TANABE CONSULTING GROUP CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥7.66B
• Operating Income: ¥954M
• Net Income: ¥547M
• EPS: ¥17.23

Income Statement

Balance Sheet

Cash Flow Statement

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

Tanabe Consulting Group reported solid FY2026 Q2 (cumulative) results with revenue of ¥7,656 million, up 14.9% YoY, demonstrating healthy demand across its consulting franchise. Profitability improved, with operating income rising 19.8% YoY to ¥954 million and net income up 10.6% YoY to ¥560 million, indicating positive operating leverage. Operating margin expanded to approximately 12.5% (¥954m/¥7,656m), from an estimated ~12.0% in the prior-year period, supported by cost discipline and scale benefits. Gross profit was ¥3,183 million, translating to a gross margin of 41.6%, which is robust for a consulting/services model with limited cost of goods sold. EBITDA reached ¥1,012 million, with an EBITDA margin of 13.2%, implying a modest non-cash burden (D&A of ¥58 million, roughly 0.8% of sales). The DuPont breakdown shows net margin of 7.31%, asset turnover of 0.504x, and financial leverage of 1.35x, producing a calculated and reported ROE of 4.98%. ROE remains modest versus many Japanese service peers due to a sizable equity base rather than weak profitability. The balance sheet is conservative: total assets were ¥15,197 million, equity ¥11,234 million, and liabilities ¥3,188 million, implying an equity ratio near 74% (management’s 0.0% equity ratio is likely unreported rather than actual). Liquidity is very strong, with a current ratio of 358% and working capital of ¥6,555 million, reflecting abundant current assets versus current liabilities. Financial risk is low; interest expense was only ¥2.4 million and interest coverage a very high 403x, consistent with minimal debt use (D/E 0.28x). Cash earnings quality is good: operating cash flow of ¥682 million exceeded net income (OCF/NI 1.22x), suggesting accruals are not inflating earnings. That said, investing cash flows and cash balance were unreported (shown as zero), limiting free cash flow analysis and capital allocation insights. The reported effective tax rate in the metrics section (0.0%) appears to be a placeholder; using disclosed income tax of ¥315 million and net income of ¥560 million suggests an implied tax rate around 36% on pre-tax income. Dividend information is also unreported (DPS 0.00, payout 0.0%), so our assessment of shareholder returns must rely on financing cash outflows of ¥-782 million, which may include dividends or buybacks. Overall, Tanabe is executing well operationally with double-digit top-line growth, margin expansion, and strong liquidity, but ROE remains constrained by capital efficiency and under-leverage. Near-term focus should be on sustaining order intake and utilization to maintain operating leverage while considering disciplined capital returns to enhance ROE. Data limitations around cash, investing flows, and share metrics constrain deeper analysis of FCF and per-share trends, which should be monitored in subsequent disclosures.

Profitability Analysis

ROE decomposition: Net margin 7.31% × asset turnover 0.504× × financial leverage 1.35× yields ROE of 4.98%, aligning with the reported figure. The modest ROE primarily reflects low leverage and a large equity base rather than weak operations. Margin quality: Gross margin of 41.6% is strong for a consulting/services mix, supporting healthy contribution after delivery costs. Operating margin of ~12.5% shows disciplined SG&A control; EBITDA margin of 13.2% indicates low D&A intensity (D&A ~0.76% of sales), consistent with an asset-light model. Operating leverage: Revenue rose 14.9% YoY while operating income grew 19.8% YoY, implying margin expansion of roughly 50 bps (from ~12.0% to ~12.5%) as fixed costs were leveraged. Ordinary margin (~12.4%) is close to operating margin, with minimal non-operating drag given very low interest expense, indicating clean earnings. Net margin at 7.31% reflects a normalized effective tax burden (implied ~36%) and limited minority interest effects (not disclosed). Overall profitability trends are positive, with potential for further ROE improvement via better asset turnover and capital efficiency.

Growth Assessment

Revenue growth of 14.9% YoY to ¥7,656 million suggests solid demand across core consulting domains. Profit growth outpaced sales at the operating level (+19.8% YoY), indicating favorable mix/pricing or utilization gains and scale efficiencies. The expansion in operating margin by ~50 bps underscores positive operating leverage, likely from higher consultant utilization and cost containment. Net income growth of 10.6% YoY trails operating income growth due to tax normalization and minor non-operating items, but still demonstrates healthy bottom-line momentum. Sustainability: Consulting revenue can be cyclical and dependent on pipeline, pricing, and staffing; the asset-light model reduces fixed cost risk, but utilization remains key. Profit quality appears solid with EBITDA conversion and limited interest burden, though lack of detail on extraordinary items and minority interests tempers certainty. Outlook: If demand remains resilient and the company sustains pricing/fee rates, mid-teens revenue growth with incremental margin expansion is plausible; however, staff cost inflation and hiring to support growth could moderate operating leverage. Continued focus on higher-value offerings (e.g., strategy, DX, M&A advisory) would support margins. Absent disclosed backlog, book-to-bill, or order intake, we assume growth is primarily organic with potential selective M&A; confirmation in future filings is needed.

Financial Health

Liquidity is strong: current assets of ¥9,092 million against current liabilities of ¥2,537 million yield a current ratio of 358% and ample working capital of ¥6,555 million. Quick ratio equals current ratio due to unreported inventories, consistent with a consulting model. Solvency is robust: total liabilities of ¥3,188 million vs equity of ¥11,234 million implies low leverage; interest expense is only ¥2.4 million with coverage of 403x. The stated equity ratio of 0.0% is clearly an unreported placeholder; calculated equity ratio is approximately 73.9% (¥11,234m/¥15,197m). Debt-to-equity of 0.28x indicates conservative financing, and refinancing risk appears minimal. Capital structure provides flexibility for investment and potential shareholder returns, though it suppresses ROE. No cash and cash equivalents were disclosed (reported as zero), limiting more granular liquidity assessment; however, the strong current asset position and positive OCF mitigate concerns.

Cash Flow Quality

Earnings quality is sound: OCF of ¥682 million exceeds net income of ¥560 million (OCF/NI 1.22x), indicating cash-backed profits and manageable accruals. EBITDA of ¥1,012 million and low D&A (¥58 million) align with an asset-light model, supporting strong cash conversion before working capital. Free cash flow cannot be reliably calculated because investing cash flows and capex were not disclosed (reported as zero). Financing cash outflow of ¥-782 million suggests distributions to shareholders and/or debt repayment, but the split is not disclosed. Working capital detail (e.g., AR, unbilled revenue, contract liabilities) is not provided; nonetheless, positive OCF implies receivables and advance billing are being managed adequately. Key watchpoints include days sales outstanding (DSO), unbilled receivables, and any build-up in contract assets that could pressure future cash conversion.

Dividend Sustainability

Dividend data are unreported for the period (DPS 0.00, payout 0.0%), so we cannot infer an actual payout from the provided fields. Financing CF of ¥-782 million could include dividends and/or buybacks, but the composition is unknown. EPS was ¥17.23 for the half-year; if a historical interim dividend exists, payout ratio would typically be benchmarked to interim EPS, but this is not disclosed here. With OCF at ¥682 million and a very strong balance sheet, the capacity to fund ordinary dividends appears ample, subject to capex/M&A needs that are not disclosed. FCF coverage of dividends cannot be assessed without capex and investing cash flows. Policy outlook depends on management’s capital allocation stance; given modest ROE (4.98%), there is room to enhance shareholder returns without compromising financial stability, but we refrain from assumptions absent explicit guidance.

Risk Assessment

Business Risks:

• Utilization risk and dependency on maintaining a strong project pipeline in consulting.
• Pricing pressure and competitive intensity in management and DX consulting markets.
• Talent acquisition and retention amid wage inflation for consultants.
• Cyclicality of client spending, particularly among SME customers in economic slowdowns.
• Execution risk in scaling higher-value services and potential M&A integration.
• Client concentration risk if large engagements account for a significant revenue share (not disclosed).

Financial Risks:

• ROE remains modest at 4.98% due to high equity base; capital efficiency risk.
• Working capital swings (receivables/unbilled) could impact OCF; details not disclosed.
• Potential tax rate volatility; implied effective tax ~36% vs placeholder 0.0% in metrics.
• Limited disclosure of cash and investing flows constrains visibility on FCF and liquidity buffers.
• Exposure to variable compensation costs impacting margins in weaker demand environments.

Key Concerns:

• Data gaps: cash balance, investing cash flows, inventories, and equity ratio reporting.
• Sustainability of double-digit growth without disclosed backlog/order intake metrics.
• Achieving higher ROE without compromising balance sheet conservatism.

Investment Implications

Key Takeaways:

• Strong topline momentum (+14.9% YoY) with operating leverage driving +19.8% YoY OI.
• Healthy margins (gross 41.6%, operating ~12.5%, EBITDA 13.2%) with low D&A burden.
• Solid cash earnings quality (OCF/NI 1.22x) and minimal interest burden (403x coverage).
• Very strong liquidity and low leverage; calculated equity ratio ~74%.
• ROE at 4.98% remains subdued, pointing to capital efficiency as a lever for improvement.
• Data limitations on cash, capex, and dividends obscure FCF and payout analysis.

Metrics to Watch:

• Order intake/backlog and consultant utilization rates.
• Fee rates/pricing and mix shift toward higher-margin services.
• SG&A ratio and headcount productivity.
• DSO, unbilled receivables, and contract liabilities for cash conversion health.
• Capex and M&A outlays (investing CF) to assess FCF and capital allocation.
• Capital return actions (dividends/buybacks) and ROE/asset turnover trajectory.

Relative Positioning: Within Japanese listed consulting and professional services peers, Tanabe exhibits above-average balance sheet strength and respectable margins, but its ROE is lower than peers that deploy more leverage or operate with higher asset turnover; continued growth and potential capital allocation actions could close this 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