Plus Alpha Consulting (4071) FY2026 Q2 Earnings Report

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Executive Summary

The Company achieved higher revenue and profit, with profit growth outpacing revenue growth, driven by the expansion of its HR Solutions business and improved SG&A efficiency. Revenue was ¥9.34B (+14.2% YoY), Operating Income was ¥3.69B (+32.2%), Ordinary Income was ¥3.68B (+34.6%), and Interim Net Income attributable to owners of the parent was ¥2.52B (+36.0%). The Operating Margin improved to 39.5% from 34.1% in the same period of the previous year, with a decline in the SG&A ratio exceeding the decline in the gross margin and driving profit growth.

Factors Affecting Performance

【Revenue】Revenue was ¥9.34B, up +14.2% YoY. By segment, HR Solutions grew substantially to ¥7.50B (+20.4% YoY; 80.3% of total revenue), accounting for the majority of the Company-wide revenue increase of ¥1.16B. In contrast, Marketing Solutions declined to ¥1.84B (▲5.5% YoY; 19.7% of total revenue), indicating a widening growth disparity between the businesses. By revenue category, revenue recognized over a certain period accounted for ¥8.30B (88.8% of total revenue), confirming a stable recurring-revenue base.

【Profit and Loss】Operating Income was ¥3.69B (+32.2% YoY), Ordinary Income was ¥3.68B (+34.6%), and Net Income was ¥2.52B (+36.0%). Non-operating income and expenses were broadly balanced, and the gap between Ordinary Income and Net Income was within the normal range attributable to the corporate tax burden (an effective tax rate of approximately 31.4%). No extraordinary gains or losses were recorded, and profit growth was driven by improved profitability in the core business. The HR Solutions segment margin was 49.2%, exceeding the Marketing Solutions segment margin of 39.3%, while the rising contribution of the higher-margin business lifted the Company-wide margin. In conclusion, the Company posted higher revenue and profit, with favorable operating leverage confirmed by profit growth exceeding revenue growth.

Segment Analysis

HR Solutions led the Company as a whole, with Revenue of ¥7.50B (+20.4% YoY) and segment profit of ¥3.69B (+45.3%), both showing substantial growth. Marketing Solutions posted lower revenue and profit, with Revenue of ¥1.84B (▲5.5% YoY) and segment profit of ¥0.72B (▲17.8%). Of total segment profit before Company-wide adjustments of ¥4.42B, HR Solutions accounted for 83.6% and Marketing Solutions for 16.4%. Company-wide expense adjustments amounted to ▲¥0.72B, expanding from ▲¥0.63B in the same period of the previous year, and the rate of Company-wide expense absorption relative to total segment profit is trending upward.

Key Financial Indicators

【Profitability】The Operating Margin of 39.5% (34.1% in the same period of the previous year) and Net Profit Margin of 27.0% (22.6%) both improved substantially, as the decline in the SG&A ratio to 31.3% (38.4%) exceeded the decline in the gross margin to 70.8% (72.5%). 【Cash Flow Quality】Operating Cash Flow (OCF) was 0.89 times Net Income, while OCF/EBITDA remained at 0.59 times. Corporate tax payments of ¥1.21B and a ¥0.35B increase in trade receivables restrained cash conversion, while the accrual ratio remained low, indicating that the quality of accrual-based earnings itself was sound. 【Investment Efficiency】Annualized ROE was 31.4% and total asset turnover was approximately 0.94 times, reflecting high capital efficiency centered on the high Net Profit Margin. Capital expenditures of ¥0.03B were below depreciation and amortization of ¥0.09B, reflecting an asset-light business model. 【Financial Soundness】The Equity Ratio was 81.2%, cash and deposits totaled ¥15.46B, and the current ratio exceeded 500%, indicating an extremely robust financial foundation.

Cash Flow Analysis

OCF was ¥2.23B, an increase of +17.6% YoY, but remained at 0.89 times Net Income of ¥2.52B. The main factors weighing on cash flow were corporate tax payments of ¥1.21B and a ¥0.35B increase in trade receivables. Investing Cash Flow was an outflow of ¥0.19B, primarily comprising the acquisition of investment securities of ¥0.15B and capital expenditures of ¥0.03B. Financing Cash Flow was an outflow of ¥1.25B, of which dividend payments accounted for ¥1.22B. As a result, Free Cash Flow (OCF + Investing Cash Flow) remained positive at ¥2.04B, while cash and cash equivalents increased from ¥14.56B at the end of the same period of the previous year to ¥15.36B. The Company’s funding structure enables it to finance dividend payments and investments with internal funds while maintaining ample cash resources.

Earnings Quality

The current period’s profit resulted from recurring improvement in profitability without extraordinary gains or losses, and no temporary factors were identified. Non-operating income of ¥0.02B and non-operating expenses of ¥0.03B were small, and Ordinary Income remained at nearly the same level as Operating Income, at ¥3.68B, indicating that non-operating gains and losses did not distort the earnings structure. Comprehensive Income was ¥2.53B, broadly in line with Net Income attributable to owners of the parent of ¥2.52B. As other comprehensive income items, including valuation differences on securities, were minimal, the divergence between Net Income and Comprehensive Income was limited. From a cash flow perspective, however, OCF was slightly below Net Income due to the increase in trade receivables and tax payments, warranting attention to the resulting time lag between accrual-based earnings and cash generation.

Earnings Forecast and Guidance

The full-year Company forecast calls for Revenue of ¥19.50B (+14.1% YoY), Operating Income of ¥7.50B (+17.6%), and Ordinary Income of ¥7.50B (+18.7%), with no revision to the earnings forecast itself. First-half progress rates were 47.9% for Revenue, 49.2% for Operating Income, and 49.1% for Ordinary Income, broadly in line with the standard first-half progress rate of 50%. Forecast EPS is ¥122.73, while first-half EPS of ¥59.42 corresponds to a progress rate of 48.4%. The dividend forecast was revised, with the annual dividend set at ¥50.00.

Shareholder Returns

The dividend at the end of Q2 was ¥0, and no interim dividend was paid. The full-year dividend forecast was revised to ¥50.00 per share, implying a Payout Ratio of approximately 40.3% based on the Company’s forecast Net Income of ¥5.20B. Assuming approximately 41.92 million shares after deducting treasury shares from issued shares, total annual dividends would be approximately ¥2.09B. Compared with first-half Free Cash Flow of ¥2.04B and cash and deposits of ¥15.46B, the Company has sufficient financial capacity to make the payments. As no share buyback was confirmed, shareholder returns are evaluated based on the Payout Ratio rather than the Total Return Ratio.

Risk Factors

1. Dependence on HR Solutions for profit: This business accounts for 83.6% of total segment profit. If the hiring market fluctuates or customers curb investment in HR DX, the impact on Company-wide performance could be significant.

2. Declining revenue and profit in Marketing Solutions: Revenue declined ▲5.5% YoY and segment profit declined ▲17.8%. If the growth disparity within the business portfolio persists, it could become a factor weighing on the Company-wide growth rate.

3. Declining cash conversion efficiency: OCF/EBITDA remained at 0.59 times, due to corporate tax payments and the increase in trade receivables. If trade receivables continue to increase at a pace exceeding revenue growth, the Company’s cash-generating capacity could weaken.

Industry Benchmark (Reference; Company Analysis)

Industry Benchmark (it_telecom)

Profitability and Return

The Company’s profitability is well above the industry median, placing it among the high-margin group within the IT and telecommunications industry.

Growth and Capital Efficiency

Revenue growth is below the industry median, and is relatively moderate compared with the Company’s high profitability.

※Source: Company analysis

Key Takeaways from the Earnings

1. Clear operating leverage was confirmed, with Revenue increasing +14.2% compared with Operating Income growth of +32.2% and Net Income growth of +36.0%, primarily due to a decline in the SG&A ratio (▲711bp YoY).

2. While the core HR Solutions business drove Company-wide growth in both revenue and profit, Marketing Solutions posted lower revenue and profit, indicating a structural concentration of growth between the businesses.

3. The robust financial foundation, comprising an Equity Ratio of 81.2% and cash and deposits of ¥15.46B, together with Free Cash Flow of ¥2.04B, supports the dividend forecast of ¥50 per year. However, the OCF/EBITDA ratio of 0.59 times warrants monitoring alongside future trends in trade receivables.

Theoretical Share Price (Reference Value)

Sensitivity: ¥671–¥712 for ±1% in the Cost of Equity, and ¥683–¥704 for ±0.1 in ω.

Notes:

• Amortization of goodwill of ¥1.7 per share has been added back to earnings (as a non-cash expense and for comparability with IFRS companies).
• Net assets as of the quarter-end have been used (there is a timing difference relative to the full-year forecast).
• As net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model (Ohlson-type; explicit 5-year fade) / Interest rate reference month: 2026-07 / This is a mechanically calculated value based solely on publicly disclosed data. It is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting with professionals as necessary.

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