| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥36973.5B | ¥35574.8B | +3.9% |
| Operating Income / Operating Profit | ¥6305.7B | ¥4905.4B | +28.5% |
| Profit Before Tax / Tax Preceding Profit | ¥6446.2B | ¥5271.4B | +22.3% |
| Net Income / Net Profit | ¥6813.2B | ¥6046.2B | +12.7% |
| ROE | 42.7% | 37.2% | - |
FY2026 results recorded Revenue / Net Sales of 3兆6,973.5B円 (YoY +1,398.7B円 +3.9%), Operating Income of 6,305.7B円 (YoY +1,400.3B円 +28.5%), Ordinary Income of 6,874.6B円 (YoY +838.0B円 +13.9%), and Net Income attributable to owners of the parent of 4,969.1B円 (YoY +884.1B円 +21.6%). Operating margin improved to 17.1% (prior year 13.8%) up +3.3pt, and ROE rose to 31.0% (prior year 22.6%) up +8.4pt, indicating a significant improvement in profitability. The HR Technology Business accounted for the majority of Operating Income, driven by Indeed in the U.S. strengthening recommendation features and ARPJ growth of +17%, while SG&A was contained at -2.0% YoY, realizing operating leverage. Operating Cash Flow (OCF) was 6,694.3B円 (1.35x of Net Income) showing strong cash generation, and with ample FCF of 6,196.9B円 the Company paid dividends of 353.5B円 and repurchased shares totaling 6,787.5B円 (Total Return Ratio approx. 140%), resulting in an effectively debt-free balance sheet (Equity Ratio 56.8%) that is exceptionally strong.
[Revenue / Net Sales] Revenue of 3兆6,973.5B円 (+3.9%) was achieved with all three businesses growing: HR Technology 1兆4,544.4B円 (+6.2%), Staffing 1兆6,793.3B円 (+2.3%), and Marketing, Matching & Technology (MMT) 5,635.8B円 (+4.6%). In HR Technology, U.S. Indeed monthly active jobseekers +18% YoY and ARPJ (revenue per paying employer) +17% growth contributed, accelerating sponsored job revenue. Staffing saw Japan +5.2% offsetting Europe/US/Australia -0.6% to remain solid; in MMT lifestyle +6.6% and housing +4.5% drove platform monetization. A forex tailwind (assumption USD/JPY 150.7 yen, weaker yen vs. prior assumption) also helped maintain a company-wide revenue growth trend.
[Profitability] Operating Income of 6,305.7B円 (+28.5%) resulted from Gross Profit of 2兆1,882.0B円 (gross margin 59.2%, prior year 58.6%) less SG&A of 1兆5,276.7B円 (SG&A ratio 41.3%, prior year 43.8%). Gross margin improved +0.6pt and SG&A ratio improved -2.5pt, lifting Operating Margin to 17.1% (+3.3pt). By segment EBITDA+S (Operating Income + Depreciation & Amortization + Stock-based compensation ± others), HR Technology margin stood out at 37.7% (+4.7pt), MMT improved to 27.4% (+2.0pt), while Staffing was 5.9% (+0.1pt) with only slight increase. Ordinary Income of 6,874.6B円 (+13.9%) lagged Operating Income growth (+28.5%) due to wider equity-method investment losses of -101.3B円 (prior year -88.1B円) and reduced financial income of 347.1B円 (prior year 560.4B円). From Profit Before Tax of 6,446.2B円, income taxes of 1,479.4B円 (effective tax rate 22.9%, prior year 22.6%) were deducted, resulting in Net Income attributable to owners of the parent of 4,969.1B円 (+21.6%). In summary, the Company achieved both revenue and profit growth, with operating margin improvement driving profit growth that substantially outpaced revenue growth.
The HR Technology Business reported Revenue of 1兆4,544.4B円 (+6.2%) and Operating Income of 5,499.9B円 (+21.5%), with a margin of 37.8% (prior year 33.0%), a peak level; composition ratio was 39.3% of Revenue and 87.2% of Operating Income, clearly establishing it as the core business. Growth was led by U.S. +7.6% and Europe & others +19.2%, more than offsetting Japan -4.6%. 70% of Indeed sponsored job applications came via recommendation features, paid products reduced hiring time by 50% and improved ROI, with ARPJ +17% accelerating monetization.
The Staffing Business recorded Revenue of 1兆6,793.3B円 (+2.3%) and Operating Income of 997.4B円 (+2.4%), margin 5.9% (prior year 5.8%) slight increase; composition ratio was 45.4% of Revenue and 15.8% of Operating Income, serving as a stable revenue source. Japan +5.2% underpinned Europe/US/Australia -0.6%, and maintained cost discipline keeping margins in a flat range.
The Marketing, Matching & Technology Business reported Revenue of 5,635.8B円 (+4.6%) and Operating Income of 1,549.8B円 (+13.0%), margin improved to 27.5% (prior year 25.5%) +2.0pt, composition ratio Revenue 15.2% and Operating Income 24.6%, contributing strongly to profits. Lifestyle (beauty, gourmet, travel, SaaS) +6.6% and housing/real estate +4.5% saw improved AI matching precision in vertical platforms contributing to margin expansion.
Company-wide adjustments of -103.3B円 were recorded, and Operating Income of 6,305.7B円 equals segment profit total 8,047.2B円 less this adjustment. High-margin growth in HR Technology was the main driver of profit growth and led the improvement in company-wide profitability.
Profitability: ROE 31.0% (prior year 22.6%, +8.4pt), Operating Margin 17.1% (prior year 13.8%, +3.3pt), Net Income Margin 18.4% (prior year 17.0%, +1.4pt). Note: Net Income Margin on Revenue is Net Income attributable to owners of the parent 4,969.1B円 ÷ Revenue 3兆6,973.5B円 = 13.4%, but using XBRL-based Net Income 6,813.2B円 yields 18.4%. Gross margin improved to 59.2% (prior year 58.6%), and SG&A ratio was contained at 41.3% (prior year 43.8%), expanding operating leverage.
Cash Quality: OCF 6,694.3B円 ÷ Net Income 6,813.2B円 = 0.98x, broadly covering Net Income, and the pre-working capital OCF subtotal of 7,826.0B円 also indicates a high cash conversion rate. FCF 6,196.9B円 (OCF 6,694.3B円 - Capital Expenditure 107.0B円 - Intangible Asset Acquisitions 515.9B円) equals 0.91x of Net Income, maintaining abundant cash generation.
Investment Efficiency: Capex 107.0B円 ÷ Depreciation & Amortization 700.3B円 = 0.15x, a low level indicating restrained growth investment. Intangible asset investment of 515.9B円 also declined from prior year 573.1B円, and re-acceleration of development investment is a medium- to long-term challenge.
Financial Soundness: Equity Ratio 56.8% (prior year 58.3%) remains high. Current Ratio 177.7% (Current Assets 1兆5,551.7B円 ÷ Current Liabilities 8,753.1B円) sufficiently covers short-term liabilities. Interest-bearing debt is effectively zero (long-term borrowings 6.5B円) giving Debt/EBITDA = 0.0x, and net cash (cash & deposits 7,255.8B円 - interest-bearing debt 6.5B円) is 7,249.3B円, indicating a very conservative capital structure.
Operating Cash Flow: 6,694.3B円 (prior year 6,103.6B円, +9.7%), 0.98x of Net Income 6,813.2B円, showing strong cash backing for earnings. From the pre-working capital OCF subtotal 7,826.0B円, working capital changes (Accounts receivable -464.7B円, Accounts payable +359.4B円, etc.) and corporate tax payments -1,230.8B円 were deducted, confirming cash-based earning power.
Investing Cash Flow: -497.4B円 (prior year -610.5B円) mainly due to Capex -107.0B円, intangible asset acquisitions -515.9B円, and acquisitions of investments -942.4B円, offset by disposals and redemptions of investments +954.1B円, keeping net outflow modest.
Financing Cash Flow: -7,434.8B円 (prior year -8,804.8B円) driven by share buybacks -6,787.5B円 and dividend payments -353.5B円, with lease liability repayments -471.7B円 also continuing. Derivative settlement receipts of 134.8B円 partly offset outflows.
FCF: 6,196.9B円 (OCF 6,694.3B円 + Investing CF -497.4B円) is about 17.5x the dividend of 353.5B円 and about 9.9x the combined Capex + intangible asset investment of 622.9B円, indicating abundant capacity to return capital.
Cash Generation Assessment: Strong. OCF/Net Income 0.98x and cash conversion (OCF 6,694.3B円 ÷ EBITDA+S approx. 7,943.9B円) 0.84x are high levels, with OCF not trailing Net Income, implying no concerns on earnings quality. Year-end cash of 7,255.8B円 is secured and liquidity is sufficient even after large returns.
Ordinary Income 6,874.6B円 and Net Income 6,813.2B円 are broadly consistent, indicating limited impact from extraordinary items. Other operating income 131.2B円 (prior year 33.9B円) and other operating expenses 430.7B円 (prior year 398.3B円) were recorded, and non-operating items included widening equity-method investment losses -101.3B円 (prior year -88.1B円) and reduced financial income 347.1B円 (prior year 560.4B円), which constrained ordinary income growth. The decline in financial income is presumed due to the lapse of one-off investment sale gains.
OCF did not fall below Net Income (OCF/Net Income 0.98x), and the accrual ratio is positive (pre-working capital OCF subtotal 7,826.0B円 - Net Income 6,813.2B円 = +1,012.8B円), suggesting conservative revenue recognition. The difference between Comprehensive Income 6,169.9B円 and Net Income 6,813.2B円 of -643.3B円 is due to OCI such as foreign currency translation adjustments from overseas operations +1,208.9B円, and is considered temporary.
There is no sign that non-operating income exceeds 5% of Revenue (financial income 347.1B円 ÷ Revenue 3兆6,973.5B円 = 0.9%), so earnings quality is assessed as recurring.
Full Year guidance is Revenue 4兆300.0B円, Operating Income 7,870.0B円 (+24.8%), Net Income attributable to owners of the parent 6,230.0B円 (+25.4%), and EPS 447.00 yen. Progress rates against current results are Revenue 91.7%, Operating Income 80.1%, Net Income 79.8%, substantially exceeding standard progress (Q2 = 50%). This suggests seasonality skewed to the first half or conservative guidance.
No revisions were made to the guidance this time; prior guidance is maintained. Operating Margin on guidance is expected at 19.5% (current results 17.1%) implying a further +2.4pt improvement, assuming continued SG&A containment and high-margin HR Technology growth. Forex assumption USD/JPY 154 yen (current results 150.7 yen) with a weaker yen assumption is also a profit tailwind.
The large deviation in progress from standard is attributed to HR Technology U.S. ARPJ quarterly growth accelerating +11% → +15% → +19% → +25%, indicating the growth curve picked up in H1. Assuming a recovery phase in labor demand in H2 and ARPJ +18% growth (full-year guidance assumption), the Company expects to achieve Operating Income growth of +24.8%.
Backlog data are not disclosed, but the Staffing business (not in manufacturing/defense) is not subject to backlog consideration. HR Technology is a monthly subscription model, so backlog concepts are weak; future revenue visibility is instead proxied by monthly active jobseekers +18% YoY and employer contract metrics (inferred from ARPJ growth).
Dividends are annual 25 yen (interim 12.5 yen, year-end 12.5 yen). Dividend payout totaling approx. 353.5B円 (based on approx. 1.40B shares outstanding after treasury stock × 25 yen) results in a Payout Ratio of 7.1% against Net Income attributable to owners of the parent of 4,969.1B円, which is very low. The forecast dividend for the full year is 26 yen (total approx. 363B円), implying a forecast Payout Ratio of approx. 5.8% against forecast Net Income 6,230.0B円, further declining.
Share buybacks of 6,787.5B円 were executed this period; combined with dividends of 353.5B円, total returns were 7,141.0B円, representing a Total Return Ratio of approx. 104.8% versus Net Income 6,813.2B円. A 3,500B円 share buyback program launched on April 1 is ongoing, and the Company intends to continue high-level total returns next fiscal year.
Dividend Sustainability: FCF 6,196.9B円 is about 17.5x the dividend of 353.5B円, and OCF 6,694.3B円 is about 18.9x the dividend, with cash & deposits of 7,255.8B円 providing a buffer, making downside risk to dividends minimal. Total Return Ratio approx. 105% can be sufficiently covered by OCF while funding growth investments (Capex + Intangible asset investment 622.9B円), indicating a sound capital allocation directing surplus funds to shareholder returns.
Dividend policy is conservative, but share buybacks provide flexibility to adjust total returns, balancing maintenance of high ROE 31.0% and enhancement of shareholder value.
[Short-term] Recovery in U.S. labor demand toward FY2026 guidance (IHL US NSA JPI job index stabilization) and continued Indeed ARPJ +18% growth are catalysts. Attention will be on whether quarterly ARPJ growth rates (+11% → +15% → +19% → +25% acceleration trend) are sustained and disclosed at the earnings briefing. Progress of the 3,500B円 share buyback and potential additional buyback capacity are short-term share price drivers.
[Long-term] The medium-term target for HR Technology—achieving >20% revenue growth during labor demand recovery and EBITDA+S margin >50%—is a focus. If Indeed AI matching functions (Talent Scout, salary comparison tools, etc.) penetrate and achieve both employer hiring efficiency (50% reduction in hiring time) and jobseeker engagement (monthly active +18% YoY), share expansion is expected in the job advertising segment (USD 34B out of global HR matching TAM USD 302B). Further deepening of AI use in MMT vertical platforms (beauty, gourmet, travel, real estate) and recovery in Japanese staffing labor supply-demand will be medium- to long-term drivers.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| ROE | 31.0% | 10.1% (2.2%–17.8%) | +20.9pt |
| Operating Margin | 17.1% | 8.1% (3.6%–16.0%) | +9.0pt |
| Net Income Margin | 18.4% | 5.8% (1.2%–11.6%) | +12.6pt |
ROE 31.0% exceeds the industry median 10.1% by +20.9pt, and Operating Margin 17.1% exceeds the median 8.1% by +9.0pt. HR Technology’s high-margin structure (margin 37.8%) elevates overall profitability, ranking the Company among the top in the IT & Communications sector.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 3.9% | 10.1% (1.7%–20.2%) | -6.2pt |
Revenue growth 3.9% lags the industry median 10.1% by -6.2pt, indicating a mature stage. However, Operating Income growth +28.5% demonstrates a high-profitability model that prioritizes profit growth over revenue growth.
※ Source: Company compilation
U.S. labor market volatility: Approximately 55% of HR Technology revenue is concentrated in the U.S., so downside in the IHL US NSA JPI (job index) would directly impact revenue. Roles driven by generative AI (Finance, Tech, Marketing, etc.) account for ~25% and are more cyclical. If Indeed monthly active jobseeker growth +18% YoY does not persist, the premise of ARPJ +17% growth could be invalidated, risking stagnation in Operating Margin improvement.
Prolonged accounts receivable collection risk: DSO 63 days indicates extended collection periods, and Accounts receivable rose +13.1% YoY (+742.0B円). If working capital further increases, OCF/Net Income could fall below 1.0x and FCF generation could weaken. The PDF materials provide limited detail on specific collection improvement measures, requiring future disclosure of actions.
Goodwill impairment risk: Goodwill of 5,533B円 (34.7% of Net Assets) is sizable; HR Technology growth slowdown or rising discount rates could trigger impairment. Goodwill to EBITDA+S ratio is about 70% against EBITDA+S approx. 7,943.9B円, within acceptable range, but in an economic downturn delayed achievement of medium-term targets (EBITDA+S margin >50% during labor demand recovery) could crystallize impairment risk.
If Operating Margin 17.1% (+3.3pt) and ROE 31.0% (+8.4pt) improvements are sustained, achieving HR Technology margin targets (EBITDA+S >50%) and company OPM >20% becomes conceivable mid-term. Penetration of Indeed AI matching (70% of sponsored job applications via recommendations) supports simultaneous improvements in employer hiring efficiency and jobseeker engagement; attention will be on whether quarterly ARPJ growth (+11%→+15%→+19%→+25% acceleration) continues.
The Company is conducting highly proactive shareholder returns (Total Return Ratio approx. 105% including dividends and buybacks) while retaining year-end cash 7,255.8B円 and effectively zero interest-bearing debt (Debt/EBITDA = 0.0x), maintaining financial soundness. OCF 6,694.3B円 supports dividends, investment and buybacks, and abundant FCF 6,196.9B円 underpins continuation of returns. The ongoing 3,500B円 buyback program supports continued high ROE 31.0% and shareholder value enhancement.
Continued low Capex / Depreciation ratio = 0.15x and restrained investment lifts short-term CF generation but may require re-acceleration of HR Technology development investment (Intangible asset investment 515.9B円, down from 573.1B円) for sustained growth long-term. Timing of growth investment during U.S. labor demand recovery and improved receivables collection (shortening DSO 63 days) to enhance working capital efficiency are prerequisites for further margin expansion and ROE improvement.
This report is an AI-generated earnings analysis integrating XBRL financial statement data and PDF earnings presentation materials. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company based on public financial statements. Investment decisions are your responsibility; consult a professional advisor as needed.