Institution for a Global Society (4265) FY2026 Q3 Earnings Report

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Executive Summary

In the current period, revenue increased, while the operating loss and net loss narrowed substantially, indicating progress in improving the earnings structure. Revenue was ¥4.3B (+8.5% YoY), the operating loss was ¥1.2B (an improvement of ¥1.7B from the ¥2.9B loss in the previous year), the ordinary loss was ¥1.1B (an improvement of ¥1.8B), and the net loss was ¥1.2B (an improvement of ¥2.1B from the ¥3.3B loss in the previous year). The primary drivers of the improvement were a substantial increase in the gross profit margin (from 21.7% in the previous year to 51.6%) and a 9.1% decrease in SG&A expenses. While the recovery in profitability of both the Education and HR businesses contributed, consolidated operating results remained in the red because corporate expenses exceeded segment profit.

Factors Affecting Performance

【Revenue】Revenue was ¥4.3B, an increase of +8.5% YoY. Both the Education Business (¥2.3B, composition ratio 53.2%, YoY +12.6%) and the HR Business (¥1.8B, YoY +10.9%) posted revenue increases, with the two core businesses driving growth. Meanwhile, the Platform/Web3 Business continued to decline, with revenue of ¥0.3B, down -25.1% YoY.

【Profit and Loss】The operating loss was ¥1.2B, an improvement of ¥1.7B from the ¥2.9B loss in the previous year. The gross profit margin rose substantially to 51.6% from 21.7% in the previous year, while SG&A expenses declined to ¥3.4B from ¥3.8B, representing the core of the improvement. By segment, the Education Business (profit margin 33.8%) and the HR Business (profit margin 7.6%, turning profitable from a loss in the previous year) led the improvement in earnings. However, corporate expenses of ¥1.85B exceeded total segment profit of ¥0.66B, and the consolidated operating loss continued. The net loss was ¥1.2B, with the absence of the ¥0.38B impairment loss recorded in the previous year also contributing to the improvement. The earnings profile was one of revenue growth accompanied by a substantial improvement in earnings, or a narrowing of losses.

Segment Analysis

The Education Business was the largest contributor to profit, with revenue of ¥2.3B (YoY +12.6%) and segment profit of ¥0.8B (profit margin 33.8%). The HR Business recorded revenue of ¥1.8B (YoY +10.9%) and segment profit of ¥0.1B (profit margin 7.6%), turning profitable from a loss in the previous year. The Platform/Web3 Business continued to have low profitability, with revenue of ¥0.3B (YoY -25.1%) and a segment loss of ¥0.3B (profit margin -95.2%). Although total segment profit was ¥0.66B, deducting corporate expenses of ¥1.85B not attributable to reportable segments resulted in a consolidated operating loss of ¥1.2B. Absorbing indirect costs remains the key to improving consolidated earnings.

Key Financial Metrics

【Profitability】The operating margin was -27.3% and the net profit margin was -26.7%, representing substantial improvement from the same period of the previous year (operating margin -72.4%, net profit margin -83.4%), although the Company remained in loss-making territory. The gross profit margin rose significantly to 51.6% from 21.7% in the previous year.【Cash Flow Quality】The gap between the ¥1.1B pretax loss and the ¥1.2B net loss was limited to ¥0.02B in income taxes and other taxes, indicating that earnings quality is directly reflecting trends in the core business.【Investment Efficiency】Annualized ROE was -23.0%, while ROIC was also substantially negative, indicating that invested capital has not yet reached the stage of generating profits. Total asset turnover was also low, and the Company’s ability to generate sales relative to its asset base was limited.【Financial Soundness】The equity ratio was high at 75.0%. Cash and deposits of ¥4.8B substantially exceeded current liabilities of ¥1.2B. Interest-bearing debt was low, consisting only of ¥0.2B in long-term borrowings; however, ¥0.8B in bonds with stock acquisition rights remains a potential source of future dilution.

Cash Flow Analysis

Although detailed disclosure of the cash flow statement was not available, changes in the balance sheet indicate that cash and deposits increased by +¥1.6B to ¥4.8B from ¥3.2B in the same period of the previous year. This increase was accompanied by increases in share capital and capital surplus, suggesting that the Company secured on-hand liquidity through capital raising despite continued losses. Meanwhile, retained earnings deteriorated further to -¥4.7B YoY, indicating that cash generation from operating activities remained challenging. Advances received increased from ¥0.05B to ¥0.65B, suggesting that customer prepayments also provided support for short-term liquidity management.

Earnings Quality

Non-operating income was ¥0.1B, equivalent to only 2.1% of revenue, indicating a low degree of dependence on non-core factors. Non-operating expenses were also limited at ¥0.04B, and there was virtually no gap between the ordinary loss of ¥1.1B and the pretax loss of ¥1.1B. The net loss of ¥1.2B consisted of the pretax loss plus ¥0.02B in income taxes and other taxes, and earnings quality generally reflected trends in operating results from the core business. An impairment loss of ¥0.38B was recorded in the same period of the previous year, but no material impairment occurred in the current period. In addition to the improvement in the core business, the absence of this one-time factor also contributed to the YoY improvement in the net loss.

Earnings Forecast and Guidance

Against the full-year revenue forecast of ¥7.0B, the Q3 cumulative progress rate was 61.9%, below the standard 75%. Achieving the full-year target will require revenue of ¥2.7B in Q4. While the progress rate for the operating loss was 62.6% against the full-year forecast loss of ¥1.9B, and the progress rate for the ordinary loss was 76.9% against the full-year forecast loss of ¥1.5B, both broadly in line with plan, the progress rate for net income was only 47.3%. Against the full-year forecast net loss of ¥2.4B, the plan assumes the recognition of a further substantial loss in Q4.

Shareholder Returns

The Q2 dividend was ¥0 per share, and no dividend payment was made. The payout ratio was effectively 0%. Given the net loss of ¥1.2B and retained earnings of -¥4.7B, capital allocation prioritizes securing on-hand liquidity and restoring business profitability over returning profits to shareholders. The full-year forecast also assumes a dividend of ¥0 per share, with the continuation of a no-dividend policy.

Risk Factors

1. Uneven Segment Profitability: The Platform/Web3 Business recorded revenue of ¥0.3B, down -25.1% YoY, and a segment loss of ¥0.3B (profit margin -95.2%). Demand fluctuations and the competitive environment in this business increase uncertainty in consolidated earnings.

2. Heavy Corporate Expenses: Corporate expenses were ¥1.85B, an increase of +4.3% YoY, exceeding total segment profit of ¥0.66B. Even if the Education and HR businesses continue to improve profitability, a delay in absorbing indirect costs could cause the consolidated operating loss to become entrenched.

3. Lengthening Accounts Receivable Collection Cycle: Accounts receivable were ¥2.6B, accounting for 29.1% of total assets, indicating that collection continues to require a certain amount of time. Prolonged project acceptance, billing, and collection processes could increase working capital requirements.

Industry Benchmark (For Reference; Company Analysis)

Industry Benchmark (it_telecom)

Profitability and Returns

Both the operating margin and net profit margin were substantially below the industry median, placing profitability at a low level within the industry.

Growth and Capital Efficiency

Although the revenue growth rate was slightly below the industry median, it remained within the IQR.

※Source: Company analysis

Key Takeaways from the Financial Results

1. The gross profit margin rose substantially from 21.7% in the previous year to 51.6%, and SG&A expenses also declined, resulting in a ¥1.7B YoY improvement in operating results. The qualitative improvement in the earnings structure is a key feature of the financial results.

2. Total segment profit recovered to ¥0.66B, but corporate expenses of ¥1.85B exceeded this amount, leaving consolidated operating results in the red. Improvement in consolidated earnings will depend on progress in absorbing corporate expenses.

3. Under the full-year forecast, the progress rate for the ordinary loss was 76.9%, broadly in line with plan, while the progress rate for net income was low at 47.3%. The planned expansion of the net loss in Q4 is a point of focus when assessing the composition of full-year earnings.

Theoretical Share Price (Reference Value)

Sensitivity: ¥25–¥26 at cost of equity ±1%; ¥24–¥26 at ω±0.1.

Notes:

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

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / 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 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 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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