| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥548.5B | ¥563.9B | -2.7% |
| Operating Income / Operating Profit | ¥91.1B | ¥134.1B | -32.0% |
| Ordinary Income | ¥89.9B | ¥132.6B | -32.2% |
| Net Income / Net Profit | ¥58.3B | ¥89.5B | -34.8% |
| ROE | 15.7% | 24.7% | - |
For the fiscal year ended February 2026, Revenue was ¥548.5B (YoY -¥15.3B, -2.7%), Operating Income was ¥91.1B (YoY -¥43.0B, -32.0%), Ordinary Income was ¥89.9B (YoY -¥42.7B, -32.2%), and Net Income was ¥58.3B (YoY -¥31.2B, -34.8%). Softening in the human resources services market led the core PersonnelService business to record lower revenue and profit. The company made an aggressive increase in advertising and promotion spending to ¥122.7B, up ¥17.7B YoY, but customer acquisition efficiency deteriorated, raising the SG&A ratio by +6.1pt from 65.8% to 71.9%. Operating margin narrowed to 16.6% from 23.8% a year earlier (-7.2pt), indicating an adjustment in profitability. Meanwhile, the DX Business maintained a high operating margin of 56.1% and delivered +9.4% operating profit growth despite a slight revenue decline, contributing to an improved revenue mix. Extraordinary items netted to a minor +¥0.9B (gain on sale of investment securities ¥1.8B offset by valuation loss ¥1.0B), and the decline from Ordinary Income to Net Income was mainly driven by a tax burden with an effective tax rate of 34.5%.
[Revenue] Revenue was ¥548.5B, a decrease of -2.7% YoY. By segment, the PersonnelService business contracted to ¥482.4B (composition 87.9%, YoY -2.9%), which drove the overall decline. Within that, Media (job advertising) was ¥460.5B (-2.9%) and Agent (recruitment placement) was ¥18.5B (-12.9%), both down. The DX Business recorded ¥66.1B (composition 12.1%, YoY -1.6%), a slight decline but accounting for just over one-tenth of consolidated revenue. Other services amounted to ¥3.4B (composition 0.6%). Weakening hiring demand and intensified customer acquisition competition led management to increase advertising and promotion spending by ¥17.7B YoY to ¥122.7B, but conversion to revenue lagged.
[Profitability] Gross profit was ¥485.3B (gross margin 88.5%), down ¥1.7B YoY, and gross margin declined by -1.1pt from 89.6% a year earlier. SG&A was ¥394.2B (SG&A ratio 71.9%), up ¥16.8B YoY, with the SG&A ratio increasing +6.1pt from 65.8% due primarily to higher advertising and promotion expenses and rising customer acquisition costs. Operating Income was ¥91.1B (Operating margin 16.6%), a significant decline of ¥43.0B YoY (-32.0%), with the operating margin contracting -7.2pt from 23.8% last year. By segment, PersonnelService Operating Income was ¥152.1B (segment margin 31.5%, YoY -17.3%), DX Operating Income was ¥37.1B (margin 56.1%, YoY +9.4%), and corporate/unallocated expenses were -¥98.1B (prior year -¥83.6B), a deterioration of -¥14.5B that pressured consolidated profit. Non-operating items were minor net -¥1.2B, producing Ordinary Income of ¥89.9B (YoY -32.2%). Extraordinary gains totaled ¥2.1B including gain on sale of investment securities ¥1.8B, extraordinary losses totaled ¥1.2B (investment securities valuation loss ¥1.0B and impairment loss ¥0.2B), netting +¥0.9B and resulting in profit before tax ¥90.8B. Income taxes were ¥31.3B (effective tax rate 34.5%), leaving Net Income of ¥58.3B (YoY -34.8%).
The PersonnelService business recorded Revenue ¥482.4B (YoY -2.9%), Operating Income ¥152.1B (YoY -17.3%), and Operating margin 31.5% (down -4.2pt from 35.7% a year ago). Media services (job advertising) were ¥460.5B (-2.9%) and Agent services (recruitment placement) were ¥18.5B (-12.9%), both declining as hiring demand softened. The DX Business posted Revenue ¥66.1B (YoY -1.6%) with Operating Income ¥37.1B (YoY +9.4%) and Operating margin 56.1% (improved +5.7pt from 50.4%), maintaining and expanding high profitability. Improved profitability in AI and RPA services contributed to the company’s revenue mix. Corporate/unallocated expenses were -¥98.1B (prior year -¥83.6B), deteriorating by -¥14.5B, and increased general and administrative costs not allocated to reporting segments compressed consolidated operating margin.
[Profitability] ROE of 15.7% declined -9.8pt from 25.5% the prior year, mainly due to a contraction in net profit margin (15.9% → 10.6%, -5.3pt) and slower total asset turnover. Operating margin of 16.6% contracted -7.2pt from 23.8%, reflecting deterioration in both gross margin (88.5%, -1.1pt from 89.6%) and SG&A ratio (71.9%, +6.1pt from 65.8%). The DX Business operating margin of 56.1% improved +5.7pt from 50.4%, with high-margin growth contributing to mix improvements, but this was offset by higher overall operating expense ratios. [Cash Quality] Operating Cash Flow / Net Income was 1.71x (Operating Cash Flow 99.7B / Net Income 58.3B), indicating good cash backing of profits, but Operating Cash Flow / EBITDA (Operating Income + Depreciation) was 0.75x (99.7B / 132.0B), a sharp decline from 1.23x last year, mainly due to higher tax payments of ¥47.6B and a decrease in accrued corporate taxes payable of -¥20.2B. The accrual ratio was -7.0% (working capital change -¥0.41B / Total Assets 499.5B), confirming cash backing of profits but a slowdown in conversion efficiency. [Investment Efficiency] Total asset turnover was 1.10x (prior year 1.12x) slightly lower. Intangible assets / Total assets ratio was 24.3% (¥121.6B / ¥499.5B), indicating high dependence on software investment, with intangible fixed assets increasing ¥9.6B YoY. Capital expenditure / depreciation was 0.14x (¥5.7B / ¥41.9B), low, showing restrained investment in tangible fixed assets. [Financial Soundness] Equity Ratio was 74.5% (up +3.5pt from 71.0% prior year), current ratio 276.7% (current assets ¥258.7B / current liabilities ¥93.5B), and quick ratio 276.7%, indicating extremely high liquidity. Debt-to-equity ratio was 0.34x (Total liabilities ¥127.6B / Net assets ¥371.9B), showing restrained leverage; net interest-bearing debt is effectively zero against cash and deposits ¥177.4B, so the financial base is solid. Asset retirement obligations are ¥9.1B (7.1% of total liabilities), somewhat elevated and requiring monitoring for future cash outflows.
Operating Cash Flow was ¥99.7B, down ¥64.8B YoY (-39.4%), but at 1.71x of Net Income ¥58.3B, cash backing of profits remains good. Adding depreciation ¥41.9B and share-based compensation expense ¥4.5B, the operating cash flow subtotal (before working capital changes) was ¥146.9B. Working capital movements included accounts receivable change +¥3.6B (improvement), accounts payable change -¥0.5B, contract liabilities change -¥1.3B, decrease in bonus reserves -¥3.3B, and other liabilities change +¥5.5B, resulting in a net working capital cash outflow of +¥4.7B. The largest pressure was corporate tax payments of ¥47.6B, up ¥18.3B from ¥29.3B prior year, and accounts payable for corporate tax decreased from ¥33.0B to ¥12.8B (-¥20.2B), a significant factor. Operating Cash Flow / EBITDA (Operating Income ¥91.1B + Depreciation ¥41.9B = ¥132.0B) was 0.75x, down from 1.23x, with higher tax payments and working capital factors slowing conversion efficiency. Investing Cash Flow was -¥110.8B, mainly comprising intangible asset acquisitions -¥47.4B (primarily software development investment), net time deposit placement -¥57.0B (time deposits placed -¥127.0B and maturities +¥70.0B), proceeds from sale of investment securities +¥2.7B, and capital expenditures -¥5.7B. Free Cash Flow was -¥11.1B (Operating CF ¥99.7B + Investing CF -¥110.8B), negative mainly due to aggressive intangible asset investment. Financing Cash Flow was -¥50.2B, centered on dividend payments -¥51.6B; treasury stock purchases were -¥0.0B (none executed), and proceeds from disposal of treasury stock were +¥1.5B. Cash decreased by -¥61.2B during the period, leaving cash and deposits at period-end ¥177.4B (prior year ¥181.6B).
Ordinary Income ¥89.9B versus Net Income ¥58.3B — the main driver of the divergence was income taxes ¥31.3B (effective tax rate 34.5%). Non-operating items were minor net -¥1.2B (non-operating income ¥1.3B, non-operating expenses ¥2.5B), including interest income ¥0.6B and insurance dividends ¥0.2B, so financial costs are near zero. Extraordinary items were net +¥0.9B (extraordinary gains ¥2.1B, extraordinary losses ¥1.2B), with limited impact. Extraordinary gains included gain on sale of investment securities ¥1.8B; extraordinary losses included investment securities valuation loss ¥1.0B and impairment loss ¥0.2B (loss of prospective use of company-shared assets). These one-off items had limited effect. Comprehensive income ¥59.7B is Net Income ¥58.3B plus unrealized gains on securities ¥0.2B, essentially consistent, and other comprehensive income had minimal impact. Operating Cash Flow ¥99.7B exceeded Net Income ¥58.3B, and the accrual ratio -7.0% indicates solid cash backing of profits. However, Operating Cash Flow / EBITDA decreased to 0.75x from 1.23x, mainly due to increased tax payments (¥47.6B, up ¥18.3B from ¥29.3B) and a large decrease in accounts payable for corporate tax (-¥20.2B), slowing cash conversion efficiency. Recurring income is the core; the aggressive investment of ¥122.7B in advertising and promotion is intended as a forward-looking investment to expand the customer acquisition pipeline but is currently cost-frontloaded and pressuring short-term profits.
Dividends for the period were an interim dividend of ¥47 and a year-end dividend (forecast) of ¥48, totaling ¥95 for the year, up ¥1 from ¥94 the prior year. Dividend payout ratio relative to EPS ¥113.81 was 83.5%, high. Total dividends amounted to approximately ¥49.7B (based on average shares outstanding during the period 52,335 thousand), equivalent to 85.2% of Net Income ¥58.3B. Free Cash Flow was negative ¥11.1B, so FCF coverage is -4.48x and dividends were funded from cash on hand. With cash and deposits of ¥177.4B and strong liquidity, short-term payment capacity is sufficient. However, continued intangible asset investment and high dividends during a negative FCF period mean medium-term sustainability depends on profit recovery and investment payback progress. Share buybacks were -¥0.0B this period (none executed), so shareholder returns were dividend-centric; the Total Return Ratio is at the same level as the dividend payout ratio at 83.5%. The company suggests a guideline for next-period payout ratio in the range 79.4%–175.2%, implying flexible management tied to profit variability.
Hiring Market Volatility Risk: The PersonnelService business (revenue composition 87.9%) is highly sensitive to hiring demand as it operates in job advertising and recruitment placement. This period recorded Revenue -2.9% and Operating Income -17.3%, a structure where economic slowdown or corporate hiring restraint can directly hit performance. The company increased advertising and promotion spending to ¥122.7B (+¥17.7B YoY) but customer acquisition efficiency declined and SG&A ratio rose +6.1pt. Continued demand softening could cause a nonlinear deterioration in revenue and profit.
Cash Conversion Decline Risk: Operating Cash Flow / EBITDA is 0.75x, down substantially from 1.23x, mainly due to higher tax payments (¥47.6B vs. ¥29.3B prior year) and a -¥20.2B decrease in accrued corporate taxes. Free Cash Flow is -¥11.1B, and continued intangible asset investment of ¥47.4B could lead to persistent investment excess. Funding high dividends (payout ratio 83.5%) from cash increases pressure on cash balances if profit recovery and investment payback are delayed.
Intangible Asset Investment Payback Risk: Intangible fixed assets total ¥121.6B (24.3% of total assets), centered on software ¥119.0B, up ¥9.6B YoY. Intangible asset additions were ¥47.4B this period, primarily for DX-related development. While the DX Business has a high operating margin of 56.1%, its revenue is only ¥66.1B (12.1% of consolidated). If monetization of investments lags, there is a risk of impairment and deterioration in capital efficiency.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 16.6% | 8.1% (3.6%–16.0%) | +8.5pt |
| Net Profit Margin | 10.6% | 5.8% (1.2%–11.6%) | +4.8pt |
Within the IT & Telecommunications sector, profitability ranks at the upper end, with both operating margin and net profit margin well above the median.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -2.7% | 10.1% (1.7%–20.2%) | -12.8pt |
Revenue growth lags the industry median by -12.8pt, reflecting weaker hiring demand and underperformance on growth.
※Source: Company tabulation
The PersonnelService business reported lower revenue and profit with operating margin down from 35.7% to 31.5% (-4.2pt). If hiring market recovery occurs, the upfront advertising investment of ¥122.7B could convert into an expanded acquisition pipeline, enabling operating leverage to reverse and margins to recover sharply. However, corporate/unallocated expenses of -¥98.1B (prior year -¥83.6B) worsened by -¥14.5B, so progress on cost structure reform is a prerequisite for profitability recovery.
The DX Business maintained high profitability with Operating margin 56.1% (improved +5.7pt from 50.4%) and Operating Income growth +9.4%, driving mix improvement. Most of the ¥47.4B intangible investment appears DX-related; accelerating monetization of AI and RPA services and expanding revenue share (currently 12.1%) are key to medium-term ROE maintenance and recovery. Monitoring the recovery speed of software balance ¥119.0B and investment efficiency is important.
Financial soundness is very high: Equity Ratio 74.5%, Current Ratio 276.7%, and cash and deposits ¥177.4B support sufficient short-term payment capacity. Dividend payout ratio is high at 83.5%, but given the cash base, short-term sustainability is secured. Nonetheless, with Free Cash Flow -¥11.1B, maintaining high dividends carries medium-term sustainability risk if profit recovery and investment payback are delayed; improvement in Operating Cash Flow / EBITDA and progress on monetizing intangible assets will be key considerations for maintaining dividends.
This report is an earnings analysis document automatically generated by AI from XBRL financial statement data. It does not constitute a recommendation to invest in any specific securities. Industry benchmarks are reference information compiled by the firm based on publicly available financial statements. Investment decisions should be made at your own responsibility and, if necessary, after consulting a professional.
---End of Report---