RAKSUL (4384) FY2026 Q2 Earnings Report

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Executive Summary

Operating income growth remained below the rate of revenue growth despite increases in both revenue and profit, resulting in a slight decline in profitability. Revenue was ¥357.5B (+20.2% YoY), operating income was ¥21.5B (+13.3%), ordinary income was ¥20.5B (+19.7%), and net income was ¥21.6B (+21.2%). While revenue growth was driven by the core Procurement Platform, SG&A expenses increased faster than revenue and slightly pressured the operating margin. Meanwhile, extraordinary income (gain on sale of shares in a subsidiary and gain on bargain purchase) boosted net income.

Factors Affecting Financial Performance

【Revenue】Revenue of ¥357.5B increased +20.2% YoY. By segment, the Procurement Platform accounted for the majority at ¥328.9B (92.0% of total revenue, +19.1% YoY), with the Packaging Materials domain expanding +33.4%, the Business Supplies-related domain +17.3%, and the Printing and Solutions domain +14.9%. The Marketing Platform achieved strong growth, with revenue of ¥26.9B (+40.1% YoY).

【Profit and Loss】Operating income was ¥21.5B (+13.3% YoY), and the operating margin declined to 6.0% from 6.4% in the previous year. SG&A expenses increased +22.6% YoY to ¥103.1B, exceeding the revenue growth rate and becoming the primary factor pressuring the profit margin. Ordinary income of ¥20.5B (+19.7% YoY) exceeded operating income growth, supported by non-operating income including a foreign exchange gain of ¥0.4B. Net income of ¥21.6B (+21.2% YoY) was boosted by the net recognition of extraordinary income of ¥9.4B, including a ¥0.7B gain on bargain purchase and a ¥6.9B gain on the sale of shares in a subsidiary, and extraordinary losses of ¥0.8B related to litigation settlement payments. In conclusion, the Company achieved increases in both revenue and profit, but the operating-stage profit margin narrowed YoY, and part of net income growth was dependent on non-recurring items.

Segment Analysis

The Procurement Platform continued to deliver increases in both revenue and profit, with revenue of ¥328.9B (+19.1% YoY), segment profit of ¥41.5B (+19.0%), and a profit margin of 12.6%, making it the earnings pillar. The Marketing Platform generated revenue of ¥26.9B (+40.1% YoY) and turned profitable, with segment profit of ¥0.03B compared with a loss of ¥0.6B in the previous year. However, its profit margin remained at 0.1%, indicating that monetization is still in progress. Company-wide expenses increased to ¥18.8B from ¥15.1B in the previous year, compressing the growth in aggregate segment profit to the growth rate of consolidated operating income.

Key Financial Indicators

【Profitability】The operating margin declined to 6.0% from 6.4% in the previous year, primarily due to the increase in the SG&A ratio to 28.8% against a gross margin of 34.9%. The net profit margin was 6.0%, a level that includes extraordinary income.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥17.8B, equivalent to only 0.82x net income of ¥21.6B. Increases of ¥2.4B in trade receivables and ¥1.4B in inventories restrained cash generation.【Investment Efficiency】Annualized ROE of 21.4% was at a high level, but it is important to note that this includes the effects of financial leverage and extraordinary income. Net assets were ¥202.1B against total assets of ¥475.9B; asset efficiency can be assessed through total asset turnover.【Financial Soundness】The equity ratio was 42.5%, improving from 36.0% in the previous year (159.8/443.0). Interest-bearing debt included ¥79.2B in long-term borrowings, ¥13.2B in bonds, and short-term borrowings and other items. Cash of ¥140.1B exceeded current liabilities, indicating stable short-term liquidity.

Cash Flow Analysis

OCF increased +9.2% YoY to ¥17.8B, but remained below the +21.2% growth rate in net income of ¥21.6B, resulting in OCF/net income of only 0.82x. The ¥2.4B increase in trade receivables, the ¥1.4B increase in inventories, and ¥9.4B in corporate income tax payments restrained OCF. Investing CF represented a net outflow of ¥40.5B, primarily due to M&A-related investments, including ¥7.5B for business acquisitions and ¥6.4B for the acquisition of shares in subsidiaries. Capital expenditures were ¥6.9B, while depreciation and amortization was ¥4.5B, indicating that investment exceeded depreciation and amortization. Free cash flow, calculated as the sum of OCF and investing CF, was negative ¥22.8B. After partially covering this shortfall with ¥7.6B in financing CF, including borrowings, cash and deposits declined from ¥155.6B in the previous year to ¥140.1B. Capital allocation remains investment-led, making the recovery of investments and improvement in OCF key focuses for cash management going forward.

Quality of Earnings

While ordinary income, which indicates recurring earnings power, was ¥20.5B (+19.7% YoY), net income of ¥21.6B included extraordinary income of ¥9.4B (a ¥6.9B gain on the sale of shares in a subsidiary and a ¥0.7B gain on bargain purchase) and extraordinary losses of ¥0.8B (litigation settlement payments), resulting in a net positive impact of ¥8.6B on net income. Excluding this difference, recurring profit growth was close to the growth rates of operating income and ordinary income. Accordingly, caution is warranted in treating the +21.2% net income growth rate as a sustainable earnings trend without adjustment. Non-operating income was ¥0.9B, mainly consisting of a ¥0.4B foreign exchange gain, while non-operating expenses were ¥2.0B, mainly consisting of ¥0.8B in interest expenses; non-operating items were primarily recurring in nature. OCF at 0.82x net income is a standard level for a period of revenue growth accompanied by an increase in working capital, but the pace of earnings conversion into cash warrants monitoring.

Earnings Forecasts and Guidance

No revisions were disclosed to either the earnings forecast or dividend forecast during the current quarter, and management has maintained its initial full-year plan.

Shareholder Returns

The annual dividend forecast is ¥0 per share, and dividends for both Q1 and Q2 were also ¥0. The payout ratio was 0%. No share repurchases were conducted during the interim period, resulting in a total return ratio of 0%. Under the no-dividend policy, retained earnings accumulated to ¥82.5B (+31.8% YoY), indicating that the Company is strengthening its financial base through retained earnings and allocating funds to growth investments.

Risk Factors

1. Declining profitability in the core business: The Procurement Platform, which accounts for 92.0% of the revenue mix, achieved increases in both revenue and profit, but the consolidated operating margin declined by approximately 0.4pt YoY to 6.0%. SG&A expenses increased 22.6%, exceeding the 20.2% revenue growth rate, and the increase in expenses is pressuring the profit margin.

2. Impairment risk related to M&A and goodwill: Goodwill of ¥66.1B represents 32.7% of net assets of ¥202.1B. The Company also carried out a ¥7.5B business acquisition and a ¥6.4B acquisition of shares in a subsidiary during the current period; depending on the monetization of the acquired businesses, this could lead to future reassessments of their value.

3. Declining cash conversion efficiency: OCF remained at 0.82x net income, with increases in trade receivables and inventories restraining cash generation. Due to the net outflow in investing CF, free cash flow was negative ¥22.8B, making the pace of cash recovery a key focus going forward.

Industry Benchmark (For Reference; Company Analysis)

Industry Benchmark (it_telecom)

Profitability and Returns

The Company’s profitability is significantly below the industry median, placing it in the low-profitability segment within the IT and telecommunications industry.

Growth and Capital Efficiency

The revenue growth rate is close to the industry median, placing the Company in the middle tier of the industry in terms of growth.

※Source: Company analysis

Key Takeaways from the Financial Results

1. Revenue continued to achieve double-digit growth of +20.2% YoY, while the profitability of the Marketing Platform in addition to the core Procurement Platform demonstrates the increasing depth of the business portfolio.

2. The operating margin declined from the previous year, and SG&A expense growth exceeded revenue growth. This warrants attention as an indicator of expense control during a period of revenue expansion.

3. Extraordinary income, including the gain on the sale of shares in a subsidiary and the gain on bargain purchase, contributed to net income growth. For evaluating recurring earnings power, it is therefore useful to examine performance based on ordinary income.

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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 available earnings data. Investment decisions should be made at your own responsibility, after consulting with a professional advisor as necessary.

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