JUSTSYSTEMS CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥25.95B
• Operating Income: ¥12.05B
• Net Income: ¥8.29B
• EPS: ¥129.11

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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

Verdict: A strong Q2 with double-digit top-line growth and even faster profit expansion, underpinned by exceptional margins and robust operating cash generation. Revenue rose 17.5% YoY to 259.5, while operating income increased 22.9% YoY to 120.5 and net income climbed 25.4% YoY to 82.9. Margin quality was outstanding: gross margin printed at 80.5%, operating margin at 46.4%, ordinary margin at 47.2%, and net margin at 31.9%. Operating margin expanded by roughly 187 bps YoY (from ~44.6% to 46.4%), reflecting positive operating leverage. Net margin likewise expanded about 188 bps YoY (from ~30.1% to 31.9%). Ordinary margin widened about 299 bps YoY, aided modestly by non-operating income (notably 2.09 in interest income). Earnings quality was high with OCF/NI at 1.59x (131.5 OCF vs 82.9 NI), signaling strong cash conversion and limited accrual reliance. The balance sheet is exceptionally liquid and conservative: cash and deposits of 1,010.5 against current liabilities of 196.7, a current ratio of 612.7%, and total liabilities at only 0.18x equity. Asset turnover is low (0.196), which, together with minimal financial leverage (1.18x), caps ROE at 7.4% despite high margins. Capex was negligible (0.05), underscoring an asset-light model that contributes to calculated ROIC being elevated (70.9%), though this likely reflects large cash lowering measured invested capital. Dividend data were not disclosed, but the calculated payout ratio is 17.0%, implying ample capacity for shareholder returns while preserving growth investments. No material signs of working capital strain emerged; receivables (33.1) and inventories (8.1) remain small relative to revenue. Effective tax rate was 32.3%, roughly in line with Japan’s statutory levels, implying limited tax-driven volatility. Non-operating items were modest and clean, with interest income as the primary driver; no equity-method income is reported, consistent with a software/edtech profile rather than a trading company. Forward-looking, strong cash and earnings quality provide strategic flexibility for organic product investment, selective M&A, or higher shareholder returns. Key watch items are sustainability of demand, churn/renewal dynamics in subscriptions, and any reinvestment to convert excess cash into growth or capital returns.

Profitability Analysis

ROE (7.4%) decomposes into Net Profit Margin (31.9%) × Asset Turnover (0.196) × Financial Leverage (1.18x). The dominant driver of ROE is the very high net margin, while asset turnover is structurally low due to a large cash position and an asset-light model; leverage is minimal. Among these components, the clearest YoY improvement is in net profit margin, inferred from net income growth (+25.4%) outpacing revenue growth (+17.5%), leading to an estimated +188 bps expansion. The business reason is operating leverage: gross profit increased substantially relative to SG&A (exact SG&A YoY not disclosed), and non-operating income (interest) provided a small tailwind to ordinary profit. This margin expansion appears sustainable near term given the mix of subscription/recurring revenues typical in software; however, normalization is possible as sales/marketing and R&D reinvestments catch up with growth. Asset turnover is unlikely to improve materially without deploying excess cash or accelerating revenue growth; both would be required to lift ROE meaningfully. Watch for SG&A growth potentially re-accelerating—if SG&A grows faster than revenue in subsequent quarters, operating leverage could fade. No red flags in cost inflation appear from the data, but the absence of SG&A breakdown limits precision.

Growth Assessment

Top-line growth of 17.5% YoY is robust and supported by exceptional unit economics (gross margin 80.5%). Profit growth outpaced revenue (OP +22.9%, NI +25.4%), evidencing operating leverage and some financial income support. Current operating margin of 46.4% and EBITDA margin of 51.8% position the company at the high end among domestic software peers. Sustainability depends on retention/expansion in core products and the pace of reinvestment; with minimal capex and ample cash, the company has capacity to fund growth initiatives. Near-term outlook skews positive given strong cash conversion and low dependency on non-operating items; medium-term growth may moderate from the current pace as the base grows. Limited disclosure on segment mix, ARR, churn, and pipeline constrains visibility. Non-operating contribution (interest income 2.09) is modest and should not be a key growth driver. Effective tax rate at 32.3% suggests little room for further bottom-line uplift from tax optimization.

Financial Health

Liquidity is exceptionally strong: current ratio 612.7% and quick ratio 608.5%, with cash and deposits (1,010.5) far exceeding current liabilities (196.7). There is no warning for Current Ratio (<1.0) or D/E (>2.0): D/E is only ~0.18x (based on total liabilities/equity, as interest-bearing debt is unreported). Solvency is robust with total equity of 1,125.5 and total liabilities of 198.7; noncurrent liabilities are minimal (2.0). Maturity mismatch risk is low: liquid assets (cash, receivables) comfortably cover short-term obligations. Interest-bearing debt details are unreported, but balance sheet composition implies de facto net cash. No off-balance sheet obligations are disclosed in the provided data. Working capital of 1,008.3 provides a substantial buffer against shocks.

Cash Flow Quality

OCF/Net Income is 1.59x (131.5 vs 82.9), indicating high-quality earnings and strong cash conversion. Free cash flow cannot be fully computed because investing cash flows are unreported; capex was negligible at 0.05, suggesting that, absent large investments, FCF likely approximated OCF. Financing CF was -7.70, likely reflecting dividends and/or minor share-related cash flows (specifics unreported). No signs of working capital manipulation are apparent: receivables and inventories are small relative to revenue and cash increased (implicit given large cash balance). With effective tax rate at 32.3% and limited non-operating reliance, cash flows should broadly track earnings barring deliberate reinvestment.

Dividend Sustainability

While DPS and dividends paid are unreported, the calculated payout ratio is 17.0%, implying conservative capital returns. If applied to current net income (82.9), implied dividends would be modest and easily covered by OCF of 131.5, yielding very strong coverage. The balance sheet’s net cash position and minimal capex enhance dividend safety and provide room for potential increases or buybacks, subject to capital allocation policy. Sustainability is high under current earnings and cash flow trajectory; policy disclosures and medium-term capital allocation targets would refine this view.

Risk Assessment

Business Risks:

• Product concentration risk in core software/education offerings; demand shifts could impact growth and margins.
• Competitive intensity from domestic and global software vendors, including AI-enabled alternatives.
• Potential slowdown in new customer acquisition or higher churn affecting subscription momentum.
• Execution risk in scaling while maintaining high margins (S&M and R&D reinvestment needs).
• Regulatory and data privacy considerations, especially for education-related solutions.

Financial Risks:

• ROE constrained by low asset turnover and minimal leverage despite high margins.
• Interest income tailwind could fade if interest rates decline, trimming ordinary margin.
• Currency risk appears limited but could affect any overseas components (scope not disclosed).
• Limited disclosure on investing cash flows and debt details obscures full capital structure assessment.

Key Concerns:

• Low asset turnover (0.196) and large cash balance depress ROE versus peers.
• Margin normalization risk if SG&A growth re-accelerates ahead of revenue.
• Visibility constraints due to unreported segment/ARR/churn metrics and investing CF.

Investment Implications

Key Takeaways:

• Beat-like profit cadence: OP +22.9% YoY on revenue +17.5% with ~187 bps OPM expansion.
• High-quality earnings: OCF/NI at 1.59x and negligible capex support FCF.
• Fortress balance sheet: cash of 1,010.5 and D/E ~0.18x mitigate downside risk.
• ROE (7.4%) lags margin quality due to low asset turnover and low leverage.
• Ordinary margin benefited slightly from interest income; core performance remains the main driver.

Metrics to Watch:

• Operating margin progression and SG&A growth vs revenue.
• OCF/NI ratio and working capital movements (receivables, deferred revenue if disclosed).
• ARR, churn/retention, and new bookings (not disclosed here).
• Capital allocation: dividend/buyback policy and potential M&A deployment of cash.
• R&D intensity and product pipeline to sustain growth.
• Tax rate stability and any changes to non-operating income (interest).

Relative Positioning: Versus Japanese software peers, the company exhibits superior margins and cash generation with a notably stronger liquidity profile; however, reported ROE is middling due to excess cash and low asset turnover. Execution on reinvestment or capital returns could unlock higher ROE.

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