MKSystem Swings to ¥58 Million Q1 Operating Profit as Costs Fall 23.5% and CuBe Loss Narrows

Revenue edged down, but costs fell far faster

MKSystem Corporation (TSE: 3910), which supplies business software and cloud services for social-insurance, labour-insurance and payroll procedures to certified social insurance and labour consultant (sharoushi) offices, labour insurance associations and companies, published consolidated results for the first quarter of FY3/2027 — the three months from April 1 to June 30, 2026 — on August 5, 2026, under Japanese GAAP. Revenue was ¥722 million, down 1.8%, against a prior-year first quarter that had itself grown 8.3%. Operating profit was ¥58 million against a loss of ¥35 million, ordinary profit ¥57 million against a loss of ¥32 million, and profit attributable to owners of the parent ¥33 million against a loss of ¥35 million, or ¥6.12 per share against a loss of ¥6.56. The filing names the Tokyo Stock Exchange as the listing venue, and the quarterly statements were not reviewed by an auditor.

The turnaround came almost entirely from cost of sales. It fell 23.5% to ¥341 million from ¥445 million while revenue dipped by only ¥13 million, so gross profit rose 31.5% to ¥381 million and the gross margin widened from 39.4% to 52.8%. Selling, general and administrative expenses were essentially flat, down 0.7% to ¥322 million. The whole ¥91 million gain in gross profit, plus a ¥2 million saving in SG&A, therefore reached the operating line, which swung by ¥93 million from loss to profit; the operating margin moved from −4.8% to 8.1%. Depreciation and amortization, which includes the amortization of software, fell 10.3% to ¥82 million.

Below the operating line, rental income offset interest and a heavier tax charge followed

Non-operating income was ¥12 million, mostly ¥11.0 million of rental income, against non-operating expenses of ¥13 million, chiefly ¥10.0 million of costs attached to that rental income and ¥3.4 million of interest; the prior-year quarter had also included a ¥3.0 million insurance receipt. Ordinary profit therefore landed just below operating profit, at ¥57 million. The income statement shows no extraordinary items, so pre-tax profit was the same ¥57 million. Income taxes took ¥24.5 million, of which ¥17.6 million was a deferred-tax adjustment, leaving profit for the period of ¥32.9 million; non-controlling interests absorbed a ¥0.3 million loss, so profit attributable to owners of the parent was slightly higher, at ¥33 million. The company reports consolidated return on equity of 3.7% for the quarter against −5.6% a year earlier, and 4.7% for the parent company alone against 3.7%.

Shalom: steady sales, sharply lower costs

The Shalom segment supplies software that supports social-insurance, labour-insurance and payroll procedures, built around the Shalom series alongside cloud services such as a My Number management system and the eNEN web year-end tax adjustment system. Segment revenue rose 1.4% to ¥604 million, of which recurring ASP service revenue was ¥571 million, up 1.3%, and system construction services ¥15.2 million, down 9.1%. The filing attributes the growth to steady ASP revenue from the existing customer base. Segment gross profit rose 15.9% to ¥339 million and segment operating profit 140.8% to ¥73 million from ¥30 million, which the company explains by lower cost of sales — reduced data-centre (IDC) expenses and software amortization — and by lower selling, general and administrative expenses, including outsourcing fees.

The segment is also developing AI Shalom, a version of Shalom with AI functions, and promoting it through seminars ahead of release; the filing gives no release date. The company describes rising demand for more efficient human-resources and labour administration on the back of labour shortages, more varied working styles and the digitalization of government procedures, and notes that an amendment to the Certified Social Insurance and Labour Consultants Act has written labour audits explicitly into the scope of sharoushi work.

CuBe: revenue delayed, loss cut by more than two-thirds

The CuBe segment builds customized front-end systems for the HR and general-affairs departments of large companies and also offers GooooN, a cloud service for small and medium-sized businesses. Revenue fell 15.3% to ¥119 million because some projects started, and were recognized as revenue, later than in the same quarter a year earlier. Costs moved the other way: the unprofitable project that had weighed on the prior-year quarter no longer affected results, and cost of sales, including outsourcing costs, declined. Segment gross profit was ¥41.7 million against a gross loss of ¥3.0 million, and the segment operating loss narrowed to ¥18 million from ¥68 million. That loss includes ¥9.7 million of goodwill amortization.

Including intersegment sales, the two segments' revenue totals ¥724 million against group revenue of ¥722 million, and their combined segment profit of ¥55 million plus a ¥3.5 million intersegment elimination gives the group's ¥58 million of operating profit. Shalom, at roughly five-sixths of revenue, carried the quarter; CuBe's improvement was a smaller loss, not a profit.

Receivables collected, borrowings trimmed

Total assets fell 7.6% to ¥2,104 million from ¥2,276 million at March 31, 2026. The largest movement was in accounts receivable, down ¥228 million to ¥446 million, while cash and deposits rose ¥87 million to ¥838 million. Software fell ¥36 million to ¥382 million and deferred tax assets ¥17.6 million. Liabilities fell ¥161 million to ¥1,204 million: accounts payable dropped ¥58 million, short-term borrowings ¥50 million to ¥250 million, income taxes payable ¥40 million and the bonus provision ¥38 million, while long-term borrowings rose ¥15 million to ¥241 million. Short-term borrowings, the current portion of long-term borrowings and long-term borrowings together come to about ¥793 million, against ¥839 million at the prior year-end.

Net assets fell 1.2% to ¥899 million, which the filing attributes to a ¥10 million decline in retained earnings. Because total assets shrank faster, the equity ratio rose from 39.6% to 42.4%. Issued shares were unchanged at 5,428,000. No quarterly cash-flow statement was prepared for the period.

Guidance and dividend unchanged

MKSystem kept the FY3/2027 guidance it published on May 8, 2026: revenue of ¥3,300 million (+1.3%), operating profit of ¥270 million (+8.9%), ordinary profit of ¥260 million (+5.1%) and profit attributable to owners of the parent of ¥192 million (−25.2%), or ¥35.37 per share. This filing does not explain the forecast decline in net profit. The first quarter delivered 21.9% of guided revenue and 21.7% of guided operating profit — close to a quarter of each — and 17.3% of guided net profit. The company says CuBe, loss-making in the quarter, is expected to turn profitable over the full year, which is why it saw no need to revise, and that it will disclose promptly if a revision becomes necessary.

The dividend forecast is also unchanged, at ¥8.00 per share paid entirely at the year-end, the same annual amount as for FY3/2026.

JapanStockPulse provides informational content only and does not constitute investment advice. Figures are taken from the company's published earnings short report and may be subject to subsequent revision.