| Metric | Current Period | Same Period Last Year | YoY |
|---|---|---|---|
| Revenue | ¥115.8B | ¥106.4B | +8.9% |
| Operating Income | ¥44.5B | ¥42.9B | +3.7% |
| Ordinary Income | ¥45.0B | ¥43.1B | +4.6% |
| Net Income | ¥30.8B | ¥29.0B | +6.2% |
| ROE | 22.8% | 23.2% | - |
This was a quarter in which Insource secured higher revenue and profit, although the operating profit margin declined slightly as revenue growth failed to maintain a pace exceeding the increase in expenses. Revenue was ¥115.8B (+8.9% YoY), Operating Income was ¥44.5B (+3.7%), Ordinary Income was ¥45.0B (+4.6%), and Net Income was ¥30.8B (+6.2%). Selling, general and administrative expenses increased by +13.2%, exceeding the revenue growth rate, causing the operating profit margin to decline to 38.4% (40.3% in the previous year). Meanwhile, the growth rate of Net Income exceeded that of Operating Income because the valuation loss on investment securities recorded in the previous period did not recur.
【Revenue】The company operates as a single segment, the Education Services Business, and does not disclose a breakdown by segment. Revenue was ¥115.8B, representing an increase of +8.9% from ¥106.4B in the previous year.
【Profit and Loss】Operating Income was ¥44.5B (+3.7%), Ordinary Income was ¥45.0B (+4.6%), and Net Income was ¥30.8B (+6.2%), with increases in profit secured across all measures. Selling, general and administrative expenses increased to ¥43.9B (+13.2% YoY), outpacing the revenue growth rate (+8.9%). As a result, the operating profit margin declined by 1.9pt to 38.4% (40.3% in the previous year), while the gross profit margin also declined by 0.5pt to 76.3% (76.8% in the previous year). Extraordinary gains and losses were nearly zero, indicating limited temporary factors. However, the valuation loss on investment securities of ¥1.09B recorded in the same period of the previous year did not occur during the current period, which was one factor behind the growth rate of Net Income (+6.2%) exceeding that of Operating Income (+3.7%). In conclusion, the company achieved higher revenue and profit.
【Profitability】The operating profit margin was 38.4%, down 1.9pt from 40.3% in the previous year; the net profit margin was 26.6%, down 0.7pt from 27.3%; and the gross profit margin was also 76.3%, down 0.5pt from 76.8%. Thus, modest margin contraction in the same direction was observed across all measures.【Cash Flow Quality】Comprehensive income was ¥30.7B, nearly equal to Net Income of ¥30.8B. Changes in the valuation difference on other securities were small at -¥0.1B, indicating limited factors distorting earnings quality.【Investment Efficiency】ROE remained high at 22.8%, supported by the combination of a high net profit margin and low financial leverage.【Financial Soundness】The Equity Ratio was 81.3%, up 4.0pt from 77.3% in the previous year. Current assets of ¥101.7B versus current liabilities of ¥30.0B resulted in a current ratio of approximately 339%, indicating a solid financial foundation.
As cash flow statement data is not disclosed, cash flow trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥82.2B, nearly flat compared with ¥81.9B in the previous year, while inflows and outflows of funds can be identified through changes in the asset and liability composition. Accounts receivable were ¥16.2B, down from ¥18.8B in the previous year, while advances received increased to ¥12.7B from ¥11.0B. These working capital movements are directionally positive for cash generation from operating activities. Conversely, income taxes payable declined significantly to ¥6.3B from ¥11.6B in the previous year, while other accounts payable decreased to ¥3.5B from ¥6.8B, suggesting that payments of taxes and expenses may have been short-term cash outflow factors. Inventories remained minimal at ¥0.2B, limiting the risk of funds being tied up in inventory. Net assets increased to ¥135.1B from ¥124.9B in the previous year, reflecting continued strengthening of equity through the accumulation of retained earnings.
Non-operating income was ¥0.6B, equivalent to only 0.5% of revenue, and extraordinary gains and losses were also nearly zero. Accordingly, current-period profit was primarily composed of operating activities. In the same period of the previous year, a valuation loss on investment securities of ¥1.09B was recorded as an extraordinary loss. As this one-time downward factor did not occur in the current period, the difference between the growth rates of Ordinary Income and Net Income narrowed. Comprehensive income was ¥30.7B, nearly equal to Net Income of ¥30.8B, and the adjustment from the valuation difference on other securities was small at -¥0.1B. Therefore, the divergence between current-period Net Income and underlying economic performance can be assessed as limited.
Progress against the full-year company forecasts—Revenue of ¥160.0B, Operating Income of ¥63.8B, Ordinary Income of ¥64.3B, and Net Income of ¥44.0B—stood at 72.4% for Revenue, 69.7% for Operating Income, 70.0% for Ordinary Income, and 70.0% for Net Income as of Q3. Each indicator was slightly below the 75% benchmark for quarterly progress, but the earnings forecasts themselves have not been revised; only the dividend forecast has been revised. With selling, general and administrative expenses continuing to increase, cost control in Q4 will be the key focus for achieving the full-year plan.
The company’s forecast year-end dividend is ¥35 (ordinary dividend of ¥29 50 sen and commemorative dividend of ¥5 50 sen). As the interim dividend paid was ¥0, the annual dividend is expected to be paid entirely at year-end. Based on the average number of shares outstanding during the period (approximately 84.0 million shares, excluding treasury shares), total annual dividends are estimated at approximately ¥29.4B, resulting in a Payout Ratio of approximately 66.8% against the full-year Net Income forecast of ¥44.0B. Although the Payout Ratio is somewhat high, the company has sufficient near-term capacity to execute the payout given its ample financial foundation, including cash and deposits of ¥82.2B and an Equity Ratio of 81.3%.
Decline in operating leverage due to front-loaded expenses: Selling, general and administrative expenses increased by +13.2% YoY, exceeding the +8.9% revenue growth rate, resulting in a 1.9pt decline in the operating profit margin to 38.4%. If this trend continues, there is a risk that a structure of declining profit margins despite revenue growth will become entrenched.
Gradual decline in the gross profit margin: The gross profit margin was 76.3%, down 0.5pt from 76.8% in the previous year, suggesting changes in the cost structure or product mix. Although the decline was small, continued monitoring is necessary to determine whether it persists over multiple periods.
High Payout Ratio: The Payout Ratio based on the company’s forecast is approximately 66.8%, including the commemorative dividend of ¥5 50 sen. Since commemorative dividends are not recurring by nature, the key focus going forward will be convergence toward the ordinary dividend level.
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Profit Margin | 38.4% | 8.2% (3.6%–18.0%) | +30.2pt |
| Net Profit Margin | 26.6% | 6.0% (2.2%–12.7%) | +20.6pt |
In terms of profitability, both the operating profit margin and net profit margin significantly exceeded the industry median, positioning the company among the high-profitability group within the IT and communications industry.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 8.9% | 10.4% (-1.1%–19.5%) | -1.5pt |
The revenue growth rate was slightly below the industry median, leaving growth performance at a mid-range level within the industry.
※Source: Compiled by the company
While high profitability is outstanding within the industry, a declining trend from the previous year is evident. The operating profit margin of 38.4% and net profit margin of 26.6% significantly exceed the industry median. However, the increase in selling, general and administrative expenses (+13.2%) exceeded revenue growth (+8.9%), making the recovery of cost control a key determinant of future margin trends.
Working capital movements are supportive of cash generation. A decline in accounts receivable and an increase in advances received were observed, indicating that the Education Services Business’s advance-order and advance-payment revenue structure supports cash conversion.
The year-end dividend is forecast at ¥35, including the commemorative dividend, and the Payout Ratio is somewhat high at approximately 66.8%. However, the financial foundation—an Equity Ratio of 81.3% and cash and deposits of ¥82.2B—supports the company’s ability to maintain shareholder returns in the near term.
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, after consulting with a professional as necessary.
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