Insource (6200) FY2026 Q1 Earnings Report

Quick View

Executive Summary

The Company recorded higher revenue but lower profit for the current period, with the primary reason for the decline in margins being the fact that the increase in SG&A expenses outpaced revenue growth. Revenue was ¥37.6B (+7.2% YoY), Operating Income was ¥14.0B (-4.0% YoY), and Ordinary Income was also ¥14.0B (-4.0% YoY). Net Income increased to ¥9.6B (+3.1% YoY), but this was attributable to the absence of the ¥1.1B impairment loss on investment securities recorded in the same period of the previous year and differs from the trend in operating-stage profitability. Although the gross profit margin remained at a high level of 76.3%, it declined from the same period of the previous year, while the increase in the SG&A ratio to 39.1% was the primary factor behind the Operating Income margin of 37.2% (approximately 4.4pt lower YoY).

Factors Affecting Results

【Revenue】Revenue increased 7.2% YoY to ¥37.6B. Progress against the Company's full-year revenue forecast of ¥168.0B (+15.8% YoY) was 22.4%, slightly below the standard 25% level.

【Profit and Loss】Cost of sales increased 12.9% YoY, while SG&A expenses increased 16.7% YoY; both grew at a pace exceeding the 7.2% revenue growth rate. The increase in SG&A expenses was particularly pronounced, resulting in declines in both the gross profit margin, to 76.3% (77.5% in the same period of the previous year), and the Operating Income margin, to 37.2% (41.6% in the same period of the previous year). Ordinary Income also remained at approximately the same level as Operating Income, at ¥14.0B, with no offset from non-operating income and expenses. Meanwhile, Net Income increased to ¥9.6B (+3.1%), but this was largely attributable to the comparative effect of the ¥1.1B impairment loss on investment securities recorded in the same period of the previous year but not incurred in the current period. In terms of underlying earnings trends, the results should be characterized as higher revenue but lower profit.

Key Financial Indicators

【Profitability】The Operating Income margin of 37.2% and Net Income margin of 25.6% were both at high levels, but the Operating Income margin declined from 41.6% in the same period of the previous year, while the gross profit margin of 76.3% was also below the previous year's 77.5%.【Cash Quality】Cash and deposits amounted to ¥60.5B, accounting for 42.3% of total assets and maintaining a substantial level approximately 2.1 times current liabilities of ¥28.7B.【Investment Efficiency】Annualized ROE was 34.0%, indicating strong capital efficiency, primarily due to the high Net Income margin and asset turnover.【Financial Soundness】The Equity Ratio was 79.3% (up from an equivalent 73.7% in the previous year), while total liabilities of ¥29.6B were extremely small relative to net assets of ¥113.4B, indicating limited financial leverage.

Cash Flow Analysis

Although a statement of cash flows was not disclosed, cash trends can be reviewed based on changes in the balance sheet. Cash and deposits decreased by ¥21.4B YoY (-26.1%) to ¥60.5B, while accounts receivable increased to ¥20.0B (+6.7% YoY), and inventories also increased to ¥0.7B. The decline in cash is considered to reflect cash outflows due to changes in working capital and capital allocation, including dividends and share repurchases. Nevertheless, cash remained at approximately 2.1 times current liabilities, and together with a quick ratio of 283.5%, there were no concerns regarding short-term liquidity.

Earnings Quality

Current-period Net Income increased 3.1% YoY to ¥9.6B, but this increase was largely attributable to the reversal of the temporary factor that the ¥1.1B impairment loss on investment securities recorded in the same period of the previous year did not occur in the current period. Since Operating Income declined 4.0% YoY, recurring earnings power has instead weakened. Non-operating income and expenses were close to zero, and the difference between Ordinary Income and Net Income was primarily limited to the deduction of ¥4.4B in income taxes and other taxes. Comprehensive Income was ¥9.5B, approximately in line with Net Income of ¥9.6B, and the change in valuation difference on other securities (-¥0.1B) was small; therefore, the divergence between Net Income and Comprehensive Income was limited. Overall, the increase in profit for the current period resulted from the reversal of a temporary factor, and the declining trend in Operating Income should be given priority when assessing earnings quality.

Earnings Forecast and Guidance

The Company plans full-year Revenue of ¥168.0B (+15.8% YoY), and Operating Income and Ordinary Income of ¥68.0B each (+13.7% and +13.4% YoY, respectively). Progress for the current period was 22.4% for Revenue, 20.6% for Operating Income, and 20.8% for Net Income (¥9.6B against the full-year forecast of ¥46.3B); all were below the simple period-allocation benchmark of 25%. In particular, the lower progress for Operating Income than for Revenue indicates that improving SG&A efficiency or accelerating revenue growth in the second half will be necessary to achieve the full-year plan.

Shareholder Returns

The Company has announced a full-year dividend forecast of ¥29.5 per share. The data for the same period of the previous year records actual dividends of ¥0, suggesting a dividend policy centered on the year-end dividend. Based on forecast EPS of ¥55.15, the Payout Ratio is approximately 53.5%. The conservative financial foundation, including cash and deposits of ¥60.5B and an Equity Ratio of 79.3%, can be considered one factor supporting the ability to pay this level of dividends.

Risk Factors

1. Margin pressure from increases in SG&A expenses: SG&A expenses increased 16.7% YoY, substantially exceeding the revenue growth rate of +7.2%; if this gap persists, it could cause a further decline in the Operating Income margin.

2. Demand fluctuation risk: Demand for corporate training and human resource development services is susceptible to corporate education investment budgets, and changes in economic conditions or the employment environment may affect the revenue growth rate.

3. Declining cash liquidity: Cash and deposits decreased by -26.1% YoY (-¥21.4B). Although liquidity remains high, the trend toward shrinking net cash due to capital allocation and changes in working capital requires monitoring.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (healthcare)

Profitability and Returns

The Company's Operating Income margin and Net Income margin are considered to be among the higher levels within the industry.

Growth and Capital Efficiency

The revenue growth rate indicates steady revenue growth, but its relative level within the industry is unclear due to limitations in the median data.

※Source: Compiled by the Company

Key Points in the Earnings Results

1. The Company recorded higher revenue but lower profit for the current period, with the increase in SG&A expenses (+16.7%) exceeding revenue growth (+7.2%) as the primary reason for the decline in the Operating Income margin. Improving SG&A efficiency in the second half will be the key to achieving the full-year plan.

2. The increase in Net Income (+3.1%) resulted from the temporary factor of the reversal of the impairment loss on investment securities recorded in the same period of the previous year. When assessing recurring earnings power, the decline in Operating Income (-4.0%) should be given greater weight.

3. The conservative financial structure, consisting of an Equity Ratio of 79.3%, a debt-to-equity ratio of 0.26x, and cash and deposits of ¥60.5B, indicates financial flexibility for business investment and shareholder returns.

Theoretical Share Price (Reference Value)

Sensitivity: ¥274–¥290 at ±1% for the cost of equity, and ¥278–¥288 at ±0.1 for ω.

Notes:

• Net assets as of the end of the quarter are used (there is a timing difference from the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model (Ohlson type; explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on 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.)

---

This report is an earnings analysis document automatically generated by AI based on XBRL earnings release 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 where necessary.

---End of Report---