| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥382.5B | ¥324.8B | +17.7% |
| Operating Income | ¥45.8B | ¥34.5B | +32.8% |
| Profit Before Tax | ¥42.3B | ¥31.8B | +33.2% |
| Net Income | ¥27.4B | ¥24.0B | +14.0% |
| ROE | 19.1% | 19.3% | - |
For the fiscal year ended March 2026, LITALICO reported Revenue of ¥382.5B (YoY +¥57.6B +17.7%), Operating Income of ¥45.8B (YoY +¥11.3B +32.8%), Ordinary Income of ¥16.8B (YoY +¥0.7B +4.1%), and Net Income attributable to owners of parent of ¥27.4B (YoY +¥3.4B +14.0%). Operating margin improved to 12.0% from 10.6% a year earlier (+1.4pp), and gross profit margin expanded to 39.0% from 37.2% (+1.8pp), reflecting improved profitability. By segment, the core Employment Support Business maintained high levels with Revenue of ¥141.6B (+13.0%) and Operating Income of ¥43.6B (-5.2%, margin 30.8%). Child Welfare Business recorded Revenue of ¥109.5B (+24.3%) and Operating Income of ¥10.2B (+1,137.8%), turning significantly profitable. Platform Business achieved Revenue of ¥54.8B (+20.9%) and Operating Income of ¥17.9B (+30.7%, margin 32.7%). Overseas Business posted Revenue of ¥36.5B (+28.7%) and Operating Income of ¥8.6B (+13.9%, margin 23.5%). All segments delivered revenue growth, resulting in a positive top- and bottom-line performance.
[Revenue] Revenue totaled ¥382.5B (YoY +17.7%), with all segments recording double-digit growth. Employment Support Business was ¥141.6B (+13.0%), representing 37.0% of the total and continued as the largest segment with stable growth. Child Welfare Business reached ¥109.5B (+24.3%), accounting for 28.6% and exhibiting notable expansion. Platform Business was ¥54.8B (+20.9%), 14.3% of revenues, with an expanding revenue base from matching media operations and SaaS. Overseas Business was ¥36.5B (+28.7%), 9.5% of revenues; although a smaller proportion, it posted the highest growth rate among segments. Other Businesses totaled ¥40.0B (+6.3%), 10.5% of revenues. Gross profit was ¥149.0B and gross margin improved to 39.0% (+1.8pp YoY), supported by better service mix and scale benefits.
[Profitability] Operating Income was ¥45.8B (YoY +32.8%), with operating margin improving to 12.0% (+1.4pp). SG&A was ¥104.2B, 27.2% of Revenue, up 0.5pp from 26.7% a year earlier, but improvement in gross margin more than offset this, generating operating leverage. By segment, Employment Support Business Operating Income declined slightly to ¥43.6B (-5.2%) but maintained a high margin of 30.8%. Child Welfare Business recovered sharply to Operating Income of ¥10.2B (from ¥0.1B prior year). Platform Business Operating Income rose to ¥17.9B (+30.7%), margin 32.7%. Overseas Business Operating Income was ¥8.6B (+13.9%), margin 23.5%. Corporate adjustments (head office costs, etc.) were -¥38.4B, up ¥1.6B from -¥36.8B prior year, but consolidated operating income expanded notably due to segment profit growth. Ordinary Income was ¥16.8B (+4.1%), with a slower increase than Operating Income because financial costs rose to ¥3.9B (from ¥3.2B) (+¥0.7B) and financial income was ¥0.5B (¥0.6B prior), leaving non-operating items net at -¥2.7B (unchanged). Profit Before Tax was ¥42.3B (+33.2%), and profit from continuing operations was ¥29.3B (+33.8%). However, a loss on discontinued operations of ¥1.9B (prior year was profit ¥2.1B) was recognized, resulting in Net Income of ¥27.4B (+14.0%). The discontinued operations loss related to subsidiary disposals and is considered a one-off factor. In conclusion, revenue growth across all segments and gross margin improvement drove the top- and bottom-line increases.
Employment Support Business maintained high-level profitability with Operating Income of ¥43.6B (-5.2%) and margin of 30.8%, though down 5.9pp from 36.7% prior year. Despite +13.0% revenue, a slight decline in profit is attributed to upfront investments and higher personnel costs associated with expansion. Child Welfare Business turned significantly profitable to Operating Income of ¥10.2B from ¥0.1B prior, achieving a 9.3% margin. High growth (+24.3%) and profitability improvements coincided, marking a structural turning point. Platform Business recorded Operating Income of ¥17.9B (+30.7%) with a 32.7% margin, demonstrating the high profitability of the SaaS and media lines. Overseas Business posted Operating Income of ¥8.6B (+13.9%), margin 23.5%, with steady progress in services for individuals with severe behavioral disorders. Other Businesses generated Operating Income of ¥3.9B (-22.1%), margin 9.8%; improving profitability in Junior Personal Course, Wonder, and Life businesses remains a future challenge. Overall, expanded profit contributions from Child Welfare and Platform businesses led consolidated profit growth.
[Profitability] Operating margin of 12.0% improved 1.4pp from 10.6% a year earlier; gross margin at 39.0% expanded 1.8pp from 37.2%. Net margin was 7.2%, down 0.2pp from 7.4%, but on a continuing-operations basis net margin was 7.7%, up 1.0pp from 6.7%. Return on Equity (ROE) was 20.4%, down 0.6pp from 21.0% but remained high. Return on Assets (ROA) was 11.1%, up 0.2pp from 10.9%, indicating broadly stable asset efficiency.
[Cash Quality] Operating Cash Flow (OCF) was ¥71.9B, 2.6x Net Income of ¥27.4B, indicating strong cash backing of profits. The accrual ratio ((Net Income ¥27.4B - OCF ¥71.9B) ÷ Total Assets ¥437.9B ≒ -10.2%) is substantially negative, signifying high quality of earnings. Working capital movements included Accounts Receivable increasing to ¥68.9B (from ¥65.3B), raising DSO to about 66 days; Accounts Payable increased to ¥15.7B (from ¥9.7B), an increase of ¥6.0B, and net working capital is being managed appropriately.
[Investment Efficiency] Total asset turnover was 0.87x (Revenue ¥382.5B ÷ Total Assets ¥437.9B), down from 0.99x, as asset base expanded ahead of revenue due to aggressive investment: capital expenditures ¥40.9B and intangible asset acquisitions ¥17.8B. Capex to depreciation ratio was 1.12x (¥40.9B ÷ ¥36.4B), indicating a growth investment phase.
[Financial Soundness] Equity Ratio was 32.8%, down 5.3pp from 38.1%, reflecting higher interest-bearing debt and increased leverage. D/E ratio was 2.05x (Interest-bearing debt ¥173.3B ÷ Net Assets ¥143.6B), a high level, up from 1.01x prior year (approximately doubled). Long-term borrowings rose significantly to ¥131.2B (from ¥37.1B), while short-term borrowings decreased to ¥42.2B (from ¥65.1B), lengthening the debt maturity profile. Debt/EBITDA was approximately 2.1x (Interest-bearing debt ¥173.3B ÷ EBITDA approx ¥82.2B), within investment-grade range. Interest coverage was approximately 11.6x (Operating Income ¥45.8B ÷ Financial Costs ¥3.9B), indicating sound coverage. Goodwill was ¥113.4B, representing 79% of net assets, and impairment risk from M&A is a mid-term consideration.
Operating Cash Flow was ¥71.9B (YoY +45.4%). Starting from Profit Before Tax ¥42.3B plus depreciation and amortization ¥36.4B, subtotal ¥83.8B, less corporate taxes paid ¥10.5B, interest paid ¥1.7B, lease payments ¥18.8B, and incorporating working capital changes (Accounts Receivable increase -¥4.7B, Accounts Payable increase ¥6.2B, Provisions increase ¥1.7B, etc.), resulted in OCF of ¥71.9B. OCF is 2.6x Net Income, showing very strong cash conversion. Investing Cash Flow was -¥71.0B, driven by tangible fixed asset acquisitions ¥40.9B, intangible asset acquisitions ¥17.8B, and subsidiary acquisitions ¥15.4B, partially offset by proceeds from subsidiary disposals ¥3.7B. Free Cash Flow was ¥0.8B (OCF ¥71.9B + Investing CF -¥71.0B), minimal, reflecting that most OCF was directed to investment. Financing Cash Flow was ¥35.9B, with long-term borrowings proceeds ¥161.0B exceeding long-term borrowings repayments ¥43.3B, net decrease in short-term borrowings ¥46.6B, lease liabilities repayments ¥18.8B, treasury stock purchases ¥13.0B, and dividends paid ¥3.2B. Cash and cash equivalents at period-end were ¥81.0B, up ¥37.6B YoY, improving liquidity. Total shareholder returns (dividends ¥3.2B + share buybacks ¥13.0B = ¥16.2B) substantially exceeded Free Cash Flow ¥0.8B, indicating shareholder returns were funded by borrowings.
Against continuing-operations Operating Income of ¥45.8B, non-operating income comprised financial income ¥0.5B and other income ¥1.5B totaling ¥2.0B, while non-operating expenses comprised financial costs ¥3.9B and other expenses ¥0.6B totaling ¥4.6B, producing net non-operating expense of -¥2.6B and resulting in Profit Before Tax of ¥42.3B. Core earnings are concentrated in operating performance; non-operating items are dominated by borrowing costs and contain limited one-off factors. Discontinued operations loss of ¥1.9B (pre-tax) related to subsidiary disposals is a one-time item; Profit from continuing operations ¥29.3B indicates underlying earning power. Comprehensive income of ¥34.8B exceeded Net Income by ¥7.4B, where other comprehensive income comprised foreign currency translation gains of ¥8.9B (positive) from overseas operating entities and fair value losses on financial assets of -¥1.5B. Translation gains reflect valuation effects from yen depreciation in overseas businesses and are temporary. With OCF ¥71.9B at 2.6x Net Income and accrual ratio -10.2%, cash backing of profits is very strong and scope for accounting profit manipulation is limited. The increase in Accounts Receivable of ¥4.7B is proportional to revenue growth with no abnormal buildup, indicating high quality of earnings.
Full-year guidance is Revenue ¥440.0B (vs. this period ¥382.5B +15.0%), Operating Income ¥55.0B (+20.2%), Net Income attributable to owners of parent ¥33.0B (+20.5%), and EPS ¥93.45. Progress rate is Revenue 86.9% (¥382.5B ÷ ¥440.0B), Operating Income 83.3% (¥45.8B ÷ ¥55.0B), Net Income 83.0% (¥27.4B ÷ ¥33.0B), generally in line with plan. To achieve full-year guidance, remaining revenue of ¥57.5B, Operating Income of ¥9.2B, and Net Income of ¥5.6B are required, assuming an Operating Income margin of 16.0%, above the current 12.0%. Continued high growth in Child Welfare and Platform businesses, contributions from invested capital coming online, and expansion of Overseas Business are key to meeting the full-year plan. Dividend guidance foresees year-end dividend of ¥0, meaning the interim dividend realized of ¥11 will be the full-year dividend; forecast payout ratio is 11 yen ÷ ¥93.45 ≒ 11.8%, remaining conservative.
Year-end dividend is ¥11 and payout ratio is 14.3% (Total dividends ¥3.9B ÷ Net Income ¥27.4B; note actual dividends paid ¥3.2B reflect changes in shares outstanding during the period), a conservative level. Share buybacks of ¥13.0B were executed, bringing total returns to ¥16.2B, and total return ratio to 59.1% (¥16.2B ÷ ¥27.4B). Total returns of ¥16.2B against Free Cash Flow ¥0.8B is more than 20x, indicating shareholder returns were financed by debt. Nonetheless, with ample OCF of ¥71.9B, there is no issue with capacity to pay dividends and buybacks. Guidance assumes year-end dividend ¥0, so interim dividend ¥11 is expected to be the annual dividend, implying forecast payout ratio approx 11.8%. The company continues a capital allocation policy prioritizing growth investment while maintaining conservative shareholder returns.
Goodwill impairment risk: Goodwill of ¥113.4B represents 79% of net assets ¥143.6B and increased ¥16.3B from ¥97.1B prior year. Large M&A-related goodwill means that deterioration in acquired businesses’ profitability or adverse market changes could trigger impairment losses, materially impacting equity and earnings. Quantitatively, a full impairment of goodwill would reduce the Equity Ratio from 32.8% to approximately 6.9%, severely affecting financial soundness.
Rising leverage risk: D/E ratio 2.05x and interest-bearing debt ¥173.3B increased 70.5% from ¥101.8B prior year, and Equity Ratio declined to 32.8%. Debt/EBITDA approx 2.1x is currently within investment-grade range, but in a rising interest rate environment interest burdens may increase and interest coverage of 11.6x could deteriorate. It is unclear how much of the long-term borrowings ¥131.2B are fixed vs. variable rate; if variable-rate share is high, there is near-term risk to earnings.
Working capital risk: DSO about 66 days with Accounts Receivable increasing to ¥68.9B (+¥3.6B YoY). While AR increases due to revenue growth are within normal range, continued high growth may create additional working capital needs and pressure OCF. Accounts Payable rose to ¥15.7B (+¥6.0B) but does not fully offset AR growth; the trend of increasing net working capital warrants monitoring.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| ROE | 20.4% | 10.1% (2.2%–17.8%) | +10.3pp |
| Operating Margin | 12.0% | 8.1% (3.6%–16.0%) | +3.9pp |
| Net Margin | 7.2% | 5.8% (1.2%–11.6%) | +1.3pp |
The company outperforms industry medians on ROE, Operating Margin, and Net Margin, ranking among the higher-profitability firms in the IT & Communications sector.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 17.7% | 10.1% (1.7%–20.2%) | +7.6pp |
Revenue growth of 17.7% exceeds the industry median of 10.1% by 7.6pp, establishing the company as a high-growth firm.
※ Source: Company compilation
Structural shift in Child Welfare Business and expanding profit contribution from a high-growth segment: Child Welfare Business Operating Income expanded to ¥10.2B from ¥0.1B prior, roughly a 100x increase, achieving a 9.3% margin. High revenue growth (+24.3%) and profitability improvements proceeded in parallel, signaling a structural inflection. Platform Business sustained a top-tier Operating Margin of 32.7%, with high profitability from SaaS and media operations becoming apparent. Although Employment Support Business margin declined 5.9pp YoY to 30.8%, it remains high, and segment mix improvements contributed +1.4pp to consolidated Operating Margin. Achieving the full-year guidance operating margin of 16.0% will require accelerated growth in Child Welfare and Platform businesses and margin recovery in Employment Support.
Balance between aggressive investment and rising leverage: Capex ¥40.9B and intangible investments ¥17.8B (total ¥58.7B) are 1.6x depreciation ¥36.4B, indicating a growth investment phase. Tangible fixed assets rose to ¥70.7B, +¥38.9B YoY (+122.4%), reflecting expansion of classrooms and locations. Meanwhile, total returns ¥16.2B against Free Cash Flow ¥0.8B were financed by borrowings; long-term borrowings increased ¥94.1B to ¥131.2B (+253.5%), and D/E ratio rose to 2.05x. Debt/EBITDA approx 2.1x and interest coverage approx 11.6x are currently healthy, but combined with goodwill ¥113.4B (79% of net assets), impairment risk and the pace of investment recovery and maintaining financial flexibility are key focus areas for the results.
This report is an AI-generated financial analysis document based on XBRL earnings disclosure data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are compiled by the company from public filings and provided as reference information. Investment decisions are your responsibility; consult professionals as needed.