BIPROGY Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥205.13B
• Operating Income: ¥21.35B
• Net Income: ¥11.81B
• EPS: ¥156.60

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

BIPROGY reported solid FY2026 Q2 results under IFRS, with broad-based top-line growth and stronger operating leverage. Revenue rose 10.3% year over year to 2,051.32, while operating income increased 19.0% to 213.50, evidencing margin expansion. Gross profit reached 486.98, delivering a gross margin of 23.7%, supported by improved mix and cost discipline. Operating margin improved to roughly 10.4% (213.50/2,051.32), indicating effective SG&A control relative to revenue (SG&A at 314.04). Net income grew 30.2% to 153.23, driving a net margin of 7.5% and an effective tax rate of 25.1%, suggesting limited one-off tax effects. DuPont metrics are consistent: net margin 7.5%, asset turnover 0.629x, and financial leverage 1.85x combine to an ROE of 8.7%, aligning with the reported ROE. EBITDA of 304.14 implies an EBITDA margin of 14.8%, and D&A of 90.64 indicates a capital-light model with high non-cash expense relative to recent capex. Operating cash flow (117.68) was below net income (OCF/NI 0.77x), as working capital consumed cash, tempering earnings quality in the quarter. Free cash flow, defined here as OCF plus investing CF, was 46.92, positive but insufficient to fund the aggregate of dividends and buybacks. Financing cash outflows were sizable at -228.30, driven by share repurchases (-111.87) and dividends (-55.28), signaling active capital returns. The balance sheet remains strong with total equity of 1,763.20 and an equity ratio of 53.4%, while total liabilities of 1,595.78 indicate moderate leverage (D/E ~0.91x). Cash and equivalents stood at 648.01, comfortably exceeding disclosed loans (short-term 94.67, long-term 112.62), implying a net cash position versus loans. Accounts receivable of 879.49 and inventories of 158.42 highlight typical systems integration seasonality and underscore the importance of receivables collection to cash flow. Total comprehensive income of 165.54 exceeded net income, implying positive other comprehensive income contributions this period. Although dividend data per share is not disclosed, the payout ratio is indicated at 72.3%, which is elevated against FCF generation for the period, and FCF coverage is shown at 0.42x, suggesting reliance on balance sheet strength for shareholder returns. Data limitations exist for non-operating items, ordinary income, current liabilities, and several balance sheet line items, but the disclosed figures collectively indicate improving profitability against a conservative financial base.

Profitability Analysis

ROE of 8.7% is driven by a 7.5% net margin, 0.629x asset turnover, and 1.85x financial leverage, reflecting disciplined cost control and moderate asset intensity. Gross margin stands at 23.7% (486.98/2,051.32), and operating margin at ~10.4% (213.50/2,051.32), with operating income growth (+19.0% YoY) outpacing revenue growth (+10.3% YoY), confirming positive operating leverage. EBITDA margin of 14.8% indicates healthy profitability after SG&A, while D&A of 90.64 suggests prior investment and/or amortization of software/intangibles relative to low current capex. Net margin at 7.5% benefited from limited non-operating drag (non-operating items not disclosed) and a normalized tax rate (25.1%). Compared to domestic SI peers, a ~10% OPM is competitive, though ROE below 10% suggests room to optimize capital efficiency or increase margins. Margin quality appears sound given broad gross-to-operating conversion (~44% of gross profit converts to operating income).

Growth Assessment

Revenue grew 10.3% YoY to 2,051.32, an acceleration consistent with robust project execution and potentially higher contribution from recurring services. Operating income rose 19.0% YoY, showing effective scalability and cost leverage. Net income increased 30.2%, indicating additional tailwinds from below-the-line items and/or tax normalization. The margin expansion (OPM ~10.4%) implies improved mix (e.g., solutions/services) and pricing/efficiency gains. Equity-method income of 4.57 provided a modest contribution to overall earnings. While R&D expense is unreported, EBITDA growth and stable tax rate suggest core-operating drivers, not one-offs. Outlook-wise, sustained growth depends on backlog conversion, enterprise IT investment cycles, and the pace of digital transformation spending. Recurring revenue mix (cloud/managed services) will be critical to maintain margin resiliency and dampen project cyclicality. Working-capital intensity (receivables) may temper near-term cash-based growth, but balance sheet capacity supports ongoing investment and shareholder returns.

Financial Health

Total assets are 3,263.21 with total equity of 1,763.20, yielding an equity ratio of 53.4% and financial leverage of 1.85x, indicating a conservative balance sheet. Total liabilities are 1,595.78 (D/E ~0.91x), while disclosed loans total 207.29 (94.67 short-term, 112.62 long-term). Cash and equivalents are 648.01, implying a net cash position versus disclosed loans of roughly +440–450. Current assets are 1,968.09; current liabilities are unreported, preventing calculation of current and quick ratios, though liquidity appears ample given cash on hand. Accounts receivable are sizable at 879.49 and inventories at 158.42, consistent with systems-integration working-capital requirements. Absence of detail on interest-bearing debt and current liabilities limits full solvency metrics, but the capital structure appears robust with strong equity and liquidity.

Cash Flow Quality

Operating cash flow was 117.68, below net income of 153.23 (OCF/NI 0.77x), indicating working-capital drag and softer cash conversion this period. Free cash flow, as presented (OCF + investing CF), was 46.92, positive but below shareholder distributions. Capex was modest at 11.58, well below D&A of 90.64, implying a capital-light model and/or shifting spend toward intangible/software investments (intangible capex not disclosed). Investing cash outflow of -70.76 may include M&A, software capitalization, or long-term investments (details not disclosed). Financing CF was -228.30, reflecting dividends (-55.28) and share repurchases (-111.87), plus other financing outflows. FCF coverage is cited at 0.42x, indicating distributions exceeded internally generated free cash flow; on dividends alone, FCF of 46.92 versus dividends of 55.28 implies sub-1x coverage. Earnings quality is adequate but not strong this quarter due to working-capital absorption; monitoring receivables and collection cycles is key.

Dividend Sustainability

The calculated payout ratio is 72.3% based on reported EPS, indicating an elevated distribution level relative to earnings. Free cash flow was 46.92 versus dividends paid of 55.28, implying FCF coverage below 1x in the period, while the provided FCF coverage metric is 0.42x (suggesting total capital returns exceeded FCF). With cash and equivalents at 648.01 and a net cash position versus disclosed loans, near-term dividend capacity is supported by the balance sheet. However, sustainability over the medium term relies on improved cash conversion (OCF/NI moving closer to 1x), ongoing earnings growth, and disciplined buyback pacing. Absence of reported DPS and explicit dividend policy limits precision; still, a payout ratio in the 70% range leaves less buffer if earnings or OCF moderate.

Risk Assessment

Business Risks:

• Project execution risk and acceptance timing affecting revenue recognition and OCF
• Pricing pressure and competitive intensity in systems integration and managed services
• Talent acquisition and wage inflation impacting SG&A and delivery capacity
• Hardware/software supply chain fluctuations affecting cost and delivery schedules
• Shift to cloud and subscription potentially cannibalizing legacy on-premise revenues before scale benefits accrue
• Customer IT budget cycles and macro slowdown risk affecting new orders and backlog conversion

Financial Risks:

• Working-capital volatility, particularly receivables, pressuring OCF and FCF
• High shareholder returns versus FCF leading to reliance on balance sheet for distributions
• Potential OCI volatility (pensions/marketable securities) impacting equity and comprehensive income
• Partial disclosure of interest-bearing debt and current liabilities complicates full liquidity assessment

Key Concerns:

• OCF/NI at 0.77x indicating weaker cash conversion in the period
• FCF below dividends and well below total shareholder returns
• ROE at 8.7% below a 10% threshold commonly targeted by peers and investors

Investment Implications

Key Takeaways:

• Healthy top-line growth (+10.3% YoY) with stronger operating leverage (+19.0% operating income)
• Margins expanded to ~10.4% OPM and 14.8% EBITDA margin, competitive within domestic SI peers
• ROE at 8.7% supported by 7.5% net margin and modest leverage (1.85x), but with room for improvement
• Cash conversion lagged (OCF/NI 0.77x) due to working-capital build, weighing on FCF
• Robust balance sheet with sizable cash (648.01) and net cash versus disclosed loans
• Shareholder returns are high (dividends + buybacks), exceeding FCF in the period

Metrics to Watch:

• Order intake, backlog, and book-to-bill to gauge revenue sustainability
• Operating margin trajectory and SG&A efficiency
• OCF/NI and receivables days to assess cash conversion
• Net cash position and pace of share repurchases relative to FCF
• Mix of recurring/cloud services vs. project-based revenue
• Capex and any disclosure of intangible investments relative to D&A

Relative Positioning: Within Japanese systems integrators, BIPROGY’s ~10% operating margin and strong balance sheet position it competitively, with profitability in the mid-to-upper range; however, ROE below 10% and weaker cash conversion versus some peers temper its relative appeal pending sustained margin gains and improved OCF.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
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