RYOMO SYSTEMS CO.,LTD. FY2026 Q3 Earnings Report

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Executive Summary

Ryomo Systems (9691) reported consolidated FY2026 Q3 results with Revenue of ¥171.4B (YoY +¥37.2B +27.8%), Operating Income of ¥19.0B (YoY +¥7.2B +61.4%), Ordinary Income of ¥18.8B (YoY +¥7.4B +64.4%), and Net Income of ¥13.0B (YoY +¥5.4B +70.4%), delivering significant top-line and bottom-line growth. Operating margin was 11.1%, improving by 2.3pt from 8.8% in the prior year, and net margin was 7.6%, up 1.9pt from 5.7%, indicating a substantial enhancement in profitability. By segment, the Public segment posted Revenue of ¥90.1B with Operating Income of ¥18.7B, and the SocialAndIndustrial segment recorded Revenue of ¥81.3B with Operating Income of ¥14.6B, with both contributing solidly to profits. The full-year forecast calls for Revenue of ¥250.0B, Operating Income of ¥28.0B, and Net Income of ¥19.0B, with progress as of Q3 at 68.6% for Revenue and 67.9% for Operating Income, indicating steady achievement pace.

Key Financial Metrics

[Profitability] ROE 8.7% (improved YoY), operating margin 11.1% (+2.3pt from 8.8% last year), net margin 7.6% (+1.9pt from 5.7% last year), EBITDA margin 15.2%. DuPont decomposition shows ROE 8.7% constructed from net margin 7.6% × total asset turnover 0.693x × financial leverage 1.66x, with net margin improvement driven by revenue expansion as the main factor. [Cash Quality] Cash and deposits ¥40.7B (¥36.9B last year), Operating Cash Flow (OCF) ¥10.3B, at 0.80x of Net Income ¥13.0B, below the ideal level (≥1.0x), suggesting room to improve cash realization of profits. Cash conversion ratio 0.40, Free Cash Flow ¥6.7B, with 4.55x coverage of dividend payments, indicating ample capacity; however, OCF efficiency requires monitoring. [Investment Efficiency] Total asset turnover 0.693x (improved from 0.543x last year), with Capex of ¥1.7B vs. depreciation of ¥7.0B, yielding a Capex/Depreciation ratio of 0.24x, a low level that raises concerns about underinvestment over the medium to long term. [Financial Soundness] Equity Ratio 60.2% (+5.1pt from 55.1% last year), current ratio 268.9%, and quick ratio 232.4%, indicating strong liquidity. Debt-to-Equity Ratio 0.66x, interest-bearing debt ¥11.3B, Debt/EBITDA 0.43x, and Interest Coverage 37.47x reflect low financial leverage and ample debt service capacity.

Cash Flow Analysis

Operating Cash Flow was ¥10.3B, only 0.80x of Net Income ¥13.0B, indicating room to improve cash backing for profits. The main cash outflow factor in the breakdown was an increase in inventories of ¥13.7B, where stock build-up accompanying revenue growth tightened funds. Meanwhile, accounts payable increased by ¥4.5B, evidencing improved cash management through the utilization of trade payables. Investing CF was negative ¥3.6B, mainly due to Capex of ¥1.7B; the Capex/Depreciation ratio of 0.24x indicates restrained asset renewal. In Financing CF, repayments of long-term borrowings of ¥3.8B were executed, reducing interest-bearing debt to ¥11.3B. FCF was ¥6.7B, securing cash generation capacity, and coverage of dividend payments (interim dividend ¥20; full-year forecast ¥22; total approximately ¥1.5B) was 4.55x, indicating ample room. Cash and deposits increased by ¥3.8B from ¥36.9B last year to ¥40.7B; cash coverage of short-term liabilities of ¥52.3B was 0.78x, and liquidity including working capital of ¥88.3B is sound.

Quality of Earnings

With Ordinary Income at ¥18.8B and Operating Income at ¥19.0B, non-operating net loss was approximately ¥0.2B and small. Although interest expense of ¥0.4B was recorded in non-operating items, it was partially offset by interest income and equity in earnings (losses) of affiliates, resulting in only a minor impact from non-operating income/expenses overall. Non-operating income was around 0.1% of Revenue and small, indicating that the profit structure relies on core operating activities. EBIT was ¥19.0B, representing 11.1% of Revenue, and the effective tax rate was 30.8%, with a tax burden coefficient of 0.692 influencing net profit formation. The point that OCF is 0.80x of Net Income is attributable to working capital expansion from higher inventories; as inventory converts to sales and cash collection progresses, the quality of earnings is expected to improve. The impact of extraordinary gains/losses is minimal, and the recurring earnings structure is sound.

Risk Factors

• Inventory build-up risk: Inventories increased 252% from ¥5.4B last year to ¥19.1B, posing risks of deteriorating inventory turnover and impairment losses. It is necessary to discern whether the build-up is justified by revenue growth or represents excess inventory.
• Decline in OCF efficiency: OCF/Net Income at 0.80x falls short of the ideal level; absent improvement in working capital management, funding risk could increase.
• Underinvestment: A Capex/Depreciation ratio of 0.24x suggests potentially insufficient investment to maintain medium- to long-term competitiveness, risking technological lag and asset obsolescence.
• Demand fluctuation risk: While Revenue expanded rapidly by 27.8%, if dependent on specific customers or temporary demand, sustainability remains uncertain.

Industry Benchmark (Reference • In-house Survey)

[Position within Industry] (Reference Information • In-house Survey) Comparing the company’s financial indicators with the Q3 2025 median for the Information & Communications sector, the following relative positioning is observed. In profitability, ROE of 8.7% exceeds the sector median of 7.3% by 1.4pt, and an operating margin of 11.1% exceeds the sector median of 6.4% by 4.7pt, indicating high profitability within the sector. The net margin of 7.6% exceeds the sector median of 4.8% by 2.8pt and is stable at 7.6% compared with the company’s historical trend. In growth, Revenue growth of 27.8% significantly exceeds the sector median of 12.0%, placing the company among the high-growth group in the sector. In soundness, the Equity Ratio of 60.2% is 5.0pt above the sector median of 55.2%, and the current ratio of 268.9% also significantly exceeds the sector median of 208.0%, indicating high financial safety. The Net Debt/EBITDA multiple is -1.12x (net cash), which is relatively modest cash holdings compared with the sector median of -2.88x, but interest-bearing debt is only ¥11.3B, resulting in low financial risk. Return on Assets is 5.3%, exceeding the sector median of 3.8%, and asset efficiency is favorable. The company can be evaluated as belonging to a top-tier group within the sector with a well-balanced mix of profitability, growth, and soundness (Industry: Information & Communications, N=68 companies, comparison: Q3 2025, source: in-house aggregation).

Earnings Highlights

• Sustainability of top-line and bottom-line growth trend: The combination of 27.8% Revenue growth and an 11.1% operating margin indicates top-tier growth and profitability within the sector, with strong short-term earnings momentum. Q3 progress toward achieving the full-year guidance stands at 68.6% for Revenue and 67.9% for Operating Income, and there is potential upside in the remaining period. However, since inventory build-up partly supports growth, continued verification of inventory turnover and the certainty of sales realization is necessary.
• Working capital management and cash realization efficiency: OCF/Net Income of 0.80x and a cash conversion ratio of 0.40 indicate that profit growth is not necessarily translating into prompt cash generation. The ¥13.7B increase in inventories and the collection status of accounts receivable of ¥50.7B will be key to improving cash flows going forward. While there is ample room for dividend payments, without improvements in working capital efficiency, it may constrain medium- to long-term funding capacity.
• Balance between Capex and growth investment: The Capex/Depreciation ratio of 0.24x contributes to maintaining current profit margins but raises concerns about restrained investment necessary to sustain competitiveness and respond to technological innovation over the medium to long term. In the IT industry, technology refresh cycles are rapid, and whether appropriate Capex and R&D investment resume is an important earnings highlight that will determine the sustainability of future growth.

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This report is an earnings analysis document automatically generated by AI based on XBRL financial summary data. It does not constitute a recommendation to invest in any specific security. The industry benchmark is reference information aggregated in-house based on publicly available financial data. Investment decisions are your responsibility; consult a professional as necessary before making any decisions.