| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥185.1B | ¥175.8B | +5.3% |
| Operating Income / Operating Profit | ¥8.3B | ¥11.2B | -26.2% |
| Ordinary Income | ¥9.3B | ¥12.0B | -22.8% |
| Net Income / Net Profit | ¥4.3B | ¥7.4B | -41.8% |
| ROE | 3.5% | 5.9% | - |
For the cumulative Q3 period of FY2026, Revenue was ¥185.1B (YoY +¥9.3B +5.3%), Operating Income was ¥8.3B (YoY -¥2.9B -26.2%), Ordinary Income was ¥9.3B (YoY -¥2.7B -22.8%), and Net Income attributable to owners of the parent was ¥4.3B (YoY -¥3.1B -41.8%). Revenue maintained steady growth driven by the core Meiko Gijuku Company-operated Business (+5.7%) and Other Businesses (+9.7%), but Operating Margin declined to 4.5% (6.4% prior year) down 1.9pt due to a higher cost of sales ratio and increased selling, general and administrative expenses. At the Ordinary Income level, equity-method investment income of ¥0.3B was recorded; however, corporate taxes and related expenses of ¥4.7B against Pre-tax Income of ¥9.0B (effective tax rate 51.9%) substantially compressed Net Income. This marks a large decline in profit for the first time in two fiscal periods since the beginning of the year, making profitability improvement the top priority.
[Revenue] Revenue of ¥185.1B (YoY +¥9.3B +5.3%) was achieved through revenue increases across all segments. The Meiko Gijuku Company-operated Business was ¥106.4B (+5.7%), accounting for 57.5% of total sales, driven by expansion of company-operated classrooms and increased revenue recognized over a period (tuition, etc.). The Meiko Gijuku Franchise Business was ¥37.2B (+1.6%), showing slight growth, and the Japanese Language School Business was ¥11.6B (+5.0%), performing well with a recovery in international student demand. Other Businesses were ¥43.1B (+9.7%), exhibiting near-double-digit growth due to expansion in the kids business and consolidated subsidiaries. The composition between goods/services transferred at a point in time (¥37.4B) and revenue recognized over a period (¥147.6B) remained almost unchanged from the prior year, with recurring tuition revenues comprising roughly 80% of total revenue. Contract liabilities (advance receipts) were ¥15.1B, up from ¥13.9B a year earlier (+7.7%), confirming an accumulation of deferred revenue that will be recognized as future sales.
[Profitability] Cost of sales was ¥143.5B (prior year ¥134.0B +7.1%), raising the cost of sales ratio to 77.5% from 76.2% a year earlier (+1.3pt), resulting in Gross Profit of ¥41.6B (prior year ¥41.8B -0.3%) and a Gross Margin of 22.5% (prior year 23.8%) down 1.3pt. SG&A was ¥33.3B (prior year ¥30.5B +9.2%), growing well above the revenue growth rate of +5.3%, increasing the SG&A ratio to 18.0% (prior year 17.4%) up 0.6pt. As a result, Operating Income was ¥8.3B (prior year ¥11.2B -26.2%), Operating Margin 4.5% (prior year 6.4%) down 1.9pt, indicating negative operating leverage despite revenue growth. Non-operating income of ¥1.1B included interest income ¥0.1B, equity-method investment income ¥0.3B, and dividend income ¥0.2B, but remained limited at 0.6% of revenue. Non-operating expenses of ¥0.1B were minor, mainly commission payments, producing Ordinary Income of ¥9.3B (prior year ¥12.0B -22.8%). Extraordinary losses were limited to impairment/loss on disposal of fixed assets of ¥0.3B, so one-off impacts were small. Pre-tax Income of ¥9.0B incurred corporate taxes and related expenses of ¥4.7B (including tax adjustments of ¥0.9B), with a high effective tax rate of 51.9% compressing after-tax profit and resulting in Net Income of ¥4.3B (prior year ¥7.4B -41.8%) and Net Margin of 2.3% (prior year 4.2%). In conclusion, the results show revenue up but profit down, with deteriorated operating efficiency and high tax burden as the main causes of profit compression.
The Meiko Gijuku Company-operated Business achieved Revenue ¥106.4B (+5.7%), Operating Income ¥11.7B (+13.7%), and an Operating Margin of 11.0%, delivering both revenue and profit growth and contributing approximately 141% to consolidated Operating Income, making it the largest profit source. Revenue recognized over a period of ¥100.6B was the main component, with recurring tuition income supporting stable growth. The Meiko Gijuku Franchise Business recorded Revenue ¥37.2B (+1.6%), Operating Income ¥5.3B (-29.6%), and Margin 14.3%; despite slight revenue growth, profit declined sharply, suggesting deterioration in royalty revenue and support fee profitability. The Japanese Language School Business posted Revenue ¥11.6B (+5.0%), Operating Income ¥1.6B (+16.9%), and Margin 13.7%, sustaining revenue and profit growth aided by increased international student numbers. Other Businesses achieved Revenue ¥43.1B (+9.7%), the highest growth rate, but Operating Income ¥2.1B (-46.4%) and Margin 4.8% showed substantial profit decline due to new investment burdens in the kids business and HR solutions. Segment total Operating Income of ¥18.6B less corporate (headquarters) expenses of ¥12.4B results in consolidated Operating Income of ¥8.3B. Corporate expenses rose +4.6% from ¥11.9B a year earlier, indicating that controlling HQ costs is key to improving consolidated profitability.
[Profitability] Operating Margin of 4.5% declined 1.9pt from 6.4% a year earlier, primarily due to a 1.3pt decline in Gross Margin and a 0.6pt rise in the SG&A ratio. Net Margin of 2.3% fell 1.9pt from 4.2% previously, with a high effective tax rate of 51.9% compressing post-tax profit. ROE of 3.5% declined 2.4pt from approximately 5.9% in the prior period (Net Income ¥7.4B / Equity ~¥125.8B), with the significant drop in Net Income directly reducing capital efficiency. Operating Margin, Net Margin, and ROE are all at low levels, making structural improvement in profitability urgent. [Cash Quality] Accounts receivable were ¥9.8B, down -28.9% from ¥13.9B a year earlier, indicating improved collections. Contract liabilities were ¥15.1B, up +7.7% from ¥13.9B, confirming cash-ahead revenue recognition. Cash and deposits of ¥82.9B decreased -9.2% from ¥91.3B but still represent a high liquidity level at 47.4% of total assets. [Investment Efficiency] Total asset turnover was 1.06x (Revenue ¥185.1B / Total Assets ¥174.8B), improved from about 0.92x a year earlier, reflecting both revenue growth and asset reduction (¥191.5B → ¥174.8B -8.7%). Investment securities were ¥32.3B (18.5% of total assets), down -14.8% from ¥37.9B, suggesting compression via impairment or disposals. [Financial Soundness] Equity Ratio rose to 69.6% (prior year 65.7%) up 3.9pt, reflecting higher capital intensity amid shrinking total assets. Current Ratio 253.5% and Quick Ratio 251.0% are exceptionally high, with Current Assets ¥110.3B far exceeding Current Liabilities ¥43.5B, indicating no short-term liquidity concerns. Interest-bearing debt is minimal; D/E ratio is effectively below 0.02, meaning financial leverage is virtually zero.
As the cash flow statement is not disclosed, funding trends are inferred from balance sheet period comparisons. Cash and deposits decreased to ¥82.9B, down ¥8.4B YoY, but still account for 47.4% of total assets, maintaining substantial liquidity. Accounts receivable decreased to ¥9.8B (-¥4.0B), showing improved collections and better working capital efficiency. Contract liabilities increased to ¥15.1B (+¥1.1B), and the cash-ahead nature of deferred revenue should positively contribute to operating cash generation. Conversely, accrued expenses decreased to ¥12.8B from ¥18.5B (-¥5.6B), and accrued corporate taxes and similar obligations decreased to ¥0.96B from ¥7.6B (-¥6.6B), indicating significant cash outflows during the period for taxes and expenses. Retained earnings decreased to ¥93.8B from ¥118.3B (-¥24.5B), reflecting the combination of lower current profit and shareholder returns compressing internal reserves. The decline in investment securities of -¥5.6B is presumed due to sales or impairment, indicating ongoing asset portfolio optimization. Broadly cash-like assets including short-term investment securities of ¥2.0B total ¥84.9B, representing 48.6% of total assets, providing ample coverage for dividends and investment expenditures.
This period's earnings are primarily recurring; non-operating income of ¥1.1B is limited to 0.6% of revenue and is composed of sustainable items such as interest income ¥0.1B, dividend income ¥0.2B, and equity-method investment income ¥0.3B. Extraordinary gains were zero, and extraordinary losses were limited to impairment/disposal of fixed assets ¥0.3B, so one-off impacts are minimal. The improvement from Operating Income ¥8.3B to Ordinary Income ¥9.3B was due to non-operating income, indicating no material issue with the quality of ordinary income. The slight decline from Ordinary Income ¥9.3B to Pre-tax Income ¥9.0B was due to extraordinary losses of ¥0.3B, so divergence between ordinary and pre-tax stages is small. However, corporate tax and related expenses of ¥4.7B on Pre-tax Income ¥9.0B (effective tax rate 51.9%) are high and may include reversal of deferred tax assets or one-time tax adjustments. The Net Income decline of ¥3.1B was mainly driven by Operating Income decline of ¥2.9B and an after-tax compression of ¥0.2B due to high tax burden; reliance on one-off revenues is not evident. Comprehensive Income of ¥2.4B was ¥1.9B below Net Income ¥4.3B, primarily due to a deterioration in valuation differences on available-for-sale securities of -¥2.0B. The gap between comprehensive income and net income stems from valuation fluctuations of equity assets and is not realized profit or loss.
Full Year forecast is maintained at Revenue ¥255.0B (YoY +2.7%), Operating Income ¥18.0B (+6.4%), Ordinary Income ¥18.7B (+0.1%), and Net Income attributable to owners of the parent ¥10.1B. Progress through the Q3 cumulative period stands at 72.6% of Revenue, roughly close to the standard 75% pace, but profit-stage progress is significantly lagging: Operating Income 46.1%, Ordinary Income 49.7%, Net Income 42.6%. Assuming standard 75% progress, Operating Income is short by -28.9pt and Net Income by -32.4pt, implying that Q4 must record Revenue ¥69.9B (above the Q1–Q3 average ¥61.7B) and Operating Income ¥9.7B (3.5x the Q1–Q3 average of ¥2.8B). Seasonality in education services typically yields upside in Q4 due to new-term preparations, but if the trend of declining Gross Margin and rising SG&A continues, achieving the full-year Operating Income target of ¥18.0B will be difficult. Ordinary Income progress of 49.7% is slightly better than the operating stage, due to non-operating income such as equity-method gains, but the high tax burden remains at the Net Income stage. Cumulative Q3 EPS of ¥16.99 represents 42.5% progress against Full Year EPS forecast of ¥39.98, assuming tax-rate improvement and earnings recovery in Q4. Dividend forecast is maintained at ¥15 per share for the full year (interim paid ¥14, year-end ¥1), implying a payout ratio of about 38% on full-year net income forecast, a sustainable level. No earnings forecast revisions have been made, but Q4 profitability recovery is key to meeting targets.
An interim dividend of ¥14 (prior year ¥13) has been paid, and progress toward the full-year dividend forecast of ¥15 (interim ¥14 + year-end ¥1) is 93.3%. Initially, the plan had been interim ¥7.5 + year-end ¥7.5 totaling ¥15, but the interim dividend was revised upward to ¥14, demonstrating a mid-period strengthening of shareholder returns. The cumulative Q3 Net Income ¥4.3B against interim dividend total approximately ¥3.5B (¥14 × average shares outstanding 25.3 million shares) yields a calculated payout ratio of about 81%, a high level driven by timing differences during the period. Based on the full-year Net Income forecast ¥10.1B and full-year dividend total approximately ¥3.8B (¥15 × average shares outstanding 25.3 million shares), the full-year payout ratio is about 38%, within a sustainable range. Cash and deposits ¥82.9B account for 47.4% of total assets, providing sufficient short-term cash coverage for dividend payments. Treasury stock fell substantially to ¥4.3B (prior year ¥26.5B), suggesting disposal or cancellation of treasury shares occurred; the impact on shares outstanding and capital efficiency should be examined. Future capacity to maintain or increase dividends depends on Q4 profit recovery, normalization of the tax rate, and progress in controlling SG&A.
Risk of persistently low operating margin: Operating Margin of 4.5% fell 1.9pt from 6.4% last year, driven by a 1.3pt decline in Gross Margin and a 0.6pt rise in SG&A ratio. The rise in cost of sales ratio to 77.5% suggests cost pressures such as higher labor and teaching material costs, and SG&A growth of ¥33.3B (+9.2%) outpaced revenue growth of +5.3%, indicating continued negative operating leverage. Achieving the full-year Operating Income target of ¥18.0B requires ¥9.7B in Q4, but if the current Operating Margin of 4.5% persists, revenue would need to exceed ¥215B, making target attainment difficult. Failure to improve operating efficiency increases the risk of downward revisions to earnings plans.
Risk of sustained high tax burden: Effective tax rate of 51.9% far exceeds the statutory effective tax rate of about 31%, suggesting reversal of deferred tax assets or tax-effect adjustments. Corporate tax and related expenses of ¥4.7B include ¥0.9B of tax adjustment amounts, indicating tax-effect accounting is elevating tax burden. The cumulative Q3 Net Income progress of 42.6% toward the full-year forecast of ¥10.1B assumes tax-rate improvement in Q4; if structural tax burden factors are not resolved, after-tax profit compression may persist and create a risk of missing full-year forecasts.
Risk of widening profit disparity among segments: The Franchise Business Operating Income fell to ¥5.3B (-29.6%) and Other Businesses to ¥2.1B (-46.4%), while only the Company-operated Business delivered profit growth (¥11.7B +13.7%), making it the sole driver of consolidated Operating Income. Continued underperformance by franchisees or profitability deterioration in new businesses would increase dependence on the Company-operated Business and concentrate portfolio risk. Corporate expenses (HQ costs) of ¥12.4B up +4.6% YoY also pressure segment profits.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 4.5% | 8.2% (3.6%–18.0%) | -3.7pt |
| Net Margin | 2.3% | 6.0% (2.2%–12.7%) | -3.7pt |
Profitability is well below the industry median, with Operating Margin and Net Margin both trailing by -3.7pt.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 5.3% | 10.4% (-1.1%–19.5%) | -5.1pt |
Revenue growth of 5.3% is -5.1pt below the industry median of 10.4%, indicating weaker growth capability.
※ Source: Company compilation
Progress in profitability recovery is the primary monitoring point: Operating Margin of 4.5% is down 1.9pt from 6.4% last year and 3.7pt below the industry median of 8.2%. Q4 must record Operating Income of ¥9.7B to meet the full-year target of ¥18.0B, but if the current Operating Margin persists, target achievement is unlikely. Improving Gross Margin and controlling SG&A—particularly compressing corporate (HQ) expenses of ¥12.4B—are key to profitability recovery. The rise in cost of sales ratio to 77.5% points to upward pressure on personnel and teaching material costs, making price pass-through or cost-structure review urgent.
Contribution from the Company-operated Business and widening segment disparities: The Company-operated Business accounts for 57.5% of sales and achieved Operating Income ¥11.7B (+13.7%), contributing about 141% to consolidated Operating Income and serving as the sole growth engine. Meanwhile, the Franchise Business Operating Income fell -29.6% and Other Businesses -46.4%, highlighting portfolio concentration. Strengthening company-operated channels improves stability but raises concerns about increased fixed costs and concentration risk. Improving franchisee profitability and monetizing other new businesses are prerequisites for recovering consolidated margins and diversifying the portfolio.
Normalization of the high tax burden and dividend sustainability: Effective tax rate of 51.9% far exceeds the statutory effective tax rate of about 31%, and reversal of deferred tax assets or tax-effect adjustments is elevating tax burden. Achieving the full-year Net Income forecast of ¥10.1B requires tax-rate improvement in Q4. Dividends—interim ¥14 paid, full-year forecast ¥15 (payout ratio ~38%)—are supported by abundant cash of ¥82.9B, but future maintenance or increases in dividends depend on profit recovery. Normalization of tax burden and improvement in Operating Margin will determine mid- to long-term shareholder return capacity.
This report is an earnings analysis document automatically generated by AI based on XBRL earnings flash data. It does not constitute a recommendation to invest in specific securities. Industry benchmarks are reference information compiled by the company based on publicly disclosed financial statements. Investment decisions are your responsibility; consult a professional adviser as necessary.