| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥445.8B | ¥343.1B | +29.9% |
| Operating Income | ¥144.8B | ¥122.1B | +18.6% |
| Ordinary Income | ¥144.7B | ¥121.9B | +18.7% |
| Net Income | ¥107.3B | ¥90.2B | +19.0% |
| ROE | 9.8% | 7.7% | - |
FY2026 May-term Q1 recorded Revenue ¥445.76B (vs prior year ¥343.07B, +¥102.69B, +29.9%), Operating Income ¥144.81B (vs prior year ¥122.07B, +¥22.74B, +18.6%), Ordinary Income ¥144.63B (vs prior year ¥120.10B, +¥24.53B, +20.1%), and quarterly Net Income attributable to owners of the parent ¥107.33B (vs prior year ¥90.16B, +¥17.17B, +19.0%), achieving revenue and profit growth. Revenue recorded double-digit growth for the second consecutive period and accelerated to +29.9% year-over-year. Operating Income increased by +18.6% year-over-year, but the Operating Margin declined to 32.5% from 35.6% in the prior-year period (down 3.1pt), as SG&A ratio rose to 26.0% (prior year 20.5%), which depressed operating leverage. Net Profit Margin remained high at 24.1%, and the effective tax rate was stable at 25.8%.
[Revenue] Revenue ¥445.76B (prior year ¥343.07B, +29.9%) sustained high growth amid expanded consulting demand. As the company operates a single segment (Consulting Business), top-line growth is inferred to have been driven by increased project counts, headcount expansion, and improvement in average billing rates. Trade receivables decreased from ¥366.10B to ¥288.70B, a decline of ¥77.40B (-21.1%), and shortening collection cycles along with progress in invoicing/collections supported cash generation. Gross Profit was ¥260.47B (prior year ¥192.22B, +35.5%), with a gross margin of 58.4%, up 2.4pt from 56.0% in the prior-year period. Improvement in gross margin likely reflects gain of higher value-added projects and improved utilization.
[Profitability] Operating Income ¥144.81B (prior year ¥122.07B, +18.6%) secured profit growth, but SG&A rose sharply to ¥115.80B (prior year ¥70.17B, +65.0%), causing the Operating Margin to fall to 32.5% (prior year 35.6%). SG&A ratio rose to 26.0% (prior year 20.5%, +5.5pt); SG&A growth of +65.0% far outpaced revenue growth of +29.9%, resulting in a short-term reversal of operating leverage. The main drivers of SG&A increase are estimated to be upfront investments associated with strengthening hiring—higher personnel costs and compensation levels—office expansion and IT investments, and share-based compensation expenses of ¥2.01B. Non-operating items were minor (financial income ¥0.08B, financial expenses ¥0.18B), maintaining an operating-led profit structure and recording Ordinary Income ¥144.63B (prior year ¥120.90B, +19.6%). There were no extraordinary gains/losses; Pre-tax Income was ¥144.71B (prior year ¥121.90B, +18.7%). After deducting corporate taxes of ¥37.38B (effective tax rate 25.8%), Net Income was ¥107.33B (prior year ¥90.16B, +19.0%). Comprehensive income totaled ¥107.29B, including Other Comprehensive Loss of △¥0.04B (valuation loss on financial assets measured at fair value through other comprehensive income), indicating limited divergence from Net Income. In conclusion, while revenue and profit growth trends continued, Operating Margin is being temporarily pressured by upfront recognition of SG&A.
[Profitability] Operating Margin 32.5% (prior year 35.6%, -3.1pt), Net Profit Margin 24.1% (prior year 26.3%, -2.2pt), Gross Margin 58.4% (prior year 56.0%, +2.4pt). Despite improved gross margin, Operating Margin declined due to SG&A ratio rising to 26.0% (prior year 20.5%, +5.5pt). ROE was 9.8% (prior year 7.7%, +2.1pt), supported by higher Net Income; financial leverage is low at 1.31x, indicating an equity-driven earnings profile. ROE is in a favorable range within the sector and has improved for two consecutive periods. [Cash Quality] Operating Cash Flow (OCF) ¥135.03B is 1.26x Net Income ¥107.33B, indicating strong cash conversion. In working capital, the substantial reduction in Trade Receivables (¥-77.40B) supported cash generation, and Inventories decreased by ¥3.47B. The accrual ratio is about -1.9%, indicating a high-quality, cash-driven earnings structure. OCF/EBITDA is approximately 0.88x (EBITDA ≒ ¥154.02B: Operating Income ¥144.81B + D&A ¥9.21B), showing healthy cash conversion. [Investment Efficiency] Total Asset Turnover 0.31x (annualized 1.24x), with limited variation due to large cash balances and seasonality. Capital expenditures were ¥3.20B, below D&A ¥9.21B, indicating low capital intensity. Intangible fixed assets increased from ¥0.95B to ¥1.47B (+¥0.52B, +54.7%), showing investment in software, but the absolute amount is minimal at 0.1% of total assets. [Financial Soundness] Equity Ratio 76.4% (prior year 74.3%, +2.1pt), interest-bearing debt ¥2.62B (same level as prior year short-term borrowings ¥2.62B), and Cash and Cash Equivalents ¥663.82B, resulting in a net cash position of ¥661.20B—extremely strong. Current Ratio approximately 340% (current assets ¥1,012.64B / current liabilities ¥297.60B) indicates no short-term liquidity issues. Interest coverage is extremely strong at EBIT ¥144.81B / interest expense ¥0.14B ≒ about 1,034x. Lease liabilities total ¥57.91B (current ¥26.76B, non-current ¥31.15B), representing 17.0% of total liabilities and appropriately diversified, centered on operating leases for offices. Goodwill is ¥191.87B, 13.3% of total assets and 17.5% of equity, attributable to past M&A, but not at a level that significantly undermines balance sheet flexibility.
OCF was ¥135.03B (prior year ¥118.69B, +13.8%), maintaining high-quality cash generation at 1.26x Net Income ¥107.33B. OCF subtotal (before working capital changes) was ¥243.79B (prior year ¥193.54B, +26.0%), adding non-cash expenses such as Pre-tax Income ¥144.71B, D&A ¥9.21B, and share-based compensation ¥2.01B, and benefiting from working capital improvements including a decrease in Trade Receivables ¥77.40B, decrease in Inventories ¥3.47B, and increase in other current liabilities ¥7.33B. Corporate tax payments were ¥108.62B (prior year ¥74.71B, +45.4%), significantly higher year-over-year, and higher tax burden associated with profit expansion pressured OCF. Investing CF was △¥6.63B (prior year △¥2.40B), with expansion investments such as acquisition of tangible fixed assets ¥3.20B and security deposits ¥2.90B, though absolute amounts are small. Free Cash Flow (FCF) was ¥128.40B (OCF ¥135.03B + Investing CF △¥6.63B), up +10.4% from prior year ¥116.29B. Financing CF was △¥187.66B (prior year △¥93.77B), executing dividend payments ¥75.34B and share buybacks ¥104.48B for total shareholder returns ¥179.82B. Total returns exceeded FCF ¥128.40B; the gap was funded by drawing down cash balances, resulting in Cash and Cash Equivalents declining from ¥723.08B to ¥663.82B (△¥59.26B). Lease liability repayments ¥5.21B and repayment of long-term borrowings ¥2.63B were routine, with no major changes in financial strategy.
Earnings quality is generally high. The gap between Operating Income ¥144.81B and Pre-tax Income ¥144.71B is ¥0.10B (financial expenses ¥0.18B − financial income ¥0.08B), indicating minimal impact from non-operating items and a predominantly core-business-driven profit structure. No extraordinary gains/losses were recorded, and there are no temporary profit-boosting factors. OCF ¥135.03B exceeded Net Income ¥107.33B, with an accrual ratio of about -1.9%, indicating cash-led high-quality earnings. The large decrease in Trade Receivables (¥-77.40B) confirms shorter collection cycles and healthy invoicing/collection processes. The difference between Comprehensive Income ¥107.29B and Net Income ¥107.33B is △¥0.04B (valuation loss on financial assets measured at fair value through other comprehensive income), which is negligible; divergence between comprehensive income and profit is limited and earnings quality is stable. The effective tax rate of 25.8% is within the standard corporate tax range and shows no signs of profit manipulation via tax effects.
Full Year / FY forecast was left unchanged: Revenue ¥1,900.00B, Operating Income ¥648.00B (vs prior year +27.2%), Net Income ¥481.00B (vs prior year +27.1%), EPS forecast ¥323.79, Dividend forecast ¥65.00. Q1 progress toward the full year is Revenue 23.5% (¥445.76B/¥1,900.00B), Operating Income 22.4% (¥144.81B/¥648.00B), Net Income 22.3% (¥107.33B/¥481.00B). Compared with a standard quarterly run-rate of 25%, Operating Income and Net Income are about 2.6–2.7pt below (approximately -10% relative), indicating a somewhat cautious start. This is likely due to upfront costs (hiring, personnel expenses, office/IT) pushing up SG&A ratio and temporarily pressuring Operating Margin. On the other hand, Gross Margin improved by +2.4pt year-over-year, and from Q2 onward, improved utilization and price adjustments are expected to absorb costs and restore operating leverage. Management has not revised full-year guidance and maintains that the full-year targets are achievable.
Q1 dividend payments were ¥75.34B (prior year ¥56.27B, +33.9%), and share buybacks were ¥104.48B (prior year ¥30.06B, +247.5%), expanding total returns to ¥179.82B (prior year ¥86.33B, +108.3%). The Total Return Ratio for the quarter was 167.6% relative to quarterly Net Income ¥107.33B, a very high level, and exceeded FCF ¥128.40B by ¥51.42B; the difference was funded by cash balance drawdown. The full-year dividend forecast is ¥65.00 (prior year ¥50.00, +30.0%). Based on an approximate year-end shares outstanding net of treasury stock of 149.9 million shares, annual dividend payments are estimated at approximately ¥9.74B, and the dividend payout ratio versus full-year Net Income forecast ¥481.00B is about 20.2%, a conservative level indicating high dividend sustainability. Treasury stock balance increased from ¥110.25B to ¥214.59B (+¥104.34B on acquisition cost basis), and treasury stock as a percentage of issued shares rose to about 3.6% (from about 3.1% at the end of the prior period). Average shares outstanding during the period were about 151.2 million shares. Share buybacks aim to enhance per-share value and capital efficiency. High cash balances (¥663.82B) and low borrowings provide considerable short-term capacity for returns, but if the pace of buybacks continues through the full year, total returns could exceed FCF and monitoring cash balance trends and OCF sustainability will be key to return policy sustainability.
Rising SG&A ratio and reversal of operating leverage: SG&A growth +65.0% substantially outpaced Revenue growth +29.9%, reducing Operating Margin from 35.6% to 32.5% (-3.1pt). Upfront growth investments—hiring, higher personnel and compensation levels, office expansion, and IT investments—are pressuring margins in the short term. If utilization improvements or price adjustments are delayed, the downward trend in Operating Margin could persist.
Sensitivity to demand fluctuations due to single-segment structure: The company operates a single segment (Consulting Business) and is exposed to the risk of rapid declines in project wins and utilization if macroeconomic conditions deteriorate or corporate IT/strategy investment is curtailed. There is limited visibility into backlog and order intake, making early detection of demand shifts difficult.
Sustainability of total returns and cash balance decline: Q1 total returns ¥179.82B exceeded FCF ¥128.40B by ¥51.42B, and cash decreased from ¥723.08B to ¥663.82B (△¥59.26B). If the pace of buybacks continues through the year, annual total returns could reach roughly ¥720B (quarter × 4), far exceeding assumed full-year FCF (hypothetically Operating CF ¥540B − Investing CF ¥26B ≒ ¥514B). There is a limit to cash drawdown, and there is a risk of revisions to the return policy.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 32.5% | 8.0% (2.2%–15.8%) | +24.4pt |
| Net Profit Margin | 24.1% | 5.8% (1.5%–10.7%) | +18.3pt |
Profitability is markedly high within the industry; both Operating and Net Margins substantially exceed the medians, positioning the company within the top 10% for high profitability.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 29.9% | 9.3% (0.2%–16.9%) | +20.6pt |
Revenue growth outperforms the industry median by 20.6pt and places the company in the top 10% as a high-growth firm.
※ Source: Company compilation
Top-line grew +29.9% and Gross Margin improved to 58.4% (+2.4pt), but Operating Margin declined to 32.5% (-3.1pt) due to a sharp rise in SG&A ratio (+5.5pt). SG&A growth of +65% far exceeds revenue growth, indicating upfront investments in hiring, personnel costs, and office/IT. The key focus for Q2 onward will be whether utilization improvement and pricing adjustments can absorb these costs.
OCF ¥135.03B is 1.26x Net Income with an accrual ratio of -1.9%, reflecting a cash-led high-quality earnings profile and healthy collection cycles as evidenced by the large decrease in Trade Receivables (¥-77.40B). While FCF of ¥128.40B was generated, total returns of ¥179.82B (dividends ¥75.34B + buybacks ¥104.48B) exceeded FCF and reduced cash by ¥59.26B. With Cash ¥663.82B and net cash ¥661.20B, short-term capacity for returns is large, but if buyback pace continues through the year, returns may exceed FCF and monitoring the sustainability of return policy and cash balances is important.
Rule of 40 stands at growth 29.9% + Operating Margin 32.5% = 62.4, a strong level. The company outperforms the industry by +24.4pt in Operating Margin and +20.6pt in Revenue Growth, demonstrating outstanding competitiveness. Equity Ratio 76.4% and net cash ¥661.20B indicate very strong financial resilience, providing ample scope for balancing growth investment and shareholder returns. However, guidance progress is slightly below the standard 25% (Operating Income 22.4%, Net Income 22.3%), indicating a short-term phase of expense front-loading. Normalization of SG&A ratio, quality of order pipeline, and post-hire utilization/productivity will be key to achieving full-year targets and sustaining medium-to-long-term growth.
This report was automatically generated by AI analyzing XBRL earnings release data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the firm based on public financial statements. Investment decisions are your own responsibility; consult a professional advisor if necessary.
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