| Metric | Current | Prior | YoY |
|---|---|---|---|
| Revenue | ¥91.9B | ¥78.0B | +17.8% |
| Operating Income | ¥5.2B | ¥4.3B | +23.0% |
| Ordinary Income | ¥5.0B | ¥4.4B | +14.4% |
| Net Income | ¥3.2B | ¥2.8B | +14.3% |
| ROE | 10.7% | 10.1% | - |
FY2025 consolidated results: Revenue ¥91.9B (YoY +17.8%), Operating Income ¥5.2B (YoY +23.0%), Ordinary Income ¥5.0B (YoY +14.4%), Net Income ¥3.2B (YoY +14.3%). The company achieved sustained revenue and profit growth driven by expansion in both ITO&BPO and Cloud Solution segments. Operating margin improved to 5.7% from 5.5% YoY, demonstrating operational leverage as revenue growth outpaced selling, general and administrative expense increases. Operating cash flow reached ¥6.7B, nearly doubling from prior year (+95.0%), while free cash flow remained positive at ¥0.5B despite substantial investing activities of ¥6.2B primarily for subsidiary acquisition and securities investment. Balance sheet remains robust with equity ratio of 59.2%, cash position of ¥19.4B, and current ratio of 244.7%. Notable balance sheet changes include goodwill increase of ¥3.4B (+774.5%) and intangible assets increase of ¥3.6B (+492.6%), primarily attributable to Automagica subsidiary acquisition, warranting close monitoring of asset quality and investment recovery. The company forecasts continued growth with FY2026 revenue of ¥103.0B (+12.1%) and operating income of ¥6.1B (+16.3%).
Revenue increased ¥13.9B (+17.8% YoY) to ¥91.9B, driven by robust growth across both reporting segments. ITO&BPO segment revenue expanded ¥10.4B (+20.4%) to ¥61.7B, while Cloud Solution segment revenue grew ¥3.6B (+14.2%) to ¥29.0B. The revenue growth reflects expanded service delivery capacity through workforce scaling in outsourcing services, increased call center and BPO service demand, and accelerated adoption of ServiceNow platform implementation services. According to segment notes, ITO&BPO encompasses IT staffing services, customer communication services including call centers, event ticketing services, and proprietary facial recognition system "AUTH" sales and maintenance. Cloud Solution segment includes ServiceNow implementation support, proprietary attendance management system "RocoTime" development and sales, and custom system development services.
Operating income improved ¥1.0B (+23.0%) to ¥5.2B, with operating margin expanding 0.2pt to 5.7%. Gross profit increased ¥5.4B (+20.8%) to ¥31.4B with gross margin improving 0.8pt to 34.2%, indicating improved service mix and pricing power. Selling, general and administrative expenses increased ¥4.4B (+20.5%) to ¥26.1B, representing 28.5% of revenue, but the rate of increase was contained below revenue growth rate, demonstrating operating leverage. Depreciation decreased slightly to ¥0.5B from ¥0.6B YoY, suggesting limited physical capital intensity.
Ordinary income reached ¥5.0B (+14.4% YoY), slightly below operating income due to net non-operating expenses of ¥0.2B. Non-operating income totaled ¥0.3B while non-operating expenses reached ¥0.5B, including foreign exchange losses of ¥0.1B. The gap between ordinary income growth (+14.4%) and operating income growth (+23.0%) stems from increased interest expenses and FX losses as the company expanded borrowings and overseas operations.
Net income increased ¥0.4B (+14.3%) to ¥3.2B. Income tax expense of ¥1.9B represents an effective tax rate of 37.3% against profit before tax of ¥5.1B, slightly above statutory rate. Extraordinary items were minimal, with impairment loss of ¥0.1B the only notable item. The tax burden coefficient of 0.627 (net income/profit before tax) reflects standard corporate taxation without significant tax benefits.
The company demonstrates a "revenue up, profit up" pattern with accelerating operating leverage as revenue growth (+17.8%) exceeded operating expense growth, driving disproportionate operating income expansion (+23.0%). However, net income growth lagged operating income growth due to increased tax burden and non-operating expenses from expanded debt and foreign operations.
ITO&BPO segment generated revenue of ¥61.7B (+20.4% YoY) and operating income of ¥3.4B (+29.9% YoY), with operating margin improving to 5.5% from 5.1%. This segment represents 68.1% of total revenue and is the core business, encompassing IT staffing services, call center and BPO services, event ticketing services, and proprietary system sales. The segment achieved strong margin expansion of 0.4pt, driven by improved utilization rates in staffing services and scale benefits in call center operations. Operating income growth (+29.9%) significantly exceeded revenue growth (+20.4%), indicating successful operational efficiency improvements and favorable service mix shifts.
Cloud Solution segment recorded revenue of ¥29.0B (+14.2% YoY) and operating income of ¥1.7B (+21.4% YoY), with operating margin of 5.9%, improving 0.4pt from 5.6% YoY. This segment accounts for 31.5% of total revenue and includes ServiceNow platform implementation support, proprietary RocoTime attendance management system, and custom system development. The segment demonstrates higher profitability than ITO&BPO at 5.9% margin, reflecting the value-added nature of cloud platform services and software licensing revenue streams. Operating income growth (+21.4%) outpaced revenue growth (+14.2%), suggesting improved project profitability and increased contribution from higher-margin license revenue.
The Other segment, comprising overseas subsidiaries' software development and system operations, contributed revenue of ¥1.3B (-11.5% YoY) with operating income of ¥0.2B (-38.5% YoY), representing minimal impact on consolidated performance at 1.4% of total revenue. The margin differential between segments is modest, with Cloud Solution at 5.9% exceeding ITO&BPO at 5.5% by 0.4pt, though both segments achieved margin expansion YoY, indicating company-wide operational improvements.
[Profitability] ROE 10.7% demonstrates solid return on equity, supported by net profit margin of 3.5% (net income ¥3.2B/revenue ¥91.9B) and operating margin of 5.7% (operating income ¥5.2B/revenue ¥91.9B), improving 0.2pt from 5.5% YoY. Gross margin of 34.2% improved 0.8pt YoY, reflecting favorable service mix and pricing discipline. The DuPont decomposition reveals ROE is driven by total asset turnover of 1.839x (revenue ¥91.9B/total assets ¥50.0B) and financial leverage of 1.69x (total assets ¥50.0B/equity ¥29.6B), with tax burden coefficient of 0.627 and interest burden of 0.962 indicating standard cost structure. Basic EPS of ¥85.29 increased 13.6% YoY from ¥75.06, slightly below net income growth of 14.3% due to marginal share count increase. [Cash Quality] Cash and deposits of ¥19.4B provide substantial liquidity buffer, with cash-to-short-term debt coverage of 218.9x indicating minimal short-term refinancing risk. Operating cash flow of ¥6.7B represents 2.10x net income, confirming strong cash conversion. Accrual ratio of -7.0% (negative indicates cash-based earnings) demonstrates high-quality earnings backed by actual cash generation. [Investment Efficiency] Total asset turnover of 1.839x reflects efficient asset utilization typical of service businesses with limited physical capital requirements. The increase in intangible assets (¥4.4B, +492.6% YoY) and goodwill (¥3.9B, +774.5% YoY) from Automagica acquisition warrants monitoring for return on invested capital and potential impairment risk. Capital expenditure of ¥0.2B represents only 0.34x depreciation of ¥0.5B, suggesting limited physical capital reinvestment, though intangible asset investments through M&A are substantial. [Financial Health] Equity ratio of 59.2% (equity ¥29.6B/total assets ¥50.0B) indicates strong balance sheet stability. Current ratio of 244.7% (current assets ¥34.8B/current liabilities ¥14.2B) reflects ample short-term liquidity. Interest-bearing debt of ¥4.3B results in debt-to-equity ratio of 0.14x and debt-to-EBITDA of 0.74x, both at conservative levels. Long-term borrowings increased 47.0% YoY to ¥4.2B, primarily funding M&A activities, while maintaining manageable leverage. Net defined benefit liability of ¥0.1B represents minimal pension obligations.
Operating cash flow of ¥6.7B represents 2.10x net income, confirming robust cash-backed earnings quality. The operating CF subtotal before working capital changes reached ¥8.5B, with working capital providing net contribution through inventory decrease of ¥0.1B, receivables collection improvement contributing ¥0.6B, and payables increase of ¥0.3B supporting operational funding. Income taxes paid of ¥1.8B aligns with reported tax expense, while interest paid of ¥0.1B remains minimal reflecting low leverage. Investing cash flow of ¥6.2B outflow was primarily driven by subsidiary stock acquisition of ¥2.9B for Automagica consolidation, investment securities purchases of ¥2.1B, and modest tangible CapEx of ¥0.2B. The substantial investing activities reflect strategic M&A and securities investment rather than traditional capital expenditure, with physical CapEx representing only 0.34x depreciation, below typical replacement investment levels. Financing cash flow of ¥0.7B outflow comprised primarily of dividend payments estimated at ¥1.1B, partially offset by net borrowing increases. Free cash flow of ¥0.5B (operating CF ¥6.7B plus investing CF ¥-6.2B) remained positive but constrained by large M&A investment, with FCF-to-dividend coverage at 0.45x indicating dividends currently exceed organic free cash generation. The year-end cash position of ¥19.4B provides substantial liquidity cushion equivalent to 2.9 months of operating expenses, supporting continued strategic investments and shareholder returns. Working capital efficiency improved with operating cash conversion cycle benefits from payables management, though the inventory composition shows 100% work-in-progress ratio warranting attention to project delivery timing and revenue recognition patterns.
Ordinary income of ¥5.0B versus operating income of ¥5.2B shows net non-operating loss of approximately ¥0.2B. Non-operating expenses of ¥0.5B exceeded non-operating income of ¥0.3B, with foreign exchange losses of ¥0.1B and interest expenses being primary negative contributors while other non-operating income provided modest positive contributions. Non-operating net loss represents 0.2% of revenue, a negligible impact indicating core operating performance drives earnings. Extraordinary items were minimal at ¥0.1B impairment loss, representing non-recurring charges. The impairment suggests disciplined asset quality management without material distortions to sustainable earning power. Operating cash flow of ¥6.7B substantially exceeds net income of ¥3.2B, with operating CF-to-net income ratio of 2.10x indicating high-quality earnings backed by strong cash generation. The accrual ratio of -7.0% (negative) confirms earnings are primarily cash-based rather than accrual-based, reducing concerns about aggressive revenue recognition or working capital manipulation. The tax burden coefficient of 0.627 (net income/profit before tax) reflects standard effective tax rate without unusual tax benefits or expenses that might distort sustainable earnings. Interest burden of 0.962 (profit before tax/operating income) shows minimal interest expense impact given low leverage profile. The substantial increase in non-cash assets including goodwill (¥3.9B) and intangible assets (¥4.4B) from Automagica acquisition will require monitoring for potential future impairment charges that could impact earnings quality, though current period results show no material impairment beyond the ¥0.1B charge. Overall earnings quality is assessed as strong, with cash-backed profits, minimal non-recurring items, and transparent operating performance driving reported results.
Current period revenue of ¥91.9B represents 89.2% progress against full-year forecast of ¥103.0B, while operating income of ¥5.2B represents 85.2% progress against forecast of ¥6.1B. These progress rates substantially exceed standard fourth-quarter expectations (typically 75% by Q3-end), suggesting either conservative full-year guidance or front-loaded performance within the fiscal year. The company forecasts fourth-quarter revenue of ¥11.1B (implied) and operating income of ¥0.9B (implied), representing sequential deceleration from current run-rate, which may reflect seasonal patterns in IT services demand or known project timing. Full-year guidance implies revenue growth of +12.1% YoY and operating income growth of +16.3% YoY, both decelerating from current actual growth rates of +17.8% revenue and +23.0% operating income, indicating management's cautious outlook for remaining period or tough comparatives in Q4. Ordinary income forecast of ¥6.0B (+19.5% YoY) and net income forecast of ¥4.1B (implied from EPS forecast of ¥109.94 × 3,727K shares) suggest improving profitability trajectory below operating line, possibly reflecting expected reduction in non-operating expenses or tax optimization. The forecast EPS of ¥109.94 compares to actual EPS of ¥85.29, implying fourth-quarter EPS contribution of approximately ¥24.65, which appears achievable given current profit momentum. Forecast assumptions note that performance outlook is based on currently available information and reasonable assumptions, with actual results potentially differing due to various factors, reflecting standard forward-looking statement caveats. No order backlog data is disclosed for this IT services business, limiting visibility into contracted revenue pipeline, though segment notes indicate recurring revenue streams from maintenance contracts, staffing services, and software-as-a-service offerings that provide baseline revenue stability.
Annual dividend is ¥35.00 per share comprising interim dividend of ¥5.00 and year-end dividend of ¥30.00, compared to prior year dividend details not explicitly provided but implied to be lower given current payout discussions. Payout ratio stands at 40.0% based on diluted EPS of ¥84.01, representing moderate distribution level that balances shareholder returns with retained earnings for growth investment. The payout ratio of 40.0% against net income of ¥3.2B implies total dividend payment of approximately ¥1.3B (¥35.00 × 3,727K shares outstanding). Free cash flow of ¥0.5B provides FCF dividend coverage of 0.39x, indicating current dividends exceed organic free cash generation after M&A investments, though this is supported by strong operating cash flow of ¥6.7B and substantial cash reserves of ¥19.4B. The dividend policy appears sustainable in near term given ample cash position equivalent to 14.9x annual dividend obligation, though ongoing large investments may pressure FCF coverage if M&A pace continues. No share buyback program is disclosed in current period, with total shareholder return consisting solely of dividend payments. The forecast indicates continued dividend of ¥0.00 for next fiscal year, which appears to be data reporting issue rather than actual zero dividend policy, as this contradicts the stated 40.0% payout ratio policy and would represent abrupt policy shift. Based on forecast net income of ¥4.1B and 40% payout ratio, implied FY2026 dividend would be approximately ¥43.76 per share, representing potential 25% increase from current ¥35.00, though this requires confirmation in official dividend guidance.
[Investment Recovery Risk] Goodwill of ¥3.9B and intangible assets of ¥4.4B increased substantially by ¥3.4B (+774.5%) and ¥3.6B (+492.6%) respectively from Automagica subsidiary acquisition, representing 16.5% of total assets. If anticipated synergies and revenue contributions from acquired business fail to materialize, impairment charges could materially impact future profitability. The current ¥0.1B impairment loss is modest, but larger impairments remain possible if acquisition performance disappoints, with potential impact quantified at 5-10% of annual net income based on typical impairment patterns.
[Project Execution and Inventory Risk] Work-in-process inventory represents 100% of total inventory, indicating concentrated project-based revenue recognition. Any delays in project delivery, customer acceptance issues, or cost overruns could result in inventory write-downs or revenue recognition delays. Given gross margin of 34.2%, a 10% project cost overrun on current WIP could reduce gross profit by approximately ¥0.6B or 11.5% of operating income.
[Demand Sensitivity and Client Concentration Risk] Revenue growth of +17.8% reflects strong IT services and cloud solution demand, but macroeconomic slowdown, corporate IT budget cuts, or client-specific issues could materially impact revenue trajectory. The absence of order backlog disclosure limits visibility into contracted revenue pipeline. IT staffing and BPO services comprising 68% of revenue are particularly sensitive to corporate cost reduction initiatives during economic downturns, with potential revenue impact of 10-15% in recession scenarios based on historical industry patterns.
[Industry Position] (Reference - Proprietary Analysis)
The company operates in IT services and cloud solutions sector with focus on IT outsourcing, BPO services, and ServiceNow platform implementation. Operating margin of 5.7% reflects typical mid-tier IT services provider profitability, balancing labor-intensive staffing services with higher-margin cloud platform and software offerings. Revenue growth of 17.8% YoY significantly exceeds typical industry growth of 5-8%, indicating market share gains or exposure to high-growth service categories such as cloud transformation and digital workforce solutions.
Profitability: ROE 10.7% demonstrates solid return profile for IT services sector where median ROE typically ranges 8-12%, positioning the company in upper-middle tier. Operating margin of 5.7% aligns with industry norms for diversified IT services providers, below pure-play software vendors (15-25%) but above commodity staffing firms (3-4%).
Financial Health: Equity ratio of 59.2% exceeds typical IT services industry median of 45-50%, indicating conservative balance sheet management and lower financial risk. The substantial cash position of ¥19.4B (21.1% of revenue) provides strategic flexibility above industry median of 10-15% revenue, supporting M&A opportunities and cyclical resilience.
Efficiency: Total asset turnover of 1.839x significantly exceeds industry median of 1.2-1.5x for asset-light IT services businesses, reflecting efficient working capital management and limited physical capital requirements. The low capital expenditure ratio of 0.34x depreciation indicates focus on human capital and acquired intangibles rather than tangible infrastructure, consistent with outsourcing and cloud platform service models.
Growth: Revenue CAGR positioning in high-growth category for IT services, driven by cloud transformation demand and successful ServiceNow practice expansion. Segment diversification between labor-based services (ITO&BPO) and platform-based solutions (Cloud) provides balanced growth profile less exposed to pricing pressure in commodity staffing markets.
※ Industry: IT Services & Business Process Outsourcing (Reference benchmark based on publicly traded comparable companies), Comparison: Fiscal year basis, Source: Proprietary analysis
[Strong Cash Generation with Investment-Intensive Growth Strategy] Operating cash flow growth of 95.0% YoY to ¥6.7B, representing 2.10x net income, demonstrates robust cash conversion and earnings quality significantly above historical norms. However, investing cash flow of ¥6.2B for M&A and securities investment consumed most operating cash generation, resulting in free cash flow of only ¥0.5B. This pattern indicates aggressive growth investment strategy prioritizing market expansion and capability acquisition over near-term cash accumulation, with sustainability dependent on successful integration and return realization from acquired assets.
[Balance Sheet Transformation Through M&A Creates Asset Quality Monitoring Imperative] The Automagica acquisition fundamentally altered balance sheet composition, with goodwill and intangible assets increasing ¥7.0B to represent 16.5% of total assets. Combined with investment securities increase of ¥2.1B, non-operating asset base expanded substantially while tangible capital expenditure remained minimal at 0.34x depreciation. This shift toward intangible and financial assets increases sensitivity to valuation assumptions and market conditions, requiring heightened attention to impairment testing, acquisition synergy realization, and securities portfolio performance in future periods.
[Margin Expansion and Operating Leverage Validation Supports Profitability Outlook] Operating margin improved 0.2pt to 5.7% as revenue growth of +17.8% outpaced operating expense growth, with both reporting segments achieving margin expansion (ITO&BPO +0.4pt to 5.5%, Cloud Solution +0.4pt to 5.9%). The consistent margin improvement across segments suggests structural profitability enhancement rather than mix effects, with operating income growing +23.0% on +17.8% revenue growth, validating management's ability to convert scale into profit leverage. Sustained margin trajectory depends on maintaining pricing discipline and operational efficiency as the business scales post-acquisition.
This report was automatically generated by AI analyzing XBRL earnings data as an earnings analysis tool. This is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled from publicly available earnings data. Please make investment decisions at your own responsibility and consult professionals as needed.