Business Engineering Corporation Q2 FY2026 earnings call

• Overall Financial Performance

  • All first-half metrics including revenue, all profit levels, and order value hit all-time records, with revenue reaching a new high for 3 consecutive years, and operating profit and net income reaching new highs for 8 consecutive years.
  • The quarter included a gain from the sale of policy-held stocks in the first quarter, and all metrics exceeded the previously revised first-half plan.
  • The company optimized capital efficiency through growth investment in products and sale of policy-held stocks.

• Long-Term Strategy Alignment

  • The company published its "BE 2030" long-term growth strategy targeting 100 billion yen in operating profit by fiscal 2030. The current fiscal year (the first year of the plan) is on track to deliver two years of planned growth in advance, with 60 billion yen in full-year operating profit forecast, equivalent to two years of progress toward the 2030 target.

• Shareholder Return Updates

  • The company increased its payout ratio target from over 35% to over 50% starting this fiscal year, resulting in a planned 11th consecutive year of dividend increases. A 5-for-1 stock split is scheduled to take effect January 1, 2026, and the company plans to discontinue its shareholder benefit program after the December 31, 2025 distribution to pursue more equitable shareholder returns. The interim dividend is set at 78 yen per pre-split share, a 36 yen increase year-over-year.

1. Solution Business: Reported strong order traction driven by high customer inquiry volume and one-time factors, with revenue significantly exceeding prior year levels. Profit declined from the first quarter due to provisioning for performance-linked employee bonuses, but core project profitability remained at high levels, and the business exceeded the post-upward revision revenue plan. 2. Product Business: Driven by strong strategic partnerships and some accelerated deal closures in the second quarter, license sales grew sharply. Both existing and new partners contributed to revenue expansion. Despite provisioning for performance-linked bonuses, strong license sales absorbed this cost, delivering higher profit levels than the first quarter. 3. mcframe License: Driven by mcframe's competitive advantage in the supply chain management space, second quarter revenue grew sharply, with the first half posting over 20% year-over-year growth. Consolidated first half total revenue was 122.88 billion yen, 51.2% of the full-year revised forecast, with 21.7% year-over-year growth; consolidated first half operating profit was 33.72 billion yen, 56.2% of the full-year revised forecast, with 39.4% year-over-year growth.

• The company revised all full-year 2026 March fiscal year performance metrics upward. Full-year revenue is forecast at 24.0 billion yen (up 2.0 billion yen from prior guidance), operating profit at 6.0 billion yen (up 0.8 billion yen), net income at 4.4 billion yen (up 0.7 billion yen), and order value at 24.3 billion yen (up 1.8 billion yen).
• Both segments and mcframe license sales received upward forecast revisions. The Solution Business is projected to maintain strong customer inquiries, secure stable revenue and profitability in the second half, and expand into new areas like data-centric business. The Product Business projects continued strong double-digit growth for mcframe license sales, targeting over 17% year-over-year growth matching the prior year's performance.
• Revenue is projected to hit a new all-time high for 4 consecutive years, with operating profit and net income reaching new highs for 10 consecutive years. Return on Equity is forecast at 29.8%.
• Full-year annual dividend is set at 188 yen per pre-split share, a 32 yen increase from prior guidance and an 88 yen increase year-over-year. The company committed to a progressive dividend policy and ruled out a dividend cut for next fiscal year.
• Management expects manufacturing industry DX demand to remain strong despite projected broader economic slowdown, with continued solid digital investment from manufacturing clients.

No explicit risks or operational failures were discussed in the available transcript content.

Q: What is driving the sharp growth in mcframe license sales, and what impact does the shift to larger customers have on profitability? / A: Growth is being driven by an increase in larger enterprise customers (typically with 300 billion to 500 billion yen in annual revenue) in addition to traditional mid-sized clients. Many of these are existing SAP users that adopt mcframe for part of their SCM needs. The shift to larger customers has not hurt profitability, as larger deals do not require deeper discounts that erode margins.

Q: How strong is current demand, and what is the outlook for the business environment going forward? / A: Strong order flow is driven by broad, sustained digital transformation demand in the manufacturing SCM space, rather than a single large one-time order. It reflects longstanding client relationships solving ongoing digitalization challenges. SAP support end-of-life is a positive catalyst, driving both S/4 HANA migration adjacent demand and replacement demand for mcframe, with this trend expected to continue. There is still large untapped potential, as less than half of Japanese manufacturers have adopted packaged SCM software, so demand is unlikely to peak in the near term.

Q: What is the strategic purpose of the stock split and elimination of shareholder benefits? / A: The 5-for-1 split lowers the per-share investment threshold to increase the number of individual shareholders, improve trading liquidity and increase the free float. The company expects this to support a more balanced shareholder structure with a healthy mix of individual and institutional investors. Eliminating shareholder benefits is part of a shift to a more equitable return of capital to all shareholders via higher direct dividends.

Q: What is the current status and future direction of the company's partner strategy? / A: Most major system integrators focused on manufacturing are already mcframe partners. The company is now prioritized expanding the pool of technical staff trained to sell and implement mcframe across both new and existing partners. It is also strengthening joint sales and promotional infrastructure to make it easier for partners to sell the product.

Q: Could you confirm the dividend policy and explain the temporary tax reduction? / A: The company maintains a progressive dividend policy, and has no plan to cut the dividend next year. The tax reduction comes from eligibility for the wage increase promotion tax incentive, which is a one-time benefit for the current fiscal year.