SHUEI YOBIKO (4678) FY2026 Q3 Earnings Report

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Executive Summary

The cumulative Q3 results reflected the coexistence of improved profitability in the core business and a final loss resulting from an extraordinary loss. Revenue was ¥78.4B (¥78.1B in the same period last year, YoY +0.3%), Operating Income was ¥1.5B (¥1.0B, YoY +43.5%), and Ordinary Income was ¥1.5B (¥1.1B, YoY +39.9%), securing earnings growth in the core business. However, the recognition of an extraordinary loss of ¥1.5B reduced Profit Before Tax to ¥0.03B, while Net Income declined and turned negative at -¥0.3B (profit of ¥0.4B in the same period last year). Although an improved gross profit margin supported higher Operating Income, progress against the full-year plan remained low, making the degree of profit recovery in Q4 a key focus.

Factors Affecting Performance

【Revenue】Revenue was ¥78.4B, essentially flat at +0.3% year on year. By segment, the Elementary and Junior High School Division generated ¥67.6B (86.2% of total revenue, Operating Income margin of 8.6%), the High School Division generated ¥10.5B (13.4%, margin of 14.1%), and Other Education Operations generated ¥0.4B (0.5%, margin of 47.0%). The Elementary and Junior High School Division accounts for the majority of revenue. With the decline in the school-age population and intensifying competition continuing, factors supporting revenue growth are limited.

【Profit and Loss】The gross profit margin improved to 15.8% (from 14.8% in the same period last year) as cost of sales decreased 0.8% year on year. This improvement absorbed the increase in SG&A expenses (+3.4%), resulting in an improvement in the Operating Income margin to 1.9% (from 1.3% in the same period last year). Ordinary Income also increased; however, the recognition of an extraordinary loss of ¥1.5B reduced Profit Before Tax to ¥0.03B. After incurring ¥0.3B in corporate income taxes and other taxes, Net Income attributable to owners of the parent was -¥0.3B. The core business achieved higher revenue and earnings growth (at the Operating Income and Ordinary Income levels), but the extraordinary loss caused the final stage to show a decline and a loss, resulting in a structure where Net Income deteriorated despite higher revenue and earnings due to the extraordinary loss.

Segment Analysis

The Elementary and Junior High School Division generated revenue of ¥67.6B and Operating Income of ¥5.8B (margin of 8.6%), representing the core of revenue and earnings. The High School Division generated revenue of ¥10.5B and Operating Income of ¥1.5B (margin of 14.1%), securing a higher margin than the Elementary and Junior High School Division. Other Education Operations are small in scale, with revenue of ¥0.4B, but have an exceptionally high margin of 47.0%, representing an unusual composition from a profitability perspective. Overall, the large-scale Elementary and Junior High School Division has a relatively low margin and therefore determines the profitability of the overall business portfolio.

Key Financial Indicators

【Profitability】The Operating Income margin improved to 1.9% (from 1.3% in the same period last year), while the Net Income margin deteriorated to -0.4% (from approximately 0.5%), as the extraordinary loss pushed down the final profit margin. The gross profit margin was 15.8%, improving from 14.8% in the same period last year. 【Cash Flow Quality】Accounts receivable increased 178.3% year on year to ¥4.3B, substantially exceeding the growth in Revenue (+0.3%). Inventories decreased 53.4% year on year to ¥0.3B. 【Investment Efficiency】ROE was -1.0% on an annualized basis, while the Equity Ratio declined slightly to 47.4% (from 48.1%). BPS declined to ¥661.50 (from ¥676.17). 【Financial Soundness】The current ratio was approximately 100.9%, and cash and deposits of ¥10.7B exceeded short-term borrowings of ¥2.8B. Interest-bearing debt (the total of short-term borrowings, long-term borrowings, and bonds) was approximately ¥9.7B. Together with an Equity Ratio of 47.4%, this indicates that financial leverage is not excessively high.

Cash Flow Analysis

As no cash flow statement has been disclosed, funding trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥10.7B, a decrease of ¥2.3B from ¥13.0B in the same period last year. While accounts receivable increased ¥2.8B year on year, inventories decreased ¥0.3B, suggesting that funds may have become more tied up in operating assets overall. Short-term borrowings increased ¥0.6B (+29.6%) year on year, indicating a slight increase in dependence on short-term funding. Retained earnings were ¥5.1B, down ¥1.0B year on year, as the recognition of the net loss for the period pressured the accumulation of internal funds. Overall, despite improved profitability in the core business, the increase in accounts receivable coincided with a decline in cash, warranting careful monitoring from a funding-efficiency perspective.

Earnings Quality

Operating Income and Ordinary Income increased in the 40% range year on year, indicating improved earnings power in the core business. This was primarily attributable to an improved gross profit margin resulting from lower cost of sales (15.8%, compared with 14.8% in the same period last year), indicating an improvement in recurring earnings power. However, the factor determining final profit or loss was the one-time extraordinary loss of ¥1.5B, which reduced Profit Before Tax to ¥0.03B and resulted in Net Income attributable to owners of the parent becoming a loss of -¥0.3B. Non-operating income was small at ¥0.3B, consisting mainly of dividend income and miscellaneous income, and no special factors were observed in the earnings structure. The fact that accounts receivable increased substantially faster than Revenue should be noted from an accrual perspective, as the speed of cash conversion may have declined. Overall, recurring earnings power in the core business is improving, but the quality of final profit remains heavily dependent on the non-recurring factor of the extraordinary loss.

Earnings Forecast and Guidance

The full-year plan calls for Revenue of ¥108.8B (YoY +1.7%), Operating Income of ¥4.1B (YoY +6.5%), Ordinary Income of ¥4.2B (YoY +4.8%), and Net Income attributable to owners of the parent of ¥2.0B. The cumulative Q3 progress rates were 72.0% for Revenue, 35.4% for Operating Income, and 36.5% for Ordinary Income, all substantially below the standard 75% level. In particular, progress in Operating Income and Ordinary Income is significantly behind the level implied by the full-year target. Achieving the full-year target of ¥2.0B in Net Income attributable to owners of the parent will require substantial Q4 profit generation exceeding the cumulative net loss of ¥0.3B. While the seasonality of the cram-school industry, with performance concentrated in Q4, should be taken into account, the low progress rates warrant close attention.

Shareholder Returns

The Q2 dividend was ¥0 per share, while the full-year dividend forecast is ¥10 per share. Based on the number of shares outstanding (6,710 thousand shares), the annual total dividend is estimated at approximately ¥0.67B, resulting in a Payout Ratio of approximately 33.6% against the full-year Net Income plan of ¥2.0B. However, the cumulative Q3 result was a net loss of ¥0.31B, meaning that payment in line with the dividend forecast assumes a recovery in Q4 earnings. Retained earnings were ¥5.1B, down ¥1.0B year on year, indicating that the pace of accumulation of retained earnings has weakened. No data on share buybacks has been disclosed.

Risk Factors

1. Sharp increase in accounts receivable: Accounts receivable increased 178.3% year on year to ¥4.3B, substantially exceeding the growth in Revenue (+0.3%). If the collection period lengthens, this could lead to a higher working capital burden and increased credit risk.

2. Low progress against the full-year plan: The progress rates for Operating Income and Ordinary Income were 35.4% and 36.5%, respectively, substantially below the standard 75% level, resulting in a plan with a high concentration of earnings in Q4. Given the cumulative net loss of ¥0.3B, a considerable recovery will be required to achieve the full-year Net Income plan of ¥2.0B.

3. Potential recurrence of extraordinary losses: The recognition of an extraordinary loss of ¥1.5B caused final profit or loss to turn negative in the current period. Asset retirement obligations of ¥5.79B account for 11.7% of total liabilities, and the possibility that losses associated with the reorganization of the school network or asset disposals may arise in the future warrants attention.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

The Company’s Operating Income margin and Net Income margin are both substantially below the industry median, placing its profitability in the lower tier of the industry.

Growth and Capital Efficiency

The Revenue growth rate is also substantially below the industry median, placing the Company in the lower tier of the industry from a growth perspective.

※Source: Compiled by the Company

Key Points from the Financial Results

1. Against the backdrop of an approximately 1pt improvement in the gross profit margin year on year, Operating Income increased +43.5% and Ordinary Income increased +39.9%, indicating an improving profitability trend in the core business. However, the recognition of an extraordinary loss of ¥1.5B resulted in Net Income attributable to owners of the parent becoming a loss of -¥0.3B, meaning that the quality of final profit remains heavily dependent on whether an extraordinary loss is incurred.

2. Progress rates for Operating Income and Ordinary Income against the full-year plan were only 35.4% and 36.5%, respectively, substantially below the standard progress rate of 75%. Profit-generation capacity in Q4 will be the most important factor to verify in assessing achievement of the full-year plan.

3. While accounts receivable increased 178.3% year on year, the current ratio was 100.9%, indicating limited working capital headroom. Trends in accounts receivable collections should be closely monitored when evaluating short-term funding efficiency.

Theoretical Share Price (Reference Value)

Sensitivity: ¥540–¥570 for cost of equity ±1%; ¥551–¥557 for ω±0.1.

Notes:

• Net Income is substantially compressed relative to Operating Income due to tax burdens, acquisition-related expenses, and non-controlling interests, among other factors (Net Income ÷ Operating Income 49%). This value reflects that compression at face value, and if the factors are temporary, normalized earnings power may be higher.
• 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 discrepancy with the full-year forecast).

(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 forecast 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 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.

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