NSD (9759) FY2026 Q3 Earnings Report

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Executive Summary

The Company posted higher revenue and earnings, accompanied by improved profit margins, as profit growth exceeded revenue growth. Revenue was ¥86.85B (+9.2% YoY), Operating Income was ¥13.89B (+14.0%), Ordinary Income was ¥14.10B (+13.9%), and Net Income attributable to owners of the parent was ¥9.12B (¥8.17B in the same period of the previous year). The primary reason earnings growth exceeded revenue growth was the restraint of selling, general and administrative expenses despite a slight decline in the gross profit margin, resulting in the realization of operating leverage.

Factors Affecting Financial Performance

【Revenue】Revenue increased 9.2% YoY to ¥86.85B. Cost of sales was ¥64.98B (+9.7% YoY), with its growth slightly exceeding that of revenue, causing the gross profit margin to decline modestly to 25.2% from 25.5% in the previous year.

【Profit and Loss】Selling, general and administrative expenses declined 1.5% YoY to ¥7.98B, and the SG&A ratio declined by approximately 1pt to 9.2% from 10.2% in the previous year. The restraint in SG&A expenses offset the decline in the gross profit margin, and Operating Income improved 14.0% YoY to ¥13.89B, while the Operating Income margin improved to 16.0% from 15.3% in the previous year. Ordinary Income was ¥14.10B (+13.9% YoY), with non-operating income and expenses resulting in net income of only ¥0.21B, indicating a limited impact on earnings. Extraordinary income and losses included an extraordinary loss of ¥0.22B, including an impairment loss of ¥0.21B, against a gain on the sale of investment securities of ¥0.07B, resulting in a net loss of ¥0.14B. Due to this temporary factor, Net Income growth of +11.7% was slightly below the growth rates of Operating Income and Ordinary Income. Overall, the Company achieved higher revenue and earnings, with earnings growth primarily driven by operating leverage resulting from improved cost efficiency.

Key Financial Indicators

【Profitability】The Operating Income margin was 16.0%, improving by approximately 0.7pt from 15.3% in the same period of the previous year, while the Net Income margin improved by approximately 0.2pt to 10.4% from 10.2% in the previous year. Although the gross profit margin declined slightly to 25.2%, this was offset by the decline in the SG&A ratio to 9.2%.【Cash Quality】Cash and deposits were ¥30.07B, placing the Company in a net cash position, substantially exceeding interest-bearing debt, which consisted solely of ¥0.88B in long-term borrowings. Accounts receivable and notes receivable were ¥20.93B, declining from the previous year, indicating that receivables remained controlled even during revenue expansion.【Investment Efficiency】Annualized ROE was 17.5%, remaining high despite low leverage, as reflected by an Equity Ratio of 76.6%. R&D expenses were ¥0.27B, or 0.3% of revenue, representing a limited level of investment.【Financial Soundness】Current assets of ¥55.67B compared with current liabilities of ¥13.78B resulted in a high current ratio, while the Equity Ratio of 76.6% improved from the previous year. Goodwill of ¥8.52B represented 9.4% of total assets and 12.3% of net assets, remaining within a manageable range.

Cash Flow Analysis

Although a cash flow statement was not disclosed, cash movements can be assessed based on changes in the balance sheet. Cash and deposits were ¥30.07B, an increase of ¥2.71B from ¥27.36B in the previous year, while interest-bearing debt remained limited to ¥0.88B in long-term borrowings. Accounts receivable declined from the previous year to ¥20.93B, indicating an improving trend in cash collection efficiency relative to earnings growth. Accounts payable were ¥5.19B, declining slightly from the previous year, while the burden on the payment side also remained controlled. Treasury stock increased year on year, expanding the deduction from shareholders’ equity; however, net assets continued to accumulate, reaching ¥69.52B, indicating that the accumulation of internally generated funds is supporting capital allocation capacity.

Quality of Earnings

Recurring earnings power was supported by the growth in Operating Income, while non-operating income and expenses, representing net income of ¥0.21B, amounted to 0.3% of revenue and had a limited impact on overall earnings. Meanwhile, extraordinary income and losses included an extraordinary loss of ¥0.22B, including an impairment loss of ¥0.21B, against a gain on the sale of investment securities of ¥0.07B, resulting in a net loss of ¥0.14B. Due to this temporary factor, a difference arose between Profit Before Tax of ¥13.96B and Ordinary Income of ¥14.10B. Although accounts receivable declined from the previous year, revenue increased, with no indication of a timing mismatch between earnings recognition and cash collection. From an accrual perspective, the quality of earnings can therefore be assessed as generally sound. However, the recognition of an impairment loss indicates the need to continue monitoring the profitability of intangible assets and goodwill.

Earnings Forecasts and Guidance

The Q3 cumulative progress rates against the Company’s full-year forecasts were 74.1% for revenue (¥86.85B/¥117.20B), 75.5% for Operating Income (¥13.89B/¥18.40B), and 75.8% for Ordinary Income (¥14.10B/¥18.60B). All were around 75%, a standard level of quarterly progress, and no significant divergence from the full-year plan was observed. Against forecast EPS of ¥166.43, Q3 cumulative EPS was ¥118.20.

Shareholder Returns

The full-year annual dividend forecast is ¥94.0 per share. The Q2 dividend was ¥0, resulting in a distribution structure in which dividends are concentrated at the fiscal year-end. Based on the average number of shares outstanding during the period, the estimated annual dividend amount is approximately ¥7.18B, resulting in a Payout Ratio of approximately 56.6% against the full-year forecast profit attributable to owners of the parent of ¥12.70B. The financial foundation of net assets of ¥69.52B and cash and deposits of ¥30.07B provides sufficient capacity to support this dividend level.

Risk Factors

1. Low level of technology investment and R&D expenses: R&D expenses were ¥0.27B, or only 0.3% of revenue. Since technology renewal and investment in human resources are sources of competitiveness in the information services industry, this low ratio warrants monitoring as an indicator of the Company’s medium- to long-term differentiation capabilities.

2. Level of the accounts receivable collection period: Annualized days sales outstanding are approximately 66 days, a relatively long level. If inspection and billing schedules are delayed during a period of revenue expansion, the working capital burden may increase.

3. Goodwill and intangible asset impairment risk: The Company holds goodwill of ¥8.52B and intangible fixed assets of ¥17.18B, and recognized an impairment loss of ¥0.21B during the current period. Goodwill represents 12.3% of net assets and 9.4% of total assets, remaining within a manageable range; however, additional impairment may occur if the earnings plans for acquired assets fall short.

Industry Benchmark (For Reference; Based on Our Analysis)

Industry Benchmark (it_telecom)

Profitability and Returns

The Company’s Operating Income margin and Net Income margin both substantially exceed the industry median, placing its profitability in a strong position within the industry.

Growth and Capital Efficiency

The revenue growth rate is slightly below the industry median but remains within the IQR, indicating a standard pace of growth within the industry.

※Source: Based on our analysis

Key Takeaways from the Financial Results

1. Operating Income increased +14.0% against revenue growth of +9.2%, and the Operating Income margin improved by approximately 0.7pt. The slight decline in the gross profit margin was offset by restraint in SG&A expenses, with improved cost efficiency leading earnings growth.

2. High profitability, reflected in annualized ROE of 17.5% and an Equity Ratio of 76.6%, under low leverage indicates a structure in which the Company is generating results through the earning power of its core business while controlling financial risk.

3. The R&D expense ratio of 0.3% and the length of the accounts receivable collection period are issues that should be monitored continuously from the perspectives of medium- to long-term technological competitiveness and working capital management in the information services industry.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,143–¥1,209 at a ±1% change in the cost of equity, and ¥1,169–¥1,184 at a ±0.1 change in ω.

Notes:

• Net assets as of the end of the quarter are used (there is a time difference from the full-year forecast).
• Since 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 solely from publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not forecast 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 our company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting with a professional as necessary.

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