en Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥29.62B
• Operating Income: ¥2.37B
• Net Income: ¥5.20B
• EPS: ¥43.47

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

For FY2026 Q2 (consolidated, JGAAP), エン株式会社 reported revenue of ¥29.6bn, declining 8.9% YoY, while operating income was resilient at ¥2.37bn, down only 0.5% YoY, indicating active cost control and operating discipline despite topline pressure. Net income fell sharply to ¥1.75bn (-66.3% YoY), pointing to below-the-line or non-recurring factors impacting the bottom line rather than core operating weakness. DuPont analysis shows ROE at 5.24%, derived from a 5.92% net profit margin, 0.592x asset turnover, and 1.50x financial leverage, suggesting middling equity returns constrained mainly by lower margins amid a softer revenue environment. Gross profit margin is disclosed at a high 88.0%, consistent with an asset-light service model, but its alignment with the reported cost of sales and gross profit values appears non-trivial, possibly reflecting classification differences under JGAAP; we rely on the provided margin metric for analysis. EBITDA of ¥3.68bn implies a 12.4% EBITDA margin, indicating moderate operating leverage; the small decline in operating income versus a larger revenue decline suggests some fixed-cost absorption but not severe deleverage. Operating cash flow of ¥3.21bn compares favorably to net income (OCF/NI = 1.83x), indicating solid cash conversion and conservative accruals in the period. Liquidity is strong with a current ratio of 224% and working capital of ¥20.5bn, providing a sizable buffer against near-term volatility. The balance sheet appears conservatively structured with liabilities at ¥19.3bn versus equity of ¥33.4bn (D/E of 0.58x) and interest coverage at 182x, signaling low financial risk from leverage or funding costs. Asset turnover at 0.592x is typical for a human resources/services business with intangible-heavy assets; maintaining utilization will be important if growth remains soft. The sharp decline in net income versus stable operating income suggests material non-operating or tax-related effects; the reported income tax of ¥2.33bn alongside a net profit of ¥1.75bn implies complex below-the-line movements and/or extraordinary items not fully visible in the disclosed snapshot. The provided effective tax rate metric (0.0%) is likely not meaningful due to data constraints. Free cash flow is shown as zero only because investing cash flow is undisclosed in this dataset; this should not be interpreted as actual zero FCF. Dividend per share is listed as ¥0.00 with a 0.0% payout ratio in the dataset; given EPS of ¥43.47 but shares outstanding not disclosed here, dividend policy assessment requires supplemental disclosures. Overall, the company exhibits resilient core profitability and strong liquidity, with weaker revenue and a pronounced contraction in net income likely driven by non-operating factors. Near-term focus should be on revenue trajectory recovery, visibility on below-the-line items, and confirmation of cash flow durability. Data limitations (unreported items shown as zero) necessitate caution in interpreting FCF, cash, equity ratio, and shares-related metrics.

Profitability Analysis

ROE of 5.24% reflects a 5.92% net margin, 0.592x asset turnover, and 1.50x leverage. The main drag is the slim net margin in this period, given the steep YoY decline in net income despite nearly flat operating income; this points to non-operating or tax effects compressing bottom-line returns. Operating margin (operating income/revenue) is approximately 8.0%, showing that core operations remain profitable even with top-line contraction. The 12.4% EBITDA margin versus an 8.0% operating margin implies meaningful SG&A and D&A load, but the small YoY operating income decline relative to revenue suggests some cost flexibility and controlled operating leverage. Gross margin is disclosed at 88.0%, consistent with a service model; however, reported cost of sales and gross profit line items are not arithmetically aligned, likely due to classification nuances—hence we anchor on the provided margin metric rather than reconstructing. Interest burden is negligible (interest expense ¥13m, 182x coverage), so financial expenses are not a profitability headwind. Ordinary income of ¥2.38bn is close to operating income, indicating limited net non-operating gains/losses before taxes; the gap to net income appears driven by tax or extraordinary line items not fully detailed here. Overall, profitability quality at the operating level is stable, but bottom-line volatility reduces ROE and masks underlying performance.

Growth Assessment

Revenue declined 8.9% YoY to ¥29.6bn, reflecting a softer demand environment in core segments and/or normalization post-strong prior periods. Operating income was resilient at -0.5% YoY, implying effective cost management and potential mix benefits that protected operating margin. Net income fell 66.3% YoY to ¥1.75bn, driven by below-the-line items rather than core operations; without clarity on extraordinary items or tax drivers, the sustainability of net income is less certain than operating income. EBITDA of ¥3.68bn (-implied YoY not provided) and a steady EBITDA margin of 12.4% suggest limited degradation in operational efficiency despite revenue pressure. Asset turnover at 0.592x is reasonable for the business model; a return to growth will require either higher client activity or expansion in higher-velocity offerings. Profit quality looks better at the operating level than at the net level; cash conversion (OCF/NI 1.83x) supports the underlying earnings quality. Near-term outlook hinges on demand recovery in recruitment/HR solutions, execution in digital products, and cost discipline to preserve margins if revenues remain under pressure. Absent explicit guidance, we assume a gradual stabilization scenario where operating income tracks revenue with modest elasticity, while net income normalizes as one-offs roll off.

Financial Health

Liquidity is strong: current assets of ¥37.1bn vs. current liabilities of ¥16.5bn produce a 224% current ratio and sizable working capital of ¥20.5bn. Inventories are reported as zero (unreported), consistent with a service model; quick ratio mirrors the current ratio. Solvency is sound with total liabilities of ¥19.3bn against equity of ¥33.4bn (D/E 0.58x) and financial leverage of 1.50x (assets/equity), indicating a conservative capital structure. Interest expense is minimal (¥13m) and coverage is very high at 182x, signaling negligible refinancing or rate risk in the near term. The equity ratio is displayed as 0.0% in the dataset but should not be interpreted literally; based on assets and equity, the implied equity ratio would be approximately 66.8% (¥33.4bn/¥50.1bn), underscoring balance sheet strength. Overall, liquidity and solvency metrics suggest ample capacity to navigate cyclical softness and invest selectively.

Cash Flow Quality

Operating cash flow of ¥3.21bn exceeds net income of ¥1.75bn (OCF/NI 1.83x), indicating strong cash conversion and limited earnings inflation from accruals in the period. Depreciation and amortization of ¥1.31bn underpins non-cash charges consistent with the EBITDA-to-OP bridge. Working capital efficiency cannot be fully assessed without detailed receivables/payables data, but the OCF strength amidst revenue decline suggests disciplined collections and cost timing. Free cash flow is shown as zero solely because investing cash flow is undisclosed in this dataset; based on OCF alone, underlying FCF would likely be positive absent unusually high capex or investments. Cash and equivalents are displayed as zero (unreported); therefore, period-end liquidity should be inferred from current assets and not taken as literal zero cash. Overall, cash flow quality appears better than the headline net income trend, supporting the view that operating earnings are of reasonable quality.

Dividend Sustainability

Annual DPS is listed as ¥0.00 and payout ratio as 0.0% in the dataset, but share-related details are unreported here, and the company historically has a dividend policy; therefore, these fields should not be interpreted as an actual suspension without confirmation from official releases. EPS of ¥43.47 would ordinarily allow for some payout capacity, but the sharp YoY decline in net income and undisclosed investing cash flows limit precision on coverage. On a cash basis, OCF of ¥3.21bn provides capacity for distributions after maintenance capex, but exact FCF coverage cannot be computed from this dataset. Policy outlook will depend on management’s stance toward balancing shareholder returns with investment in growth and balance sheet conservatism; given strong liquidity and low leverage, the balance sheet can support a stable policy, subject to earnings normalization and visibility on below-the-line items. Until full cash and investing data are available, dividend sustainability should be assessed cautiously.

Risk Assessment

Business Risks:

• Cyclical demand in recruitment and HR services impacting volumes and pricing
• Client hiring freezes or slower job postings amid macro uncertainty
• Competition and pricing pressure from domestic peers and global platforms
• Execution risk in digital product enhancements and new service lines
• Regulatory changes in labor markets and data privacy compliance

Financial Risks:

• Bottom-line volatility from non-operating items or tax adjustments
• Potential working capital swings tied to receivables collections in downturns
• Currency exposure if overseas operations or cross-border services are material
• Limited visibility on investing cash flows and cash balances in this dataset

Key Concerns:

• 66.3% YoY decline in net income despite stable operating income implies non-recurring or below-the-line headwinds
• Revenue contraction of 8.9% YoY could persist if macro softness continues
• Data gaps (cash, investing CF, share count) constrain assessment of FCF and dividend coverage
• Apparent inconsistencies between cost of sales and gross profit presentation suggest classification nuances that require detailed notes

Investment Implications

Key Takeaways:

• Core operations resilient: operating income nearly flat despite a high single-digit revenue decline
• ROE at 5.24% is held back by net margin compression from below-the-line items
• Strong liquidity and low leverage reduce financial risk and support flexibility
• Cash conversion is solid (OCF/NI 1.83x), indicating decent earnings quality
• Data limitations obscure FCF and dividend assessment; supplemental disclosures needed

Metrics to Watch:

• Top-line trajectory by segment and leading indicators of hiring demand
• Operating margin and SG&A discipline amid revenue fluctuations
• Bridge from operating income to net income, including extraordinary items and taxes
• Working capital turns and OCF sustainability
• Capex and investment outflows to refine true FCF
• Order intake / pipeline metrics for HR and digital solutions

Relative Positioning: Within Japan’s HR/services peer set, the company exhibits conservative leverage and strong liquidity, with operating margin resilience better than implied by the steep decline in reported net income; however, near-term relative returns are constrained by net margin volatility and a softer revenue base.

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