OBIC BUSINESS CONSULTANTS CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

This was a strong earnings result, with profitability improving further as profit growth outpaced revenue growth. Revenue was ¥138.3B (+13.8% YoY), Operating Income was ¥65.8B (+18.1%), Ordinary Income was ¥71.3B (+20.8%), and Net Income was ¥48.8B (+19.7%). The factors behind profit growth exceeding revenue growth were an improvement in the gross margin (85.1%→85.5%) and the emergence of operating leverage, as the increase in SG&A expenses (+10.0%) remained below the revenue growth rate. Ordinary Income grew faster than Operating Income due to the contribution of ¥5.5B in non-operating income, primarily dividends received and interest received.

Factors Affecting Earnings

【Revenue】Revenue was ¥138.3B, representing a +13.8% increase year on year. Although segment information is not disclosed, the gross margin of 85.5% (improved from 85.1% in the same period last year) indicates that demand expansion in the core business progressed without deterioration in the pricing or cost structure.

【Profit and Loss】Operating Income was ¥65.8B (+18.1%), and the Operating Income margin improved by approximately 1.8pt to 47.6% from 45.8% in the same period last year. SG&A expenses were ¥52.4B (+10.0%), below the revenue growth rate, resulting in operating leverage. Ordinary Income was ¥71.3B (+20.8%), exceeding the growth in Operating Income, with dividends received of ¥3.2B and interest received of ¥2.2B contributing to the result. There were no extraordinary gains or losses, and Net Income of ¥48.8B (+19.7%) was driven by higher operating profit and increased financial income. This was a high-quality earnings result, with both revenue and profit increasing and the profit growth rate exceeding the revenue growth rate.

Key Financial Metrics

【Profitability】The Operating Income margin improved by approximately 1.8pt to 47.6% from 45.8% in the same period last year, while the Net Income margin rose from 33.5% to 35.3%. The gross margin remained high at 85.5%.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥32.8B, only 0.67x Net Income of ¥48.8B, as the ¥8.4B increase in accounts receivable constrained cash conversion. OCF/EBITDA was also low at 0.48x, warranting attention to the conversion of profit into cash.【Investment Efficiency】Annualized ROE was 11.6%, primarily due to the high Net Income margin, while total asset turnover was low at 0.255x. Capital expenditures of ¥0.3B were below depreciation and amortization of ¥2.2B, resulting in capital expenditures/depreciation and amortization of only 0.12x.【Financial Soundness】The Equity Ratio was 77.8%, the current ratio was approximately 309.7%, and cash and deposits were substantial at ¥1145.0B. The debt-to-equity ratio was 0.29x, indicating a conservative capital structure.

Cash Flow Analysis

Operating Cash Flow was ¥32.8B, a significant improvement from ¥10.5B in the same period last year; however, it was only 0.67x Net Income of ¥48.8B, with the ¥8.4B increase in accounts receivable and ¥34.9B in income taxes paid acting as downward pressure. Investing Cash Flow was an outflow of ¥6.7B, primarily reflecting the ¥6.0B acquisition of investment securities, while capital expenditures were small at ¥0.3B. Financing Cash Flow was an outflow of ¥43.6B, mainly due to dividend payments of ¥43.6B. Free cash flow (Operating Cash Flow + Investing Cash Flow) was positive at ¥26.0B, below the dividend payment amount for the current quarter. Cash and deposits were substantial at ¥1145.0B, and no short-term funding constraints have arisen.

Earnings Quality

The current-period profit growth was not attributable to extraordinary gains or losses, but was generated by the impact of higher operating revenue and non-operating income (dividends received of ¥3.2B and interest received of ¥2.2B). No extraordinary gains or extraordinary losses were recorded, indicating that the profit growth was based on a recurring earnings structure. Meanwhile, Operating Cash Flow/Net Income was 0.67x and OCF/EBITDA was 0.48x, indicating a delay in cash generation relative to profit. This difference was primarily due to the ¥8.4B increase in accounts receivable, indicating that the increase in revenue is being reflected in cash collections with some delay. The accrual ratio is low, and reliance on excessive non-cash accounting treatments is limited.

Earnings Forecast and Guidance

Q1 progress against the full-year company forecast was 24.1% for Revenue (¥138.3B/¥575.0B), 24.8% for Operating Income (¥65.8B/¥265.0B), 25.2% for Ordinary Income (¥71.3B/¥282.6B), and 25.2% for Net Income (¥48.8B/¥193.5B). All were near the standard 25% level, and there was no significant deviation from the full-year plan as of Q1. The full-year forecasts are Revenue +11.9%, Operating Income +12.4%, and Net Income +6.7%; the Q1 growth rates (+13.8%, +18.1%, and +19.7%, respectively) exceeded these forecasts.

Shareholder Returns

The full-year dividend forecast is ¥130.0 per share, with no revision to the dividend forecast during the current quarter. Based on the average number of shares outstanding during the period of 75,176,703 shares, the annual total dividend amount is estimated at approximately ¥97.7B, resulting in a Payout Ratio of approximately 50.5% against the full-year Net Income forecast of ¥193.5B. The cash dividend of ¥43.6B paid in Q1 exceeded Q1 free cash flow of ¥26.0B; however, cash and deposits of ¥1145.0B and the low debt-to-equity ratio of 0.29x support dividend safety. It is not appropriate to assess the sustainability of the annual dividend based solely on the cash flow for a single quarter, and it is important to monitor the full-year cash flow trend.

Risk Factors

1. Delayed collection of accounts receivable: Annualized DSO was 68 days, exceeding 60 days, and the ¥8.4B increase in accounts receivable was a cash outflow factor in Q1 Operating Cash Flow. If the delayed conversion of revenue into cash continues, the gap between profit growth and cash generation may widen.

2. Efficiency of earnings cash conversion: Operating Cash Flow/Net Income was 0.67x and OCF/EBITDA was 0.48x, indicating that cash generation is relatively weaker compared with the high level of profit. Income taxes paid of ¥34.9B also pressured Q1 cash flow.

3. Low level of investment: Capital expenditures were ¥0.3B, below depreciation and amortization of ¥2.2B, and capital expenditures/depreciation and amortization was only 0.12x. If replacement and growth investments continue to be constrained, the impact on the future business foundation will require monitoring.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

The company's profitability metrics substantially exceed the industry median and rank among the highest.

Growth and Capital Efficiency

The Revenue growth rate exceeds the industry median but is close to the upper end of the IQR and is not particularly outstanding within the industry.

※Source: Compiled by the Company

Key Earnings Highlights

1. Revenue increased +13.8%, while Operating Income increased +18.1%, improving the Operating Income margin to 47.6%. Operating leverage is evident, as the increase in SG&A expenses (+10.0%) remained below the revenue growth rate.

2. Q1 progress against the full-year forecast was in the 24% to 25% range for each metric, representing progress generally consistent with the company plan.

3. Despite high profitability, Operating Cash Flow/Net Income of 0.67x and OCF/EBITDA of 0.48x indicate a gradual pace of profit conversion into cash. The trend in accounts receivable collections will be a key area to monitor going forward.

Theoretical Share Price (Reference Value)

Sensitivity: ¥2,353–¥2,489 at ±1% for the cost of equity, and ¥2,415–¥2,426 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).
• Since net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; it is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary 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 discretion and responsibility, after consulting a professional as necessary.

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