GAKUJO (2301) FY2026 Q3 Earnings Report

Quick View

Executive Summary

For the cumulative Q3 period of the fiscal year ending October 2026, the Company posted higher revenue and profits, accompanied by improved profitability in its core business, although progress against the full-year forecast remained low. Revenue was ¥76.8B (+8.8% YoY), Operating Income was ¥9.6B (+13.7%), Ordinary Income was ¥11.3B (+4.3%), and Net Income was ¥7.8B (+2.0%). While Operating Income growth exceeded Revenue growth, the slowdown in Ordinary Income and Net Income growth was primarily attributable to the reversal of gains on the sale of marketable securities recorded in the same period of the previous year. Progress against the full-year forecast was 64.0% for Revenue and 37.1% for Operating Income, both below the standard 75% level, making the realization of earnings in Q4 a key focus.

Factors Affecting Performance

【Revenue】Revenue was ¥76.8B, representing an 8.8% increase YoY. This is broadly consistent with the Company’s full-year Revenue forecast of ¥120.0B (+8.9% YoY), indicating that underlying business growth is continuing.

【Profitability】Operating Income was ¥9.6B (+13.7% YoY), driven by an approximately 2.2pt improvement in the gross profit margin to 64.0% from 61.8% in the same period of the previous year. However, SG&A expenses increased by 12.7% YoY to ¥39.5B, outpacing Revenue growth, warranting attention to the sustainability of margin improvement. Ordinary Income was limited to ¥11.3B (+4.3% YoY), reflecting the reversal of gains on the sale of marketable securities, which decreased from ¥0.96B in the same period of the previous year to ¥0.06B in the current period. Net Income was ¥7.8B (+2.0% YoY), and the net profit margin declined to 10.2% from 10.9% in the same period of the previous year. Overall, the Company achieved higher revenue and profits; however, growth at the Ordinary Income and Net Income levels was slower than the improvement at the operating level, necessitating an assessment based on underlying earnings excluding the temporary reversal of financial income.

Key Financial Indicators

【Profitability】The Operating Income margin was 12.6%, improving by approximately 0.5pt from 12.0% in the same period of the previous year, while the Net Income margin was 10.2%, slightly lower than 10.9% in the same period of the previous year. The gross profit margin was 64.0%, exceeding 61.8% in the same period of the previous year, with an improvement in the cost-of-sales ratio driving better profitability.【Cash Quality】Accounts receivable were ¥11.6B, down 47.8% from ¥22.1B in the same period of the previous year. The reduction in receivables amid Revenue growth represents a positive development in cash collection. Contract liabilities were ¥3.6B, up from ¥1.7B in the same period of the previous year, indicating an accumulation of liabilities related to future service provision.【Investment Efficiency】Annualized ROE was 7.2% and annualized ROA was approximately 6.3%. Despite profitability reflected in a Net Income margin exceeding 10%, the substantial capital structure, with an Equity Ratio of 90.2%, is relatively suppressing ROE.【Financial Soundness】The Equity Ratio was 90.2%, the current ratio was 561.9%, and the debt-to-equity ratio was 0.11x. All were at extremely conservative levels, indicating high financial safety.

Cash Flow Analysis

Although detailed disclosure of the statement of cash flows is unavailable, changes in the balance sheet provide insight into cash trends. Cash and deposits were ¥45.4B, down approximately 20.2% YoY; however, liquid assets remained substantial, including ¥12.0B in short-term investment securities. Accounts receivable declined by ¥10.6B, and improved collections amid Revenue growth had a positive impact on working capital. Investment securities were ¥47.8B, accounting for 29.9% of total assets. Income from the management of financial assets—dividends received, interest, and interest on securities—supports earnings through non-operating income. Total liabilities were ¥15.6B, down 29.8% YoY, indicating a further strengthening of financial conservatism.

Earnings Quality

The increase in Operating Income during the current period was primarily attributable to an improvement in the cost-of-sales ratio and the resulting increase in the gross profit margin, which can be considered a highly recurring factor. Meanwhile, the slowdown in Ordinary Income and Net Income growth was primarily due to the reversal of gains on the sale of marketable securities, which declined from ¥0.96B in the same period of the previous year to ¥0.06B in the current period; this factor should be distinguished as temporary. Non-operating income of ¥1.96B included dividends received of ¥0.52B, interest on securities of ¥0.97B, and interest received of ¥0.18B, indicating that recurring income from held financial assets supported Ordinary Income. The effective tax rate was approximately 31.0%, and Net Income growth after taxes was below Operating Income growth. The significant decline in accounts receivable and increase in contract liabilities suggest changes in the timing of Revenue recognition and collection, making it useful to monitor future Revenue recognition patterns.

Earnings Forecast and Guidance

Progress against the full-year forecast was 64.0% for Revenue (¥76.8B/¥120.0B), 37.1% for Operating Income (¥9.6B/¥26.0B), 40.5% for Ordinary Income (¥11.3B/¥28.0B), and 39.2% for Net Income (¥7.8B/¥20.0B). These figures are substantially below the standard Q3 progress rate of 75%. To achieve the full-year plan, the Company will need Revenue of ¥43.2B and Operating Income of ¥16.4B in Q4. This implies an Operating Income margin of approximately 37.9% in Q4 alone, substantially above the cumulative actual margin of 12.6%. The Company has referred to uncertainty in its earnings forecast, suggesting a potentially high degree of dependence on seasonality and the timing of project recognition.

Shareholder Returns

The Q2 dividend was ¥37.00 per share, and the full-year dividend forecast is ¥75.00 (the previous year’s dividend was broadly consistent with the annual level calculated from the interim dividend of ¥37.00). The Payout Ratio based on cumulative Q3 Net Income of ¥7.8B is 73.4%; however, this is a calculated figure based on cumulative progress, while the forecast Payout Ratio based on full-year forecast Net Income of ¥20.0B and forecast EPS of ¥149.76 is approximately 50.1%. The difference between the two reflects the different denominators used for the progress-based and full-year calculations. If the full-year plan is achieved, the dividend burden will be at a more conservative level. No specific data regarding share repurchases has been disclosed, and this report evaluates only the Payout Ratio.

Risk Factors

1. Q4 concentration risk: Cumulative progress against the full-year Operating Income forecast was only 37.1%, requiring an Operating Income margin of approximately 37.9% in Q4 to achieve the plan. The Company may have a high degree of dependence on the timing of project recognition.

2. SG&A cost acceleration risk: SG&A expenses increased 12.7% YoY, outpacing the 8.8% Revenue growth rate. If improvement in the gross profit margin slows, the Operating Income margin may come under pressure.

3. Risk of volatility in financial asset income: Investment securities of ¥47.8B account for 29.9% of total assets, and fluctuations in dividends received, interest, and gains on the sale of marketable securities affect Ordinary Income. The decline in gains on the sale of marketable securities from ¥0.96B in the same period of the previous year to ¥0.06B in the current period is one example of this volatility.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

The Company’s profitability is clearly above the industry median.

Growth and Capital Efficiency

The Revenue growth rate is slightly below the industry median but remains within the IQR.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. In terms of core business profitability, the gross profit margin improved by approximately 2.2pt YoY, while the Operating Income margin increased by approximately 0.5pt. Improvement in the cost-of-sales ratio was the primary driver of profit growth, indicating good quality of growth at the operating level.

2. The fact that Ordinary Income and Net Income growth was below Operating Income growth was primarily due to the reversal of gains on the sale of marketable securities recorded in the same period of the previous year. An assessment based on underlying earnings excluding temporary factors is necessary.

3. Progress against the full-year forecast was substantially below the standard 75% level for all four key indicators, making the degree of realization in Q4 a key determinant of full-year performance.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,195–¥1,264 at Cost of Equity ±1%; ¥1,226–¥1,234 at ω±0.1.

Notes:

• Net assets as of the quarter-end are used (there is a timing discrepancy relative to the full-year forecast).

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-08 / Mechanically calculated solely from publicly disclosed data; this does not constitute a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices.)

---

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

---End of Report---