NEC consolidated CSG Systems International from 14 May 2026, and its interim earnings report for the six months to September 2026 shows what the purchase added and what it cost. CSG contributed ¥81.3bn of revenue and ¥5.9bn of interim profit after the acquisition date. Against that, NEC recorded ¥394.4bn of goodwill and now forecasts negative free cash flow for the year.
What CSG added, and what it did not
Group revenue rose 11.7% to ¥1.75tn. Operating profit rose 23.3% to ¥146.2bn, and Non-GAAP operating profit, NEC's measure that strips out acquisition amortisation, M&A costs, restructuring, impairments and other one-offs, rose 47.7% to ¥188.3bn.
NEC's results presentation credits CSG with helping lift sales and profit in overseas IT services, where revenue reached ¥309.8bn against ¥202.3bn a year earlier. It also credits domestic IT services (on BluStellar growth and better profitability), aerospace and defence, and marine systems.
The pro forma figures, which assume CSG was consolidated from 1 April 2025, separate the deal from the rest. On that basis revenue rose 6.6%, below the reported 11.7%, and Non-GAAP operating profit rose ¥46.7bn to ¥187.6bn, against a reported rise of ¥60.8bn.
Goodwill and restructuring costs
NEC bought 100% of CSG through its North American unit, via a reverse triangular merger, for ¥360.8bn in cash. The fair value of identifiable net assets was minus ¥33.6bn, so goodwill came to ¥394.4bn. Total goodwill on the balance sheet rose to ¥824.2bn from ¥450.5bn at end-March. NEC says the goodwill reflects excess earning power and synergies with its Netcracker unit, and that none is expected to be tax-deductible. The allocation of the purchase price is provisional.
The distance between reported and Non-GAAP profit widened. Excluded items included ¥7.7bn of M&A-related costs and ¥23.0bn of restructuring and impairment charges, against ¥1.6bn a year earlier. Other gains and losses swung to a ¥18.4bn loss, including ¥13.7bn of restructuring costs tied to the agreed sale of an overseas network equipment resale business and government and municipal IT services in some countries. Of ¥4.1bn in acquisition-related costs, ¥1.8bn was expensed in the half.
Interim profit rose 59.8% to ¥117.7bn, well ahead of the 23.2% rise in pre-tax profit; income tax expense was ¥24.5bn against ¥41.8bn a year earlier. Had CSG been consolidated from the start of the half, NEC says interim profit would have been ¥107.5bn.
Cash, debt and the new guide
Cash paid for subsidiaries was ¥413.4bn, a figure that includes redeeming CSG's convertible bonds, which sit outside the purchase consideration. Free cash flow for the half was minus ¥412.6bn against plus ¥174.2bn. Interest-bearing debt rose to ¥774.7bn from ¥489.2bn at end-March, while cash fell to ¥435.8bn from ¥659.0bn.
NEC raised its full-year Non-GAAP forecasts from the July 29 level, adding CSG. Guidance covers Non-GAAP measures and revenue; the ¥30bn allowance set at the start of the year for component risk and macroeconomic uncertainty stays. The dividend forecast is unchanged at ¥40 a share, including a ¥20 interim payment.
| Measure | July 29 forecast | October 28 forecast |
|---|---|---|
| Revenue | 3,540.0 | 3,740.0 |
| Non-GAAP operating profit | 430.0 | 460.0 |
| Non-GAAP profit attributable to owners | 290.0 | 310.0 |
| Free cash flow | 300.0 | -90.0 |
| Overseas IT services revenue | 450.0 | 620.0 |
| Overseas IT services Non-GAAP operating profit | 52.0 | 77.0 |
NEC left its group financial targets from the May 12 medium-term plan unchanged. It raised its overseas IT services target and put growth investment capacity at ¥1.3tn, a figure that assumes CSG's earnings contribution. The interim report is not subject to auditor review.