Axis Consulting Corporation FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥1.46B
• Operating Income: ¥-255M
• Net Income: ¥-179M
• EPS: ¥-35.77

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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

Verdict: Mixed-to-weak quarter — solid top-line growth but loss-making at the operating and net levels, with notable data inconsistencies limiting precision. Revenue rose 19.2% YoY to 14.56, indicating healthy demand momentum. Reported operating income was -2.55 (operating margin -17.5%), despite a strong gross profit margin of 49.5%, implying heavy operating cost pressure. Ordinary income was -2.57, pointing to minimal contribution from non-operating items (non-operating income 0.03). Net income was -1.79 (net margin -12.3%) with a stated effective tax rate of 27.7%, though the coexistence of positive pre-tax profit (2.67) and negative net profit suggests data classification/timing differences in the provided snapshot. DuPont indicates ROE of -6.2% (Net margin -12.3%, Asset turnover 0.367, Financial leverage 1.37x), driven primarily by the negative margin. Liquidity is very strong (current ratio 453.5%, cash 29.99 vs current liabilities 8.78), and leverage is moderate (D/E 0.41x) with total interest-bearing loans of about 3.33. Working capital is ample at 31.04, reducing near-term financial risk. The quarter’s gross margin at 49.5% is solid for a human-capital/consulting model, but SG&A intensity prevented operating breakeven; controlling fixed personnel and go-to-market costs is critical. Margin expansion/compression in basis points cannot be reliably quantified due to lack of comparable prior-period margin disclosures and internal inconsistencies among line items. Earnings quality cannot be assessed because operating cash flow and free cash flow were not disclosed. The negative ROIC flag (-82.3%) is not decision-useful for a single-quarter, single-entity view and likely distorted by the loss numerator; treat with caution. Forward-looking, the key to restoring profitability is utilization and fee-rate leverage over a fixed cost base, alongside receivables discipline to translate revenue growth into cash. With strong liquidity, the company has runway to execute, but near-term earnings volatility remains elevated until opex normalizes versus revenue.

Profitability Analysis

ROE decomposition (DuPont): ROE (-6.2%) = Net Profit Margin (-12.3%) × Asset Turnover (0.367) × Financial Leverage (1.37x). The largest driver is the negative net profit margin; asset turnover and leverage are modest and typical for an asset-light, service-centric model. The negative margin stems from SG&A intensity overwhelming gross profit despite a healthy 49.5% gross margin; reported operating income (-2.55) implies that personnel and selling expenses outpaced revenue scale. Business reason: likely headcount additions, recruiting costs, and/or front-loaded sales/marketing and corporate costs to support growth, with revenue not yet scaled enough this quarter to absorb fixed costs. Sustainability: the gross margin appears structurally healthy, suggesting that loss-making status could be reversible if utilization, pricing, and volume scale improve; however, cost discipline is needed to avoid prolonged negative operating leverage. Concerning trend: SG&A growth likely exceeded revenue growth in the quarter (revenue +19.2% YoY, but operating loss persisted), indicating adverse operating leverage; exact SG&A YoY growth is not disclosed, but the margin outcome implies cost pressure.

Growth Assessment

Top-line growth was robust at +19.2% YoY, signaling healthy demand conditions or improved execution. Profit growth quality is weak: despite strong gross margin, the company posted operating and net losses, indicating costs are not yet aligned with scale. Non-operating items were negligible (0.03), so the loss is primarily operational. The current loss profile suggests near-term earnings are sensitive to utilization and billable-hours ramp. Without cash flow data, we cannot confirm whether revenue growth is translating into cash receipts; receivables of 7.33 against revenue of 14.56 for the quarter point to typical DSO for a consulting/recruiting business but warrant monitoring. Outlook: if headcount/productivity improves and cost growth moderates, operating leverage could drive breakeven and margin recovery; absent that, continued losses could persist despite revenue growth.

Financial Health

Liquidity is strong: current ratio 453.5% and quick ratio 453.5%, with cash and deposits of 29.99 comfortably exceeding current liabilities of 8.78. No warning on current ratio (<1.0) or D/E (>2.0); D/E is 0.41x, conservative. Maturity mismatch risk appears low: short-term loans of 1.00 are fully covered by cash; total interest-bearing loans (short + long) of about 3.33 are modest relative to equity (28.90) and cash. Balance sheet is asset-light (total assets 39.66; equity 28.90; leverage 1.37x assets/equity implied by DuPont). No off-balance sheet obligations were disclosed in the data provided; absence of disclosure does not confirm absence of such commitments.

Cash Flow Quality

Operating cash flow and free cash flow were not disclosed, so OCF/Net Income and FCF coverage cannot be assessed. As such, we cannot test earnings quality via cash conversion; OCF/Net Income < 0.8 cannot be evaluated. Working capital dynamics: receivables of 7.33 suggest meaningful billing in progress; with strong cash, liquidity risk from working capital swings is low. No signs of working capital manipulation can be inferred due to data gaps.

Dividend Sustainability

Dividend data were not disclosed; payout ratio reported as not calculable, with a calculated payout ratio shown as -98.9% that is not decision-useful in a loss quarter. Without OCF/FCF, we cannot gauge dividend coverage. Given the current operating and net losses, sustainable dividends would depend on balance sheet capacity (cash 29.99) and management policy rather than earnings coverage; policy clarity is needed.

Risk Assessment

Business Risks:

• Operating leverage risk: SG&A intensity remains high versus revenue, keeping operating margin negative.
• Utilization and pricing risk typical of consulting/recruiting models; small swings materially impact margins.
• Client demand cyclicality tied to hiring and investment cycles.
• Execution risk in scaling headcount while maintaining gross margin (~49.5%).

Financial Risks:

• Earnings volatility risk given negative operating and net margins.
• Data inconsistencies (e.g., gross profit/SG&A vs operating income; pretax vs net) complicate monitoring.
• Some leverage present (D/E 0.41x), though currently cushioned by cash 29.99.
• Potential receivables collection risk (7.33) if demand weakens.

Key Concerns:

• Negative ROE (-6.2%) driven by negative net margin (-12.3%).
• Reported ROIC flag (-82.3%) indicates capital inefficiency in the quarter, albeit likely distorted by losses.
• Lack of cash flow disclosure prevents assessment of earnings quality and dividend coverage.
• EPS anomaly (basic negative, diluted positive) suggests data/timing or instrument effects requiring clarification.

Investment Implications

Key Takeaways:

• Solid revenue growth (+19.2% YoY) but continued operating loss (-2.55; margin -17.5%).
• Gross margin is strong (49.5%), implying unit economics are viable; issue lies in SG&A absorption.
• Balance sheet strength (cash 29.99; current ratio 453.5%) provides runway to execute.
• Negative ROE (-6.2%) and loss-making profile reduce capital efficiency in the near term.
• Data inconsistencies limit precision; rely on management commentary for reconciliation.

Metrics to Watch:

• Operating margin progression toward breakeven and beyond.
• SG&A as a percentage of sales and headcount/productivity (utilization, bill rates).
• Order intake/backlog and client mix to validate revenue sustainability.
• DSO/receivables trends and OCF/Net Income once disclosed.
• Hiring costs and churn affecting gross margin and opex.

Relative Positioning: Versus domestic consulting/recruiting peers, the company shows stronger liquidity and conservative leverage but weaker profitability in the quarter due to elevated SG&A; successful operating leverage execution would be needed to close the margin gap.

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