| Indicator | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥366.6B | ¥300.1B | +22.1% |
| Operating Income / Operating Profit | ¥36.3B | ¥27.6B | +31.4% |
| Ordinary Income | ¥36.6B | ¥27.8B | +31.6% |
| Net Income / Net Profit | ¥28.8B | ¥18.2B | +58.2% |
| ROE | 29.0% | 21.7% | - |
FY2026 Q2 cumulative results recorded Revenue ¥366.6B (YoY +¥66.5B +22.1%), Operating Income ¥36.3B (YoY +¥8.7B +31.4%), Ordinary Income ¥36.6B (YoY +¥8.8B +31.6%), and Net Income attributable to owners of the parent ¥28.8B (YoY +¥10.6B +58.2%), achieving both revenue and profit growth. Gross margin was 28.3% (from 27.7% a year earlier, +60bp), Operating Margin 9.9% (from 9.2%, +69bp), and Net Margin 7.9% (from 6.1%, +180bp), indicating a significant improvement in profitability. The largest structural change this period was a large-scale M&A: ¥281.2B was deployed to acquire subsidiary shares, causing Goodwill to surge to ¥278.1B (prior year ¥5.6B) and Total Assets to expand to ¥474.7B (prior year ¥130.6B), approximately 3.6x. The acquisition was funded primarily by short-term borrowings, raising short-term borrowings to ¥292.4B (effectively zero in the prior year) and sharply reducing the Equity Ratio to 20.9% (prior year 63.2%). A special gain on business transfer of ¥2.39B boosted Net Income by about ¥1.7B (post-tax estimate), so recurring earning power should be evaluated after excluding this item. Operating Cash Flow was ¥30.7B, 1.06x of Net Income ¥28.8B, meaning accounting profits are broadly backed by cash. However, Investment Cash Flow was ▲¥283.7B, producing Free Cash Flow of ▲¥253.0B and reliance on Financing Cash Flow +¥279.8B (short-term borrowings increase +¥317.4B).
【Revenue】Revenue ¥366.6B was a large increase of YoY +¥66.5B (+22.1%). The company operates a single segment of engineer staffing (Technical Staffing Business), where tight labor supply and higher dispatch unit prices contributed. Two consolidated subsidiaries were added during Q2, and the acquired entities’ revenue contributions appear to have significantly boosted growth rates. Cost of Sales was ¥263.0B (YoY +¥41.6B +18.8%), growing less than revenue and increasing Gross Profit to ¥103.6B (YoY +¥24.9B +31.6%), improving Gross Margin to 28.3% (from 27.7%, +60bp). Improvement in utilization rates, higher dispatch unit prices, and variable cost control from scale expansion are likely the main drivers of gross margin improvement.
【Profitability】SG&A was ¥67.3B (YoY +¥11.8B +21.3%), rising slightly less than revenue growth (+22.1%), improving SG&A ratio to 18.4% (from 18.5%, ▲10bp). Operating Income was ¥36.3B (YoY +¥8.7B +31.4%), with Operating Margin rising to 9.9% (from 9.2%, +69bp) as fixed cost absorption contributed. Non-operating income included dividend income ¥0.60B and interest income ¥0.09B, while interest expense ¥0.50B (prior year ¥0.04B) surged due to increased short-term borrowings. Non-operating income ¥1.0B versus non-operating expense ¥0.7B yielded a small net non-operating gain of +¥0.3B. Ordinary Income rose to ¥36.6B (YoY +¥8.8B +31.6%). In extraordinary items a business transfer gain of ¥2.39B was recorded, contributing total extraordinary gains of ¥2.4B while extraordinary losses were ¥0.0B, netting +¥2.4B uplift. Pre-tax profit was ¥39.0B (YoY +¥11.2B +40.2%) and income taxes totaled ¥10.2B (effective tax rate 26.2%), resulting in Net Income ¥28.8B (YoY +¥10.6B +58.2%). In conclusion, the company achieved revenue and profit growth; improvement in core profitability and one-off gains led Net Income growth to substantially exceed Operating Income growth.
【Profitability】Operating Margin 9.9% improved +69bp from 9.2%, Net Margin 7.9% up +180bp from 6.1%. ROE rose to 29.0% (prior year 22.3%), driven by Net Margin improvement and higher financial leverage (Total Assets/Equity 4.78x, prior year 1.55x). Gross Margin 28.3% (+60bp) and SG&A ratio 18.4% (▲10bp) both contributed to improved Gross Profit and Operating Income.
【Cash Quality】Operating Cash Flow ¥30.7B is 1.06x Net Income ¥28.8B, indicating generally good cash backing. OCF/EBITDA (EBITDA ≒ ¥40.0B — Operating Income ¥36.3B + Depreciation ¥3.6B) is approximately 0.77x, below the strong benchmark (>0.9x), with working capital expansion impairing cash conversion. Days Sales Outstanding (DSO) is about 70 days (Accounts Receivable ¥70.8B ÷ (annualized revenue ¥366.6B × 2) × 365 days), a significant extension from about 50 days a year earlier, and extended collection terms are affecting liquidity.
【Investment Efficiency】Total Asset Turnover on an annualized basis is approximately 0.77x (Revenue ¥366.6B × 2 ÷ Total Assets ¥474.7B), a large decline from about 2.30x in the prior year. Rapid increase in intangible assets from M&A pushed up Total Assets and lowered turnover. Goodwill is ¥278.1B, representing 58.6% of Total Assets and 280.2% of Equity, shifting the balance sheet toward intangible-asset concentration. Capital Expenditure was ¥4.7B versus Depreciation ¥3.6B, yielding a CapEx/Depreciation ratio of 1.29x, indicating growth investments at a reasonable level.
【Financial Soundness】Equity Ratio fell sharply to 20.9% (prior year 63.2%), and D/E ratio turned to 3.78x (virtually zero previously), indicating high leverage. Current Ratio is 45.6% (Current Assets ¥168.2B / Current Liabilities ¥369.0B), Quick Ratio 45.6%, signaling liquidity at cautionary levels. Against short-term borrowings of ¥292.4B, cash is ¥88.6B (Cash/Short-term Liabilities 0.30x), showing weak refinancing resilience. Interest coverage is about 73x (Operating Income ¥36.3B / Interest Expense ¥0.5B), indicating sufficient interest-paying capacity at present. Debt/EBITDA is about 7.3x (short-term borrowings ¥292.4B ÷ EBITDA ≒ ¥40B), and Debt/Capital about 74.7%, placing the company in a high-leverage range.
Operating Cash Flow ¥30.7B increased YoY +37.4%. Pre-tax profit ¥39.0B plus Depreciation ¥3.6B and Goodwill amortization ¥3.0B were added back; working capital changes included Accounts Receivable increase ▲¥2.0B, Other Liabilities increase ¥3.2B, and income taxes paid ▲¥12.4B. Operating CF subtotal (before working capital changes) was ¥42.8B and is 1.49x Net Income ¥28.8B, indicating good quality of accounting profit. Investment CF was ▲¥283.7B, mostly due to subsidiary share acquisitions ▲¥281.2B; CapEx ▲¥4.7B was within normal range. Free Cash Flow was a sizable negative ▲¥253.0B and was financed by Financing CF +¥279.8B. Financing CF comprised short-term borrowings increase +¥317.4B and short-term borrowings repayments ▲¥25.0B for a net raise of +¥292.4B, dividend payments ▲¥13.4B, and share buybacks ▲¥8.0B. Cash increased from ¥61.5B at the beginning of the period to ¥88.6B (+¥26.7B), reflecting a temporary cash build from borrowings. Overall, operating cash generation is solid, but the structure of funding the large M&A via short-term borrowings weakens cash conversion (OCF/EBITDA ≒ 0.77x); early realization of integration synergies and working capital efficiency improvements are key going forward.
Of Net Income ¥28.8B, a business transfer gain ¥2.39B (post-tax estimate about ¥1.7B) was a temporary contributor, so recurring earning power is estimated at roughly ¥27B. The difference from Operating Income ¥36.3B to Ordinary Income ¥36.6B is a small non-operating net of +¥0.3B, indicating that earnings at the ordinary level are largely business-derived. Operating Cash Flow ¥30.7B is 1.06x Net Income ¥28.8B, showing high consistency between accounting profit and cash and limited concerns over earnings manipulation. Comprehensive income ¥28.8B equaled Net Income, with foreign currency translation adjustment ▲¥0.0B, indicating minimal FX impact. Goodwill amortization ¥3.0B (about 7% of EBITDA) is a Japan GAAP-specific expense and would slightly suppress Net Income compared with IFRS peers. The increase in Accounts Receivable (DSO 70 days) signals lengthening collection terms and a structure that requires time to convert revenue into cash, leaving some concerns over earnings quality from an accrual perspective. Considering the disappearance of the special gain, evaluating Net Income trends from a recurring-earnings perspective is appropriate for the coming year.
Full Year / FY guidance is unchanged at Revenue ¥570.0B (YoY +55.5%), Operating Income ¥30.0B (YoY ▲17.4%), Ordinary Income ¥25.5B (YoY ▲30.4%), Net Income ¥16.6B, and EPS ¥43.25. As of Q2 cumulative, Revenue has reached 64.3% of full-year guidance, Operating Income 121.1%, and Ordinary Income 143.5% progress — revenue is on track while profits have already materially exceeded full-year forecasts. The guidance is likely conservative and may incorporate expected integration costs and one-time expenses in H2, or reflect the likely disappearance of the Q2 special gain ¥2.4B and expected increases in interest costs. The projected year-on-year declines in Operating Income and Ordinary Income likely reflect anticipated higher full-year Goodwill amortization and increased interest expense from short-term borrowings. There is substantial scope for revision; if integration synergies materialize and working capital improves, upward revisions are possible.
Interim dividend at Q2 end was ¥30, and the year-end forecast is ¥25, making total annual dividends ¥55. However, a 2-for-1 stock split was implemented effective October 1, 2025, so on a post-split basis the annual dividend is effectively ¥15 equivalent (pre-split totals: year-end ¥50 + interim ¥30 = ¥80). Against Net Income ¥28.8B, interim dividend payments were ¥13.4B, giving a computed Payout Ratio of about 46.5% (pre-split adjusted basis about 76.4%), while based on full-year guidance the Payout Ratio is 62.9%, a high level. Additionally, the company executed share buybacks of ¥8.0B; combined with dividends ¥13.4B, total shareholder returns were ¥21.4B, implying a Total Return Ratio of about 74% relative to Net Income ¥28.8B (pre-split dividend payment basis implies about 104% estimated). With Free Cash Flow at ▲¥253.0B, the funding for shareholder returns is effectively dependent on external financing and thus sustainability is limited. Future dividend policy will be influenced by the extension of short-term borrowing maturities, improvements in OCF/EBITDA, and whether impairment risks materialize. If prioritizing growth investment while maintaining stable dividends, smoothing total returns and restoring retained earnings would be desirable.
M&A Integration Risk: The acquisition of subsidiary shares for ¥281.2B added two consolidated subsidiaries and recorded Goodwill ¥278.1B (280% of equity). If acquired-company employee retention, utilization rates, or delays in system integration lead to deteriorating profitability, Goodwill impairment (potential capital loss risk up to approximately ¥200B) could occur, further pressuring the Equity Ratio 20.9%. Delays in synergy realization or rising discount rates from higher interest rates are also potential drivers of impairment test failure.
Liquidity & Refinancing Risk: Current Ratio 45.6%, Cash/Short-term Liabilities 0.30x, short-term borrowings ¥292.4B and a heavy short-term liability profile create a maturity mismatch. If financing market conditions worsen or credit spreads widen, borrowing terms may deteriorate or funding could become unavailable, rapidly worsening liquidity. With Debt/EBITDA 7.3x and D/E 3.78x, sensitivity to interest rate increases and covenant breaches is high.
Working Capital & Cash Conversion Risk: DSO about 70 days and a large increase in Accounts Receivable to ¥70.8B (YoY +71%) show significantly extended collections. OCF/EBITDA about 0.77x indicates weak cash conversion; if order conditions deteriorate or counterparties delay payments, Operating Cash Flow volatility could increase and hinder availability of funds to repay short-term borrowings.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 9.9% | 8.1% (3.6%–16.0%) | +1.8pt |
| Net Margin | 7.9% | 5.8% (1.2%–11.6%) | +2.0pt |
Profitability exceeds the industry median, ranking the company toward the top in Operating and Net Margins.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 22.1% | 10.1% (1.7%–20.2%) | +12.0pt |
Revenue growth rate substantially outperforms the industry median, achieving high growth including M&A contributions.
※ Source: Our company’s aggregation of public financial statements
The large-scale M&A has transformed the capital structure: Goodwill ¥278.1B (280% of equity) and short-term borrowings ¥292.4B shifted the company to intangible-asset concentration and high leverage. Early realization of integration effects (maintaining utilization and unit prices, eliminating duplicate costs) and extension/terming out of short-term debt are top priorities; monitoring Goodwill impairment risk and refinancing resilience is critical.
Of Net Income ¥28.8B, a business transfer gain ¥2.4B (post-tax estimate about ¥1.7B) was a one-off uplift, with recurring earning power estimated around ¥27B. The full-year guidance projecting YoY declines in Operating and Ordinary Income appears conservative, likely reflecting higher full-year Goodwill amortization and interest expense; there is room for upgrades depending on integration progress. DSO about 70 days weakens cash conversion, and improving OCF/EBITDA (0.77x) and working capital efficiency will be key next fiscal year.
Payout Ratio 62.9% and Total Return Ratio about 74% (pre-split basis estimated about 104%) mean shareholder returns are materially funded via external financing given Free Cash Flow ▲¥253.0B. With Current Ratio 45.6% and Cash/Short-term Liabilities 0.30x, liquidity is at cautionary levels and refinancing conditions and interest rate movements will affect dividend sustainability. It is advisable to smooth total returns and rebuild internal reserves while balancing growth investments.
This report is an AI-generated earnings analysis document produced by analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by our firm from publicly available financial statements. Investment decisions are your responsibility; please consult a professional advisor if necessary.