DTS (9682) FY2026 Q3 Earnings Report

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Executive Summary

The results reflect a phase of revenue and profit growth accompanied by margin improvement, with operating income growth exceeding revenue growth. Revenue was ¥98.34B (up +8.1% YoY), operating income was ¥12.32B (up +19.2%), ordinary income was ¥12.74B (up +19.8%), and net income was ¥8.60B (up +19.0%). The operating margin improved to 12.5% from 11.4% in the same period of the previous year. The simultaneous increase in gross margin and decline in the SG&A ratio contributed to the high incremental profit margin. All three segments reported higher revenue and profit, indicating a high degree of diversification in growth.

Factors Affecting Results

【Revenue】Revenue increased +8.1% YoY to ¥98.34B. By segment, Business & Solutions generated ¥39.46B (up +1.4%), Technology & Solutions generated ¥34.06B (up +8.9%), and Platform & Services generated ¥24.81B (up +19.2%), with Platform & Services showing the highest growth. Revenue composition was 40.1% for Business & Solutions, 34.6% for Technology & Solutions, and 25.2% for Platform & Services.

【Profit and Loss】Operating income was ¥12.32B (up +19.2%), while ordinary income was ¥12.74B (up +19.8%). The operating margin improved to 12.5% from 11.4% in the same period of the previous year, supported by an increase in gross margin to 22.7% (22.3% in the previous year) and a decline in the SG&A ratio to 10.1% (11.0% in the previous year). Segment profit margins were 13.9% for Business & Solutions, 12.5% for Technology & Solutions, and 10.4% for Platform & Services. Platform & Services, which has the highest growth rate, lags the other businesses in terms of profit margin. Extraordinary income was ¥0.08B compared with extraordinary losses of ¥0.13B, resulting in a net loss of ¥0.05B; however, the impact on pretax income was limited to 0.4%. Net income of ¥8.60B (up +19.0%) grew at nearly the same rate as ordinary income, supporting the conclusion that the company achieved both revenue and profit growth.

Segment Analysis

Business & Solutions is the core business, generating segment profit of ¥5.49B (up +17.3% YoY) and accounting for 44.5% of the total. Although revenue growth was moderate, profitability improved significantly. Technology & Solutions recorded segment profit of ¥4.26B (up +24.7%), the highest profit growth rate among the segments. Platform & Services recorded segment profit of ¥2.59B (up +15.2%). Although its revenue growth was the highest of the three businesses, its 10.4% profit margin was below those of the other businesses, suggesting that growth investments and project mix may be restraining margin improvement.

Key Financial Indicators

【Profitability】The operating margin improved to 12.5% from 11.4% in the same period of the previous year, while the net margin increased to 8.7% from 7.9%. The gross margin was 22.7% and the SG&A ratio was 10.1%; both cost control and revenue expansion contributed to margin improvement.【Cash Flow Quality】Accounts receivable decreased 4.6% YoY to ¥22.76B, but annualized DSO remained at 63 days, above 60 days. Inventories increased sharply by 112.6% YoY to ¥2.40B. Changes in working capital efficiency therefore warrant monitoring when assessing earnings quality.【Investment Efficiency】Annualized ROE was 18.8%, while annualized ROA was approximately 14.5%, indicating high capital efficiency supported by both the net margin and total asset turnover.【Financial Soundness】The equity ratio was 77.7%, the current ratio was equivalent to 332.2%, and the D/E ratio was approximately 0.29x, indicating a conservative financial structure with low reliance on debt.

Cash Flow Analysis

As detailed disclosure of the cash flow statement is unavailable, funding trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥23.99B, down from ¥29.92B in the same period of the previous year, suggesting that internal capital allocation, including increases in investment securities and shareholder returns, may have progressed. Meanwhile, the 112.6% YoY increase in inventories suggests an increase in working capital associated with business expansion. Net assets increased to ¥60.93B, primarily due to accumulated retained earnings of ¥49.56B, indicating continued strengthening of the financial foundation through the expansion of equity.

Earnings Quality

Ordinary income of ¥12.74B exceeded operating income of ¥12.32B, with non-operating income and expenses providing a net uplift of ¥0.41B. Non-operating income of ¥0.57B consisted of dividend income of ¥0.13B, foreign exchange gains of ¥0.12B, interest income of ¥0.09B, and other items. Each was small relative to revenue, indicating that operating income from the core business was the primary earnings driver. Extraordinary items resulted in a net loss of ¥0.05B, with a limited impact on pretax income; no earnings uplift from temporary factors was observed. Comprehensive income was ¥9.51B, ¥0.91B higher than net income of ¥8.60B, as a ¥1.17B increase in the valuation difference on securities boosted other comprehensive income. Because this accrual-like difference depends on market price movements, it should be distinguished from recurring earnings power.

Earnings Forecast and Guidance

Progress toward the full-year plan was 72.8% for revenue, 79.5% for operating income, and 80.4% for ordinary income. Compared with the standard Q3 progress rate of 75%, operating income and ordinary income were ahead, while revenue was slightly behind. Against full-year plan YoY growth of +7.2% for revenue, +7.0% for operating income, and +2.5% for ordinary income, cumulative actual growth rates were +8.1%, +19.2%, and +19.8%, respectively. The company’s full-year plan therefore assumes some normalization of the profit growth rate in Q4. Achieving the full-year operating income plan of ¥15.50B will require operating income of approximately ¥3.18B in Q4.

Shareholder Returns

The Q2 dividend was ¥60.00 per share. The payout ratio calculated for disclosure purposes, using dividends only as the numerator and cumulative net income, was 115.4% based on the Q2 dividend, representing a high level relative to cumulative profit for the current period. However, compared with forecast full-year EPS of ¥68.52, ¥60.00 represents 87.6%; assuming full-year results, the assessment of the level of shareholder returns changes. Cash and deposits of ¥23.99B and an equity ratio of 77.7% are factors supporting the company’s ability to pay dividends.

Risk Factors

1. Extension of the accounts receivable collection period: Annualized DSO was 63 days, above 60 days. Although the accounts receivable balance itself decreased 4.6% YoY, delays in project acceptance or billing timing could affect cash collection efficiency during a period of revenue expansion.

2. Sharp increase in inventories: Inventories increased 112.6% YoY to ¥2.40B. Although the absolute level was limited at 3.1% of total assets, stagnant product inventories or changes in the demand outlook could lead to valuation losses or lower profit margins.

3. Differences in profit margins among segments: Platform & Services, which has the highest revenue growth rate, had a segment profit margin of 10.4%, below the 13.9% for Business & Solutions and 12.5% for Technology & Solutions. Depending on the status of growth investments and project mix, this may constrain further improvement in the company-wide profit margin.

Industry Benchmark (For Reference; Company Research)

Industry Benchmark (it_telecom)

Profitability and Returns

Profitability exceeds the industry median, placing the company in the upper-tier group.

Growth and Capital Efficiency

The revenue growth rate is slightly below the industry median but remains within the IQR, indicating a growth pattern that prioritizes profitability.

※Source: Company research

Key Takeaways from the Results

1. The operating margin improved by approximately 1.1 percentage points YoY to 12.5%. The simultaneous improvement in gross margin and decline in the SG&A ratio indicate structural profitability enhancement through profit growth exceeding revenue growth.

2. The full-year operating income progress rate of 79.5% exceeds the standard progress rate of 75%. The gap versus the revenue progress rate of 72.8% indicates that achieving the plan depends more on maintaining profitability than on revenue growth.

3. The accounts receivable collection period (annualized DSO of 63 days) and sharp inventory increase (+112.6% YoY) are useful points to monitor in future results as changes in working capital associated with business growth.

Theoretical Stock Price (Reference Value)

Sensitivity: ¥474–¥503 for a ±1% change in the cost of equity, and ¥485–¥492 for a change of ±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 / This is a mechanically calculated value based solely on publicly available data; it is not a forecast of the market stock price or a recommendation of any specific investment action, and does not predict or guarantee future stock prices.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the company based on publicly available earnings data. Investment decisions should be made at your own discretion and responsibility, in consultation with professionals as necessary.

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