TalentX Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥827M
• Operating Income: ¥162M
• Net Income: ¥124M
• EPS: ¥21.68

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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

G-TalentX reported solid topline growth for FY2026 Q2 with revenue of 827,000,000 yen, up 21.8% year on year, indicating healthy demand for its services. Gross profit reached 562,338,000 yen, translating to a robust gross margin of 68.0%, which suggests strong pricing power and/or a scalable cost structure with limited direct costs. Operating income was 162,000,000 yen, up 17.1% YoY, implying some operating leverage but also suggesting higher operating expenses growing roughly in line with sales. Ordinary income of 163,000,000 yen is only slightly above operating income, indicating minimal net non-operating gains or losses in the period. Net income came in at 124,000,000 yen, down 10.1% YoY, implying the decrement occurred below the operating line—likely due to extraordinary items under JGAAP or changes in tax effects; detailed extraordinary items were not disclosed. Despite the dip in net income, cash generation was strong: operating cash flow was 315,986,000 yen, yielding an OCF/Net Income ratio of 2.55, which is a sign of good earnings quality and cash conversion. EBITDA was 172,389,000 yen, for a 20.8% EBITDA margin, consistent with a high-margin, likely asset-light model typical of HR-tech/professional services platforms. Liquidity appears adequate with a current ratio of 152.3% and quick ratio of 152.3%, supported by the absence of inventories and positive working capital of 341,176,000 yen. The capital structure is moderate with total liabilities of 700,779,000 yen against equity of 762,000,000 yen, implying a liabilities-to-equity ratio of about 0.92x and financial leverage (assets/equity) of 2.12x. DuPont decomposition yields a calculated ROE of 16.27% (Net margin 14.99% × Asset turnover 0.511 × Leverage 2.12), which is in line with the reported figure and indicates respectable shareholder returns for a company at this scale. Interest expense is very low at 247,000 yen, and interest coverage is extremely comfortable at 655.9x, limiting financial risk from borrowing costs. Reported income tax expense is minimal at 272,000 yen, resulting in a near-zero effective tax rate in the metrics; this likely reflects timing differences, NOL usage, or classification effects and may not be sustainable. The balance sheet shows total assets of 1,619,000,000 yen and equity of 762,000,000 yen; while the reported equity ratio is 0.0% (undisclosed), the simple period-end equity/asset ratio would approximate 47%, indicating a balanced structure if maintained through the period. Dividend payout is currently nil (DPS 0, payout ratio 0%), consistent with reinvestment to drive growth. Some data points (cash & equivalents, investing cash flows, equity ratio disclosure, share counts) were not reported; this limits precision on free cash flow and per-share analyses. Overall, the business exhibits strong growth, high margins, solid cash conversion, and manageable leverage, with the main caveats being the decline in net income due to below-operating-line items and several disclosure gaps that constrain full assessment.

Profitability Analysis

ROE of 16.27% is driven by a healthy net margin of 14.99%, moderate asset turnover of 0.511, and financial leverage of 2.12x. Gross margin stands at 68.0%, indicating strong unit economics; the operating margin is approximately 19.6% (162,000,000 / 827,000,000), showing good cost control but slightly lagging revenue growth due to operating expense investments. EBITDA margin of 20.8% supports the thesis of an asset-light, scalable model with low D&A (10,389,000) relative to operating income. Ordinary income is only marginally above operating income, suggesting limited reliance on non-operating items during the period. Net income decline (-10.1% YoY) despite operating income growth (+17.1% YoY) implies negative extraordinary items and/or tax normalization effects under JGAAP. Interest expense is negligible (247,000) and interest coverage of 655.9x indicates profitability is not dependent on financial engineering. Overall margin quality appears high, but the gap between OI and NI warrants monitoring for extraordinary losses or one-off charges. Operating leverage is evident but tempered; revenue grew 21.8% while operating income grew 17.1%, implying some opex step-up (likely in sales & marketing or R&D) to support growth.

Growth Assessment

Revenue expanded 21.8% YoY to 827,000,000 yen, a strong pace consistent with share gains or category growth in its end markets. Operating income grew 17.1% YoY, indicating continued scalability albeit with reinvestment that modestly compressed incremental margins. The net income decline (-10.1% YoY) suggests below-operating-line headwinds (extraordinary items/taxes), not core operating weakness. High gross margin (68.0%) and stable EBITDA margin (20.8%) point to durable economics if pricing and utilization remain intact. Asset turnover of 0.511 is reasonable for a half-year view and could improve as the company scales without proportional asset growth. OCF of 315,986,000 yen outpaced net profit, reflecting supportive working capital dynamics or strong collections, which enhances growth funding from internal sources. The business appears to be in an expansionary phase, with adequate liquidity to continue investing. Near-term outlook hinges on sustaining double-digit revenue growth and maintaining operating discipline to translate growth into profit, while preventing extraordinary losses from recurring. Absent disclosure of bookings/backlog or cohort metrics, revenue sustainability must be inferred from margins and cash conversion, both of which are favorable. Key swing factors include client demand tied to hiring cycles, competitive intensity, and potential changes in pricing or product mix.

Financial Health

Liquidity is sound with a current ratio of 152.3% and quick ratio of 152.3%, supported by no reported inventories and positive working capital of 341,176,000 yen. Total liabilities of 700,779,000 yen versus equity of 762,000,000 yen implies moderate leverage (approx. 0.92x liabilities/equity). Financial leverage in the DuPont set (2.12x) is consistent with assets of 1,619,000,000 yen vs. equity of 762,000,000 yen. Interest expense is minimal and coverage is extremely high (655.9x), indicating low refinancing or rate risk. While the reported equity ratio is shown as 0.0% (undisclosed), a simple end-period calculation suggests an equity ratio around the high-40% range; however, we treat the disclosed 0.0% as unreported rather than zero. The absence of reported cash and equivalents limits visibility into the immediate liquidity buffer, but positive OCF provides operating funding. Current liabilities (652,807,000 yen) are well-covered by current assets (993,983,000 yen). No details on long-term debt maturities or covenants were provided; nevertheless, solvency risk appears low given profitability and coverage metrics.

Cash Flow Quality

Operating cash flow of 315,986,000 yen is 2.55x net income (124,000,000 yen), indicating strong earnings quality and cash conversion, likely helped by working capital inflows. Depreciation and amortization are modest (10,389,000 yen), consistent with limited capital intensity. Investing cash flow is not reported (0 indicates undisclosed), preventing precise estimation of capital expenditures and free cash flow; the reported FCF of 0 is a placeholder. Based on OCF alone, internal cash generation appears ample to fund growth and meet obligations. Working capital appears well-managed given the current and quick ratios and positive working capital position; the improvement in OCF may reflect favorable receivables collections or payables timing, but detailed AR/AP/DSO/DPO data are not disclosed. With limited D&A and a scalable model, structural cash conversion should remain robust if revenue scales and working capital disciplines are maintained. The lack of cash balance disclosure is a key limitation for assessing immediate liquidity and FCF coverage of potential dividends or debt.

Dividend Sustainability

The company did not declare a dividend (DPS 0.00) and has a payout ratio of 0.0%, indicating a reinvestment-oriented policy appropriate for a growing business. Given strong OCF relative to earnings, the capacity to fund distributions exists in principle, but management appears to prioritize growth. FCF coverage cannot be assessed due to undisclosed investing cash flows; the reported FCF of 0 is a placeholder and not indicative of true free cash flow. With moderate leverage and high interest coverage, there is no near-term financial constraint forcing distributions. Future dividend sustainability would depend on maintaining positive OCF after working capital needs, the level of growth investments (CapEx or M&A), and clarity on cash reserves. Policy outlook likely remains conservative with a focus on reinvestment until scale and visibility improve.

Risk Assessment

Business Risks:

• Exposure to hiring cycles and macroeconomic conditions that affect client demand
• Competitive pressure in HR-tech/professional staffing leading to pricing or margin compression
• Customer concentration risk if a small number of clients drive a large share of revenue (not disclosed)
• Execution risk in scaling sales capacity and maintaining service quality
• Regulatory and compliance risks around labor, data protection, and privacy
• Talent acquisition and retention risk for key consultants/engineers

Financial Risks:

• Limited disclosure of cash and investing flows reduces visibility on liquidity runway and FCF
• Potential for extraordinary losses under JGAAP impacting net income volatility
• Working capital swings could affect cash generation in high-growth periods
• Moderate leverage (liabilities/equity ~0.92x) could rise if growth is debt-funded
• Tax rate normalization risk given very low reported tax expense in the period

Key Concerns:

• Net income declined 10.1% YoY despite operating income growth, implying below-the-line pressure
• Investing cash flow and cash balance were not disclosed, obscuring true FCF and liquidity
• Equity ratio reported as 0.0% (undisclosed), limiting direct comparability of capital structure metrics

Investment Implications

Key Takeaways:

• Strong revenue growth (+21.8% YoY) with high gross margin (68.0%) supports a high-quality growth profile
• Operating income growth (+17.1% YoY) and EBITDA margin (20.8%) indicate scalable operations with continued reinvestment
• ROE of 16.27% is supported by solid margins and moderate leverage
• OCF substantially exceeds net income (2.55x), signaling robust earnings quality
• Net income decline and undisclosed extraordinary/tax details warrant caution on bottom-line volatility
• Liquidity appears adequate (current ratio 152.3%), but cash balance and CapEx data are missing

Metrics to Watch:

• Extraordinary gains/losses and reconciliation from operating income to net income
• Effective tax rate trends and NOL utilization
• Bookings/pipeline, client retention, and revenue concentration metrics
• AR days, AP days, and working capital intensity
• CapEx and investing cash flows to derive true free cash flow
• Equity ratio (calculated) and leverage trajectory
• S&M efficiency (e.g., revenue growth vs. operating expense growth) and margin progression

Relative Positioning: Relative to domestic HR-tech/professional services peers, G-TalentX exhibits above-average gross margins, healthy operating margins, strong cash conversion, and low interest burden, with moderate leverage; however, bottom-line volatility due to below-the-line items and disclosure gaps (cash, investing CF, equity ratio) temper the clarity of its comparative strength.

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