| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥245.6B | ¥166.2B | +47.7% |
| Operating Income / Operating Profit | ¥20.1B | ¥20.8B | -3.8% |
| Ordinary Income | ¥20.3B | ¥21.1B | -3.7% |
| Net Income / Net Profit | ¥14.5B | ¥13.6B | +6.7% |
| ROE | 4.4% | 4.2% | - |
FY2026 Q1 delivered strong top-line growth with Revenue of ¥245.6B (YoY +¥79.3B +47.7%), while Operating Income of ¥20.1B (YoY -¥0.8B -3.8%) and Ordinary Income of ¥20.3B (YoY -¥0.8B -3.7%) declined. However, Net Income rose to ¥14.5B (YoY +¥0.9B +6.7%). Revenue expansion was driven by the short-term staffing (short-term business support) segment (+52.7%), but gross margin fell to 32.2% (prior year 38.0%) — a 5.8pt decline — highlighting difficulty converting revenue growth into profit. Operating margin compressed to 8.2% (prior year 12.5%) — down 4.3pt — yet Net Income benefited from a special gain of ¥2.9B from fixed asset disposals, enabling an increase at the bottom line.
[Revenue] Revenue reached ¥245.6B (+47.7%), showing high growth. By segment, the short-term business support segment led with ¥185.2B (+52.7%), accounting for a 75.4% share of revenue. HRTech produced ¥10.5B (+26.8%), Food & Beverage ¥19.4B (+11.6%), and Other Businesses ¥30.4B (+58.2%) — all increasing. Global / Long-term business support was ¥0.1B (-7.7%), a slight decline. The rapid expansion in short-term business support reflects heightened labor demand and new contract wins, but changes in contract pricing and utilization mix leave profitability challenged.
[Profitability] Cost of sales was ¥166.5B, yielding Gross Profit of ¥79.1B and Gross Margin of 32.2%, deteriorating 5.8pt from 38.0% a year ago. Rising labor and subcontracting costs and a higher proportion of low-margin contracts were primary causes. SG&A was ¥59.0B (SG&A ratio 24.0%), contained to a +39.1% increase despite Revenue growth of +47.7%, improving SG&A ratio 1.5pt from 25.5% a year ago; however this did not offset gross margin deterioration, and Operating Income decreased to ¥20.1B (-3.8%). Adding non-operating income of ¥1.5B (including equity-method investment income ¥0.4B) and non-operating expenses of ¥1.2B (interest expense ¥0.7B) resulted in Ordinary Income of ¥20.3B (-3.7%). After Special Gain ¥2.9B (gain on sale of fixed assets) and Special Loss ¥0.3B, Profit Before Tax was ¥22.8B, and Net Income after corporate taxes of ¥8.3B was ¥14.5B (+6.7%), supported by one-off items. In conclusion, revenue up but operating profit down; special gains drove an increase at the net profit level.
The short-term business support segment reported Operating Income ¥19.4B (+3.1%) and margin 10.5%; despite rapid Revenue growth (+52.7%), profit growth was limited and gross margin deterioration was notable. HRTech reported Operating Income ¥2.7B (-18.9%) and margin 25.6%, maintaining high margins but declining due to front-loaded investment. Food & Beverage reported Operating Income ¥1.2B (-6.4%) and margin 6.0%, a slight profit decline. Global / Long-term business support fell to Operating Income ¥0.0B (-100.0%), turning to a loss. Other Businesses recorded Operating Income ¥0.9B (-57.1%) and margin 3.0%, a substantial decline diluting company-wide margins. After deducting corporate expenses of ¥4.1B, consolidated Operating Income was ¥20.1B. The core short-term business support is scaling but needs margin improvement; HRTech is expected to recoup growth investments; Other Businesses require profit structure correction.
[Profitability] Operating margin 8.2% declined 4.3pt from 12.5% a year ago; Net Profit Margin 5.9% fell 2.3pt from 8.2%. Gross Margin deterioration to 32.2% (prior year 38.0%) compressed profitability. ROE 4.4% is below historical performance and industry norms (~8%), indicating substantial room to improve capital efficiency. [Cash Quality] Days Sales Outstanding (DSO) extended to 162 days, and Cash Conversion Cycle (CCC) is 150 days, indicating working capital efficiency issues. With Operating Income ¥20.1B versus non-operating expenses ¥1.2B, Interest Coverage Ratio is 29.9x, showing strong interest payment capacity. [Investment Efficiency] Total Asset Turnover is 0.41x (annualized 1.6x), somewhat low. Goodwill ¥89.6B represents 27.3% of Net Assets ¥328.4B, necessitating monitoring of M&A payback and impairment risk. [Financial Soundness] Equity Ratio 55.1% (prior year 56.4%) is healthy, D/E ratio 0.82x and Debt/Capital 30.4% indicate reasonable leverage. Current Ratio 145.3%, Quick Ratio 144.4% show short-term solvency generally stable. However, with Short-term Borrowings ¥130.0B and Current Liabilities ¥233.3B versus Cash ¥195.3B, the short-term debt ratio is 90.5%, suggesting higher refinancing dependency.
As the cash flow statement is not disclosed, funding trends are inferred from balance sheet movements. Cash and deposits decreased ¥15.7B to ¥195.3B (prior year ¥211.0B). Short-term borrowings rose ¥25.0B from ¥105.0B to ¥130.0B, indicating increased working capital demand. Accounts receivable increased ¥7.8B to ¥108.7B (prior year ¥100.9B); this 7.7% increase in receivables is far below Revenue growth of 47.7%, but DSO at 162 days and its lengthening raises concerns over delayed cash collection. Property, plant and equipment increased ¥26.7B to ¥256.9B (prior year ¥230.2B), and Goodwill increased ¥9.2B to ¥89.6B (prior year ¥80.4B), indicating continued M&A investment. Current liabilities rose ¥16.3B to ¥233.3B (prior year ¥217.0B), mainly driven by ¥25.0B increase in short-term borrowings, interpreted as funding for working capital. Retained earnings increased ¥3.3B to ¥264.3B (prior year ¥261.0B); considering Net Income ¥14.5B and dividend payments approx. ¥11B (prior term dividend ¥31 × shares), the movements are broadly consistent.
Of Net Income ¥14.5B, Special Gain ¥2.9B (gain on sale of fixed assets) accounts for roughly 20%, indicating significant reliance on one-off items. With Ordinary Income ¥20.3B vs Net Income ¥14.5B, the Net Income ratio to Ordinary Income is 7.1% and corporate taxes of ¥8.3B are standard. Non-operating income ¥1.5B includes equity-method investment income ¥0.4B, so non-core contributions are limited. Comprehensive income ¥14.9B is roughly in line with Net Income ¥14.5B; FX translation adjustments ¥0.1B and valuation difference on securities ¥0.3B have minor impacts. From an accrual perspective, the increase in accounts receivable (+7.7%) lags revenue growth (+47.7%), suggesting some efficiency in receivables relative to growth, but absolute DSO of 162 days remains long and implies timing risk in cash generation. Declining operating profitability and dependence on special gains reduce earnings quality; restoring recurring earnings power is a priority.
Full Year forecast: Revenue ¥1,047.0B (+35.6%), Operating Income ¥87.0B (+9.9%), Ordinary Income ¥87.8B (+12.9%), Net Income ¥54.3B (EPS ¥156.06). Q1 progress rates are Revenue 23.5% (standard 25%), Operating Income 23.0% (same), Ordinary Income 23.1% (same) — roughly on plan — while Net Income is 26.6% aided by Special Gain ¥2.9B. Achievement of full-year Operating Income target depends on gross margin recovery from Q2 onward and continued SG&A containment. No revision to the full-year forecast was announced at Q1; company guidance remains unchanged. Seasonal peak benefits and segment mix improvement are key to achieving the plan, but if the Q1 gross margin deterioration trend persists, the challenge of recovering in H2 will increase.
Full Year dividend forecast is ¥32 (prior ¥31), a ¥1 increase. Q1 EPS ¥41.41 and full-year EPS forecast ¥156.06 imply a payout ratio of 20.5%, a conservative level; retained earnings ¥264.3B and cash ¥195.3B provide ample dividend funding. The decision to increase the dividend by ¥1 while maintaining prior dividend indicates a strengthened shareholder return stance. A payout ratio in the low-20%s is lower than peers (30–40%), indicating scope for future dividend increases. Given liquidity and leverage levels, dividend sustainability is high, but improvements in working capital efficiency and reduced reliance on one-off gains would strengthen the basis for stable dividends. No share buyback was disclosed; Total Return Ratio equals the payout ratio.
Structural Gross Margin Deterioration Risk: Gross Margin declined to 32.2% (down 5.8pt), compressing Operating Margin by 4.3pt. Continued upward pressure on labor and subcontracting costs, and failure to improve contract pricing or shift to higher-margin contracts, could entrench lower profitability for the full year. The scale expansion of short-term business support has shown dilution of margins; urgent implementation of price adjustments and utilization optimization is required.
Working Capital Efficiency Deterioration: DSO 162 days and CCC 150 days indicate prolonged receivables turnover, potentially straining liquidity. Although receivables increased only 7.7% against Revenue growth of 47.7%, the absolute length is indicative of delayed cash generation. Short-term borrowings increased to ¥130.0B, revealing heightened working capital demand and a mismatch with collection cycles. Delay in strengthening credit control and billing collection processes would raise liquidity risk.
Concentration of Short-term Liabilities and Refinancing Risk: Short-term liabilities ratio 90.5% and short-term borrowings ¥130.0B imply significant maturity concentration, increasing sensitivity to interest rate and credit condition changes. Cash ¥195.3B provides a near-term buffer, but persistent working capital stagnation would necessitate additional borrowing or refinancing with potential adverse terms. Interest Coverage Ratio 29.9x indicates strong interest capacity, but the financial structure relies on continuous roll-over of short-term debt.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 8.2% | 6.2% (4.2%–17.2%) | +1.9pt |
| Net Profit Margin | 5.9% | 2.8% (0.6%–11.9%) | +3.1pt |
Profitability metrics exceed industry medians, placing the company in the upper-middle within the IT & Communications sector.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 47.7% | 20.9% (12.5%–25.8%) | +26.8pt |
Revenue growth far outpaces the industry median, positioning the company as a high-growth firm.
※ Source: Company aggregation
Structural Gap Between Revenue Growth and Profitability: Revenue up 47.7% while Operating Income down 3.8% reveals difficulty converting scale into profit. Gross Margin decline of 5.8pt is the main cause; improving contract mix and executing price increases are prerequisites to meeting full-year targets. Special Gain ¥2.9B accounts for roughly 20% of Net Income, underscoring the need to restore core earnings power for sustainable growth.
Working Capital Efficiency and Delayed Cash Generation: DSO 162 days and CCC 150 days are concerning for receivables turnover. An increase in short-term borrowings of ¥25.0B to meet working capital needs, combined with slow receivables collection, raises liquidity risk. While cash ¥195.3B and Interest Coverage Ratio 29.9x secure near-term payment capacity, strengthening credit management and collection processes is a priority.
Potential for Segment Restructuring: The main short-term business support segment (75.4% of revenue) has a limited margin of 10.5%; HRTech enjoys high margin 25.6% but is small and investment-led; Other Businesses have seen substantial profit declines. Narrowing profitability gaps across segments — expanding HRTech and improving short-term business support pricing, and correcting Other Businesses — could boost ROE from 4.4% toward industry norms around 8%.
This report was automatically generated by AI analyzing XBRL financial statement data. It does not constitute an investment recommendation for any specific security. Industry benchmarks are compiled by the firm based on public financial data and are for reference only. Investment decisions are your own responsibility; consult a professional advisor as needed.