WILL GROUP (6089) FY2026 Q3 Earnings Report

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Executive Summary

Cumulative results through Q3 posted increases in both revenue and profit, with profit growth substantially exceeding revenue growth. Revenue was ¥1,086.3B (+3.1% YoY), Operating Income was ¥28.5B (+59.2%), Profit Before Tax was ¥27.4B (+62.0%), and Profit Attributable to Owners of the Parent was ¥19.8B (+77.2%). The primary drivers of the profit increase were an improvement in the gross profit margin (22.1%, approximately +1.1pt YoY) and the containment of SG&A expenses below the rate of revenue growth. Profit growth was driven more by improved profitability than by volume expansion. Improved profitability in the domestic Working Business was the central factor behind the increase in consolidated profit.

Factors Affecting Performance

【Revenue】Revenue was ¥1,086.3B, up +3.1% YoY. The domestic Working Business accounted for the largest revenue scale at ¥655.2B (+4.9%), while growth in the overseas Working Business slowed to ¥430.4B (+0.6%). Overall revenue growth was led by the domestic business, while the overseas business struggled to grow due to the impact of local employment markets and foreign exchange rates.

【Profit and Loss】Operating Income was ¥28.5B (+59.2% YoY), and Profit Attributable to Owners of the Parent was ¥19.8B (+77.2%). The primary factors were an improvement in the gross profit margin to 22.1% (approximately +1.1pt YoY) and the containment of the SG&A expense ratio at 19.5% (approximately -0.1pt YoY), resulting in operating leverage. The segment profit margin of the domestic Working Business improved to 4.6% from 3.3% in the same period of the previous year, making it the largest contributor to consolidated profit growth. The gap between Profit Before Tax and Profit Attributable to Owners of the Parent was primarily attributable to corporate income tax expense of ¥8.3B, with no temporary factors identified. In conclusion, both revenue and profit increased.

Segment Analysis

The domestic Working Business is the core business and the largest contributor to consolidated Operating Income, with Revenue of ¥655.2B (+4.9% YoY), segment profit of ¥30.1B (+44.7%), and a profit margin of 4.6% (improved from 3.3% in the same period of the previous year). The overseas Working Business recorded Revenue of ¥430.4B (+0.6%), segment profit of ¥17.5B (+16.2%), and a profit margin of 4.1% (3.5% in the same period of the previous year); although revenue growth was modest, the profit margin improved. Other Businesses recorded Revenue of ¥0.7B and a segment loss of ¥2.1B, with a limited impact on consolidated results. Against combined segment profit of ¥47.7B from the two reportable segments, consolidated Operating Income was ¥28.5B after deducting adjustments for corporate expenses and other items of ¥17.0B.

Key Financial Indicators

【Profitability】The Operating Income margin was 2.6%, improving by approximately 0.9pt from 1.7% in the same period of the previous year. The gross profit margin improved to 22.1% (from approximately 22.0% in the same period of the previous year), while the SG&A expense ratio was broadly flat at 19.5%, resulting in profit growth exceeding the rate of revenue growth. 【Cash Flow Quality】Operating Cash Flow (OCF) was ¥47.3B, approximately 2.4 times Profit Attributable to Owners of the Parent of ¥19.8B, indicating strong cash-generation capacity. However, the increase was supported by a ¥13.6B increase in trade payables and a decrease in income taxes paid, so the sustainability excluding working-capital factors requires continued monitoring. 【Investment Efficiency】Annualized ROE of 13.0% represents a level supported by the total asset turnover ratio and a certain degree of financial leverage, reflecting a structure in which the low net profit margin of 1.8% is offset by asset efficiency. 【Financial Soundness】The Equity Ratio was 36.2%, while cash and cash equivalents of ¥69.9B represented only 26.5% of current liabilities of ¥263.5B, making the collection status of trade receivables of ¥190.5B a key factor in short-term liquidity management. Short-term borrowings declined significantly from ¥40.0B in the same period of the previous year to ¥19.6B, indicating an improving financial position.

Cash Flow Analysis

Operating Cash Flow (OCF) was ¥47.3B, a substantial increase from ¥20.3B in the same period of the previous year, demonstrating cash generation exceeding Profit Attributable to Owners of the Parent of ¥19.8B. The increase included timing-related factors, including a ¥13.6B increase in trade payables and a decrease in income taxes paid from ¥16.2B to ¥3.5B compared with the same period of the previous year. Investing Cash Flow was an outflow of ¥10.3B, including ¥4.2B in capital expenditures and ¥8.2B for the acquisition of subsidiaries. Free Cash Flow was ¥37.0B, providing approximately 3.6 times coverage of dividend payments of ¥10.2B. Financing Cash Flow was an outflow of ¥40.6B, reflecting net repayment of short-term borrowings of ¥20.7B, a net increase in long-term borrowings, repayment of lease liabilities of ¥9.6B, and dividend payments, indicating reduced reliance on short-term funding and a shift toward longer-term borrowing.

Earnings Quality

Against Operating Income of ¥28.5B, the net contribution from other income of ¥1.6B and other expenses of ¥0.4B was limited to ¥1.2B, indicating limited reliance on non-operating income. The gap between Profit Before Tax of ¥27.4B and Profit Attributable to Owners of the Parent of ¥19.8B was primarily attributable to corporate income tax expense of ¥8.3B, resulting in an effective tax rate of approximately 30.3%, with no particular abnormalities. As Operating Cash Flow substantially exceeded Profit Attributable to Owners of the Parent and the accrual ratio was negative, the cash backing of current-period profit can be assessed as sound. However, part of the increase in Operating Cash Flow was attributable to an increase in trade payables and the timing of income tax payments, so attention is required because recurring profitability improvements and temporary working-capital factors are mixed.

Earnings Forecasts and Guidance

Progress rates against the full-year company forecasts (Revenue of ¥1,435.0B, Operating Income of ¥31.0B, and Net Income of ¥19.8B) were 75.7% for Revenue, 92.0% for Operating Income, and 99.0% for Net Income. Revenue progress was close to the standard 75% level, while profit progress was substantially ahead, implying a plan premised on a significant decline in the Q4 Operating Income margin to approximately 0.7%. Neither the earnings forecast nor the dividend forecast was revised, and the Company maintained its conservative assumptions for the second half.

Shareholder Returns

The full-year dividend forecast is ¥44.0 per share, implying a Payout Ratio of approximately 50.4% based on full-year forecast EPS of ¥87.31. Cumulative dividend payments of ¥10.2B represented approximately 51.3% of cumulative Profit Attributable to Owners of the Parent of ¥19.8B and approximately 27.5% of Free Cash Flow of ¥37.0B, indicating ample cash capacity for dividend payments. The disposal of treasury shares was ¥0.04B and was small in scale; no expansion of the Total Return Ratio through share repurchases was identified during the period.

Risk Factors

1. Dependence on profitability from the domestic business: The domestic Working Business is the primary contributor to consolidated Operating Income, and Revenue of ¥655.2B accounts for 60.3% of the consolidated total. Fluctuations in demand for human resources and utilization rates are likely to have an amplified impact on profit under the low-margin structure represented by a consolidated Operating Income margin of 2.6%.

2. Liquidity and trade receivables management: Cash and cash equivalents of ¥69.9B represented only 26.5% of current liabilities of ¥263.5B, meaning that short-term liquidity management depends on the collection status of trade receivables of ¥190.5B, which account for 68.2% of current assets.

3. Goodwill-to-equity ratio: Goodwill of ¥96.7B accounts for 49.3% of net assets of ¥196.2B. Under IFRS, goodwill is not subject to regular amortization and is instead assessed through impairment testing; therefore, deterioration in the profitability of acquired businesses could have a significant impact on equity.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

The Company's profitability is substantially below the industry median and is positioned within the low-margin group in the industry.

Growth and Capital Efficiency

The revenue growth rate was also below the industry median, confirming a moderate revenue growth trend for a human resources services company.

※Source: Compiled by the Company

Key Points from the Financial Results

1. Revenue increased +3.1%, while Operating Income increased +59.2% and Profit Attributable to Owners of the Parent increased +77.2%, confirming profit growth substantially exceeding the rate of revenue growth. The primary driver was operating leverage resulting from the improved gross profit margin and containment of SG&A expenses.

2. The profit margin of the domestic Working Business improved by approximately 1.3pt YoY, making it the central factor behind consolidated profit growth. The profit margin of the overseas Working Business also improved, although revenue growth remained modest.

3. Operating Cash Flow reached approximately 2.4 times Profit Attributable to Owners of the Parent, demonstrating cash generation exceeding dividends and investment. Meanwhile, the cash coverage ratio of current liabilities was 26.5%, and goodwill accounted for 49.3% of net assets, making short-term liquidity and the quality of M&A assets subjects for ongoing monitoring.

Theoretical Share Price (Reference Value)

Sensitivity: ¥867–¥917 at ±1% for the cost of equity, and ¥891–¥893 at ±0.1 for ω.

Notes:

• Because progress of Net Income against the full-year forecast (99%) exceeds the standard level (75%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies with progress ahead of schedule tend to exceed forecasts; the adjustment may be excessive for businesses with strong seasonality).
• The ratio of goodwill to net assets is high, and the assumptions would change significantly if impairment occurred.
• Net assets as of the end of the quarter are used (there is a timing gap relative to the full-year forecast).

(Calculation model: Residual Income Model (Ohlson-type; explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated solely from publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI through analysis of XBRL earnings summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting a professional advisor where necessary.

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