| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥289.9B | ¥232.4B | +24.8% |
| Operating Income / Operating Profit | ¥-2.1B | ¥-15.9B | +86.9% |
| Ordinary Income | ¥-12.1B | ¥-19.0B | +36.5% |
| Net Income / Net Profit | ¥5.7B | ¥-19.0B | +129.9% |
| ROE | 1.0% | -3.4% | - |
For the cumulative Q2 of FY May 2026, Revenue was ¥289.9B (YoY +¥57.5B +24.8%), Operating Loss was ¥2.1B (improved by ¥13.8B vs. prior period loss of ¥15.9B), Ordinary Loss was ¥12.1B (improved by ¥6.9B vs. prior period loss of ¥19.0B), and Net Income attributable to owners of the parent for the quarter was ¥5.5B (turned to profit from ¥-21.9B in the prior period). Cost of sales was ¥89.4B (30.9% of sales) resulting in Gross Profit of ¥200.5B (gross margin 69.1%, +1.8pt from 67.3% prior year). Selling, General and Administrative Expenses were ¥202.6B (69.9% of sales, -4.3pt from 74.2% prior year), resulting in an Operating Margin of -0.7% (improved +6.2pt from -6.9% prior year). Recognition of Special Income of ¥26.5B (including Gain on Sales of Available-for-Sale Securities ¥24.1B) produced Profit before Tax of ¥11.3B; after deducting Income Taxes of ¥5.6B (effective tax rate 49.8%), final profit was achieved. EPS 10.00円 (turned positive from -39.97円 prior year). Operating Cash Flow (OCF) was ¥50.5B (YoY +373.3%) and EBITDA (adding Depreciation & Amortization of ¥33.2B) was ¥31.1B (EBITDA margin 10.7%), indicating improved cash generation. While the trend is revenue growth and profit improvement (substantial narrowing of operating loss), final profit relied largely on special gains, and establishing a sustained operating profit will be the focus going forward.
[Revenue] Revenue ¥289.9B (+24.8%) was driven by the core HOME business revenue of ¥26.1B (+9.0%) and growth across corporate infrastructure. By segment, HOME revenue ¥26.1B (9.0% of total), Operating Income ¥6.5B (margin 25.0%, improved +9.8pt from 15.2% prior year) showed progress in high profitability. Finance revenue ¥0.01B (-99.8%), Operating Loss ¥1.5B—losses from a contracting business pressured consolidated profit. An adjustment (corporate-level costs, etc.) of -¥20.9B is included, leading to segment total Revenue of ¥288.5B. Contract liabilities ¥113.4B (YoY +¥13.7B) indicate buildup of deferred revenue supporting future revenue recognition. Accounts receivable ¥86.3B (DSO 109 days) shows a relatively long collection period, indicating room to improve working capital efficiency.
[Profitability] Gross margin 69.1% (+1.8pt) improved due to a higher mix of high value-added services and cost efficiencies. SG&A ¥202.6B (+17.5%, below revenue growth +24.8%) resulted in SG&A ratio 69.9% (-4.3pt), reflecting positive operating leverage. Operating loss narrowed to ¥2.1B (improvement of ¥13.8B vs. ¥-15.9B prior year), Operating Margin -0.7% (+6.2pt), showing steady improvement in core profitability. Non-operating expenses ¥10.8B (including interest expense ¥2.1B and equity-method losses ¥5.4B) produced Ordinary Loss ¥12.1B. Special income ¥26.5B (Gain on Sales of Available-for-Sale Securities ¥24.1B, Gain on Sales of Fixed Assets ¥0.1B, etc.) and Special Losses ¥3.2B (impairment loss ¥2.3B) were recorded, resulting in Profit before Tax ¥11.3B. Income Taxes ¥5.6B (effective tax rate 49.8%, elevated due to special income) were deducted, delivering Net Income attributable to owners of the parent ¥5.5B (turned positive from ¥-21.9B prior year). In conclusion, while revenue growth and a large narrowing of operating loss demonstrate structural improvement, final profit is heavily dependent on one-off gains from sales of securities; securing sustainable core profitability through persistent operating profit is the key issue.
HOME: Revenue ¥26.1B (YoY +9.0%), Operating Income ¥6.5B (YoY +65.2%), margin 25.0% (improved +9.8pt from 15.2%). As a high-margin business it leads consolidated profitability, with scale expansion and operating leverage effects evident. Finance: Revenue ¥0.01B (YoY -99.8%), Operating Loss ¥1.5B (loss widening -171.1%). Very low revenue versus fixed cost burden results in high negative contribution. Consolidated revenue is effectively 99.9% concentrated in HOME, highlighting concentration risk in the business portfolio.
[Profitability] Operating Margin -0.7% (improved +6.2pt from -6.9% prior year), Net Margin 2.0% (improved +11.4pt from -9.4% prior year), Gross Margin 69.1% (improved +1.8pt) — core profit structure is steadily improving. ROE 1.0% (reversed from -5.4% prior year) is explained by Net Margin 2.0% × Total Asset Turnover 0.202 × Financial Leverage 2.49, with the greatest contributor being improvement in Net Margin (including uplift from special income). [Cash Quality] Operating Cash Flow 50.5億円 (OCF) is 9.2x Net Income ¥5.5B, indicating good cash realization; OCF/EBITDA ratio 1.62x indicates high cash conversion quality. Accrual ratio -3.1% (negative accrual supports cash generation) indicates strong cash flow quality. DSO 109 days is relatively long with room to improve working capital efficiency. [Investment Efficiency] Total Asset Turnover 0.202x (slight increase from 0.182x prior year), Intangible Asset Ratio 24.3% (up +3.3pt from 21.0% prior year) reflects expanded investment in software and goodwill. Goodwill ¥126.2B (up +87.5% from ¥67.3B prior year) represents 21.9% of Total Equity ¥575.8B, requiring monitoring for M&A integration and impairment risk. [Financial Soundness] Equity Ratio 40.1% (down -3.7pt from 43.8% prior year), Current Ratio 154.1% (slight decline from 157.7% prior year) — short-term liquidity remains sound. Cash ¥453.9B versus Short-term Borrowings ¥60.0B and Current Liabilities ¥502.0B gives Cash/Short-term Liabilities 7.56x, limiting maturity mismatch. Interest-bearing debt ¥238.8B (Short-term Borrowings ¥60.0B + Long-term Borrowings ¥178.8B), Debt/Equity 0.414x, Debt/EBITDA 7.67x — financial leverage is elevated. Interest Coverage -1.01x (EBIT / Interest Expense) shows interest burden exceeds operating earnings; sustained operating profitability is a prerequisite for financial stability.
Operating Cash Flow was ¥50.5B (improved ¥69.0B from ¥-18.5B prior year), with operating CF subtotal ¥56.2B adjusted for contract liabilities increase ¥13.7B, accounts receivable increase -¥12.3B, corporate tax payments -¥3.8B, etc., deriving cash generation. Operating CF is 9.2x Net Income ¥5.5B, indicating excellent cash realization of profits. Investing CF was -¥91.9B (down -¥8.6B from -¥83.3B prior year) reflecting intangible asset acquisitions -¥46.0B, business acquisitions, etc. -¥59.5B, and proceeds from sales of available-for-sale securities +¥28.3B — deploying growth capital into M&A and software while partially recouping via asset disposals. Free Cash Flow was -¥41.4B (Operating CF + Investing CF), indicating growth investment is in a lead phase. Financing CF was ¥77.3B (up ¥42.0B from ¥35.3B prior year), securing funds via long-term borrowings ¥115.5B, long-term repayments -¥24.6B, minority shareholder contributions ¥50.0B, etc. Cash increased by ¥44.6B from opening balance ¥409.3B to closing ¥453.9B, leaving ample cash on hand. EBITDA (Operating CF ¥50.5B + Depreciation & Amortization ¥33.2B = ¥31.1B) and OCF/EBITDA 1.62x indicate strong cash generation. Interest payments -¥2.1B are absorbable by Operating CF, but insufficient EBIT implies that sustained coverage requires establishment of operating profitability.
There is a significant gap between Operating Loss ¥-2.1B and Net Income ¥5.5B, primarily due to Special Income ¥26.5B. Special Income breakdown: Gain on Sales of Available-for-Sale Securities ¥24.1B, Gain on Sales of Fixed Assets ¥0.1B, etc. One-off asset sale gains account for a large portion of Net Income. On a recurring basis, Gross Margin 69.1% is high and Gross Profit ¥200.5B is secured, but SG&A ¥202.6B exceeds this leading to an operating loss. Non-operating expenses ¥10.8B (Interest Expense ¥2.1B, Equity-method losses ¥5.4B, etc.) further pressured Ordinary Income to ¥-12.1B. Comprehensive Income ¥9.6B (Net Income ¥5.5B + Other Comprehensive Income ¥4.1B) includes Foreign Currency Translation Adjustments ¥1.6B and Net Changes in Valuation of Available-for-Sale Securities ¥2.3B. Accrual ratio -3.1% (Operating CF ¥50.5B vs. Net Income ¥5.5B) shows excellent cash conversion, but approximately 42.8% of Net Income derives from temporary special income, so evaluating sustainable earning power requires achieving core operating profitability. Goodwill amortization ¥6.5B (specific to JGAAP) represents 20.9% of EBITDA, so for comparisons with IFRS companies, evaluation on a pre-goodwill-amortization EBITDA basis is appropriate.
No interim dividend (same as prior year). Payout Ratio is not calculable (Retained earnings deficit ¥-72.1B and accumulated losses persist). Despite abundant Operating CF ¥50.5B, Free Cash Flow is -¥41.4B as growth investments lead, so capital allocation prioritizing intangible asset investment, M&A, and strengthening the balance sheet over dividends is consistent. Preconditions for sustainable dividend implementation are establishment of operating profitability, conversion to positive FCF, and elimination of accumulated losses.
Continuation of operating losses and interest burden mismatch risk: Operating Loss ¥-2.1B (loss margin -0.7%) versus Interest Expense ¥2.1B pressuring earnings. Debt/EBITDA 7.67x and Interest Coverage -1.01x (EBIT basis) indicate debt burden is heavy relative to current earnings; interest rate rises could exacerbate financial pressure. Delays in achieving core operating profitability could impair sustainability of interest burden.
Impairment risk of intangible assets and goodwill: Goodwill ¥126.2B (21.9% of equity), Intangible Assets ¥349.1B (24.3% of total assets) indicate high dependency on intangibles. An impairment loss of ¥2.3B was recorded this period; M&A integration delays or deteriorating business conditions could trigger large impairments. Goodwill/EBITDA 4.05x implies a long payback period, so monitoring investment recovery progress is necessary.
Business portfolio concentration risk and working capital efficiency: 99.9% of Revenue is concentrated in HOME, creating high dependence on a single business. Slower HOME growth or intensified competition would materially affect consolidated results. Additionally, DSO 109 days and long receivable collection periods can fix working capital and reduce capital efficiency, increasing liquidity risk.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | -0.7% | 14.0% (3.8%–18.5%) | -14.7pt |
| Net Margin | 2.0% | 9.2% (1.1%–14.0%) | -7.3pt |
Operating Margin is 14.7pt below the industry median, indicating core profitability is still improving; Net Margin gap is narrower at -7.3pt due to one-off gains.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 24.8% | 21.0% (15.5%–26.8%) | +3.8pt |
Revenue growth rate exceeds the industry median by +3.8pt, maintaining high growth.
※ Source: Company aggregation
Operating Loss Margin -0.7% (improved +6.2pt from -6.9% prior year) shows significant improvement in the revenue structure and suggests a path toward core profitability. With Gross Margin 69.1% and SG&A Ratio 69.9% nearly balanced, further SG&A efficiency and scale-driven operating leverage are key to sustainable operating profitability.
Final profit is heavily dependent on Special Income ¥26.5B (including Gain on Sales of Available-for-Sale Securities ¥24.1B), so caution is required when assessing sustainable earning power. Operating CF ¥50.5B shows strong cash generation, but with Free Cash Flow -¥41.4B amid growth investments and high financial leverage (Debt/EBITDA 7.67x), the establishment of operating profitability and improved interest resilience are the top monitoring priorities.
This report is an earnings analysis document automatically generated by AI based on XBRL financial statement data. It does not recommend investment in any specific security. Industry benchmarks are reference information aggregated by the company based on public financial statement data. Investment decisions are your own responsibility; consult advisors as needed.