MEDLEY,INC. FY2026 Q2 Earnings Report

Quick View

Executive Summary

Driven by highly profitable growth in its core RecruitmentPlatform Business, the company delivered strong results in which profit growth significantly outpaced revenue growth. Revenue was ¥226.8B (¥184.7B in the previous year, +22.8%), Operating Income was ¥24.5B (¥14.6B in the previous year, +67.4%), Ordinary Income was ¥28.0B (¥15.8B in the previous year, +77.6%), and Net Income was ¥15.0B (¥6.5B in the previous year, +131.4%). The fact that the increase in profit significantly exceeded the increase in revenue was attributable to operating leverage resulting from margin improvement in the core business and company-wide SG&A expense controls.

Factors Affecting Performance

【Revenue】Revenue was ¥226.8B, up +22.8% year on year. By segment, RecruitmentPlatform generated ¥166.8B (+24.4%), accounting for 73.5% of the revenue mix and leading growth. MedicalPlatform grew to ¥54.9B (+22.8%), while NewBusinessDevelopmentServices declined to ¥5.1B (-12.9%).

【Profit and Loss】Operating Income was ¥24.5B (+67.4%), and the Operating Income margin improved to 10.8% from 7.9% in the previous year. RecruitmentPlatform’s Operating Income was ¥62.2B (+29.3%), with a highly profitable margin of 37.3%, driving company-wide profit. In contrast, MedicalPlatform posted an Operating Loss of ¥4.8B, widening from a loss of ¥0.5B in the previous year, while NewBusinessDevelopmentServices also posted a loss of ¥3.9B; loss-making businesses are diluting the company-wide margin. Ordinary Income was ¥28.0B (+77.6%), with non-operating income of ¥5.2B and non-operating expenses of ¥1.7B, resulting in a limited impact on Net Income. Net Income increased significantly to ¥15.0B (+131.4%), but the recognition of ¥12.6B in corporate income taxes resulted in a high effective tax rate of approximately 45.6%, with the tax burden suppressing Net Income growth to some extent. The results featured both revenue and profit growth, with the increase in profit significantly exceeding the increase in revenue.

Segment Analysis

The segment composition consists of three businesses: RecruitmentPlatform, MedicalPlatform, and NewBusinessDevelopmentServices. RecruitmentPlatform generated revenue of ¥166.8B (+24.4%) and Operating Income of ¥62.2B (+29.3%), with a margin of 37.3%, making it the primary source of company-wide profit. MedicalPlatform continued to grow, with revenue of ¥54.9B (+22.8%), but its Operating Loss widened to ¥4.8B from a loss of ¥0.5B in the previous year, indicating that it remains in an investment-for-growth phase. NewBusinessDevelopmentServices recorded revenue of ¥5.1B (-12.9%) and an Operating Loss of ¥3.9B, resulting in the lowest profitability, with a margin of -75.0%. Against company-wide Operating Income of ¥24.5B, the total for reportable segments was ¥53.5B, while adjustments, including company-wide common expenses, amounted to a negative ¥29.0B, indicating a structure in which the burden of common expenses puts pressure on company-wide profit.

Key Financial Indicators

【Profitability】The Operating Income margin improved significantly to 10.8% from approximately 7.9% in the previous year, while the Net Income margin improved to 6.6% from approximately 3.5%; the gross margin was maintained at 60.9%. 【Cash Flow Quality】Operating Cash Flow (OCF) was ¥33.3B, approximately 2.2 times Net Income of ¥15.0B, demonstrating strong cash backing for earnings. Cash generation capacity also remained stable after taking into account depreciation and amortization of ¥5.5B. 【Investment Efficiency】ROE was 10.0%, while capital expenditures were limited to ¥0.5B, indicating that profitability was secured while keeping the investment burden low. 【Financial Soundness】The Equity Ratio was 33.0%. The company had long-term borrowings of ¥140.5B, while intangible fixed assets of ¥226.5B, including goodwill of ¥124.9B, accounted for 49.9% of total assets of ¥453.8B, making the high concentration of intangible assets a notable feature of its financial structure.

Cash Flow Analysis

Operating Cash Flow (OCF) increased significantly by +72.4% year on year to ¥33.3B, generating approximately 2.2 times the cash represented by Net Income of ¥15.0B, indicating good earnings quality. Investing Cash Flow was negative ¥7.6B, primarily due to the acquisition of investment securities and other items in addition to capital expenditures of ¥0.5B, although the overall scale was limited. As a result, Free Cash Flow was positive at ¥25.6B, a level sufficient to fund growth investments and shareholder returns through internal funds. Financing Cash Flow was positive at ¥9.0B, as proceeds from long-term borrowings exceeded the ¥17.1B share buyback conducted during the period. Cash and deposits increased substantially from the end of the previous fiscal year to ¥120.4B, strengthening the company’s funding base.

Earnings Quality

Most profit was generated from recurring business activities, and the impact of extraordinary gains and losses was extremely limited (extraordinary income of ¥0.0B and extraordinary losses of ¥0.5B). Non-operating income was ¥5.2B, or 2.3% of revenue, representing a small component; the gap between Ordinary Income and Operating Income was mainly attributable to this non-operating balance. Against Ordinary Income of ¥28.0B, Net Income was limited to ¥15.0B, with the gap primarily attributable to the ¥12.6B corporate income tax burden, equivalent to an effective tax rate of approximately 45.6%. Operating Cash Flow (OCF) of ¥33.3B substantially exceeded Net Income, indicating that accruals—the difference between accounting profit and cash—were negative, i.e., earnings were supported by cash, and earnings quality can be assessed as high. However, the company has a structure in which amortization expenses for goodwill and other intangible assets continue; therefore, it should be noted that JGAAP Net Income is somewhat restrained relative to cash generation capacity.

Earnings Forecast and Guidance

Progress against the full-year forecast was approximately standard for Revenue at 48.9% (¥226.8B out of ¥464.0B), while Operating Income was significantly ahead at 82.9% (¥24.5B out of ¥29.5B), and Ordinary Income was also significantly ahead at 86.2% (¥28.0B out of ¥32.5B). This lead in profit progress suggests that highly profitable growth in the core business and SG&A expense controls exceeded plan. No revision was made to the earnings forecast during the quarter, although the dividend forecast was revised. The full-year outcome may vary depending on whether investments are brought forward in the second half.

Shareholder Returns

The dividend paid for the first half was zero, but the full-year dividend forecast is ¥18.00 per share, and the dividend forecast was revised during the quarter. Based on the full-year Net Income forecast of ¥18.0B, the Payout Ratio is approximately 30%, calculated from total dividends based on the number of shares outstanding after deducting treasury shares. Meanwhile, the company conducted share buybacks of ¥17.1B during the first half, and total shareholder returns, including dividends and share buybacks, were within the first-half Free Cash Flow of ¥25.6B. Because the ratio based solely on dividends differs from the Total Return Ratio including share buybacks, the two should be evaluated separately.

Risk Factors

1. Business Portfolio Concentration: RecruitmentPlatform accounts for 73.5% of revenue (¥166.8B/¥226.8B) and generates the majority of segment profit. Demand fluctuations in this business are therefore likely to have a direct impact on company-wide performance.

2. Intangible Asset Concentration and Goodwill Risk: Intangible fixed assets of ¥226.5B account for 49.9% of total assets of ¥453.8B, while goodwill of ¥124.9B represents 83.5% of net assets of ¥149.6B. If concerns arise regarding the recoverability of goodwill in the future, the impact on equity could be substantial.

3. High Effective Tax Rate and Continued Segment Losses: The effective tax rate is high at approximately 45.6% and is therefore likely to be a factor affecting EPS volatility. In addition, losses at MedicalPlatform (Operating Loss of ¥4.8B) and NewBusinessDevelopmentServices (Operating Loss of ¥3.9B) continue, diluting the company-wide margin.

Industry Benchmark (Reference; Compiled by the Company)

Profitability and Returns

Compared with the industry median, both the Operating Income margin and Net Income margin are below the mid-range within the industry.

Growth and Capital Efficiency

The Revenue growth rate is broadly in line with the industry median, placing the company’s growth pace at a standard level within the industry.

※Source: Compiled by the Company

Key Points from the Financial Results

1. The emergence of operating leverage through higher profitability in the core business has been confirmed. RecruitmentPlatform’s Operating Income margin of 37.3% significantly exceeds the company-wide margin of 10.8%, and the financial results indicate a high degree of dependence on the core business in the earnings structure.

2. The fact that profit progress significantly exceeds revenue progress against the full-year plan will be an important point to monitor when assessing the expense recognition pattern and the status of any investment acceleration in the second half.

3. Goodwill and intangible assets account for approximately half of total assets and more than approximately 80% of net assets, indicating the significant impact that future goodwill valuation trends associated with business combinations and changes in the business environment could have on financial indicators.

Theoretical Share Price (Reference Value)

Sensitivity: ¥673–¥713 at ±1% for the Cost of Equity, and ¥687–¥700 at ±0.1 for ω.

Notes:

• Goodwill amortization of ¥47.0 per share is added back to profit (to reflect a non-cash expense and comparability with IFRS companies).
• Because Net Income progress against the full-year forecast (83%) exceeds the standard level (50%), forecast EPS is adjusted upward within a maximum range of +10% (because companies ahead of schedule tend to exceed forecasts; the adjustment may be excessive for businesses with strong seasonality).
• The goodwill-to-net-assets ratio is high, and the assumptions would change substantially if impairment were recognized.
• Net assets as of the quarter-end are used (there is a timing difference from the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated at a somewhat high level.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest Rate Reference Month: 2026-07 / 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 forecast or guarantee future share prices)

---

This report is an earnings analysis document automatically generated by AI through analysis of 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. You should make investment decisions at your own responsibility and, where necessary, consult a professional.

---End of Report---