Fibergate (9450) FY2026 Q2 Earnings Report

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Executive Summary

The interim period was characterized by higher revenue but lower earnings, with the key issue being an increase in SG&A expenses exceeding revenue growth and a decline in the gross margin, which pressured margins. Revenue increased to ¥6.77B (+3.3% YoY), while Operating Income declined to ¥0.92B (-6.1%), Ordinary Income to ¥0.91B (-6.3%), and Net Income to ¥0.60B (-7.1%; Net Income attributable to owners of the parent was ¥0.62B, down 4.8% YoY). The primary causes of the earnings decline were the decrease in the gross margin from 41.1% in the previous year to 39.8%, while SG&A expenses increased 3.9%, exceeding the revenue growth rate.

Factors Affecting Performance

【Revenue】Revenue increased 3.3% YoY to ¥6.77B. By segment, the Telecommunications Business maintained its position as the earnings pillar, with revenue of ¥6.40B (94.6% composition ratio), Operating Income of ¥1.49B, and a profit margin of 23.3%. The Real Estate Business contributed ¥0.30B and achieved a profit margin of 8.1%, remaining small in scale but profitable. Overall revenue growth of 3.3% was significantly below the industry median of 22.5%, indicating a moderate growth pace.

【Profit and Loss】Operating Income declined to ¥0.92B (-6.1% YoY), while Ordinary Income declined to ¥0.91B (-6.3%), indicating a downward earnings trend. The gross margin declined by approximately 1.3pt from 41.1% in the previous year to 39.8% due to the increase in the cost-of-sales ratio. In addition, SG&A expenses increased to ¥1.78B (+3.9%), outpacing revenue growth, resulting in a contraction in the Operating Income margin from 14.9% in the previous year to 13.6%. A loss on disposal of fixed assets of ¥0.03B was recorded as an extraordinary loss, which should be distinguished from recurring earnings power as a temporary factor. Net Income declined to ¥0.60B (-7.1% YoY), confirming a pattern of higher revenue but lower earnings.

Segment Analysis

The Telecommunications Business generated revenue of ¥6.40B, Operating Income of ¥1.49B, and a profit margin of 23.3%, serving as the core contributor to consolidated earnings. The Real Estate Business generated revenue of ¥0.30B, Operating Income of ¥0.02B, and a profit margin of 8.1%; although small in scale, it has steadily secured profits. Against consolidated Operating Income of ¥0.92B, the combined segment profit represents the amount before reflecting adjustments such as corporate expenses and unallocated general and administrative expenses; after these adjustments, it reconciles with the consolidated results.

Key Financial Indicators

【Profitability】The Operating Income margin was 13.6%, down from 14.9% in the same period of the previous year, while the Net Income margin was approximately 9.2%, down from approximately 10.0%. The decline in the gross margin and increase in SG&A expenses were the factors compressing margins. 【Cash Flow Quality】Operating Cash Flow (OCF) was ¥1.22B, approximately 2.0 times Net Income of ¥0.60B, indicating favorable cash conversion of earnings. However, OCF declined from ¥1.66B in the same period of the previous year, primarily due to an increase in inventories and a decrease in contract liabilities. 【Investment Efficiency】Annualized ROE remained high at 17.7%, while the EBITDA margin was approximately 25.7%, indicating substantial cash-generation capacity in the business. 【Financial Soundness】The Equity Ratio was 52.8%, a slight decline from 53.1% in the same period of the previous year, but remained at a high level. Interest coverage on interest-bearing debt was also high, and financial leverage remained within a conservative range.

Cash Flow Analysis

Operating Cash Flow was ¥1.22B, a decline of 26.8% YoY. The primary causes were the working-capital cash burden arising from an increase of ¥0.38B in inventories (real estate for sale) and a decrease of ¥0.16B in contract liabilities. Meanwhile, an increase of ¥0.14B in trade payables contributed to an increase in OCF and partially offset the deterioration in working capital. Investing Cash Flow was -¥0.56B, including capital expenditures of ¥0.66B, which remained within the ¥0.82B level of depreciation and amortization. Free Cash Flow remained positive at ¥0.65B even after investment. Financing Cash Flow was -¥0.42B, reflecting the execution and repayment of long-term borrowings as well as dividend payments. Overall, the Company continues to maintain a funding structure in which investments and shareholder returns are financed through cash generation.

Quality of Earnings

The decline in Operating Income was attributable to a decline in the gross margin resulting from recurring business activities—the cost of sales of ¥4.08B increased at a pace exceeding revenue growth—and an increase in SG&A expenses (+3.9%). It should therefore be understood as a structural change in profitability. A loss on disposal of fixed assets of ¥0.03B was recorded as an extraordinary loss, which should be distinguished from recurring earnings power as a non-recurring factor. Non-operating income and expenses were minimal, with non-operating income of ¥0.01B versus non-operating expenses of ¥0.02B, including interest expenses of ¥0.01B, indicating that earnings were generated primarily by the core business. Operating Cash Flow of ¥1.22B exceeded Net Income of ¥0.60B, indicating limited reliance on non-cash items and that earnings quality remained sound from an accrual perspective. Comprehensive Income was ¥0.60B, including ¥0.62B attributable to owners of the parent, and the divergence from Net Income was small. The effects of valuation differences on other securities and foreign currency translation adjustments were also almost negligible.

Earnings Forecast and Guidance

Progress against the full-year forecast was 48.2% for revenue (¥6.77B / ¥14.05B), 46.0% for Operating Income (¥0.92B / ¥2.00B), and 45.4% for Ordinary Income (¥0.91B / ¥2.00B), slightly behind the standard 50% progress rate for the interim period. The full-year forecast assumes revenue growth of +7.5% and Operating Income growth of +2.1%, requiring an acceleration in growth and an improvement in profitability from the first-half revenue growth rate of 3.3% and the decline in Operating Income toward the second half. The Operating Income margin required in the second half is above the first-half actual level of 13.6%; improvement in the gross margin and SG&A efficiency will be necessary to achieve the plan.

Shareholder Returns

The interim dividend was ¥13.50 per share, and the full-year dividend forecast is ¥27.00 per share. The Payout Ratio based solely on dividends is approximately 44%, using interim Net Income attributable to owners of the parent as the basis, which is within the range generally regarded as a sustainable level. No share repurchases were conducted, and it is not necessary to present the Total Return Ratio alongside the Payout Ratio. Free Cash Flow of ¥0.65B exceeded the interim dividend payment amount, providing cash flow support for the source of dividends.

Risk Factors

1. Structural decline in profitability: The gross margin declined by approximately 1.3pt YoY, while the Operating Income margin also declined by approximately 1.3pt. Improvement in the cost-of-sales and SG&A expense structure will be necessary to achieve the full-year target in the second half.

2. Risk of achieving the full-year plan: Against an Operating Income progress rate of 46.0%, the Company must raise the second-half Operating Income margin from the first-half actual level of 13.6% to achieve the full-year forecast. The probability of achievement should therefore be monitored.

3. Changes in working capital and funding composition: While inventories (real estate for sale) increased and weighed on OCF, short-term borrowings also increased YoY. The shortening of funding maturities and progress in inventory recovery will be key areas for monitoring going forward.

Industry Benchmarks (For Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

The Company’s profitability is below the industry median, confirming a relative disadvantage in terms of margins.

Growth and Capital Efficiency

The revenue growth rate significantly lags the industry median, placing the Company in the low-growth group within the industry.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. Although higher revenue was secured, Operating Income declined 6.1% due to the decline in the gross margin and the increase in SG&A expenses, clearly indicating a pattern of higher revenue but lower earnings.

2. OCF remained above Net Income, but declined YoY. The working-capital burden caused by the increase in inventories and decrease in contract liabilities affected cash-generation capacity.

3. Progress against the full-year forecast was in the 45%–48% range for both revenue and earnings. The financial results indicate that improvement in the profit margin in the second half will be the key determinant of whether the plan is achieved.

Theoretical Share Price (Reference Value)

Sensitivity: ¥425–¥450 for ±1% in the cost of equity, and ¥435–¥441 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 value based solely on publicly disclosed data; it is not a forecast of the market share price or a recommendation of any specific investment action, nor does it 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 release data. It does not recommend investment in any specific security. 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 with professionals as necessary.

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