| Metric | Current Period | Prior-Year Period | YoY |
|---|---|---|---|
| Revenue | ¥1178.1B | ¥1077.9B | +9.3% |
| Operating Income | ¥190.7B | ¥168.5B | +13.2% |
| Ordinary Income | ¥193.3B | ¥170.4B | +13.4% |
| Net Income | ¥127.1B | ¥108.6B | +17.1% |
| ROE | 17.0% | 15.9% | - |
For the fiscal year ended March 2026, Revenue was ¥1,178B (YoY +¥100B, +9.3%), Operating Income was ¥191B (YoY +¥22B, +13.2%), Ordinary Income was ¥193B (YoY +¥23B, +13.4%), and Net Income was ¥127B (YoY +¥17B, +17.1%), achieving both top-line and bottom-line growth. The operating margin improved by 0.6pt from 15.6% to 16.2%, mainly driven by a reduction in SG&A ratio from 9.9% to 9.1%. Although gross margin slightly declined from 25.6% to 25.3%, containment of SG&A produced operating leverage. All five segments posted revenue growth; notably the Solutions Business recorded a sharp increase in Operating Income of +92.7% YoY. ROE remained high at 17.0%, and under a robust financial position with an Equity Ratio of 76.8%, the company returned capital to shareholders via a dividend of ¥96 per share and ¥20B share buybacks. Operating Cash Flow improved to ¥162B (YoY +31.4%), but working capital absorption due to increased trade receivables limited cash conversion; OCF/EBITDA was 0.80x leaving room for improvement. Guidance for FY2027 (Mar 2027 year) projects Revenue ¥1,260B (+6.9%), Operating Income ¥195B (+2.2%), and Ordinary Income ¥197B (+1.9%), reflecting a conservative plan.
Revenue: Revenue was ¥1,178B (YoY +9.3%), with all segments recording growth. By segment, the Solutions Business expanded most rapidly to ¥177B (+15.0%), driven by expanded sales of proprietary products and services. Industrial IT was ¥283B (+10.3%), IT Infrastructure ¥133B (+7.2%), Financial IT ¥351B (+8.0%), and Social Infrastructure IT ¥242B (+7.8%), all showing solid performance. By region, domestic customers accounted for over 90% of revenue, with strong domestic demand supporting the company-wide top line. Cost of sales rose to ¥880B (YoY +9.6%), increasing more than revenue and resulting in a slight gross margin decline from 25.6% to 25.3% (-0.3pt). Outsourcing and labor cost increases pressured gross margin, but absolute gross profit increased from ¥275B to ¥298B (+8.3%) due to revenue expansion.
Profitability: Operating Income was ¥191B (YoY +13.2%), outpacing revenue growth. SG&A was contained at ¥108B (YoY +0.6%), improving SG&A ratio from 9.9% to 9.1% (-0.8pt). Major expense items: salaries and allowances were ¥38B (+3.4%), goodwill amortization ¥13B (-9.8%), and lease expenses ¥7B (+7.1%); the reduced goodwill amortization contributed to margin improvement. R&D expenses were ¥4B (0.3% of revenue), down from ¥5B the prior year, continuing an investment restraint trend. Non-operating income totaled ¥3B (interest income ¥0.8B, insurance dividends ¥1.0B, etc.), and non-operating expenses were ¥0.7B (FX losses ¥0.3B, interest expense ¥0.2B, etc.), resulting in Ordinary Income of ¥193B (+13.4%). Extraordinary income was ¥0.8B (gain on sale of investment securities ¥0.7B) and extraordinary losses were ¥4.8B (valuation loss on investment securities ¥2.7B, impairment loss ¥2.1B), producing Pre-tax Income of ¥189B (+10.8%). Income taxes amounted to ¥58B (effective tax rate 30.5%), and after deducting non-controlling interest of ¥2B, Net Income attributable to owners of the parent was ¥127B (+17.1%). In conclusion, broad-based demand across segments and SG&A efficiency delivered higher revenue and profit, with particularly strong growth in the Solutions Business lifting company-wide profitability.
Financial IT: Revenue ¥351B (+8.0%), Operating Income ¥68B (+7.1%), maintaining a high margin of 19.3%. Industrial IT: Revenue ¥283B (+10.3%), Operating Income ¥44B (+17.7%), margin improving to 15.6%. Social Infrastructure IT: Revenue ¥242B (+7.8%), Operating Income ¥48B (+4.5%), margin highest among segments at 19.7%. IT Infrastructure: Revenue ¥133B (+7.2%), Operating Income ¥23B (+6.6%), margin 17.4%. Solutions Business: Revenue ¥177B (+15.0%), Operating Income ¥15B (YoY +92.7%), achieving substantial profit growth and improving margin to 8.4%; expansion of proprietary solutions and products drove the profit increase. Corporate expenses totaled ¥7B, unchanged from ¥7B in the prior year. All segments achieved revenue growth, with particularly strong contributions to company performance from Solutions and Industrial IT.
Profitability: Operating margin improved to 16.2% (prior-year 15.6%, +0.6pt), and Net Margin rose to 10.8% (prior-year 10.1%). ROE remained high at 17.0%, reflecting efficient use of equity. Gross margin slightly declined to 25.3% (prior-year 25.6%), but improved SG&A ratio of 9.1% (prior-year 9.9%) enhanced operating-level profitability. EBITDA margin is estimated at approximately 18.3% (Operating Income + goodwill amortization + depreciation), indicating strong cash-generation capability.
Cash Quality: Operating CF / Net Income was 1.27x (¥162B/¥127B), indicating good conversion; subtotal of Operating CF was ¥221B and is robust. Conversely, OCF/EBITDA was 0.80x (¥162B/¥201B) with room for improvement, and an increase in trade receivables (+¥7.5B) suppressed cash conversion. Days Sales Outstanding (DSO) for trade receivables extended to approximately 73 days (¥236B ÷ (¥1,178B/365 days)), pointing to elongated collection periods and the need to improve collection efficiency. Accrual ratio was -3.2% ((¥127B-¥162B)/¥1,178B), a negative value indicating high quality of earnings.
Investment Efficiency: Total asset turnover was 1.21x (¥1,178B/¥974B), indicating efficient asset use. Capital expenditures were ¥4B, only 0.37x depreciation of ¥12B, below maintenance investment levels. R&D spending was ¥4B (0.3% of revenue), down from ¥5B, suggesting a need to raise investment to sustain medium- to long-term competitiveness. Intangible fixed assets amounted to ¥168B (goodwill ¥82B, software ¥10B), with goodwill/Net Assets ratio 11.0% and goodwill/EBITDA ratio 0.41x, indicating a light goodwill burden.
Financial Soundness: Equity Ratio was 76.8% (prior-year 75.5%), high, with current ratio 393% and quick ratio 389%, demonstrating extremely strong liquidity. Cash and deposits were ¥309B, approximately 77x short-term borrowings of ¥4B. Debt/EBITDA was 0.08x (¥16B/¥201B) and Debt/Equity was 2.0%, indicating low leverage. Interest-bearing debt totaled ¥16B (short-term borrowings ¥4B, long-term borrowings ¥12B), and Net Cash (cash & deposits + short-term securities - interest-bearing debt) was ¥337B, ample.
Operating CF improved significantly to ¥162B (YoY +31.4%), with Operating CF subtotal of ¥221B (YoY +33.2%). Corporate tax payments increased to ¥60B (prior-year ¥44B), but core operating cash generation outweighed this. In working capital, trade receivables increased by ¥7.5B and inventories increased by ¥1.9B, while trade payables increased by ¥7.5B and other current liabilities increased by ¥6.1B, partially offsetting cash outflows. Investing CF was -¥31B, primarily consisting of capital expenditures ¥4.4B, intangible asset acquisitions ¥5.1B, net increase in time deposits ¥20B (deposits ¥41B - withdrawals ¥22B), short-term investment securities acquisitions ¥5B, and investment securities acquisitions ¥3.5B. Cash inflows from sale/redemption of securities amounted to ¥6B, indicating restrained investing activity. Financing CF was -¥105B, mainly dividends paid ¥66.5B, share buybacks ¥20B, repayment of long-term borrowings ¥14.6B, and repayment of short-term borrowings ¥4B. Dividends to non-controlling interests ¥0.3B and cash outflows related to changes in ownership interests ¥16B also occurred, while proceeds from disposal of treasury stock were ¥1.4B. Free Cash Flow was ¥131B (Operating CF ¥162B - Investing CF ¥31B), ample to fully cover the combined dividend and share buyback of ¥87B, with FCF coverage of 1.51x (¥131B/¥87B). Cash at end of period increased by ¥26B to ¥325B (prior-year ¥299B), further strengthening the financial base.
Non-operating income was ¥3.2B (0.3% of revenue), composed of interest income ¥0.8B, insurance dividends ¥1.0B, dividends received ¥0.4B, etc., both small in scale and low dependency. Non-operating expenses were limited to ¥0.7B (FX losses ¥0.3B, interest expense ¥0.2B). Extraordinary items netted to -¥4.0B (extraordinary income ¥0.8B — gain on sale of investment securities ¥0.7B; extraordinary losses ¥4.8B — valuation loss on investment securities ¥2.7B, impairment loss ¥2.1B), but their impact on Net Income of ¥127B was limited to 3.1%. The difference between Ordinary Income ¥193B and Pre-tax Income ¥189B is explained by extraordinary items of -¥4.0B, indicating core operations account for the majority of profits. Operating CF ¥162B exceeded Net Income ¥127B, and the accrual ratio of -3.2% indicates earnings are being converted to cash. However, OCF/EBITDA at 0.80x suggests room for improvement, and the extended DSO (~73 days) is absorbing working capital. Comprehensive income was ¥150B (Net Income ¥127B + Other Comprehensive Income ¥18B), mainly driven by a ¥16B increase in remeasurements related to retirement benefits. Retirement benefit assets increased by ¥27B to ¥110B (prior-year ¥83B), with valuation improvements boosting comprehensive income. Overall, recurring earnings comprise most profits, with low reliance on one-off items or financial income; earnings quality is high.
Full Year guidance for the fiscal year ending March 2027 is Revenue ¥1,260B (YoY +6.9%), Operating Income ¥195B (YoY +2.2%), Ordinary Income ¥197B (YoY +1.9%), and Net Income ¥131B (EPS ¥173.76), representing a conservative plan. Compared with the current fiscal results, Revenue is forecast to increase by ¥82B (+6.9%) from ¥1,178B, while Operating Income is projected to rise only ¥4B (+2.2%) from ¥191B. The plan assumes Operating margin declines from 16.2% to 15.5%, likely incorporating pressures from labor cost inflation, higher outsourcing costs, and resumed growth investments. Progress toward the full-year plan stands at 93.5% for Revenue (¥1,178B/¥1,260B) and 97.8% for Operating Income (¥191B/¥195B), indicating company performance is already near guidance and plan achievement is within reach. However, sustaining the remaining ¥82B revenue increase and preserving margins will depend on continued high growth in the Solutions Business, project wins in Industrial IT, and improvements in trade receivable collection efficiency. Dividend guidance is undisclosed (shown as ¥0 in filings); given the company’s policy of a year-end lump-sum dividend, the amount is expected to be determined after results are finalized.
Year-end dividend was ¥96 per share (no interim dividend), with total dividends of ¥66.5B. Payout ratio was 56.6% (company disclosed), allocating about half of Net Income ¥127B to shareholder returns. Share buybacks totaled ¥20B; combined with dividends ¥66.5B, total shareholder returns were ¥86.5B, yielding a Total Return Ratio of 68.1% (¥86.5B/¥127B). Dividend coverage by Free Cash Flow was 1.97x (¥131B/¥66.5B), and total return coverage was 1.51x (¥131B/¥86.5B), indicating ample capacity. In the prior year, returns comprised only dividends of ¥66.5B (Total Return Ratio 60.9%); this year the addition of buybacks raised the Total Return Ratio. Given cash & deposits ¥309B and Net Cash ¥337B alongside improved Operating CF, current levels of dividends and returns are sustainable. However, because capital expenditures and R&D remain at low levels, it is desirable to balance returns with growth investment when maintaining the return policy.
Risk of prolonged trade receivable collection: Trade receivables increased to ¥236B (prior-year ¥228B), up ¥8B, and DSO is roughly 73 days, showing a trend toward elongation. Operating CF subtotal was ¥221B while Operating CF was ¥162B, indicating working capital absorption suppressed cash conversion. OCF/EBITDA of 0.80x is below an ideal benchmark (≥0.9), making improvement in collection efficiency urgent. Continued delays in project acceptance or extended customer payment terms could affect cash flow management and financial flexibility.
Risk of weakened medium- to long-term competitiveness from restrained growth investment: Capital expenditure of ¥4.4B is only 0.37x depreciation of ¥12.1B, below maintenance investment levels. R&D was ¥4B (0.3% of revenue), down from ¥5B, leaving investment in new technologies and products thin. In the fast-evolving IT industry, strategic early investments in AI, cloud, security, etc., determine competitive advantage; prolonged investment restraint risks eroding differentiation.
Talent retention and utilization risk: Salaries and allowances within SG&A were ¥38B (prior-year ¥36B, +3.4%), reflecting labor market tightness and upward pressure on personnel costs. The decline in gross margin from 25.6% to 25.3% suggests increasing outsourcing and labor costs. Intensified competition for talent or higher turnover could reduce utilization rates and cause project delays, adversely affecting both margins and growth.
Revenue & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 16.2% | 8.1% (3.6%–16.0%) | +8.1pt |
| Net Margin | 10.8% | 5.8% (1.2%–11.6%) | +5.0pt |
Both Operating Margin and Net Margin substantially exceed industry medians, placing the company among the higher-profitability firms within the IT & Communications sector.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 9.3% | 10.1% (1.7%–20.2%) | -0.8pt |
Revenue growth is slightly below the industry median but well above the first quartile (1.7%), placing growth between median and upper quartile.
※ Source: Company compilation
Sustained high-profit model and room for margin improvement: With Operating Margin at 16.2% (industry median +8.1pt) and ROE 17.0%, the company maintains industry-leading profitability, and operating leverage from improved SG&A ratio is commendable. The Solutions Business improved to an 8.4% operating margin (significant YoY improvement), and expanded proprietary products and services are likely to continue bolstering company margins. Although the FY2027 plan assumes a decline in operating margin to 15.5%, there is scope to exceed the plan through improvements in trade receivable collection efficiency and continued cost discipline.
Room to improve cash conversion and DSO: Operating CF / Net Income is healthy at 1.27x, but OCF/EBITDA at 0.80x indicates room for improvement, with DSO ~73 days as the next focal point. Accelerating project acceptance and enhancing billing/collection processes would further increase Free Cash Flow, expanding resources for shareholder returns and growth investment. Given abundant cash on hand (¥309B) and Net Cash (¥337B), improvements in working capital could generate additional mid-term cash.
Timing and allocation strategy for resuming growth investments: With CapEx/Depreciation at 0.37x and R&D at 0.3% of revenue, investment levels remain low; strategic resumption of investment is indispensable to sustain competitiveness. Early investment in AI/DX-related technologies, strengthening in-house solution development, and investment in talent acquisition and development will determine long-term growth sustainability. Financial capacity is sufficient, so whether the company phases up growth investment while balancing dividends and buybacks will be a key watchpoint.
This report was automatically generated as an earnings analysis document by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company based on publicly disclosed financial statements. Investment decisions are your responsibility; please consult professionals as needed before making investment decisions.