| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥3085.0B | ¥3092.4B | -0.2% |
| Operating Income / Operating Profit | ¥-11.5B | ¥-12.4B | +7.1% |
| Ordinary Income | ¥1.4B | ¥-4.6B | +984.8% |
| Net Income / Net Profit | ¥-68.2B | ¥-131.0B | +47.9% |
| ROE | -5.1% | -9.3% | - |
For the fiscal year ended May 2026, Revenue was ¥3,085B (YoY -¥7B, -0.2%) and remained essentially flat, while Operating Loss improved slightly to ¥11B (improved by ¥1B from prior-year loss of ¥12B, +7.1%). Ordinary Income turned marginally positive at ¥1B (improved by ¥6B from prior-year loss of ¥5B, +984.8%), but Net Loss continued at ¥68B (improved by ¥63B from prior-year loss of ¥131B, +47.9%). Gross margin was stable at 22.8%, however SG&A ratio of 23.2% exceeded Revenue leading to an operating-stage loss. The shift to ordinary-income profitability was primarily driven by non-operating income of ¥24B (interest income ¥4B, equity-method investment income ¥2B, etc.), indicating that core operating profitability has not recovered. Special losses of ¥21B (impairment ¥5B, loss on disposal of fixed assets ¥3B, valuation loss on investment securities ¥2B, etc.) and corporate taxes of ¥23B substantially pressured the final bottom line.
[Revenue] Revenue was ¥3,085B (YoY -¥7B, -0.2%) and largely flat. By segment, BPO & Expert Solutions (revenue mix 87.3%) was ¥2,692B (-1.0%) slight decline; Career Solutions (mix 4.5%) ¥140B (-3.3%) deceleration; Global Solutions (mix 3.9%) ¥121B (+6.3%); Life Solutions (mix 3.1%) ¥97B (+12.3%); Regional Revitalization & Tourism Solutions (mix 2.7%) ¥83B (+17.1%) — growth areas expanded but stagnation in core BPO weighed on consolidated Revenue. Cost of sales was ¥2,382B (cost ratio 77.2%), Gross Profit was ¥703B and Gross Margin improved to 22.8% (+0.8pt vs prior-year 22.0%).
[Profitability] Selling, General & Administrative Expenses were ¥714B (SG&A ratio 23.2%), up 3.2% from prior-year ¥692B (22.4%), and with flat Revenue expense growth led to continuing Operating Loss of ¥11.5B (Operating margin -0.4%). Improvement from prior-year Operating Loss of ¥12.4B was limited to ¥1B, leaving Operating margin broadly unchanged at -0.4%. Net non-operating income was +¥13B (non-operating income ¥24B — interest income ¥4B, equity-method investment income ¥2B, other non-operating income ¥5B, etc. — less non-operating expenses ¥11B — interest expense ¥4B, other ¥2B, etc.), which turned the ordinary-income line positive at Ordinary Income ¥1.4B (improved ¥6B from prior-year loss ¥4.6B). Special income was ¥9B (gain on sale of investment securities ¥2B, etc.) but special losses were ¥21B (impairment ¥5B, loss on disposal of fixed assets ¥3B, valuation loss on investment securities ¥2B, etc.), netting to -¥12B and producing Loss before Income Taxes of ¥-10B (improved ¥48B from prior-year loss ¥-58B). After recording corporate taxes of ¥23B (including reversals in corporate tax adjustments), Net Loss attributable to owners of the parent was ¥-68B (improved ¥63B from prior-year loss ¥-131B, +47.9%), marking a substantial narrowing of the final loss. However, continued operating losses and accumulated special losses and tax burdens leave profitability fragile. Conclusion: not an increase-in-revenue with decline-in-profit pattern; rather a slight revenue decline and contraction of losses (reduced red ink) phase.
BPO & Expert Solutions: Revenue ¥2,692B (YoY -1.0%), Operating Income ¥100B (+2.4%), Operating Margin 3.7%. As the core business representing 87.3% of Revenue and 74.1% of segment Operating Income, it slightly improved profitability despite marginal Revenue decline. Career Solutions: Revenue ¥140B (-3.3%), Operating Income ¥42B (-15.9%), Operating Margin 30.2% — high profitability maintained but Revenue slowdown directly reduced profits. Global Solutions: Revenue ¥121B (+6.3%) but Operating Income ¥3B (-33.7%), Operating Margin 2.2% — profitability deterioration notable. Life Solutions: Revenue ¥97B (+12.3%), Operating Income ¥5B (from prior-year ¥0.2B, +1,927%), Operating Margin 4.9% — achieved a turnaround. Regional Revitalization & Tourism Solutions: Revenue ¥83B (+17.1%) with Operating Loss ¥15B (improved 22% from prior-year loss ¥19B), Operating Margin -18.0% — still in loss. While combined profits from BPO and Career totaled ¥142B, Regional Revitalization loss of ¥15B and corporate/headquarter allocations of -¥146B resulted in consolidated operating loss.
[Profitability] Operating margin was -0.4% (prior year -0.4%), Gross Profit Margin 22.8% (prior year 22.0%, +0.8pt), but rising SG&A ratio to 23.2% sustained operating losses. ROE was -5.1% (prior -6.1%), modestly improved with reduced losses. Return on Assets (ROA) was 0.1% (prior -0.2%) turning positive but still low. EBIT is Operating Loss ¥11.5B; adding Depreciation ¥27B yields EBITDA ¥16B and an EBITDA margin of 0.5%, very low. Goodwill amortization ¥2B equals about 13% of EBITDA, indicating a moderate accounting distortion. [Cash Quality] Operating Cash Flow was ¥29B versus Net Loss ¥68B, giving an Operating CF / Net Income ratio of -0.43x, well below benchmarks, indicating weak cash conversion. Operating CF / EBITDA is 1.83x (appears favorable but driven by small EBITDA denominator). [Investment Efficiency] Total Asset Turnover improved to 1.31x (prior 1.17x); Construction in Progress of ¥372B is elevating total assets, but Revenue remains flat indicating investment benefit not yet realized. Tangible Fixed Asset Turnover 4.94x and Fixed Asset Turnover 3.21x are standard for a human resources services company. [Financial Soundness] Equity Ratio was 56.4% (prior 53.2%) improving; Current Ratio 231.4%, Quick Ratio 227.5% — short-term liquidity favorable. Debt/Equity (D/E) was 0.28x (interest-bearing debt ¥325B / equity ¥1,256B) low, but low profitability makes Debt/EBITDA 23.2x high and interest-rate sensitivity weak. Interest Coverage (EBIT basis) was -2.74x and Operating Loss cannot cover interest expense ¥4B, requiring structural improvement.
Operating Cash Flow was ¥29B (prior ¥43B, -33%), a positive surplus. Despite Loss before Income Taxes of ¥-10B, non-cash charges including Depreciation ¥27B and Impairment Losses ¥5B, reductions in Trade Receivables & Contract Assets ¥42B (collections progressed), and other working capital adjustments secured an operating-CF subtotal of ¥40B; after corporate tax payments of ¥18B, Operating CF was ¥29B. Investing Cash Flow was -¥273B (prior -¥476B, improved), driven by purchases of tangible fixed assets -¥181B (prior -¥149B, +¥32B), intangible fixed assets -¥37B, net outflow from short-term investment securities (purchases -¥240B, redemptions +¥225B), increase in time deposits -¥25B, etc. Financing Cash Flow was +¥1B: proceeds from long-term borrowings ¥123B offset by repayments of long-term borrowings -¥57B, dividend payments -¥30B, acquisition of treasury shares -¥25B, redemption of corporate bonds -¥5B, resulting in a slight net positive. Free Cash Flow was Operating CF ¥29B + Investing CF -¥273B = -¥244B, a large negative reflecting aggressive capex that strained liquidity. Cash and cash equivalents declined from ¥787B at the beginning of the period to ¥546B at period-end, a decrease of ¥241B (including foreign exchange impact +¥2B, new consolidation +¥0B), reducing on-hand liquidity. Positive Operating CF despite operating losses reflects effective working capital management, but the large investing outflow tightens overall cash flow.
Core recurring revenue is service sales from BPO & Expert segments. Non-operating items — interest income ¥4B, equity-method income ¥2B, etc. contributing to ¥24B of non-operating income — accounted for 0.8% of Revenue and are limited in scale, so dependence on non-operating income is low. One-off items included Special Income ¥9B (gain on sale of investment securities ¥2B, gain on disposal of fixed assets ¥0B, etc.) and Special Losses ¥21B (impairment ¥5B, loss on disposal of fixed assets ¥3B, valuation loss on investment securities ¥2B, etc.), net -¥12B, which worsened the position from Ordinary Income ¥1B to Loss before Income Taxes ¥-10B. The divergence between Ordinary Income and Net Loss is ¥69B (Ordinary Income ¥1B - Net Loss ¥68B), 2.2% of Revenue; the primary causes are special losses and corporate taxes of ¥23B. Comprehensive income was -¥28B; the difference vs Net Loss of -¥68B (+¥40B) was driven by foreign currency translation adjustments +¥2B, valuation differences on securities -¥1B, retirement benefit adjustments +¥4B and other comprehensive income +¥5B plus adjustments attributable to non-controlling interests. On an accrual basis, the accrual ratio ((Net Loss - Operating CF) / Total Assets) = (¥-68B - ¥29B) / ¥2,355B = -4.1%, neutral-to-favorable, but Operating CF / Net Income ratio -0.43x suggests weak cash conversion. Goodwill amortization ¥2B is about 13% of EBITDA, a moderate JGAAP-specific amortization burden.
For FY ending May 2027, the company projects Revenue ¥3,250B (YoY +5.3%), Operating Income ¥15B (turning from prior-year loss of ¥12B to positive), Ordinary Income ¥15B (from ¥1B prior-year, +¥14B), and Net Loss attributable to owners of the parent ¥-10B (improved from prior-year loss ¥-68B). Progress against full-year guidance based on FY2026 results is: Revenue 94.9% (¥3,085B / ¥3,250B), Operating Income -76.6% (¥-12B / ¥15B), Ordinary Income 9.2% (¥1B / ¥15B) — Operating-stage profitability not yet achieved. Company assumptions include improved utilization and pricing in core BPO, re-acceleration of high-margin Career Solutions, substantial narrowing of Regional Revitalization losses, and commencement of revenue contribution from large investments (Construction in Progress ¥372B, etc.). Achieving these requires SG&A restraint and expansion of higher-margin business mix. If operating-stage profitability accelerates earlier, there is significant upside to EBITDA margin, but delays in investment returns increase risk of impairments and maintenance cost pressure.
A year-end dividend of ¥75 per share (ordinary dividend ¥15, special dividend ¥60) was paid, totaling ¥30B for the year. Dividend payout ratio versus Net Loss of ¥-68B is arithmetically negative, and dividends were funded from retained earnings and liquidation of cash on hand. Free Cash Flow -¥244B versus total dividends ¥30B results in an FCF coverage of -8.15x, materially uncovered. Additionally, ¥25B of share buybacks were executed, making total shareholder returns (dividends + buybacks) ¥55B, entirely uncovered by Free Cash Flow and contributing to the decline in cash on hand (beginning ¥787B → ending ¥546B, -¥241B). The projected FY2027 year-end dividend is ¥75 per share (ordinary ¥15 + special ¥60) at the same level, but with forecast Net Loss ¥-10B the sustainability of dividends depends heavily on FCF improvement; absent improvement, dividend continuity will be contingent on profit recovery and investment return progress. Continuing returns without confirmation of operating profitability and activation of Construction in Progress risks depletion of financial buffers and merits close monitoring.
Business concentration risk: BPO & Expert Solutions account for 87.3% of Revenue and 74.1% of segment profits; demand fluctuations or shifts in pricing power among key clients would directly affect consolidated performance. Regional Revitalization & Tourism’s Operating Loss of ¥15B (Operating Margin -18.0%) remains, and demand volatility makes a clear path to margin recovery uncertain.
Investment recovery risk: With Construction in Progress ¥372B and tangible fixed assets ¥625B accumulating, delays in ramp-up and revenue contribution could trigger repeat impairment risk (¥5B in the current period) and increased maintenance costs, pressuring profits and cash flow. Increased intangible assets ¥112B (software ¥90B) expose the company to IT investment execution risk.
Financial leverage and interest-rate sensitivity: Debt/EBITDA 23.2x and Interest Coverage (EBIT basis) -2.74x indicate weak debt resilience given low profitability. Interest-rate rises or missed profit targets could lead to covenant constraints and higher funding costs, limiting investment capacity. With large negative Free CF (-¥244B) and declining cash on hand (¥767B, YoY -38.5%), external funding dependence is rising and liquidity management requires close oversight.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | -0.4% | 8.1% (3.6%–16.0%) | -8.5pt |
| Net Profit Margin | -2.2% | 5.8% (1.2%–11.6%) | -8.0pt |
Both Operating Margin and Net Profit Margin are well below industry medians; profitability ranks in the lower tier of the industry.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -0.2% | 10.1% (1.7%–20.2%) | -10.3pt |
Revenue growth is -0.2% vs industry median +10.1%, indicating weaker growth capability compared with peers.
※ Source: Company compilation
Continued Operating Loss and the inflection to profitability: Operating Loss ¥11.5B (Operating Margin -0.4%) marks a second consecutive year in the red. While Gross Margin 22.8% is stable, SG&A ratio 23.2% exceeding it is becoming entrenched. Achievement of the company’s FY2027 Operating Income target ¥15B depends on improved utilization and pricing in core BPO, reacceleration of high-margin Career business, and significant narrowing of Regional Revitalization losses. Given first-half progress of -76.6% toward the operating target, ¥27B of additional operating income in H2 is required; therefore, quarterly monitoring is critical.
Progress on large investments and financial strain: Construction in Progress ¥372B (YoY +68%), tangible fixed assets ¥625B (YoY +32%), and aggressive capex ¥181B contributed to Free Cash Flow -¥244B and a sharp reduction in cash balances to ¥767B (YoY -38%). If investments ramp as planned they could underpin sustained operating profitability; if delayed, risk of impairments, additional capex burdens, and liquidity depletion increases. With Debt/EBITDA 23.2x and Interest Coverage (EBIT basis) -2.74x, debt resilience is weak; investment recovery and Operating CF improvement are the highest priorities for balance-sheet health.
Sustainability of shareholder returns and capital efficiency: Amid Net Loss ¥-68B and Free Cash Flow -¥244B, dividends ¥30B and share buybacks ¥25B (total returns ¥55B) materially depleted cash balances. While the company projects the same dividend level for FY2027, sustainability depends on pace of profit and FCF recovery. ROE -5.1% and Total Asset Turnover 1.31x show low capital efficiency; if operating profitability and investment monetization materialize, capital efficiency and return capacity could improve substantially, but delays could force a re-evaluation of the return policy.
This report is an AI-generated earnings analysis created by analyzing XBRL financial statement data. It does not constitute an investment recommendation for any specific security. Industry benchmarks are reference information compiled by the company based on publicly disclosed financial statements. Investment decisions are your own responsibility; consult professional advisors as necessary before making investment decisions.