Revenue rose, but 1Q saw higher revenue and lower profit as margins declined

Revenue in 1Q of FY2027 was ¥2,009.8 million, up 13.3% from ¥1,774.1 million in the same quarter of the previous year. Operating profit, however, was ¥390.0 million, below the ¥397.2 million recorded in the same quarter of the previous year, representing a 1.8% decline. The operating margin was approximately 19.4%, down 3.0 percentage points from approximately 22.4%. Operating profit, ordinary profit of ¥394.0 million, and net profit attributable to owners of the parent of ¥285.0 million were all positive, but the increase in revenue did not translate directly into profit growth.

The full-year forecasts are revenue of ¥8,569.0 million, operating profit of ¥1,537.0 million, ordinary profit of ¥1,547.0 million, and net profit attributable to owners of the parent of ¥1,113.0 million, and had not been revised as of 1Q. Progress against the full-year forecast was 23.5% for revenue and 25.4% for operating profit, with operating profit progress exceeding revenue progress. However, if 50% of the full-year forecast is used as a simple interim benchmark, revenue of ¥4,284.5 million and operating profit of ¥768.5 million will be required by the end of June.

The company explained that its customer base expanded on demand for more efficient and sophisticated labor management and for migration from other systems. It also said that the higher comparison base resulting from the billing-system change completed in the previous fiscal year, as well as the deletion of IDs following existing customers’ retirement, leave of absence, or transfers, partially offset the increase in IDs from new customer acquisitions. The impact of these factors on revenue and operating profit has not been disclosed, so the extent to which the 1Q decline in profit was attributable to investment, changes in customer IDs, or higher expenses cannot currently be quantified.

At the next interim results announcement, we will check whether the 1Q operating margin of 19.4% can be maintained and whether standalone 2Q operating profit returns to positive year-on-year growth. If cumulative interim operating profit falls short of ¥768.5 million, the company will need to generate ¥1,147.0 million in operating profit in the second half to meet its full-year forecast. As the company has a single segment, segment profit is not disclosed, making any additional explanation by expense item or service of the causes of the margin decline and the prospects for recovery important.