YAMADA Consulting Group (4792) FY2027 Q1 Earnings Report

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Executive Summary

Although revenue declined during the quarter, the Company secured increases in operating income and ordinary income; however, net income attributable to owners of the parent declined due to the higher tax burden. Revenue was ¥6.41B (-2.3% YoY), operating income was ¥1.04B (+0.2%), and ordinary income was ¥1.02B (+2.7%), while net income attributable to owners of the parent remained at ¥0.571B (-14.1%). The primary reason for the decline in revenue was a 36.2% decrease in revenue from the Investment Business. The core Consulting Business supported increases at the operating and ordinary income levels through a 9.0% increase in revenue and profit, as well as an improvement in gross margin. The main factors depressing net income were the increase in the effective tax rate (29.3% in the previous year → 35.6% in the current period) and the increase in net income attributable to non-controlling interests.

Factors Affecting Performance

【Revenue】Consolidated revenue was ¥6.41B (-2.3% YoY), with contrasting performance across segments. The Consulting Business remained solid at ¥5.35B (83.5% of total, +9.0%), while the Investment Business recorded a substantial revenue decline to ¥1.06B (16.5% of total, -36.2%), weighing on consolidated revenue.

【Profit and Loss】The gross margin improved by approximately 6.9pt from the previous year to 80.9%, while the SG&A expense ratio rose to 64.7% (SG&A expenses of ¥4.15B, +8.4% YoY). However, the improvement in gross profit absorbed this increase, enabling the Company to secure operating income of ¥1.04B (+0.2%). Ordinary income was ¥1.02B (+2.7%), with non-operating income of ¥0.02B and non-operating expenses of ¥0.04B, both limited in scale. Against profit before tax of ¥1.02B, corporate income taxes and other taxes of ¥0.36B were recorded (effective tax rate of 35.6%, up from 29.3% in the previous year). After deducting net income attributable to non-controlling interests of ¥0.08B (¥0.03B in the previous year), net income attributable to owners of the parent was ¥0.571B (-14.1%). Thus, the Company recorded higher profit despite lower revenue at the operating and ordinary income levels, while final profit declined primarily due to the higher tax burden. Overall, the results can be characterized as lower revenue but higher operating profit, with final profit declining due to tax-related factors.

Segment Analysis

The Consulting Business recorded revenue of ¥5.35B (+9.0%), operating income of ¥0.779B (+14.5%), and a profit margin of 14.5% (improved from 13.9% in the previous year), reflecting both revenue and profit growth as well as an improved profit margin. The Investment Business recorded revenue of ¥1.06B (-36.2%), operating income of ¥0.260B (-27.8%), and a profit margin of 24.6% (improved from 21.7% in the previous year). Although revenue declined, the profit margin itself increased due to such factors as a review of the composition of projects. On a consolidated operating income basis, the increase in profit from the Consulting Business (+¥0.099B) exceeded the decrease in profit from the Investment Business (-¥0.010B), contributing to the increase in consolidated profit. The Consulting Business accounts for more than 80% of the business composition, and the structure in which fluctuations in the Investment Business cause volatility in consolidated performance remains unchanged.

Key Financial Indicators

【Profitability】The operating margin was 16.2%, the ordinary income margin was 15.8%, and the net margin on a basis attributable to owners of the parent was 8.9%, while ROE was 2.7%. Both the gross margin of 80.9% and the operating margin of 16.2% improved from the previous year, indicating enhanced margin quality; however, ROE remains low. 【Cash Flow Quality】Operating Cash Flow (OCF) of ¥0.24B was approximately 42% of net income attributable to owners of the parent of ¥0.571B, indicating limited cash generation relative to profit. 【Investment Efficiency】Revenue of ¥6.41B against total assets of ¥33.80B indicates a low total asset turnover ratio, and the heavy asset composition, including the Investment Business, is weighing on capital efficiency. 【Financial Soundness】The Equity Ratio was 70.7%. Based on current assets of ¥29.42B and current liabilities of ¥9.04B, the current ratio was approximately 325%, indicating substantial liquidity. However, interest-bearing debt is primarily short-term borrowings of ¥5.496B, and the maturity profile of liabilities is skewed toward the short term.

Cash Flow Analysis

Operating Cash Flow was ¥0.24B, turning positive from -¥0.57B in the same period of the previous year. The decrease in trade receivables (+¥0.82B) and the decrease in inventories (+¥0.55B) contributed positively, while the decrease in trade payables (-¥0.12B) and corporate income tax payments (-¥0.38B) were negative factors. Investing Cash Flow was -¥0.53B. Capital expenditures remained small at ¥0.02B, with transfers to time deposits and similar items representing the primary uses of funds. Financing Cash Flow was -¥0.15B, with dividend payments of ¥0.75B partially offset by a net increase in short-term borrowings (+¥0.60B) and other items. As a result, free cash flow was -¥0.29B. Dividend payments during the quarter could not be fully covered by OCF alone and were supplemented by cash on hand of ¥10.14B.

Quality of Earnings

Operating income and ordinary income reflect the recurring earning power of the core business. Non-operating income of ¥0.02B and non-operating expenses of ¥0.04B were limited in scale, and the impact of temporary extraordinary gains and losses was also small. Meanwhile, against ordinary income of ¥1.02B, net income attributable to owners of the parent was ¥0.571B. This difference was attributable to the higher tax burden (effective tax rate of 35.6%, compared with 29.3% in the previous year) and the increase in net income attributable to non-controlling interests (¥0.08B, compared with ¥0.03B in the previous year). Comprehensive income was ¥0.72B on a consolidated basis, of which ¥0.62B was attributable to owners of the parent. The difference between this amount and net income attributable to owners of the parent of ¥0.571B reflects the positive impact of other comprehensive income, including foreign currency translation adjustments. The fact that OCF remained at approximately 42% of net income attributable to owners of the parent reflects the impact of working capital movements during the quarter—improvements from decreases in trade receivables and inventories coexisting with deterioration from a decrease in trade payables—as well as tax payments. The pace of cash conversion of earnings is therefore moderate.

Earnings Forecast and Guidance

Progress against the full-year forecast was 23.8% for revenue (¥6.41B/¥26.90B), 23.1% for operating income (¥1.04B/¥4.50B), 23.3% for ordinary income (¥1.02B/¥4.35B), and 19.7% for net income on a basis attributable to owners of the parent (¥0.571B/¥2.90B). Both revenue and profit were slightly below the simple progress benchmark of 25%, but the deviations were not significant. The somewhat slower progress in net income was attributable to the increase in the effective tax rate and the increase in income attributable to non-controlling interests during the quarter. No revisions were made to the earnings forecast or dividend forecast during the quarter.

Shareholder Returns

The full-year dividend forecast is ¥77 per share, representing a Payout Ratio of approximately 51.0% against forecast EPS of ¥150.91. Dividend payments during the quarter were ¥0.75B, exceeding OCF of ¥0.24B for the quarter, but were sufficiently covered by cash on hand of ¥10.14B. The dividend paid in the same period of the previous year was ¥38. Compared with the full-year forecast of ¥77, an increase in the annual dividend, including the year-end dividend, is expected.

Risk Factors

1. Volatility of the Investment Business: The Investment Business recorded a substantial decline in both revenue and operating income, with revenue of ¥1.06B (-36.2%) and operating income of ¥0.26B (-27.8%), and has a structure in which performance is easily affected by market conditions and the exit environment. Fluctuations in this business, which accounts for 16.5% of consolidated revenue, are a factor that amplifies volatility in consolidated performance.

2. Dependence on Short-Term Funding: Interest-bearing debt is primarily short-term borrowings of ¥5.496B. Although liquidity itself is substantial, with a current ratio of 325%, the maturity profile of liabilities is skewed toward the short term. Cash on hand of ¥10.14B is approximately 1.85 times short-term borrowings, providing a certain degree of flexibility; however, sensitivity to changes in funding conditions requires monitoring.

3. Fluctuations in the Tax Burden and Cash Conversion: The effective tax rate rose to 35.6% from 29.3% in the previous year, widening the decline from ordinary income to net income (approximately -44%). In addition, OCF remained at approximately 42% of net income attributable to owners of the parent, indicating a moderate pace of cash conversion.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Both the operating margin and net margin exceed the industry median, placing the Company among the more profitable companies in the industry.

Growth and Capital Efficiency

The revenue growth rate was substantially below the industry median, with the decline in revenue from the Investment Business contributing to the Company’s relatively weak growth within the industry.

Source: Compiled by the Company

Key Takeaways from the Financial Results

1. The quality of profitability improved, as reflected by the approximately 6.9pt improvement in gross margin from the previous year and the expansion of the operating margin to 16.2%. However, the increase in the effective tax rate from 29.3% to 35.6% was a factor behind the decline in net income attributable to owners of the parent. The divergence between improvement at the operating level and the movement in final profit is therefore an important point when evaluating the quality of the results.

2. OCF remained at approximately 42% of net income attributable to owners of the parent, while interest-bearing debt was primarily short-term borrowings. Cash on hand is substantial and there is little immediate concern regarding liquidity; however, the pace of cash conversion and the maturity profile of liabilities warrant continued monitoring.

3. The core Consulting Business supported consolidated performance through revenue and profit growth (+9.0%/+14.5%), while the Investment Business recorded substantial declines in both revenue and profit (-36.2%/-27.8%). The differing sensitivity of the two businesses to performance drivers creates a structure in which the range of fluctuations in full-year performance is influenced by their respective results.

Theoretical Share Price (For Reference)

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

Sensitivity: ¥1,330–¥1,406 at ±1% for the cost of equity, and ¥1,364–¥1,371 at ±0.1 for ω.

Notes:

• Goodwill amortization of ¥6.9 per share is added back to profit (to account for a non-cash expense and comparability with IFRS companies).
• Net assets as of the quarter-end are used (there is a timing difference relative to the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-07 / 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 release 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 professionals as necessary.

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AI Financial Analysis

Executive Summary

FY2027 Q1 performance was resilient at the operating level but weaker in profit attributable to owners and cash conversion. Revenue declined 2.3% YoY to JPY6.41bn, while operating income was essentially flat at JPY1.04bn, up 0.2% YoY. Ordinary income increased 2.7% YoY to JPY1.02bn, supported by a lower net non-operating expense burden. Profit attributable to owners fell 14.1% YoY to JPY0.57bn, and EPS declined to JPY29.75 from JPY34.84. The operating margin improved by 40bp YoY to 16.2%, remaining above the 15% threshold generally associated with excellent profitability. Gross margin expanded sharply by 690bp YoY to 80.9%, as cost of sales fell 28.2% despite lower revenue. This gross-profit improvement was absorbed by an 8.4% increase in SG&A expenses, indicating continued personnel and operating-cost investment. Consulting revenue grew 9.1% YoY, offsetting part of a 36.2% decline in investment-business revenue. Consulting segment profit rose 14.5% YoY, whereas investment segment profit declined 27.8% YoY. The investment business nevertheless retained the higher segment margin, at 24.6% versus 14.5% for consulting. Operating cash flow turned positive at JPY0.24bn, compared with an outflow of JPY0.57bn a year earlier, but remained materially below profit attributable to owners. OCF/net income of 0.42x and OCF/EBITDA of 0.22x indicate that Q1 accounting earnings were not yet fully realized in cash. Free cash flow was negative JPY0.29bn after investing outflows of JPY0.53bn, mainly limiting internally generated funding capacity during the quarter. Liquidity is ample, with JPY10.14bn of cash and a 325.6% current ratio, but all JPY5.50bn of interest-bearing debt is short term. Full-year guidance implies a material operating-income acceleration later in the year, as Q1 operating-income progress was 23.1% against the annual forecast. The investment case will depend on the durability of consulting growth, stabilization of investment-business revenue, improved operating-cash conversion, and management of short-term funding.

Profitability Analysis

The reported annualized DuPont ROE is 9.6%, decomposed into an 8.9% net profit margin, 0.759x asset turnover, and 1.41x financial leverage. The primary positive operating movement was margin quality: EBIT margin was 16.2% and EBITDA margin was 16.8%, supported by a 690bp expansion in gross margin to 80.9%. However, the benefit was constrained because SG&A rose 8.4% YoY while revenue fell 2.3% YoY, reducing operating leverage below the gross-profit line. The consulting business is the core business by segment operating-income contribution, generating JPY0.78bn, or approximately 75.0% of aggregate segment profit. Its revenue increased to JPY5.35bn from JPY4.91bn and its segment margin improved to 14.5% from 13.8%. Investment-business revenue fell to JPY1.06bn from JPY1.66bn, while segment profit declined to JPY0.26bn from JPY0.36bn; nevertheless, its segment margin improved to 24.6% from 21.7%. Thus, the flat consolidated operating profit reflects stronger consulting execution offsetting lower investment-business volume. The 8.9% net margin is below the operating margin principally because of tax and non-operating costs, rather than interest stress. The extended DuPont tax burden is 0.562, which is low and signals a material tax drag on returns; however, the reported effective tax rate calculated from consolidated profit before tax and income tax expense is 35.5%, not above 40%. The supplied quality alert on tax burden is therefore relevant to owner-attributable earnings conversion, while the stated 44% effective-tax-rate characterization is not corroborated by the reported consolidated income-tax expense. Interest burden remains healthy at 0.978 and interest coverage is very strong at 54.23x, so financing cost is not presently a material earnings constraint. Goodwill amortization under JGAAP was JPY0.33bn, equal to roughly 3.1% of EBITDA, a modest rather than material difference between reported EBITDA of JPY1.08bn and pre-goodwill-amortization EBITDA of JPY1.11bn.

Growth Assessment

Revenue sustainability is mixed. Consulting is demonstrating favorable momentum, with Q1 revenue up 9.1% YoY and segment profit up 14.5% YoY, suggesting improved utilization, pricing, project mix, or cost absorption. By contrast, investment-business revenue declined 36.2% YoY, demonstrating that consolidated sales remain exposed to transaction timing, portfolio activity, and investment-exit conditions. The consolidated gross-margin increase to 80.9% is encouraging, but it must translate into operating-profit growth because SG&A expansion materially exceeded revenue growth. Full-year guidance calls for revenue of JPY26.90bn, up 0.7% YoY, operating income of JPY4.50bn, up 20.2%, ordinary income of JPY4.35bn, up 17.1%, and owner-attributable profit of JPY2.90bn. Q1 progress is 23.8% for revenue, 23.1% for operating income, 23.3% for ordinary income, and 19.7% for owner-attributable profit, versus a standard 25% quarterly run rate. The operating-income progress shortfall is modest at 1.9 percentage points and does not by itself indicate a material miss, while the owner-profit shortfall of 5.3 percentage points places greater reliance on subsequent-quarter tax and profit conversion. Achieving the full-year operating-income forecast requires a substantial margin improvement versus Q1, as the forecast implies a 16.7% full-year operating margin compared with 16.2% in Q1. The key growth test is whether consulting growth can remain sufficient to compensate for volatility in the investment business.

Financial Health

Financial health is strong from a liquidity and balance-sheet-capital perspective. Current assets of JPY29.42bn exceeded current liabilities of JPY9.04bn by JPY20.39bn, producing a 325.6% current ratio and 325.4% quick ratio. Cash and deposits were JPY10.14bn, equivalent to 1.85x short-term debt of JPY5.50bn. Total equity was JPY23.89bn against total liabilities of JPY9.91bn, and the debt-to-equity ratio was a moderate 0.41x. Debt-to-capital was 18.7%, also consistent with a conservatively capitalized balance sheet. There is no current-ratio warning and no D/E warning under the stated thresholds. The principal financing issue is maturity concentration: 100% of interest-bearing debt is short term, creating refinancing exposure even though cash currently covers this debt. Debt/EBITDA of 5.09x is above the 4.0x high-leverage benchmark and is the key leverage-quality alert; it is elevated because Q1 EBITDA is a cumulative quarterly figure used in the supplied covenant metric, while the strong cash balance and 56.36x EBITDA interest coverage mitigate immediate debt-servicing risk. Accounts receivable fell JPY0.82bn, or 39.3% YoY, to JPY1.26bn, which reduced receivables concentration and supported liquidity. Accounts payable fell JPY0.12bn, or 26.2% YoY, to JPY0.34bn, indicating lower supplier financing but with limited absolute impact. Real estate for sale of JPY3.72bn represents 11.0% of total assets and should be monitored for valuation, sales timing, and capital lock-up. Goodwill of JPY0.60bn is only 2.5% of equity and 1.8% of total assets, leaving low balance-sheet dependence on acquired intangible value and limited goodwill impairment risk.

Notable B/S Changes

Accounts receivable: -JPY0.82bn (-39.3%) to JPY1.26bn - improves receivables liquidity and was supportive of operating cash flow. Accounts payable: -JPY0.12bn (-26.2%) to JPY0.34bn - reduces trade-credit funding, although the absolute balance is small relative to total liabilities. Short-term loans: +JPY0.60bn (+12.3%) to JPY5.50bn - debt is entirely short term, reinforcing refinancing-risk monitoring despite cash coverage of 1.85x. Real estate for sale: -JPY0.56bn (-13.0%) to JPY3.72bn - remains a sizable 11.0% of assets and is relevant to valuation and cash-realization timing.

Cash Flow Quality

Cash-flow quality is the principal weak point of the Q1 result. Operating cash flow was JPY0.24bn, only 0.42x owner-attributable profit of JPY0.57bn and 0.22x EBITDA of JPY1.08bn, both below the stated quality thresholds. This explicitly triggers the earnings-quality and low-cash-conversion alerts: reported earnings have not yet converted into operating cash at a normal rate. The low conversion is partly explained by working-capital and tax movements, including a JPY5.52bn increase in inventories and JPY0.38bn increase in other liabilities, partly offset by a JPY0.82bn reduction in trade receivables. The reduction in receivables is cash-supportive and does not indicate receivables-led earnings inflation. The accruals ratio of 1.0% is low and does not independently indicate aggressive accrual accounting. Capital expenditure was JPY0.21bn, while depreciation and amortization was JPY0.41bn, resulting in CapEx/depreciation of 0.51x. This explicitly triggers both underinvestment alerts: investment spending is below asset consumption and could constrain capacity renewal or future growth if sustained. Free cash flow was negative JPY0.29bn, so Q1 internally generated cash did not cover investment spending. Investing cash outflow was JPY0.53bn, while financing cash outflow was JPY0.15bn and cash declined JPY0.37bn in the quarter. Given the strong cash reserve, the negative Q1 FCF is manageable, but improvement in OCF conversion is needed before treating the quarterly cash profile as sustainably supportive of dividends, debt refinancing, and investment.

Dividend Sustainability

The full-year forecast dividend is JPY77 per share, implying a forecast dividend payout ratio of approximately 51.0% based on forecast EPS of JPY150.91. This is below the 60% sustainability benchmark and appears reasonable relative to forecast earnings. Q1 owner-attributable EPS of JPY29.75 represents 19.7% of full-year forecast EPS, so dividend coverage depends on a stronger earnings contribution in later quarters. Q1 free cash flow was negative JPY0.29bn and therefore did not cover distributions during the quarter on a standalone basis. However, cash and deposits of JPY10.14bn, equivalent to 1.85x short-term debt, provide a substantial liquidity buffer. Cash dividends paid were JPY0.75bn during Q1, broadly consistent with the prior-year annual DPS of JPY38 and reflecting the timing of shareholder distributions rather than the current-period forecast DPS. No share buyback data is provided, so assessment is limited to the dividend payout ratio rather than a total return ratio. Dividend sustainability is presently supported by forecast earnings, capital adequacy, and cash reserves, but persistent weak cash conversion or higher refinancing requirements would reduce flexibility.

Risk Assessment

Business risks include Investment-business revenue declined 36.2% YoY to JPY1.06bn. This business retains a high 24.6% segment margin but appears sensitive to transaction timing, investment realizations, valuation conditions, and real-estate or capital-market activity., Consulting is now the core profit contributor, representing about 75% of segment profit. Sustaining its 9.1% revenue growth is important because a slowdown would expose the consolidated earnings impact of the investment-business decline., SG&A increased 8.4% YoY despite a 2.3% revenue decline. If staffing and selling costs continue to rise faster than revenue, the Q1 gross-margin improvement may not produce the full-year operating-margin expansion embedded in guidance., Real estate for sale totals JPY3.72bn, or 11.0% of assets, creating exposure to real-estate valuation, project turnover, and liquidity timing..

Financial risks include Debt/EBITDA of 5.09x exceeds the 4.0x high-leverage benchmark. Although interest coverage is strong, leverage capacity is more sensitive to EBITDA volatility than the D/E ratio alone suggests., All JPY5.50bn of interest-bearing debt is short term. The 100% short-term debt ratio creates refinancing and rollover risk, even though cash covers 1.85x of short-term debt., OCF/net income of 0.42x and OCF/EBITDA of 0.22x indicate weak quarterly cash conversion. Continued divergence would reduce internally funded debt repayment and distribution capacity., CapEx/depreciation of 0.51x is below the 0.7x warning threshold. Extended underinvestment could defer rather than eliminate asset renewal requirements..

Key concerns include Highest priority: investment-business revenue recovery and its effect on consolidated sales growth and earnings volatility., High priority: conversion of operating profit into cash, particularly the inventory and other-working-capital movements that constrained Q1 OCF., High priority: refinancing management for JPY5.50bn of short-term loans and the trajectory of debt/EBITDA., Moderate priority: whether consulting growth and gross-margin expansion can offset SG&A growth and deliver the guided 20.2% full-year operating-income increase., Moderate priority: the low tax-burden factor of 0.562, which reduced the translation of pre-tax income into owner-attributable profit..

Investment Implications

Key takeaways include Operating profitability remains high, with a 16.2% operating margin and 16.8% EBITDA margin, despite a 2.3% revenue decline., Consulting is the core business and delivered 9.1% revenue growth and 14.5% segment-profit growth, while the investment business was the main source of consolidated revenue weakness., The balance sheet has strong liquidity, but short-term debt concentration and debt/EBITDA of 5.09x warrant attention., Cash conversion is materially weak in Q1, with OCF/net income of 0.42x, negative JPY0.29bn free cash flow, and CapEx/depreciation of 0.51x., The JPY77 forecast DPS implies an approximately 51.0% payout ratio, which is supportable on forecast earnings but should be evaluated alongside subsequent-quarter cash-flow recovery..

Metrics to watch include Consulting revenue growth and segment margin, Investment-business revenue, segment profit, and transaction timing, SG&A growth relative to revenue growth, Operating cash flow, OCF/net income, and OCF/EBITDA, Inventory and real-estate-for-sale movements, Debt/EBITDA, cash-to-short-term-debt coverage, and short-term loan rollover, Progress against full-year revenue, operating-income, and owner-profit guidance, CapEx/depreciation and maintenance-investment requirements.

Regarding relative positioning, The company combines a high-margin advisory-oriented consulting franchise with a higher-margin but more volatile investment business. Its operating margin and liquidity are strong for a professional-services-led model, while its current relative weaknesses are lower cash conversion, elevated debt/EBITDA on the supplied metric, and full reliance on short-term debt funding. Limited goodwill and intangible-asset exposure reduce M&A-related balance-sheet risk.