INTELLIGENT WAVE INC. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥3.75B
• Operating Income: ¥205M
• Net Income: ¥139M
• EPS: ¥5.34

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Intelligent Wave Co., Ltd. (48470) reported FY2026 Q1 non-consolidated results under JGAAP with revenue of ¥3,746 million, up 5.7% year over year, indicating continued demand in its solutions/services portfolio. Gross profit was ¥979 million, translating to a gross margin of 26.1%, which suggests a relatively tight contribution after direct costs for a software/services-centric business. Operating income declined 32.4% YoY to ¥205 million, signaling negative operating leverage as expenses outpaced revenue growth in the quarter. Ordinary income was ¥204 million, broadly in line with operating income, implying minimal net non-operating impact in the quarter. Net income was ¥139 million, down 32.9% YoY, with an EPS of ¥5.34, reflecting margin compression below the operating line as well. DuPont decomposition yields a net margin of 3.71%, asset turnover of 0.217x, and financial leverage of 1.89x, producing a calculated ROE of 1.52% for the quarter. Liquidity remains sound with current assets of ¥10,461 million against current liabilities of ¥8,418 million, resulting in a current ratio of 124.3% and working capital of ¥2,043 million. Inventories are modest at ¥143 million, which fits the company’s project/services orientation and lowers inventory risk. Total assets are ¥17,278 million and total equity is ¥9,122 million; while the reported equity ratio is shown as 0.0% (undisclosed), these balances imply a healthy capital base. Total liabilities stand at ¥9,215 million, implying a liabilities-to-equity ratio of approximately 1.01x. The decline in operating income despite higher revenue suggests elevated SG&A, staffing, or project-related costs, or a less favorable mix impacting gross-to-operating conversion. Cash flow figures (OCF/ICF/FCF) are undisclosed in this dataset, limiting assessment of earnings-to-cash conversion for the quarter. Dividend data are also not disclosed here; the DPS and payout ratio fields show zeros and should be treated as unreported rather than actual values. Given the YoY revenue growth but profit contraction, near-term focus should be on cost discipline, project mix, and pricing power. Overall, the quarter demonstrates resilient top-line momentum but weaker profitability, with balance sheet liquidity and solvency remaining adequate. Data limitations around cash flows and dividends constrain a full view of earnings quality and capital allocation in Q1.

Profitability Analysis

ROE_decomposition: ROE (DuPont) = Net margin (3.71%) × Asset turnover (0.217x) × Financial leverage (1.89x) = 1.52%. This indicates modest profitability driven by low net margins and low asset turnover, with moderate balance-sheet leverage. margin_quality: Gross margin of 26.1% (¥979m gross profit on ¥3,746m revenue) suggests constrained contribution after direct costs. Operating margin is approximately 5.5% (¥205m/¥3,746m), indicating significant SG&A and development spend absorption. Net margin at 3.71% reflects additional tax burden and minor non-operating effects. operating_leverage: Revenue grew +5.7% YoY while operating income declined -32.4% YoY, implying negative operating leverage in Q1. This likely stems from higher personnel costs, investment in product development, or a project/service mix shift that reduced gross-to-operating conversion. Monitoring SG&A run-rate versus revenue trajectory will be critical to assess whether this is timing-related or structural.

Growth Assessment

revenue_sustainability: Top-line growth of +5.7% YoY to ¥3,746m suggests ongoing demand in payments/security solutions and maintenance services. Low inventories (¥143m) imply limited hardware exposure and a services/project-driven model; sustaining growth will depend on order intake and backlog conversion. profit_quality: Profit contraction (OP -32.4% YoY; NP -32.9% YoY) indicates cost pressure or mix deterioration. With gross margin at 26.1% and operating margin ~5.5%, incremental margins appear weak this quarter. Ordinary income tracked operating income, suggesting limited aid from non-operating items. outlook: If growth is driven by recurring maintenance and stable service contracts, margins could recover as utilization improves; if driven by lower-margin build projects, profitability may remain pressured. Near-term outlook hinges on backlog quality, pricing discipline, and cost control, especially personnel and subcontracting expenses.

Financial Health

liquidity: Current assets ¥10,460,943k vs current liabilities ¥8,417,575k yields a current ratio of 124.3% and quick ratio of 122.6%, indicating satisfactory near-term liquidity. Working capital stands at ¥2,043,368k, providing a buffer for project execution. solvency: Total liabilities ¥9,215,222k vs total equity ¥9,122,000k implies liabilities/equity of ~1.01x. Although the equity ratio is shown as 0.0% in the feed (undisclosed), balance sheet totals imply a solid capital base relative to assets of ¥17,278,000k. capital_structure: Financial leverage in DuPont at 1.89x (assets/equity) indicates moderate leverage. Interest expense is shown as 0 (undisclosed), and ordinary income ≈ operating income suggests minimal financial burden.

Cash Flow Quality

earnings_quality: OCF/Net income ratio is shown as 0.00 due to undisclosed cash flow data; thus, earnings-to-cash conversion cannot be assessed from this dataset. FCF_analysis: Free cash flow is undisclosed (shown as 0). Without OCF and capex detail, FCF coverage of investments and shareholder returns cannot be evaluated for Q1. working_capital: With inventories at only ¥143m and healthy working capital of ¥2,043m, cash conversion is likely driven more by receivables and payables timing than by inventory swings. Detailed movements are not available due to missing cash flow disclosures.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio are shown as 0.00 (unreported). Given Q1 EPS of ¥5.34, any actual dividend policy or quarterly payment cannot be inferred from this dataset. FCF_coverage: FCF is undisclosed; consequently, dividend coverage by FCF cannot be assessed for the quarter. policy_outlook: Absent disclosed DPS/FCF data, sustainability hinges on recurring earnings capacity and cash generation from maintenance and services. Balance sheet strength (liabilities/equity ~1.01x; implied equity base ¥9.1bn) provides some flexibility, but visibility is limited without cash flow details.

Risk Assessment

Business Risks:

• Margin pressure from project mix (lower-margin system build vs. higher-margin maintenance/licenses).
• Cost inflation in personnel and subcontracting, reducing operating leverage.
• Timing risk in order intake and revenue recognition impacting quarterly volatility.
• Competitive intensity in payments/security solutions leading to pricing pressure.
• Technology transition risk (cloud migration, cybersecurity requirements) necessitating higher R&D and delivery investment.
• Customer concentration risk typical in domestic financial/settlement systems.

Financial Risks:

• Working capital swings affecting cash conversion due to receivables and project milestones.
• Potential increase in leverage if large projects require upfront costs without commensurate billing terms.
• Limited non-operating income and minimal interest burden leaving little buffer below operating line.
• Dividend and cash flow visibility constrained by undisclosed OCF/FCF data in the quarter.

Key Concerns:

• Negative operating leverage in Q1 despite +5.7% revenue growth.
• Compression in operating and net income (-32% to -33% YoY).
• Lack of disclosed cash flow data limiting assessment of earnings quality and dividend capacity.

Investment Implications

Key Takeaways:

• Top-line growth of +5.7% YoY to ¥3.75bn shows demand resilience.
• Gross margin at 26.1% and operating margin ~5.5% indicate margin pressure.
• Operating income fell 32.4% YoY, evidencing negative operating leverage.
• ROE at 1.52% (DuPont: 3.71% × 0.217 × 1.89) reflects low margin/turnover.
• Liquidity is adequate (current ratio 124.3%, working capital ¥2.04bn).
• Cash flow and dividend data are undisclosed, limiting capital return analysis.

Metrics to Watch:

• Order backlog and book-to-bill trends.
• Gross margin and SG&A ratio trajectory.
• Operating margin and incremental margin on revenue growth.
• Receivables days and OCF/NI once disclosed.
• Mix of recurring maintenance vs. project revenue.
• Headcount, subcontracting ratio, and wage inflation impact.

Relative Positioning: Within Japanese IT services and payments/security solution providers, Intelligent Wave shows steady revenue growth but weaker quarterly profitability and modest ROE, with a balance sheet that appears reasonably capitalized; improving operating leverage and cash conversion are key to strengthen its standing versus peers.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
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