JOHNAN ACADEMIC PREPARATORY INSTITUTE,INC. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.98B
• Operating Income: ¥109M
• Net Income: ¥-33M
• EPS: ¥12.37

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

For FY2026 Q2, Jounan Shingaku Kenkyusha posted modest top-line growth with revenue of ¥2,983 million (+1.2% YoY) and a sharp recovery in operating profitability, as operating income rose to ¥109 million (+164.4% YoY). Gross profit of ¥725.7 million implies a gross margin of 24.3%, indicating reasonable pricing and cost control in a competitive cram school/education services market. Operating margin improved to approximately 3.6%, reflecting effective SG&A discipline and operating leverage on flattish revenue. Ordinary income was ¥108 million, suggesting limited non-operating drag; interest expenses are modest at ¥3.9 million, with strong interest coverage of 27.7x. Net income was ¥99 million (flat YoY), implying that below-the-line items and taxes offset the operating rebound. The reported effective tax rate metric shows 0.0% (unreported), but using ordinary income as a pre-tax proxy implies an effective tax rate around 33–34%. DuPont analysis yields a net margin of 3.32%, asset turnover of 0.615x, and financial leverage of 3.26x, resulting in ROE of 6.66%, aligning with the reported figure. The balance sheet shows total assets of ¥4,851 million and total equity of ¥1,487 million, implying an equity ratio near 30.7% even though the provided equity ratio field is unreported (0.0%). Liquidity appears adequate with a current ratio of 119% and working capital of ¥349 million; quick ratio equals current ratio given inventories are unreported. Operating cash flow was negative at -¥82 million, indicating weak cash conversion this half, likely tied to seasonal working capital movements typical in education businesses (e.g., receivable build or timing of tuition). Investing cash flow is unreported and cash and equivalents are unreported, limiting free cash flow assessment; the provided FCF of 0 should be treated as undisclosed, not zero. Leverage measured by total liabilities to equity is 2.55x, which is manageable given improving profitability and high interest coverage, but still warrants monitoring in a low-growth environment. Dividend-related fields show 0 (undisclosed), so no conclusions can be drawn on payout policy from this dataset. Overall, fundamentals point to improving operating efficiency and a solid ROE for the business model, counterbalanced by negative OCF in the period and limited disclosure on cash and capex. The near-term outlook hinges on sustaining enrollment and price/mix, maintaining SG&A discipline, and converting earnings to cash as seasonal effects normalize.

Profitability Analysis

ROE of 6.66% is driven by: net margin 3.32% × asset turnover 0.615 × financial leverage 3.26. The margin component improved at the operating level (operating income +164% YoY on revenue +1.2%), indicating strong operating leverage and expense control. Gross margin is 24.3%, suggesting stable instructional cost management; the step-up in operating margin to about 3.6% implies SG&A efficiencies. Ordinary income tracks operating income closely (¥108m vs ¥109m), so non-operating items had limited impact; interest burden is light (¥3.9m) with 27.7x coverage, underscoring resilient core earnings. EBITDA is ¥160.9m (EBITDA margin 5.4%), demonstrating incremental buffer from non-cash depreciation (¥51.9m). The flat net income YoY despite stronger operating income implies adverse below-the-line/tax effects; using ordinary income as a proxy, the implied effective tax rate is roughly 33–34% (versus the unreported metric shown as 0.0%). Overall margin quality improved, and operating leverage was significant; sustaining this will depend on maintaining utilization and managing personnel costs.

Growth Assessment

Revenue increased 1.2% YoY to ¥2,983m, indicating stable but subdued topline momentum typical of a mature education services market. The outsized operating income growth (+164.4% YoY) versus revenue suggests cost optimization rather than volume-led expansion drove earnings improvement. With ordinary income at ¥108m and net income flat at ¥99m, non-operating/tax effects offset some of the operating gains. Given the sector’s seasonality, second-half trends in enrollments, retention, and course mix will be key to confirming sustainability. Profit quality appears improved at the operating level; however, negative OCF in the period tempers the quality of earnings until working capital normalizes. Outlook depends on enrollment trajectory, pricing power, and wage/instructor-cost management; modest revenue growth with continued SG&A discipline could preserve improved margins, but structural headwinds (demographics and competition) limit high-growth scenarios.

Financial Health

Total assets are ¥4,851m and total equity is ¥1,487m, implying an equity ratio around 30.7% despite the reported 0.0% (unreported). Total liabilities of ¥3,791.9m translate to a liabilities-to-equity ratio of 2.55x. Liquidity is adequate with a current ratio of 119% and working capital of ¥349m; quick ratio equals current ratio because inventories are unreported. Interest expense of ¥3.9m is well covered by operating income (27.7x coverage), indicating low near-term refinancing pressure. The capital structure appears balanced for a service business, but the moderate leverage and negative OCF this half warrant monitoring. Absence of disclosed cash and equivalents limits assessment of immediate liquidity buffers.

Cash Flow Quality

Operating cash flow was -¥82m, yielding an OCF/net income ratio of -0.83, which signals weak cash conversion in the period, likely due to seasonal working capital outflows (e.g., receivables timing, prepaid expenses, or payables normalization). Depreciation of ¥51.9m and positive EBITDA support accounting earnings quality, but cash realization lagged this half. Investing cash flow and cash balance are unreported, so we cannot infer capex levels or free cash flow; the provided FCF of 0 should be treated as undisclosed, not zero. Working capital metrics are not fully available, but the positive working capital position (¥349m) suggests a cushion; monitoring AR collection and tuition timing is important. Overall, earnings quality at the operating level improved, but confirmation via positive OCF in subsequent quarters is needed.

Dividend Sustainability

Dividend-related fields (annual DPS, payout ratio, and FCF coverage) are shown as 0, indicating undisclosed values rather than actual zeros. With net income of ¥99m and negative OCF this half, near-term distributable cash visibility is limited without cash and capex data. If the company targets balance-sheet stability and improved cash conversion, any payout policy would hinge on second-half cash generation and seasonality unwind. In the absence of disclosed DPS or policy, we cannot assess payout ratio or FCF coverage; monitoring management guidance and historical patterns (if available) is essential.

Risk Assessment

Business Risks:

• Enrollment volatility and retention risk in a competitive juku/education market
• Demographic headwinds in Japan (shrinking school-age population) pressuring volume growth
• Pricing pressure from rivals and online/digital learning alternatives
• Instructor availability and wage inflation impacting gross and operating margins
• Seasonality of demand and revenue recognition timing creating intra-year volatility
• Brand differentiation and curriculum efficacy impacting customer acquisition costs

Financial Risks:

• Negative operating cash flow in the period heightens reliance on working capital management
• Moderate leverage (liabilities/equity 2.55x) increases sensitivity to earnings downturns
• Limited disclosure on cash, investing cash flows, and capex constrains liquidity assessment
• Potential interest rate increases could raise financing costs (albeit current burden is low)
• Tax rate variability affecting bottom-line stability

Key Concerns:

• Sustainability of operating margin gains amid flat revenue growth
• Conversion of accounting profits into cash as seasonality normalizes
• Exposure to structural demographic decline limiting long-term growth

Investment Implications

Key Takeaways:

• Revenue was stable (+1.2% YoY) while operating income surged (+164% YoY), highlighting effective cost control and operating leverage.
• ROE of 6.66% reflects improved margins, reasonable asset turnover, and moderate leverage.
• Interest coverage is strong (27.7x), but liabilities/equity at 2.55x calls for cautious balance-sheet monitoring.
• Negative OCF (-¥82m) weakens cash flow quality this half; cash and capex data are undisclosed.
• Equity ratio implied around 31% despite the reported metric being unreported.

Metrics to Watch:

• Enrollment trends, retention, and average tuition per student
• SG&A ratio and personnel cost per student/instructor-hour
• AR days, tuition prepayments, and payables turnover to track working capital normalization
• Cash balance, capex, and OCF in the next quarter to confirm FCF trajectory
• Operating margin and gross margin sustainability
• Leverage and interest coverage under potential rate changes

Relative Positioning: Within Japan’s listed education services/after-school market, the company appears smaller scale with mid-20s gross margin and mid-single-digit EBITDA margin, broadly in line with lower-to-mid-tier peers; profitability improvements are notable, but growth remains modest and cash conversion needs confirmation.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
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