COPRO-HOLDINGS.Co.,Ltd. FY2027 Q1 Earnings Report

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Executive Summary

While revenue achieved substantial growth of +68.0% year on year, net income declined due to higher interest expense and an increase in the effective tax rate. Revenue was ¥139.4B, Operating Income was ¥9.6B (+55.1% YoY), and Ordinary Income was ¥8.4B (+36.8% YoY), whereas Net Income remained at ¥3.6B (-4.7% YoY). The gross margin improved to 29.8%, but the SG&A ratio increased, causing the Operating Income margin to decline slightly from the previous year’s level to 6.9%. In addition, interest expense of ¥1.3B and an increase in the effective tax rate to 56.9% compressed margins below the Ordinary Income level.

Factors Driving Earnings Fluctuations

【Revenue】Revenue was ¥139.4B, representing substantial growth of +68.0% from ¥83.0B in the same period of the previous year. The Company operates in a single segment, the Engineer Staffing Business, and expansion in the number of engineers deployed and business scale through M&A appear to have driven top-line growth.

【Profit and Loss】Operating Income increased to ¥9.6B (+55.1% YoY) in line with higher revenue, but its growth rate fell short of the 68.0% revenue growth rate, leaving the Operating Income margin at 6.9%, broadly flat. While the gross margin improved to 29.8%, the SG&A ratio rose to 22.9%, confirming a slowdown in operating leverage whereby profit growth lagged revenue growth. Ordinary Income was ¥8.4B (+36.8% YoY). Interest expense increased sharply from ¥0.001B to ¥1.3B, pushing up non-operating expenses and slowing growth from Operating Income. Net Income declined to ¥3.6B (-4.7% YoY), mainly due to the higher effective tax rate. In conclusion, although the Company achieved higher revenue and Operating Income, Net Income declined; the results can therefore be characterized as a mixed performance of revenue and operating profit growth alongside net income decline.

Segment Analysis

As the Company operates in a single segment, the Engineer Staffing Business, no segment-level disclosure is provided.

Key Financial Indicators

【Profitability】The Operating Income margin was 6.9% and the Net Income margin was 2.6%, indicating that margins have struggled to expand despite revenue growth. ROE was 3.9%, while capital efficiency equivalent to ROIC was also at a low level.【Cash Quality】Accounts receivable were ¥71.0B, large relative to the scale of revenue, suggesting a lengthening collection period. Cash and deposits were ¥80.1B, down ¥8.5B from the previous year, indicating a gradual decline in available cash.【Investment Efficiency】The total asset turnover ratio was low. Goodwill of ¥271.1B accounted for 58.6% of total assets and 290.5% of net assets, resulting in an asset structure heavily weighted toward intangible assets.【Financial Soundness】The Equity Ratio was 20.2%. Current assets of ¥162.9B versus current liabilities of ¥364.7B resulted in a current ratio of approximately 44.7%. Short-term borrowings of ¥292.4B accounted for nearly all interest-bearing debt, indicating a structure highly dependent on short-term funding.

Cash Flow Analysis

As no cash flow statement has been disclosed, funding trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥80.1B, down ¥8.5B from ¥88.6B in the same period of the previous year, suggesting that increased working capital requirements associated with business expansion put pressure on cash. Accounts receivable were ¥71.0B and remained broadly flat year on year, although collection delays may have become relatively more significant as the scale of revenue expanded. Short-term borrowings were ¥292.4B, remaining at the same level as the previous year, indicating that funding needs for business expansion have primarily been addressed through short-term borrowings. Given that interest expense increased to ¥1.3B for the quarter, the rising cost of debt may affect future cash-generation capacity.

Quality of Earnings

Profit improved steadily through the operating level during the current period, but was substantially diluted at the net income level by higher non-operating expenses and tax expenses. Non-operating income was minimal at ¥0.1B, while non-operating expenses consisted primarily of ¥1.3B in interest expense, clearly weighing on Ordinary Income of ¥8.4B. Extraordinary gains and losses were nearly zero, and no impact from temporary factors on earnings was observed; changes in current-period profit were therefore attributable to changes in the recurring earnings structure. Corporate income taxes and other taxes were ¥4.8B against Profit Before Tax of ¥8.4B, resulting in an effective tax rate of approximately 56.9%. This high tax rate caused a significant divergence between Ordinary Income and Net Income, resulting in a -4.7% decline in net income. It will be necessary to monitor whether this tax burden normalizes from the next quarter onward.

Earnings Forecast and Guidance

Progress toward the Full-Year forecast was 139.4B/576.5B, or 24.2%, for revenue; 9.6B/38.8B, or 24.8%, for Operating Income; and 8.4B/34.3B, or 24.5%, for Ordinary Income. All were broadly in line with the simple 25% benchmark for progress. Net Income, however, was 3.6B/16.6B, or 21.8%, lagging the other indicators. If higher interest expense and the elevated effective tax rate continue into the second half of the year and beyond, normalization of the tax rate will be key to achieving Full-Year Net Income. The Full-Year forecast calls for year-on-year revenue growth of +57.2%, Operating Income growth of +6.7%, and Ordinary Income decline of -6.5%, implying a further slowdown below the Ordinary Income level in the second half. It should also be noted that the earnings forecast was revised during the current quarter.

Shareholder Returns

The Full-Year dividend forecast is ¥45 per share. Based on the Full-Year forecast EPS of ¥43.31, the Payout Ratio is approximately 104%, resulting in a dividend plan exceeding the current-period profit level. The dividend forecast has not been revised. The Company conducted a 2-for-1 stock split effective October 1, 2025. As annual dividends contain amounts before and after the split, simple aggregation is not possible and this point should be noted. Given the current financial structure, including an Equity Ratio of 20.2% and a current ratio of approximately 44.7%, the high Payout Ratio requires continued monitoring from the perspective of balancing retained earnings and cash-generation capacity.

Risk Factors

1. Liquidity and refinancing risk: The current ratio is approximately 44.7%, while short-term borrowings of ¥292.4B are high relative to cash and deposits of ¥80.1B, indicating substantial dependence on short-term liabilities. Short-term borrowings account for nearly all interest-bearing debt, creating rollover risk due to concentrated maturities.

2. Goodwill and intangible asset impairment risk: Goodwill of ¥271.1B amounts to 58.6% of total assets and 290.5% of net assets, while total intangible assets account for 59.6% of total assets. If future profitability falls below plan, a significant impairment charge could materially erode shareholders’ equity.

3. Risk of higher interest and tax burdens: Interest expense rose sharply from the minimal level of the previous year to ¥1.3B, while the effective tax rate was also high at approximately 56.9%. These two factors widened the divergence between Ordinary Income and Net Income, and changes in the interest-rate environment or tax-related factors may continue to increase earnings volatility.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

Profitability was below the industry median, with the Net Income margin particularly low within the industry.

Growth and Capital Efficiency

The revenue growth rate significantly exceeded the industry median, demonstrating standout growth within the industry.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. While revenue increased by +68.0%, Net Income declined by -4.7%, confirming a structure in which slowing operating leverage and higher interest and tax burdens constrained bottom-line growth.

2. Goodwill accounts for 58.6% of total assets and 290.5% of net assets. The balance sheet’s heavy weighting toward intangible assets makes it highly sensitive to the results of future impairment testing.

3. The current ratio of approximately 44.7% and high dependence on short-term borrowings are monitoring points from a funding-structure perspective. It is also notable that, in terms of Full-Year progress, only Net Income is lagging the other indicators.

Theoretical Share Price (Reference Value)

Sensitivity: ¥285–¥299 for a ±1% change in the Cost of Equity, and ¥291–¥293 for a ±0.1 change in ω.

Notes:

• Net Income is substantially compressed relative to Operating Income due to tax burdens, acquisition-related expenses, and non-controlling interests, among other factors (Net Income ÷ Operating Income 43%). This value reflects that compression at face value; if these factors are temporary, underlying earnings power may be higher.
• Goodwill represents a high proportion of net assets, and the assumptions would change materially if impairment were recognized.
• Net assets as of the quarter-end are used; there is a timing difference relative to the Full-Year forecast.
• As 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 solely from 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 the future share price.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings-summary 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 as necessary.

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