Solekia (9867) FY2026 Q3 Earnings Report

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Executive Summary

For the cumulative Q3 of the fiscal year ending March 2026, the Company achieved higher revenue and profit, driven by significant operating leverage in addition to revenue growth. Revenue was ¥214.6B (+15.6% YoY), Operating Income was ¥14.7B (+118.6%), Ordinary Income was ¥14.9B (+113.8%), and Net Income was ¥9.6B (+111.5%). The factors behind profit growth significantly outpacing revenue growth were the rapid expansion of the East Japan Segment and improved fixed-cost absorption resulting from SG&A expenses declining on a relative basis against the increase in revenue.

Factors Affecting Performance

【Revenue】Revenue was ¥214.6B, up +15.6% YoY. By segment, East Japan led overall growth at ¥59.4B (+49.5%), while West Japan also grew to ¥45.1B (+15.0%); meanwhile, growth in the Tokyo Metropolitan Area slowed to ¥109.4B (+1.6%). Revenue composition was 51.0% for the Tokyo Metropolitan Area, 27.7% for East Japan, and 21.0% for West Japan. Although the Tokyo Metropolitan Area remains the largest segment, the presence of East Japan is increasing.

【Profit and Loss】Operating Income was ¥14.7B, up +118.6% YoY, substantially exceeding the revenue growth rate. The gross margin was 19.6% (improved YoY), while the SG&A ratio declined to 12.7%; both contributed to the expansion of the Operating Income margin to 6.9%. By segment profit, East Japan showed the highest growth and margin at ¥6.1B (+226.3% YoY; 10.3% margin), becoming the central driver of earnings growth. Ordinary Income of ¥14.9B was broadly in line with Profit Before Tax, and the impact of non-operating income and expenses (including dividend income of ¥0.1B and foreign exchange gains of ¥0.1B) was limited. Net Income of ¥9.6B (+111.5% YoY) maintained strong growth despite the tax burden associated with an effective tax rate of 35.3%. Overall, the Company achieved higher revenue and profit, with operating leverage resulting from improved cost absorption being the primary driver of profit growth.

Segment Analysis

Segment profit was ¥6.7B for the Tokyo Metropolitan Area (6.1% margin, +34.2% YoY), ¥6.1B for East Japan (10.3% margin, +226.3% YoY), and ¥3.0B for West Japan (6.7% margin, +74.7% YoY). East Japan led the Company-wide growth in both revenue and profit, and its margin was the highest among the three segments, making it the largest driver of earnings growth. Although revenue in the Tokyo Metropolitan Area remained sluggish, its margin improved, suggesting progress in cost efficiencies. West Japan posted steady growth in both revenue and profit. Going forward, a key issue will be determining whether East Japan’s high growth and profitability are temporary effects of its project mix or reflect structural factors.

Key Financial Metrics

【Profitability】The Operating Income margin was 6.9% and the Net Income margin was 4.5%, both significantly improving from the same period of the previous year. The gross margin was 19.6%, contributing to the realization of operating leverage, although the level itself cannot be considered high.【Cash Flow Quality】Accounts receivable were ¥47.3B, accounting for 20.7% of total assets, and DSO was approximately 60 days, indicating that working capital continues to increase alongside revenue growth.【Investment Efficiency】ROE was 7.9%, consisting of a DuPont decomposition of a 4.5% Net Income margin × 0.94x total asset turnover × 1.88x financial leverage; the improvement in the profit margin was the primary factor supporting ROE. Total asset turnover has some room for improvement in terms of asset efficiency, partly due to the high cash ratio (51.0% of total assets).【Financial Soundness】The Equity Ratio was 53.1% (improving from 49.9% in the previous year), while cash and deposits of ¥116.5B substantially exceeded interest-bearing debt of ¥26.5B, resulting in a net cash position. The current ratio was high at 248.2%, indicating sound short-term payment capacity.

Cash Flow Analysis

As figures from the cash flow statement are not included in the disclosed data, cash trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥116.5B, increasing from ¥104.5B in the same period of the previous year, indicating an expanded funding base. Meanwhile, although accounts receivable declined from ¥73.8B in the previous year to ¥47.3B, inventories increased from ¥14.8B to ¥22.2B, and work in process also increased from ¥0.8B to ¥2.8B. Accounts payable declined from ¥56.3B to ¥37.3B, indicating that the funds tied up on the procurement and payment side are easing. Overall, cash has increased, but the rise in inventories and work in process may be absorbing part of working capital. The extent to which profit growth is being converted into cash will need to be confirmed through quarterly trends going forward.

Quality of Earnings

The earnings growth this time resulted from improved profit at the operating level, with limited impact from extraordinary income and expenses or temporary factors. Non-operating income of ¥0.5B (including dividend income of ¥0.1B and foreign exchange gains of ¥0.1B) and non-operating expenses of ¥0.3B (interest expenses of ¥0.3B) were both minor relative to revenue. Ordinary Income of ¥14.9B and Profit Before Tax of ¥14.9B were broadly in line, indicating that the Company’s performance is not structurally subject to significant influence from non-operating income and expenses. Comprehensive income was ¥10.9B, exceeding Net Income of ¥9.6B; the difference was primarily attributable to an increase of ¥1.4B in the valuation difference on securities, which is a factor separate from the profitability of the core business. The gross margin of 19.6% still leaves room for improvement, and whether the expansion in the profit margin this time resulted from a temporary decline in the SG&A ratio or structural productivity improvements will need to be assessed based on future trends in the gross margin and SG&A ratio.

Earnings Forecast and Guidance

The full-year Company forecasts are Revenue of ¥291.0B (+3.8% YoY), Operating Income of ¥19.1B (+10.6%), and Ordinary Income of ¥19.1B (+9.5%). The cumulative Q3 achievement rates were 73.7% for Revenue, 77.0% for Operating Income, 78.0% for Ordinary Income, and 80.4% for Net Income, exceeding the standard achievement rate of 75%. Profit progress is ahead of revenue progress, suggesting that the Company’s full-year revenue and profit growth forecasts may be conservative relative to the pace of results achieved to date. Trends in revenue and profit recognition in Q4 will be a key point for confirming achievement of the full-year forecasts.

Shareholder Returns

The Company’s forecast dividend per share is ¥50. Based on forecast EPS of ¥1,388.91, the Payout Ratio is estimated at approximately 36%. Given the financial position, including cash and deposits of ¥116.5B and net cash of approximately ¥90.0B, the dividend burden is restrained relative to the level of profit. There has been no disclosure regarding share repurchases, and the Company is evaluated based on the Payout Ratio alone rather than the Total Return Ratio.

Risk Factors

1. Low gross margin: The gross margin is 19.6%, exceeding the industry median of 3.3% (based on Operating Income margin), but room for improvement remains in absolute terms. Rising procurement prices, price competition, and an increase in low-profitability projects could again place pressure on margins.

2. Reversal of growth in the East Japan Segment: East Japan has expanded rapidly, with Revenue up +49.5% and segment profit up +226.3%, potentially indicating a high degree of concentration in specific projects or dependence on high-profitability projects. The risk of a reversal in both growth and profitability needs to be monitored.

3. Working capital management: Accounts receivable account for 20.7% of total assets, and DSO is approximately 60 days. In addition, work in process increased from ¥0.8B in the previous year to ¥2.8B, requiring ongoing monitoring from the perspectives of project delays and inventory valuation.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

The Company’s Operating Income margin and Net Income margin exceed the industry median, indicating that its profitability is relatively high within the industry.

Growth and Capital Efficiency

The Revenue growth rate significantly exceeds the industry median, positioning the Company among the industry’s high-growth companies.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. The Operating Income margin expanded from approximately 3.6% in the same period of the previous year to 6.9%, achieving profit growth substantially exceeding revenue growth. Whether this expansion resulted from structural productivity improvements or a temporary project mix in East Japan will be the focus of sustainability checks in future quarters.

2. The profit achievement rates (77.0% for Operating Income and 80.4% for Net Income) exceeded the standard progress rate of 75%, indicating progress slightly ahead of the full-year Company forecasts.

3. The Equity Ratio improved to 53.1% (49.9% in the previous year), and cash and deposits exceeded interest-bearing debt by approximately ¥90.0B on a net basis. While the financial foundation is stable, changes in working capital items such as accounts receivable and work in process will be points to monitor going forward.

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not constitute a recommendation to invest in any particular 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, and you should consult a professional adviser as necessary.

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AI Financial Analysis

Executive Summary

Solekia delivered a strong FY2026 Q3 cumulative earnings result, with profit growth materially outpacing revenue growth. Revenue increased 15.6% year on year to ¥21.46bn. Operating income rose 118.6% to ¥1.47bn, while ordinary income increased 113.8% to ¥1.49bn. Net income more than doubled, rising 111.5% to ¥0.96bn. The operating margin expanded by 323bp to 6.9% from 3.6% in the prior-year period. Gross margin improved by 104bp to 19.6%, reflecting better gross-profit conversion despite remaining just below the 20% quality-alert threshold. Net margin expanded by 203bp to 4.5% from 2.5%. SG&A expense declined 1.4% year on year to ¥2.73bn despite double-digit sales growth, demonstrating substantial operating leverage. The East Japan segment was the principal earnings growth engine, with segment profit increasing 226.2% year on year. The Tokyo metropolitan segment remained the largest contributor to segment profit and therefore represents the core business. Full-year operating-income guidance of ¥1.91bn has already been achieved by 77.0% at Q3, ahead of the standard 75% seasonal progress rate. Net-income progress is stronger at 80.4% of the ¥1.20bn full-year forecast. Revenue progress is 73.7% of the ¥29.10bn target, modestly below the standard Q3 rate, implying that management expects a seasonally stronger fourth quarter in sales while profit guidance retains some conservatism. Financial liquidity is robust, supported by ¥11.65bn of cash and a 248.2% current ratio. Balance-sheet risk is limited by low interest-bearing debt relative to equity and interest coverage of 49.63x. However, inventory increased 50.1% year on year, including a high work-in-process ratio alert, requiring monitoring of project execution and inventory conversion. The 42.6% short-term debt ratio also creates a refinancing and maturity-management consideration despite abundant cash. Overall, the quarter demonstrates a meaningful improvement in earnings power, but the sustainability of margin gains, working-capital discipline, and conversion of inventory into revenue are the central factors for the remaining fiscal year.

Profitability Analysis

The reported annualized DuPont ROE is 10.6%, which meets the 10-15% benchmark range for good capital efficiency. Its components are a 4.5% net profit margin, 1.251x annualized asset turnover, and 1.88x financial leverage. The principal driver of improved profitability is margin expansion rather than greater balance-sheet leverage: operating margin rose to 6.9% from 3.6%, and net margin rose to 4.5% from 2.5%. Gross margin improved to 19.6% from 18.6%, while SG&A fell to 12.7% of sales from 14.9%, producing the much larger operating-margin expansion. SG&A expense decreased to ¥2.73bn from ¥2.77bn even as revenue grew by ¥2.89bn, indicating strong fixed-cost absorption and favorable operating leverage. EBIT margin of 6.8% is above the reported operating-margin benchmark concern threshold of 5%, although it remains below the 8% level associated with stronger profitability. The tax burden was 0.647, equivalent to a 35.3% effective tax rate, which restrained net-income conversion relative to pre-tax profit. Interest burden was 1.013 because non-operating income slightly exceeded interest and other non-operating expenses; therefore, financing costs are not currently impairing profitability. Interest coverage of 49.63x confirms that ¥0.30bn of interest expense is readily serviceable from operating earnings. The annualized asset turnover of 1.251x is reasonable for the company's distribution and systems-integration-oriented operating model. The annualized ROA, calculated using annualized Q3 net income and average total assets, is approximately 5.7%, indicating adequate but not exceptional asset profitability. By region, the Tokyo metropolitan segment is the core business, generating ¥6.68bn of segment profit on ¥107.84bn of external revenue, a 6.2% segment margin. East Japan delivered ¥6.15bn of profit on ¥59.43bn of external revenue, with the highest segment margin at 10.3%, versus 4.7% a year earlier. West Japan generated ¥3.01bn of profit on ¥45.13bn of revenue, a 6.7% margin, versus 4.4% a year earlier. Tokyo metropolitan profit increased 34.2%, West Japan profit increased 74.7%, and East Japan profit increased 226.2%, establishing East Japan as the largest incremental contributor. The margin improvement appears operationally supported by gross-margin improvement and SG&A leverage, but its durability should be tested against fourth-quarter mix and the elevated work-in-process balance.

Growth Assessment

Revenue growth of 15.6% to ¥21.46bn indicates broad-based expansion, with all three reportable geographic segments growing. Tokyo metropolitan revenue increased 1.7% year on year to ¥107.84bn, reflecting stability in the largest revenue base. East Japan revenue grew 49.5% to ¥59.43bn, materially outperforming the group and supporting the sharp increase in segment profitability. West Japan revenue increased 15.0% to ¥45.13bn, also contributing positively to consolidated growth. Segment profit grew faster than sales in every reportable region, pointing to favorable sales mix, improved gross profit, and improved absorption of overhead. The group’s gross profit increased 22.0% to ¥4.20bn, faster than sales, confirming improved unit economics at the gross-profit level. Operating income increased ¥0.80bn year on year, with approximately all of this increase supported by the ¥0.76bn gross-profit expansion and a ¥0.04bn reduction in SG&A. The FY2026 full-year revenue forecast implies fourth-quarter revenue of ¥7.64bn, while operating-income guidance implies ¥0.44bn of fourth-quarter operating income. This corresponds to an implied fourth-quarter operating margin of approximately 5.7%, below the 6.9% achieved cumulatively through Q3, suggesting prudent guidance or expected normalization in sales mix and costs. Management forecasts full-year revenue growth of 3.8% and operating-income growth of 10.6%, which is substantially slower than Q3 cumulative growth and similarly indicates a conservative exit-rate assumption. Net income has reached 80.4% of full-year guidance, ahead of the 75% standard Q3 progress level. Growth quality is strengthened by the fact that ordinary income of ¥1.49bn closely tracks operating income of ¥1.47bn, meaning earnings growth is predominantly operating in nature rather than dependent on non-operating items. Non-operating income of ¥0.50bn represented only 0.2% of revenue, including ¥0.11bn of dividend income and ¥0.12bn of foreign-exchange gains. The absence of reported segment impairment or goodwill-related charges supports the current earnings trajectory. The key question for growth sustainability is whether East Japan can preserve its elevated 10.3% segment margin and whether inventory, including work in process, converts into sales without requiring margin concessions.

Financial Health

Financial health is strong, led by a current ratio of 248.2% and a quick ratio of 221.4%. Current assets of ¥20.52bn exceed current liabilities of ¥8.27bn by ¥12.25bn, providing substantial liquidity coverage. Cash and deposits of ¥11.65bn alone are greater than total interest-bearing debt of ¥2.65bn. Cash covers short-term debt by 10.31x, substantially mitigating near-term refinancing pressure. Interest-bearing debt represents approximately 0.22x total equity, while the reported debt-to-equity ratio is 0.88x and remains below the 2.0x aggressive-leverage warning threshold. Debt-to-capital is 17.9%, well below the 40% investment-grade reference threshold. The liability-to-asset ratio is 46.9%, and the capital adequacy ratio improved to 53.1% from 49.9% a year earlier. Long-term loans were ¥1.52bn and short-term loans were ¥1.13bn, with current portions of long-term loans of ¥1.30bn adding to obligations due within one year. The quality alert on the 42.6% short-term debt ratio is relevant because a meaningful portion of borrowings requires regular rollover or repayment. This maturity structure is manageable in the current period because cash holdings exceed short-term debt by more than ten times, but preserving this liquidity buffer remains important if working-capital requirements rise. Accounts receivable declined ¥2.65bn, or 35.9%, to ¥4.73bn, while electronically recorded monetary claims were ¥0.67bn. Accounts payable declined ¥1.89bn, or 33.7%, to ¥3.73bn. The simultaneous decline in receivables and payables may reflect timing of transactions, settlement patterns, or a shift in procurement and billing cycles; it should be assessed alongside quarterly operating cash generation. Inventories increased ¥0.74bn, or 50.1%, to ¥2.22bn and now represent 9.7% of total assets. Investment securities increased ¥0.21bn, or 35.1%, to ¥0.81bn, remaining a modest 3.5% of assets. The balance sheet has minimal intangible-asset exposure, with intangibles equivalent to 0.1% of total assets, and no goodwill impairment or segment goodwill was reported. Defined-benefit obligations of ¥0.46bn, directors’ retirement provisions of ¥0.06bn, and asset-retirement obligations of ¥0.06bn are modest relative to equity.

Notable B/S Changes

Inventories: +¥0.74bn (+50.1%) to ¥2.22bn - increased working-capital commitment; timely conversion into deliveries and accepted projects is important, particularly given the high WIP-ratio alert. Accounts receivable: -¥2.65bn (-35.9%) to ¥4.73bn - favorable reduction in billed receivables and potentially supportive of cash conversion, although the 60-day DSO alert remains a collection-efficiency monitoring point. Accounts payable: -¥1.89bn (-33.7%) to ¥3.73bn - lower supplier financing may partly offset cash benefits from reduced receivables and can increase net working-capital funding requirements. Investment securities: +¥0.21bn (+35.1%) to ¥0.81bn - the increase is modest relative to total assets at 3.5%, but introduces incremental market-value exposure. Current portion of long-term loans: +¥0.86bn (+189.1%) to ¥1.30bn - increases debt maturing within one year and contributes to the 42.6% short-term debt ratio; substantial cash holdings mitigate the immediate refinancing risk.

Cash Flow Quality

Profit quality is supported by the close relationship between operating income of ¥1.47bn and ordinary income of ¥1.49bn, indicating that the period’s earnings were principally generated by core operations. Non-operating income was limited to ¥0.50bn, or 0.2% of revenue, and therefore does not materially distort operating performance. Dividend income of ¥0.11bn and foreign-exchange gains of ¥0.12bn were small contributors relative to operating income. Working-capital movements provide mixed signals for cash conversion. Accounts receivable decreased by ¥2.65bn year on year, which is supportive of cash release and collection discipline. However, the quality alert identifying DSO of 60 days indicates that collection efficiency remains a monitoring item despite the lower receivable balance. The root cause is that receivables and electronic monetary claims still constitute a meaningful ¥5.40bn of operating claims. For an IT solutions, systems integration, and equipment distribution business, billing and acceptance timing can create elevated receivable days, but sustained DSO above the 60-day threshold could delay cash realization and increase credit exposure. The impact is moderate because liquidity is ample, but continued high DSO would reduce the resilience of earnings-to-cash conversion. Inventories rose ¥0.74bn to ¥2.22bn, including ¥0.28bn of reported work in process. The high work-in-process ratio alert indicates an elevated concentration of project-related unfinished assets within inventory classification. This can be normal for project-based systems integration and manufacturing-related work, but it raises execution, acceptance, and potential valuation-risk sensitivity if customer schedules are delayed. The impact is that part of the reported gross-profit improvement depends on timely conversion of project inventory into delivered revenue and cash. Accounts payable fell by ¥1.89bn, reducing supplier-financing support relative to the prior year. Consequently, receivable collection improvement may be partly offset by faster settlement of payables and higher inventory investment. The company’s ¥11.65bn cash balance provides a substantial buffer against these working-capital fluctuations. Ongoing monitoring should focus on whether inventory and work in process decline as fourth-quarter revenue is recognized, and whether receivable days remain contained.

Dividend Sustainability

The full-year dividend forecast is ¥50 per share. Based on forecast EPS of ¥1,388.91, the implied dividend payout ratio is approximately 3.6%. This is significantly below the 60% sustainability benchmark and leaves substantial earnings retention capacity. Forecast net income of ¥1.20bn is more than sufficient to support the implied aggregate dividend commitment of approximately ¥43m based on 863,973 average shares. Retained earnings increased to ¥7.15bn from ¥6.25bn a year earlier, reinforcing internal funding capacity. Cash and deposits of ¥11.65bn also provide considerable balance-sheet support for the dividend. The modest payout ratio suggests that dividend continuity is not dependent on non-operating gains or incremental borrowings. No share repurchase activity is indicated by the small treasury-share balance of 1,369 shares, so the dividend payout ratio remains the relevant shareholder-return measure. Dividend capacity appears robust provided that earnings remain near the stated forecast and working-capital investment does not increase materially.

Risk Assessment

Business risks include Margin sustainability risk: the operating margin improved to 6.9% from 3.6%, driven by a 104bp gross-margin gain and SG&A leverage. A normalization of product mix, project mix, or procurement costs could reduce the implied fourth-quarter margin., East Japan concentration of incremental earnings: East Japan segment profit increased 226.2% to ¥6.15bn and delivered a 10.3% segment margin. Maintaining this unusually strong regional profitability is important to sustaining consolidated earnings momentum., Low gross-margin alert: gross margin of 19.6% remains marginally below the 20% alert threshold. The root cause is the relatively low-margin nature of equipment distribution and systems-integration activities. This is structurally common in the industry, but it makes the company sensitive to pricing pressure, supplier costs, and adverse sales mix. The impact is that a modest gross-margin reversal can have an outsized effect on operating profit., Work-in-process execution risk: the high WIP ratio alert reflects meaningful project-related unfinished inventory. This is consistent with project-based operations, but delays in completion, customer acceptance, or specification changes could defer revenue recognition and create valuation risk..

Financial risks include Refinancing risk: the 42.6% short-term debt ratio exceeds the 40% alert threshold. The root cause is the concentration of borrowings and current portions of loans due within one year. This is currently mitigated by ¥11.65bn of cash and a 10.31x cash-to-short-term-debt ratio, but the company should maintain access to bank facilities and avoid allowing working-capital needs to erode its cash buffer., Receivable-collection risk: the DSO alert at 60 days signals that operating claims remain sizeable relative to sales. This is partly typical for enterprise and project-based transactions, but extended payment or acceptance cycles can weaken cash conversion and increase customer-credit exposure., Inventory funding risk: inventories rose 50.1% year on year to ¥2.22bn while accounts payable declined 33.7% to ¥3.73bn. This combination can increase cash funding needs if inventory conversion slows., Interest-rate risk is limited at present because interest coverage is 49.63x and debt-to-capital is only 17.9%, but future borrowing costs could rise if short-term facilities are refinanced at higher rates..

Key concerns include Monitor fourth-quarter revenue conversion of inventory and work in process, particularly because full-year revenue guidance requires ¥7.64bn of Q4 sales., Monitor whether the implied Q4 operating margin of approximately 5.7% reflects normal seasonality or a more durable moderation from the 6.9% Q3 cumulative margin., Monitor DSO and the relationship between accounts receivable, electronic monetary claims, inventories, and accounts payable as indicators of working-capital discipline., Monitor short-term debt rollover and liquidity deployment, although the current cash position provides a substantial near-term cushion..

Investment Implications

Key takeaways include FY2026 Q3 cumulative operating income rose 118.6% to ¥1.47bn, substantially outperforming 15.6% revenue growth., Operating margin expanded 323bp to 6.9%, supported by a 104bp gross-margin improvement and lower absolute SG&A expense., The Tokyo metropolitan segment remains the core business by segment-profit contribution, while East Japan was the main source of incremental earnings and achieved the highest 10.3% segment margin., The company has achieved 77.0% of full-year operating-income guidance and 80.4% of net-income guidance by Q3, indicating a modestly favorable profit-progress position., Liquidity is exceptionally strong, with ¥11.65bn of cash, a 248.2% current ratio, and cash equal to 10.31x short-term debt., The principal operating watch items are low absolute gross margin, high work-in-process exposure, 60-day DSO, and the sustainability of East Japan’s margin expansion..

Metrics to watch include Gross margin relative to the current 19.6% level, Operating margin relative to the Q3 cumulative 6.9% and implied Q4 5.7%, East Japan segment revenue growth and segment margin, Inventory and work-in-process conversion in the fourth quarter, DSO and combined accounts receivable plus electronic monetary claims, Short-term debt ratio and cash-to-short-term-debt coverage, Achievement of ¥29.10bn revenue, ¥1.91bn operating income, and ¥1.20bn net-income full-year targets.

Regarding relative positioning, Solekia shows stronger-than-typical balance-sheet liquidity and conservative debt capacity for a project-oriented IT solutions and equipment-distribution business. Its 10.6% annualized ROE is in the good benchmark range, while the 6.9% operating margin is improved but remains below the 8% threshold associated with stronger profitability. The company’s relative strength is its cash-rich balance sheet and current operating leverage; its relative constraint is a sub-20% gross margin that leaves earnings sensitive to project mix, pricing, and working-capital execution.