Interworks Confidence Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥4.72B
• Operating Income: ¥676M
• Net Income: ¥437M
• EPS: ¥67.06

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Confidence Interworks posted FY2026 Q2 consolidated results showing solid top-line growth with some margin compression. Revenue was 4,716 million yen, up 8.8% year on year, indicating healthy demand in its staffing and outsourcing franchises. Gross profit reached 2,180 million yen, translating to a gross margin of 46.2%, which is robust for an asset-light services model. Operating income was 676 million yen, down 2.8% YoY, implying SG&A growth outpaced gross profit expansion. Ordinary income came in at 656 million yen, and net income was 415 million yen, down 5.4% YoY, yielding a net margin of 8.8%. EBITDA was 731 million yen with a 15.5% margin, highlighting modest non-cash charges (D&A of 55 million yen) and limited capital intensity. DuPont metrics show Net Profit Margin of 8.80%, Asset Turnover of 0.613x, and Financial Leverage of 1.25x, producing a reported ROE of 6.76%. The balance sheet is very strong: total assets were 7,692 million yen and total equity 6,141 million yen, implying an equity-to-asset ratio near 80% and a low debt-to-equity ratio of 0.13x. Liquidity is ample with current assets of 4,829 million yen versus current liabilities of 794 million yen, driving a current ratio of 608%. Operating cash flow was 495 million yen, 1.19x net income, indicating good earnings-to-cash conversion. Financing cash flow was an outflow of 1,053 million yen, likely reflecting shareholder returns or debt reduction; investing cash flow was not disclosed. Interest expense was de minimis at 45 thousand yen and interest coverage extremely high at over 15,000x, underscoring minimal financial risk. The effective tax burden implied by reported numbers is about 38% (tax expense of 249 million yen over ordinary income of 656 million yen). Dividend data were not disclosed in the provided line items, so payout policy cannot be assessed from this dataset. Overall, the company exhibits an asset-light, cash-generative profile with strong liquidity and solvency, but the slight decline in operating and net income despite revenue growth points to operating leverage pressures and higher SG&A intensity.

Profitability Analysis

ROE_decomposition: ROE 6.76% = Net Profit Margin 8.80% × Asset Turnover 0.613 × Financial Leverage 1.25. The modest ROE chiefly reflects conservative leverage (~1.25x) and moderate asset turnover, while margins are solid for the business model. margin_quality: Gross margin of 46.2% signals healthy pricing and mix. Operating margin is 14.3% (676/4,716), down YoY given operating income fell 2.8% despite revenue growth. Net margin at 8.8% is supported by low interest burden but tempered by an effective tax rate around 38%. operating_leverage: Revenue grew 8.8% YoY while operating income declined 2.8% YoY, indicating negative operating leverage in the period. SG&A is estimated at about 1,504 million yen (Gross Profit 2,180 minus Operating Income 676), suggesting SG&A growth exceeded gross profit growth. D&A is small (55 million yen), so changes in margins largely stem from personnel costs, selling expenses, and other operating items.

Growth Assessment

revenue_sustainability: An 8.8% YoY revenue increase suggests resilient demand across client verticals and potentially successful account expansion. The absence of inventories aligns with a services/staffing mix, where revenue is driven by headcount, billable hours, and unit rates. profit_quality: EBITDA margin of 15.5% and net margin of 8.8% are consistent with an asset-light model. However, the decline in operating and net income indicates cost pressure (e.g., wage inflation, recruitment costs, or sales expenses) offsetting top-line gains. outlook: Near-term growth hinges on utilization rates, average billing rates, and hiring velocity. If SG&A normalization and pricing discipline take hold, operating leverage could turn positive. Macro sensitivity (employment trends in client industries) will influence the sustainability of the near-10% revenue growth trajectory.

Financial Health

liquidity: Current assets 4,829 million yen vs. current liabilities 794 million yen produce a current ratio of 608% and quick ratio of 608%, indicating substantial headroom to meet obligations. solvency: Total liabilities are 797 million yen against equity of 6,141 million yen (debt-to-equity 0.13x). Equity comprises roughly 80% of assets, pointing to a very conservative capital structure. capital_structure: Negligible interest expense (45 thousand yen) and an interest coverage ratio over 15,000x reflect minimal reliance on interest-bearing debt. The company appears under-levered relative to cash generation, providing flexibility for strategic investments or shareholder returns.

Cash Flow Quality

earnings_quality: OCF of 495 million yen vs. net income of 415 million yen yields an OCF/NI of 1.19x, a healthy indicator of earnings backed by cash. Limited D&A (55 million yen) suggests low accounting distortion. FCF_analysis: Investing cash flow was not disclosed in the data, so capex and free cash flow cannot be precisely determined from this dataset. Given the model’s low capital intensity, maintenance capex is likely modest relative to OCF, but this remains an assumption. working_capital: Strong current asset base and absence of inventory imply receivables and cash drive working capital. With working capital of 4,035 million yen, the company likely has favorable collection cycles and low funding needs for operations, although detailed AR/AP turnover was not disclosed.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio were not disclosed in the provided data, so a payout ratio-based assessment cannot be made from these figures. FCF_coverage: Free cash flow was not computable due to undisclosed investing cash flows; therefore FCF-based dividend coverage cannot be assessed. policy_outlook: Financing cash outflow of 1,053 million yen suggests potential shareholder returns (e.g., buybacks) or debt repayment during the period, but without explicit dividend disclosure, policy direction remains unclear.

Risk Assessment

Business Risks:

• Macroeconomic sensitivity impacting client hiring and project volumes
• Wage inflation and talent acquisition costs compressing margins
• Client concentration risk typical in staffing/outsourcing businesses
• Utilization and bill rate volatility affecting revenue per head
• Regulatory changes in labor laws or dispatch staffing rules
• Competition from larger HR service providers and gig platforms

Financial Risks:

• Receivables concentration and collection timing affecting OCF
• Potential mismatch between payroll cycles and client payment terms
• Limited disclosure on cash and investments constrains liquidity visibility
• Tax rate variability (implied ~38%) affecting net margins

Key Concerns:

• Negative operating leverage in the period despite 8.8% revenue growth
• SG&A intensity rising faster than gross profit
• Lack of disclosure on cash, investing cash flows, and dividends complicates capital allocation assessment

Investment Implications

Key Takeaways:

• Top-line growth of 8.8% YoY with robust 46.2% gross margin
• Operating income down 2.8% YoY, indicating margin pressure and negative operating leverage
• Strong balance sheet: equity ~80% of assets; debt-to-equity 0.13x; interest coverage >15,000x
• Solid cash conversion: OCF/NI 1.19x; low D&A reflects asset-light model
• Financing CF outflow of 1,053 million yen suggests capital returns or deleveraging
• ROE at 6.76% restrained by conservative leverage and moderate asset turnover

Metrics to Watch:

• SG&A-to-sales ratio and trajectory
• Gross margin and billing rate trends
• Utilization/headcount growth vs. wage inflation
• OCF/NI ratio and receivables days (DSO)
• Capex and investing cash flows to gauge FCF
• Capital allocation: buybacks/dividends vs. reinvestment

Relative Positioning: Versus TSE-listed HR/staffing peers, the company appears asset-light with strong liquidity and low leverage, delivering mid-teens operating margins but a modest ROE due to excess equity; opportunity exists to enhance capital efficiency if growth and margin discipline are maintained.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis