ASO INTERNATIONAL (9340) FY2026 Q2 Earnings Report

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Executive Summary

In addition to revenue and profit growth, profit margins also improved, resulting in a solid interim financial performance that achieved both growth and profitability. Revenue was ¥2.02B (+8.5% YoY), Operating Income was ¥0.32B (+11.1%), Ordinary Income was ¥0.33B (+18.8%), and Net Income was ¥0.24B (+17.4%). Profit growth exceeding the rate of revenue growth was attributable to an improved gross margin, controlled growth in SG&A expenses, and improved non-operating income and expenses.

Factors Affecting Performance

【Revenue】Revenue was ¥2.021B, up +8.5% year on year. Although segment-level breakdown data is unavailable, expanding demand in existing businesses appears to have driven the increase in revenue.

【Profit and Loss】Operating Income was ¥0.320B (+11.1%), and the Operating Income margin improved by approximately 0.4pt to 15.8%, from 15.5% in the year-ago period. While the gross margin was essentially flat at 43.2% (43.1% in the prior year), SG&A expense growth of +7.3% was below revenue growth of +8.5%, resulting in operating leverage. Ordinary Income was ¥0.330B (+18.8%), exceeding Operating Income growth, helped by non-operating income and expenses improving from an excess of expenses in the year-ago period to an excess of income in the current period. Net Income was ¥0.235B (+17.4%), with an effective tax rate of approximately 28.6%. Revenue and profit increased.

Key Financial Indicators

【Profitability】The Operating Income margin was 15.8% (15.5% in the year-ago period), while the Net Income margin was 11.6% (10.8% in the year-ago period), with both improving year on year. Annualized ROE was a high 16.0%, consisting of a Net Income margin of 11.6% × total asset turnover of 1.16x × financial leverage of 1.19x, indicating capital efficiency driven by profitability rather than debt utilization.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥0.194B, representing 0.82x Net Income of ¥0.235B, down from ¥0.223B in the year-ago period. OCF/EBITDA was 0.57x, confirming that cash conversion was somewhat weak relative to the improvement in earnings.【Investment Efficiency】Capital expenditures were ¥0.010B, compared with depreciation and amortization of ¥0.020B, resulting in a low CapEx/depreciation ratio of 0.49x. This reflects an asset-light business structure while also suggesting restrained replacement investment.【Financial Soundness】The Equity Ratio was 84.3% (88.0% in the year-ago period), the current ratio was approximately 496%, and D/E was 0.19x, indicating that the Company continues to maintain an extremely conservative financial base.

Cash Flow Analysis

Operating Cash Flow was ¥0.194B, down from ¥0.223B in the year-ago period. As Net Income increased, the direction of the two measures diverged. Investing Cash Flow was negative ¥0.645B, primarily due to the acquisition of short-term investment securities totaling ¥0.630B, while capital expenditures remained small at ¥0.010B. Financing Cash Flow was negative ¥0.111B, mainly due to dividend payments. As a result, Free Cash Flow was negative ¥0.452B; however, most of the deficit reflected the acquisition of short-term investment securities for cash management purposes and was fundamentally different from cash outflows resulting from business investment or reliance on borrowings. Cash and deposits declined 28.1% year on year to ¥1.399B, but liquid assets, including ¥0.500B in short-term investment securities, reached ¥1.899B, indicating that the Company continues to maintain ample financial capacity.

Quality of Earnings

The current period’s profit growth was accompanied by improved non-operating income and expenses. Non-operating income was ¥0.013B and non-operating expenses were ¥0.003B, both small, and no one-time extraordinary gains or losses were identified. Ordinary Income growth (+18.8%) exceeded Operating Income growth (+11.1%) because non-operating income and expenses shifted from an excess of expenses in the year-ago period to an excess of income in the current period. This can be viewed as high-quality profit growth in addition to the improvement in recurring business earnings. On the other hand, OCF/Net Income was 0.82x and OCF/EBITDA was 0.57x, indicating that Operating Cash Flow did not keep pace with the improvement shown in the income statement. Inventories increased +33.5% year on year, to ¥0.060B, also absorbing funds through working capital and contributing to the divergence between accounting profit and cash flow.

Earnings Forecast and Guidance

The full-year Company forecast calls for Revenue of ¥4.013B (+5.7% YoY), Operating Income of ¥0.746B (+13.3%), and Ordinary Income of ¥0.725B (+14.9%). Progress against the full-year forecast was 50.4% for Revenue, 42.9% for Operating Income, 45.5% for Ordinary Income, and 46.8% for Net Income. While Revenue was near the standard 50% level, the profit indicators were somewhat below that level. To achieve the full-year plan, second-half Revenue of ¥1.992B and second-half Operating Income of ¥0.426B will be required, implying a second-half Operating Income margin of approximately 21.4%. This is approximately 5.6pt above the first-half result of 15.8%, making the degree of profitability improvement in the second half a key factor in achieving the plan.

Shareholder Returns

The interim dividend was ¥13.00 per share, resulting in a Payout Ratio of approximately 54.2% based on first-half Net Income. The full-year forecast dividend is ¥26.00 per share, and the Payout Ratio based on forecast full-year Net Income of ¥0.504B is approximately 50.6%, broadly consistent with the first-half result. This Payout Ratio is based on Net Income and does not represent the Total Return Ratio, which includes share repurchases. Operating Cash Flow of ¥0.194B exceeded the interim dividend payment amount, ensuring dividend coverage on an operating cash flow basis. Ample liquidity, with total cash, deposits, and short-term investment securities of ¥1.899B, together with an Equity Ratio of 84.3% and D/E of 0.19x, also supports dividend sustainability.

Risk Factors

1. Achievement of the second-half profitability target: Achieving the full-year plan requires a second-half Operating Income margin of approximately 21.4%, representing an improvement of approximately 5.6pt from the first-half result of 15.8%. The degree of achievement will be a factor affecting second-half performance.

2. Cash conversion efficiency: OCF/EBITDA was 0.57x, below the general cautionary level of 0.7x. Operating Cash Flow support for the improvement in earnings was relatively weak, making trends in tax payments and working capital important areas for future monitoring.

3. Increase in inventories: Inventories increased +33.5% year on year to ¥0.060B. Although inventories represented a limited 1.7% of total assets, consistency with demand trends and inventory turnover require attention.

Industry Benchmark (Reference; Company Analysis)

Industry Benchmark (it_telecom)

Profitability and Returns

Profitability was slightly below the industry median but remained within the IQR, with no significant divergence observed.

Growth and Capital Efficiency

The Revenue growth rate was significantly below the industry median and also below the lower bound of the IQR.

※Source: Company analysis

Key Points from the Financial Results

1. Operating Income increased +11.1% and Net Income increased +17.4%, exceeding Revenue growth of +8.5%. Both the Operating Income margin and Net Income margin improved year on year. Securing annualized ROE of 16.0% with low leverage (D/E of 0.19x) is notable from a capital efficiency perspective.

2. OCF/Net Income of 0.82x and OCF/EBITDA of 0.57x indicate that Operating Cash Flow growth was somewhat sluggish relative to the improvement in the income statement. The progress of profit conversion into cash, including the increase in inventories, will be an area for future observation.

3. Achieving the full-year plan requires a second-half Operating Income margin of approximately 21.4%, necessitating improvement from the first-half result of 15.8%. The Payout Ratio is 54.2% for the first half and approximately 50.6% based on the full-year forecast, a manageable level supported by ample liquid assets (total cash, deposits, and short-term investment securities of ¥1.899B).

Theoretical Share Price (Reference Value)

Sensitivity: ¥352–¥372 for ±1% in the Cost of Equity, and ¥360–¥364 for ±0.1 in ω.

Notes:

• Net assets as of the quarter-end are used (there is a timing difference from 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 solely from 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 future share prices.)

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This report is an earnings analysis document automatically generated by AI through analysis of 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 discretion and responsibility, after consulting with a professional adviser as necessary.

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