KOSHIDAKA HOLDINGS (2157) FY2026 FY Earnings Report

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Executive Summary

Despite higher revenue, Operating Income and Ordinary Income declined, with only net income increasing. The increase in net income was attributable to a reduction in extraordinary losses, rather than stronger performance in the core business. Revenue was ¥80.4B (+15.9% YoY), Operating Income was ¥10.77B (down 5.5% YoY), and Ordinary Income was ¥11B (down 5.1% YoY). Net income attributable to owners of the parent was ¥6.35B (+20.7% YoY). The operating margin fell 3.0pt, from 16.4% in the prior year to 13.4%, as higher SG&A expenses (+21.5%) and increased costs outweighed the benefit of revenue growth.

Factors Affecting Results

【Revenue】Most of the increase in revenue came from the Karaoke Business. Revenue from this business was ¥78.08B (+16.3% YoY), accounting for approximately 97.1% of consolidated revenue. Property Management generated ¥1.4B (+4.1%). The main driver was the expansion of store operations, and two new subsidiaries were consolidated during the current period.

【Profit and Loss】Gross profit was ¥19.25B, and the gross margin was 23.9%, down approximately 2.6pt from 26.5% in the prior year. SG&A expenses were ¥8.48B, up 21.5% from ¥6.98B in the prior year, outpacing revenue growth. As a result, the operating margin declined by 3.0pt. Extraordinary gains and losses were driven by one-off factors: extraordinary income of ¥1.01B (gain on sale of property, plant and equipment) compared with extraordinary losses of ¥3.25B (including impairment losses of ¥2.97B). The net loss of ¥2.24B narrowed from a loss of approximately ¥4.34B in the prior year. Profit before taxes was ¥8.76B (¥7.26B in the prior year). Overall, revenue increased while Operating Income declined, whereas net income increased due to the reduction in extraordinary losses.

Segment Analysis

The Karaoke Business generated revenue of ¥78.08B (+16.3%), while Operating Income was ¥12.03B (down 3.0%), representing a margin of 15.4%. This was down approximately 3pt from about 18.5% in the prior year, indicating that revenue growth did not translate into higher profit. Impairment losses of ¥2.94B were also recorded in this business.

Property Management generated revenue of ¥1.4B (+4.1%) and Operating Income of ¥0.22B (down 1.2%), with a stable margin of 15.7%. Other Businesses generated revenue of ¥0.92B and recorded an Operating Loss of ¥0.06B (compared with Operating Income of ¥0.04B in the prior year). Adjustments for corporate expenses and other items were △¥1.42B, a greater burden than the △¥1.27B in the prior year.

Key Financial Metrics

【Profitability】ROE was 15.0%, the operating margin was 13.4% (16.4% in the prior year), and the gross margin was 23.9%. ROE was roughly flat year over year, as an improvement in the net profit margin was offset by lower financial leverage. EPS was ¥76.31 (¥64.01 in the prior year, +19.2%).【Cash Flow Quality】Operating Cash Flow (OCF) was ¥10.63B (down 16.8% YoY), approximately 1.7x net income. However, after deducting items including income taxes paid of ¥3.8B from the OCF subtotal before working capital changes of ¥15.54B, OCF declined.【Investment Efficiency】Capital expenditures were ¥9.04B, approximately 1.66x depreciation and amortization of ¥5.45B. The company is actively investing for growth, and progress in monetizing these investments will be a key focus going forward.【Financial Soundness】The Equity Ratio rose to 53.8% (from 51.2% in the prior year). Meanwhile, the current ratio was approximately 82.9% (current assets of ¥13.72B ÷ current liabilities of ¥16.56B), below 100%. Asset retirement obligations were ¥9.26B, accounting for approximately 25% of total liabilities.

Cash Flow Analysis

Operating Cash Flow (OCF) was ¥10.63B (down 16.8% YoY), providing cash coverage of net income. In terms of working capital, there were cash outflows of ¥0.64B due to an increase in trade receivables and ¥0.29B due to an increase in inventory. Investing cash flow was △¥12.56B, of which capital expenditures accounted for ¥9.04B. As a result, free cash flow was △¥1.94B, deteriorating from a positive figure of approximately ¥4.48B in the prior year. Financing cash flow was △¥2.21B, mainly due to dividend payments of ¥2.06B. Borrowings of ¥2.5B through long-term loans were offset by repayments of ¥2.44B. Cash and deposits decreased to ¥6.54B from ¥10.49B in the prior year. The company is in a phase in which growth investments exceed OCF.

Earnings Quality

One-off factors had a significant impact on net income for the period. Extraordinary income comprised a gain on the sale of property, plant and equipment of ¥1.01B, while extraordinary losses totaled ¥3.25B, including impairment losses of ¥2.97B and litigation settlement costs of ¥0.19B. The approximately ¥4.65B difference between Ordinary Income of ¥11B and net income attributable to owners of the parent of ¥6.35B reflects extraordinary losses and income taxes of ¥2.4B. Of other operating income of ¥0.59B, foreign exchange gains accounted for ¥0.31B, equivalent to approximately 2.8% of Ordinary Income, indicating limited reliance on this source. OCF was approximately 1.7x net income, supported in part by non-cash expenses such as depreciation and amortization of ¥5.45B and impairment losses. Comprehensive income was ¥6.37B, with only a small divergence from net income. Deferred tax assets doubled to ¥8.35B from ¥4.2B in the prior year, and their recoverability depends on future taxable income.

Earnings Forecast and Guidance

The company’s forecast for the following period is revenue of ¥90.36B (+12.4%), Operating Income of ¥12.6B (+17.0%), Ordinary Income of ¥12.32B (+12.0%), and net income of ¥7.14B (+12.5%). The forecast operating margin is approximately 13.9%, an improvement of approximately 0.5pt from 13.4% in the current period. Forecast EPS is ¥80.95. As revenue growth translated into lower profit in the current period, achieving the forecast depends on converting revenue growth into profit.

Shareholder Returns

The annual dividend was ¥28 (interim dividend of ¥13 and year-end dividend of ¥15), a significant increase from ¥12 in the prior year. The Payout Ratio was 36.7%; as this excludes share buybacks, it is not the Total Return Ratio. Share buybacks were negligible at ¥0B, while cash dividends paid totaled ¥2.06B. Meanwhile, free cash flow was △¥1.94B, so dividends were funded through cash on hand and OCF. The forecast dividend for the following period is ¥30, implying a forecast Payout Ratio of approximately 37.1% based on forecast EPS of ¥80.95.

Risk Factors

1. Business concentration risk: The Karaoke Business accounts for approximately 97.1% of consolidated revenue, and more than 90% of sales are generated in Japan. Although revenue from this business increased, Operating Income declined 3.0%; continued increases in store-related expenses could weigh on margins.

2. Liquidity risk: The current ratio is approximately 82.9%, and working capital is approximately △¥2.84B. Cash and deposits decreased by ¥3.95B YoY, and free cash flow was also △¥1.94B. If capital investment continues, the trajectory of available liquidity will warrant attention.

3. Asset returns and debt risk: Impairment losses for the current period were ¥2.97B, and goodwill increased to ¥2.69B. Asset retirement obligations were ¥9.26B (+36.7% YoY), representing future costs associated with store closures and restoration work.

Industry Benchmarks (Reference; Compiled by the Company)

Profitability and Returns

Both the operating margin and net profit margin exceed the industry median and are within the IQR.

Growth and Capital Efficiency

The revenue growth rate exceeds the industry median and is within the IQR.

※Source: Company compilation

Key Points to Watch in the Earnings Results

1. Revenue increased 15.9%, while Operating Income declined 5.5%, and the operating margin fell 3.0pt. Both the gross margin and SG&A ratio deteriorated, making the ability to translate revenue growth into profit the central issue to watch in the results.

2. The increase in net income (+20.7%) was driven by the reduction in extraordinary losses and should be viewed separately from operating performance. The increase in net income does not indicate an improvement in the core business.

3. OCF was approximately 1.7x net income, but capital expenditures of ¥9.04B resulted in free cash flow of △¥1.94B. While the Equity Ratio rose to 53.8%, the current ratio was approximately 82.9%; future cash generation as investments are monetized will be an important point to monitor.

Theoretical Share Value (Reference)

Sensitivity: ¥586 to ¥620 for cost of equity ±1%; ¥600 to ¥607 for ω ±0.1.

Notes:

• Goodwill amortization of ¥2.1 per share is added back to earnings (a non-cash expense; for comparability with IFRS companies).

(Model: residual income model (Ohlson-type, explicit 5-year fade) / rate reference month: 2026-09 / a mechanical estimate from public data only; it is not a forecast of the market price or a recommendation of any investment action, and it does not predict or guarantee future share prices)

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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 particular security. Industry benchmarks are reference information compiled by the company based on publicly available earnings data. Investment decisions should be made at your own discretion and, where appropriate, after consulting a professional.

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