| Metric | Current Period | Prior Year | YoY |
|---|---|---|---|
| Revenue | ¥238.3B | ¥262.9B | -9.4% |
| Operating Income | ¥60.6B | ¥56.4B | +7.6% |
| Ordinary Income | ¥63.5B | ¥58.8B | +8.1% |
| Net Income | ¥44.5B | ¥31.4B | +41.7% |
| ROE | 31.2% | 22.0% | - |
For the fiscal year ended March 2026, Revenue was ¥238.3B (¥-24.6B YoY, -9.4%), a decline, while Operating Income was ¥60.6B (¥+4.3B YoY, +7.6%) and Ordinary Income was ¥63.5B (¥+4.7B YoY, +8.1%), both increasing. Net Income rose substantially to ¥44.5B (¥+13.1B YoY, +41.7%). The company discontinued its Investment Business and absorbed it via merger, shifting to a single Consulting segment; gross margin improved to 49.4% (from 44.6%, +4.8pt) and operating margin to 25.4% (from 21.4%, +4.0pt), driving most of the profit increase. The revenue decline includes the impact of stopping the Investment Business, but SG&A decreased to ¥57.2B (from ¥60.9B, -6.2%), producing operating leverage. In non-recurring items, an impairment on investment securities of ¥6.5B was recorded; however, last year’s special losses were minor, resulting in a sizable increase in Net Income. ROE remained at a high level of 31.2% (prior year 32.0%), indicating a high-profitability structure is established.
[Revenue] Revenue was ¥238.3B (YoY -9.4%), a decline. The prior Investment Business was suspended in May 2025 and absorbed in July 2025, resulting in a transition to a single segment (Consulting Business). The loss of Investment Business revenue is the primary reason for the decline, though changes in Consulting orders and project mix likely also contributed. Major client disclosure: last year sales to NYK Business Systems were ¥35.4B (13.5% of sales), but in the current period there were no customers exceeding 10% of sales, suggesting revenue diversification. Cost of sales was ¥120.5B (prior year ¥145.6B), down -17.2%, yielding Gross Profit of ¥117.8B and Gross Margin of 49.4% (from 44.6%, +4.8pt). Improvement in project quality, utilization rates, and billing rates likely underpinned the gross margin expansion.
[Profitability] Operating Income was ¥60.6B (YoY +7.6%). SG&A was ¥57.2B (YoY -6.2%), and SG&A ratio edged up slightly to 24.0% (from 23.2%, +0.8pt), but Gross Margin improvement drove Operating Margin to 25.4% (from 21.4%, +4.0pt). Non-operating income was ¥3.1B (including ¥1.1B dividends received and ¥1.2B gain on sale of securities), up from ¥2.6B a year earlier; non-operating expenses were minor at ¥0.2B (interest expense ¥0.0B). Ordinary Income was ¥63.5B (YoY +8.1%), reflecting operating improvements. Extraordinary gains were ¥0.9B (including ¥0.8B gain on sale of subsidiary shares), and extraordinary losses were ¥6.7B (mainly ¥6.5B impairment on investment securities), resulting in Profit Before Tax of ¥57.7B. After deducting income taxes of ¥18.0B (effective tax rate 31.2%), Net Income was ¥44.5B (YoY +41.7%). Although this period’s valuation loss pressured final profit, Net Income improved substantially from prior-year ¥31.4B, where special losses were minor. Comprehensive income was ¥37.7B; the difference from Net Income was influenced by Other Comprehensive Income - valuation difference on securities of -¥2.1B. In conclusion, the company achieved lower revenue but higher profit, with margin-driven profitability improvement clear.
[Profitability] Operating Margin improved to 25.4% (from 21.4%, +4.0pt), and Net Margin expanded to 18.7% (from 12.0%, +6.7pt). ROE was 31.2% (prior year 32.0%), remaining at high levels, decomposed as Net Margin 18.7% × Total Asset Turnover 1.24x × Financial Leverage 1.20x. Gross Margin improved to 49.4% (from 44.6%, +4.8pt), suggesting improved project mix and utilization.
[Cash Quality] Operating Cash Flow (OCF) was ¥33.0B, which is 74.2% of Net Income ¥44.5B, a significant decline from prior-year OCF ¥53.9B (171.7% of Net Income ¥31.4B). OCF/EBITDA was 0.52x (EBITDA ¥63.1B = Operating Income ¥60.6B + D&A ¥2.5B), indicating weakness. Before working capital changes, subtotal OCF was ¥51.3B, but decreases in bonus provisions (-¥8.8B), trade payables (-¥2.2B), and tax payments (-¥19.5B) pressured cash. Free Cash Flow was ¥26.0B (OCF ¥33.0B - Investing CF ¥7.1B) and dividends of ¥17.9B were sufficiently covered.
[Investment Efficiency] Total Asset Turnover slightly declined to 1.24x (from 1.33x). Capital expenditures were ¥3.9B / D&A ¥2.5B = 1.54x, indicating continued growth investment. Investment securities increased materially to ¥59.7B (from ¥30.2B, +97.5%), comprising 35.0% of total assets and raising balance sheet market sensitivity.
[Financial Soundness] Equity Ratio improved to 83.6% (from 72.3%, +11.3pt), extremely strong. Current ratio was 354%; cash was ¥51.4B versus short-term liabilities of ¥23.8B, indicating no liquidity risk. Interest-bearing debt was effectively zero (interest expense ¥0.0B); financial leverage arises purely from the ratio of equity to total assets.
OCF was ¥33.0B, down -38.7% from prior-year ¥53.9B. OCF subtotal (before working capital changes) was ¥51.3B and healthy, but decreases in bonus provisions (-¥8.8B; prior year was an increase of +¥8.4B), reductions in trade payables (-¥2.2B; prior year -¥0.3B), and decreases in other payables contributed negatively to working capital. Tax payments of -¥19.5B (prior year -¥15.0B) also increased, pressuring cash conversion. OCF/Net Income was 74.2% and OCF/EBITDA 0.52x, weak, with the timing differences in provisions and payables as primary factors—thus largely temporary. Investing CF was -¥7.1B: capital expenditures -¥3.9B and purchases of investment securities -¥15.4B were partly offset by proceeds from sale of securities ¥12.9B, limiting net outflow. Financing CF was -¥44.0B, driven mainly by dividends -¥17.9B and share buybacks -¥26.1B (net of share disposals +¥6.7B, net -¥26.1B), the total shareholder return. Dividends of ¥17.9B were covered 1.46x by Free Cash Flow ¥26.0B, but total return (dividends + buybacks ¥44.0B) exceeded FCF, reducing cash to ¥51.4B (from ¥69.5B, -26.0%). The company balanced growth investment and active return using internal funds, but normalization of working capital next period is key to OCF recovery.
Of Ordinary Income ¥63.5B, Operating Income ¥60.6B accounts for 95.4%, indicating core operating strength. Non-operating income ¥3.1B (1.3% of sales) consisted of dividends received ¥1.1B and gains on sale of securities ¥1.2B, reflecting contributions from increased investment securities. Conversely, extraordinary losses of ¥6.7B (mainly ¥6.5B impairment on investment securities) are highly temporary and are the main driver of the divergence between Net Income ¥44.5B and Ordinary Income ¥63.5B. OCF ¥33.0B / Net Income ¥44.5B = 74.2% is neutral, but OCF/EBITDA 0.52x is weak, with accrual timing differences in bonus provisions and payables evident. Comprehensive income ¥37.7B vs. Net Income ¥44.5B, the ¥-6.8B gap reflects valuation differences on securities -¥2.1B (Other Comprehensive Income) and tax effects; market value swings in investment securities are depressing comprehensive income. Recurring earnings are primarily operating-driven and of high quality, but special items and investment securities volatility affect final and comprehensive profits. If the special losses dissipate next period, Net Income could revert higher.
For FY2027 (year ending March 2027), management forecasts Revenue ¥253.0B (YoY +6.2%), Operating Income ¥66.0B (YoY +8.8%), Ordinary Income ¥67.0B (YoY +5.5%), and Net Income ¥44.6B (YoY +0.2%), indicating planned revenue and profit growth. Recovery in revenue is assumed alongside a slight improvement in Operating Margin to 26.1% (from 25.4%, +0.7pt), with tight SG&A control to leverage operating gains. The Ordinary Income growth rate (+5.5%) below Operating Income growth (+8.8%) likely reflects assumed normalization or reduction in non-operating income. Net Income is flat, which suggests conservative assumptions that may not fully incorporate the disappearance of this period’s extraordinary loss of ¥6.7B, or that the forecast considers potential valuation impacts on investment securities. EPS is forecast at ¥54.67 (current period actual ¥47.67, +14.7%), consistent with Net Income guidance. Dividend guidance lists ¥0 for interim dividend, indicating no interim payout, with year-end dividend to be decided separately. Progress toward the annual Operating Income target is already high at 60.6/66.0 = 91.8%, increasing the likelihood of achieving the plan into Q4.
Year-end dividend is ¥26, and on a Net Income attributable to owners basis of ¥39.7B, the payout ratio is approximately 48% (reported payout ratio 40.4%). Total dividends amounted to ¥17.9B, covering 68.8% of Free Cash Flow ¥26.0B, suggesting sustainability. Share buybacks of ¥26.1B were executed (back-calculated from shares acquired and financing CF), and combined with dividends total shareholder return was about ¥44.0B, yielding a Total Return Ratio approximately 110% relative to Net Income—an aggressive level. Total return including buybacks exceeded FCF, funded by cash on hand. Shares outstanding: 86.0M, treasury shares 4.42M, weighted average shares during the period 83.32M, implying a treasury share ratio of 5.1%. With BPS of ¥174.83, a dividend of ¥26 corresponds to a dividend yield of about 1.49%. Dividend guidance for the next period is undecided, but management is presumed to target a payout ratio in the 40% range. Given total returns exceeded FCF this period, the focus will be on OCF recovery next period and balancing growth investment.
Market price volatility of investment securities: Investment securities were increased to ¥59.7B (35.0% of total assets); an impairment loss of ¥6.5B was recorded this period and valuation difference on securities is -¥1.7B, indicating unrealized losses. Fluctuations in equity and bond markets can directly hit final profit and the balance sheet via special items and comprehensive income, affecting ROE and equity stability. Similar loss-recognition risk remains in future market downturns.
Decline in cash conversion ratios: OCF/Net Income 74.2% and OCF/EBITDA 0.52x represent significant declines this period. The main drivers were bonus provision decrease -¥8.8B (prior year +¥8.4B) and trade payables -¥2.2B; while largely temporary, if working capital does not normalize next period, internal cash generation could weaken, constraining growth investment and shareholder returns. Tax payments of ¥19.5B (prior year ¥15.0B) are trending higher, and higher tax burdens in a profit growth phase can compress OCF.
Margin pressure from adverse project mix or utilization declines: Operating Margin 25.4% depends on Gross Margin 49.4% and cost control. Although project quality improved after suspending the Investment Business and moving to a single segment, loss of major clients, slower new client acquisition, or intensified competition for talent raising labor costs could compress Gross Margin. Most of SG&A ¥57.2B is likely personnel expenses; in a wage inflation scenario operating leverage could reverse and margins could decline sharply.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 25.4% | 8.1% (3.6%–16.0%) | +17.3pt |
| Net Margin | 18.7% | 5.8% (1.2%–11.6%) | +12.9pt |
Both Operating Margin and Net Margin significantly exceed industry medians, placing the company in the top tier for profitability within the IT & Telecom sector.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -9.4% | 10.1% (1.7%–20.2%) | -19.5pt |
Revenue declined due to suspension of the Investment Business and lags the industry median double-digit growth. Revenue recovery in subsequent periods is key to improving industry positioning.
※ Source: Company compilation
Margin-driven profitability improvement is pronounced, with Operating Margin 25.4% (industry median 8.1%, +17.3pt) and ROE 31.2%, establishing an industry-leading high-profit profile. Suspension of the Investment Business and transition to a single segment have relatively improved revenue stability; maintaining Gross Margin of 49.4% is key to sustaining profit growth. Next period guidance suggests a modest improvement in Operating Margin to 26.1%, contingent on SG&A control and project quality retention.
Temporary decline in cash conversion (OCF/EBITDA 0.52x) is mainly due to working capital timing differences; OCF recovery through normalization of bonus provisions and payables is the focal point for next period. With cash ¥51.4B and Equity Ratio 83.6%, the financial base is extremely solid, and total returns (dividends + buybacks ¥44.0B) can be absorbed by internal funds even when exceeding FCF. There is significant room to balance growth investment (CapEx/D&A 1.54x) and shareholder returns, but sustained OCF recovery is a prerequisite for ongoing distributions.
The increase in investment securities to ¥59.7B (35.0% of total assets) has amplified volatility in profit and comprehensive income. An impairment loss of ¥6.5B was recorded this period and valuation difference on securities is -¥1.7B, implying unrealized losses. Market price movements can impact special items and equity via comprehensive income, affecting ROE and BPS; therefore, portfolio management and monitoring of market valuations are important. If special losses abate next period, Net Income could revert, but similar losses may recur in market downturns.
This report was auto-generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the firm from public financial statements. Investment decisions are your responsibility; consult professional advisors as needed.