YAMADA Consulting Group Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥13.37B
• Operating Income: ¥2.09B
• Net Income: ¥2.01B
• EPS: ¥74.07

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Yamada Consulting Group (consolidated, JGAAP) delivered FY2026 Q2 revenue of ¥13,367m, up 7.6% YoY, indicating resilient topline growth across its consulting franchises. Despite a robust gross margin of 76.5% (gross profit ¥10,224.9m), operating income declined 27.8% YoY to ¥2,090m, pointing to significant SG&A cost inflation or mix-related pressure that outweighed revenue growth. Ordinary income was ¥2,037m and net income ¥1,415m, implying a net margin of 10.6%, down from the prior year given the operating compression. DuPont analysis shows ROE of 7.33%, driven by a 10.59% net margin, asset turnover of 0.526x, and modest financial leverage of 1.32x; the main drag is lower operating margin rather than balance sheet leverage. Liquidity remains very strong with a current ratio of 422% and quick ratio of 392%, supported by current assets of ¥20,148.5m against current liabilities of ¥4,774.3m. The company has conservative solvency metrics: total liabilities of ¥4,890.5m versus equity of ¥19,299m (debt-to-equity ~0.25x) and an interest coverage of ~288x, indicating minimal refinancing risk. Operating cash flow was negative at -¥406.8m, contrasting with positive net income, suggesting working capital consumption or timing effects in receivables and project advances typical in consulting. Free cash flow was reported as 0 in the summary, which likely reflects unreported capex/investing cash flows rather than true zero; thus FCF cannot be reliably assessed this quarter. Effective tax rate is shown as 0.0% in the summary table, but with reported income tax expense of ¥813.3m and net income of ¥1,415m, the tax burden appears meaningful; the 0.0% should be treated as unavailable. Similarly, equity ratio, cash and equivalents, investing cash flows, shares outstanding, and DPS reported as 0 should be treated as undisclosed, not literal zeros. Overall profitability remains positive with high gross margin and solid ordinary income, but operating deleveraging and negative OCF temper the quality of earnings in the quarter. The balance sheet provides ample flexibility to navigate near-term cash flow volatility and to continue investing in talent and capabilities. Revenue growth durability appears intact, yet cost discipline and project delivery efficiency will be key to restore margin trajectory in 2H. Given limited disclosure on cash and investing activity this quarter, conclusions on FCF and dividend capacity should remain cautious. We focus on normalization of working capital, SG&A run-rate, and utilization in the second half to gauge earnings quality. Despite the pullback in operating profit, risk from leverage is low, with strong coverage and modest liabilities.

Profitability Analysis

ROE of 7.33% decomposes into: net margin 10.59% × asset turnover 0.526 × financial leverage 1.32. The margin component is the primary swing factor, given operating income fell 27.8% YoY to ¥2,090m (operating margin ~15.6%) despite +7.6% revenue growth. Gross margin is a very strong 76.5%, indicating pricing power and a knowledge-intensive mix, but SG&A intensity rose, compressing operating margin. Ordinary income (¥2,037m) remained close to operating income due to minimal financing costs (interest expense ¥7.3m), reinforcing that margin pressure is operating, not financial. EBITDA of ¥2,178.8m (16.3% margin) suggests modest D&A (¥88.8m) and a largely people-driven cost base; incremental revenue should drop through meaningfully when utilization and pricing improve. Operating leverage turned adverse this quarter, with higher personnel, delivery costs, or growth investments outpacing revenue. To restore ROE, management must improve operating efficiency (utilization, pricing, pyramid mix) and stabilize SG&A growth relative to sales.

Growth Assessment

Topline expanded 7.6% YoY to ¥13,367m, signaling continued demand for consulting and advisory services. However, profit growth lagged, with operating income down 27.8% YoY, implying revenue growth is currently less profitable (mix shift, ramp-up costs, or pricing discounts). Net income of ¥1,415m resulted in a 10.6% margin, which remains healthy but below prior-year levels, indicating near-term margin headwinds. The high gross margin (76.5%) supports a medium-term outlook for recovery once cost run-rates normalize and utilization improves. Negative operating cash flow suggests working capital absorption—potentially from receivable build tied to 1H bookings—consistent with growth but affecting cash conversion. With minimal leverage and strong liquidity, the company can sustain growth investments while addressing cost efficiency. Outlook hinges on 2H delivery: conversion of backlog, fee rate discipline, and containment of SG&A will determine whether operating margins re-expand.

Financial Health

Total assets are ¥25,425m, with current assets of ¥20,148.5m substantially exceeding current liabilities of ¥4,774.3m, yielding a current ratio of 422% and quick ratio of 392%, both very strong. Total liabilities of ¥4,890.5m against equity of ¥19,299m imply a debt-to-equity ratio of ~0.25x, indicating a conservative balance sheet. Interest expense is low at ¥7.3m, and interest coverage is robust at ~288x (operating income/interest), reflecting negligible financial risk. Working capital stands at ¥15,374.1m, providing ample liquidity headroom. Equity ratio is shown as 0.0% in the summary but should be treated as undisclosed; based on totals, the implied equity-to-asset ratio is roughly 76% (¥19,299m/¥25,425m). Overall solvency is strong, and the company is well-positioned to weather temporary cash conversion volatility.

Cash Flow Quality

Operating cash flow was -¥406.8m versus net income of ¥1,415m, resulting in an OCF/NI ratio of -0.29, indicating weak cash conversion in the period. Given the consulting model, this likely reflects working capital outflows—receivables growth and reduced advances—rather than earnings deterioration. D&A of ¥88.8m is small, suggesting limited non-cash support to earnings; earnings quality will hinge on collection of trade receivables and billing discipline. Investing cash flow is reported as 0, which should be interpreted as undisclosed; thus free cash flow cannot be reliably computed (the reported FCF of 0 should be treated as not available). Financing cash flow of ¥190.6m suggests modest net inflow, possibly from lease/short-term debt or minor equity-related movements, but details are not disclosed. Key to normalization will be working capital release in 2H and visibility on capex or investment spending.

Dividend Sustainability

Annual DPS and payout ratio are shown as 0.00%/0.0%, which should be treated as undisclosed for this period. Without reliable FCF (investing cash flows not disclosed) and without shares outstanding data, we cannot compute a credible payout ratio or FCF coverage. From a capacity perspective, the company has low leverage, strong liquidity, and positive earnings; however, negative OCF in 1H argues for prudence until working capital normalizes. Dividend sustainability will depend on cash generation in 2H, collection of receivables, and maintenance of operating margin. Policy outlook cannot be inferred from the provided data; monitor management guidance and past distribution practices when available.

Risk Assessment

Business Risks:

• Margin compression from higher personnel costs, subcontracting, or ramp costs amid growth investments
• Utilization risk and project delivery slippage affecting operating leverage
• Pricing pressure and mix shift to lower-margin mandates
• Cyclical demand in consulting tied to corporate restructuring and investment cycles
• Client concentration risk if large projects comprise a significant revenue share

Financial Risks:

• Weak cash conversion with negative OCF driven by working capital outflows
• Receivables collection and DSO elongation risk in a consulting-heavy model
• Limited disclosure on cash and investing flows reduces visibility on FCF
• Potential increase in variable financing needs if OCF remains negative, despite low leverage

Key Concerns:

• Operating income down 27.8% YoY despite 7.6% revenue growth, indicating adverse operating leverage
• OCF/Net income ratio of -0.29, highlighting near-term cash quality issues
• Unreported items (cash balance, investing CF, DPS, equity ratio, shares) constrain assessment of FCF and capital return capacity

Investment Implications

Key Takeaways:

• Topline growth remains healthy at +7.6% YoY, but profitability declined with operating margin compression
• ROE of 7.33% reflects solid margins and low leverage; improvement hinges on operating margin recovery
• Liquidity and solvency are strong, limiting balance sheet risk amid cash conversion volatility
• Negative OCF suggests working capital absorption; 2H collections are critical for cash normalization
• Limited disclosure on cash, investing, and dividends constrains assessment of FCF and payout capacity

Metrics to Watch:

• Operating margin trajectory and SG&A ratio in 2H
• DSO/receivables and working capital movements; OCF to net income conversion
• Utilization rates, fee rates, and subcontracting ratio (if disclosed)
• Order backlog/bookings and project pipeline mix
• Headcount growth versus revenue growth to gauge productivity

Relative Positioning: Within Japan’s listed consulting and advisory peers, YCG shows strong gross margins and conservative leverage, but its 1H margin compression and negative OCF place it behind best-in-class peers on near-term earnings quality; balance sheet strength provides resilience to regain ground if execution improves in the second half.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis