Expanding license sales lifted revenue to JPY 218.5B, with operating income up 14.9%. Next year's focus is margin improvement toward JPY 10B in operating income.

Key Positives From The Full-Year Results

Revenue rose to JPY 218,571M (+26.6% YoY) and operating income to JPY 8,723M (+14.9% YoY), delivering double-digit top- and bottom-line growth. The company uses Microsoft license sales to broaden its customer base and then converts those customers into cloud build and managed services. That model drove profit growth across all three segments. Next year's plan calls for operating income of JPY 10,000M (+14.6% YoY), extending the earnings uptrend.

• Net income attributable to owners of parent company rose to JPY 7,008M (+24.5%), EPS to JPY 155.45 (+25.9%), and ROE to 24.5% (+1.9pt).
• Cloud Services segment profit grew 21.2%, well ahead of 8.5% revenue growth. Expanding AI enablement and managed services for overseas sites lifted the margin to 16.8% (+1.8pt, our estimate).
• Licenses & Products revenue grew 33.0%. Large software deals, hardware demand from the education and public sectors, and new Microsoft license customer wins all contributed.
• The provision for contract losses fell from JPY 346M to JPY 51M, easing the risk from unprofitable projects.
• The annual dividend was raised to JPY 50 (+JPY 10). Combined with JPY 2,021M spent on share buybacks, this marks an expansion of shareholder returns.

Key Concerns From The Full-Year Results

Low-margin Licenses & Products rose to 74.8% of revenue (71.2% in the prior year, our estimate), pulling gross profit margin down to 9.5% (-0.9pt). Accounts receivable doubled on large deals, swinging operating CF negative to -JPY 2,220M, with the shortfall funded by short-term borrowings. The key question now is how to balance the pace of scale expansion against the growing financial burden.

• Operating income margin fell to 4.0% (-0.4pt). Fixed costs also rose, with SG&A at JPY 11,931M (+16.2%) and corporate expenses at JPY 4,253M (+18.4%).
• Working capital swelled, with accounts receivable at JPY 47,418M (+101.5%) and short-term borrowings at JPY 18,190M (+JPY 9,390M). The equity ratio fell to 29.9% (-6.5pt).
• Interest expense rose to JPY 308M (+77.0%) as higher borrowings and rising rates began to bite. Next year's plan puts recurring profit at JPY 9,500M, below operating income of JPY 10,000M.
• This year's recurring profit and net income were partly supported by a JPY 365M gain on sale of investment securities, a JPY 104M valuation gain on securities, and a JPY 452M gain on sale of fixed assets. Next year's net income plan is -10.1%.
• Cloud Integration segment profit rose only 7.9%, trailing 13.0% revenue growth. Its margin slipped to 17.3% (-0.8pt, our estimate).

Focus Areas / Items To Monitor Going Forward

• Next year's plan targets +7.5% revenue growth but +14.6% operating income growth, so most of the profit gain relies on margin improvement. The key is whether higher-margin Cloud Integration and Cloud Services grow as planned, alongside improvements in utilization rates and project pricing.
• Collection of the receivables that doubled at year-end, and the pace of short-term debt reduction. A return to positive operating CF and containment of interest expense are key to assessing financial health.
• How much visibility the new reporting segments will give into the earnings contribution of each growth area: AI, Business IT, and Global.

Key Financial Highlights

(Gross profit margin, operating income margin, and growth rates are our estimates)

Recurring profit (+22.3%) and net income (+24.5%) outpaced operating income growth (+14.9%). This reflects non-operating securities-related gains and an extraordinary gain on the sale of fixed assets. Extraordinary losses include a JPY 92M valuation loss on shares of affiliates and a JPY 34M provision for losses on affiliates' businesses.

Performance By Business Segment

All three segments posted higher revenue and profit. Licenses & Products accounts for 74.8% of revenue, while Cloud Integration and Cloud Services generate 73.6% of segment profit (our estimate).

Segment Performance Table

(Revenue is revenue from external customers. Margin is our estimate, calculated as segment profit ÷ external customer revenue)

Progress Versus Full-Year Guidance

As these are full-year results, we review stand-alone quarterly trends to track the earnings build. Standalone 4Q revenue was JPY 50,704M (+25.3%) and operating income JPY 1,831M (+13.2%), sustaining double-digit growth through year-end (our estimate). For the full year, the sharp 1Q revenue jump (+74.4%) drove the overall result.

(Standalone quarterly figures are our estimates, derived from differences in cumulative disclosed figures)

• Revenue concentrates in 3Q (Apr-Jun), the largest quarter for two consecutive years. This year it reached JPY 81,490M, or 37.3% of the annual total.
• Operating income tends to peak in 2Q (Jan-Mar). This year it was JPY 2,911M, or 33.4% of the annual total.

Next Fiscal Year Guidance

For FY9/2027, the company plans revenue of JPY 235,000M (+7.5%) and operating income of JPY 10,000M (+14.6%). The plan assumes expanded business with existing customers, new customer acquisition, and continued investment in hiring and training. At the net income level, the company expects higher revenue but lower profit.

• Revenue: JPY 235,000M (+7.5%)
• Operating Income: JPY 10,000M (+14.6%)
• Recurring Profit: JPY 9,500M (+5.4%)
• Net Income: JPY 6,300M (-10.1%)
• EPS: JPY 139.50 (-10.3%)

Commentary On Shareholder Returns

• The annual dividend for FY9/2026 is JPY 50 (interim JPY 22, year-end JPY 28), up JPY 10 from JPY 40 in the prior year. The payout ratio is 34.0%, with total dividends of JPY 2,380M.
• The FY9/2027 dividend forecast is unchanged at JPY 50 annually (interim JPY 25, year-end JPY 25), implying a payout ratio of 37.8%.
• Share buybacks totaled JPY 2,021M. Combined with dividends paid of JPY 2,139M, total shareholder returns came to JPY 4,160M, or 59.4% of net income (our estimate).
• The company introduced an executive compensation BIP trust, which holds 300,000 of the company's shares.

Financial Position

A surge in accounts receivable and payable tied to large deals expanded total assets to JPY 100,404M (+34.8%). The resulting working capital gap was funded with short-term borrowings, lowering the equity ratio to 29.9% as leverage rises. Interest coverage nonetheless remains strong.

Disclosures Released Alongside The Earnings Announcement

Major Announcements During The Quarter

Large-Shareholding Filings / Material Proposals Over The Past Year

• Yukihiro Makita (including joint holders): 43.4% → 43.4% (2026/10/26) - Held as a stable shareholder by the founder and Representative Director, his spouse, and an asset management company. Reason for filing: execution and amendment of material agreements, such as collateral agreements.
• Mitsubishi Research Institute: 15.0% → 15.0% (2026/05/14) - Held to maintain and develop the business and alliance relationship, with the company as an equity-method affiliate of Mitsubishi Research Institute. Reason for filing: decrease in joint holders.