Open Up Group Inc. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥41.16B
• Operating Income: ¥4.12B
• Net Income: ¥2.78B
• EPS: ¥32.40

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Open Up Group (2154) reported FY2026 Q1 IFRS consolidated results showing resilience in profitability despite a double-digit revenue contraction. Revenue declined 14.9% YoY to 411.6, but operating income decreased only 0.7% YoY to 41.2, indicating effective cost control and a stable operating structure. Gross profit was 117.27, implying a gross margin of 28.5%, which underpins the relatively firm EBITDA margin of 11.4% (EBITDA 46.8). Net income rose 16.4% YoY to 27.77, supported by limited below-OP line volatility and a normalized effective tax rate of 37.8%. The DuPont bridge indicates ROE of 3.8%, driven by a 6.8% net margin, asset turnover of 0.348, and financial leverage of 1.60x, suggesting low leverage and moderate operating efficiency. The revenue decline alongside broadly stable operating profit points to improved mix and/or disciplined SG&A, but it also heightens the need to verify sustainability of margins if top-line softness persists. Operating cash flow was negative at -14.77, resulting in negative free cash flow of -18.43 after modest capex of -2.18, highlighting a cash conversion shortfall this quarter. The balance sheet remains robust with total equity of 737.81 and an equity ratio of 62.3%, while debt-to-equity is moderate at 0.59x and short-term loans stand at 50.30. Liquidity appears adequate given cash and equivalents of 203.53 and accounts receivable of 205.15, though current liabilities were not disclosed, limiting precision on short-term coverage. Retained earnings are slightly negative at -6.13 despite the quarterly profit, reflecting historical distributions or equity transactions booked to capital surplus (827.76) and suggesting constrained distributable reserves under typical policy frameworks. Dividend cash outflow during the quarter was -38.98, exceeding quarterly net income and not covered by free cash flow, which raises questions about near-term dividend sustainability if cash conversion does not improve. Ordinary income and non-operating items are unreported under IFRS, and interest expense is not disclosed, which prevents interest coverage analysis; however, leverage appears manageable given overall capital structure. The discrepancy between disclosed cost of sales and gross profit (with gross margin clearly anchored at 28.5%) suggests classification or mapping differences; we rely on the margin and gross profit figures for analysis. Overall, the company demonstrates earnings resilience and balance sheet strength, but cash flow volatility, a high cash dividend outflow relative to earnings, and negative retained earnings warrant close monitoring. The near-term outlook hinges on stabilizing demand and improving working capital discipline to restore positive operating cash flow. Data limitations (notably missing current liabilities, interest expense, and detailed non-operating items) temper the precision of certain ratios, and all interpretations focus on the available non-zero datapoints.

Profitability Analysis

ROE_decomposition: ROE 3.8% = Net profit margin 6.8% x Asset turnover 0.348 x Financial leverage 1.60x. The relatively low asset turnover and modest leverage cap ROE despite resilient margins. margin_quality: Gross margin is 28.5% (gross profit 117.27 on revenue 411.6). EBITDA margin is 11.4% (46.8), and operating margin approximates 10.0% (41.2/411.6). Net margin at 6.8% reflects a 37.8% effective tax rate and limited below-OP noise. The small decline in operating income versus a sharp revenue drop implies mix/pricing and SG&A discipline. operating_leverage: Revenue fell 14.9% YoY while operating income declined only 0.7% YoY, implying favorable operating leverage (cost flex or mix benefits). Sustaining this will depend on utilization, bill rates, and containment of hiring and back-office costs.

Growth Assessment

revenue_sustainability: Top line contracted to 411.6 (-14.9% YoY). Without segment data, the decline likely reflects softer client demand or slower project starts in core staffing/engineering services. Monitoring backlog, headcount, and utilization is critical. profit_quality: Operating profit stability with higher net income suggests underlying margin durability and no material one-offs in the quarter. However, cash conversion was weak (OCF/NI -0.53x), tempering the quality of earnings. outlook: If demand stabilizes and working capital normalizes, margins can remain stable near current levels given demonstrated cost control. Risks include prolonged client spending weakness, wage inflation pressuring spreads, and potential seasonal cash flow swings.

Financial Health

liquidity: Cash and equivalents 203.53 and accounts receivable 205.15 provide liquidity buffers, but current liabilities are unreported; hence current and quick ratios are not calculable. Short-term loans are 50.30, and accounts payable are 25.11. Working capital was presented as 473.39 (equal to current assets), but true working capital cannot be confirmed without current liabilities. solvency: Equity ratio is strong at 62.3% (equity 737.81 on assets 1,182.76). Debt-to-equity is 0.59x, indicating moderate leverage. Noncurrent liabilities and long-term loans are unreported, but the balance sheet suggests ample solvency headroom. capital_structure: Capital surplus is large at 827.76 with retained earnings at -6.13, indicating historical equity transactions/distributions impacting retained earnings. Financial leverage of 1.60x in the DuPont set corroborates conservative balance sheet positioning.

Cash Flow Quality

earnings_quality: Despite net income of 27.77, operating cash flow was -14.77 (OCF/NI -0.53x), pointing to working capital outflows or timing effects. EBITDA of 46.8 with D&A 5.6 confirms limited non-cash inflation of profits. FCF_analysis: FCF was -18.43 after capex of -2.18, implying that OCF shortfall, not investment intensity, drove negative FCF. Sustained negative FCF would pressure cash balances and potentially constrain distributions. working_capital: AR balance of 205.15 is sizable relative to revenue; absent prior-period data, the OCF weakness likely reflects AR build and/or reduced payables. Current liabilities are unreported, limiting a precise DSO/DPO analysis.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio is 248.0% (basis per provided metric), and cash dividends paid were 38.98 versus quarterly net income of 27.77 (~140% cash payout). Such levels are not supported by this quarter’s earnings alone. FCF_coverage: FCF coverage is -0.27x; dividends were not covered by free cash flow in the quarter, indicating reliance on existing cash or balance sheet capacity. policy_outlook: Given negative retained earnings (-6.13) and weak cash conversion this quarter, continuity of high payout levels may hinge on subsequent quarters’ earnings and OCF normalization. Management policy signals (not provided) will be important to assess sustainability.

Risk Assessment

Business Risks:

• Demand softness in client industries leading to fewer placements or project delays
• Wage inflation and recruitment costs compressing gross spreads
• Utilization rate volatility impacting margin leverage
• Competitive pricing pressure in staffing/engineering dispatch
• Regulatory and labor compliance risks in dispatch operations
• Integration and M&A execution risk if pursuing roll-up strategy
• Potential impairment risk on acquired intangibles (goodwill not disclosed here)

Financial Risks:

• Weak cash conversion with OCF negative despite profitability
• Dividend outflows exceeding earnings and FCF, pressuring liquidity
• Refinancing and interest rate risk on short-term loans (50.30) amid undisclosed interest expense
• Working capital swings tied to accounts receivable collection timing
• Limited visibility on current liabilities and long-term debt structure due to unreported items

Key Concerns:

• Sustainability of margins if revenue declines persist
• Negative retained earnings alongside sizable capital surplus and cash dividends
• Near-term dividend coverage given negative FCF and OCF/NI of -0.53x

Investment Implications

Key Takeaways:

• Revenue down 14.9% YoY but operating income nearly flat (-0.7%), evidencing cost control and mix support
• Gross margin solid at 28.5% and EBITDA margin 11.4%, supporting profit resilience
• Net income up 16.4% YoY; effective tax rate 37.8%
• OCF -14.77 and FCF -18.43 highlight cash conversion shortfall in the quarter
• Balance sheet strong: equity ratio 62.3%, debt-to-equity 0.59x, cash 203.53
• Short-term loans 50.30 manageable versus liquidity, but interest expense undisclosed
• Dividend cash outflow 38.98 not covered by earnings or FCF; payout metrics elevated
• Retained earnings negative (-6.13), implying limited distributable capacity under conventional constraints

Metrics to Watch:

• Order backlog, headcount, and utilization rates
• AR days and OCF/Net Income ratio improvement toward >1.0x
• EBITDA margin trajectory and SG&A-to-sales ratio
• Revenue trend and pricing/bill rate spread versus wage inflation
• Dividend policy guidance and retained earnings trajectory
• Leverage and liquidity: cash balance versus short-term debt and any changes in current liabilities

Relative Positioning: Within domestic staffing/engineering service peers, Open Up Group exhibits stronger balance sheet solvency and moderate leverage but weaker near-term cash conversion and a steeper revenue decline; profitability margins are competitive, yet sustained performance will require stabilization in demand and improved working capital discipline.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis