ID Holdings Corporation FY2027 Q1 Earnings Report

Quick View

Executive Summary

For Q1 of the fiscal year ending March 2027, revenue was nearly flat, while higher SG&A expenses and an increased tax burden resulted in double-digit declines in Operating Income and Net Income, producing results characterized by lower revenue and lower profit (slightly lower revenue and lower profit). Revenue was ¥9.65B (¥9.67B in the previous year, YoY -0.2%), Operating Income was ¥0.81B (¥1.01B in the previous year, YoY -19.5%), Ordinary Income was ¥0.85B (¥1.01B in the previous year, YoY -15.8%), and Net Income was ¥0.51B (¥0.62B in the previous year, YoY -18.7%, consolidated basis). Although the gross margin improved to 27.0% (26.7% in the previous year), the SG&A ratio increased to 18.6% (16.3% in the previous year), worsening operating leverage. In addition, the effective tax rate rose to 40.6% (38.3% in the previous year). These were the primary reasons for the decline in profit.

Factors Affecting Results

【Revenue】Revenue was ¥9.65B, essentially flat year on year at -0.2%. As the company operates under a single-segment structure centered on the Information Services Business, no business-by-business breakdown is disclosed. Contract assets increased to ¥1.13B (¥0.78B in the previous year, +46.3%), indicating an accumulation of revenue recognized prior to customer acceptance, while accounts receivable and notes receivable decreased to ¥6.85B (¥8.32B in the previous year).

【Profit and Loss】Operating Income was ¥0.81B (YoY -19.5%), and the Operating Income margin declined by 2.0pt to 8.4% from 10.4% in the previous year. Although the gross margin improved to 27.0% (26.7% in the previous year), the SG&A ratio increased by 2.3pt to 18.6% (16.3% in the previous year), resulting in a deterioration in operating leverage that more than offset the gross-margin improvement. Ordinary Income was ¥0.85B (YoY -15.8%). Non-operating income and expenses resulted in a net gain of only ¥0.04B, primarily consisting of ¥0.05B in dividend income, making its contribution to profit limited. Net Income was ¥0.51B (YoY -18.7%), with the increase in the effective tax rate to 40.6% (38.3% in the previous year) amplifying the decline from Ordinary Income. Extraordinary items were limited, consisting of ¥0.002B in extraordinary income and virtually zero extraordinary losses, and the impact of one-time factors was limited. In conclusion, the results reflect lower revenue and lower profit (slightly lower revenue and a double-digit decline in profit).

Key Financial Indicators

【Profitability】The Operating Income margin was 8.4%, down 2.0pt from 10.4% in the previous year. The Net Income margin (consolidated basis) was 5.3%, down 1.2pt from 6.5% in the previous year, while the gross margin was 27.0%, improving by 0.3pt from 26.7% in the previous year. ROE remained at 3.4%. 【Cash Flow Quality】Contract assets increased by +46.3% year on year to ¥1.13B, while accounts receivable and notes receivable decreased by -17.7% year on year to ¥6.85B, indicating a change in the composition toward a greater proportion of revenue recognized prior to customer acceptance. This change requires monitoring from a cash-collection perspective. 【Investment Efficiency】Total asset turnover, calculated by dividing quarterly revenue by total assets, remained at approximately 0.44x, indicating a limited level of efficient capital utilization. The decline in ROE was primarily attributable to deterioration in the Net Income margin, while the contributions from asset efficiency and financial leverage remained small. 【Financial Soundness】The Equity Ratio was 68.5%, up 4.9pt from 63.6% in the previous year, while the current ratio remained high at 238% (204% in the previous year). Short-term borrowings were ¥0.60B, down -40.0% from ¥1.00B in the previous year, and the financial base remained conservative.

Cash Flow Analysis

Cash and deposits were ¥5.69B, down -¥0.83B (-12.7%) from ¥6.52B in the previous year. Short-term borrowings were ¥0.60B, reduced by -¥0.40B from ¥1.00B in the previous year, indicating lower reliance on interest-bearing debt. Contract assets were ¥1.13B, up +¥0.36B from ¥0.78B in the previous year. This may have increased the funds tied up in working capital due to the accumulation of revenue recognized prior to customer acceptance, while accounts receivable and notes receivable decreased to ¥6.85B from ¥8.32B in the previous year, indicating a change in the composition of these items. Income taxes payable were ¥0.09B, a substantial decrease from ¥0.88B in the previous year, suggesting that tax payments proceeded and constituted one source of cash outflow. The provision for bonuses was also ¥0.71B, down from ¥2.04B in the previous year, suggesting that cash outflows occurred in connection with bonus payments. In light of these factors, the decline in cash is considered to have resulted from the combined impact of tax and bonus payments and changes in working capital arising from the increase in contract assets.

Earnings Quality

Recurring earnings were the core of performance, while extraordinary items were limited to ¥0.002B in extraordinary income and virtually zero extraordinary losses, meaning that one-time factors had a limited impact on results. Non-operating income of ¥0.06B consisted primarily of ¥0.05B in dividend income and was approximately 0.7% of revenue, indicating a low dependence on non-core income. The gap of approximately -40% between Ordinary Income of ¥0.85B and Net Income of ¥0.51B was primarily attributable to the increase in the effective tax rate to 40.6% (38.3% in the previous year), against the backdrop of changes in the tax effect accompanying a decrease in deferred tax assets (¥0.57B, versus ¥0.80B in the previous year). Comprehensive Income was ¥0.55B, close to Net Income of ¥0.51B, and the contribution of other comprehensive income, primarily a +¥0.03B foreign currency translation adjustment, remained small.

Earnings Forecasts and Guidance

Progress against the full-year plan was below the quarterly benchmark of 25% for the key indicators, making achievement of the plan dependent on a concentration of results in the second half. Revenue progress was 23.0% (¥9.65B / full-year forecast of ¥42.00B), Operating Income progress was 18.0% (¥0.81B / ¥4.50B), Ordinary Income progress was 18.7% (¥0.85B / ¥4.55B), and Net Income progress was 16.8% (Net Income attributable to owners of the parent of ¥0.505B / full-year forecast of ¥3.00B). There were no revisions to the earnings forecast or dividend forecast during the quarter. The Information Services Business tends to have a high proportion of customer acceptance occurring at the end of the fiscal year, making the balance between project execution and cost discipline in the second half the key to achieving the plan.

Shareholder Returns

The annual dividend forecast is ¥50, reflecting the 2-for-1 stock split effective April 1, 2026 (¥100 annually without taking the split into account). The Payout Ratio based on the company’s forecast EPS of ¥88.29 is 56.6% (¥50 / ¥88.29). A simple comparison with the previous year’s actual dividend of ¥35 is difficult due to the impact of the stock split. There was no revision to the dividend forecast during the quarter. Against cash and deposits of ¥5.69B, short-term borrowings were only ¥0.60B, indicating that cash on hand provides a substantial source for dividends.

Risk Factors

1. Deterioration in operating leverage due to higher SG&A expenses: The SG&A ratio increased by +2.3pt to 18.6% from 16.3% in the previous year, offsetting the +0.3pt improvement in the gross margin and lowering the Operating Income margin to 8.4% (10.4% in the previous year). It will be necessary to monitor future expense trends to determine whether this increase represents temporary front-loaded investment or a structural increase in costs.

2. Tax burden risk due to the higher effective tax rate: The effective tax rate increased to 40.6% from 38.3% in the previous year, amplifying the decline from Ordinary Income to Net Income (¥0.85B → ¥0.51B, approximately -40%). Deferred tax assets declined to ¥0.57B from ¥0.80B in the previous year, and changes in the tax effect may continue to be a factor causing earnings volatility.

3. Change in working capital composition: Contract assets increased by +46.3% to ¥1.13B from ¥0.78B in the previous year, indicating an accumulation of revenue recognized prior to customer acceptance. Meanwhile, accounts receivable and notes receivable decreased to ¥6.85B from ¥8.32B in the previous year, indicating a change in composition that suggests a change in the collection cycle.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

The Operating Income margin slightly exceeds the industry median, while the Net Income margin is somewhat below the median, with the relatively heavy tax burden weighing on comparative profitability.

Growth and Capital Efficiency

The revenue growth rate is substantially below the industry median, placing the company in the low-growth range within the IT and telecommunications industry.

Source: Compiled by the Company

Key Points in the Results

1. Inflection point in profitability: The Operating Income margin declined by 2.0pt to 8.4% from 10.4% in the previous year, primarily due to the +2.3pt increase in the SG&A ratio, which exceeded the +0.3pt improvement in the gross margin. The key focus going forward is whether the change in the cost structure is temporary or structural.

2. Progress pace against the full-year plan: Q1 progress was 23.0% for revenue, 18.0% for Operating Income, and 16.8% for Net Income, lagging the 25% benchmark. There was no revision to the earnings forecast during the quarter. Progress in customer acceptance of projects in the second half is a prerequisite for achieving the plan.

3. Change in working capital composition: Contract assets increased by 46.3% while accounts receivable and notes receivable declined, resulting in a simultaneous change in composition. The timing of the customer acceptance and billing processes may affect the quality of future cash flow and therefore warrants attention.

Theoretical Share Price (Reference Value)

This is a reference range mechanically calculated solely from publicly disclosed data using a residual income model (Ohlson type, with an explicit 5-year fade). It is not a forecast of the market share price or a recommendation to take any specific investment action.

Sensitivity: ¥571–¥604 at ±1% for the cost of equity, and ¥584–¥593 at ±0.1 for ω.

Notes:

• Net assets as of the end of the quarter are used (there is a timing difference from the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual income model / Interest rate reference month: 2026-06 / This value does not forecast or guarantee the future share price)

---

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 disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting with professionals as necessary.

---End of Report---