| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥137.2B | ¥157.9B | -13.1% |
| Operating Income / Operating Profit | ¥8.2B | ¥33.8B | -75.8% |
| Ordinary Income | ¥8.2B | ¥33.3B | -75.2% |
| Net Income / Net Profit | ¥6.2B | ¥22.9B | -72.8% |
| ROE | 1.8% | 6.2% | - |
For the quarter ended March 2027 (Q1), Revenue was ¥137.2B (YoY -¥20.7B -13.1%), Operating Income was ¥8.2B (YoY -¥25.6B -75.8%), Ordinary Income was ¥8.2B (YoY -¥25.1B -75.2%), and Quarterly Net Income attributable to owners of the parent was ¥6.2B (YoY -¥16.7B -72.8%), representing a substantial decline in both revenue and profit. Gross profit totaled ¥119.9B (gross margin 87.4%), but SG&A including company-wide costs increased to ¥111.8B, shrinking the operating margin from 21.4% in the prior-year period to 6.0% (down 15.4pt). The PersonnelService Business (human resources services) saw revenue decline of -13.8% in job advertising and recruitment placement due to weak market conditions, and the DX Business declined -7.6%, reversing operating leverage. Extraordinary gains/losses netted +¥0.9B (special gains ¥2.0B including ¥0.7B gain on sale of investment securities and ¥1.1B gain on sale of subsidiary shares, offset by ¥1.0B impairment on investment securities), which provided some support to Net Income. However, the effective tax burden was heavy at 38.9% on pre-tax income of ¥10.2B, compressing profits. On the other hand, Operating Cash Flow was ¥16.6B (YoY -36.9%), generating 2.7x Net Income, and Investing CF was +¥64.1B largely due to term deposit maturities, resulting in Free Cash Flow of ¥80.6B and ample liquidity.
[Revenue] Revenue was ¥137.2B (YoY -¥20.7B -13.1%), a significant decline. By segment, the PersonnelService Business accounted for ¥120.6B (composition 87.9%, YoY -13.8%) as the core, with job advertising services at ¥114.2B (YoY -13.5%) and recruitment placement services at ¥5.2B (YoY -28.9%), both posting double-digit declines reflecting weakened hiring intent. The DX Business reported ¥16.6B (composition 12.1%, YoY -7.6%), with a limited decline but a slowdown from the prior year’s high growth. Cost of sales rose slightly to ¥17.3B (prior year ¥16.7B), and gross margin remained high at 87.4% (prior year 89.4%, -2.0pt), though margin pressure was caused by mix deterioration and softer pricing.
[Profitability] Operating Income was ¥8.2B (YoY -¥25.6B -75.8%). SG&A increased to ¥111.8B (prior year ¥107.4B, +¥4.4B +4.1%), raising the SG&A ratio to 81.5% (prior year 68.0%, +13.5pt). By segment, PersonnelService operating income was ¥30.8B (YoY -38.2%, margin 25.6%), and DX operating income was ¥8.4B (YoY -21.7%, margin 51.0%), but company-wide costs (general & administrative expenses not allocated to segments) rose to ¥31.1B, substantially offsetting the segment total profit of ¥39.3B. Non-operating items were roughly neutral at net +¥0.0B (non-operating income ¥0.2B, non-operating expenses ¥0.2B), leaving Ordinary Income at ¥8.2B (YoY -75.2%). Extraordinary items netted +¥0.9B (special gains ¥2.0B less special losses ¥1.0B), delivering temporary upside and producing Pre-tax Income of ¥10.2B (YoY -69.1%). Income taxes were ¥4.0B (effective tax rate 38.9%), high and resulting in Net Income of ¥6.2B (YoY -72.8%). In conclusion, reversed operating leverage from revenue decline and higher company-wide costs compressed profits, with temporary special gains supporting Net Income.
The PersonnelService Business reported Revenue of ¥120.6B (YoY -13.8%) and Operating Income of ¥30.8B (YoY -38.2%), with an operating margin down to 25.6% (prior year 35.7%, -10.1pt). Job advertising services were ¥114.2B (YoY -13.5%) as the mainstay, hit directly by weakened hiring sentiment. Recruitment placement services declined significantly to ¥5.2B (YoY -28.9%), with fewer high-ticket assignments reducing contribution. The DX Business posted Revenue of ¥16.6B (YoY -7.6%) and Operating Income of ¥8.4B (YoY -21.7%), maintaining a high operating margin of 51.0% (prior year 60.2%, -9.2pt), and remains a high-profit segment, but margin contracted due to increased fixed-cost burden amid revenue decline. Company-wide costs rose to ¥31.1B (prior year ¥26.9B, +¥4.2B +15.5%), compressing consolidated Operating Income from the segment aggregate profit of ¥39.3B down to ¥8.2B.
[Profitability] Operating margin was 6.0% (prior year period 21.4%, -15.4pt), and Net Margin was 4.6% (prior year period 14.5%, -10.0pt), materially lower as both revenue decline and cost increases weakened profit generation. ROE was 1.8% (annualized basis), a significant decline from the prior-year high. EBITDA was ¥19.3B (Operating Income ¥8.2B + Depreciation & Amortization ¥11.1B), and EBITDA margin was 14.1% (prior year 28.0%, -13.9pt), indicating reduced cash-generating ability at the operating level. [Cash Quality] Operating CF / Net Income was 2.7x, and the accrual ratio was -2.2%, showing good cash backing of profits. OCF / EBITDA was 0.86x, slightly below the 0.9x benchmark, with working capital swings dampening cash conversion efficiency. Days Sales Outstanding (DSO) was 130 days (prior year 119 days, +11 days), lengthening and indicating ongoing collection delays. [Investment Efficiency] Total asset turnover was 0.29x (annualized), reflecting lower asset efficiency. Capex / Depreciation was 0.16x, very low, indicating maintenance-level investment and constrained growth investment. Intangible assets totaled ¥120.0B (25.1% of total assets), dominated by software-related investment balances. ROIC was 2.6% (annualized), low and indicating a need to improve capital efficiency. [Financial Soundness] Equity ratio was 73.4% (prior year 74.5%, -1.1pt), maintaining a high level, current ratio 268.6%, and quick ratio 268.6%, showing solid short-term payment capacity. Cash and deposits were ¥160.0B, representing 33.4% of total assets and ample on-hand liquidity. Interest-bearing debt is minimal, and debt-to-equity (debt-to-capital) ratio was 0.36x, preserving a conservative capital structure. Asset retirement obligations were ¥9.3B (7.3% of liabilities), recognized as a future cash outflow risk but coverable by cash balances.
Operating CF was ¥16.6B (prior year period ¥26.2B, -36.9%), impacted by profit decline but generating 2.7x Net Income. Subtotal (pre-tax operating CF) was ¥27.8B, with major adjustments including Depreciation & Amortization ¥11.1B, cash paid for income taxes -¥11.6B, and net effects of provisions and changes in liabilities contributing. In working capital, Accounts Receivable contributed +¥3.3B cash inflow (collection progress), Accounts Payable +¥0.8B small increase, and Contract Liabilities +¥1.1B increase contributed to cash inflow. Conversely, Other Liabilities increased by +¥12.1B (large) and Other Assets outflow -¥1.4B, among mixed movements, leaving OCF / EBITDA at 0.86x, slightly below the 0.9x benchmark. Investing CF was +¥64.1B (prior year period -¥24.2B), mainly due to ¥80.0B proceeds from term deposit maturities. Capex was -¥1.7B, intangible asset investment -¥9.9B, sale of investment securities +¥0.9B, purchases -¥0.4B, etc. Financing CF was -¥20.5B (prior year period -¥25.4B), with dividend payments -¥25.7B the main outflow, partially offset by long-term borrowings +¥5.0B. Free Cash Flow was ¥80.6B (Operating CF ¥16.6B + Investing CF ¥64.1B), leaving cash and cash equivalents up ¥60.1B from opening ¥90.4B to closing ¥150.5B, materially improving on-hand liquidity.
Earnings quality is broadly recurring. Revenue arises from customer contracts for job advertising, recruitment placement, and DX services. Non-operating income of ¥0.2B (0.2% of Revenue) is minor, comprised of interest income ¥0.1B and forex gains ¥0.1B. Extraordinary items netted +¥0.9B as temporary gains (special gains ¥2.0B including ¥0.7B gain on sale of investment securities and ¥1.1B gain on sale of subsidiary shares, less special losses ¥1.0B for investment securities valuation loss). Comprehensive income was ¥5.7B (Net Income ¥6.2B less other comprehensive income -¥0.5B from valuation differences on other securities), showing small divergence from Net Income. Accrual quality is strong, with Operating CF / Net Income 2.7x and accrual ratio -2.2%. OCF / EBITDA at 0.86x is somewhat low, with working capital movements (Other liabilities increase +¥12.1B, Other payables decrease -¥10.2B, etc.) affecting cash conversion. DSO of 130 days is prolonged beyond industry characteristics, necessitating stronger collection management. Income taxes were ¥4.0B (effective tax rate 38.9%), a primary cause of the gap between Ordinary Income and Net Income. Recurring profit (Operating + Non-operating) was ¥8.2B, indicating that core profitability is concentrated at the operating level excluding extraordinary items.
Dividend policy remains unchanged with an annual forecast of ¥48 per share. Based on outstanding shares at the end of Q1 of 60,140 thousand shares (52,281 thousand shares after deducting 7,859 thousand treasury shares), annual dividend payout is estimated at approximately ¥25B. Q1 Free Cash Flow was ¥80.6B, and period-end cash and deposits were ¥160.0B, indicating sufficient capacity for dividend payments. Dividends paid in Q1 were ¥25.7B, nearly unchanged from ¥25.8B in the prior-year period. The payout ratio is difficult to compute at this time as it depends on full-year performance, but given ample FCF and on-hand liquidity, dividend stability is considered high. No share buybacks were disclosed; shareholder returns currently consist solely of dividends.
Deterioration in hiring demand cycle risk: The PersonnelService Business accounts for 87.9% of revenue and is directly exposed to weakening hiring sentiment linked to macro conditions. Job advertising -13.5% and recruitment placement -28.9% both recorded double-digit declines; prolonged economic stagnation could materially impair the revenue base. High operating leverage amplifies revenue declines into profit declines, so delayed demand recovery risks prolonged low profitability.
Collection delays and liquidity risk: DSO extended to 130 days from 119 days a year earlier (+11 days), substantially above industry averages. Continued delays or receivables aging would depress Operating CF and raise bad-debt risk. Current DSO trends suggest weakness in working capital management; quantitatively, accounts receivable of ¥48.7B equate to nine months of operating CF (annualized assumption ¥66B), making acceleration of collections an urgent priority.
Asset efficiency and intangible asset impairment risk: Intangible assets of ¥120.0B (25.1% of total assets), primarily software, carry impairment risk if profitability declines or market conditions change. ROIC at 2.6% and Capex/Depreciation ratio 0.16x indicate continued investment suppression, which could lead to competitive obsolescence and prolonged weak capital efficiency. Asset retirement obligations ¥9.3B (7.3% of liabilities) are also potential future cash outflows warranting balance sheet vigilance.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 6.0% | 8.0% (2.2%–15.8%) | -2.1pt |
| Net Margin | 4.6% | 5.8% (1.5%–10.7%) | -1.2pt |
Profitability is below the industry median, placing the company in the lower range for both operating margin and net margin.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -13.1% | 9.3% (0.2%–16.9%) | -22.4pt |
Revenue growth is well below the industry median, strongly impacted by deteriorating market conditions.
※ Source: Company aggregation
Rapid deterioration in profitability and urgent need to review cost structure: Operating margin shrank from 21.4% to 6.0% (down 15.4pt), and company-wide costs of ¥31.1B offset segment profits of ¥39.3B. Against a 13.1% revenue decline, Operating Income fell 75.8%, highlighting clearly reversed operating leverage. Timing of recovery in job advertising and recruitment demand and the ability to curtail and convert company-wide costs to variable expenses are key to restoring profitability. The DX Business’s 51.0% margin demonstrates competitiveness but its 12.1% composition remains small; expanding its share is a condition for raising overall margins.
Cash-generating capacity is healthy, but asset efficiency requires improvement: Free Cash Flow of ¥80.6B is ample, and Operating CF / Net Income 2.7x and cash on hand ¥160.0B secure dividend and investment capacity. However, DSO at 130 days, Capex/Depreciation at 0.16x, high intangible asset share at 25.1% of total assets, and ROIC decline to 2.6% indicate structural weakness in capital efficiency. Strengthening collections, resuming strategic investments, and reassessing intangible assets are essential for mid-to-long-term growth recovery.
Dividends are expected to continue stably, but recovery in performance is key: The annual dividend of ¥48 is sufficiently covered by cash and FCF, and the capital policy is resilient. However, if low operating margins around 6.0% persist, payout ratio pressure and sustainability of total shareholder returns may increase. Recovery in hiring demand in H2, expanded DX sales, and progress in cost optimization are prerequisites for stable continuation and potential increases in dividends. Delays in macro recovery or the inability to restructure company-wide costs could pressure dividend policy revisions.
This report is an earnings analysis document automatically generated by AI based on XBRL financial statement data. It is not a recommendation to invest in any specific securities. Industry benchmarks are reference information aggregated by the Company based on public financial statements. Investment decisions are your responsibility; please consult a professional as needed before making investment decisions.