Slogan Inc. FY2026 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥1.27B
• Operating Income: ¥289M
• Net Income: ¥177M
• EPS: ¥69.11

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

AI Financial Analysis

Executive Summary

Verdict: A strong quarter with double-digit top-line growth and outsized margin expansion, delivering solid ROE despite a high tax burden and limited disclosure on cash flows. Revenue rose 22.4% YoY to 12.71, while operating income surged 142.7% YoY to 2.89, indicating powerful operating leverage. Net income increased 119.0% YoY to 1.77, pushing net margin to 13.9%, which sits in the excellent range by industry benchmarks. Operating margin expanded to 22.7% from roughly 11.5% a year ago, a 1,129 bps improvement reflecting improved cost efficiency (SG&A ratio down to ~75.5% of sales) and strong gross margin resilience (98.3%). Net margin improved by 622 bps YoY (from ~7.7% to 13.9%), even after a higher effective tax rate of 38.3%. ROE printed at 10.8% (good), supported by healthy net margin, moderate asset turnover (0.557x), and low leverage (1.38x assets/equity). The balance sheet remains highly liquid: cash and deposits of 19.62 represent 86% of total assets, and the current ratio is a robust 332%. Liabilities are all current (6.33), but liquidity coverage is ample with cash alone at 3.1x current liabilities. Receivables declined YoY (0.85 → 0.54), suggesting improved collections and supportive working capital dynamics. Retained earnings rose 31.2% to 7.46, consistent with profit accretion and zero dividends. Treasury stock increased (−1.00 → −1.51), implying modest buyback activity alongside cash retention. Intangible assets increased to 0.17 (+65.6%), likely software or product development; scale is small but merits monitoring for amortization and returns. Earnings quality cannot be fully validated due to unreported cash flow statements, but the A/R contraction is a positive signal. Forward-looking, revenue momentum and leaner opex suggest continued margin resilience, but the high tax burden and a reported ROIC quality flag require attention to capital efficiency and potential cash deployment. Overall, we view the quarter as operationally strong with clean balance sheet strength and upside if cash is deployed or tax rate normalizes.

Profitability Analysis

DuPont (3-factor): ROE 10.8% = Net Profit Margin (13.9%) × Asset Turnover (0.557x) × Financial Leverage (1.38x). The largest YoY improvement came from Net Profit Margin, driven by operating margin expansion to 22.7% (from ~11.5%), while leverage remained conservative and asset turnover moderate. Business drivers: stronger revenue growth (22.4% YoY) outpaced SG&A growth, yielding operating leverage; gross margin held exceptionally high (98.3%), indicating an asset-light, service-centric model with minimal cost of sales. The tax burden (0.616) was a headwind, partly diluting margin gains at the net level. Sustainability: operating leverage benefits appear supported by scale and disciplined cost control; however, sustaining a >22% OPM will require continued growth and SG&A discipline, with potential normalization of gross margin if service mix shifts. Flags: the effective tax rate at 38.3% (tax burden <0.70) is elevated versus benchmarks and could persist; also, keep watch that SG&A growth does not re-accelerate ahead of revenue as hiring and go-to-market investments resume.

Growth Assessment

Revenue growth of 22.4% YoY demonstrates solid demand recovery/expansion in the company’s HR/services domains. Operating income growth of 142.7% far outpaced sales, evidencing strong operating leverage from fixed-cost absorption and tighter SG&A control. Net income growth of 119.0% confirms broad-based improvement despite a high tax rate. Gross margin at 98.3% underscores limited direct costs and pricing power/efficiency; any sustained growth will hinge on maintaining volume growth while preventing SG&A creep. With receivables shrinking, growth appears quality-driven rather than credit-fueled. Outlook: near-term momentum is favorable; key determinants are client demand in hiring, macro sensitivity, and ability to scale services without proportionate cost increases.

Financial Health

Liquidity is robust: current ratio 3.32x and quick ratio 3.32x (no inventories reported). Cash and deposits (19.62) cover all current liabilities (6.33) by 3.1x, minimizing near-term refinancing risk. Solvency is conservative: D/E 0.38x and equity ratio roughly 72%, with low financial leverage (assets/equity 1.38x). Maturity profile: all liabilities are classified as current; however, the large cash position and modest liability base mitigate maturity mismatch risk. Investment securities account for 6.2% of assets (1.42), introducing some market valuation risk but within prudent levels. No off-balance sheet obligations were disclosed in the provided data. No warnings triggered for Current Ratio (<1.0) or D/E (>2.0).

Notable B/S Changes

Intangible Assets: +0.07 (+65.6%) - Likely software/product development; monitor amortization and returns on digital investments. Treasury Stock: -0.51 (-51.7%) - Increase in buybacks; modest capital return alongside cash accumulation. Accounts Receivable: -0.31 (-36.7%) - Improved collections and tighter credit terms; supportive for OCF. Retained Earnings: +1.77 (+31.2%) - Profit accretion with no dividends; builds equity cushion.

Cash Flow Quality

OCF, FCF, and EBITDA data were unreported, so we cannot compute OCF/NI or cash conversion ratios. That said, the YoY decline in accounts receivable (0.85 → 0.54) is supportive of positive operating cash flow via improved collections. Capex intensity appears low from the scale of intangible asset increase (+0.07), implying limited investment needs to sustain operations. With no dividends paid and no material debt service disclosed, FCF is likely positive given profitability and low maintenance capex, but formal validation awaits cash flow statements. No clear signs of working capital manipulation are evident from the limited data.

Dividend Sustainability

Interim and year-end DPS are reported as ¥0, implying retention of earnings to fund growth and/or preserve balance sheet flexibility. Payout ratios and FCF coverage are not calculable due to unreported cash flows. Retained earnings increased by 1.77, consistent with net income accretion and no payouts. Given strong liquidity and low leverage, the company has capacity for future distributions, but current policy appears oriented toward reinvestment or cash build. Absent visibility into OCF and capex, sustainability of a prospective dividend initiation would depend on maintaining current profitability and low investment needs.

Risk Assessment

Business risks include Demand sensitivity to hiring cycles and macroeconomic conditions affecting client recruitment budgets, Competition in HR/services and potential pricing pressure impacting margins, Execution risk in scaling operations while controlling SG&A, Concentration risk if revenue is driven by a limited set of clients or verticals (not disclosed).

Financial risks include High effective tax rate (38.3%) depresses net profitability, Capital efficiency risk related to large cash balances and the ROIC quality flag, Valuation risk on investment securities (1.42; 6.2% of assets), All liabilities classified as current (timing risk), albeit mitigated by ample cash.

Key concerns include Quality Flag: ROIC reported at -56.7% despite positive EBIT suggests measurement/denominator issues and potential capital deployment inefficiency, Limited disclosure on cash flows impairs assessment of earnings quality and FCF, Sustainability of >22% operating margin requires continued top-line growth and cost control.

Investment Implications

Key takeaways include Strong top-line growth (+22.4% YoY) with significant operating leverage (OPM 22.7%), Net margin improved to 13.9% and ROE at 10.8% (good range), Balance sheet is cash-rich and lowly levered; liquidity risk is low, Receivables decline supports better cash conversion, though OCF unreported, Capital efficiency flagged (ROIC), indicating need to deploy or optimize excess cash.

Metrics to watch include Operating cash flow and OCF/NI once disclosed, SG&A growth versus revenue growth and resulting OPM trajectory, Effective tax rate normalization path, DSO/receivables trends to confirm cash conversion, ROIC (excluding excess cash) and capital deployment (M&A, organic investments, or shareholder returns).

Regarding relative positioning, The company appears operationally efficient and asset-light with superior margins and conservative leverage versus typical small-cap HR/services peers in Japan, but capital efficiency and disclosure depth lag best-in-class.