| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥363.2B | ¥364.2B | -0.3% |
| Operating Income / Operating Profit | ¥11.7B | ¥10.7B | +9.1% |
| Ordinary Income | ¥11.8B | ¥10.0B | +17.6% |
| Net Income | ¥6.6B | ¥4.1B | +61.1% |
| ROE | 7.5% | 4.6% | - |
The FY2026 Q2 results showed Revenue of ¥363.2B (YoY -¥1.0B -0.3%) with slight revenue decline, while Operating Income reached ¥11.7B (YoY +¥1.0B +9.1%), Ordinary Income ¥11.8B (YoY +¥1.8B +17.6%), and Net Income attributable to owners of the parent ¥6.6B (YoY +¥2.5B +61.1%), delivering substantial profit growth. Gross profit margin improved to 14.8% (up +0.6pt from 14.2% prior year), and operating margin improved to 3.2% (up +0.3pt from 2.9%), indicating enhanced profitability. Drivers of the profit increase were improvements in cost of sales ratio and restraint of SG&A; SG&A ratio remained nearly flat at 11.5% (prior year 11.3%). The increase from Operating Income to Ordinary Income included the impact of equity-method loss of -¥0.1B, but a reduction in non-operating expenses contributed positively; profit before tax was ¥10.1B. The effective tax rate was high at 43.2%, which partially limited Net Income growth. A special loss of ¥1.7B (including impairment losses of ¥1.6B) was recorded, while a gain on sales of investment securities of ¥0.8B was recorded as special income, resulting in Net Income increasing by +61.1% YoY. Operating Cash Flow was ¥13.0B (YoY +10.5%), exceeding Net Income of ¥6.6B, indicating strong cash generation. However, Investment Cash Flow of -¥14.9B, including acquisition of subsidiary shares for M&A of -¥12.5B, led to Free Cash Flow of -¥1.9B, a negative driven by growth investments.
[Revenue] Revenue was ¥363.2B (YoY -0.3%), remaining roughly flat. As a single-segment company in the Contact Center / BPO Business, order intake trends and utilization rates directly affect top-line performance. The slight revenue decline likely reflects adjustments in utilization for existing large contracts and demand variations on the client side, while the improvement in gross margin (14.8%, prior year 14.2%) appears to have been supported by price corrections, operational automation, and shift optimization. Cost of sales was ¥309.6B, with a cost ratio of 85.2% (prior year 85.8%), improving by -0.6pt. Cost control is functioning despite a wage inflation environment.
[Profitability] Operating Income was ¥11.7B (YoY +9.1%), and operating margin improved to 3.2% (prior year 2.9%). SG&A was ¥41.9B (prior year ¥41.7B), a slight increase in absolute terms, but SG&A ratio remained near flat at 11.5%, and operating leverage from higher gross profit worked in favor. Ordinary Income was ¥11.8B (YoY +17.6%), slightly above Operating Income after net non-operating income of ¥0.3B and non-operating expenses of ¥0.1B. Equity-method loss of ¥0.1B was a negative contribution, but reduced non-operating expenses offset this. Profit before tax was ¥10.1B, and special items were net -¥1.7B (special loss ¥1.7B - special income ¥0.0B, including gain on sale of investment securities ¥0.8B and impairment loss ¥1.6B, etc.). Corporate taxes and related amounted to ¥4.4B (effective tax rate 43.2%), high, resulting in Net Income of ¥6.6B (YoY +61.1%). The substantial YoY increase in Net Income was supported by Operating Income growth and a reduction in one-off special losses from ¥2.5B in the prior year to ¥1.7B this period. In conclusion, this is a revenue-decline-and-profit-increase pattern, with profitability improvements driving profit growth.
[Profitability] Operating margin was 3.2% (improved +0.3pt from 2.9%), and Net Income margin was 1.8% (improved +0.7pt from 1.1%), reflecting improved gross margin and controlled SG&A. ROE was 7.5%, explained by Net Income margin 1.8% × total asset turnover 2.20 × financial leverage 1.87, with improvement driven mainly by Net Income margin. EBITDA was ¥16.6B, and EBITDA margin was 4.6%, indicating recovering cash-generation capacity. [Cash Quality] Operating Cash Flow of ¥13.0B versus Net Income of ¥6.6B gives an OCF/NI ratio of 1.97x, indicating good cash backing of profits. Operating Cash Flow subtotal (before working capital changes) was ¥15.9B; accounts receivable increase of -¥2.4B partly offset this, while inventory decrease of +¥0.6B supported it. OCF/EBITDA was 0.78x, with working capital movements slightly weakening cash conversion. [Investment Efficiency] Total asset turnover was 2.20x (prior year 2.51x), declining due to asset expansion from M&A. Goodwill was ¥6.8B and intangible fixed assets ¥10.0B, giving an intangible ratio of 10.2% of total assets; goodwill/EBITDA ratio was 0.41x, indicating manageable recovery burden. Capital expenditures were ¥2.1B and depreciation ¥4.9B, with depreciation coverage of 2.3x. [Financial Soundness] Equity ratio was 53.5% (down -8.2pt from 61.7% prior year), but current ratio was 212.3% and quick ratio 211.6%, indicating ample liquidity. Cash and deposits were ¥64.9B versus interest-bearing debt ¥13.5B (short-term borrowings ¥1.0B + long-term borrowings ¥12.5B), giving Debt/EBITDA of 0.82x and D/E ratio of 0.87x, a conservative capital structure. The increase in long-term borrowings (prior year ¥0.2B → this period ¥12.5B) largely reflects M&A financing, but repayment capacity stress is limited. Asset retirement obligations of ¥9.1B account for 11.9% of liabilities, warranting attention to future restoration cost burdens.
Operating Cash Flow was ¥13.0B (YoY +10.5%), 1.97x Net Income of ¥6.6B, indicating strong cash backing of profits. Operating Cash Flow subtotal (before working capital changes) was ¥15.9B, with non-cash items including depreciation ¥4.9B, impairment losses ¥1.6B, and equity-method loss ¥0.1B added back. In working capital, accounts receivable increase of -¥2.4B caused cash outflow, while inventory decrease of +¥0.6B and increases in accrued expenses supported cash. After corporate tax payments -¥3.0B, final Operating Cash Flow was ¥13.0B. Investment Cash Flow was -¥14.9B, mainly due to acquisition of subsidiary shares -¥12.5B and capital expenditures -¥2.1B. Investment in intangible assets -¥0.9B was also included, reflecting allocation of funds to growth investments. FCF was -¥1.9B, negative but attributable to growth investments, and liquidity of ¥64.9B provides support. Financing Cash Flow was +¥4.6B, with long-term borrowing proceeds +¥13.0B exceeding dividend payments -¥10.9B. Ending cash was ¥63.6B (beginning cash ¥60.9B, change +¥2.7B), and the cash position remains stable.
With Ordinary Income of ¥11.8B and Net Income of ¥6.6B, the Ordinary/Net Income ratio is 0.56x, indicating significant impact from taxes and special items. A special loss of ¥1.7B (impairment losses ¥1.6B, loss on disposal of fixed assets ¥0.1B) was recorded, causing temporary suppression of Net Income. Special income included gain on sale of investment securities ¥0.8B, but net special items were negative. The effective tax rate of 43.2% is high; write-down of deferred tax assets and adjustments to tax effects may have influenced this. Net non-operating items were +¥0.1B, a positive contribution as dividend income and subsidies exceeded non-operating expenses. Equity-method loss of ¥0.1B slightly reduced Ordinary Income but was limited in scale. From a quality-of-earnings perspective, the increase in Operating Income signals core-business improvement, while the high effective tax rate and special loss reduced Net Income quality somewhat. The fact that Operating Cash Flow significantly exceeds Net Income indicates healthy cash-side earnings quality, with non-cash charges such as depreciation and impairment boosting Operating Cash Flow. From an accruals perspective, accounts receivable increases slightly suppressed cash conversion, but overall remained within a healthy range.
Full Year / FY forecast: Revenue ¥383.0B (YoY +5.4%), Operating Income ¥16.0B (YoY +37.1%), Ordinary Income ¥15.8B (YoY +33.8%), and Net Income attributable to owners of the parent ¥9.5B. As of Q2, progress rates are: Revenue 94.8%, Operating Income 73.1%, Ordinary Income 74.7%, Net Income 69.5%, indicating profit items are weighted to the second half. The full-year operating margin is expected to improve to 4.2%, with price corrections, operational efficiency improvements, and M&A contributions as earnings drivers. The revenue growth plan assumes winning new contracts and expansion of existing contracts, with upside possible depending on second-half execution. EPS forecast is ¥66.12, and dividend guidance is stated as ¥0, so attention is needed for possible changes to the dividend policy. The ambitious YoY profit increase plan assumes continuation of the first-half profit trend and ramp-up of projects in the second half; wage inflation and utilization volatility are key risks to achieving the plan.
A year-end dividend of ¥77 per share was paid, totaling ¥10.9B. Payout ratio on a single-year basis was 188%, a high level and a dividend payment far exceeding Net Income attributable to owners of the parent of ¥6.6B. Operating Cash Flow of ¥13.0B covers the dividend payment of ¥10.9B, but with FCF of -¥1.9B the dividend is not covered by free cash flow, requiring either depletion of cash on hand or financing in Financing Cash Flow. The full-year forecast lists dividend guidance as ¥0, suggesting either a revision of dividend policy or a possible documentation error. No share buybacks were executed; shareholder returns consist solely of dividends. The high payout ratio raises issues around short-term sustainability; if next fiscal year profit growth (full-year Net Income forecast ¥9.5B) materializes, the payout ratio would naturally decline, but greater transparency around dividend policy considering investment plans is desirable.
Wage inflation and labor shortage risk: The Contact Center / BPO Business is labor-intensive and wages make up the majority of cost of sales. With cost of sales ¥309.6B (cost ratio 85.2%), a large portion is presumed to be labor costs; wage increases or hiring difficulty leading to lower utilization would directly pressure gross margin. Offsetting via price corrections or automation is necessary, but negotiation difficulty with clients and upfront investment burdens are risk factors.
Reduced investment capacity due to high payout ratio: Payout ratio of 188% represents dividend payments far exceeding single-year profits, preventing accumulation of internal reserves and constraining own-funds capacity for growth investments and M&A. With FCF of -¥1.9B, dividend funding requires financing in Financing Cash Flow or depletion of cash on hand. If profit growth does not proceed as planned next year, maintaining dividends while also funding investments may be difficult.
Goodwill and intangible asset impairment risk: Goodwill ¥6.8B and intangible fixed assets ¥10.0B total ¥16.8B, representing 10.2% of total assets, reflecting increased acquired assets from M&A. Goodwill/EBITDA ratio of 0.41x indicates manageable recovery burden, but if acquired targets perform poorly or integration delays occur, impairment risk exists. An impairment loss of ¥1.6B was recorded this period, so ongoing impairment testing and monitoring of synergy realization progress are required.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 3.2% | 8.1% (3.6%–16.0%) | -4.9pt |
| Net Income Margin | 1.8% | 5.8% (1.2%–11.6%) | -4.0pt |
Both operating margin and Net Income margin are below industry medians, indicating the company sits in the lower range of profitability within the industry.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -0.3% | 10.1% (1.7%–20.2%) | -10.4pt |
Revenue growth rate is well below the industry median, indicating weaker growth performance versus peers.
※ Source: Company compilation
Sustainability of profit growth from cost optimization: Despite flat revenue, operating margin improved from 2.9% to 3.2%, driven by higher gross margin and SG&A restraint. The full-year plan targets operating margin improvement to 4.2%, with price corrections, automation, and M&A contributions as profit drivers. If cost control of production costs functions under wage inflation, profit acceleration in the second half is expected. Conversely, if revenue growth does not reaccelerate, fixed SG&A cost burden could reverse operating leverage, making monitoring of utilization and pricing trends important.
Post-M&A integration progress and synergy realization: With goodwill of ¥6.8B and acquisition of subsidiary shares ¥12.5B, growth investments have been executed to expand business scale. Goodwill/EBITDA ratio 0.41x indicates manageable recovery burden, but the recording of impairment loss ¥1.6B suggests uncertainty remains around target performance and integration work. Financial leverage is conservative (D/E 0.87x, Debt/EBITDA 0.82x), providing downside resilience, but the speed of synergy realization will be key to next-year onward profit growth. It is important to monitor the operational contribution of M&A projects and expansion of the customer base.
This report was auto-generated by AI analyzing XBRL financial statement data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company based on public financial statements. Investment decisions are your own responsibility; consult a professional advisor as needed.