| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥93.4B | ¥81.8B | +14.2% |
| Operating Income / Operating Profit | ¥36.9B | ¥27.9B | +32.2% |
| Ordinary Income | ¥36.8B | ¥27.4B | +34.6% |
| Net Income / Net Profit | ¥25.2B | ¥18.5B | +36.2% |
| ROE | 15.7% | 12.5% | - |
For the cumulative Q2 of FY2026 ending March 2026, the company achieved revenue of ¥93.4B (YoY +¥11.6B, +14.2%), Operating Income of ¥36.9B (YoY +¥9.0B, +32.2%), Ordinary Income of ¥36.8B (YoY +¥9.5B, +34.6%), and Net Income attributable to owners of the parent of ¥25.2B (YoY +¥6.7B, +36.2%), representing growth in both top-line and bottom-line. Operating margin improved to 39.5%, up 5.4pt from 34.1% in the prior-year period, and profitability rose significantly as income growth outpaced revenue growth. The core HR Solution segment led high-growth and high-profitability with Revenue of ¥74.99B (YoY +20.4%) and Segment Profit of ¥36.93B (YoY +45.3%), contributing to an overall margin uplift. ROE stood at 15.7%, supported by a substantial improvement in Net Profit Margin to 27.0%, Total Asset Turnover of 0.47x, and Financial Leverage of 1.23x. Progress toward the full-year guidance is within normal range at 47.9% for revenue and 49.2% for operating income, indicating a high likelihood of meeting the full-year targets.
[Revenue] Revenue of ¥93.4B (YoY +14.2%) was mainly driven by expansion in HR Solutions. By segment, HR Solutions generated ¥74.99B (prior year ¥62.29B, +20.4%), maintaining double-digit growth and accounting for 80.3% of consolidated revenue as the primary business. Services delivered over a fixed period (subscription-type) amounted to ¥82.99B (prior year ¥73.77B, +12.5%), representing 88.8% of the total and indicating a solid stock revenue base. Marketing Solutions declined to ¥18.43B (prior year ¥19.50B, -5.4%), acting as a drag on overall growth. Gross margin remained high at 70.8% (prior year 72.5%), yielding Gross Profit of ¥66.1B against Cost of Sales of ¥27.3B.
[Profitability] Subtracting SG&A of ¥29.2B from Gross Profit of ¥66.1B resulted in Operating Income of ¥36.9B (prior year ¥27.9B, +32.2%). SG&A ratio fell to 31.3% from 38.4% a year earlier (down 7.1pt), demonstrating operating leverage as SG&A increases were contained relative to revenue growth. By segment, HR Solutions’ margin improved substantially to approximately 49.3% (prior year 40.8%, +8.5pt), while Marketing Solutions’ margin deteriorated to approximately 39.3% (prior year 45.2%, -5.9pt). Consolidated operating margin after corporate allocations was 39.5%, up 5.4pt from 34.1% a year earlier, driven by HR’s higher margins and scale benefits. Non-operating items were minor, with Non-operating Income of ¥0.2B (including interest income ¥0.1B) and Non-operating Expenses of ¥0.3B, producing a net -¥0.1B; Ordinary Income of ¥36.8B was therefore roughly in line with Operating Income. After deducting Corporate Income Taxes of ¥11.6B (effective tax rate 31.4%), Net Income attributable to owners of the parent was ¥25.2B (Net Margin 27.0%, up 4.4pt from 22.6%). Overall, the company achieved revenue and profit growth.
The HR Solution segment delivered Revenue of ¥74.99B (prior year ¥62.29B, +20.4%) and Segment Profit of ¥36.93B (prior year ¥25.42B, +45.3%), achieving high growth and high profitability; segment margin improved significantly to 49.3% (prior year 40.8%, +8.5pt). Subscription-type services accounted for ¥65.14B within the segment, underscoring strengthening of the stock revenue model. The Marketing Solution segment recorded Revenue of ¥18.43B (prior year ¥19.50B, -5.4%) and Segment Profit of ¥7.24B (prior year ¥8.81B, -17.9%), resulting in decreased revenue and profit and a margin decline to 39.3% (prior year 45.2%, -5.9pt). Corporate allocation (unallocated general administrative expenses) totaled ¥7.25B (prior year ¥6.30B), producing consolidated Operating Income of ¥36.9B. HR Solutions’ high-margin profile contributed to raising consolidated margins, while the profitability deterioration in Marketing Solutions is an emerging issue.
[Profitability] Operating margin at 39.5% improved 5.4pt from 34.1% a year earlier, achieved through maintaining a high Gross Margin of 70.8% (prior year 72.5%) and a significant reduction in SG&A ratio to 31.3% (prior year 38.4%). Net margin was 27.0% (prior year 22.6%, +4.4pt), and ROE was a strong 15.7%. ROE decomposition shows Net Profit Margin 27.0% × Total Asset Turnover 0.47x × Financial Leverage 1.23x, with the improvement in Net Profit Margin as the primary driver. EBITDA margin was 40.5% (EBITDA ¥37.85B, Depreciation ¥0.93B), indicating a capital-efficient business model. [Cash Quality] Operating Cash Flow (OCF) was ¥22.3B, representing 0.89x of Net Income ¥25.2B, which is generally favorable; however, OCF/EBITDA was 0.59x (low), with Accounts Receivable increase of ¥3.5B and Corporate Tax payments of ¥12.1B delaying cash conversion. Accrual ratio was 1.4% (low), suggesting healthy cash backing of earnings over the medium to long term. DSO was 84 days (relatively long), indicating room for working capital efficiency improvement. [Investment Efficiency] CapEx was ¥0.3B, 0.32x of Depreciation ¥0.93B, indicating a capital recovery phase. Total Asset Turnover of 0.47x is low, driven by total asset expansion from high cash holdings. Goodwill and Intangible Asset ratios to total assets are low at 1.6% and 3.8% respectively, limiting impairment risk. [Financial Soundness] Equity Ratio was 81.2% and Debt-to-Equity (debt-equity multiple) was 0.23x, reflecting a very conservative capital structure; Current Ratio was 501% and Cash & Deposits were ¥154.6B, indicating virtually no short-term liquidity risk. Interest-bearing debt is effectively zero, and Interest Coverage is extremely high.
Operating Cash Flow was ¥22.3B (YoY +17.6%). It was calculated from Pre-tax Income ¥36.8B after Corporate Tax payments of ¥12.1B, Accounts Receivable increase of ¥3.5B, Contract Liability decrease of ¥0.1B, and other working capital movements. Operating cash flow subtotal before working capital movements was ¥33.4B, with non-cash items such as Depreciation ¥0.9B, Goodwill Amortization ¥0.4B, and Provision Additions ¥0.2B added back. Investing Cash Flow was -¥1.9B, driven by CapEx ¥0.3B, Intangible Asset acquisitions ¥0.1B, and Investment Securities purchases ¥1.5B, partially offset by proceeds from fixed asset sales of ¥0.01B. Free Cash Flow was ¥20.4B (Operating CF ¥22.3B + Investing CF -¥1.9B), representing a conversion ratio of 55.3% relative to Operating Income ¥36.9B. Financing Cash Flow was -¥12.5B, reflecting dividend payments of ¥12.2B and share repurchases of ¥30.6B, partially offset by ¥18.9B proceeds from treasury stock disposal, resulting in a net large outflow. Cash & Deposits increased from ¥146.6B at the beginning of the period to ¥154.6B at the end, a rise of ¥8.0B, maintaining abundant liquidity. On working capital, the increase in Accounts Receivable accompanied revenue growth, but the longer collection period (DSO 84 days) will require monitoring.
Overall quality of earnings is high, with recurring core business income accounting for the majority of profits. Non-operating Income ¥0.2B (0.2% of Revenue) and Non-operating Expenses ¥0.3B are minor; apart from Interest Income ¥0.1B, there are no material one-off items. The gap between Ordinary Income ¥36.8B and Net Income ¥25.2B is mainly due to Corporate Income Taxes of ¥11.6B (effective tax rate 31.4%), and the impact of extraordinary items is limited. Comprehensive Income was ¥25.3B (¥0.1B difference vs Net Income ¥25.2B), with Unrealized Gains on Securities of ¥0.01B having a minimal effect, effectively aligning Comprehensive Income with Net Income. In accrual analysis, Operating CF ¥22.3B is 0.89x of Net Income ¥25.2B, generally favorable; Accounts Receivable increase ¥3.5B and Corporate Tax payments ¥12.1B caused timing differences in cash conversion, but cash backing of earnings is healthy over the medium term. Goodwill amortization ¥0.4B is about 1% of EBITDA ¥37.85B and therefore immaterial, limiting distortion versus IFRS peers. The low Operating CF/EBITDA ratio of 0.59x is attributed to working capital movements and timing of tax payments, and does not necessarily indicate a structural decline in earnings quality.
Full-year guidance is maintained at Revenue ¥195.0B (YoY +14.1%), Operating Income ¥75.0B (YoY +17.6%), Ordinary Income ¥75.0B (YoY +18.7%), Net Income attributable to owners of the parent ¥52.0B, and EPS ¥122.73. Progress at the Q2 cumulative point is Revenue 47.9% (¥93.4B/¥195.0B), Operating Income 49.2% (¥36.9B/¥75.0B), and Net Income 48.4% (¥25.2B/¥52.0B), all near the standard 50% run-rate. Given continued high margins in core HR Solutions and stability of subscription revenues, the probability of achieving full-year guidance is high. Declines in Marketing Solutions apply downward pressure, but at the consolidated level are expected to be absorbed by improvements in the profit mix. The dividend forecast was revised upward to DPS ¥50, and a change in dividend policy was announced (raising the payout ratio target and introducing a new DOE metric).
No dividends were paid during the Q2 cumulative period; full-year dividend forecast is DPS ¥50 (YoY not disclosed), implying a payout ratio of approximately 40.8% against forecast EPS ¥122.73. The change in dividend policy raises the payout ratio target and introduces the DOE (Dividend on Equity) metric, strengthening the downward rigidity of shareholder returns. The company executed share buybacks of ¥30.6B in Financing Cash Flow, a return substantially exceeding Free Cash Flow ¥20.4B during the same period. Combined with dividend payments of ¥12.2B, total shareholder returns amounted to approximately ¥42.8B, representing a Total Return Ratio of about 170% relative to Net Income attributable to owners of the parent ¥25.2B, indicating cash-intensive returns. With ample Cash & Deposits of ¥154.6B, the company is clearly pursuing aggressive shareholder returns. Going forward, under the new dividend policy, stable and sustainable dividends are expected from both profit growth and improved ROE.
Concentration risk in the core business: The HR Solution segment accounts for 80.3% of consolidated revenue and 83.6% of segment profit (before corporate allocations), creating high dependence. Slower growth or intensified competition in this segment would directly affect consolidated performance. If the decline in Marketing Solutions persists, portfolio diversification benefits are limited and earnings stability may deteriorate.
Working capital efficiency risk: Accounts Receivable increased by +19.3% YoY, and DSO is 84 days, indicating prolonged collection cycles. While the Accounts Receivable increase related to revenue growth is within a normal range, continued collection delays could make low OCF/EBITDA persistent, reducing cash generation capacity and increasing realized credit costs. Work-in-process of ¥13 million suggests further room for working capital efficiency improvements.
Risk of continued low investment level: CapEx ¥0.3B is 0.32x of Depreciation ¥0.93B, indicating a capital recovery phase that supports short-term cash generation but risks underinvestment in medium- to long-term growth (R&D, infrastructure, M&A), potentially impairing the ability to maintain or enhance competitive advantage. In the IT/SaaS sector, rapid technological obsolescence necessitates ongoing product updates and human capital investment.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 39.5% | 14.0% (3.8%–18.5%) | +25.6pt |
| Net Margin | 27.0% | 9.2% (1.1%–14.0%) | +17.8pt |
The company’s Operating Margin 39.5% and Net Margin 27.0% substantially exceed industry medians, placing it among the top-tier profitability in the IT & Telecom sector.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 14.2% | 21.0% (15.5%–26.8%) | -6.8pt |
The company’s Revenue Growth of 14.2% is below the industry median of 21.0%, positioning it from median to somewhat below peers in growth within the IT & Telecom sector.
※Source: Company compilation
The core HR Solution’s maintenance of high growth and high profitability, driving consolidated Operating Margin of 39.5% and ROE of 15.7%, demonstrates a strong earnings base. The subscription-type revenues, comprising 88.8% of total, enhance predictability and stability of earnings. Progress toward full-year guidance is near 50%, supporting high confidence in achieving full-year targets.
Conversely, DSO of 84 days and OCF/EBITDA of 0.59x indicate lower cash conversion efficiency, and suppressed CapEx (CapEx/Depreciation 0.32x) supports short-term cash generation but flags potential underinvestment for medium- to long-term growth. Continued decline in Marketing Solutions’ revenue and profit also warrants monitoring from a portfolio diversification perspective.
Financial position is extremely healthy with Equity Ratio 81.2% and Cash ¥154.6B, allowing aggressive shareholder returns (Total Return Ratio ~170%) while maintaining financial flexibility. The change in dividend policy increases downward rigidity of payouts, bolstering expectations for stable dividends, but balancing growth investments and shareholder returns will be key to capital efficiency and long-term value creation.
This report is an earnings analysis document automatically generated by AI analyzing XBRL financial disclosure data. It does not recommend investment in any specific security. Industry benchmarks are reference information compiled by the company based on public financial disclosures. Investment decisions are your own responsibility; consult a professional adviser as necessary.