Inbound Tech (7031) FY2026 Q3 Earnings Report

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Executive Summary

For the cumulative Q3 of the fiscal year ending March 2026, operating results fell into the red due to a decline in revenue from the core businesses and deterioration in the gross margin. Revenue was ¥16.25B (-17.2% YoY), operating income was ¥-0.32B (turning from income of ¥0.26B in the previous year period to a loss), ordinary income was ¥-0.56B (turning from income of ¥0.22B to a loss), and quarterly net loss attributable to owners of the parent was ¥-0.71B (turning from income of ¥0.03B to a loss). The primary factor was a decline in gross profit (-34.6% YoY) exceeding the rate of revenue decline, which could not be fully absorbed by reductions in SG&A expenses (-22.7% YoY).

Factors Affecting Business Performance

【Revenue】Revenue was ¥16.25B, down -17.2% YoY. By segment, the Multilingual CRM Business generated ¥11.99B (-11.4% YoY; 73.8% composition), while the Sales Outsourcing Business generated ¥4.27B (-30.3% YoY; 26.2% composition). Both businesses experienced revenue declines, with the Sales Outsourcing Business showing a particularly significant decrease.

【Profit and Loss】Gross profit was ¥2.90B (-34.6% YoY), and the gross margin declined to 17.8% from 22.5% in the previous year period, a decrease of 4.7pt. Although SG&A expenses were controlled at ¥3.22B (-22.7% YoY), the decline in gross profit could not be absorbed, and operating loss deteriorated to ¥-0.32B. Ordinary loss was ¥-0.56B after the addition of non-operating expenses of ¥0.26B, including interest expenses of ¥0.06B. A ¥0.03B loss on disposal of fixed assets and ¥0.07B profit attributable to non-controlling interests were added to the ¥0.60B loss before taxes, resulting in a quarterly net loss attributable to owners of the parent of ¥0.71B. The results are classified as a decline in both revenue and profit.

Segment Analysis

The Multilingual CRM Business recorded revenue of ¥11.99B (-11.4% YoY) and segment profit of ¥1.57B (-33.3% YoY). Its profit margin declined from 17.3% to 12.8%, but it remains the largest profit-contributing segment. The Sales Outsourcing Business experienced a significant revenue decline to ¥4.27B (-30.3% YoY), but segment profit was nearly flat at ¥0.97B (-0.7% YoY), while its profit margin improved from 15.9% to 22.7%. Combined segment profit was ¥2.53B (-23.7% YoY), which was insufficient to absorb company-wide expenses of ¥2.86B (¥3.06B in the previous year period), resulting in a company-wide operating loss.

Key Financial Indicators

【Profitability】The operating margin deteriorated to -2.0% from 1.4% in the previous year period, while the gross margin deteriorated to 17.8% from 22.5%; annualized ROE was -4.5%. 【Cash Quality】Accounts receivable were ¥4.07B, accounting for 15.1% of total assets, and annualized DSO was 69 days, indicating a somewhat extended collection period. Non-operating expenses of ¥0.26B exceeded non-operating income of ¥0.02B, resulting in a deficit in net financial income. 【Investment Efficiency】Annualized ROIC was in negative territory, indicating that the company is not generating returns from invested capital. 【Financial Soundness】The equity ratio was 70.3% and the current ratio was 243.2%, both high levels that secure short-term payment capacity. Meanwhile, short-term borrowings of ¥4.00B accounted for 14.8% of total assets, and debt maturities are concentrated in the short term.

Cash Flow Analysis

Although the cash flow statement was not disclosed, an examination of fund movements based on changes in the balance sheet shows that cash and deposits were ¥14.66B, increasing from ¥14.07B in the previous year period. Meanwhile, retained earnings were ¥5.64B, down 11.3% YoY, as the net loss for the period directly reduced internal reserves. Accounts receivable were ¥4.07B, down from ¥4.80B in the previous year period, possibly reflecting a decline in collections accompanying the reduced scale of sales even amid an operating loss. Cash and deposits were equivalent to 3.67 times short-term liabilities, including borrowings of ¥4.00B, providing sufficient room for the immediate funding position. However, if operating losses continue, the impact on working capital efficiency and cash-generation capacity will remain points requiring ongoing monitoring.

Quality of Earnings

The loss for the period was primarily attributable to deterioration in the core business, as reflected in operating results. The only temporary factor was the recognition of a ¥0.03B loss on disposal of fixed assets, whose quantitative impact was limited. Non-operating expenses were ¥0.26B, including interest expenses of ¥0.06B, representing a recurring factor depressing ordinary income. The only extraordinary loss was the loss on disposal of fixed assets, with no extraordinary income recorded. The gap between the ¥0.60B loss before taxes and the ¥0.64B net loss was attributable to corporate income taxes and other taxes of ¥0.05B. Comprehensive loss was ¥-0.64B, while the portion attributable to owners of the parent was ¥-0.72B, broadly in line with the net loss of ¥-0.71B. No significant divergence attributable to other comprehensive income items was observed, and the substance of the loss can be assessed as closely reflecting the deterioration in the profitability of the core business.

Earnings Forecast and Guidance

The full-year company forecasts are revenue of ¥26.00B (+2.2% YoY), operating income of ¥1.35B (+531.2% YoY), and ordinary income of ¥1.05B (+562.4% YoY). The Q3 cumulative revenue progress rate was only 62.5%, below the standard progress level of approximately 75%. To achieve the forecasts, Q4 alone would need to generate revenue of ¥9.75B and operating income of ¥1.67B, equivalent to an operating margin of 17.1%, representing a substantial gap from the cumulative actual operating loss of ¥0.32B. Recovery in the gross margin and a bottoming out of revenue in the Sales Outsourcing Business will be key to achieving the forecasts. No revisions to the earnings forecasts were disclosed this time.

Shareholder Returns

The Q2 dividend was ¥0 per share, and the full-year dividend forecast is also ¥0, making the payout ratio incalculable (no dividend). The company is continuing its no-dividend policy while recording a loss attributable to owners of the parent of ¥0.71B, suggesting a capital allocation policy that prioritizes preserving retained earnings and liquidity on hand. Treasury shares increased by ¥0.37B YoY; however, because the timing and purpose of the transactions cannot be individually identified, the Total Return Ratio, including share repurchases, has not been calculated.

Risk Factors

1. Declining revenue and profit margins in the core business: Revenue in the Multilingual CRM Business declined -11.4% YoY, while the segment profit margin fell from 17.3% to 12.8%. A delayed recovery in the business generating more than half of company-wide profit could determine whether the company achieves full-year profitability.

2. Deterioration in interest payment capacity: As operating income turned negative, interest coverage became significantly negative, and interest expenses (¥0.06B) cannot be covered by profit from the core business. Cash and deposits of ¥14.66B provide a short-term buffer, but if the recovery in earnings is delayed, the impact on borrowing terms may become a concern.

3. Lengthening accounts receivable collection period: Annualized DSO was 69 days, confirming a lengthy collection period even as revenue declined. Continued working capital tie-up could affect the maintenance of cash and deposit levels.

Industry Benchmark (Reference; Prepared by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

Both metrics are substantially below the industry median, indicating that profitability is relatively low within the industry.

Growth and Capital Efficiency

While many companies in the industry secured revenue growth, the company shifted to a revenue decline and is also lagging within the industry in terms of growth.

※Source: Compiled by the Company

Key Points in the Earnings Results

1. While the core Multilingual CRM Business declined in both revenue and profit margin, the Sales Outsourcing Business improved its segment profit margin to 22.7% despite a 30.3% decline in revenue. The degree of its contribution to profit when revenue recovers will be a key point of focus.

2. Achieving the full-year company forecast of ¥1.35B in operating income requires a Q4 operating margin equivalent to 17.1%. Given the gap from cumulative actual results, the recovery in the gross margin will be closely monitored in future earnings results.

3. Short-term financial stability is secured, with a current ratio of 243.2% and cash and deposits of ¥14.66B. However, a short-term liabilities ratio of 100.0% and annualized DSO of 69 days are points to monitor in managing funding efficiency during a period of operating losses.

Theoretical Share Price (Reference Value)

Sensitivity: ¥613–¥649 at ±1% for the cost of equity, and ¥626–¥634 at ±0.1 for ω.

Notes:

• Net income is substantially compressed relative to operating income due to tax burden, acquisition-related expenses, non-controlling interests, and other factors (net income ÷ operating income 44%). This value reflects that compression at face value; if the factors are temporary, normalized earnings power may be higher than this.
• As forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the quarter-end were used; there is a timing difference relative to the full-year forecast.
• Because 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 / Mechanically calculated value based solely on publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee the future share price.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release 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 a professional as necessary.

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