Recruit Holdings Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.79T
• Operating Income: ¥313.52B
• Net Income: ¥248.33B
• EPS: ¥173.12

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

Recruit Holdings reported FY2026 Q2 consolidated IFRS results with resilient profitability despite flat top-line trends. Revenue was 17,935.84, down 0.3% YoY, indicating a soft demand backdrop or mix effects, but cost discipline and operating leverage lifted operating income to 3,135.25 (+16.2% YoY). Gross profit was 10,571.84, implying a robust gross margin of 58.9%, consistent with the company’s high-value, platform-driven business model. SG&A was 7,691.86, equating to 42.9% of revenue; the YoY margin improvement at the operating level suggests effective expense control and possibly favorable mix in higher-margin segments. EBITDA reached 3,681.95 with a 20.5% margin, reflecting solid underlying cash earnings supported by disciplined D&A (546.70). Net income was 2,483.80 (+11.6% YoY), delivering a net margin of 13.8%, aided by a normalized effective tax rate of 23.1%. DuPont analysis shows ROE of 16.8% driven by a healthy net margin (13.8%), moderate asset turnover (0.703x), and prudent financial leverage (1.72x). The balance sheet remains strong with total assets of 25,519.90 and an equity ratio of 57.6%, underscoring structural solvency strength. Liquidity appears ample with cash and equivalents of 8,086.25 (31.7% of total assets), though current liability details are unreported. Operating cash flow was 2,790.46, yielding an OCF/Net income ratio of 1.12x—indicative of good earnings quality. Free cash flow was 2,491.70, as capex remained modest at 43.03, highlighting the asset-light characteristics of the business. Capital returns were significant: share repurchases totaled 5,325.66 and dividends paid were 177.65, resulting in financing cash outflows of 5,971.22. The calculated payout ratio is a conservative 15.1% and FCF coverage of dividends is a robust 6.64x, suggesting high dividend sustainability. Debt appears minimal with reported long-term loans of 10.11; the reported debt-to-equity ratio of 0.77x likely reflects broader IFRS interest-bearing liabilities (e.g., lease liabilities) not fully itemized here. Accounts receivable of 5,650.69 and accounts payable of 3,775.43 are material, but working capital dynamics cannot be fully assessed due to unreported current liabilities. Overall, Recruit is balancing near-flat revenue with margin expansion, strong cash generation, and substantial shareholder returns, supported by a solid capital structure. Data limitations include unreported non-operating items, current liabilities, detailed debt composition, and R&D, which constrain some ratio precision and segment interpretation.

Profitability Analysis

ROE_decomposition: ROE 16.8% = Net margin 13.8% x Asset turnover 0.703x x Financial leverage 1.72x. This indicates returns are driven primarily by strong profitability, with moderate capital efficiency and disciplined leverage. margin_quality: Gross margin 58.9% reflects strong platform economics; operating margin ~17.5% (3,135.25 / 17,935.84) improved despite -0.3% YoY revenue, showing SG&A control and favorable mix. EBITDA margin 20.5% demonstrates healthy recurring cash earnings. Net margin 13.8% is solid, supported by a 23.1% effective tax rate and no evident non-recurring items in the provided data. operating_leverage: Revenue -0.3% YoY alongside operating income +16.2% suggests positive operating leverage via cost optimization and mix shift to higher-margin activities. D&A remains modest (546.70) relative to revenue (3.0%), reinforcing an asset-light cost base that supports incremental margins.

Growth Assessment

revenue_sustainability: Top-line was essentially flat (-0.3% YoY), implying cautious demand conditions in certain verticals or FX/mix headwinds. Given Recruit’s exposure to HR Tech and marketing solutions, cyclical sensitivity remains a factor; sustainability hinges on labor market conditions and ad demand normalization. profit_quality: Profit growth outpaced sales, driven by cost discipline and margin expansion. EBITDA growth and stable tax rate suggest underlying earnings quality is sound. Equity method loss (-23.40) is small versus consolidated profits and not a material drag. outlook: With strong cash generation and ample liquidity, the company is positioned to continue investing in product, sales efficiency, and selective M&A while maintaining returns to shareholders. Near-term growth likely depends on improving hiring activity and continued monetization/efficiency in HR platforms; absent a clear demand re-acceleration, margin preservation will be the key earnings lever.

Financial Health

liquidity: Cash and equivalents of 8,086.25 are sizable (31.7% of assets). Current assets total 14,703.78; current liabilities are unreported, so conventional liquidity ratios (current/quick) cannot be computed here. Working capital reported equals current assets due to missing current liabilities, a data limitation. solvency: Total equity is 14,814.77 (equity ratio 57.6%), indicating a strong solvency position. Reported long-term loans are minimal at 10.11. The reported debt-to-equity ratio of 0.77x likely includes lease liabilities and other interest-bearing items not itemized; even so, cash holdings point to a net cash or low net leverage profile. capital_structure: Treasury shares stand at 143,550,623, highlighting ongoing buyback activity. Retained earnings of 16,063.48 exceed total equity, which can occur under IFRS due to offsets from treasury stock and accumulated other comprehensive income; this is not necessarily a quality issue but reflects capital return history and OCI movements.

Cash Flow Quality

earnings_quality: OCF/Net income at 1.12x indicates solid cash conversion, consistent with limited working capital drag and manageable non-cash items. EBITDA comfortably covers taxes and capex. FCF_analysis: Free cash flow was 2,491.70, driven by healthy OCF and low capex (43.03). The business exhibits asset-light characteristics, enabling robust FCF even in a flat revenue environment. working_capital: Accounts receivable of 5,650.69 and accounts payable of 3,775.43 are significant; without current liabilities detail, full turnover analysis is constrained. No inventory data is reported, consistent with the service/platform-heavy model. Overall, no signs of unusual working capital strain are evident in the period’s OCF.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio is 15.1%, indicating ample headroom relative to earnings. Annual DPS data is unreported, but the paid dividends of 177.65 appear modest versus profits. FCF_coverage: FCF coverage of dividends is approximately 6.64x, signifying strong sustainability under current cash generation. policy_outlook: Given strong balance sheet liquidity and consistent FCF, the company can likely maintain a stable-to-improving shareholder return framework, balancing dividends with opportunistic buybacks. The FY2026 Q2 period saw significant repurchases (5,325.66), signaling a preference for buybacks alongside a conservative cash dividend.

Risk Assessment

Business Risks:

• Cyclical exposure to hiring demand and advertising budgets affecting HR Tech and marketing solutions.
• Competitive pressure in global online job search and recruitment platforms.
• Regulatory and labor market policy changes across key geographies.
• FX volatility impacting overseas revenues and profits under IFRS translation.
• Execution risks in technology investment and product monetization.
• Potential integration risks from M&A activities, given historical inorganic growth.

Financial Risks:

• Limited visibility on total interest-bearing liabilities (including leases) due to unreported breakdowns.
• Working capital seasonality can affect OCF in shoulder quarters.
• Concentration of intangible assets and goodwill not disclosed here; potential impairment risk cannot be assessed from provided data.
• Share buybacks reduce cash buffers if maintained at elevated levels.

Key Concerns:

• Flat revenue trajectory (-0.3% YoY) implies dependence on margin management for earnings growth.
• Data gaps (non-operating items, current liabilities, detailed debt composition) constrain full ratio analysis and coverage assessment.
• Macro sensitivity in core end-markets could limit near-term acceleration.

Investment Implications

Key Takeaways:

• Operating income up 16.2% YoY on flat revenue, highlighting strong cost control and mix benefits.
• High-quality margins: gross 58.9%, operating ~17.5%, EBITDA 20.5%, net 13.8%.
• ROE 16.8% driven by profitability and moderate leverage; capital efficiency remains solid.
• Robust FCF of 2,491.70 with low capex (43.03) underscores asset-light model.
• Strong balance sheet with 57.6% equity ratio and sizable cash (8,086.25).
• Shareholder returns skew to buybacks (5,325.66) with a conservative dividend (payout 15.1%).
• OCF/Net income at 1.12x indicates healthy cash conversion.

Metrics to Watch:

• Revenue growth re-acceleration in HR Tech and marketing solutions segments.
• Operating margin sustainability amid potential marketing and R&D reinvestment.
• OCF/Net income and working capital trends (receivables/payables days).
• FX impacts on reported revenue and margins.
• Total interest-bearing liabilities including lease obligations and resulting net cash position.
• Equity method gains/losses trajectory and any non-operating items.
• Buyback pace versus cash balances and FCF.

Relative Positioning: Within the Japanese and global human capital/online recruitment space, Recruit maintains a strong competitive and financial position characterized by superior margins, robust FCF, and a conservative dividend complemented by active buybacks; the primary near-term differentiator will be its ability to reignite revenue growth while preserving elevated margin levels.

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