| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥46.2B | ¥43.6B | +5.8% |
| Operating Income | ¥3.5B | ¥4.7B | -25.8% |
| Ordinary Income | ¥4.6B | ¥6.4B | -28.7% |
| Net Income | ¥3.1B | ¥4.6B | -32.1% |
| ROE | 2.1% | 3.1% | - |
For the cumulative period of Q2 of the fiscal year ending October 2026 (Nov 2024–Apr 2025), Revenue was ¥46.2B (YoY +¥2.6B +5.8%), Operating Income was ¥3.5B (YoY -¥1.2B -25.8%), Ordinary Income was ¥4.6B (YoY -¥1.8B -28.7%), and Net Income was ¥3.1B (YoY -¥1.5B -32.1%). Revenue expanded steadily, but SG&A expenses increased to ¥25.5B (+15.2%), far outpacing revenue growth, causing the operating margin to decline to 7.5% (from 10.7%, -3.2pt). Gross margin improved to 62.7% (from 61.4%, +1.3pt), but the SG&A ratio rose to 55.2% (from 50.7%, +4.5pt), reversing operating leverage.
[Revenue] Revenue was ¥46.2B (YoY +5.8%), maintaining growth. Cost of sales was contained at ¥17.2B (from ¥16.8B, +2.1%), expanding gross profit to ¥29.0B (+8.0%). Gross margin improved by +1.3pt to 62.7%, likely driven by maintained unit prices and improved product mix. Although detailed drivers of revenue growth were not disclosed, demand for recruitment support services and event-related services is believed to have remained firm.
[Profitability] SG&A expenses rose to ¥25.5B (from ¥22.1B, +¥3.4B +15.2%), increasing at about 2.6x the pace of revenue growth and raising the SG&A-to-sales ratio to 55.2% (from 50.7%). As a result, Operating Income declined to ¥3.5B (-25.8%), and operating margin fell to 7.5% (from 10.7%, -3.2pt). The primary drivers of higher SG&A are estimated to be upfront investments in recruitment advertising, personnel costs, and event-related expenses. Ordinary Income was ¥4.6B (-28.7%), with non-operating income of ¥1.3B (¥1.8B prior year) including ¥0.7B in securities interest income and ¥0.4B in dividend income. Non-operating expenses were minor at ¥0.2B, and the decline in Ordinary Income was mainly due to the drop in Operating Income. Profit before tax was ¥4.6B (-28.7%) and, after corporate taxes of ¥1.4B (effective tax rate 31.6%), Net Income was ¥3.1B (-32.1%). In summary: higher revenue but lower profits due to expense growth.
[Profitability] Operating margin 7.5% (prior 10.7%) and Net margin 6.8% (prior 10.6%) both declined, with SG&A growth deteriorating profitability. ROE was low at 2.1%, primarily driven by the decline in net margin. [Cash Quality] Operating Cash Flow (OCF) was ¥4.3B (from ¥4.0B, +8.4%), 1.38x Net Income of ¥3.1B, indicating good cash backing of accounting earnings. OCF/EBITDA was 0.83x, below the 0.9x benchmark, with tax payments and a decrease in bonus reserves (-¥2.3B) dampening cash conversion. [Investment Efficiency] Equity Ratio was 90.1% (prior 87.0%), very high, and financial leverage remained at 1.11x. [Financial Soundness] Current ratio 579% (prior 441%) and quick ratio 579% indicate very strong liquidity. Cash and deposits of ¥53.4B plus investment securities of ¥47.7B substantially exceed short-term liabilities of ¥13.4B. Debt-to-equity ratio was a very low 0.11x, no interest-bearing debt was identified, and the financial base is extremely robust.
OCF was ¥4.3B (from ¥4.0B, +8.4%). Within OCF subtotal of ¥6.9B, decreases in trade receivables +¥3.4B and increases in contract liabilities +¥2.3B were positive drivers, while corporate tax payments -¥3.7B were a major outflow. Decrease in bonus reserves -¥2.3B also acted as a cash outflow. Investing Cash Flow was a large outflow of -¥18.2B, led by purchase of investment securities -¥5.8B and acquisition of intangible assets (software, etc.) -¥3.2B; capital expenditure was limited to -¥1.2B. CapEx was 67% of depreciation expense of ¥1.8B, modest, and the focus on intangible asset investment suggests strengthening of digital infrastructure. Financing Cash Flow was -¥4.6B, mainly due to dividend payments -¥4.6B. Free Cash Flow was -¥13.9B; cash outflows from investing activities and dividends could not be covered by internal funds alone, and cash and deposits decreased to ¥53.4B (from ¥56.9B, -¥3.5B).
Non-operating income of ¥1.3B (2.9% of Revenue) was mainly securities interest ¥0.7B and dividend income ¥0.4B, indicating limited dependence on non-operating sources. Gains on sale of securities were ¥34K, effectively zero, so one-off valuation or sale gains contributed little. OCF exceeds Net Income (OCF/NI = 1.38x), indicating good accrual quality. The gap between Ordinary Income and Net Income is due to tax burden (effective tax rate 31.6%); no material extraordinary items were identified. OCF/EBITDA at 0.83x falls short of the guideline, and tax payments and reserve decreases slightly weaken cash conversion, but the recurring earnings structure is maintained.
Full Year plan is unchanged at Revenue ¥120.0B (YoY +8.9%), Operating Income ¥26.0B (+11.4%), Ordinary Income ¥28.0B (+5.5%), and Net Income ¥20.0B (+5.7%). Progress through Q2 cumulative is Revenue 38.5%, Operating Income 13.3%, Ordinary Income 16.4%, Net Income 15.7%, well below the standard 50% progress. Progress below Operating Income is especially low; even assuming seasonality skewed to the second half, cost restraint and accumulation of higher value-added projects are essential. Contract liabilities increased to ¥4.0B (from ¥1.7B, +¥2.3B +140%), suggesting revenue recognition potential in the second half, but if SG&A growth continues the hurdle to achieving full-year profit targets remains high.
An interim dividend of ¥37 (from ¥33, +¥4) was paid, resulting in a payout ratio of 184% on a Q2 cumulative Net Income basis — a high level. Total dividends were approximately ¥4.6B, substantially exceeding Net Income of ¥3.1B; however, strong financial assets (Cash & Deposits ¥53.4B and Investment Securities ¥47.7B) provide sufficient short-term capacity to execute dividends. Full-year dividend forecast is unchanged at ¥38 (prior ¥38); if full-year Net Income target ¥20.0B is achieved, the payout ratio would decline to 25.5%. No share buybacks were executed; shareholder returns consist solely of dividends. Free Cash Flow is negative at -¥13.9B, resulting in an FCF coverage of -2.41x, and internal funds alone are insufficient to cover dividends for the first half.
Risk of persistently high SG&A: SG&A at ¥25.5B (YoY +15.2%) far exceeded revenue growth of +5.8%, raising the SG&A ratio to 55.2% (from 50.7%, +4.5pt). If recruitment market competition, advertising costs, and personnel cost inflation continue, the reversal of operating leverage could be prolonged and recovering operating margin may be difficult.
Risk of missing full-year targets: H1 operating income progress 13.3%, Ordinary Income 16.4%, Net Income 15.7% are well below norms, requiring very high growth in H2. Increases in contract liabilities may support H2 revenue, but continued expense growth would make achieving full-year targets difficult and could undermine market confidence.
Risk of continued low capital efficiency: ROE is low at 2.1%, mainly due to deteriorated Net margin of 6.8%. If SG&A control and operating margin improvement do not progress, low ROE will persist, constraining the balance between shareholder returns and growth investments. Market volatility in investment securities of ¥47.7B could also pressure Net Assets if unrealized losses occur.
Profitability & Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 7.5% | 14.0% (3.8%–18.5%) | -6.5pt |
| Net Margin | 6.8% | 9.2% (1.1%–14.0%) | -2.5pt |
Profitability is below the industry median, and the decline in margins due to SG&A growth has worsened the company’s relative position within the industry.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 5.8% | 21.0% (15.5%–26.8%) | -15.2pt |
Revenue growth is well below the industry median of 21.0%, indicating a noticeable lag in growth relative to peers.
※Source: Company aggregation
Gross margin improved to 62.7% (YoY +1.3pt), confirming maintained pricing and improved product mix. However, SG&A ratio rose to 55.2% (+4.5pt), and operating margin fell to 7.5% (-3.2pt). If SG&A growth continues to far exceed revenue growth, improvements in profitability will be difficult. Cost control and accumulation of high value-added projects in H2 are key to achieving full-year plans and margin recovery.
Contract liabilities increased to ¥4.0B (from ¥1.7B, +¥2.3B +140%), and the build-up of advance payments suggests revenue recognition potential in H2. Nevertheless, H1 operating income progress of 13.3% is extremely low, and a large rebound is required even accounting for H2 seasonality. If improvements in collection terms and cost smoothing do not proceed, the risk of revising full-year forecasts increases.
The financial base is extremely solid, with Cash & Deposits ¥53.4B, Investment Securities ¥47.7B, and Equity Ratio 90.1%, ranking high in both liquidity and soundness. Free Cash Flow is negative at -¥13.9B, but this is mainly due to acquisition of investment securities and investment in intangible assets, so immediate funding concerns are limited. However, ROE at 2.1% reflects low capital efficiency; recovery of margins and improvement in capital deployment efficiency are conditions for mid- to long-term shareholder value creation.
This report is an earnings analysis document automatically generated by AI that analyzed XBRL earnings disclosure data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the firm based on public financial statements. Investment decisions are your own responsibility; consult a professional as necessary before making investment decisions.