KYCOM HOLDINGS (9685) FY2026 Q3 Earnings Report

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Executive Summary

Although the Company secured revenue growth, primarily driven by the Information Processing Business, growth in operating income was limited due to lower profitability in the core business. Revenue was ¥5.32B (+8.0% YoY), operating income was ¥0.42B (+1.1%), ordinary income was ¥0.47B (+3.5%), and net income was ¥0.35B (+10.1%). While the operating margin was 7.9%, down approximately 17bp from the same period of the previous year, net income benefited from ¥0.07B in extraordinary income, mainly insurance gains, enabling net income growth to exceed operating income growth.

Factors Affecting Business Performance

【Revenue】Revenue was ¥5.32B, up +8.0% YoY. The Information Processing Business, which accounts for 91.4% of consolidated revenue, drove company-wide revenue growth, with external revenue of ¥4.86B (+8.4% YoY). The Real Estate Business increased revenue to ¥0.14B (+11.4%), and the Rental Car Business increased revenue to ¥0.13B (+4.7%), while the Wireless Solutions Business continued to post declining revenue at ¥0.19B (-1.5%).

【Profit and Loss】Operating income was limited to ¥0.42B (+1.1% YoY), and the operating margin contracted to 7.9% from 8.4% in the same period of the previous year. The primary factor was a decline in the Information Processing Business segment margin from 7.7% to 6.3%, meaning that revenue growth was not sufficiently converted into profit. Ordinary income was ¥0.47B (+3.5%), and net income was ¥0.35B (+10.1%). Net income growth exceeding operating income growth was attributable to the recognition of ¥0.069B in extraordinary income, including ¥0.067B in insurance gains. Profit before tax was ¥0.533B, ¥0.068B higher than ordinary income of ¥0.465B due to net extraordinary gains and losses. In conclusion, although the Company achieved revenue and profit growth, profit growth was sluggish relative to revenue growth, resulting in an earnings profile characterized by “revenue growth and low profit growth.”

Segment Analysis

The Information Processing Business posted revenue of ¥4.86B (+8.4% YoY) and segment profit of ¥0.31B (-10.4%), resulting in higher revenue but lower profit, while its margin declined from 7.7% to 6.3%. The Real Estate Business achieved revenue of ¥0.14B (+11.4%) and profit of ¥0.078B (+47.4%), recording growth in both revenue and profit, with its margin improving substantially from 43.3% to 57.0%. The Rental Car Business posted revenue of ¥0.13B (+4.7%) but swung to a loss of ¥0.008B. The Wireless Solutions Business recorded revenue of ¥0.19B (-1.5%) and continued to post a loss of ¥0.018B. The Information Processing Business makes the largest contribution to consolidated profit, and the profitability trend of this business determines the Company’s overall earnings structure.

Key Financial Indicators

【Profitability】The operating margin was 7.9%, while the net margin was 6.6%, slightly up from 6.5% in the same period of the previous year. Meanwhile, the gross margin declined to 21.2% from 21.5%. 【Cash Quality】Work in progress was ¥0.0032B, accounting for 98.3% of inventories, up from ¥0.0008B in the same period of the previous year. This level warrants continued monitoring of project progress and cost recovery. 【Investment Efficiency】Annualized ROE was 9.2%, comprising a net margin of 6.6%, total asset turnover of 0.836x, and financial leverage of 1.67x. 【Financial Soundness】The equity ratio was 59.9%, up from 56.4% in the same period of the previous year, and the current ratio was 213.4%. Cash and deposits of ¥2.11B exceeded interest-bearing debt of ¥1.81B, placing the Company in a net cash position.

Cash Flow Analysis

Although cash flow statement figures are not included in the disclosed data, fund flows can be assessed based on changes in the balance sheet. Cash and deposits were ¥2.11B, nearly unchanged from ¥2.16B in the same period of the previous year, while investment securities increased 29.8% YoY to ¥1.78B. This suggests that a portion of surplus funds was allocated to securities investments. Interest-bearing debt was ¥1.81B, and cash and deposits exceeded this amount by ¥0.30B, maintaining a net cash position without signs of funding pressure. Work in progress increased to ¥0.0032B from ¥0.0008B in the same period of the previous year, and attention should be paid to the possibility that the accumulation of working capital associated with project execution could affect future cash-generation capacity.

Quality of Earnings

Net income of ¥0.35B included ¥0.069B in extraordinary income, mainly consisting of ¥0.067B in insurance gains. Profit before tax was ¥0.533B, 14.7% higher than ordinary income of ¥0.465B. Non-operating income and expenses comprised income of ¥0.07B and expenses of ¥0.02B, resulting in a net gain. The interest burden coefficient of 1.276 and interest coverage ratio of 25.43x indicate sound non-operating income and expenses. Meanwhile, net income growth of 10.1% substantially exceeded operating income growth of 1.1%. As this divergence was largely attributable to non-recurring extraordinary income, operating margin and the trend in ordinary income should be prioritized when assessing recurring earnings power. In addition, the accrual-related characteristic of work in progress accounting for 98.3% indicates a concentration of costs in projects not yet accepted, leaving uncertainty regarding the timing of profit realization.

Earnings Forecast and Guidance

Progress against the full-year company forecasts was 73.2% for revenue, 64.3% for operating income, 65.5% for ordinary income, and 70.2% for net income. Compared with the standard progress rate of 75% as of Q3, progress for both operating income and ordinary income was approximately 10 percentage points behind. Achieving the full-year forecast of operating income of ¥0.65B (+10.1% YoY) will require improved profitability in the Information Processing Business in Q4. The relatively high progress rate for net income was attributable to the recognition of extraordinary income, requiring separate confirmation of the degree of recovery in operating performance.

Shareholder Returns

The Q2 dividend was ¥0 per share, while the full-year company forecast calls for an annual dividend of ¥10. Based on the average number of shares outstanding during the period of 5,079 thousand shares, the total annual dividend is estimated at approximately ¥0.051B, and the forecast payout ratio against forecast full-year net income of ¥0.50B is approximately 10.2%, a conservative level. The net cash position, with cash and deposits of ¥2.11B exceeding interest-bearing debt of ¥1.81B, and the current ratio of 213.4% support dividend capacity. However, given that net income includes extraordinary income, dividend sustainability should be assessed together with the recovery in the profitability of the core business.

Risk Factors

1. Declining profitability in the core business: In the Information Processing Business, which accounts for 91.4% of consolidated revenue, segment profit declined 10.4% YoY despite revenue growth of +8.4%. Continued deterioration in the segment margin could affect achievement of the full-year operating income forecast.

2. Continuation of unprofitable businesses: The Rental Car Business swung to a segment loss of ¥0.008B, while the Wireless Solutions Business continued to post a loss of ¥0.018B. Delays in reducing losses in both businesses could weigh on overall profitability.

3. Concentration of costs in work in progress: Work in progress accounted for 98.3% of inventories, or ¥0.0032B, up from ¥0.0008B in the same period of the previous year. Project delays, cost overruns, or delays in acceptance and collection could affect future profit margins.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

The operating margin was slightly below the industry median, while the net margin exceeded the median, with the Company’s relative position at the net income level improving due to the contribution of extraordinary income.

Growth and Capital Efficiency

The revenue growth rate was slightly below the industry median. Although it was within the IQR, the Company’s growth pace was around the industry average or somewhat slower.

※Source: Compiled by the Company

Key Takeaways from the Earnings Results

1. Although revenue growth was maintained, the decline in the margin of the Information Processing Business, which accounts for more than 90% of consolidated revenue, caused operating income growth to fall below revenue growth. This was the structural characteristic of the current earnings results.

2. Extraordinary income, mainly insurance gains, contributed to net income growth of 10.1%. Accordingly, operating margin and the trend in ordinary income should be prioritized when assessing recurring earnings power.

3. Financial soundness was favorable, as indicated by a current ratio of 213.4%, a net cash position, and an equity ratio of 59.9%. The delay in progress toward the full-year operating income forecast and the high work-in-progress ratio will require monitoring from the next quarter onward.

Theoretical Share Price (Reference Value)

Sensitivity: ¥960–¥1,017 at ±1% for the cost of equity, and ¥987–¥988 at ±0.1 for ω.

Notes:

• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the quarter-end are used; there is a timing difference relative to the full-year forecast.

(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, and does not predict or guarantee future share 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 disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting a professional where necessary.

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