| Metric | Current Period | Same Period of Previous Year | YoY |
|---|---|---|---|
| Revenue | ¥367.0B | ¥324.3B | +13.2% |
| Operating Income | ¥248.6B | ¥214.8B | +15.7% |
| Ordinary Income | ¥320.5B | ¥272.4B | +17.7% |
| Net Income | ¥227.0B | ¥195.1B | +16.3% |
| ROE | 4.6% | 3.8% | - |
In addition to higher revenue and earnings, a key feature of the current quarter was that Ordinary Income and Net Income grew faster than Operating Income. Revenue was ¥367.0B (+13.2% year on year), Operating Income was ¥248.6B (+15.7%), Ordinary Income was ¥320.5B (+17.7%), and Net Income was ¥227.0B (+16.3%). In addition to the expansion of the core SystemSupport Business, non-operating income, including dividend income of ¥29.2B and gains on sales of securities of ¥20.0B, boosted the growth rate at the Ordinary Income level. Progress against the full-year plan was 24.7% for Revenue and 28.0% for Ordinary Income, indicating somewhat accelerated progress at the Ordinary Income level.
【Revenue】Revenue increased 13.2% year on year to ¥367.0B. By segment, SystemSupport was the largest growth driver at ¥195.9B (+15.5%, representing 53.4% of the total), followed by SystemIntegration at ¥151.4B (+11.8%, representing 41.3% of the total). OfficeAutomation maintained revenue growth at ¥19.8B (+2.1%), although its scale remained small.
【Profitability】Operating Income was ¥248.6B (+15.7%), and the Operating Income margin improved to 67.7% from 66.2% in the same period of the previous year. This improvement was attributable to an increase in the gross margin to 79.5% from 78.8% and the containment of the SG&A expense ratio at 11.8%. Ordinary Income grew faster than Operating Income, increasing 17.7% to ¥320.5B, driven by non-operating income of ¥75.7B, equivalent to 20.6% of Revenue, including dividend income of ¥29.2B and gains on sales of securities of ¥20.0B. Net Income increased 16.3% to ¥227.0B, with earnings growth secured even after the burden of an effective tax rate of 29.2%, compared with 28.4% in the same period of the previous year. This was a financial result characterized by higher revenue and earnings across both the top and bottom lines.
SystemSupport was the largest segment driving up the Company-wide profit margin, with Revenue of ¥195.9B (+15.5%), Operating Income of ¥145.9B (+16.6%), and an Operating Income margin of 74.5%. SystemIntegration maintained the second-highest profitability, with Revenue of ¥151.4B (+11.8%), Operating Income of ¥95.9B (+14.3%), and a margin of 63.3%. OfficeAutomation had Revenue of ¥19.8B (+2.1%), Operating Income of ¥6.9B (+17.3%), and a margin of 34.7%; although smaller than the other two segments, it recorded the highest earnings growth rate. Profit margins ranked in the order of SystemSupport, SystemIntegration, and OfficeAutomation, while the increasing contribution of the highly recurring SystemSupport Business contributed to improved Company-wide profitability.
【Profitability】The Operating Income margin was 67.7% (66.2% in the same period of the previous year), the Net Income margin was 61.9% (60.2%), and the gross margin was 79.5% (78.8%); all improved from the previous year.【Cash Flow Quality】Operating Cash Flow (OCF) was only 0.65 times Net Income, as corporate income tax payments of ¥170.8B and an increase in trade receivables of ¥16.6B constrained cash conversion.【Investment Efficiency】ROE was 4.6%. Despite the high Net Income margin, the total asset turnover ratio remained low, which constrained asset efficiency.【Financial Soundness】The Equity Ratio was 84.4% (83.4% in the same period of the previous year), with current assets of ¥2165.3B versus current liabilities of ¥300.1B, indicating an exceptionally strong financial position.
Operating Cash Flow was ¥148.5B, up 5.5% year on year, but remained only 0.65 times Net Income of ¥227.0B, as corporate income tax payments of ¥170.8B and an increase in trade receivables of ¥16.6B constrained cash conversion. Investing Cash Flow was positive at +¥24.2B, owing to sales of investment securities and other items, while capital expenditures remained small at ¥1.7B. As a result, Free Cash Flow was ¥172.7B, while Financing Cash Flow was -¥303.7B, primarily due to dividend payments of ¥203.7B and share repurchases of ¥100.0B. Shareholder returns were therefore implemented on a scale exceeding the current quarter’s Free Cash Flow. This difference was absorbed by the Company’s ample holdings of cash and cash equivalents and investment securities.
The core of recurring earnings consists of Operating Income from the SystemSupport and SystemIntegration segments, which together provide a stable earnings base accounting for the majority of Operating Income. Meanwhile, non-operating income of ¥75.7B, representing the difference between Ordinary Income of ¥320.5B and Operating Income of ¥248.6B, was substantial at 20.6% of Revenue. It primarily comprised dividend income of ¥29.2B and gains on sales of securities of ¥20.0B, both of which have a temporary nature and are susceptible to the effects of the securities portfolio and market conditions. The divergence between Ordinary Income and Net Income (¥320.5B→¥227.0B) was primarily attributable to corporate income taxes of ¥93.5B, resulting in an effective tax rate of 29.2%. The fact that Operating Cash Flow remained at 0.65 times Net Income indicates somewhat sluggish conversion of earnings into cash. Considering the effects of tax payments and the increase in trade receivables, it is important to assess the sustainability of the underlying earnings power at the operating level.
Against the full-year forecasts of Revenue of ¥1487.0B, Operating Income of ¥980.0B, and Ordinary Income of ¥1145.0B, progress in the current Q1 was 24.7% for Revenue, 25.4% for Operating Income, 28.0% for Ordinary Income, and 27.7% for Net Income. Progress at the Operating Income level was broadly in line with the simple 25% progress benchmark, while progress at the Ordinary Income and Net Income levels was somewhat higher, due to contributions from non-operating income such as dividend income and gains on sales of securities. Neither the earnings forecast nor the dividend forecast has been revised.
Against the Company’s forecast EPS of ¥189.23, DPS was ¥47.00, resulting in a calculated Payout Ratio of approximately 24.8%. During the current quarter, the Company repurchased ¥100.0B of its own shares, resulting in total shareholder returns of ¥303.7B when combined with dividend payments of ¥203.7B. This total return amount represented a Total Return Ratio of approximately 133.8% relative to Net Income of ¥227.0B for the current quarter, and exceeded Free Cash Flow of ¥172.7B, reflecting the use of ample cash and cash equivalents and investment securities for shareholder returns.
Segment concentration risk: SystemSupport accounts for 53.4% of Revenue and 58.7% of total Operating Income (¥145.9B/¥248.6B), indicating a high degree of earnings dependence on a single segment.
Sensitivity to securities market conditions: Investment securities totaled ¥3095.5B, representing 53.0% of total assets. Other comprehensive income for the current quarter was ¥71.3B, substantially below Net Income of ¥227.0B, primarily due to valuation differences on securities of -¥150.2B. The asset composition is therefore susceptible to the impact of equity market fluctuations on net assets.
Slower cash conversion: Operating Cash Flow remained at 0.65 times Net Income, while corporate income tax payments of ¥170.8B and the ¥16.6B increase in trade receivables placed pressure on working capital. Total shareholder returns through dividends and share repurchases amounted to ¥303.7B, exceeding Free Cash Flow of ¥172.7B.
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Income Margin | 67.7% | 8.1% (2.5%–15.8%) | +59.7pt |
| Net Income Margin | 61.8% | 5.8% (1.6%–10.7%) | +56.0pt |
Both the Operating Income margin and Net Income margin substantially exceeded the industry median, placing the Company among the highest profitability levels in the IT and telecommunications sector.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (Year on Year) | 13.2% | 9.3% (0.2%–16.9%) | +3.9pt |
The Revenue growth rate exceeded the industry median but did not reach the upper bound of the industry IQR (16.9%), placing the growth rate within the upper range of the industry.
Source: Compiled by the Company
The fact that the growth rates of Ordinary Income and Net Income (+17.7% and +16.3%) exceeded the growth rate of Operating Income (+15.7%) was attributable to contributions from non-operating income such as dividend income of ¥29.2B and gains on sales of securities of ¥20.0B. The somewhat accelerated progress rates for Ordinary Income and Net Income against the full-year plan are important considerations when evaluating the quality of the earnings results.
While Operating Cash Flow remained at 0.65 times Net Income, total shareholder returns for the current quarter (dividends + share repurchases totaling ¥303.7B) exceeded Free Cash Flow of ¥172.7B. The fact that this difference was funded through the use of cash and cash equivalents and investment securities is noteworthy from a cash flow perspective.
The Operating Income margin of 74.5% in the SystemSupport segment lifted the Company-wide Operating Income margin to 67.7%. The segment’s concentration, representing 53.4% of Revenue, is an important point to monitor when evaluating the sustainability of Company-wide profitability.
This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly available earnings data. Investment decisions should be made at your own responsibility, after consulting professionals as necessary.
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