Gurunavi (2440) FY2026 Q3 Earnings Report

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Executive Summary

Despite securing revenue growth, this was an earnings period marked by a substantial decline in profit due to deterioration in the gross profit margin. Revenue was ¥9.98B, up +5.2% year on year; operating income was ¥0.25B, down ▲58.9%; ordinary income was ¥0.24B, down ▲60.9%; and net income was ¥0.26B, down ▲62.1%. The primary factor behind the decline in profit was a 23.8% increase in the cost of sales, which caused the gross profit margin to fall from 66.7% to 60.8%. Increases in personnel expenses, recruitment costs, and depreciation expenses associated with strengthening the organizational structure of the Restaurant Support Business also contributed.

Factors Affecting Earnings

【Revenue】Revenue increased 5.2% year on year to ¥9.98B. The core restaurant promotion services business generated ¥8.22B (+5.7%), with the subscription-based business at ¥7.32B (+8.3%) driving growth, while the spot-based business declined to ¥0.899B (▲11.7%). Promotion revenue was ¥0.76B (▲0.4%), essentially flat, while related businesses generated ¥0.997B (+5.6%), supported by expanded sales at Tempos Gurunavi. Both the number of subscription-based paying member restaurants, at 34,300 (+1.5%), and ARPU, at ¥24,688 (+7.1%), increased, confirming growth in both quality and scale.

【Profit and Loss】Operating income declined 58.9% year on year to ¥0.25B. The cost of sales increased 23.8% from ¥3.16B to ¥3.91B, while gross profit decreased 4.1% year on year and the gross profit margin declined by 590bp. Selling, general and administrative expenses increased only 1.7%, improving the SG&A expense ratio by approximately 200bp, but this was insufficient to offset the deterioration in gross profit. Ordinary income was ¥0.24B (▲60.9%), additionally burdened by ¥0.055B in interest expenses. Net income of ¥0.26B benefited from ¥0.032B in extraordinary income, including a ¥0.031B gain on the sale of investment securities; therefore, the divergence from operating income includes temporary factors. In conclusion, the company achieved revenue growth but experienced a decline in profit.

Segment Analysis

Restaurant promotion services are the core business and account for the majority of the revenue mix, driving overall revenue growth with revenue of ¥8.22B (+5.7%). Within this business, the subscription-based business continued to grow at ¥7.32B (+8.3%), while the spot-based business declined to ¥0.899B (▲11.7%), reflecting the policy of focusing on subscription-based orders. Related businesses, including kitchen equipment sales, expanded to ¥0.997B (+5.6%), although their share of total revenue remains limited. At the operating income level, personnel expenses and depreciation expenses increased company-wide in conjunction with organizational strengthening, and cost increases exceeding the revenue growth benefits of the core business were the primary cause of the decline in operating income.

Key Financial Metrics

Profitability: ROE 6.7%, Operating Margin 2.5% (6.4% in the prior year)
Equity Ratio: 46.0%
Current Ratio: 326.5%
Interest Coverage: 4.54x
DSO (Annualized): 66 days

Cash Flow Analysis

Cash and deposits were ¥3.94B, down approximately ¥1.10B from ¥5.04B in the same period of the prior year. Long-term borrowings increased by ¥1.15B to ¥3.35B, reflecting the refinancing of short-term borrowings with long-term debt. Current assets of ¥8.25B substantially exceeded current liabilities of ¥2.53B, indicating sound short-term liquidity. Work in progress of ¥0.34B accounted for the majority of inventories, and project progress and acceptance status may affect cash-generation capacity.

Quality of Earnings

Net income of ¥0.26B exceeded ordinary income of ¥0.24B, an inversion given the company’s ordinary tax burden. The effective tax rate was approximately 1.6%, primarily because extraordinary income of ¥0.032B, including a ¥0.031B gain on the sale of investment securities, increased pretax income. Interest expenses of ¥0.055B accounted for the majority of non-operating expenses of ¥0.066B and pressured ordinary income, confirming the cost burden associated with increased borrowings. As net income includes a temporary gain on sale, it should be evaluated alongside the ongoing downward trend in operating income.

Earnings Forecast and Guidance

Progress against the full-year forecast was 67.0% for revenue, 83.0% for operating income, 112.4% for ordinary income, and 112.0% for net income. Compared with the standard progress benchmark of 75%, revenue was slightly below the benchmark, while operating income exceeded it. Ordinary income and net income exceeded their full-year forecasts due to the contribution of extraordinary income and should therefore be evaluated separately from operating income progress. For the full year, the company plans revenue and profit growth (revenue +10.7%, operating income +14.3%), and achieving both revenue expansion and cost efficiency in the second half will be critical.

Shareholder Returns

The Q2 dividend was ¥0 per share, and the company’s full-year forecast for the annual dividend is also ¥0, resulting in a Payout Ratio of 0%. No share buyback has been disclosed, and the Total Return Ratio has not been calculated. The no-dividend policy is consistent with a capital allocation strategy that prioritizes internal funds during a period of declining operating margins, increasing long-term borrowings, and expanding investment in intangible assets.

Catalysts

【Short Term】The emergence of the revenue impact from organizational strengthening in the second half and the status of achieving the full-year operating income plan of ¥0.30B (83.0% progress).

【Long Term】Expansion of the target restaurant base—from approximately 100,000 restaurants toward the long-term target of 200,000–300,000 restaurants—through enhancement of the AI agent application “UMAME!” (multilingual support and Android rollout) and expansion of contracts for operational outsourcing products and mobile ordering.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Compared with the industry median, profitability is below the median on both metrics, placing the company at a disadvantage in terms of profitability within the IT and communications industry.

Growth and Capital Efficiency

The revenue growth rate also falls below the industry median, indicating a relatively slower growth pace within the industry.

※Source: Compiled by the Company

Risk Factors

1. Gross profit margin decline: The gross profit margin declined by 590bp from 66.7% to 60.8%. If the increase in the cost of sales continues, revenue growth may fail to translate into profit growth under the 2.5% operating margin.

2. Extension of the accounts receivable collection period: Annualized DSO was 66 days, exceeding 60 days. The working capital burden may fluctuate depending on collection terms and the cash-flow conditions of business partners.

3. Increased borrowings and interest burden: Long-term borrowings increased 52.3% year on year to ¥3.35B, and interest coverage was 4.54x. This is below 5x, and further deterioration in profitability could affect the company’s ability to service interest payments.

Key Takeaways from the Earnings

1. The 23.8% increase in the cost of sales reduced the gross profit margin by 590bp. This could not be offset by the approximately 200bp improvement in the SG&A expense ratio, resulting in a 58.9% decline in operating income. The divergence between revenue growth and profit growth is a key structural point to monitor.

2. Ordinary income and net income are progressing above their full-year forecasts, but this includes the contribution of extraordinary income, including a gain on the sale of investment securities. These figures must be viewed separately from the 83.0% progress achieved on an operating income basis.

3. The 52.3% increase in long-term borrowings was driven by refinancing from short-term borrowings. Together with the continuation of the no-dividend policy, this indicates a capital policy that prioritizes the allocation of internal funds to investment and debt repayment.

Theoretical Share Price (Reference Value)

Sensitivity: ¥78–¥83 at ±1% for the cost of equity, and ¥80–¥81 at ±0.1 for ω.

Notes:

• Because net income progress against the full-year forecast (112%) exceeds the standard level (75%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies progressing ahead of plan tend to exceed their forecasts; the adjustment may be excessive for businesses with strong seasonality).
• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets at the end of the quarter are used (there is a timing difference relative to the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated at a slightly high level.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / This is a mechanically calculated value based solely on publicly disclosed data; it is not a forecast of the market share price or a recommendation of any specific investment action, and it does not forecast or guarantee future share prices.)

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

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