YAMADA Consulting Group Co.,Ltd. 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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