WASEDA ACADEMY CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

During the current period, Revenue increased 9.9% year on year to ¥77.2B, while the Company recorded losses at the operating, ordinary income, and net income levels; however, the magnitude of the losses narrowed substantially from the previous year, indicating that profitability is in the process of improving. Revenue was ¥77.2B (¥70.2B in the previous year, +9.9%), Operating Income was ¥-0.9B (¥-3.3B in the previous year, loss narrowed by 72.7%), Ordinary Income was ¥-0.6B (¥-3.1B in the previous year, narrowed by 79.9%), and Net Income attributable to owners of the parent was ¥-1.3B (¥-2.8B in the previous year, narrowed by 53.6%). In addition to the increase in Revenue, overall earnings improved year on year as the gross margin improved to 25.5% (22.6% in the previous year).

Factors Affecting Performance

【Revenue】Revenue was ¥77.2B, representing a 9.9% year-on-year increase. The Company consists of a single Education-Related Business segment, and detailed segment disclosures are not provided; however, the gross margin improved by +2.9pt to 25.5% (22.6% in the previous year), suggesting that improvements in tuition fees per student and utilization rates likely contributed to the increase in Revenue. Advances received declined to ¥5.2B (¥9.2B in the previous year, -44.0%), suggesting changes in the timing of Revenue recognition and seasonality during Q1.

【Earnings】Against Cost of Sales of ¥57.5B, SG&A expenses remained at ¥20.6B (+7.6% year on year), growing more slowly than Revenue (+9.9%), and the SG&A ratio improved to 26.7% (27.3% in the previous year). As a result, the Operating Loss narrowed to ¥-0.9B (¥-3.3B in the previous year), the Ordinary Loss narrowed to ¥-0.6B (¥-3.1B in the previous year), and the Net Loss narrowed to ¥-1.3B (¥-2.8B in the previous year). Non-operating income of ¥0.4B (including dividend income of ¥0.1B) supported Ordinary Income, while Corporate Income Taxes and Other of ¥0.7B were recorded against a Loss Before Taxes of ¥-0.6B, thereby increasing the Net Loss. In conclusion, the Company is on a trend of improving earnings through higher Revenue, but has not yet achieved operating profitability.

Key Financial Indicators

【Profitability】The Operating Margin improved substantially to -1.2% (-4.6% in the previous year), the Ordinary Income Margin improved to -0.8% (-4.5% in the previous year), and the Net Profit Margin improved to -1.7% (-3.9% in the previous year), although all remain negative. ROE was -0.8%, with capital efficiency remaining negative due to the recorded loss. 【Cash Quality】Inventories increased substantially to ¥4.2B (¥1.3B in the previous year, +226.8%), while Accounts Payable increased to ¥6.8B (¥3.0B in the previous year, +125.7%); meanwhile, Advances Received declined to ¥5.2B (¥9.2B in the previous year, -44.0%). Accordingly, the improvement in earnings may not have directly translated into cash generation through working capital. 【Investment Efficiency】Total Assets contracted to ¥243.8B (¥262.0B in the previous year). Although asset efficiency remains low amid the recorded loss, the improving trend in operating performance suggests a recovery in asset efficiency. 【Financial Soundness】The Equity Ratio rose by +1.7pt to 64.9% (63.2% in the previous year), while the Current Ratio was approximately 243% and the Quick Ratio approximately 234%, indicating a high level of short-term payment capacity. Cash and Deposits of ¥100.9B substantially exceeded Current Liabilities of ¥49.0B, and the Debt-to-Equity Ratio remained at a conservative 0.54x.

Cash Flow Analysis

As a separate Cash Flow Statement disclosure is not available for the quarter, cash trends are assessed based on changes in the Balance Sheet. Cash and Deposits were ¥100.9B, a decrease of ¥4.98B from ¥105.9B in the same period of the previous year. Changes in working capital items, including an increase in Inventories (+¥2.9B), an increase in Accounts Payable (+¥3.8B), and a decrease in Advances Received (-¥4.0B), appear to have affected the cash position. Total Assets contracted to ¥243.8B (¥262.0B in the previous year), while Net Assets declined to ¥158.3B (¥165.6B in the previous year). However, the Equity Ratio improved to 64.9%, indicating that the soundness of the financial base has been maintained despite asset contraction. Interest paid was a minor ¥0.03B and is not a structural factor placing pressure on the cash position.

Quality of Earnings

The earnings for the current period primarily arose from recurring business activities centered on tuition revenue, and no significant one-off gains or losses were identified apart from a loss on disposal of fixed assets of ¥0.02B. Non-operating income was limited to ¥0.4B (including dividend income of ¥0.1B), equivalent to approximately 0.5% of Revenue, indicating a low degree of dependence on non-core income; the improvement in earnings can therefore be viewed as being driven by improved profitability in the core business. Meanwhile, Corporate Income Taxes and Other of ¥0.7B were recorded against a Loss Before Taxes of ¥-0.6B, resulting in the reversal phenomenon of a negative effective tax rate. This is considered attributable to the valuation allowance for deferred tax assets and timing differences in tax effects. The fact that the tax burden amid the recorded loss expanded the Net Loss beyond the Ordinary Loss is an important consideration when assessing earnings quality.

Earnings Forecasts and Guidance

The Company’s full-year forecast calls for Revenue of ¥405.2B (+7.6% year on year), Operating Income of ¥42.4B (+7.0%), and Ordinary Income of ¥42.7B (+7.7%), with no revisions to the earnings forecast or dividend forecast during the current quarter. Q1 Revenue progress was 19.1% (¥77.2B/¥405.2B), below the simple quarterly allocation benchmark of 25%. However, the Education-Related Business is considered to have seasonality characterized by a significant contribution from the second half, including intensive course periods, which is consistent with the tendency for Q1 to record losses at the earnings level. The Company has maintained its plan for higher Revenue and higher earnings, and the slower progress can be interpreted as being within the range of seasonal fluctuations.

Shareholder Returns

The Company’s full-year dividend forecast is ¥75.00 per share, with no revision to the dividend forecast during the current quarter. Based on approximately 18.51 million shares, calculated by deducting treasury shares from shares issued, the total dividend is estimated at approximately ¥1.39B. The Payout Ratio against the full-year forecast Net Income attributable to owners of the parent of ¥2.75B is therefore approximately 50.4%. Given Cash and Deposits of ¥100.9B and the minor interest payment burden, the Company has sufficient capacity to pay dividends, assuming achievement of its full-year plan.

Risk Factors

1. Level of Asset Retirement Obligations: Asset Retirement Obligations were ¥20.6B, accounting for 24.1% of Total Liabilities of ¥85.5B. As temporary cash outflows may occur when school facilities are vacated or renewed, the impact on the medium- to long-term funding plan should be monitored.

2. Seasonality of Quarterly Performance: In Q1, the Company recorded an Operating Loss, Ordinary Loss, and Net Loss, while progress against full-year Revenue was limited to 19.1%. The Education-Related Business’s earnings structure, which is weighted toward the second half, is a factor causing quarterly fluctuations in earnings.

3. Working Capital Fluctuations: Inventories increased +226.8% year on year to ¥4.2B, and Accounts Payable increased +125.7% to ¥6.8B, while Advances Received decreased -44.0% to ¥5.2B. Cash and Deposits declined by ¥4.98B year on year, requiring close monitoring of the impact of working capital fluctuations on the cash position.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

In terms of profitability and returns, both the Operating Margin and Net Profit Margin are substantially below the industry median.

Growth and Capital Efficiency

The Revenue Growth Rate slightly exceeds the industry median, and the pace of Revenue growth is at a standard level within the industry.

Source: Compiled by the Company

Key Points from the Earnings Results

1. Higher Revenue, an improvement in the gross margin (+2.9pt), and a decline in the SG&A ratio (-0.6pt) combined to substantially narrow the Operating Loss, Ordinary Loss, and Net Loss from the previous year. Profitability is on an improving trend.

2. With an Equity Ratio of 64.9% (63.2% in the previous year) and a Current Ratio of approximately 243%, the financial base is solid. Short-term payment capacity and the safety of the capital structure have been maintained even amid the recorded loss.

3. Fluctuations in working capital items—including the sharp increase in Inventories and Accounts Payable and the decline in Advances Received—as well as Asset Retirement Obligations accounting for 24.1% of Total Liabilities, are structural points of note identified in the earnings data.

Theoretical Share Price (Reference Value)

This is a reference range mechanically calculated solely from publicly disclosed data using a residual income model (Ohlson type, explicit 5-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥1,040–¥1,100 at Cost of Equity ±1%, and ¥1,065–¥1,077 at ω±0.1.

Notes:

• Net Assets as of the quarter-end are used (there is a time lag relative to the full-year forecast).
• As Net Assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-06 / This value does not predict or guarantee the future share price)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary 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 with a professional as necessary.

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