| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥231.0B | ¥205.5B | +12.4% |
| Operating Income / Operating Profit | ¥38.6B | ¥35.3B | +9.2% |
| Ordinary Income | ¥40.5B | ¥36.7B | +10.5% |
| Net Income / Net Profit | ¥24.3B | ¥25.7B | -5.4% |
| ROE | 11.5% | 13.5% | - |
For the fiscal year ended March 2026 (Full Year), results came in at Revenue ¥231.0B (YoY +¥25.5B +12.4%), Operating Income ¥38.6B (YoY +¥3.3B +9.2%), Ordinary Income ¥40.5B (YoY +¥3.9B +10.5%), and Net Income attributable to owners of the parent ¥27.6B (YoY +¥1.9B +7.3%), delivering growth in both sales and profits. By segment, System Development & Sales drove performance with revenue up +18.8% and recorded Operating Income ¥19.6B (+15.0%), while Recurring achieved revenue +4.5% and Operating Income ¥19.0B (+3.9%) maintaining stable growth. Operating margin declined 0.5pt to 16.7% from 17.2% a year earlier, primarily due to mix effects from the higher share of System Development & Sales (59.3%), but high-margin profile was preserved. ROE was 11.5%, above historical levels, and with an Equity Ratio of 75.3% and effectively no net debt, capital efficiency was maintained on a strong financial base. Operating Cash Flow was ¥30.9B, a healthy 1.12x of net income, but an increase in Accounts Receivable of ¥16.7B left the OCF/EBITDA ratio at 0.72x, indicating room to improve cash conversion efficiency. Dividends were annual ¥80 (Payout Ratio 46.3%), a mid-level return, but coverage was tight with FCF ¥14.7B vs. dividend payments ¥14.8B.
[Revenue] Revenue ¥231.0B (YoY +12.4%) was driven by System Development & Sales at ¥137.2B (+18.8%), with Recurring at ¥94.3B (+4.5%) remaining resilient. Segment mix was System Development & Sales 59.3% and Recurring 40.8%, reflecting an increased weighting toward System Development & Sales year-on-year. Three new consolidations (increase of 3 consolidated subsidiaries) boosted the top line, and Accounts Receivable rose +35.2% YoY, suggesting accumulation of year-end projects and longer acceptance/billing cycles. Gross margin edged down slightly to 38.1% from 38.3% a year earlier, with the higher share of System Development & Sales exerting a minor negative mix effect.
[Profitability] Operating Income ¥38.6B (+9.2%) absorbed an increase in SG&A of ¥49.3B (prior ¥43.4B, +13.7%) to deliver higher profit. SG&A growth outpaced revenue growth by 1.3pt, primarily due to higher Depreciation ¥4.3B (+25.5%) and an increase in share-based compensation reserves ¥0.2B; goodwill amortization ¥0.2B also arose from new consolidations. Operating margin fell 0.5pt to 16.7% from 17.2%, a structural result of mix changes—System Development & Sales margin 14.3% vs. Recurring margin 20.2%. Ordinary Income ¥40.5B (+10.5%) exceeded Operating Income by ¥1.9B after netting non-operating income ¥2.3B (dividends received ¥0.8B, interest received ¥0.5B, equity-method investment income ¥0.1B, etc.) against non-operating expenses ¥0.3B (interest paid ¥0.0B, foreign exchange losses ¥0.1B). Extraordinary items netted +¥1.1B (extraordinary gains ¥1.6B — gain on sale of investment securities ¥1.2B, step-acquisition gain ¥0.3B; extraordinary losses ¥0.5B — impairment loss ¥0.5B, loss on retirement of fixed assets ¥0.1B), bringing Income before Income Taxes to ¥41.6B. After Income Taxes ¥13.1B (effective tax rate 31.6%) and non-controlling interests ¥0.9B, Net Income attributable to owners of the parent was ¥27.6B (+7.3%). In conclusion, growth in System Development & Sales was the primary driver of revenue and profit increases; extraordinary items made a small positive contribution and earnings quality remains dependent on operating activities.
System Development & Sales recorded Revenue ¥137.2B (YoY +18.8%), Operating Income ¥19.6B (+15.0%), and margin 14.3%, driven by larger project scales and effects from new consolidations. Recurring posted Revenue ¥94.3B (+4.5%), Operating Income ¥19.0B (+3.9%), and margin 20.2%, maintaining high margins supported by stable revenues from maintenance, operations, cloud, and BPO services. Both segments delivered revenue and profit growth, but System Development & Sales grew faster and the absolute Operating Income of both segments was nearly level. The company-wide 0.5pt decline in operating margin was mainly a mix effect from the higher proportion of the lower-margin System Development & Sales; profitability within each segment was broadly flat. Segment assets: System Development & Sales ¥60.9B (YoY +46.3%), Recurring ¥27.4B (+13.7%), with substantial increases in Accounts Receivable and intangible assets in System Development & Sales.
[Profitability] Operating margin 16.7% (prior 17.2%), gross margin 38.1% (prior 38.3%) slightly down, explained by mix effects from higher System Development & Sales weighting, but levels remain high. ROE 11.5% (prior 15.4%) declined, primarily due to contraction in Net Profit Margin 10.5% (prior 12.5%) and a decrease in Total Asset Turnover to 0.82x (prior 0.86x). Under a conservative capital structure with Equity Ratio 75.3%, the level remains above historical average. [Cash Quality] Operating CF ¥30.9B is 1.27x Net Income ¥24.3B, exceeding benchmarks and indicating generally good cash backing of earnings. However, Operating CF/EBITDA (¥43.3B) is 0.72x, below the 0.9x standard, with Accounts Receivable increase +¥16.7B (ending balance ¥64.1B) suppressing cash conversion efficiency. FCF was ¥14.7B, covering capex ¥3.0B and intangible asset acquisitions ¥4.5B, but FCF coverage of dividends was tight at 0.66x vs. dividend ¥14.8B. [Investment Efficiency] Total Asset Turnover 0.82x, Tangible Fixed Asset Turnover 21.6x indicate good asset efficiency. Capex/Depreciation ratio 0.69x signals restrained investment and suggests the need to increase investment in talent, cloud, and software to sustain medium- to long-term growth. [Financial Soundness] Equity Ratio 75.3%, Current Ratio 330% — extremely robust. Interest-bearing debt comprises Short-term borrowings ¥0.9B and Long-term borrowings ¥1.5B, total ¥2.4B, Debt/EBITDA 0.06x — effectively debt-free. Cash and deposits ¥78.1B plus investment securities ¥50.9B (current) and ¥45.5B (non-current) provide ample liquidity cushion. Goodwill ¥1.1B is 0.5% of net assets, indicating limited impairment risk.
Operating CF was ¥30.9B, up +18.5% YoY, with a cash conversion rate vs. Income before Income Taxes ¥41.6B of 74.3%. Operating CF subtotal (before working capital changes) was ¥38.8B, adding back Depreciation ¥4.3B and tax adjustments -¥1.4B, and deducting equity-method investment income -¥0.1B, gain on sale of investment securities -¥1.2B, and step-acquisition gain -¥0.3B. In working capital, Accounts Receivable increased -¥14.0B (ending ¥64.1B, YoY +35.2%), a major cash outflow. Inventories decreased ¥3.3B (ending ¥4.0B) and Accounts Payable increased ¥4.5B (ending ¥17.5B) partially offsetting the impact, but AR increase dominated. After income taxes paid ¥9.1B and interest/dividend received ¥1.3B, Operating CF totaled ¥30.9B, representing 1.27x Net Income and 79.6% of the Operating CF subtotal. Investing CF was -¥16.2B, driven by acquisition of investment securities -¥14.9B, acquisition of tangible fixed assets -¥3.0B, and acquisition of intangible assets -¥4.5B, partially offset by proceeds from sale of securities ¥3.1B and net recovery of time deposits ¥6.0B. Financing CF was -¥15.0B, mainly dividend payments -¥14.8B and long-term borrowings repayments -¥0.8B; share buybacks were effectively zero. As a result, cash decreased by ¥0.2B, with year-end cash and equivalents ¥89.1B (prior ¥89.3B) almost flat. Operating CF/Net Income ratio 1.27x is healthy, but OCF/EBITDA 0.72x reflects prolonged Accounts Receivable and underscores the need to shorten DSO and strengthen acceptance/billing management.
Current period earnings are primarily operating-based; Non-operating income ¥2.3B (1.0% of Revenue) and net extraordinary items ¥1.1B (0.5% of Revenue) are minor and temporary, so one-off effects are limited. Major non-operating items were dividends received ¥0.8B and interest received ¥0.5B from surplus fund management, recognized as recurring income sources. Extraordinary gains ¥1.6B comprised gain on sale of investment securities ¥1.2B and step-acquisition gain ¥0.3B; extraordinary losses ¥0.5B were impairment losses ¥0.5B (Recurring segment), with net effect limited to 2.6% of Income before Income Taxes. The gap between Ordinary Income ¥40.5B and Net Income ¥24.3B is attributable to Income Taxes ¥13.1B (effective tax rate 31.6%) and non-controlling interests ¥0.9B, within a reasonable range. Operating CF ¥30.9B is 1.27x Net Income ¥24.3B, and the accrual ratio (Net Income - Operating CF)/Total Assets is -2.4%, low, indicating reasonable cash backing of earnings. However, OCF/EBITDA 0.72x suggests Accounts Receivable growth is pressuring working capital and leaves room for improving cash conversion. Comprehensive income ¥31.3B exceeded Net Income by ¥7.0B, with Other Comprehensive Income ¥2.9B (valuation difference on securities ¥2.7B, retirement benefit adjustments ¥0.1B, etc.) contributing. Overall, earnings quality relies on operating activities; non-operating and extraordinary elements are small, accruals are low, but prolonged Accounts Receivable remains a challenge for cash realization efficiency.
Company guidance for the full year projects Revenue ¥280.0B (YoY +21.2%), Operating Income ¥48.0B (+24.4%), Ordinary Income ¥49.0B (+20.9%), Net Income attributable to owners of the parent ¥34.0B, EPS ¥128.48, and dividend ¥40. Progress against current-period results stands at Revenue 82.5%, Operating Income 80.4%, and Net Income attributable to owners 81.1% — roughly a 20pt shortfall vs. the 100% standard, implying a back-end weighted year or reliance on full contribution from new projects, expansion of Recurring, and effects from new consolidations. Planned Operating Margin is 17.1%, a 0.4pt improvement from the current 16.7%, justified by an assumed increase in Recurring ratio and improvements in workforce productivity. The dividend forecast ¥40 is half of the current period ¥80, but if stated as a year-end dividend only it effectively represents no change. The low progress rates and high targeted growth rely on scheduling of large project acceptances, buildup of Recurring revenue, and year-round impact of M&A; shortening DSO and visibility into order consumption are key to achieving the targets.
Annual dividend is ¥80 (interim ¥30, year-end ¥50), total dividend payments ¥14.8B (including ¥0.3B related to treasury share trust). Payout Ratio relative to Net Income attributable to owners ¥27.6B is 46.3%, a mid-range level and generally sustainable. Share buybacks were ¥0.0B during the period, so total returns are concentrated in dividends. Payout Ratio of 46.3% was maintained from the prior year, reflecting a consistent policy and emphasis on stable dividends. However, FCF ¥14.7B vs. dividends ¥14.8B yields FCF coverage 0.66x and is tight; prospects for further dividend increases depend on normalization of working capital and improvement of Operating CF. Cash deposits ¥78.1B, effectively no net debt, and Equity Ratio 75.3% provide a financial cushion supporting dividend continuation. The dividend forecast ¥40 (if only year-end is specified, equivalent to ¥80 full-year) is a reasonable level. Payout Ratio 46.3% is mid-range; room for upward revision exists with earnings growth, but improving FCF coverage is the priority.
Accounts Receivable Prolongation Risk: Accounts Receivable ¥64.1B (YoY +35.2%), DSO 101 days — significantly increased, heightening the importance of acceptance/billing cycle length and credit management for large system projects. Accounts Receivable / Operating CF ratio is 2.1x, and Allowance for Doubtful Accounts is small at ¥0.01B, raising concerns over potential realization of credit/collection risk.
Segment Concentration Risk: System Development & Sales accounts for 59.3% of revenue; its Operating Margin 14.3% is below Recurring 20.2%. Project delays or scope changes can amplify fluctuations in operating margin, and mix changes directly affect company-wide profitability.
Investment Securities Valuation Risk: Investment securities ¥96.4B (current ¥50.9B, non-current ¥45.5B) represent 34.4% of total assets and include valuation differences on securities ¥12.0B (5.7% of net assets). Market price declines could reverse valuation gains, reduce net assets, and cause volatility in comprehensive income.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 16.7% | 8.1% (3.6%–16.0%) | +8.6pt |
| Net Profit Margin | 10.5% | 5.8% (1.2%–11.6%) | +4.7pt |
Profitability substantially exceeds industry medians, confirming a high-margin profile in both operating and net terms.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 12.4% | 10.1% (1.7%–20.2%) | +2.3pt |
Revenue growth outpaces industry median, indicating a robust growth trajectory.
※ Source: Company aggregation
High-margin profile and strong financial base: Operating Margin 16.7%, ROE 11.5%, Equity Ratio 75.3%, effectively debt-free — a defensive earnings model combining high profitability and financial safety. Industry benchmarks also show Operating Margin +8.6pt and Net Margin +4.7pt, placing the company among industry leaders with structural advantages.
Room to improve cash conversion and dividend sustainability: Operating CF ¥30.9B is 1.27x Net Income, above standard, but OCF/EBITDA 0.72x and prolonged Accounts Receivable reduce cash conversion efficiency; shortening DSO from 101 days is a priority. FCF ¥14.7B does not fully cover dividends ¥14.8B (FCF coverage 0.66x), but cash deposits ¥78.1B and no net debt provide a cushion for dividend continuity. Normalization of working capital and strengthening acceptance/billing controls will determine scope for future dividend increases.
Achievement probability of growth plans and segment mix: Next-year guidance (Revenue +21%, Operating Income +24%) is based on back-end weighted assumptions (progress rates 82.5%/80.4%), with successful acceptance of large System Development & Sales projects and expansion of high-margin Recurring revenue being key. Segment concentration (System Development & Sales 59.3%) and margin mix (14.3% vs. 20.2%) increase performance volatility; recovery of Recurring ratio and visibility into order consumption (order backlog / KPI disclosure) are essential for investor expectation management. Capex/Depreciation 0.69x indicates restrained investment; increasing allocation to human capital, cloud, and IPization is necessary for sustainable growth.
This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any particular security. Industry benchmarks are reference information compiled by the company from publicly disclosed financial statements. Investment decisions are your responsibility; please consult a professional if necessary.