| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥590.9B | ¥656.8B | -10.0% |
| Operating Income / Operating Profit | ¥39.6B | ¥58.9B | -32.7% |
| Ordinary Income | ¥41.9B | ¥59.4B | -29.5% |
| Net Income / Net Profit | ¥16.0B | ¥70.0B | -77.1% |
| ROE | 5.0% | 18.6% | - |
FY2026 results: Revenue ¥590.9B (YoY -¥65.9B -10.0%), Operating Income ¥39.6B (YoY -¥19.3B -32.7%), Ordinary Income ¥41.9B (YoY -¥17.5B -29.5%), Net Income attributable to owners of the parent ¥16.0B (YoY -¥54.0B -77.1%). The company reported lower revenue and profit. The prior year included a gain on sale of investment securities of ¥54.6B recorded as an extraordinary gain, and the large YoY decline in Net Income is mainly due to that reversal. At the operating level, Gross Profit Margin improved significantly to 84.0% (prior year 79.8%, +4.2pt), while SG&A ratio rose to 77.3% (prior year 70.9%), causing Operating Margin to decline to 6.7% (prior year 9.0%, -2.3pt). Extraordinary losses of ¥5.7B (including impairment losses of ¥3.9B) pressured the conversion from Ordinary Income to Net Income.
[Revenue] ¥590.9B (YoY -10.0%). The company operates in a single segment: Human Resources Services Business, and segmental breakdowns are not disclosed. Cost of sales improved significantly to ¥94.8B (as a percentage of sales 16.0%, prior year 20.2%), resulting in Gross Profit ¥496.1B and Gross Margin 84.0% (+4.2pt). While the quality of the revenue structure improved, the contraction of the top line directly reduced profit scale.
[P&L] At the operating level, SG&A totaled ¥456.5B (prior year ¥465.5B, -1.9%), only slightly down, and SG&A ratio rose sharply to 77.3% (prior year 70.9%, +6.4pt). Major expense items were roughly flat: Advertising expenses ¥146.8B (prior year ¥157.3B), Salaries and allowances ¥122.9B (prior year ¥122.6B), Bonuses ¥18.8B (prior year ¥19.1B), indicating insufficient cost adjustments in a revenue decline. Operating Income ¥39.6B (-32.7%), Operating Margin 6.7% (-2.3pt). Non-operating income included interest income ¥3.3B and equity-method income ¥1.5B, totaling non-operating income ¥6.1B, resulting in Ordinary Income ¥41.9B (-29.5%). Extraordinary items included impairment losses ¥3.9B, loss on disposal of fixed assets ¥0.1B, valuation losses on investment securities ¥0.2B, producing Extraordinary Losses ¥5.7B (prior year ¥4.2B). The prior year’s gain on sale of investment securities ¥54.6B boosted Net Income, but this year the reversal reduced pre-tax income to ¥36.3B (prior year ¥109.8B, -67.0%). After deducting income taxes of ¥10.1B (effective tax rate 27.8%, prior year 30.5%), Net Income attributable to owners of the parent was ¥16.0B (-77.1%). In summary, the company reported lower revenue and profit, while improved gross margin and non-recurring reversals complicated the profitability structure.
[Profitability] Operating Margin 6.7% (prior year 9.0%, -2.3pt), Net Margin 2.7% (prior year 10.7%, -8.0pt) — profitability declined significantly. Despite Gross Margin improvement to 84.0% (+4.2pt), SG&A ratio rose to 77.3% (+6.4pt), squeezing margins. ROE 5.0% (prior year 22.2%) retreated substantially, indicating low return on equity. [Cash Quality] Operating Cash Flow (OCF) ¥35.5B is 2.2x Net Income ¥16.0B and superficially looks healthy, but considering Depreciation & Amortization ¥31.8B, the OCF subtotal is ¥68.7B versus OCF ¥35.5B, implying outflows of ¥33.2B for working capital and taxes. OCF/EBITDA (Operating Income + D&A) is 0.50x (¥35.5B ÷ (¥39.6B + ¥31.8B)), indicating weak cash conversion efficiency. [Investment Efficiency] Total asset turnover is 1.19x (¥590.9B ÷ ¥497.1B) and is favorable, but intangible assets are high at ¥126.9B (25.5% of total assets), mainly software ¥82.7B and goodwill ¥23.8B. High reliance on intangibles implies amortization burden and impairment risk. [Financial Soundness] Equity Ratio 64.0% (prior year 65.0%, -1.0pt), Current Ratio 187.1%, Quick Ratio 187.1% indicate solidity. Cash and deposits ¥185.2B and marketable securities ¥20.0B provide ample liquidity. Interest-bearing debt is minimal (only lease liabilities ¥3.9B), and Interest Coverage is 99.0x (OCF ¥35.5B ÷ interest paid ¥0.4B), showing strong financial capacity.
Operating CF ¥35.5B (prior year ¥80.6B, -56.0%). Against an operating CF subtotal of ¥68.7B, changes in working capital and taxes—increase in accounts receivable -¥9.4B, increase in accounts payable ¥17.0B, decrease in contract liabilities -¥6.9B, corporate taxes paid -¥36.2B—caused working capital and tax outflows of ¥33.2B. Investing CF was -¥65.2B, with major items including acquisition of intangible assets -¥41.8B (mainly software investment), acquisition of subsidiary shares -¥19.2B, deposit placements -¥63.4B, and deposit recoveries ¥59.7B. Free Cash Flow was -¥29.7B (Operating CF ¥35.5B + Investing CF -¥65.2B + capital expenditures -¥1.2B included) and negative. Financing CF was -¥80.5B, driven by share buybacks -¥50.0B and dividend payments -¥30.2B. Cash and cash equivalents decreased ¥111.0B during the period to an ending balance of ¥124.8B (disclosed cash and deposits ¥185.2B; cash equivalents exclude short-term investments and are ¥124.8B). Although OCF is 2.2x Net Income, OCF/EBITDA remains 0.50x, and tax payments and working capital changes were drag factors. Simultaneous intangible asset investment and shareholder returns compressed the liquidity cushion.
There is a large gap between Ordinary Income ¥41.9B and Net Income ¥16.0B. The primary causes are Extraordinary Losses ¥5.7B (impairment losses ¥3.9B, valuation losses on investment securities ¥0.2B, etc.) and the loss of prior-year extraordinary gains (prior year included gain on sale of investment securities ¥54.6B). Prior year Net Income ¥70.0B relied heavily on extraordinary gains; at the ordinary level it was ¥59.4B versus this year ¥41.9B, about 1.4x. This year’s impairment loss ¥3.9B is a one-off, but the ¥126.9B of intangible assets carries future impairment risk. Non-operating income ¥6.1B (interest income ¥3.3B, equity-method income ¥1.5B, foreign exchange gains ¥0.5B, etc.) is mainly recurring. Comprehensive income ¥23.7B versus Net Income ¥16.0B — the ¥7.7B difference was contributed by Other Comprehensive Income -¥2.5B (foreign currency translation adjustments -¥3.0B, valuation differences on available-for-sale securities ¥0.5B). Accrual (Net Income ¥16.0B - Operating CF ¥35.5B) is -¥19.5B, i.e., reversed, as working capital movements and non-cash expenses (D&A ¥31.8B) boosted Operating CF. On an ordinary basis excluding non-recurring items, earnings power declined YoY, but Ordinary Income was maintained at a certain level due to stability of non-operating income.
Full-year guidance: Revenue ¥500.0B (YoY -15.4%), Operating Income ¥28.0B (YoY -29.3%, Operating Margin 5.6%), Ordinary Income ¥34.1B (YoY -18.7%), Net Income attributable to owners of the parent ¥54.6B. The first-half results (cumulative Revenue ¥590.9B is unclear relative to full-year due to reporting format; on a simple annualized basis progress would be 118%, far exceeding the full-year forecast, so attention to fiscal period alignment and disclosure format is required). The implied gap between Operating Margin 5.6% and Net Margin 10.9% suggests an assumption of a ¥24.6B net increase from non-operating/extraordinary items. The prior year’s extraordinary gain of ¥54.6B boosted Net Income; next year’s forecast appears to assume certain conversion assumptions from ordinary income to net income. Dividend forecast is ¥0, suggesting either a change in dividend policy or a conservative judgment based on profit levels. It is necessary to scrutinize assumptions regarding continuity of non-operating income, impact of non-recurring items, and tax rate changes.
A year-end dividend of ¥32.7 per share was paid. Annual payout ratio 37.5% (calculated based on assumed Net Income ¥26.2B) and is at an appropriate level. Total dividends ¥30.2B are superficially covered by Operating CF ¥35.5B, but because Free Cash Flow is -¥29.7B, dividends were funded from retained earnings and cash balances. The company executed share buybacks ¥50.0B, making total shareholder returns ¥80.2B (dividends ¥30.2B + share buybacks ¥50.0B). Total return ratio is 307% (¥80.2B ÷ ¥26.2B) and is substantially high, indicating insufficient cash flow coverage. Treasury shares increased by an amount equivalent to -¥50.0B from year-end ¥119.7B (prior year ¥149.7B), showing commitment to shareholder value enhancement but also contributing to liquidity pressure. The ¥0 dividend forecast for next year may reflect a conservative stance due to performance volatility or a reconsideration of dividend policy. Improvement in Operating CF and optimization of investment allocation will be key to sustainable shareholder returns.
Risk of profitability deterioration due to declining revenue and SG&A stickiness: Revenue -10.0% vs. SG&A -1.9% indicates slow expense adjustment, and Operating Margin fell to 6.7% (-2.3pt). High fixed-cost ratios such as Advertising ¥146.8B (24.8% of sales) and Salaries and allowances ¥122.9B increase sensitivity of profits to revenue declines. If SG&A optimization lags while revenue is expected to fall -15.4% next year, there is risk of Operating Margin dropping below 5.6%.
Low cash conversion efficiency and liquidity pressure risk: OCF/EBITDA 0.50x is weak, and Operating CF ¥35.5B vs. Free CF -¥29.7B. Simultaneous intangible investment ¥41.8B and share buybacks ¥50.0B compressed cash and deposits by YoY -¥89.6B (-32.6%). If investments and returns continue without improvement in Operating CF, the liquidity cushion may continue to shrink.
Dependence on intangible assets and impairment risk: Intangible fixed assets ¥126.9B (25.5% of total assets) are high, primarily software ¥82.7B and goodwill ¥23.8B. The company recorded impairment losses ¥3.9B this period, and there is risk of additional impairments if monetization of intangibles is delayed or market conditions worsen. Goodwill ¥23.8B (7.5% of net assets, 0.33x of EBITDA) is modest in scale but could face impairment pressure if business conditions change.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 6.7% | 8.1% (3.6%–16.0%) | -1.4pt |
| Net Margin | 2.7% | 5.8% (1.2%–11.6%) | -3.1pt |
Profitability is below the industry median, and elevated SG&A ratio weakens competitiveness.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -10.0% | 10.1% (1.7%–20.2%) | -20.1pt |
Growth is materially lagging peers; top-line recovery is urgent.
※ Source: Company aggregation
While Gross Margin improved to 84.0% (+4.2pt) indicating qualitative improvement in the revenue structure, the persistently high SG&A ratio of 77.3% keeps Operating Margin at 6.7%. Improving advertising efficiency (lower customer acquisition cost, higher LTV/CAC) and enhancing labor productivity are focal points for margin recovery.
Net Income fell substantially due to the reversal of prior-year gain on sale of investment securities ¥54.6B, but Ordinary Income ¥41.9B was maintained at a certain level. Next year’s forecast shows a large gap between Operating Margin 5.6% and Net Margin 10.9%, implying that assumptions regarding non-operating and extraordinary items are key to achieving guidance. Recovery of ordinary earnings power excluding non-recurring elements and progress in SG&A optimization will be watched closely.
Financial soundness appears solid with Equity Ratio 64.0%, Current Ratio 187.1%, and Interest Coverage 99.0x, but Free Cash Flow -¥29.7B combined with share buybacks ¥50.0B compressed liquidity. Improvement in Operating CF and the speed of monetizing intangible asset investments will determine the balance between sustainable shareholder returns and growth investment.
This report is an automated financial analysis document generated by AI from XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the firm based on public financial statements. Investment decisions are your responsibility; please consult professionals as necessary before making investment decisions.