Human Holdings Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥50.73B
• Operating Income: ¥1.18B
• Net Income: ¥605M
• EPS: ¥71.39

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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

Human Holdings Co., Ltd. reported FY2026 Q2 consolidated results under JGAAP with steady top-line growth and improved profitability, alongside a notable cash outflow from operations. Revenue reached ¥50.73bn, up 3.2% YoY, indicating resilient demand across core segments such as staffing, education, and related human resources services. Gross profit was ¥12.42bn, yielding a gross margin of 24.5%, which appears broadly stable and consistent with a service-heavy cost structure. Operating income improved to ¥1.18bn (+9.0% YoY), expanding the operating margin to roughly 2.3%, suggesting disciplined cost control despite a modest growth environment. Ordinary income of ¥1.38bn exceeded operating income, indicating a positive non-operating balance (e.g., financial income or equity method gains) that partially offset modest operating leverage. Net income rose 22.4% YoY to ¥0.74bn, outpacing revenue growth and reflecting improved cost efficiency and a favorable non-operating contribution. EPS was reported at ¥71.39, though share count details are not disclosed in the dataset. DuPont analysis shows an ROE of 4.10%, driven by a slim net margin of 1.46%, strong asset turnover of 0.993x, and financial leverage of 2.83x, underscoring an efficiency-led return profile with moderate leverage support. EBITDA of ¥1.59bn implies a margin of 3.1%, leaving limited buffer for shock absorption but consistent with the low-margin nature of staffing and HR services. Interest burden remains very manageable with an interest coverage ratio of 48.8x, reflecting low interest expense (¥24.2m) relative to operating earnings. Liquidity appears solid, with a current ratio of 170% and working capital of approximately ¥17.17bn, providing short-term financial flexibility. Conversely, operating cash flow was negative at -¥0.95bn despite positive net profit, indicating a significant working capital outflow or timing effects in receivables/payables typical of HR services with high payroll pass-through. The reported effective tax rate metric of 0.0% conflicts with the presence of income tax expense (¥592m); this suggests the effective tax rate figure is not available rather than truly zero. Several balance sheet and cash flow items (e.g., equity ratio, cash and equivalents, investing cash flow, dividends, shares outstanding) are reported as zero and should be treated as undisclosed data points, not literal zeros. Overall, the quarter shows stable growth, improved profitability, and healthy coverage metrics, offset by weak operating cash conversion in the period and limited visibility on capital allocation and dividend policy due to missing disclosures. Near-term focus should be on cash conversion, sustainability of margin improvements, and confirmation of leverage and capital structure metrics as more complete disclosures become available.

Profitability Analysis

ROE of 4.10% decomposes into a net profit margin of 1.46%, asset turnover of 0.993x, and financial leverage of 2.83x. The return profile is driven primarily by asset efficiency and moderate leverage rather than high margins. Gross margin stands at 24.5%, which is reasonable for a labor-intensive service model; however, the operating margin of ~2.3% indicates limited operating leverage. The 9% YoY increase in operating income against 3.2% revenue growth signals modest operating leverage and effective expense management, possibly within SG&A. Ordinary income exceeding operating income suggests supportive non-operating items (e.g., financial income), adding to bottom-line resilience. EBITDA margin of 3.1% highlights a relatively thin margin structure; depreciation and amortization of ¥415m implies limited capital intensity but also a constrained EBITDA-to-OP bridge. Interest expense is low (¥24m), yielding an interest coverage of 48.8x and indicating minimal financial drag. The net margin improvement vs. revenue growth supports the YoY uplift in ROE, albeit from a low base. Sustainability of margin gains will depend on pricing discipline, mix (higher-margin solutions and education), and utilization rates. Overall margin quality appears adequate, but buffers are thin, necessitating vigilant cost control and utilization management.

Growth Assessment

Revenue grew 3.2% YoY to ¥50.73bn, suggesting steady but not rapid expansion in the core HR services and education businesses. The growth rate is consistent with a mature market backdrop and could reflect modest volume increases and stable pricing. Operating income growth (+9.0% YoY) outpacing sales implies incremental efficiency gains and potential scale benefits. Ordinary income of ¥1.38bn points to a small but positive contribution from non-operating activities, which supported overall profit growth. Net income rose 22.4% YoY to ¥0.74bn, reflecting both operational improvements and non-operating tailwinds. Profit quality is mixed: while accrual earnings improved, operating cash flow was negative, indicating growth was accompanied by working capital investment or timing effects. Without segment disclosures, the sustainability of growth by business line cannot be assessed; however, the broad-based nature of HR services suggests cyclicality tied to labor demand and corporate hiring trends. Near-term outlook hinges on maintaining client demand, controlling subcontracting and labor costs, and improving billing/collection cycles. Given thin margins, even modest pricing or utilization improvements can drive profit growth, but the converse also holds true. We lack guidance and backlog data; therefore, growth sustainability is inferred but not confirmed.

Financial Health

Total assets are ¥51.07bn and total equity is ¥18.06bn, implying financial leverage of 2.83x (assets/equity). Debt-to-equity is shown as 1.81x, indicating moderate leverage, though the specific composition of liabilities (interest-bearing vs. operating) is not disclosed. Liquidity is strong with current assets of ¥41.59bn versus current liabilities of ¥24.42bn, yielding a current ratio of 170% and working capital of approximately ¥17.17bn. Quick ratio matches the current ratio due to inventories being undisclosed, consistent with the service model. Interest coverage is robust at 48.8x, suggesting ample capacity to service debt. The equity ratio is reported as 0.0%, which is not reflective of the provided balance sheet and should be treated as undisclosed. Cash and equivalents are reported as zero, which is likely a disclosure gap; however, the strong current asset position implies adequate liquidity sources. The capital structure appears balanced, but greater clarity on net debt, cash balances, and the split of short- vs. long-term borrowings would refine solvency assessment.

Cash Flow Quality

Operating cash flow of -¥951m contrasts with positive net income of ¥740m, resulting in an OCF/Net Income ratio of -1.29, indicating weak cash conversion in the period. The negative OCF likely stems from working capital outflows (e.g., increased receivables or reduced payables), which are common in staffing models with timing mismatches between payroll and client collections. Depreciation and amortization of ¥415m represents a non-cash add-back; however, the overall OCF outcome suggests sizable working capital investments or timing effects overshadowing accrual profitability. Investing cash flow is reported as zero and should be considered undisclosed; thus, Free Cash Flow cannot be reliably calculated from the provided data, despite the placeholder value of zero. The quality of earnings appears mixed: accrual profits improved, but cash realization lagged this quarter. Sustained negative OCF would be a concern; monitoring subsequent quarters for reversal of temporary working capital swings is key. Absent capex detail, we cannot assess maintenance vs. growth investment intensity or capital allocation discipline.

Dividend Sustainability

Annual DPS is reported as 0.00 and payout ratio as 0.0%, which should be interpreted as undisclosed rather than literal zero. With net income positive and OCF negative in the period, point-in-time FCF coverage cannot be assessed due to unreported investing cash flows. Historically, service companies with moderate leverage and steady earnings may target stable dividends, but no policy detail is provided here. Dividend sustainability therefore cannot be evaluated quantitatively from this dataset. Key determinants would include normalized FCF generation, net cash position, and management’s stated payout policy—none of which are disclosed in these figures.

Risk Assessment

Business Risks:

• Cyclical demand for staffing and HR services tied to macro employment conditions and client hiring plans
• Margin pressure from wage inflation, subcontracting costs, and competitive pricing
• Client concentration risk if large accounts drive a significant share of revenue (not disclosed)
• Regulatory changes in labor laws and dispatch regulations affecting operating models and costs
• Talent acquisition and retention challenges impacting service quality and fulfillment rates
• Potential shifts in education/training demand and modality (online vs. offline) affecting mix and margins

Financial Risks:

• Negative operating cash flow in the period, indicating working capital strain or timing effects
• Moderate leverage (D/E 1.81x) with sensitivity to earnings volatility in a low-margin model
• Limited EBITDA margin (3.1%) leaves lower cushion for shocks or cost overruns
• Disclosure gaps on cash balances and investing cash flows impede assessment of liquidity runway
• Potential interest rate risk if a portion of liabilities are floating-rate (not disclosed)

Key Concerns:

• Weak cash conversion this quarter (OCF/NI -1.29) despite higher profits
• Thin operating and EBITDA margins elevate execution risk
• Incomplete disclosures on cash, capex, and dividend policy reduce visibility

Investment Implications

Key Takeaways:

• Revenue growth of 3.2% YoY with operating income up 9.0% indicates modest operating leverage
• ROE at 4.10% is efficiency-driven (asset turnover 0.993x) with moderate leverage (A/E 2.83x)
• Interest coverage is strong at 48.8x, suggesting low financial risk from interest burden
• OCF of -¥951m flags cash conversion issues likely rooted in working capital timing
• EBITDA margin of 3.1% underscores thin buffers; sustained cost control is critical
• Key balance sheet and cash flow items are undisclosed, limiting capital allocation insights

Metrics to Watch:

• Working capital movements (DSO/DPO) and subsequent-quarter OCF normalization
• Operating margin trend and SG&A efficiency
• Segment mix and pricing to support margin improvement
• Net debt and cash balance disclosures to refine leverage and liquidity view
• Capex and investing cash flows to assess FCF and dividend capacity
• Client demand indicators and order pipelines in staffing and education units

Relative Positioning: Within Japan’s HR services landscape, the company exhibits stable top-line growth and strong interest coverage but operates with thinner margins and lower ROE than top-tier peers; sustained margin discipline and improved cash conversion would be needed to enhance its relative standing.

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