JAC Recruitment (2124) FY2025 FY Earnings Report

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Executive Summary

Revenue and profit increased, primarily driven by the expansion of the domestic recruitment placement business, resulting in an earnings performance characterized by simultaneous improvements in profitability, capital efficiency, and cash-generation capacity. Revenue was ¥460.9B (¥391.6B in the previous year, +17.7%), Operating Income was ¥116.8B (¥90.9B in the previous year, +28.5%), Ordinary Income was ¥117.1B (¥91.2B in the previous year, +28.4%), and Net Income attributable to owners of the parent was ¥84.0B (¥56.1B in the previous year, +49.7%). The fact that Net Income growth substantially exceeded Revenue growth was attributable to the reduction in impairment losses recorded in the previous year (¥7.7B) to ¥2.1B in the current fiscal year, in addition to the increase in Operating Income. The Operating Margin improved by 2.1pt to 25.3% from 23.2% in the previous year, as the 14.3% increase in SG&A expenses remained below the 17.7% Revenue growth rate, allowing operating leverage to take effect.

Factors Driving Earnings Fluctuations

【Revenue】Revenue was ¥460.9B, up +17.7% year on year. The domestic recruitment placement business led company-wide growth, with Revenue of ¥416.6B (90.4% composition ratio, +19.0%), while the overseas business generated ¥40.3B (+7.6%) and the domestic job advertising business generated ¥4.0B (△1.0%). By revenue recognition category, performance obligations satisfied at a point in time accounted for 94.4%, indicating a structure with a high degree of dependence on placement revenue linked to successful hiring decisions.

【Profit and Loss】Operating Income was ¥116.8B (+28.5%) and Ordinary Income was ¥117.1B (+28.4%), achieving profit growth above the Revenue growth rate. Non-operating income and expenses resulted in a net profit of only ¥0.3B, and Ordinary Income was therefore almost identical to Operating Income, indicating a high dependence on the core business. Although the company recorded extraordinary losses of ¥2.1B (impairment losses of ¥1.1B and losses on the liquidation of affiliated companies of ¥0.9B), these were a temporary factor that decreased from ¥7.7B in the previous year. After deducting income taxes of ¥31.0B (effective tax rate of 27.0%) from Profit Before Tax of ¥115.0B, Net Income was ¥84.0B (+49.7%). Segment profit in the domestic recruitment placement business was ¥111.2B (+27.3%, margin of 26.7%), representing profit growth above Revenue growth, while the overseas business expanded its profit into the black to ¥0.29B (+164.2%), although its margin remained at 7.1%. The company achieved both Revenue and profit growth, and the fact that profit growth exceeded Revenue growth indicates good earnings quality.

Segment Analysis

The domestic recruitment placement business is the core of company-wide performance, with Revenue of ¥416.6B (90.4% composition ratio, +19.0%) and segment profit of ¥111.2B (+27.3%, margin of 26.7%). The overseas business expanded its profitability, with Revenue of ¥40.3B (+7.6%) and segment profit of ¥0.29B (+164.2%), but its 7.1% margin was 19.6pt below that of the domestic recruitment placement business, leaving room for profitability improvements. The domestic job advertising business recorded a slight Revenue decline to ¥4.0B (△1.0%), but segment profit increased to ¥0.9B (+55.9%, margin of 23.2%), indicating progress in cost efficiency. By geographical region, Revenue was ¥420.6B in Japan (91.3% composition ratio), ¥26.5B in Asia, and ¥13.9B in Europe and North America, with the high weighting of domestic operations underlying the business concentration risk. It should be noted that segment profit is based on Profit Before Tax and is defined differently from consolidated Operating Income.

Key Financial Indicators

【Profitability】The Operating Margin improved by 2.1pt to 25.3% from 23.2% in the previous year, while the Net Profit Margin also increased to 18.2% from 14.3% in the previous year. Against the backdrop of a high gross-profit structure, with a Gross Margin of 92.7%, the 14.3% increase in SG&A expenses remained below the 17.7% Revenue growth rate, contributing to the improvement in margins.【Cash Quality】Operating Cash Flow (OCF) was ¥95.7B, up +17.8% year on year, and its ratio to Net Income of ¥84.0B was 1.14x, indicating good cash conversion.【Investment Efficiency】ROE was 37.6%, while the Equity Ratio was 72.3% (69.6% in the previous year). The high Net Profit Margin supported capital efficiency under low leverage (financial leverage of approximately 1.38x).【Financial Soundness】Current assets of ¥267.9B compared with current liabilities of ¥83.6B resulted in a current ratio of approximately 320%. The company held ¥233.1B in cash and deposits, while fixed liabilities were only ¥1.9B, indicating a minimal debt burden.

Cash Flow Analysis

Operating Cash Flow (OCF) was ¥95.7B, up +17.8% year on year, demonstrating cash-generation capacity exceeding Net Income of ¥84.0B. Investing Cash Flow was an outflow of ¥87.8B, primarily due to deposits into time deposits, while capital expenditures remained modest at ¥1.8B. Financing Cash Flow was an outflow of ¥46.1B, mainly consisting of dividend payments (approximately ¥41.5B) and share repurchases (¥5.9B). Free Cash Flow (OCF + Investing Cash Flow) was ¥7.9B, below total dividends of ¥57.5B on a single-year basis; however, considering that most Investing Cash Flow consisted of time deposits for fund management purposes, sufficient funds necessary to maintain the business have been secured. The company held ¥233.1B in cash and deposits, indicating a strong cash position.

Quality of Earnings

Current-period profit was driven substantially by the core business, with Ordinary Income of ¥117.1B almost matching Operating Income of ¥116.8B, while net non-operating income and expenses were limited to ¥0.3B. Extraordinary losses of ¥2.1B (impairment losses of ¥1.1B and losses on the liquidation of affiliated companies of ¥0.9B) were a temporary factor, and their reduction from extraordinary losses of ¥7.7B in the previous year supported Net Income growth of +49.7%. Operating Cash Flow of ¥95.7B was 1.14x Net Income of ¥84.0B, indicating no significant divergence between accounting profit and cash generation and suggesting that accruals (dependence on items such as accrued revenue) were limited. Comprehensive Income was ¥84.4B, almost matching Net Income of ¥84.0B, indicating that the impact of valuation differences, such as foreign currency translation adjustments, was also limited.

Earnings Forecast and Guidance

For the fiscal year ending December 2026, the company forecasts Revenue of ¥532.0B (+15.4%), Operating Income of ¥126.0B (+7.8%), and Ordinary Income of ¥126.0B (+7.6%). Compared with the current fiscal year’s Revenue growth of 17.7% and profit growth of 28.5%, the next-period plan assumes a moderate slowdown in Revenue growth and a more pronounced slowdown in profit growth. This implies a planned decline in the Operating Margin from 25.3% to approximately 23.7%, making the company’s ability to absorb increases in costs such as personnel expenses and advertising expenses, in addition to sustaining growth in domestic recruitment placement, a key area to monitor. Forecast EPS is ¥54.18, and forecast dividends are ¥38.00.

Shareholder Returns

The annual dividend for the current period was ¥36.00 per share (no dividend was paid in the previous year, shortly after listing), with total dividends of ¥57.5B and a Payout Ratio of 68.5%. Including share repurchases of ¥5.9B, the Total Return Ratio was 75.5%, higher than the ratio based solely on dividends. Operating Cash Flow of ¥95.7B covered 1.66x total dividends, indicating that the shareholder return burden was within an acceptable range based on operating cash flow. The company forecasts an increase in the annual dividend to ¥38.00 per share for the fiscal year ending December 2026, implying a forecast Payout Ratio of approximately 70.1% against forecast EPS of ¥54.18.

Risk Factors

1. Business concentration risk: The domestic recruitment placement business accounts for 90.4% of Revenue, creating a structure in which fluctuations in corporate hiring demand and the number of successful placements directly affect company-wide performance. Revenue related to performance obligations satisfied at a point in time accounts for 94.4%, limiting downside resilience from recurring-revenue models.

2. Risk of margin deterioration due to rising costs: In the current period, the 14.3% increase in SG&A expenses remained below the 17.7% Revenue growth rate, allowing operating leverage to take effect. However, the company’s forecast for the fiscal year ending December 2026 assumes that the Operating Margin will decline from 25.3% to approximately 23.7%, and increases in personnel expenses and advertising expenses may pressure margins.

3. Overseas business profitability risk: The overseas business operates across 11 countries and regions through 20 subsidiaries. Although it has progressed into profitability, its margin remains at 7.1%, substantially below the 26.7% margin of the domestic recruitment placement business. The business structure is susceptible to the effects of foreign exchange rates, local employment markets, and economic conditions in individual countries.

Industry Benchmark (Reference; Company Analysis)

Industry Benchmark (it_telecom)

Profitability and Returns

The company’s Operating Margin and Net Profit Margin are both substantially above the industry median, positioning its profitability at a high level within the industry.

Growth and Capital Efficiency

The Revenue growth rate exceeds the industry median but remains below the upper range within the industry (20.8%).

※Source: Company analysis

Key Points from the Earnings Results

1. The 2.1pt year-on-year improvement in the Operating Margin to 25.3% demonstrates the effect of operating leverage resulting from controlling SG&A expenses below Revenue growth, and is notable as a qualitative improvement in the earnings structure.

2. Operating Cash Flow was 1.14x Net Income, indicating good cash conversion. The fact that the accounting profit increase was supported by actual cash generation is an important point in assessing the reliability of the earnings results.

3. The company’s earnings forecast for the next period plans for profit growth to slow more substantially than Revenue growth. Together with the high dependence on the domestic recruitment placement business, the sustainability of growth needs to be monitored continuously.

Theoretical Share Price (Reference Value)

Sensitivity: ¥263–¥278 at Cost of Equity ±1%; ¥267–¥275 at ω±0.1.

Note:

• Goodwill amortization of ¥0.1 per share is added back to profit (for non-cash expense and comparability with IFRS companies).

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; it is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI through analysis of XBRL earnings summary data. It does not recommend investment in any specific issue. The industry benchmarks are reference information compiled by the company based on publicly disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, in consultation with a professional where necessary.

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