Virtualex Holdings (6193) FY2026 Q3 Earnings Report

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Executive Summary

For the cumulative Q3 period, the Company recorded increases in both revenue and earnings, with the substantial growth in net income largely attributable to non-operating and special factors. Revenue was ¥50.1B (+4.4% YoY), Operating Income was ¥1.8B (+20.7%), Ordinary Income was ¥2.1B (+138.2%), and Net Income attributable to owners of the parent was ¥1.5B (+140.1%). Although the increase in Operating Income was supported by higher revenue in both segments, the substantial increases in Ordinary Income and Net Income were largely attributable to non-operating items, including investment gain on investment limited partnerships (¥0.2B) and gains on the sale of fixed assets. Accordingly, the pace of improvement in the profitability of the core business was more moderate.

Factors Affecting Earnings

【Revenue】Revenue was ¥50.1B (+4.4% YoY), with both segments recording higher revenue: the IT & Consulting Business generated ¥28.5B (+3.6%), while the Outsourcing Business generated ¥21.6B (+5.5%). Segment profit also increased year on year in both businesses, to ¥5.9B for IT & Consulting and ¥3.9B for Outsourcing, indicating that the revenue increase was accompanied by profit growth.

【Profit and Loss】Operating Income was ¥1.8B (+20.7%), and the Operating Income margin improved slightly to 3.5% (3.0% in the previous year). Ordinary Income, however, increased substantially to ¥2.1B (+138.2%), primarily due to the recognition of investment gain on investment limited partnerships of ¥0.2B and the elimination of the investment loss on investment limited partnerships (¥0.5B) recorded in the previous year. Net Income of ¥1.5B (+140.1%) benefited not only from the increase in Ordinary Income but also, in part, from special gains of ¥0.1B, including gains on the sale of fixed assets. In conclusion, the Company recorded higher revenue and earnings, but it should be noted that the growth rate in Net Income includes factors outside the core business.

Segment Analysis

The IT & Consulting Business generated revenue of ¥28.5B (56.9% of total revenue, +3.6% YoY) and segment profit of ¥5.9B (20.5% margin), making it the largest source of earnings among the two segments. The Outsourcing Business generated revenue of ¥21.6B (43.1% of total revenue, +5.5% YoY) and segment profit of ¥3.9B (17.9% margin), with both businesses recording increases in revenue and profit. Against total segment profit of ¥9.7B, the allocation of company-wide expenses of ¥7.95B (¥7.57B in the previous year, +5.0%) resulted in consolidated quarterly Operating Income of ¥1.75B. The growth rate of company-wide expenses slightly exceeded revenue growth, absorbing part of the increase in segment profit and contributing to the low Operating Income margin.

Key Financial Indicators

【Profitability】The Operating Income margin was 3.5% and the Net Income margin was 2.9%, both improving from the same period of the previous year (Operating Income margin of 3.0% and Net Income margin of 1.3%). The gross margin was 23.4% (23.7% in the previous year), remaining broadly flat, while the SG&A expense ratio declined slightly to 19.9% (20.7% in the previous year), indicating a modest improvement in cost efficiency. 【Cash Quality】Cash and deposits were ¥14.6B, an increase of +7.0% YoY, while accounts receivable declined to ¥10.2B (¥12.3B in the previous year). As cash flow statement data, including Operating Cash Flow (OCF), has not been disclosed, the analysis is limited to estimates based on changes in the balance sheet. 【Investment Efficiency】Annualized ROE was 10.3%, and the total asset turnover ratio was high, indicating relatively favorable asset efficiency. Total assets increased to ¥39.1B (¥37.9B in the previous year), while net assets increased to ¥18.9B (¥17.7B in the previous year). 【Financial Soundness】The Equity Ratio improved to 48.2% (45.6% in the previous year). Current assets were ¥26.5B versus current liabilities of ¥17.1B, resulting in a current ratio of approximately 155%. The Company had long-term borrowings of ¥3.1B and short-term borrowings of ¥5.0B, indicating a high proportion of short-term interest-bearing debt.

Cash Flow Analysis

As individual figures from the cash flow statement have not been disclosed, changes in the balance sheet are used to assess funding trends. Cash and deposits were ¥14.6B, an increase of +7.0% compared with the same period of the previous year, indicating continued accumulation of funds. Meanwhile, accounts receivable declined from ¥12.3B in the previous year to ¥10.2B, and progress in collections may have contributed to the increase in cash. Investment securities increased to ¥5.4B (¥4.3B in the previous year, +26.6%), suggesting that a portion of excess funds was allocated to marketable assets. Intangible fixed assets increased to ¥3.9B (¥3.5B in the previous year), indicating continued investment related to software. Long-term borrowings declined from ¥3.9B in the previous year to ¥3.1B, indicating progress in reducing liabilities.

Quality of Earnings

The increase in earnings for the current period was characterized by a significant contribution from non-recurring factors in addition to growth in the core business. Investment gain on investment limited partnerships accounted for ¥0.2B of non-operating income of ¥0.4B, while the elimination of the investment loss on investment limited partnerships recorded as a non-operating expense in the previous year substantially boosted Ordinary Income. Special gains of ¥0.1B (gain on the sale of fixed assets) also contributed to Net Income, and these items have low recurrence potential. The difference between Operating Income and Ordinary Income was primarily attributable to changes in non-operating gains and losses. Excluding special gains from Ordinary Income, the pace of improvement on a core-business basis can be viewed as being close to the growth in Operating Income (+20.7%). Comprehensive income was ¥1.5B, broadly in line with Net Income, and changes in the valuation difference on securities were limited (¥0.03B), with no significant divergence from Net Income.

Earnings Forecast and Guidance

The full-year earnings forecast calls for revenue of ¥69.0B (+6.3% YoY), Operating Income of ¥3.3B (+18.2%), Ordinary Income of ¥3.2B (+72.8%), and EPS of ¥71.90. No revisions to the earnings forecast had been made as of the current quarter. Cumulative Q3 revenue of ¥50.1B represented 72.6% of the full-year forecast, indicating generally steady progress. Operating Income of ¥1.8B represented 54.5% progress against the full-year forecast, implying that a meaningful accumulation of profit will be required in Q4. Cumulative Ordinary Income had already reached ¥2.1B, or 64.4% of the full-year forecast of ¥3.2B. The projected full-year growth in Ordinary Income (+72.8%) is therefore more moderate than the growth through the current quarter (+138.2%).

Shareholder Returns

The Company plans to pay a year-end dividend of ¥15.00, with no interim dividend. As the Company paid no dividend in the same period of the previous year, the current period represents a resumption of dividends. Based on the total dividend amount calculated from the full-year Net Income forecast of ¥2.0B and approximately 2.83 million issued shares (excluding treasury shares), the Payout Ratio is approximately 31%, remaining at a conservative level. No revisions to the dividend forecast had been made as of the current quarter, and no disclosure regarding share repurchases has been identified.

Risk Factors

1. Risk of an extension in the collection period for accounts receivable: Accounts receivable were ¥10.2B, representing a high residual ratio relative to quarterly revenue. Any delay in collection could affect cash flow.

2. Dependence on short-term liabilities: Current liabilities of ¥17.1B, including short-term borrowings of ¥5.0B, account for a substantial portion of total liabilities of ¥20.3B. Changes in the refinancing environment could therefore cause funding costs to fluctuate.

3. Dependence on non-recurring items: The substantial increases in Ordinary Income and Net Income include contributions from non-recurring items such as investment gain on investment limited partnerships and gains on the sale of fixed assets. If these items do not recur, the pace of earnings growth may slow.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

Compared with the industry median, both the Operating Income margin and Net Income margin rank in the lower tier of the industry.

Growth and Capital Efficiency

The revenue growth rate also fell below the industry median, indicating that the pace of growth is relatively moderate within the industry.

Source: Compiled by the Company

Key Points from the Earnings Results

1. The Operating Income margin improved from the previous year to 3.5%, but remained low compared with the industry median of 8.3%, indicating potential for structural improvement in profitability.

2. The substantial increase in Net Income (+140.1%) included contributions from non-recurring items such as investment gain on investment limited partnerships and gains on the sale of fixed assets. This differs from the pace of improvement in the core business, as reflected in Operating Income growth of +20.7%, and represents a key feature of the earnings results.

3. The Equity Ratio improved to 48.2% (45.6% in the previous year), and cash and deposits also increased. However, short-term borrowings account for a high proportion of current liabilities, and changes in the funding structure warrant monitoring.

Theoretical Share Price (Reference Value)

Sensitivity: ¥657–¥696 at cost of equity ±1%; ¥676–¥677 at ω±0.1.

Notes:

• Net assets as of the end of the quarter are used (there is a timing gap relative to the full-year forecast).
• As net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / These are mechanically calculated values based solely on publicly disclosed data and do not constitute forecasts of the market share price or recommendations for specific investment actions, nor do they predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility and, where necessary, after consulting with a professional.

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