| Indicator | Current Period | Prior Year | YoY |
|---|---|---|---|
| Revenue | ¥407.2B | ¥384.8B | +5.8% |
| Operating Income | ¥49.5B | ¥44.2B | +11.8% |
| Ordinary Income | ¥51.1B | ¥45.4B | +12.5% |
| Net Income | ¥37.5B | ¥32.1B | +16.8% |
| ROE | 8.3% | 7.4% | - |
For the fiscal year ended March 2026, Alpha Systems reported Revenue of ¥407.2B (YoY +¥22.4B +5.8%), Operating Income of ¥49.5B (YoY +¥5.3B +11.8%), Ordinary Income of ¥51.1B (YoY +¥5.7B +12.5%), and Net Income of ¥37.5B (YoY +¥5.4B +16.8%), achieving double-digit profit growth across all profit metrics. The core Software Development related segment delivered Revenue of ¥394.8B (+6.7%) and Operating Income of ¥47.1B (+9.6%), driving steady performance and improving the operating margin to 12.1% (prior year 11.5%, +0.6pt). Net margin improved to 9.2% (prior year 8.3%, +0.9pt), indicating continued profitability improvement. Operating Cash Flow (OCF) improved significantly to ¥30.3B (YoY +93.0%), while Investing Cash Flow was -¥30.5B (capital expenditure ¥9.0B, acquisition of securities ¥16.3B, etc.), resulting in Free Cash Flow of -¥0.3B, a slight negative. Cash and deposits remained ample at ¥227.7B, and the company maintained a strong financial base with an Equity Ratio of 85.2%.
[Revenue] Revenue of ¥407.2B (YoY +5.8%) was driven by the core Software Development related segment, which accounted for ¥394.8B (+6.7%) or 96.9% of total Revenue, fueling top-line growth. This segment secured stable growth through expansion of existing client projects and accumulation of new orders. Other segments contracted to ¥12.5B (-16.3%) but had limited impact on the consolidated result. Contract assets increased to ¥14.8B (prior year ¥7.0B), suggesting expansion of percentage-of-completion projects. By region, domestic sales accounted for over 90%, indicating primarily domestic demand.
[Profitability] Gross profit was ¥94.4B (gross margin 23.2%, prior year 23.2%), maintaining a stable level. Selling, general and administrative expenses were ¥44.9B (SG&A ratio 11.0%, prior year 11.7%), growing below Revenue expansion and producing operating leverage. As a result, Operating Income rose to ¥49.5B (+11.8%) and Operating Margin improved by 0.6pt to 12.1%. Non-operating income was ¥1.8B (interest income ¥0.8B, securities interest ¥0.5B, etc.), and non-operating expenses were ¥0.2B, resulting in net financial income that boosted Ordinary Income to ¥51.1B (+12.5%). Extraordinary items were minor (extraordinary income ¥0.0B, extraordinary losses ¥0.3B), and income before income taxes was ¥50.8B with income taxes of ¥13.3B (effective tax rate 26.2%), yielding Net Income of ¥37.5B (+16.8%). Overall, the company achieved revenue and profit growth.
The Software Development related segment posted Revenue of ¥394.8B (YoY +6.7%), Operating Income of ¥47.1B (+9.6%), and margin of 11.9% (prior year 11.7%), with Operating Income growth outpacing Revenue growth and improving profitability. As the core business accounting for 96.9% of group Revenue and the majority of Operating Income, it secured stable growth. The Other segment contracted to Revenue of ¥12.5B (-16.3%) but Operating Income increased substantially to ¥2.5B (+95.8%), with margin improving to 20.2% (prior year 12.9%, +7.3pt), likely reflecting improved profitability in product sales and related businesses. Consolidated Operating Income after inter-segment adjustments was ¥49.5B.
[Profitability] Operating Margin was 12.1% (prior year 11.5%, +0.6pt) and Net Margin was 9.2% (prior year 8.3%, +0.9pt), indicating improving profitability. ROE was 8.3% (prior year 7.5%), exceeding historical performance, driven mainly by improved Net Margin and higher capital efficiency. ROA (based on Ordinary Income) was 9.7% (prior year 8.8%), at a healthy level.
[Cash Quality] OCF/Net Income ratio was 0.81x, slightly above the threshold, indicating room for improving cash conversion efficiency. The accrual ratio was low at 1.4%, suggesting good accounting quality of earnings. DSO (Days Sales Outstanding) was 75 days, somewhat long, and the increase in contract assets (¥14.8B, prior year ¥7.0B) is pressuring working capital.
[Investment Efficiency] Capital expenditure was ¥9.0B, approximately 3.1x depreciation of ¥2.9B, indicating active investment, and net buildings increased to ¥44.1B (prior year ¥37.8B, +16.7%), reflecting enhancements to development environments and owned assets. R&D expense was ¥0.4B (0.1% of Revenue), remaining at a very low level.
[Financial Soundness] Equity Ratio was 85.2% (prior year 83.6%), current ratio 444.8%, and quick ratio 444.8%, indicating an extremely strong financial position. Debt-to-equity ratio was 0.17x, close to effectively debt-free. Cash and deposits were ¥227.7B, and investment securities were ¥53.0B (prior year ¥37.7B, +40.7%), demonstrating ample liquidity.
Operating Cash Flow was ¥30.3B (prior year ¥15.7B, +93.0%), a significant improvement. Operating CF subtotal, adding back depreciation of ¥2.9B to pre-tax profit of ¥50.8B, totaled ¥42.9B, but decreases in trade receivables of ¥2.5B and corporate tax payments of ¥13.9B resulted in actual OCF of ¥30.3B. OCF/Net Income ratio was 0.81x and OCF/EBITDA ratio was 0.58x, indicating room to improve cash conversion efficiency. Investing Cash Flow was -¥30.5B, with acquisition of securities ¥16.3B, capital expenditure ¥9.0B, and net increase in time deposits (deposits paid ¥50.0B - withdrawals ¥45.0B) ¥5.0B as cash outflows. Free Cash Flow was slightly negative at -¥0.3B. Financing Cash Flow was -¥18.9B, primarily due to dividend payments of ¥18.9B. Ending cash and deposits were ¥200.7B (prior year ¥220.0B, -8.7%), while the sum of cash and deposits plus short-term investment securities was ¥227.7B, maintaining ample liquidity.
Of Ordinary Income of ¥51.1B, Operating Income of ¥49.5B is the core recurring earnings, and non-operating income of ¥1.8B (interest income ¥0.8B, securities interest ¥0.5B, etc.) represents stable income from financial asset management. Extraordinary items were minor (extraordinary income ¥0.0B, extraordinary losses ¥0.3B — impairment loss on fixed assets), indicating limited volatility from one-off factors. Income before income taxes of ¥50.8B and Net Income of ¥37.5B correspond to an effective tax rate of 26.2%, a standard level. OCF/Net Income ratio of 0.81x slightly exceeds the threshold, but increases in contract assets (¥14.8B, prior year ¥7.0B) and fluctuations in trade receivables create timing divergence between revenue recognition and cash collection. The accrual ratio of 1.4% is low, indicating good accounting quality of earnings.
For the full year ending March 2027, management forecasts Revenue of ¥425.0B (YoY +4.4%), Operating Income of ¥51.0B (+3.1%), Ordinary Income of ¥53.0B (+3.7%), and Net Income of ¥36.5B (-2.7%). While Revenue and operating metrics are expected to increase year-over-year, Net Income is projected to decline by 2.7%, suggesting conservative assumptions that incorporate tax burden and normalization of one-off items. Progress against the current fiscal year-end forecast stands at: Revenue 95.8%, Operating Income 97.1%, Ordinary Income 96.4%, Net Income 102.7%, indicating performance broadly on plan except for Net Income which is ahead. EPS forecast is ¥260.00 (current period actual ¥267.14). Dividend guidance is annual ¥70.00; although this implies a cut compared to the current year actual annual dividend of ¥135.00 (interim ¥60.00, year-end actual ¥75.00), management has separately disclosed a policy to increase the year-end dividend to ¥75.00, effectively signaling continuation of dividend increases.
The current period dividend was interim ¥60.00 and year-end ¥75.00, totaling annual dividends of ¥135.00 (prior year annual ¥50.00), a substantial increase. The Payout Ratio was 54.6% (prior year 54.6%), maintained at a consistent level. The year-end dividend includes a commemorative dividend of ¥25.00. Total dividends amounted to ¥18.9B, representing a dividend payout ratio of 50.5% relative to Net Income of ¥37.5B, a healthy level. Free Cash Flow was slightly negative at -¥0.3B, and dividends were funded by drawing down cash balances; however, with cash and deposits of ¥227.7B (42.8% of total assets) and ample liquidity, there is no concern over dividend sustainability. Share buybacks were effectively zero (CF -¥0.0B), and the Total Return Ratio was at the same level as the Payout Ratio. Management has separately disclosed a policy to increase the year-end dividend to ¥75.00 for FY2027, indicating a continued dividend increase stance.
Risk of declining cash conversion efficiency: OCF/Net Income ratio is 0.81x and OCF/EBITDA ratio is 0.58x, leaving cash conversion efficiency at a low level. The increase in contract assets to ¥14.8B (prior year ¥7.0B, +112%) and a DSO of 75 days, lengthening trade receivables collection, are pressuring working capital and resulted in Free Cash Flow of -¥0.3B. If contract assets and accounts receivable increase further with order growth, there is a risk of reduced cash generation and constrained investment capacity.
Segment concentration risk: The Software Development related segment accounts for 96.9% of Revenue and the majority of Operating Income, creating a high-concentration structure where demand fluctuations from specific customers or domains can directly impact performance. The Other segment is small at ¥12.5B (3.1% of total), so business diversification is limited. Deterioration in the order environment or intensified price competition in the core segment could pose significant downside risk to consolidated results.
Talent and cost inflation risk: Intensifying competition for engineers and rising labor costs could increase cost of sales (mainly labor and subcontracting) and SG&A (salaries and allowances ¥19.1B). R&D expense is only ¥0.4B (0.1% of Revenue), a very low level, limiting investment capacity for long-term product differentiation and strengthening proprietary assets. Simultaneous increases in talent acquisition costs and technological obsolescence could erode profitability and competitiveness.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 12.1% | 8.1% (3.6%–16.0%) | +4.0pt |
| Net Margin | 9.2% | 5.8% (1.2%–11.6%) | +3.4pt |
Both Operating Margin and Net Margin exceed industry medians, demonstrating favorable profitability within the IT & Communications sector.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 5.8% | 10.1% (1.7%–20.2%) | -4.3pt |
Revenue growth lags the industry median, placing the company in the middle-to-lower tier on growth pace within the sector.
※ Source: Company compilation
Improvement in profitability and a very strong financial base are notable. Operating Margin improved to 12.1% (+0.6pt) and Net Margin to 9.2% (+0.9pt), with ROE at 8.3% (prior year 7.5%) reflecting improved capital efficiency. Equity Ratio of 85.2% and cash and deposits of ¥227.7B indicate very high financial soundness, with no short-term concerns on solvency or dividend continuity. Industry benchmarks also show Operating and Net Margins above medians, confirming high profitability.
There is room to improve cash conversion efficiency and working capital management. OCF/Net Income ratio is 0.81x and OCF/EBITDA ratio is 0.58x, indicating low cash conversion efficiency; contract assets of ¥14.8B (YoY +112%) and DSO of 75 days are pressuring working capital. Free Cash Flow was slightly negative at -¥0.3B, and dividends of ¥18.9B were funded by drawing down cash. Optimizing contract terms, shortening DSO, and accelerating billing/acceptance processes will be necessary to balance sustainable shareholder returns and growth investment.
Next fiscal year guidance is conservative and upside potential should be evaluated. FY2027 guidance assumes Revenue +4.4%, Operating Income +3.1%, Net Income -2.7% under cautious assumptions. Current year progress is on plan for Revenue (95.8%) and Operating Income (97.1%), with Net Income at 102.7% outperforming plan. Management’s disclosed policy to increase the year-end dividend to ¥75.00 indicates a proactive shareholder return stance. If order environment stabilizes and gross margins improve, there is upside potential to the full-year forecast.
This report was automatically generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company based on public financial statement data. Investment decisions are the responsibility of the investor; please consult a professional advisor as needed.