1,643m)
• operating_margin: 7.6% (Operating income ¥572m / Revenue ¥7,517m)
• ordinary_margin: 7.7% (Ordinary income ¥577m / Revenue ¥7,517m)
• net_margin: 4.7% (Net income ¥353m / Revenue ¥7,517m)
• tax_rate: Approx. 27.6% (Income tax ¥159m / Ordinary income ¥577m), despite a reported 0.0% metric operating_leverage: Revenue grew +22.1% YoY while operating income rose +31.3% YoY; back-calculated operating margin improved from ~7.1% to 7.6% (+0.5ppt), indicating positive operating leverage from scale, mix, or SG&A efficiency.

Growth Assessment

revenue_sustainability: Top-line +22.1% YoY reflects robust demand in IT services/SI; minimal inventories point to service-led growth rather than product cycles. Sustainability will hinge on order intake, backlog, headcount growth, and utilization. profit_quality: Net income +42.7% YoY outpaced sales, suggesting improved mix/pricing or lower cost intensity. Interest burden is negligible, so profit growth is primarily operational, not financial. outlook: If utilization and pricing remain firm and subcontractor cost inflation is managed, modest margin expansion could persist. However, without order/backlog or segment disclosure, growth durability beyond Q1 is uncertain; seasonal patterns in SI may also affect quarter-to-quarter comparisons.

Financial Health

liquidity:

• current_ratio: 176.5% (CA ¥10,735m / CL ¥6,081m)
• quick_ratio: 176.1% (near current ratio due to very low inventories ¥25m)
• working_capital: ¥4,653.9m solvency:
• equity_ratio_calculated: 43.5% (Equity ¥6,108m / Assets ¥14,026m) vs reported 0.0% (likely undisclosed in XBRL)
• debt_to_equity: 1.25x (Total liabilities ¥7,616m / Equity ¥6,108m)
• interest_coverage: 78.6x (Operating income ¥572m / Interest expense ¥7.28m) capital_structure: Moderate leverage with ample equity buffer; low interest expense implies limited reliance on costly debt. Balance sheet appears sound for growth investment and working-capital needs.

Cash Flow Quality

earnings_quality: OCF data are not disclosed this quarter; OCF/NI shows as 0.00 by placeholder and should not be interpreted as cash burn. With service-heavy revenue and low inventories, earnings conversion typically hinges on receivables collection (DSO not provided). FCF_analysis: Free cash flow is undisclosed due to missing OCF and capex details. Given the sector, capex is usually modest (human-capital intensive), but we cannot quantify FCF. working_capital: Low inventory intensity is positive; however, the large current assets balance suggests receivables are a key cash driver. Monitoring DSO and unbilled receivables is important for cash conversion.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratio are undisclosed (zeros indicate unreported). EPS is ¥34.14 for Q1, but without DPS or policy commentary, payout sustainability cannot be assessed. FCF_coverage: Not assessable; OCF and capex are not disclosed, so FCF coverage of dividends cannot be calculated. policy_outlook: No information on dividend policy in this dataset. For an IT services firm with moderate leverage and growing earnings, a stable or progressive policy is common in the sector, but this remains an assumption pending company guidance.

Risk Assessment

Business Risks:

• Demand cyclicality tied to corporate IT spending and macro conditions
• Execution risk on fixed-price/large system integration projects (cost overruns)
• Talent acquisition and retention amid wage inflation in IT engineers
• Pricing pressure and competition from larger SIers and cloud-native firms
• Client concentration risk if top accounts dominate revenue
• Project delay/cancellation risk impacting revenue recognition and utilization

Financial Risks:

• Receivables collection and potential lengthening of DSO affecting OCF
• Cost inflation in subcontractors squeezing gross margin
• Limited visibility on cash and capex due to undisclosed CF data
• Exposure to variable subcontracting vs in-house capacity impacting margin volatility
• Interest rate changes are a minor risk given low interest expense but not zero

Key Concerns:

• Lack of disclosed cash flow data this quarter prevents validation of earnings-to-cash conversion
• Discrepancy between cost of sales and gross profit figures in the provided lines; relying on gross margin metric instead
• Sustainability of margin gains depends on utilization and pricing in a competitive market

Investment Implications

Key Takeaways:

• Strong Q1 growth with positive operating leverage: revenue +22.1% YoY, OP +31.3%, NI +42.7%
• Operating margin improved to ~7.6%; net margin 4.7% with a normalized tax rate (~28%)
• Healthy balance sheet: calculated equity ratio ~43.5%, current ratio 176.5%, minimal inventory
• Interest burden is low (coverage ~79x), reducing financial risk
• Cash flow and dividend data not disclosed, limiting assessment of earnings quality and payout sustainability

Metrics to Watch:

• Order intake/backlog and book-to-bill
• Headcount growth, utilization rate, and billing rates
• Gross margin drivers: mix and subcontractor cost ratio
• SG&A ratio and operating margin progression
• DSO, unbilled receivables, and OCF/NI conversion
• Capex intensity and any M&A-related cash needs
• Client concentration and renewal rates

Relative Positioning: Within Japanese mid-tier IT services/SI peers, the company exhibits above-trend revenue growth and improving margins with moderate leverage and strong liquidity; confirmation via cash conversion and backlog would improve comparative conviction.

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