WILL GROUP,INC. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥71.53B
• Operating Income: ¥1.64B
• Net Income: ¥1.14B
• EPS: ¥50.11

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

Verdict: A solid profitability rebound in FY2026 Q2 with margin expansion and strong cash conversion, albeit on modest top-line growth and still-subpar capital efficiency. Revenue rose 1.7% YoY to 715.3, while operating income surged 62.4% YoY to 16.38, driven by tighter SG&A control and better operating leverage. Net income more than doubled (+126.5% YoY) to 11.47, lifting net margin to 1.6%. Operating margin improved to 2.3% (16.38/715.3), and the implied YoY expansion is roughly 86 bps from about 1.4% in the prior-year period. Net margin expanded by roughly 88 bps YoY from around 0.7%. Gross profit reached 153.6 (GP margin 21.5%), indicating stable pricing/spread versus labor costs. OCF came in at 23.6, exceeding net income by 2.06x, a positive signal on earnings quality and working capital discipline. Free cash flow was 23.25 (OCF + investing CF), comfortably covering dividends (dividends paid: 10.16) and modest capex (2.09). PBT of 15.56 sits below operating income, implying net non-operating expense of about 0.82, likely interest/other costs (line-item details unreported). Leverage remains meaningful with D/E at 1.80x and equity ratio at 35.8%, though reported cash and equivalents of 73.11 versus interest-bearing loans of about 60.68 suggest a net cash tilt at quarter-end. ROE is 6.4% on a DuPont basis (NPM 1.6% × asset turnover 1.419 × leverage 2.80x), improving with profit recovery but still moderate. ROIC is reported at 5.0%, below typical 7–8% targets, highlighting a capital efficiency gap. Goodwill is sizable at 83.93 (about 16.6% of assets and ~46.6% of equity), presenting medium-term impairment risk if growth slows. Equity-method income is minimal at 0.24, indicating earnings are predominantly operating, not investment-derived. The quarter’s improvements look operationally driven and repeatable near term, but sustained upgrades will require further mix/pricing improvements and tighter capital allocation to lift ROIC. Outlook-wise, disciplined SG&A and solid cash generation support ongoing shareholder returns, but elevated payout (∼89%) and below-target ROIC argue for prudence if macro or demand weakens.

Profitability Analysis

ROE decomposition: ROE 6.4% = Net Profit Margin (1.6%) × Asset Turnover (1.419) × Financial Leverage (2.80x). The most material positive change YoY is the Net Profit Margin, inferred from NI +126.5% on revenue +1.7%, lifting NPM by ~88 bps to 1.6%. Operating margin rose to 2.3% (from ~1.4%), indicating SG&A efficiency and operating leverage as the key drivers; non-operating results were a modest drag (PBT < OI by 0.82). Asset turnover of 1.419 remains a strength for a staffing/services model, reflecting lean asset intensity, while financial leverage at 2.80x continues to bolster ROE. Business reason: tighter SG&A versus revenue and likely improved utilization/mix underpinned margin gains; wage pass-through and pricing discipline appear intact given stable GP margin (21.5%). Sustainability: operating improvements are partly repeatable if demand stays steady and mix holds, but thin absolute margins make the model sensitive to wage inflation or pricing pressure. Watch-outs: SG&A at 138.29 (19.3% of sales) is still heavy relative to a 2.3% OPM; any SG&A growth outpacing revenue would quickly compress margins. Overall, ROE uplift is chiefly margin-driven, supported by stable asset turnover and steady leverage, but capital efficiency remains only mid-single-digit on ROIC.

Growth Assessment

Top-line growth was modest at +1.7% YoY to 715.3, consistent with a stable but not accelerating demand environment. Profit growth far outpaced sales (OI +62.4%, NI +126.5%), indicating operating leverage and cost discipline, not volume, drove the quarter. Gross margin of 21.5% suggests pricing/spread stability; the key driver was SG&A efficiency yielding an OPM of 2.3%. Non-operating headwinds (net -0.82 vs OI) slightly tempered PBT, but tax rate was normal at 26.9%. Equity-method income contributed only 0.24, making earnings quality reliant on core operations. With ROIC at ~5.0%, incremental growth needs better mix and capital discipline to create sufficient spread over WACC. Outlook: near-term profitability can remain supported if utilization and pricing hold, but sustaining double-digit profit growth without stronger revenue momentum will be challenging. Monitoring order trends, headcount utilization, and client segment mix will be key to gauging revenue sustainability.

Financial Health

Liquidity: Current ratio and quick ratio are unreported, limiting precision; cash and equivalents of 73.11 provide a cushion against short-term funding needs. Solvency: D/E at 1.80x is above the conservative benchmark (1.5x), warranting attention even though interest-bearing loans total ~60.68 and cash is 73.11 (implying a small net cash position at period-end). Equity ratio stands at 35.8%, reasonable for a human resources/services business but not high. Maturity profile: short-term loans are 31.64 vs long-term 29.04; without current liabilities disclosure we cannot fully assess maturity mismatch risk, though sizable accounts receivable (183.14) versus accounts payable (181.78) suggests working capital is balanced but sensitive to collection cycles. Off-balance sheet: none reported in the dataset. No explicit warning thresholds triggered for current ratio (<1.0) due to lack of data; leverage should be watched given the slim OPM.

Cash Flow Quality

Earnings quality is strong: OCF/NI at 2.06x indicates healthy cash conversion and limited accrual build. Free cash flow of 23.25 (OCF + investing CF) comfortably covered dividends (10.16) and capex (2.09), leaving residual flexibility. Working capital appears well-managed given OCF strength despite receivables intensity inherent in staffing; no signs of aggressive working capital pull-forward are evident from the provided figures. With EBITDA at 26.09, cash generation aligns with operating profit uplift. Sustainability: as margins are thin, maintaining OCF robustness relies on tight receivables collection and disciplined capex.

Dividend Sustainability

The calculated payout ratio is elevated at 88.7%, above a typical sustainability benchmark (<60%), but FCF coverage is solid at 2.29x this quarter. Cash on hand (73.11) and positive net cash versus loans provide near-term support. However, given ROIC at ~5.0% and modest growth, a high payout constrains reinvestment unless cash flow resilience persists. Policy outlook: dividends look maintainable near term if operating momentum and cash conversion continue, but any profit volatility or working capital swing could pressure coverage; a balanced stance between returns and ROIC-improving investments would be prudent.

Risk Assessment

Business Risks:

• Demand cyclicality in staffing and outsourcing impacting volumes and utilization
• Wage inflation and pass-through risk compressing gross margin
• Client concentration or sector-specific slowdowns affecting placements
• Execution risk in SG&A control given thin operating margins
• Goodwill impairment risk (83.93; ~16.6% of assets) if acquired units underperform

Financial Risks:

• Leverage above conservative benchmark (D/E 1.80x) despite net cash position
• Collection risk on large accounts receivable (183.14) relative to payables (181.78)
• Interest rate risk on floating-rate debt (interest expense not disclosed)
• Potential maturity mismatch not fully assessable due to missing current liabilities data

Key Concerns:

• ROIC at ~5.0%, below 7–8% target range, limiting value creation headroom
• High payout ratio (~89%) reduces buffer for reinvestment during downturns
• Non-operating drag (PBT 15.56 vs OI 16.38) could persist if financing costs rise
• Data gaps on current ratio, interest coverage, and detailed SG&A components

Investment Implications

Key Takeaways:

• Margin-led earnings rebound: OPM up to ~2.3% with NI +126.5% on modest sales growth
• Cash conversion strong: OCF/NI 2.06x and FCF 23.25 supporting shareholder returns
• Leverage needs monitoring: D/E 1.80x, though cash > interest-bearing loans at quarter-end
• Capital efficiency below target: ROIC ~5.0% suggests need for mix/pricing and capital discipline
• Goodwill-heavy balance sheet elevates impairment sensitivity

Metrics to Watch:

• Operating margin and SG&A as a percentage of sales
• ROIC versus management targets
• OCF/NI and receivables days (collection trends)
• Net debt (cash vs short/long-term loans) and interest burden
• Goodwill impairment indicators and performance of acquired units

Relative Positioning: Versus domestic staffing peers, Will Group shows improving profitability and strong cash conversion but operates with thinner margins and a lower ROIC profile; leverage is somewhat higher than conservative benchmarks, and goodwill is relatively elevated, underscoring the importance of continued SG&A discipline and capital efficiency improvements.

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
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