| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥3323.2B | ¥2834.4B | +17.2% |
| Operating Income / Operating Profit | ¥252.3B | ¥242.1B | +4.2% |
| Ordinary Income | ¥237.3B | ¥239.5B | -0.9% |
| Net Income / Net Profit | ¥139.1B | ¥143.9B | -3.3% |
| ROE | 11.4% | 13.2% | - |
For the cumulative Q3 of the fiscal year ending May 2026, Revenue was ¥3323.2B (YoY +¥488.9B +17.2%), Operating Income was ¥252.3B (YoY +¥10.3B +4.2%), Ordinary Income was ¥237.3B (YoY -¥2.2B -0.9%), and Quarterly Net Income attributable to owners of the parent was ¥129.2B (YoY -¥6.5B -4.8%). Revenue achieved double-digit growth and progressed ahead of plan at 78.3% of the Full Year forecast, while Operating margin declined to 7.6% (prior year 8.5%) down -0.9pt as cost increases partially offset the revenue uplift. At the ordinary income stage, doubled interest expense (¥9.28B, prior year ¥5.70B) and foreign exchange losses of ¥4.55B weighed on results, leaving Ordinary Income roughly flat year-on-year. Net Income decreased due to a persistently high effective tax rate of 39.4%. Growth was driven by Communications & Energy Business revenue +22.2% and Finance, Real Estate & Global Business revenue +106.4%, while Store & Facility Solutions Business maintained high profitability (Operating margin 17.0%).
[Revenue] Revenue reached ¥3323.2B (YoY +17.2%), showing robust growth. By segment, Communications & Energy Business was the largest at ¥1379.4B (+22.2%), aided by recognition of subsidy income associated with measures to mitigate electricity and gas price volatility and expansion of the contract base. Finance, Real Estate & Global Business increased sharply to ¥165.2B (+106.4%), driven by expansion of lease income and insurance contracts. Content Distribution Business recorded ¥1076.2B (+13.3%), supported by paid subscriber base growth and improved delivery efficiency. Store & Facility Solutions Business continued stable growth at ¥767.5B (+4.9%). Gross Profit was ¥1039.2B (Gross margin 31.3%), down -2.8pt from 34.1% a year earlier, as content costs and procurement price increases compressed margins.
[Profitability] Operating Income was ¥252.3B (+4.2%); SG&A was ¥786.8B (23.7% of Revenue), improved -1.9pt from 25.6% a year earlier, indicating enhanced operating efficiency. By segment, Store & Facility Solutions Business was the largest contributor with Operating Income of ¥130.6B (-2.0%) and sustained high profitability with a 17.0% Operating margin. Content Distribution Business achieved Operating Income of ¥90.1B (+16.2%) with margin improving to 8.4%, delivering profit growth exceeding revenue growth. Communications & Energy Business posted Operating Income of ¥86.4B (-1.3%) with a thin-margin structure at 6.3%, while Finance, Real Estate & Global Business recorded Operating Income of ¥17.6B (+44.1%) with a 10.6% margin. Ordinary Income was ¥237.3B (-0.9%); doubled interest expense of ¥9.28B (prior year ¥5.70B) and foreign exchange losses of ¥4.55B offset operating profit increases. Quarterly Net Income attributable to owners of the parent was ¥129.2B (-4.8%), with the persistently high effective tax rate of 39.4% and special losses of ¥7.73B (impairment/loss on disposal of fixed assets) as temporary factors reducing final profit. In conclusion, while the company is on a revenue-and-profit-increasing trend, post-operating profit stages were pressured by costs and tax burden leading to reduced net profit.
Store & Facility Solutions Business delivered Operating Income of ¥130.6B (YoY -2.0%) and maintained a high Operating margin of 17.0%, providing a stable earnings base. Content Distribution Business posted Operating Income of ¥90.1B (+16.2%) with margin improving to 8.4%, showing efficiency gains with profit growth exceeding revenue growth of +13.3%. Communications & Energy Business recorded Operating Income of ¥86.4B (-1.3%) with a 6.3% margin, indicating continued thin-margin structure; profit growth did not keep pace with scale expansion (Revenue +22.2%), suggesting effects of cost inflation. Finance, Real Estate & Global Business posted Operating Income of ¥17.6B (+44.1%) with margin 10.6%, supported by expansion of leasing and insurance contracts and recognition of subsidy income, accelerating profit growth. Goodwill of ¥105.5B arose in the Store & Facility Solutions Business due to the EXING consolidation; allocation of acquisition cost remains provisional at the Q3 reporting date.
[Profitability] Operating margin 7.6% (prior year 8.5%) declined -0.9pt, primarily due to Gross margin compression to 31.3% (prior year 34.1%) of -2.8pt. SG&A ratio improved to 23.7% (prior year 25.6%) by -1.9pt, confirming operating efficiency gains from scale expansion. ROE is 11.4%, which can be decomposed into Net Profit Margin 4.2% × Total Asset Turnover 0.99 × Financial Leverage 2.75; compared to the prior year, lower Net Profit Margin and asset growth reducing turnover were offset by higher leverage. [Cash Quality] DSO calculated as Accounts Receivable ¥598.2B ÷ (Revenue ¥3323.2B ÷ 365 days) × 365 days = 66 days, exceeding 60 days, indicating receivables collection lagging revenue growth. Cash and deposits ¥797.2B (prior year ¥568.8B) increased +40.2%, confirming liquidity buildup and internal funding accumulation with business expansion. [Investment Efficiency] Total assets ¥3354.6B (prior year ¥2597.8B) increased +29.1%, with Tangible Fixed Assets +36.5% and Intangible Fixed Assets +29.2% reflecting capital expenditure and M&A-driven asset expansion. Goodwill is ¥478.9B, representing 39.2% of Net Assets, elevated by EXING consolidation. [Financial Soundness] Equity Ratio 36.4% (prior year 37.6%) slightly declined, but Current Ratio is 198.0% and Quick Ratio 183.9%, indicating ample liquidity. D/E ratio 1.75x and Interest Coverage 27.2x (Operating Income ¥252.3B ÷ Interest Expense ¥9.28B) show adequate interest-bearing debt tolerance.
Although the Operating Cash Flow statement is not directly disclosed, funding trends are analyzed from balance sheet movements. Cash and deposits increased by +¥228.4B to ¥797.2B, confirming internal funding accumulation from revenue growth and profit recognition. Accounts receivable rose by +¥102.9B to ¥598.2B (+20.8%), growing faster than revenue growth of +17.2%, expanding working capital needs with DSO at 66 days. Accounts payable increased by +¥182.9B to ¥548.5B (+50.0%), reflecting higher procurement/content costs and monetization of short-term working capital accompanying increased transaction scale. Inventories rose by +¥31.2B to ¥153.1B (+25.6%), reflecting stock build-up in response to demand expansion. In investing activities, goodwill of ¥105.5B due to EXING consolidation and increases in tangible fixed assets +¥89.1B and intangible fixed assets +¥155.2B suggest active investments in capex and M&A. In financing activities, long-term borrowings increased by +¥88.7B to ¥646.0B and corporate bonds increased by +¥200.0B to ¥300.0B, indicating growth funding raised via interest-bearing debt. Doubling of interest expense to ¥9.28B is a consequence of higher debt, but with Interest Coverage at 27.2x there is sufficient coverage and short-term liquidity risk is limited.
Operating Income ¥252.3B versus Ordinary Income ¥237.3B shows a ¥15.0B gap, mainly due to Interest Expense ¥9.28B and Foreign Exchange Losses ¥4.55B, with non-operating expenses of ¥18.4B weighing on Ordinary Income. Non-operating income was ¥3.4B, only 0.1% of Revenue, centered on Interest Income ¥1.0B and Equity-method investment gains ¥0.8B, indicating earnings with a high degree of recurrence. Extraordinary items comprised Extraordinary Gains ¥0.1B (Gain on sale of investment securities ¥0.3B, Gain on sale of fixed assets ¥0.1B) against Extraordinary Losses ¥7.7B (Loss on disposal of fixed assets ¥7.7B), which reduced final profit by ¥7.7B as a one-off factor. Pretax income was ¥229.6B and Corporate Taxes ¥90.6B, leaving an effective tax rate of 39.4% and Quarterly Net Income attributable to owners of the parent of ¥129.2B, reducing Net Profit Margin to 3.9% (prior year 4.8%) down -0.9pt. Comprehensive income was ¥139.2B, with ¥129.3B attributable to owners of the parent; the ¥0.1B difference between the parent-attributable comprehensive income ¥129.3B and Net Income ¥129.2B is minor and driven by valuation differences on securities ¥0.2B and retirement benefit adjustments -¥0.1B, indicating high quality of recurring earnings.
Full Year forecast: Revenue ¥4240.0B (YoY +8.6%), Operating Income ¥335.0B (+6.1%), Ordinary Income ¥322.0B (+4.2%), Net Income attributable to owners of the parent ¥185.0B (Forecast EPS 102.57円), Dividend ¥8.50. Progress against the Full Year forecast at the Q3 cumulative is: Revenue 78.3%, Operating Income 75.3%, Ordinary Income 73.7%, Net Income 69.9% (¥129.2B ÷ ¥185.0B). Revenue is pacing ahead of the standard 75% progress at 78.3%, Operating Income is roughly on track, Ordinary Income is slightly behind but within an acceptable range. Net Income progress of 69.9% is somewhat behind schedule; this is likely due to higher-than-expected effective tax rate and transient non-operating expenses (increased interest and FX losses), and recovery by year-end is considered possible. No revisions to the earnings forecast have been made; current guidance is judged to be highly achievable.
Interim dividend at the end of Q2 was ¥8.50; Quarterly Net Income attributable to owners of the parent ¥129.2B ÷ Shares Outstanding 180,375 thousand = EPS 71.63円, implying a Payout Ratio of 11.9%, which is low. Total dividend amount is approximately ¥15.3B (¥8.50 × 180,375 thousand shares). Given strong liquidity with Cash and deposits ¥797.2B and earning power with Operating Income ¥252.3B, dividend sustainability is well secured. Prior year same period dividend was ¥7, so this period’s increase of +¥1.5 maintains a consecutive dividend increase trend. Full Year forecast dividend remains ¥8.50; depending on final profit and working capital movements, there is room for further shareholder returns. No share buyback has been disclosed; current policy focuses on dividends for shareholder returns.
Gross margin pressure from rising content and procurement costs: Gross margin is 31.3%, down -2.8pt from 34.1% a year earlier, as content costs and procurement price increases compressed margins. Relative to revenue growth, gross profit expansion has slowed and Operating margin fell to 7.6% (prior year 8.5%) down -0.9pt. If inflationary pressure persists, delayed price pass-through and limits to SG&A efficiency improvements could further erode profitability.
Increased impairment sensitivity due to high goodwill: Goodwill ¥478.9B is high at 39.2% of Net Assets, with ¥105.5B added from the EXING consolidation and provisional allocation of acquisition cost. Intangible assets ¥687.0B constitute 20.5% of Total Assets; deterioration in future business conditions or reduced profitability of acquired businesses could crystallize goodwill impairment risk. Recognition of impairment losses would materially damage Net Income and shareholder value.
Volatility in Ordinary Income from interest rate increases and FX fluctuations: Interest expense ¥9.28B doubled from ¥5.70B last year, reflecting increases in interest-bearing debt balances—Long-term borrowings ¥646.0B and corporate bonds ¥300.0B. Foreign exchange losses ¥4.55B were also recorded, offsetting operating profit gains. Changes in future interest rate environment or FX rates could increase earnings volatility at the ordinary income stage and amplify impacts on Net Income.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 7.6% | 8.2% (3.6%–18.0%) | -0.6pt |
| Net Profit Margin | 4.2% | 6.0% (2.2%–12.7%) | -1.8pt |
Operating margin is slightly below the industry median 8.2% by -0.6pt, while Net Profit Margin 4.2% lags the median 6.0% by -1.8pt, reflecting compression of final margin from tax burden and non-operating expenses.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 17.2% | 10.4% (-1.1%–19.5%) | +6.8pt |
Revenue growth of 17.2% outperformed the industry median 10.4% by +6.8pt, placing the company among the higher growth peers driven by expansion in Communications & Energy and Finance, Real Estate & Global businesses.
※ Source: Company compilation
Revenue achieved double-digit growth (+17.2%) and is progressing ahead of the Full Year forecast at 78.3%, driven by Communications & Energy Business +22.2% and Finance, Real Estate & Global Business +106.4%. Operating Income increased +4.2%, but Operating margin declined to 7.6% (prior year 8.5%) down -0.9pt, with Gross margin compression of -2.8pt as a concern. Full Year forecast appears achievable, but cost inflation and tax burden trends will be key to recovering Net Profit margin.
High levels of goodwill ¥478.9B (39.2% of Net Assets) and intangible assets ¥687.0B (20.5% of Total Assets) raise impairment sensitivity. The provisional ¥105.5B allocation related to EXING consolidation and the monitoring of acquired business profitability are important. Financial soundness indicators such as Current Ratio 198.0% and Interest Coverage 27.2x are favorable and short-term liquidity risk is limited, but increased interest-bearing debt (Long-term borrowings +¥88.7B, Corporate bonds +¥200.0B) elevates interest sensitivity and warrants attention to future interest rate developments.
Payout Ratio at 11.9% is low, leaving substantial room for shareholder returns, and the company maintained a consecutive dividend increase trend (prior year ¥7 → this year ¥8.50). ROE 11.4% with Equity Ratio 36.4% indicates moderate capital efficiency; improving Net Profit Margin is key to enhancing capital productivity. Segment-wise, the high profitability of Store & Facility Solutions Business (margin 17.0%) provides a stable earnings base, and Content Distribution Business showed efficiency improvements with Revenue +13.3% and profit +16.2%, while Communications & Energy Business’s thin-margin structure (margin 6.3%) remains an area for improvement.
This report is an AI-generated earnings analysis produced by analyzing XBRL financial statement data. It does not constitute a recommendation to invest in specific securities. Industry benchmarks are reference information compiled by the Company from public financial statements. Investment decisions are your own responsibility; consult experts as needed.