Nihon M&A Center Holdings Inc. FY2027 Q1 Earnings Report

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Executive Summary

In Q1 of the fiscal year ending March 2027, Operating Income, the company’s core earnings measure, declined, while Net Income attributable to owners of the parent increased significantly due to the recognition of extraordinary income, primarily gains on the sale of shares in subsidiaries. Revenue was ¥91.0B (+0.9% YoY), Operating Income was ¥23.5B (▲6.4%), and Ordinary Income was ¥22.5B (▲11.1%). Net Income attributable to owners of the parent increased substantially to ¥20.3B (+33.8%), but this increase was largely attributable to the one-time contribution of ¥9.0B in extraordinary income, including an ¥8.5B gain on the sale of shares in subsidiaries. Although the company maintained its revenue growth trend, the increase in SG&A expenses (+9.5%) exceeded revenue growth (+0.9%), resulting in a modest decline in profitability at the operating level.

Factors Affecting Business Results

【Revenue】Revenue increased modestly to ¥91.0B, up +0.9% YoY. By segment, the core M&A Consulting Business remained solid at ¥91.4B (including intersegment transactions, +1.6% YoY) and accounted for the majority of the revenue mix (99.5% of revenue from external customers). The Fund Business recorded strong growth of 69.2% YoY to ¥0.4B, although its revenue scale itself remains limited.

【Profit and Loss】Operating Income was ¥23.5B (▲6.4% YoY), and the Operating Margin declined by approximately 2.0pt from the previous year to 25.8%. Cost of sales was ¥36.1B, nearly flat year on year (▲0.7%), and the gross margin improved from the previous year to 60.3%. However, SG&A expenses increased to ¥31.4B (+9.5% YoY), outpacing revenue growth and putting pressure on profitability at the operating level. Ordinary Income was ¥22.5B (▲11.1% YoY), with an increase in non-operating expenses, including a ¥0.3B foreign exchange loss, acting as a downward factor. Meanwhile, due to the recognition of ¥9.0B in extraordinary income, including an ¥8.5B gain on the sale of shares in subsidiaries, Profit Before Tax increased to ¥31.6B (+24.6% YoY), while Net Income attributable to owners of the parent rose to ¥20.3B (+33.8% YoY). Excluding extraordinary income, the underlying earnings level is estimated to have been broadly flat to slightly lower than the previous year, reflecting a pattern of lower Operating Income but higher final profit due to extraordinary income.

Segment Analysis

Following the organizational restructuring in April 2026, the reporting segments were reorganized into two categories: the “M&A Consulting Business” and the “Fund Business.” Segment profit for the M&A Consulting Business declined to ¥25.4B (▲6.9% YoY), indicating a modest deterioration in the profitability of the core business. Meanwhile, segment profit for the Fund Business improved substantially to ¥6.5B, compared with ▲¥0.5B in the same period of the previous year, supporting consolidated earnings. However, revenue from this business was only ¥0.4B, and its earnings are considered to be strongly characterized by investment valuation gains, gains on sales, and similar items; therefore, earnings recurrence is limited. Company-wide expenses (adjustments) were ▲¥2.5B, narrowing from ▲¥3.2B in the previous year.

Key Financial Indicators

【Profitability】The Operating Margin declined by approximately 2.0pt from the previous year to 25.8%, as the increase in SG&A expenses offset the improvement in the 60.3% gross margin. The Net Profit Margin (22.3% attributable to owners of the parent) rose substantially from the previous year, but this was largely due to the temporary boost from extraordinary income.【Cash Quality】Cash and deposits totaled ¥329.3B, accounting for 60.5% of total assets, representing an extremely high cash holding ratio.【Investment Efficiency】ROE was 4.6%, while the total asset turnover ratio remained low, reflecting a structure in which ample cash and investment securities weigh on asset efficiency. Financial leverage is also low, indicating room for improvement in capital efficiency.【Financial Soundness】The Equity Ratio rose substantially to 87.7% from 75.8% in the previous year, while long-term borrowings declined to ¥14.0B from ¥21.0B, further strengthening the company’s financial foundation.

Cash Flow Analysis

As the cash flow statement has not been disclosed, funding trends are reviewed based on changes in the balance sheet. Cash and deposits were ¥329.3B, down ¥75.2B from ¥404.5B at the end of the previous fiscal year. At the same time, investment securities declined to ¥146.2B, down ¥18.7B from ¥164.9B at the end of the previous fiscal year, while long-term borrowings also decreased by ¥7.0B to ¥14.0B. Notes and accounts receivable decreased to ¥6.0B, down ¥2.1B from ¥8.1B at the end of the previous fiscal year, indicating solid working capital collection. Overall, asset contraction and debt repayment progressed in parallel. Although the cash balance declined, liquidity remains ample, and the company continues to have substantial capacity to repay interest-bearing debt using internal funds.

Quality of Earnings

The increase in Net Income attributable to owners of the parent to ¥20.3B in the current period was not due to an improvement in recurring earnings power, but was heavily dependent on the one-time factor of ¥9.0B in extraordinary income, including an ¥8.5B gain on the sale of shares in subsidiaries. Ordinary Income declined to ¥22.5B (▲11.1% YoY), while non-operating income and expenses made a modest downward contribution relative to revenue, including ¥0.3B in interest income offset by a ¥0.3B foreign exchange loss. Profit Before Tax excluding extraordinary income was approximately ¥22.5B, broadly in line with Ordinary Income, indicating that no increase in pre-tax profit would have been observed without extraordinary income. Accordingly, it should be noted that a substantial portion of the increase in Net Income for the current period was attributable to non-recurring factors and does not reflect recurring earnings power.

Earnings Forecast and Guidance

The Q1 progress rates against the full-year forecast were 17.2% for Revenue (¥91.0B/¥528.0B), 12.2% for Operating Income (¥23.5B/¥193.0B), 11.7% for Ordinary Income (¥22.5B/¥193.0B), and 15.1% for Net Income attributable to owners of the parent (¥20.3B/¥134.0B). These levels are below the simple one-quarter benchmark of 25%, with progress in Operating Income and Ordinary Income particularly low. Progress in Net Income was boosted by the contribution from extraordinary income, but the lagging progress at the ordinary income level suggests that the underlying earnings pace may have been estimated somewhat conservatively relative to guidance, or that the concentration of deal closings in the second half of the fiscal year may be having an impact. There were no revisions to the earnings forecast or dividend forecast during the quarter.

Shareholder Returns

The annual dividend forecast for the fiscal year ending March 2027 is ¥14.00, including a special dividend of ¥4. The Payout Ratio against the company’s forecast EPS of ¥41.91 is approximately 33.4%, representing a sustainable level within the current forecast range. Given the company’s strong financial foundation, including an Equity Ratio of 87.7% and cash and deposits of ¥329.3B, its funding capacity for dividends can be considered substantial.

Risk Factors

1. Business concentration risk: The M&A Consulting Business accounts for 99.5% of revenue from external customers, indicating a high degree of dependence on a single business. Segment profit for this business declined by ▲6.9% year on year, and its structure is susceptible to quarterly earnings volatility due to the timing of deal closings.

2. Price fluctuation risk of investment securities: Investment securities totaled ¥146.2B, accounting for 26.9% of total assets. Market price fluctuations may affect net assets and comprehensive income through valuation gains and losses.

3. Pressure on profitability from higher costs: SG&A expenses increased to ¥31.4B (+9.5% YoY), substantially outpacing revenue growth (+0.9%). If this trend continues, it may lead to a further decline in the Operating Margin.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

Both the Operating Margin and Net Profit Margin are substantially above the industry median, placing the company among the leaders in the industry.

Growth and Capital Efficiency

The Revenue Growth Rate is below the industry median, placing the company in the lower tier of the industry in terms of growth.

Source: Compiled by the company

Key Points from the Financial Results

1. The increase in Net Income attributable to owners of the parent (+33.8%) was largely due to the recognition of ¥9.0B in extraordinary income, primarily consisting of a gain on the sale of shares in subsidiaries. It is important for understanding the quality of the results that Operating Income declined by ▲6.4% and Ordinary Income declined by ▲11.1% at the recurring earnings level.

2. Negative operating leverage emerged, with the rate of increase in SG&A expenses (+9.5%) exceeding the revenue growth rate (+0.9%). Consequently, the Operating Margin declined despite a +0.7pt improvement in the gross margin. The relationship between the pace of expense growth and revenue growth is a key point to monitor when assessing future profitability trends.

3. The Equity Ratio rose to 87.7% from 75.8% in the previous year, while long-term borrowings declined to ¥14.0B, further strengthening the company’s financial position. However, ROE remained at 4.6%, indicating room for improvement in asset efficiency.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson-type model with an explicit 5-year fade period). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥244–¥259 at ±1% for the Cost of Equity, and ¥248–¥256 at ±0.1 for ω.

Notes:

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

(Calculation model: Residual income model / Interest rate reference month: 2026-06 / This value does not predict 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 release data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the company based on publicly available earnings data. Investment decisions should be made at your own responsibility, and you should consult a professional as necessary.