| 指標 | 当期 | 前年同期 | YoY |
|---|---|---|---|
| Revenue | ¥54.6B | ¥58.7B | -6.9% |
| Operating Income | ¥5.7B | ¥9.3B | -39.0% |
| Ordinary Income | ¥5.9B | ¥9.3B | -36.7% |
| Net Income | ¥3.7B | ¥6.1B | -38.5% |
| ROE | 3.1% | 5.0% | - |
For the six months ended Q2 of the fiscal year ending March 2026, consolidated results were Revenue ¥54.6B (YoY -¥4.0B, -6.9%), Operating Income ¥5.7B (YoY -¥3.6B, -39.0%), Ordinary Income ¥5.9B (YoY -¥3.4B, -36.7%), and Net Income attributable to owners of the parent ¥3.7B (YoY -¥2.3B, -38.5%), representing declines in both revenue and profit. Gross profit margin was 28.0% (down 3.1pt from 31.1% last year), and operating margin was 10.4% (down 5.4pt from 15.8% last year), indicating a significant deterioration in profitability. SG&A ratio rose to 17.6% (up 2.3pt from 15.3% last year). Progress toward full year guidance stands at 45.5% for Revenue, 35.3% for Operating Income, and 36.1% for Net Income, showing lagging profit performance and necessitating a recovery in H2.
[Revenue] Revenue declined to ¥54.6B (YoY -6.9%). The Group operates a single segment, Internet Security Business, and does not disclose a breakdown by business. Gross profit was ¥15.3B (YoY -¥3.0B, -16.4%), with a gross profit margin of 28.0%, down 3.1pt from 31.1% last year. The decline in margin is likely attributable to lower project unit prices, deterioration in service mix, and/or reduced utilization rates. Cost of sales decreased to ¥39.3B (prior ¥40.4B), but the drop in Revenue was larger, resulting in pressure on gross margin.
[Profitability] Operating Income decreased substantially to ¥5.7B (YoY -39.0%). SG&A increased to ¥9.6B (prior ¥9.0B, +7.2%), growing faster than revenue and pushing the SG&A ratio up to 17.6% (up 2.3pt from prior year). Operating margin narrowed to 10.4% (down 5.4pt from 15.8%), with both gross margin decline and SG&A ratio increase compressing Operating Income. Non-operating income was ¥0.3B, mainly interest income ¥0.2B, and non-operating expenses were negligible at ¥0.0B, so Ordinary Income of ¥5.9B was roughly in line with Operating Income. Extraordinary losses were only impairment of fixed assets ¥0.0B, resulting in Profit Before Tax of ¥5.9B. Income taxes were ¥2.2B, yielding an effective tax rate of 36.8% (prior 34.9%), producing Net Income attributable to owners of the parent of ¥3.7B (YoY -38.5%). Comprehensive income was ¥3.8B, essentially consistent with Net Income of ¥3.7B; Other Comprehensive Income was minor at currency translation adjustments of ¥0.1B. In conclusion, revenue decline combined with lower gross margin and higher SG&A led to a significant decrease in revenue and profit.
[Profitability] Operating margin of 10.4% declined 5.4pt from 15.8% last year, driven by lower gross margin (28.0%, -3.1pt YoY) and higher SG&A ratio (17.6%, +2.3pt YoY). Net margin contracted to 6.8% (down 3.5pt from 10.3% last year), and the effective tax rate was relatively high at 36.8%. [Cash Quality] Operating Cash Flow (OCF) to Net Income ratio was low at 0.34x, indicating challenges in cash realization of earnings. The gap between OCF ¥1.3B and Net Income ¥3.7B was mainly due to decreases in other payables (YoY -¥6.69B), reversal of bonus reserves (YoY -¥0.67B), and increased payments related to taxes and public charges, with working capital deterioration pressuring OCF. Days Sales Outstanding (DSO) was relatively long at 84 days, suggesting delays in project acceptance and collections. [Investment Efficiency] ROE remained low at 3.1%. Dupont decomposition shows Net Margin 6.8% × Total Asset Turnover 0.41 × Financial Leverage 1.11 ≒ 3.1%, indicating that the decline in Net Margin is the primary downward driver. Total Asset Turnover of 0.41 is diluted by ample cash and deposits of ¥106.4B (79.5% of total assets), reducing asset efficiency. [Financial Soundness] Equity Ratio was 89.9% and Current Ratio 1010.8%, indicating an extremely robust balance sheet; Debt-to-Equity was 0.11x, effectively near-zero net debt. Goodwill was ¥1.4B (1.2% of equity), small and with high impairment resilience. Interest received was ¥0.2B while interest paid was effectively zero, leaving interest coverage unconstrained.
Operating Cash Flow fell sharply to ¥1.3B (YoY -56.6%). Operating cash flow before working capital changes was ¥3.8B; non-cash expenses added back included Depreciation ¥0.4B, Goodwill Amortization ¥0.5B, and Stock-based Compensation ¥0.1B, while corporate tax payments of ¥2.7B were deducted. In working capital, a decrease in trade receivables of ¥0.1B contributed positively, but decreases in other payables (YoY -¥6.69B), reversal of bonus reserves (YoY -¥0.67B), and a decrease in accrued taxes of ¥0.7B were major headwinds. Investing Cash Flow was -¥0.7B, primarily for capital expenditure ¥0.3B, intangible asset investments (software, etc.) ¥0.6B, and acquisition of investment securities ¥0.1B. Financing Cash Flow was -¥4.1B, mainly dividend payments of ¥4.1B, with share buybacks effectively zero. Free Cash Flow was limited to ¥0.6B, substantially below dividend payments of ¥4.1B during the same period. Cash and deposits decreased from ¥109.9B at the beginning of the period to ¥106.4B at the end, a decline of ¥3.5B, but remain very ample.
Operating Income ¥5.7B and Ordinary Income ¥5.9B are nearly aligned, indicating operating performance is the main profit driver. Non-operating income of ¥0.3B consists of interest income ¥0.2B and miscellaneous income ¥0.1B; non-operating expenses were minor at foreign exchange losses ¥0.0B, so non-operating items are routine in nature. Extraordinary items consisted only of fixed asset retirement losses ¥0.0B, so there is little distortion from one-time factors. Comprehensive income ¥3.8B is almost identical to Net Income ¥3.7B, with Other Comprehensive Income limited to currency translation adjustments of ¥0.1B, indicating minimal divergence between comprehensive income and net income. However, with OCF ¥1.3B versus Net Income ¥3.7B (OCF/NI 0.34x), there is concern over accrual expansion. Working capital issues such as reversal of bonus reserves and decreases in other payables have hindered cash conversion of profits, leaving residual concerns over earnings quality.
Full year guidance is unchanged: Revenue ¥120.1B (YoY +6.1%), Operating Income ¥16.0B (YoY +6.7%), Ordinary Income ¥16.3B (YoY +6.5%), and Net Income attributable to owners of the parent ¥10.3B. Progress through H1 stands at 45.5% for Revenue, 35.3% for Operating Income, 36.2% for Ordinary Income, and 36.1% for Net Income. While Revenue progress is roughly in line with normal levels, profit metrics are lagging by around 10 percentage points. Achieving the full year plan requires a significant H2 recovery: Revenue of ¥65.5B in H2 (H1 vs H2 +19.9%), and Operating Income of ¥10.3B in H2 (H1 vs H2 +81.1%). Although historical seasonality and concentration of project acceptance may result in H2 weighting, unless the structural issues behind H1 gross margin decline and SG&A ratio increase are addressed, the hurdle to meet full year guidance is high.
The company did not pay an interim dividend, and the full year dividend forecast is maintained at ¥38. Total dividend payout against the full year Net Income forecast of ¥10.3B amounts to approximately ¥4.4B (based on shares outstanding 11,934 thousand - treasury shares 338 thousand = 11,596 thousand shares), implying a payout ratio of about 43%. Interim dividend payments recorded in H1 were ¥4.1B (payment of prior-year dividends during the period), which far exceeded H1 FCF of ¥0.6B, indicating inadequate CF coverage. Sustainability through the full year depends on H2 profit recovery and normalization of working capital to improve OCF. Share buybacks were effectively zero, and total shareholder return is dividend-centric. Considering cash and deposits of ¥106.4B, the company has adequate quantitative capacity to pay dividends, but sustainability of dividend policy will depend on funding needs for business growth and working capital volatility.
Gross Margin Decline Risk: Gross profit margin fell to 28.0% (YoY -3.1pt). This is likely due to lower project unit prices, deterioration in service mix, and reduced utilization. Continued price competition or adverse project mix shifts could further pressure profitability. Recovery in gross margin is a prerequisite for achieving the full year plan, but quantitative evidence for improvement is unclear.
SG&A Control Risk: SG&A rose +7.2% YoY, outpacing revenue growth (-6.9%), and SG&A ratio increased to 17.6% (YoY +2.3pt). This may reflect higher personnel costs and increased investment in hiring and training, causing fixed-cost pressure and reverse operating leverage. If revenue recovery lags, profitability could deteriorate further.
Cash Conversion Risk: OCF ¥1.3B vs Net Income ¥3.7B yields an OCF/NI ratio of 0.34x, indicating delayed cash realization of earnings. DSO of 84 days is relatively long, and if decreases in other payables and reversal of bonus reserves or other working capital reversals continue, the company’s full year cash generation could be impaired, constraining dividend resources and M&A capacity.
Profitability & Returns
| 指標 | 自社 | 中央値 (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 10.4% | 14.0% (3.8%–18.5%) | -3.6pt |
| Net Margin | 6.8% | 9.2% (1.1%–14.0%) | -2.4pt |
Both Operating Margin and Net Margin are below the industry median, placing the company at the lower end of profitability within the IT & Communications sector.
Growth & Capital Efficiency
| 指標 | 自社 | 中央値 (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -6.9% | 21.0% (15.5%–26.8%) | -27.9pt |
Revenue growth is substantially below the industry median, indicating the company lags peers in the IT & Communications sector.
※Source: Company compilation
Lagging profit progress and H2 dependency risk: H1 Operating Income progress of 35.3% and Net Income progress of 36.1% lag full year plans by about 10 percentage points, making substantial H2 recovery a prerequisite. Although H2 weighting may be customary due to seasonality and project acceptance timing, unless structural factors behind H1 gross margin decline (28.0%, YoY -3.1pt) and SG&A ratio increase (17.6%, YoY +2.3pt) improve, meeting full year guidance will be challenging.
High financial safety and capacity for growth investment: With cash and deposits of ¥106.4B, Equity Ratio 89.9%, and Current Ratio 1010.8%, the balance sheet remains extremely strong and short-term liquidity risk is low. Goodwill is small at ¥1.4B (1.2% of equity), indicating high impairment resilience. However, H1 FCF of ¥0.6B versus dividend payments of ¥4.1B shows inadequate cash coverage; H2 OCF improvement and working capital normalization are key to sustaining dividends. Ample cash offers flexibility for growth investment and M&A, but Total Asset Turnover of 0.41 indicates low efficiency, highlighting the need for strategic capital allocation to improve capital efficiency.
This report is an AI-generated earnings analysis based on XBRL financial statement data. It is not a recommendation to invest in any particular security. Industry benchmarks are reference data compiled by the company from public financial statements. Investment decisions are your responsibility; please consult a professional advisor as needed.