| Metric | Current Period | Prior-year Period | YoY |
|---|---|---|---|
| Revenue | ¥30.2B | - | - |
| Operating Income | ¥1.1B | - | - |
| Ordinary Income | ¥1.8B | - | - |
| Net Income | ¥1.0B | - | - |
| ROE | 2.8% | - | - |
For FY2026 Q3 year-to-date, the company recorded Revenue of ¥30.2B, Operating Income of ¥1.1B, Ordinary Income of ¥1.8B, and Net Income of ¥1.0B. The operating margin remained at 3.5%, while Ordinary Income was lifted by ¥0.6B in dividend income within non-operating income. By segment, Enterprise Solutions posted revenue of ¥17.9B and operating profit of ¥2.5B, while IoT Solutions posted revenue of ¥12.6B and operating profit of ¥1.9B. Against the combined segment operating profit of ¥4.4B, corporate/eliminations recorded a negative adjustment of ¥3.3B, resulting in consolidated Operating Income of ¥1.1B. Operating Cash Flow (OCF) was ¥1.5B, exceeding net income, but Investing CF was an outflow of ¥3.0B including ¥2.3B for the acquisition of a consolidated subsidiary, leading to Free Cash Flow of negative ¥1.5B. The full-year outlook calls for Revenue of ¥41.4B, Operating Income of ¥1.5B, Ordinary Income of ¥2.1B, and Net Income of ¥1.4B, with a planned year-end dividend of ¥10.
[Profitability] ROE 2.8%, operating margin 3.5% (below the industry median of 8.0%), net margin 3.2% (below the industry median of 5.6%), EBITDA margin 5.6%. Dividend income of ¥0.6B contributed to lifting Ordinary Income to ¥1.8B, with a non-operating net increase of approximately ¥0.7B from Operating Income to Ordinary Income. An effective tax rate of 45.2% resulted in a high tax burden that pressured net income. [Cash Quality] Cash and deposits of ¥19.8B accounted for 40.9% of total assets, and the OCF/Net Income ratio was 1.56x, indicating solid cash backing for earnings. However, due to Investing CF outflow of ¥3.0B, Free Cash Flow was negative ¥1.5B. Cash conversion ratio was 0.89x. [Investment Efficiency] Total asset turnover was 0.62x (below the industry median of 0.68x), ROIC was 3.9%, and the Capex/Depreciation ratio was 0.19x, below the maintenance investment level. Days Sales Outstanding (DSO) was 104 days (significantly above the industry median of 60.5 days), indicating signs of delayed collections. [Financial Soundness] Equity Ratio was 71.6% (above the industry median of 59.5%), Current Ratio was 474.1% (well above the industry median of 213%), and the debt-to-capital ratio was 0.40x, indicating a conservative capital structure. There is no disclosure of interest-bearing debt, implying limited interest burden.
Operating CF was ¥1.5B, or 1.56x net income of ¥1.0B, confirming cash backing for earnings. In the breakdown of Operating CF, changes in accounts receivable contributed a positive ¥2.7B, with collection progress contributing to monetization. Investing CF was an outflow of ¥3.0B, mainly due to ¥2.3B for the acquisition of a consolidated subsidiary and ¥0.6B for the acquisition of intangible fixed assets. Financing CF details, including dividend payments, were not disclosed, but Free Cash Flow was negative ¥1.5B, indicating that M&A funding needs exceeded Operating CF. Cash and deposits were ¥19.8B, providing 3.1x coverage of short-term liabilities of ¥6.4B, ensuring ample liquidity. However, FCF coverage of dividends was negative 2.8x; the planned dividend of ¥10 is not covered by FCF and would entail drawing down cash balances.
Against Ordinary Income of ¥1.8B, Operating Income was ¥1.1B, with a non-operating net increase of approximately ¥0.7B. Major components of non-operating income were dividend income of ¥0.6B and interest income of ¥0.05B, with financial income underpinning Ordinary Income. Dividend income accounted for approximately 2.1% of Revenue of ¥30.2B and about 34% of Ordinary Income, indicating high reliance on financial income. Operating CF of ¥1.5B exceeded net income of ¥1.0B, and the quality of earnings on a cash basis is generally sound. However, with an effective tax rate of 45.2%, approximately 44% flowed out as taxes from Profit before tax of ¥1.8B to Net Income of ¥1.0B, indicating pronounced tax-related pressure on earnings. DSO of 104 days was significantly above the industry median of 60.5 days, and inefficiencies in working capital due to delayed receivables collection pose risks to earnings quality.
Risk of reliance on financial income (dividend income of ¥0.6B accounts for 34% of Ordinary Income of ¥1.8B, creating the risk that Ordinary Income will fluctuate with changes in portfolio companies’ performance or dividend policies). Receivables collection delay risk (DSO of 104 days is 1.7x the industry median of 60.5 days, creating the risk of bad debt losses or increased working capital burden if counterparties’ credit conditions deteriorate). Risk of profit pressure from high tax burden (an effective tax rate of 45.2% continuously suppresses the net margin and acts as a hindrance to ROE improvement; regional tax regimes and the recoverability of deferred tax assets are variables).
[Positioning within Industry] (Reference Information; In-house Research) Profitability: operating margin 3.5% (4.5pt below the industry median of 8.0%), net margin 3.2% (2.4pt below the industry median of 5.6%), ROE 2.8% (5.4pt below the industry median of 8.2%). Within the IT & Telecommunications industry, profitability ranks in the lower tier. Soundness: Equity Ratio 71.6% (12.1pt above the industry median of 59.5%), Current Ratio 474.1% (2.2x the industry median of 213%), with financial safety in the upper tier of the industry. Efficiency: Total asset turnover 0.62x (slightly below the industry median of 0.68x); DSO 104 days (43.5 days above the industry median of 60.5 days, indicating delayed collections), suggesting ample room to improve asset efficiency. Growth: No disclosure of YoY revenue growth. Versus the industry median of 10.5% (2025-Q3), the progress rate toward the full-year forecast of ¥41.4B is 73% at Q3, which is estimated to be on track for full-year achievement. (Industry: IT & Telecommunications (n=99 companies), Comparison: FY2025 Q3, Source: In-house aggregation)
High financial safety and liquidity (cash and deposits of ¥19.8B, Equity Ratio of 71.6%, Current Ratio of 474.1%) indicate strong short-term payment capacity and risk resilience, noteworthy from a stability perspective. Investing CF, including ¥2.3B for the acquisition of a consolidated subsidiary, drove FCF into negative territory, highlighting that the company is in a growth investment phase via M&A. If future contributions from subsidiaries materialize, increases in revenue and profit could improve total asset turnover and ROE. The high reliance on dividend income, accounting for about 34% of Ordinary Income, helps compensate for the low operating margin but entails earnings risk from fluctuations in investees’ performance. If the significant delay in collections versus the industry average (DSO of 104 days) improves, further stabilization of Operating CF and better working capital efficiency can be expected based on the results data.
This report is an automatically generated earnings analysis prepared by AI based on XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. The industry benchmarks are reference information aggregated in-house based on publicly available financial statements. Investment decisions are your own responsibility; consult a professional as necessary before making any decisions.