OBIC BUSINESS CONSULTANTS CO.,LTD. FY2026 FY Earnings Report

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Executive Summary

FY2026 Q2 results delivered revenue of ¥514.0B (YoY +¥44.2B +9.4%), Operating Income of ¥235.8B (YoY +¥18.4B +8.4%), Ordinary Income of ¥252.2B (YoY +¥21.8B +9.4%), and Net Income of ¥181.3B (YoY +¥19.5B +12.0%), achieving steady profit growth led by top-line expansion. Nearly double-digit revenue growth was converted through to the operating stage by a high-margin model with a Gross Margin of 84.6%, and Ordinary Income margin reached 49.1% supported by stable financial income of ¥16.4B. Net Income recorded double-digit growth driven by a lower tax rate (28.1%, prior year 30.5%), with EPS241.20円 (YoY +12.0%) indicating continued expansion of shareholder value. The financial position is extremely robust with an Equity Ratio of 76.7% and Net Cash of ¥1,162.5B; Deferred Revenue (Advance Receipts) of ¥358.2B highlights a solid foundation for the subscription-style business.

Drivers of Performance

Revenue of ¥514.0B (YoY +9.4%) was driven by expansion of the subscription-style revenue base. Deferred revenue was ¥358.2B (¥336.4B prior year, +¥21.8B +6.5%), supporting steady recurring revenue growth. Accounts receivable increased to ¥111.3B (¥89.8B prior year, +¥21.5B), and DSO (Days Sales Outstanding) extended to approximately 79 days, suggesting timing shifts for large year-end projects and lengthening collection cycles. Inventories were minimal at ¥0.6B, limiting inventory risk. Segment-level regional and business breakdowns were undisclosed, but stable revenue growth and expanding deferred revenue imply high customer retention and progress in upsell/cross-sell to existing customers.

Cost of sales was ¥79.0B (¥76.5B prior year), yielding Gross Profit of ¥435.1B and a Gross Margin of 84.6% (up +0.9pt from 83.7% prior year), reflecting appropriate pricing policy and a shift to higher value-added services. SG&A was ¥199.2B (¥175.9B prior year, +13.2%), notably Advertising ¥31.0B (¥25.6B prior year, +21.1%) and R&D ¥44.3B (¥40.6B prior year, +9.1%), indicating front-loaded growth investments. SG&A ratio was 38.8% (up +1.4pt from 37.4% prior year), resulting in Operating Income of ¥235.8B and an Operating Margin of 45.9% (down -0.4pt from 46.3% prior year), showing short-term margin pressure from expense front-loading. Non-operating income was ¥16.4B (Dividend income ¥12.0B, Interest income ¥3.7B), with stable contributions from financial asset management, producing Ordinary Income of ¥252.2B and an Ordinary Income margin of 49.1% (up +0.1pt from 49.0% prior year). Extraordinary losses were limited to asset retirement losses of ¥0.2B. Pre-tax income of ¥252.1B less income taxes of ¥70.8B (effective tax rate 28.1%, improved -2.4pt from 30.5% prior year) resulted in Net Income of ¥181.3B and a Net Margin of 35.3% (up +0.9pt from 34.4% prior year). In conclusion, revenue and profit increased, with Gross Margin improvement and lower tax burden driving Net Income expansion, while front-loaded SG&A caused a slight contraction in Operating Margin.

Key Financial Metrics

Profitability: Operating Margin 45.9%, Ordinary Income Margin 49.1%, Net Margin 35.3% reflect a high-margin subscription model and a light cost structure (Cost of Sales ratio 15.4%). Gross Margin 84.6% (up +0.9pt from 83.7% prior year) indicates optimization of pricing policy and product mix. EBITDA (Operating Income + Depreciation & Amortization ¥6.7B) is approximately ¥242.5B, yielding an EBITDA Margin of 47.2%. R&D ratio 8.6% (¥44.3B/Revenue ¥514.0B) demonstrates ongoing investment to maintain and strengthen product competitiveness.

Cash Quality: Operating Cash Flow (OCF) was ¥173.7B versus Net Income ¥181.3B, producing OCF/Net Income of 0.96x—generally consistent and indicating acceptable cash conversion of profits. However, OCF/EBITDA is approximately 0.72x, below the ideal threshold (≥0.9x), as increases in accounts receivable (-¥28.5B) and working capital headwinds suppressed cash conversion. Investment Efficiency: ROE 10.7% (Net Income ¥181.3B / Equity ¥1,693.8B) decomposes into Net Margin 35.3% × Asset Turnover 0.233 × Financial Leverage 1.30x, with Net Margin improvement being the primary driver. Asset Turnover 0.233 (Revenue ¥514.0B / Total Assets ¥2,208.0B) is low but slightly improved from 0.225 prior year, indicating modest uplift in asset efficiency.

Financial Soundness: Equity Ratio 76.7%, Debt-to-Equity ratio 0.30x, effectively debt-free, indicating a very strong balance sheet. Current Ratio 295.6% and Quick Ratio 295.5% show ample short-term liquidity. Investment securities ¥342.5B include valuation reserves of ¥137.5B (post-tax), exposing sensitivity to market movements, but they provide a buffer to equity.

Cash Flow Analysis

Operating Cash Flow was ¥173.7B (down -1.7% from ¥176.7B prior year), roughly aligned with Net Income at 0.96x, indicating healthy earnings quality. Starting from pre-tax income before adjustments, OCF subtotal adjusted for Depreciation & Amortization ¥6.7B and working capital changes reached ¥239.2B, and after corporate tax payments of -¥79.6B realized. Accounts receivable increase of -¥28.5B (DSO extended to ~79 days) and a slight inventory increase of ¥0.1B were cash outflows, while accounts payable increase of ¥0.4B was limited. Interest and dividend receipts of ¥14.1B provided stable inflows. Investing Cash Flow was a large outflow of -¥544.2B, primarily due to time deposit placements of -¥500.0B; business-related investment was modest: capital expenditures -¥4.4B, intangible asset acquisitions -¥11.1B, and acquisition of investment securities -¥29.0B. Time deposit withdrawals totaled ¥10.0B. Free Cash Flow was -¥370.5B (Operating CF ¥173.7B + Investing CF -¥544.2B) and negative, but excluding time deposit transfers the effective FCF is estimated at roughly ¥130B, sufficient to cover dividends of ¥77.4B. Financing Cash Flow was -¥77.4B, centered on dividend payments -¥77.4B, with share buybacks negligible at -¥0.0B. Cash and deposits at period-end were ¥1,162.5B (down -¥448.0B from ¥1,610.5B prior year) but liquidity remains ample and funding risk is negligible.

Quality of Earnings

Overall quality of earnings is high. Against Operating Income of ¥235.8B, Non-operating income of ¥16.4B (Dividend income ¥12.0B, Interest income ¥3.7B) is recurring financial asset income with high sustainability. Non-operating expenses were minimal at ¥0.0B, so earnings at the ordinary level derive almost entirely from core business and financial income. Extraordinary items were minor: Extraordinary gains ¥0.0B (Gains on sale of investment securities ¥0.0B), Extraordinary losses ¥0.2B (Asset retirement losses ¥0.2B), so the bulk of pre-tax income of ¥252.1B stems from subscription revenue combined with financial income. With Operating CF ¥173.7B vs Net Income ¥181.3B, Accrual (Net Income - OCF) is +¥7.6B, a small positive, mainly due to accounts receivable increase -¥28.5B, while deferred revenue increase +¥21.8B indicates cash received in advance. Comprehensive income data is undisclosed, but if valuation reserve movements are limited, divergence from Net Income is likely small. Overall, most earnings are recurring and alignment with Operating CF is acceptable; accrual quality is generally good.

Forecasts & Guidance

Full Year / FY forecast: Revenue ¥575.0B (YoY +11.9%), Operating Income ¥265.0B (YoY +12.4%), Ordinary Income ¥282.6B (YoY +12.1%), Net Income ¥193.5B (YoY +6.7%). Q2 results imply year-to-date progress rates against full-year guidance of: Revenue 89.4%, Operating Income 89.0%, Ordinary Income 89.3%, Net Income 93.7%. Revenue and operating-stage metrics are somewhat behind plan, while Net Income shows favorable progress. Shortfalls are attributed to timing shifts in accounts receivable collections and year-end large project deferrals, and front-loading of Advertising and R&D investment. The stronger Net Income progress rate reflects the preponement effect of the lower tax rate. To achieve the full-year target, the company needs approximately ¥61.0B in revenue in H2 (exceeding prior H2 level) and roughly ¥29.2B in Operating Income; given Deferred Revenue accumulation of ¥358.2B and a robust subscription base, attainment is reasonably achievable, though improvement in H2 expense efficiency and accelerated collections are key. Dividend forecast was ¥65 annual (Interim ¥53 + Year-end assumed ¥12?), but actual dividends paid were Interim ¥53 + Year-end ¥58 = Annual ¥111, indicating a total return materially above the ¥65 forecast and signaling stronger shareholder return policy.

Shareholder Returns

Annual dividend ¥111 (Interim ¥53, Year-end ¥58), corresponding to a Payout Ratio of 46.0% against EPS241.20円. Total dividends amount to approximately ¥77.2B (Outstanding shares 75,404 thousand shares - Treasury shares 227 thousand shares = 75,177 thousand shares × ¥111), which is comfortably covered by Operating CF ¥173.7B. Prior year interim dividend was ¥50 with full-year dividend data unavailable, but this year interim increased to ¥53, confirming an active shareholder return stance. Share buybacks were minimal at -¥0.0B on a cash flow basis, so total return is dividend-centric. Payout Ratio 46.0% is within a sustainable range, and DOE (Dividend on Equity) is ~4.9% (Dividend total ¥77.2B / Net Assets ¥1,693.8B), reflecting a good balance between capital efficiency and returns. Compared to full-year dividend guidance of ¥65, the company has already distributed Interim ¥53 + Year-end ¥58 = ¥111, representing a substantive increase. Going forward, there is scope for stepwise dividend increases in line with profit growth, while prioritizing optimization of working capital and continued R&D investment; expansion of total returns is expected as cash generation improves.

Risk Factors

1. Accounts receivable collection extension risk: Accounts receivable ¥111.3B (¥89.8B prior year, +24.0%) and DSO ~79 days have extended collection terms and are inflating working capital, pressuring cash conversion. OCF/EBITDA 0.72x is below the ideal threshold (≥0.9x); continued collection delays could materially impair apparent cash generation and increase bad debt risk.

2. Margin pressure from front-loaded SG&A: SG&A ¥199.2B (YoY +13.2%), notably Advertising +21.1% and R&D +9.1%, has grown faster than revenue growth +9.4%, causing Operating Margin to compress to 45.9% (from 46.3% prior year, -0.4pt). While growth investments support product competitiveness medium-term, they reduce operating leverage short-term and contribute to misses versus plan.

3. Valuation fluctuation risk of investment securities: Investment securities ¥342.5B (¥313.7B prior year, +9.2%) include valuation reserves ¥137.5B (post-tax), exposing equity to market price volatility and interest rate rises that could generate valuation losses or reduce Other Comprehensive Income. Although the Equity Ratio of 76.7% provides a substantial buffer, reversal of unrealized gains could cause swings in shareholders’ equity.

Industry Benchmark (Reference, Internal Analysis)

Profitability & Returns

The company’s Operating Margin 45.9% and Net Margin 35.3% significantly exceed the IT & Communications industry medians (Operating 8.1%, Net 5.8%), demonstrating a standout competitive advantage driven by a high-margin subscription model and a light cost base.

Growth & Capital Efficiency

Revenue growth of 9.4% is roughly in line with the industry median of 10.1%, maintaining industry-standard growth momentum, though front-loaded Advertising and R&D investments mean the company lags the top-tier growth cohort (20%+).

※Source: Company compilation

Key Takeaways from the Results

1. Sustainability of a high-margin model and scope to improve cash conversion: Operating Margin 45.9% and EBITDA Margin 47.2% rank among the industry’s best, and Deferred Revenue of ¥358.2B underpins the subscription business. Conversely, OCF/EBITDA 0.72x and DSO ~79 days indicate room to optimize working capital and improve cash conversion. Accelerating accounts receivable collections and modest operational efficiency adjustments could further enhance cash generation.

2. Balancing front-loaded growth investments and margin optimization: Advertising +21.1% and R&D +9.1% have slightly compressed margins but are strategic investments for product strengthening and demand creation. Although revenue and operating metrics are somewhat behind plan for the full year, Net Income progress of 93.7% reflects the tax-rate timing benefit; H2 improvements in expense efficiency and conversion of Deferred Revenue into recognized revenue should support full-year attainment. Medium-term, continued R&D and expansion of intangible assets (software) should drive new products and cloud migration, improving revenue quality and restoring margin expansion.

3. Strong balance sheet and expanded shareholder returns: Equity Ratio 76.7%, Net Cash ¥1,162.5B, Current Ratio 295.6% demonstrate a very healthy financial position, and Payout Ratio 46.0% is within sustainable range. Dividends of ¥111 annual (well above the ¥65 FY forecast) signal an active shareholder return policy, with DOE ~4.9% showing a favorable balance between capital efficiency and returns. There is potential for phased dividend increases tied to profit growth, and as cash generation improves, total returns could expand.

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This report is an AI-generated earnings analysis document produced by analyzing XBRL financial statement data. It is not a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by our firm based on public financial statements. Investment decisions are your responsibility; consult a professional advisor as needed before making any investment choices.