Q1 saw a significantly larger drop in profit than in sales, making the first half a key period for confirming a turnaround in margins

Revenue in the first quarter of the fiscal year ending February 2027 was ¥13.719 billion, down 13.1% year on year, while operating profit was ¥817 million, down 75.8%. Compared with revenue of ¥15.786 billion and operating profit of ¥3.377 billion in the same quarter of the previous year, profit declined by more than sales. The operating margin fell approximately 15 percentage points, from approximately 21.4% in the same quarter of the previous year to approximately 6.0%. The central issue in these results is therefore not the decline in revenue itself, but the impact of lower sales and investment costs on margins.

By segment, the Human Resources Services business recorded revenue of ¥12.064 billion and segment profit of ¥3.083 billion, down 13.8% and 38.2%, respectively, year on year. Its simple segment profit margin was approximately 25.6%, down substantially from approximately 35.6% in the same quarter of the previous year. The DX business recorded revenue of ¥1.656 billion and segment profit of ¥844 million, down 7.6% and 21.7%, respectively, year on year. The DX business’s margin was also approximately 51.0%, below approximately 56.1% for the previous full year.

The company attributed the decline in revenue to an increase in the transfer of account responsibilities following the change to the solution-based organisation implemented in the previous fiscal year, as well as slower contract acquisition from new customers and former customers. It also made upfront investments in Spot Baitoru, recruited new graduates to strengthen its sales force, and expanded its offices. However, it has not disclosed the revenue impact of the organisational change, the number of companies affected by the transfers, or the breakdown and amount of upfront investment. In the first half, it will be necessary to assess both segment revenue and margins to determine whether the burden of the sales organisation transition remains and whether contract acquisition is normalising.

The full-year forecasts remain a wide range of ¥53.5 billion–¥57.6 billion in revenue and ¥5.0 billion–¥10.0 billion in operating profit. First-quarter revenue represents approximately 23.8%–25.6% of the full-year range, while operating profit represents only approximately 8.2%–16.4%, indicating that profit is progressing more slowly than revenue. In FY2027-H1, we will closely monitor whether the operating margin recovers from approximately 6.0% in Q1 and whether the company continues to provide conservative guidance based on the lower end of the full-year operating profit range of ¥5.0 billion.