NISSO HOLDINGS Co.,Ltd. FY2027 Q1 Earnings Report

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Executive Summary

In Q1 of the fiscal year ending March 2027, in addition to revenue growth, an improvement in the gross profit margin and a lower tax burden combined to drive growth in both operating income and net income above the revenue growth rate. Revenue was ¥29.28B (¥24.96B in the same period last year, YoY +17.3%), operating income was ¥0.71B (¥0.43B, YoY +64.7%), ordinary income was ¥0.71B (¥0.43B, YoY +64.4%), and net income attributable to owners of the parent was ¥0.428B (¥0.224B, YoY +91.0%). The main factors behind earnings growth significantly exceeding revenue growth were the improvement in the gross profit margin and the decline in the effective tax rate (from 46.7% in the previous year to 39.1% in the current period). Although the operating margin improved to 2.4% (1.7% in the previous year), its absolute level remains low, reflecting the earnings structure characteristic of the labor-intensive human resources services business.

Factors Affecting Earnings

【Revenue】Revenue increased to ¥29.28B, up +17.3% year on year. Although segment information has been omitted because the “Comprehensive Human Resources Services” business accounts for a high proportion of the Group’s overall business and its disclosure is not material, the expansion of demand for human resources and the higher utilization rate appear to have driven company-wide revenue growth.

【Profit and Loss】Operating income increased to ¥0.71B (YoY +64.7%), exceeding the revenue growth rate. The gross profit margin improved by +0.6pt to 16.8% (16.2% in the previous year) due to a decline in the cost-of-sales ratio, while the SG&A ratio also declined slightly to 14.4% (14.5%), resulting in operating leverage. As non-operating income and expenses were almost neutral (non-operating income of ¥0.05B and non-operating expenses of ¥0.05B), ordinary income was ¥0.71B (YoY +64.4%), approximately at the same level as operating income. The net income growth rate (+91.0%) exceeded the operating income growth rate (+64.7%), primarily because the effective tax rate declined from 46.7% in the previous year to 39.1% in the current period, reducing the tax burden. Extraordinary income, including a gain on the bargain purchase of negative goodwill, of ¥0.005B recorded in the same period last year did not occur in the current period, indicating that the earnings growth was of higher quality and more attributable to the core business. In conclusion, revenue and profit both increased.

Key Financial Indicators

【Profitability】Improvement continued at each level, with an operating margin of 2.4% (1.7% in the previous year, +0.7pt), a net profit margin attributable to owners of the parent of 1.46% (0.90% in the previous year, +0.56pt), and a gross profit margin of 16.8% (16.2% in the previous year, +0.6pt). 【Cash Quality】The accounts receivable turnover period was approximately 41.6 days in the current period (accounts receivable of ¥13.39B / quarterly revenue of ¥29.28B × 91 days), shortening from approximately 47.7 days in the same period last year. Thus, the increase in accounts receivable has not outpaced revenue growth, and collection efficiency has not deteriorated. 【Investment Efficiency】ROE was 2.4%. Approximate ROIC, calculated by dividing EBIT after deducting the effective tax rate (NOPAT of approximately ¥0.43B) by invested capital (interest-bearing debt of ¥0.914B + equity of ¥18.25B - cash of ¥6.35B, approximately ¥12.8B), remained at approximately 3.4%, indicating room for improvement in capital efficiency. Quarterly total asset turnover was 0.84x. 【Financial Soundness】The equity ratio was 52.5% (53.4% in the previous year, -0.9pt), the current ratio was 149%, and the D/E ratio was 0.90x. Interest-bearing debt was small at ¥0.914B, and interest coverage was approximately 236x, indicating a high capacity to withstand interest payments.

Cash Flow Analysis

Although a standalone cash flow statement has not been disclosed, funding trends can be confirmed from changes in the balance sheet. Cash and deposits increased by ¥0.444B (+7.5%) year on year, while long-term borrowings declined by ¥0.073B and current portion of long-term borrowings declined by ¥0.051B, resulting in an overall decrease in interest-bearing debt. The Company simultaneously increased on-hand liquidity and reduced debt while achieving earnings growth. Retained earnings declined by ¥0.414B year on year, suggesting that external outflows, such as dividends, may have exceeded the accumulation of quarterly profit. Accounts receivable increased by ¥0.289B, but this was a moderate increase relative to revenue growth (+17.3%), and the amount of funds tied up in working capital has not deteriorated from the previous year. The declines of ¥0.702B in the provision for bonuses and ¥0.326B in income taxes payable reflect seasonal cash outflows associated with bonus payments and tax payments and can be viewed as one-time fluctuations. Overall, the Company appears to be generating sufficient cash from its core business to fund both debt repayment and the accumulation of cash.

Earnings Quality

Current-period profit is considered to be of high quality because non-operating income and expenses were almost neutral (non-operating income of ¥0.05B and non-operating expenses of ¥0.05B), and no one-time factors such as the ¥0.005B extraordinary income from a gain on the bargain purchase of negative goodwill recorded in the same period last year occurred in the current period. Comprehensive income was ¥0.422B, only slightly below net income attributable to owners of the parent of ¥0.428B, primarily due to an adjustment related to retirement benefits of -¥0.01B. Other comprehensive income items, including valuation differences on securities, were also limited, resulting in only a small divergence between net income and comprehensive income. The effective tax rate declined from 46.7% in the previous year to 39.1% in the current period, causing the net income growth rate to exceed the growth rates of operating income and ordinary income. However, it should be noted that the factor behind this decline in the tax rate may fluctuate each period.

Earnings Forecast and Guidance

Progress against the full-year company forecast was 24.7% for revenue, at ¥29.28B / ¥118.50B; 20.2% for operating income, at ¥0.71B / ¥3.50B; 20.3% for ordinary income, at ¥0.71B / ¥3.50B; and 20.4% for net income, at ¥0.428B against the forecast attributable to owners of the parent of ¥2.10B. While revenue was approximately in line with the simple progress benchmark of 25% (one-quarter), each profit indicator remained in the low 20% range, slightly below the standard pace. As of Q1, no revisions had been made to either the earnings forecast or the dividend forecast. Although the Company appears to anticipate achieving its full-year plan, the lag in profit progress will be a key point to monitor in assessing the pace of recovery in the coming quarters.

Shareholder Returns

The full-year dividend forecast announced by the Company is ¥25 per share, resulting in a payout ratio of approximately 40.1% based on the full-year EPS forecast of ¥62.36. No revision to the dividend forecast had been made as of Q1. The low-leverage financial structure, consisting of cash and deposits of ¥6.35B and interest-bearing debt of ¥0.914B, indicates sufficient financial capacity to support dividends. However, the payout ratio will also depend on future earnings progress, which is currently in the low 20% range relative to the full-year forecast. Accordingly, it is useful to monitor earnings trends from the second half onward. No disclosure regarding share buybacks has been made, and the Total Return Ratio has not been calculated.

Risk Factors

1. Continued low-margin structure: Although the operating margin improved to 2.4% (1.7% in the previous year), the cost structure characteristic of the labor-intensive human resources services business could cause margins to come under renewed pressure if increases in wages, recruitment costs, and training costs exceed revenue growth.

2. Bottom-line volatility due to changes in the effective tax rate: The effective tax rate declined from 46.7% in the previous year to 39.1% in the current period, contributing to the net income growth rate (+91.0%) exceeding the operating income growth rate (+64.7%). Changes in the tax rate may continue to affect comparative earnings growth rates in the future.

3. Increase in other current liabilities: Other current liabilities increased to ¥4.49B (¥2.95B in the previous year, +52.5%). Although this appears to have resulted from increases in accrued expenses and other items, short-term cash flow trends require continued monitoring.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Both the operating margin and net profit margin were below the industry median, placing profitability in the lower tier of the industry.

Growth and Capital Efficiency

The revenue growth rate exceeded both the industry median and the upper bound of the IQR, placing growth in the upper tier of the industry.

※Source: Compiled by the Company

Key Points from the Financial Results

1. Earnings growth exceeding revenue growth: Operating income increased +64.7% against revenue growth of +17.3%, securing earnings growth above the revenue growth rate. Operating leverage resulting from the improved gross profit margin and controlled SG&A ratio was confirmed.

2. Moderate profit progress: Progress against the full-year plan was 24.7% for revenue, compared with 20.2% for operating income and 20.4% for net income, indicating a slight lag. The pace of progress in the second half will be a key point to monitor.

3. Conservative financial position: With an equity ratio of 52.5%, interest-bearing debt of ¥0.914B, and interest coverage of approximately 236x, financial soundness remains high. Financial safety serves to offset the Company’s comparatively weaker profitability within the industry.

Theoretical Share Price (For Reference)

This is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson-type model with an explicit five-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥561–¥594 at ±1% for the cost of equity, and ¥577–¥579 at ±0.1 for ω.

Notes:

• Net assets as of the end of the quarter are used (there is a timing difference from the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual income model / Interest rate reference month: 2026-07 / This value does not forecast 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 responsibility, after consulting professionals as necessary.

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