Quick View
| Metric | Current | Prior | YoY |
|---|---|---|---|
| Revenue | ¥275.2B | ¥256.2B | +7.4% |
| Operating Income | ¥24.8B | ¥23.9B | +4.1% |
| Ordinary Income | ¥25.1B | ¥24.0B | +4.6% |
| Net Income | ¥16.1B | ¥15.0B | +7.9% |
| ROE | 10.3% | 9.9% | - |
Executive Summary
FY2026 Q3 consolidated results for Waseda Academy show revenue of 27.52B yen (YoY +7.4%), operating income of 2.48B yen (+4.1%), ordinary income of 2.51B yen (+4.6%), and net income of 1.61B yen (+7.9%). Revenue increased from 25.62B yen in the prior year period, with gross profit margin at 31.0% supporting profitability. Operating margin stands at 9.0% with non-operating items contributing minimally (non-operating income 0.06B yen, expenses 0.03B yen). The company maintains a conservative financial position with total assets of 26.35B yen and equity of 15.73B yen. Cash and deposits of 8.46B yen represent 32.1% of total assets, providing substantial liquidity buffer. Notable balance sheet movements include inventory increasing 162% from 0.14B yen to 0.36B yen and accounts payable rising 77.5% from 0.37B yen to 0.65B yen, indicating significant working capital adjustments. Full-year guidance projects revenue of 37.68B yen, operating income of 3.67B yen, and net income of 2.59B yen, with Q3 results tracking in line with expectations.
Key Metrics
[Profitability] Return on equity of 10.3% demonstrates solid profitability, decomposed into net profit margin of 5.9%, asset turnover of 1.044, and financial leverage of 1.67x. Operating margin of 9.0% reflects effective cost management with gross profit margin at 31.0%. The tax burden coefficient of 0.629 indicates an effective tax rate of approximately 37.1%, while the interest burden of 1.034 shows minimal financing costs. [Cash Quality] Cash and deposits of 8.46B yen provide strong liquidity, representing 2.8x coverage of quarterly net income. The high cash balance relative to total assets at 32.1% indicates conservative cash management. [Investment Efficiency] Asset turnover of 1.044 demonstrates efficient asset utilization. Total assets increased from 24.48B yen to 26.35B yen, growing at 7.6% in line with revenue growth of 7.4%. [Financial Health] Equity ratio of 59.7% (equity 15.73B yen divided by total assets 26.35B yen) indicates solid financial stability. Current ratio of 192.0% and quick ratio of 186.8% demonstrate excellent short-term liquidity. Debt-to-equity ratio of 0.67 reflects conservative leverage with total liabilities of 10.62B yen. Financial leverage of 1.67x remains moderate, supporting sustainable capital structure.
Cash Flow Analysis
Cash and deposits increased to 8.46B yen, representing 32.1% of total assets and providing substantial liquidity cushion. The cash position supports coverage of current liabilities at 1.9x, indicating strong short-term payment capacity. Working capital exhibits notable movements with inventory rising 2.24B yen (162% increase) from 0.14B yen to 0.36B yen, suggesting advance procurement or business expansion preparation. Accounts payable increased 2.83B yen (77.5% increase) from 0.37B yen to 0.65B yen, reflecting extended supplier credit utilization that provides favorable financing for operations. The significant buildup in both inventory and payables indicates potential seasonal factors or strategic positioning ahead of peak enrollment periods. Net income of 1.61B yen combined with high cash reserves suggests underlying cash generation capability, though detailed operating cash flow metrics would provide more precise assessment of earnings quality and sustainability. The balance sheet structure with 69.24B yen in current liabilities against 132.94B yen in current assets maintains a comfortable liquidity buffer of 1.92x coverage.
Earnings Quality
Ordinary income of 2.51B yen versus operating income of 2.48B yen indicates net non-operating contribution of approximately 0.03B yen, representing just 0.1% of revenue and demonstrating that profitability derives primarily from core operations. Non-operating income of 0.06B yen against non-operating expenses of 0.03B yen shows minimal impact from financial activities. The effective tax rate of 37.1% (tax expense 0.95B yen on pre-tax income of 2.57B yen) aligns with standard corporate tax rates. Operating profit margin of 9.0% combined with net profit margin of 5.9% reflects appropriate progression from operating to bottom-line earnings. The absence of significant non-recurring items or extraordinary gains indicates earnings are derived from recurring educational services. The company's profitability chain flows consistently from gross profit of 8.54B yen (31.0% margin) through operating income to net income without material distortions. While operating cash flow data is not disclosed for this quarterly period, the substantial cash balance growth and positive net income suggest earnings are translating to cash, though detailed cash flow statement would provide definitive confirmation of earnings quality and accrual patterns.
Risk Factors
Demographic headwinds from declining birthrate in Japan pose structural pressure on student enrollment, potentially constraining long-term revenue growth and requiring increased market share capture or service expansion to offset population trends. Operating leverage risk exists from rising personnel costs, particularly instructor wages and recruitment expenses in a competitive labor market, which could compress margins if revenue growth decelerates, especially given the labor-intensive nature of educational services. Working capital management requires attention as inventory increased 162% and accounts payable rose 77.5%, with inventory of 0.36B yen now representing 1.4% of revenue; rapid changes in working capital components warrant monitoring to ensure operational efficiency and avoid cash flow pressure from inventory buildup or payable normalization.
Industry Benchmark (Reference - Proprietary Data)
[Industry Position] (Reference - Proprietary Analysis)
Waseda Academy demonstrates above-median profitability compared to the IT and telecom services sector benchmark. Operating margin of 9.0% exceeds the industry median of 8.0% (Q3 2025, n=99), placing the company in a favorable competitive position. Net profit margin of 5.9% aligns closely with the industry median of 5.6%, indicating comparable bottom-line efficiency. Return on equity of 10.3% surpasses the industry median of 8.2% (IQR: 3.5%-13.3%), reflecting stronger shareholder value generation. Return on assets of 6.1% (calculated as 1.61B net income / 26.35B assets) exceeds the industry median of 4.2%, demonstrating superior asset utilization. Revenue growth of 7.4% trails the industry median of 10.5%, suggesting more moderate top-line expansion in the educational services segment. Financial leverage of 1.67x matches the industry median of 1.66, indicating typical capital structure. Equity ratio of 59.7% aligns with the industry median of 59.5%, reflecting standard financial stability. Current ratio of 192.0% (1.92x) falls below the industry median of 2.13x but remains strong. Asset turnover of 1.044 significantly exceeds the industry median of 0.68, highlighting operational efficiency advantages in the education sector model.
(Industry: IT and Telecom Services (99 companies), Comparison: Q3 2025 period, Source: Proprietary analysis)
Key Takeaways from Earnings
Waseda Academy demonstrates consistent profitability expansion with net income growing 7.9% YoY despite operating income growth of 4.1%, indicating effective cost control below the operating line and sustained earnings quality derived from core educational operations. The company's operating margin of 9.0% and net margin of 5.9% both meet or exceed industry medians, positioning it favorably within the competitive landscape while maintaining asset turnover of 1.044 that significantly outpaces the industry median of 0.68, reflecting the capital-light nature of educational services.
Financial stability remains robust with equity ratio of 59.7%, current ratio of 192%, and cash holdings of 8.46B yen representing 32% of total assets, providing substantial flexibility for strategic investments or dividend distributions, though the calculated payout ratio approaching 65% suggests limited room for further dividend increases without profit acceleration. The company's return on equity of 10.3% exceeds both the industry median of 8.2% and demonstrates efficient capital deployment with moderate leverage of 1.67x.
Working capital dynamics warrant attention as inventory surged 162% and accounts payable increased 77.5% YoY, suggesting either operational scaling, seasonal patterns, or business model adjustments that merit monitoring in subsequent periods to confirm whether these represent sustainable efficiency improvements or temporary timing effects that could reverse and impact cash generation.
This report was automatically generated by AI analyzing XBRL earnings data as an earnings analysis tool. This is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled from publicly available earnings data. Please make investment decisions at your own responsibility and consult professionals as needed.
AI Financial Analysis
Executive Summary
FY2026 Q3 performance was solid, with revenue growth maintained and net income growth exceeding operating-income growth, although operating leverage weakened modestly. Cumulative Q3 revenue increased 7.4% year on year to ¥27.52bn. Operating income rose 4.1% to ¥2.48bn, while ordinary income increased 4.6% to ¥2.51bn. Net income grew 7.9% to ¥1.61bn, producing EPS of ¥87.39. Gross profit increased 10.8% to ¥8.54bn, faster than revenue growth. Accordingly, gross margin expanded by approximately 92bp year on year to 31.0%. The operating margin nevertheless declined by approximately 29bp to 9.0%, because SG&A expense increased 13.8% to ¥6.06bn. SG&A therefore grew materially faster than sales, raising the SG&A-to-sales ratio by roughly 124bp to 22.0%. Net margin was broadly stable to slightly higher at 5.9%, up about 3bp, aided by non-operating income and a lower level of fixed-asset disposal losses. Dividend income and interest income totaled ¥0.35bn, while interest expense was only ¥0.07bn. A ¥0.53bn gain on sale of fixed assets was recorded, partly offset by a ¥0.14bn loss on retirement of non-current assets; this makes a limited positive contribution to pre-tax profit but is non-recurring. Annualized ROE was 13.7%, within the good 10-15% range, supported primarily by efficient asset utilization rather than aggressive leverage. The balance sheet remains liquid, with cash and deposits of ¥8.46bn and a current ratio of 192.0%. The full-year plan calls for 7.5% sales growth and 3.5% operating-income growth, broadly consistent with the current revenue trajectory but requiring a seasonally important fourth quarter. Q3 progress against full-year net-income guidance is below the standard three-quarter run rate, making execution in the final quarter the key near-term earnings variable.
Profitability Analysis
The annualized 13.7% ROE decomposes into a 5.9% net profit margin, 1.392x asset turnover, and 1.67x financial leverage. Asset turnover is the principal contributor to the return profile, reflecting an education-services model that generates substantial revenue relative to the asset base. Financial leverage is moderate rather than aggressive, consistent with total equity of ¥15.73bn against total assets of ¥26.35bn. The net margin is in the good 5-10% range, but it remains well below the 31.0% gross margin because personnel, facility and other SG&A costs absorb a substantial share of gross profit. Gross-margin expansion of about 92bp demonstrates favorable gross-profit conversion on 7.4% revenue growth. However, SG&A increased about 13.8%, versus 7.4% sales growth, and this was the largest adverse movement in the profit structure. This expense growth compressed operating margin by about 29bp to 9.0%, although the resulting margin remains within the good 8-15% benchmark range. The five-factor analysis shows a 62.9% tax burden, indicating an effective tax rate of 37.1%, while the 103.4% interest burden reflects net non-operating financial income rather than debt-service strain. Interest coverage of 345.05x confirms that financing costs are immaterial to operating profitability. The modest improvement in net margin reflects factors below operating income, including financial income and extraordinary asset-sale gains, so the more durable profitability measure to monitor is operating-margin recovery. Goodwill equals only 3.9% of equity and 2.3% of assets, limiting M&A-related distortion to reported returns.
Growth Assessment
Revenue growth of 7.4% to ¥27.52bn is close to the full-year sales-growth assumption of 7.5%, indicating that demand momentum is broadly aligned with the annual plan. Gross profit grew 10.8%, faster than revenue, which suggests favorable gross-profit conversion. Operating income grew only 4.1% because SG&A rose faster than sales, reducing incremental operating leverage. Net income growth of 7.9% exceeded operating-income growth, but part of the improvement reflects non-operating and extraordinary items rather than solely recurring operations. Q3 revenue represents 73.0% of the ¥37.68bn full-year forecast, 2.0 percentage points below the standard 75% three-quarter progress rate. Operating income represents 67.6% of the ¥3.67bn full-year forecast, 7.4 percentage points below the standard pace. Ordinary income progress is 67.4% against the ¥3.73bn forecast, also below the standard pace. Net income progress is 62.3% against the ¥2.59bn forecast, 12.7 percentage points below the standard pace and therefore the clearest deviation. Achieving guidance requires implied Q4 revenue of ¥10.16bn, operating income of ¥1.19bn and net income of ¥0.97bn. The final-quarter hurdle is therefore substantially more profit intensive than the cumulative Q3 margin profile. For a cram-school operator, enrollment demand, student retention, pricing, instructor capacity and seasonal course demand are key determinants of whether this required Q4 conversion can be achieved.
Financial Health
Liquidity is strong: the current ratio is 192.0%, the quick ratio is 186.8%, and working capital is ¥6.37bn. Cash and deposits of ¥8.46bn account for 32.1% of total assets and exceed current liabilities of ¥6.92bn. This cash position supports operating flexibility and reduces refinancing dependence. The debt-to-equity ratio of 0.67x is conservative relative to the 1.0x benchmark and well below the 2.0x level associated with aggressive balance-sheet risk. Total liabilities represent 40.3% of total assets, while equity represents 59.7%, providing a solid capital buffer. Lease obligations total ¥0.57bn across current and non-current portions, a manageable amount relative to the cash balance and equity base. Net defined-benefit liability is ¥1.17bn and should remain monitored as a longer-term obligation. Asset-retirement obligations total ¥2.04bn, equivalent to 19.2% of total liabilities. This high ARO ratio is the identified quality alert: it reflects material restoration and closure obligations associated with the physical facility footprint. Such obligations are structurally relevant for an education operator with leased teaching sites and may become cash-relevant when locations are relocated, consolidated or closed. The risk is moderated by strong liquidity, but it increases fixed-commitment exposure and reduces balance-sheet flexibility relative to a more asset-light education-services model. Inventories increased 162.4% to ¥0.36bn, while trade accounts payable increased 77.5% to ¥0.65bn. The inventory rise is small relative to total assets at 1.4%, but it should be monitored alongside demand for educational materials and the pace of inventory turnover. The payable increase partly finances the higher inventory balance, although it remains modest relative to the liquidity position.
Notable B/S Changes
Inventories: +¥0.22bn (+162.4%) to ¥0.36bn - the balance remains only 1.4% of total assets, but the sharp percentage increase warrants monitoring for educational-material demand conversion and working-capital efficiency. Trade accounts payable: +¥0.28bn (+77.5%) to ¥0.65bn - the increase partly offsets higher inventory funding needs, but should be tracked alongside purchasing activity and payment timing.
Cash Flow Quality
The available earnings data show cumulative net income of ¥1.61bn and comprehensive income of ¥1.66bn. Working-capital balances warrant monitoring because inventories rose by ¥0.22bn year on year and trade payables rose by ¥0.28bn. Higher inventories can absorb cash if instructional-material demand does not convert as expected, while the payable increase can temporarily support operating cash generation. The ¥0.53bn gain on sale of fixed assets is non-recurring and should not be treated as a recurring operating cash source. The company’s ¥8.46bn cash balance provides a meaningful liquidity cushion against operational cash-flow variability.
Dividend Sustainability
The Q2 dividend per share was ¥20.00. The calculated dividend-only payout ratio based on the Q2 dividend and cumulative Q3 net income is 23.6%, a conservative level. The full-year dividend forecast is ¥55.00 per share, compared with forecast EPS of ¥140.14. This implies a forecast dividend-only payout ratio of approximately 39.2%, which remains comfortably below the 60% sustainability benchmark. Retained earnings of ¥12.20bn and cash and deposits of ¥8.46bn provide substantial balance-sheet support for the distribution. The dividend framework therefore appears financially conservative on reported earnings and balance-sheet measures. The principal variable for the year-end distribution outcome is delivery of the implied Q4 profit required to meet the full-year forecast.
Risk Assessment
Business risks include Enrollment, retention and pricing risk: revenue growth is healthy at 7.4%, but the education-services model remains sensitive to student acquisition, competitive intensity and demand for seasonal courses., Cost inflation and instructor-capacity risk: SG&A increased about 13.8%, substantially faster than revenue, and continued personnel or facility-cost pressure could further compress operating margin., Demographic risk: a declining school-age population in Japan can constrain the long-term addressable market and raise customer-acquisition costs for cram-school operators., Facility-footprint risk: asset-retirement obligations of ¥2.04bn create exposure to restoration costs when teaching locations are closed, relocated or reconfigured..
Financial risks include Final-quarter guidance execution risk: net income has reached 62.3% of full-year guidance versus a standard 75% progress rate, requiring ¥0.97bn of implied Q4 net income., Working-capital risk: inventories increased 162.4% year on year to ¥0.36bn; although small relative to assets, continued accumulation without corresponding demand could weigh on cash conversion., Non-recurring-profit risk: the ¥0.53bn fixed-asset sale gain supports pre-tax income but is not a recurring operating earnings source., ARO concentration risk: asset-retirement obligations equal 19.2% of total liabilities, which is high and increases the fixed-obligation component of the liability structure..
Key concerns include Whether Q4 operating-margin conversion improves sufficiently to close the 7.4-percentage-point operating-income progress gap versus the standard three-quarter pace., Whether SG&A growth moderates toward revenue growth after rising materially faster than sales through Q3., Whether inventory growth reflects normal educational-material preparation and converts efficiently into revenue., Whether facility commitments and related asset-retirement obligations remain proportionate to enrollment and classroom utilization..
Investment Implications
Key takeaways include Revenue growth of 7.4% and gross-margin expansion to 31.0% demonstrate resilient top-line and gross-profit momentum., Operating-margin compression to 9.0% shows that overhead growth, rather than gross-margin pressure, is the central near-term profitability issue., Annualized ROE of 13.7% is good and is driven by solid asset turnover with only moderate leverage., Liquidity and capitalization are strong, with a 192.0% current ratio, ¥8.46bn of cash and a 0.67x debt-to-equity ratio., The full-year profit plan depends on a strong Q4, particularly because net-income progress is 12.7 percentage points below the standard three-quarter pace., The forecast ¥55.00 DPS implies a moderate approximately 39.2% dividend-only payout ratio..
Metrics to watch include Q4 revenue, operating income and net income versus the implied ¥10.16bn, ¥1.19bn and ¥0.97bn required to achieve full-year guidance, SG&A growth rate and operating margin, Enrollment trends, retention and seasonal course demand, Inventory balance and trade-payable movements, Asset-retirement obligations relative to liabilities and changes in facility footprint, Cash balance and dividend progress toward the ¥55.00 full-year DPS forecast.
Regarding relative positioning, The company presents a financially sound education-services profile: gross margin and annualized ROE are in good benchmark ranges, leverage is conservative, and goodwill exposure is low. Relative differentiation will depend on its ability to translate revenue growth into operating leverage, as SG&A growth currently exceeds sales growth and the annual profit forecast requires a notably strong final quarter.