GAKUJO (2301) FY2026 Q1 Earnings Report

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Executive Summary

The key point for the current period was that SG&A expenses increased amid declining revenue, resulting in a wider operating loss compared with the previous year. Revenue was ¥13.7B (¥14.5B in the previous year, -5.5% YoY), operating income was ¥-6.9B (¥-4.0B in the previous year, wider loss), ordinary income was ¥-6.1B (¥-2.8B in the previous year, wider loss), and net income was ¥-4.3B (¥-1.8B in the previous year, wider loss). Although gross margin improved to 51.1% (49.6% in the previous year) due to control of the cost of sales, the 24.1% YoY increase in SG&A expenses offset this improvement, resulting in deteriorating profitability.

Factors Affecting Performance

【Revenue】Revenue was ¥13.7B, a 5.5% decrease from the same period of the previous year. Fluctuations in hiring demand for human resources recruitment and employment information services appear to have been behind the decline in revenue, while the decrease in trade receivables (accounts receivable down 43.3% YoY) may also reflect demand trends.

【Profit and Loss】Gross margin improved to 51.1% from 49.6% in the previous year due to control of the cost of sales. However, SG&A expenses increased by ¥2.7B (+24.1%) from the previous year to ¥13.9B, causing the SG&A ratio to rise to 101.7% (77.4% in the previous year). As a result, the operating loss widened to ¥-6.9B from ¥-4.0B in the previous year. Although non-operating income of ¥0.8B (including ¥0.4B in dividend income, among other items) provided partial support, the ¥0.8B gain on the sale of securities recorded in the previous year was almost entirely absent in the current period, resulting in ordinary income of ¥-6.1B (¥-2.8B in the previous year). The tax effect reduced the loss after tax, but net income was ¥-4.3B, representing a wider loss than the ¥-1.8B recorded in the previous year. The company reported declining revenue and earnings, with losses widening.

Key Financial Indicators

【Profitability】The operating margin deteriorated significantly to -50.6% (-27.8% in the previous year), while the net profit margin declined to -31.1% (-12.6% in the previous year). Although gross margin improved to 51.1%, the increase in the SG&A ratio to 101.7% more than offset this improvement, weighing on overall profitability.【Cash Quality】Cash and deposits amounted to ¥44.2B, while the substantial financial asset base, including investment securities of ¥47.7B, supports the financial foundation. Accounts receivable declined significantly to ¥12.6B (¥22.1B in the previous year), reducing the amount of funds tied up in working capital.【Investment Efficiency】Annualized ROE was -12.2%, with operating losses being the primary factor behind the deterioration in capital efficiency.【Financial Soundness】The equity ratio was 91.3% (86.9% in the previous year), and the current ratio was equivalent to 622.1%, both extremely high. With total liabilities of ¥13.3B against net assets of ¥139.6B, leverage remained low.

Cash Flow Analysis

Although detailed data from the statement of cash flows was not provided, an analysis of fund movements based on changes in the balance sheet indicates that cash and deposits amounted to ¥44.2B, down ¥12.6B from ¥56.9B in the previous year. While accounts receivable decreased by ¥9.6B from ¥22.1B to ¥12.6B, accounts payable also decreased by ¥2.0B from ¥4.5B to ¥2.5B, suggesting that changes in working capital, in addition to the operating loss, affected the cash balance. Current securities amounted to ¥5.0B, showing almost no change from the previous year, and no significant drawdown was observed in total financial assets, including investment securities of ¥47.7B. Total assets contracted from ¥171.1B to ¥152.8B, with the decline in asset size moving in line with the decrease in cash.

Quality of Earnings

The current period’s non-operating income of ¥0.8B consisted mainly of ¥0.4B in dividend income and ¥0.3B in interest on securities, representing income of a recurring nature. Meanwhile, the ¥0.8B gain on the sale of securities recorded in the same period of the previous year was almost entirely absent in the current period, meaning that the year-on-year comparison of ordinary income was affected by the disappearance of a one-time factor. Income taxes were ¥-1.9B, resulting in a negative tax amount, and the tax effect on the loss before tax reduced the loss after tax. Amid concurrent revenue declines and increases in SG&A expenses, the deterioration in earnings quality stems from the structural factor of worsening operating results themselves, while support from temporary income and expenses was limited.

Earnings Forecast and Guidance

The full-year company plan assumes substantial growth in both revenue and earnings, with revenue of ¥133.0B (+20.7% compared with the previous fiscal year), operating income of ¥32.5B (+39.3%), ordinary income of ¥34.5B (+30.0%), and net income of ¥24.8B (+31.1%). Against this backdrop, revenue progress for the current period (equivalent to Q1) was 10.3%, while operating income represented a loss in the opposite direction from the plan. Achieving the full-year plan will therefore require a significant recovery in revenue and absorption of SG&A expenses during the remaining period. Revenue and expenses in human resources recruitment and employment information services tend to be uneven across quarters depending on the timing of recruitment activities, and the likelihood of achieving the full-year plan cannot be determined based solely on progress during a single period. No revision has been made to the dividend forecast.

Shareholder Returns

The full-year dividend forecast is ¥75.00 per share, and the full-year EPS forecast is ¥183.46, resulting in an implied payout ratio of 40.9%. Based on 15,560 thousand shares outstanding (2,140 thousand treasury shares), the estimated annual total dividend amount is approximately ¥11.7B. Although the company recorded a net loss for the current period, it has substantial retained earnings and financial capacity, with retained earnings of ¥118.9B and cash and deposits of ¥44.2B, and no revision has been made to the dividend forecast. However, realization of the dividend forecast assumes a recovery in earnings during the remaining period in line with the full-year plan.

Risk Factors

1. Risk of deteriorating profitability: The operating margin of -50.6% and net profit margin of -31.1% both deteriorated significantly from the previous year. SG&A expenses increased 24.1% YoY while revenue declined, creating a risk that losses could continue or widen if revenue growth is not achieved.

2. Risk of divergence from the full-year plan: Revenue progress against the full-year revenue plan of ¥133.0B was 10.3%, while the current period recorded a loss of ¥6.9B against the operating income plan of ¥32.5B. This is substantially below a standard pace of progress. Accelerating revenue growth and absorbing expenses during the remaining period are prerequisites for achieving the plan.

3. Risk of fluctuations in investment securities: Investment securities of ¥47.7B account for 31.2% of total assets of ¥152.8B, and market price fluctuations may affect net assets and non-operating income and expenses, including dividend income.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

The company’s profitability is substantially below the industry median and ranks toward the lower end within the industry.

Growth and Capital Efficiency

The revenue growth rate also fell below the industry median, lagging peers that are on a growth trajectory.

※Source: Compiled by the Company

Key Points in the Earnings Results

1. Gross margin improved to 51.1%, but the increase in the SG&A ratio to 101.7% was the primary cause of deteriorating profitability. Whether the increase in costs will lead to a recovery in revenue will be a key focus going forward.

2. The conservative financial structure, with an equity ratio of 91.3% and net assets of ¥139.6B against liabilities of ¥13.3B, provides a foundation supporting continued investment until performance recovers.

3. The full-year plan assumes substantial growth in both revenue and earnings. However, current-period progress is significantly below plan for both revenue and profit, and actual results during the remaining period will be a basis for assessing the likelihood of achieving the plan.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,274–¥1,348 at cost of equity ±1%, and ¥1,304–¥1,320 at ω ±0.1.

Notes:

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

(Calculation model: Residual income model (Ohlson-type model with an explicit 5-year fade) / Interest rate reference month: 2026-07 / This is a mechanically calculated value based solely on publicly disclosed data, and is not a forecast of the market share price or a recommendation of any specific investment action, nor does it predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI through analysis of XBRL earnings summary data. It does not recommend investment in any specific securities. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting professionals as necessary.

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