NOVA SYSTEM CO.,LTD.

Business Details

The majority of revenue comes from System Integration, with core operations in developing business systems for the life insurance, non-life insurance, banking and other financial industries. The insurance industry accounts for approximately half of SI revenue, and the company pursues an industry-specialized strategy leveraging accumulated business knowledge. The remainder consists of Cloud Services (Order Revolution, etc.) for restaurants, reception support, and AI facial recognition. Over 90% of revenue comes from indirect contracts via prime SI contractors such as IBM Japan, Nissay Information Technology, and SCSK.

Recent Overview

Q1 operating profit rose sharply, up 26.6% year on year, while net profit declined slightly due to an extraordinary loss

In Q1 of FY2026 (ending December 2026) (January to March 2026), revenue was ¥1,718 million (up 2.4% year on year) and operating profit was ¥121 million (up 26.6% year on year), reflecting a significant improvement in profitability. The gross profit margin improved from 19.2% in the same period of the prior year to 21.8%. On the other hand, selling, general and administrative expenses increased 12.2% year on year due to the opening costs of the Yodoyabashi office and increased mid-career recruitment expenses. Because the company recorded ¥23 million in officer retirement benefits as an extraordinary loss, quarterly net profit was limited to ¥70 million (down 4.2% year on year). Net assets decreased by ¥204 million from the end of the previous fiscal year due to dividend payments of ¥147 million and a decrease of ¥127 million in valuation difference on available-for-sale securities. The full-year earnings forecast remains unchanged (revenue of ¥7,535 million, operating profit of ¥617 million).

Key Products

Growth Drivers

• Sustained expansion in customer companies' IT investment demand (software investment across all industries is expected to increase 4.4% versus FY2025)
• Continued order intake in insurance industry system development through accumulated business knowledge and an industry-specialized strategy
• Expansion into new development areas for the insurance and banking sectors through AI technology utilization and proposal-based sales activities
• Promotion of sales measures for Cloud Services (Order Revolution, etc.) and increase in the number of stores using the service
• Reduction of unprofitable project risk through the full-scale operation of the Project Risk Management Group
• Expansion of recruitment and sales infrastructure through the opening of the Yodoyabashi office

Risks

• Risk of occurrence of unprofitable projects (delay recovery response in FY2025 (ending December 2025) directly impacted profit)
• Rising trend in labor costs and outsourcing costs (high proportion of labor costs and outsourcing costs in cost of sales)
• Revenue concentration among three major clients (IBM Japan, Nissay Information Technology, and SCSK), accounting for 62.5% in total
• Difficulty in hiring system development engineers and intensifying competition for talent (mid-career recruitment advertising costs are on an increasing trend)
• Risk of downward pressure on the domestic economy due to US trade policy and tariff measures, as well as volatility in financial and capital markets
• Risk of customer companies restraining IT investment due to the impact of rising consumer prices on consumer sentiment