| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥505.8B | ¥516.8B | -2.1% |
| Operating Income / Operating Profit | ¥36.5B | ¥51.7B | -29.4% |
| Profit Before Tax | ¥36.2B | ¥50.7B | -28.7% |
| Net Income / Net Profit | ¥23.5B | ¥34.5B | -31.7% |
| ROE | 18.5% | 28.2% | - |
For FY2026, Revenue was ¥505.8B (YoY -¥11.0B, -2.1%), Operating Income was ¥36.5B (YoY -¥15.2B, -29.4%), Ordinary Income was ¥33.3B (YoY +¥12.0B, +56.1%), and Net Income was ¥23.5B (YoY -¥11.0B, -31.7%). The results show declining revenue and profit, with a marked deterioration in operating-stage profitability. Gross profit was ¥86.4B (gross margin 17.1%), down ¥5.9B year-on-year, while SG&A increased to ¥49.9B (+¥9.5B, +23.5%), causing the operating margin to fall to 7.2% from 10.0% a year earlier (-2.8pt). Ordinary Income benefited from higher financial income (¥1.3B, prior year ¥0.2B), which partially offset operating profit decline and resulted in a significant increase. However, at the Net Income level the decline remains significant even after considering a reduction in tax burden. Versus the company plan (Revenue ¥510B, Operating Income ¥30B, Net Income ¥19B), Revenue slightly missed (progress 99%), while Operating Income and Net Income beat (121.7% and 123.8% respectively), suggesting contributions from cost control and high-margin projects. The core LTV Marketing Business accounted for 97.6% of Revenue, with segment profit margin at 12.6%, down from the prior year. Financial soundness is high with an Equity Ratio of 52.4% and Cash of ¥73.1B; however, Operating Cash Flow was ¥16.2B, or 0.69x of Net Income ¥23.5B, and working capital deteriorated due to an increase in accounts receivable and a decrease in accounts payable, leaving room for improvement in cash conversion quality.
[Revenue] Revenue was ¥505.8B, a YoY decrease of -2.1%. The core LTV Marketing Business was ¥493.6B (-2.7%) showing deceleration; performance-based fees were ¥480.5B (prior year ¥492.6B), decreasing, and fixed fees were ¥13.1B (prior year ¥14.6B), slightly down. "Other" was ¥12.2B (+27.1%) and high-growth, but only 2.4% of total company revenue and insufficient to offset the core slowdown. Revenue composition is highly concentrated: LTV Marketing 97.6%, Other 2.4%, indicating clear dependence on specific business lines. The revenue decline is suggested to reflect a slowdown in performance-based projects and client budget tightening.
[Profitability] Gross profit was ¥86.4B (gross margin 17.1%), down ¥5.9B from ¥89.2B (gross margin 17.9%) in the prior year, a -0.8pt decline in gross margin. Cost of sales deterioration was mainly driven by higher media costs and changes in project mix. SG&A was ¥49.9B, up ¥9.5B (+23.5%) from ¥40.4B, and the SG&A ratio rose to 9.9% from 7.8% (+2.1pt). Upfront burdens from personnel costs, hiring, and development investment were heavy, and in a revenue-declining environment operating leverage reversed, causing Operating Income to fall to ¥36.5B (-29.4%) and operating margin to 7.2% (-2.8pt). Financial income increased to ¥1.3B (prior year ¥0.2B); financial expenses were ¥1.6B (prior year ¥1.2B), leaving net financials at -¥0.3B and allowing Ordinary Income to recover substantially to ¥33.3B (+56.1%) despite operating profit decline. Corporate taxes were ¥12.6B (effective tax rate 34.9%), and Net Income was ¥23.5B (-31.7%), with net margin 4.7% (prior year 6.7%, -2.0pt). The gap between Ordinary Income and Net Income is mainly due to tax burden; one-off items are minor. In conclusion, the result is reduced revenue and profit driven by lower gross margin and higher SG&A.
The core LTV Marketing Business recorded Revenue ¥493.6B (-2.7%), Operating Income ¥62.0B (-13.9%), and margin 12.6%. Segment assets were ¥100.0B. "Other" recorded Revenue ¥12.2B (+27.1%), Operating Income ¥4.2B (+15.5%), and margin 35.0%, with segment assets of ¥39.6B. LTV Marketing accounts for 97.6% of company revenue and carries the majority of operating profit, but its margin has declined year-on-year, confirming profitability pressure. While "Other" is small, it is high-margin and growing, potentially a seed for portfolio diversification. Large margin disparities across segments indicate that improving gross margin and SG&A ratio in the core business and scaling "Other" are keys to restoring overall profitability.
[Profitability] Operating margin was 7.2%, down -2.8pt from 10.0% a year ago; net margin was 4.7%, down -2.0pt from 6.7%. Gross margin decreased to 17.1% (prior 17.9%, -0.8pt), and SG&A ratio rose to 9.9% (prior 7.8%, +2.1pt). ROE was 19.0%, down -11.4pt from 30.4% a year earlier, but still +8.9pt above the industry median of 10.1%, representing high return on equity. [Cash Quality] Operating Cash Flow was ¥16.2B, representing 0.69x of Net Income ¥23.5B, a low level; working capital deteriorated due to increased accounts receivable and decreased accounts payable, leaving cash conversion quality as an issue. EBITDA (Operating Income + Depreciation & Amortization) was ¥39.5B, and OCF/EBITDA was 0.41x, indicating weak cash realization of profits. [Investment Efficiency] Total Asset Turnover was approximately 2.10x (¥505.8B ÷ average total assets during the period ~¥240B), maintaining high efficiency and strengths in asset compression and turnover. Goodwill was ¥39.3B, accounting for 16.3% of total assets and 31.0% of net assets, and the Goodwill/EBITDA ratio was 0.99x, within an appropriate range and indicating a light M&A premium recovery burden. [Financial Soundness] Equity Ratio was 52.4% (prior 52.7%), and total interest-bearing debt was ¥42.4B (short-term ¥18.7B + long-term ¥23.8B). Debt/EBITDA was 1.07x, a low level. Cash and cash equivalents were ¥73.1B, far exceeding short-term borrowings of ¥18.7B, indicating strong short-term debt repayment capacity. Interest coverage was extremely robust at Operating Income ¥36.5B ÷ Interest Expense ¥0.4B ≒ 91x.
Operating Cash Flow was ¥16.2B, a substantial improvement from prior year ¥-3.4B, but still low at 0.69x of Net Income ¥23.5B, indicating issues in cash realization of profits. Operating Cash Flow before working capital changes was ¥32.5B; from this, increases in accounts receivable of ¥4.1B, decreases in accounts payable of ¥4.0B, and other working capital improvement of -¥1.2B led to a total working capital cash consumption of ¥8.3B, and corporate tax payments of ¥18.8B were also a heavy burden. Even after a tax refund of ¥2.8B, large totals of working capital consumption and tax payments left Operating Cash Flow at ¥16.2B. Investing Cash Flow was -¥9.0B, with restrained capital expenditure of -¥0.3B but proactive business investments including subsidiary acquisitions -¥5.9B, other financial asset acquisitions -¥2.2B, and loans -¥1.2B. Free Cash Flow was ¥7.2B (Operating Cash Flow ¥16.2B + Investing Cash Flow -¥9.0B), a large improvement from prior year -¥13.8B. Financing Cash Flow was -¥9.2B; although long-term borrowings of ¥20.0B were raised, short-term borrowings decreased -¥0.4B, long-term repayments were -¥4.4B, share buybacks were -¥20.0B, dividend payments -¥2.5B, and lease repayments -¥1.9B were executed. Total shareholder returns of ¥22.5B (dividends ¥2.5B + buybacks ¥20.0B) far exceeded Free Cash Flow ¥7.2B, indicating that total returns were financed by borrowings. Cash and cash equivalents decreased from ¥75.1B at the beginning of the period to ¥73.1B at the end, a decline of -¥2.0B. While Operating Cash Flow improvement is commendable, strengthening working capital management and improving cash conversion rate remain key tasks.
Earnings recurrence is high; other income ¥0.1B and other expenses ¥0.1B mean one-off items are minor. Non-operating results were financial income ¥1.3B and financial expense ¥1.6B, net -¥0.3B, and financial income amounted to 0.3% of Revenue, indicating a business model centered on core operations. The gap between Ordinary Income ¥33.3B and Net Income ¥23.5B is mainly due to corporate taxes ¥12.6B (effective tax rate 34.9%) and is not anomalous. However, from an accrual quality perspective, Operating Cash Flow being below Net Income (CF/NI = 0.69x) calls for caution. End-of-period increases in accounts receivable and decreases in accounts payable worsened working capital, suggesting timing lags between revenue recognition and cash collection and changes in purchasing conditions. Comprehensive income was ¥26.4B, ¥2.9B higher than Net Income ¥23.5B; the ¥2.9B other comprehensive income consisted of valuation gains on financial assets measured at fair value through other comprehensive income, so divergence from recurring earnings is limited. Overall, core earnings quality is high, but weak cash conversion is a notable concern.
Against the full-year forecast (Revenue ¥510.0B, Operating Income ¥30.0B, EPS ¥152.53), actuals were Revenue ¥505.8B (progress 99.2%), slightly missed; Operating Income ¥36.5B (progress 121.7%), and Net Income ¥23.5B (EPS ¥169.49, progress ~123.8%) beat plans. Revenue missed due to slowdown in performance-based projects within core LTV Marketing, but cost control and contributions from high-margin projects led to profits exceeding plan. The full-year dividend forecast had been ¥0, but a year-end dividend of ¥55 per share was paid, resulting in a payout ratio of 34.3%. The company’s plan was conservative and confirms resilience in profits. Future performance will hinge on optimizing SG&A, improving gross margin, and restoring cash generation through working capital efficiency.
The year-end dividend was ¥55 per share, making total annual dividend ¥55. The payout ratio was 34.3% (total dividends ¥0.68B ÷ Net Income ¥23.5B × outstanding shares ratio; approximated as annual dividend ¥55 ÷ EPS ¥169.49 ≒ 32.4%), a sustainable level. Coverage of dividend payments ¥2.5B by Free Cash Flow ¥7.2B is about 2.9x, sufficient. However, a share buyback of ¥20.0B was conducted during the period, and combined with dividends ¥2.5B, total shareholder returns were ¥22.5B, yielding a total return ratio of approximately 95.7% relative to Net Income ¥23.5B, a high level. The buyback was financed by long-term borrowings of ¥20.0B, indicating an aggressive pursuit of capital efficiency. That total returns far exceed Free Cash Flow suggests that sustained shareholder returns depend on recovery of cash generation. The dividend policy is profit-linked and reasonable, but in the short term prioritizing cash flow stabilization and flexible allocation between dividends and buybacks is advisable.
Business concentration risk: The LTV Marketing Business accounts for 97.6% of Revenue, making performance tied to specific platforms and large clients. Gross margin is 17.1%, down -0.8pt year-on-year, and media cost increases and project mix changes are pressuring profitability of performance-based business. "Other" is high-margin (35.0%) but small in scale, meaning portfolio diversification through other businesses is still incomplete.
Cash flow quality risk: Operating Cash Flow ¥16.2B is only 0.69x of Net Income ¥23.5B, and working capital deteriorated due to accounts receivable increase ¥4.1B and accounts payable decrease ¥4.0B. Accounts receivable collection period is about 63 days (Accounts Receivable ¥87.5B ÷ Revenue ¥505.8B × 365 days), somewhat long, and credit costs could materialize in an economic downturn. OCF/EBITDA ratio is 0.41x, below industry average, indicating structural challenges in cash realization.
Goodwill & financial soundness risk: Goodwill of ¥39.3B accounts for 31.0% of Net Assets and the Goodwill/EBITDA ratio is 0.99x; while impairment risk is limited under current profitability, a future deterioration in earnings could increase impairment risk. Equity Ratio 52.4% and Debt/EBITDA 1.07x indicate a solid financial position, but short-term liabilities including short-term borrowings ¥18.7B make up about 43.9% of current liabilities and could be a pressure point under deteriorating refinancing conditions. However, cash holdings of ¥73.1B provide a buffer and high near-term liquidity resilience.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Return on Equity | 19.0% | 10.1% (2.2%–17.8%) | +8.9pt |
| Operating Margin | 7.2% | 8.1% (3.6%–16.0%) | -0.9pt |
| Net Margin | 4.7% | 5.8% (1.2%–11.6%) | -1.2pt |
ROE significantly exceeds the industry median, highlighting strong capital efficiency, while operating and net margins are slightly below peers, indicating room for profitability improvement.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -2.1% | 10.1% (1.7%–20.2%) | -12.2pt |
Revenue growth is well below the industry median, reflecting a clear slowdown in the core business. Expanding high-value-added projects and cultivating new businesses are keys to restoring growth.
※ Source: Company compilation of public financial statements
While declines in revenue and profit revealed lower margins and weak cash conversion, the company exceeded full-year profit guidance, confirming progress in cost control. Operating margin 7.2% (prior 10.0%, -2.8pt) and net margin 4.7% (prior 6.7%, -2.0pt) show reduced profitability, but ROE 19.0% remains +8.9pt above the industry median 10.1%, preserving high capital efficiency. Revenue growth -2.1% lags the industry median +10.1% by -12.2pt, and core business deceleration is a key challenge. Short-term priorities are SG&A optimization, gross margin recovery, and strengthening working capital management to restore cash generation.
Financial soundness is strong with Equity Ratio 52.4%, Debt/EBITDA 1.07x, and Cash ¥73.1B, providing robust liquidity. Goodwill ¥39.3B (31.0% of Net Assets, Goodwill/EBITDA 0.99x) is within an appropriate range with light recovery burden. However, Operating Cash Flow ¥16.2B is 0.69x of Net Income ¥23.5B, and worsening working capital along with OCF/EBITDA 0.41x indicate cash conversion quality issues. Total returns ¥22.5B (dividends ¥2.5B + buybacks ¥20.0B) far exceeded Free Cash Flow ¥7.2B and were financed by long-term borrowings ¥20.0B. The active pursuit of capital efficiency is commendable, but sustained shareholder returns require recovery in cash generation. Medium-term levers for recovery include expanding high-margin fixed-fee projects, scaling the "Other" business for portfolio diversification, and improving CPA and ARPU through data and algorithm enhancements.
This report was generated automatically by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the Company based on public financial statements. Investment decisions are your responsibility; please consult a professional advisor as appropriate.