RESOL HOLDINGS Co.,Ltd. FY2027 Q1 Earnings Report

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Executive Summary

The first quarter was characterized by higher revenue but lower profit, as the increase in SG&A expenses outpaced revenue growth. Revenue increased to ¥7.94B (+3.6% YoY), while Operating Income declined to ¥0.74B (-19.7%), Ordinary Income to ¥0.68B (-22.5%), and Net Income attributable to owners of the parent to ¥0.64B (-21.5%). The primary factors were the 6.5% increase in SG&A expenses to ¥4.86B, exceeding the pace of revenue growth, as well as a decline in segment profit from the core Hotel Operations Business to ¥0.74B (-10.1%) and deteriorating profitability in the Resol no Mori Business, where profit fell to ¥0.05B (-39.8%).

Factors Affecting Performance

【Revenue】Revenue was ¥7.94B (+3.6% YoY), with five of the six businesses reporting revenue growth. The core Hotel Operations Business was the largest driver, increasing to ¥4.23B (53.2% of total revenue, +5.4% YoY). The Resol no Mori Business rose to ¥1.10B (13.7% of total revenue, +3.8%), while the Well-Being Business increased to ¥0.28B (3.5% of total revenue, +10.4%). Meanwhile, the Golf Operations Business remained essentially flat at ¥2.32B (29.2% of total revenue, -0.1%).

【Profitability】Operating Income declined to ¥0.74B (-19.7%), and the Operating Margin fell to 9.3% from 12.0% in the same period of the previous year, a decrease of 2.7pt. While the gross margin declined to 70.5% from 71.6% in the previous year, SG&A expenses increased to ¥4.86B (+6.5%), outpacing the +3.6% revenue growth rate, and the SG&A ratio rose to 61.2% from 59.5%. Ordinary Income declined to ¥0.68B (-22.5%), with higher non-operating expense burdens also weighing on profit as interest expenses increased to ¥0.06B from ¥0.05B in the previous year. Special gains and losses were zero in the current period, compared with ¥0.004B in losses on disposal of fixed assets and other items in the same period of the previous year, indicating a limited impact from temporary factors. Accordingly, the first quarter resulted in higher revenue but lower profit.

Segment Analysis

The Hotel Operations Business, the core earnings pillar, recorded revenue of ¥4.23B (53.2% of total revenue, +5.4% YoY), while segment profit declined to ¥0.74B (-10.1%, 17.5% margin). The Golf Operations Business remained broadly flat, with revenue of ¥2.32B (-0.1%) and segment profit of ¥0.30B (-3.2%, 12.9% margin). The Resol no Mori Business generated revenue of ¥1.10B (+3.8%), but segment profit fell sharply to ¥0.05B (-39.8%, 4.6% margin), making it the primary factor depressing the Company-wide profit margin. The Well-Being Business showed strong growth despite its small scale, with revenue of ¥0.28B (+10.4%) and segment profit of ¥0.04B (+230.8%). The Renewable Energy Business recorded flat revenue of ¥0.03B and segment profit of ¥0.01B (-41.7%). The Investment and Revitalization Business generated revenue of ¥0.01B and returned to profitability from a loss in the previous year, recording profit of ¥0.00B. Adjustments for Company-wide expenses and other items expanded to -¥0.47B from -¥0.37B in the previous year, widening the difference between total segment profit and Ordinary Income.

Key Financial Metrics

【Profitability】The Operating Margin declined to 9.3% from 12.0% in the previous year, while the Net Profit Margin declined to 8.0% from 10.6%; ROE was 3.5%. 【Cash Quality】Cash and deposits were ¥3.93B, remaining broadly flat compared with ¥3.97B in the same period of the previous year. The absence of special gains and losses and the earnings composition rooted in operating activities represent qualitative stability factors. 【Investment Efficiency】The ratio of Revenue to Total Assets remained low at 0.180x, indicating room for improvement in asset efficiency. 【Financial Soundness】The Equity Ratio remained broadly flat at 41.5% versus 41.7% in the previous year. Meanwhile, the Current Ratio was below 100% at 74.6%, making short-term liquidity management a key focus; however, the Interest Coverage Ratio was 12.4x, indicating sufficient interest-servicing capacity.

Cash Flow Analysis

As the Cash Flow Statement has not been disclosed, cash trends are assessed based on changes in the Balance Sheet. Cash and deposits were ¥3.93B, remaining broadly flat compared with ¥3.97B in the same period of the previous year. Long-term borrowings declined by ¥0.54B to ¥7.16B from ¥7.69B in the same period of the previous year, indicating progress in scheduled repayments. Meanwhile, short-term borrowings of ¥1.70B and the current portion of long-term borrowings of ¥2.80B remained at similar levels to the previous year. Property, plant and equipment increased by ¥0.60B to ¥30.71B from ¥30.12B in the same period of the previous year, suggesting that capital investment has continued. Other current liabilities increased by ¥1.01B to ¥5.53B from ¥4.53B in the same period of the previous year, potentially reflecting an accumulation of accounts payable, advances received, and other items that supported working capital. Current assets of ¥8.07B versus current liabilities of ¥10.81B resulted in a Current Ratio of 74.6%, requiring appropriate management of short-term liquidity.

Earnings Quality

Special gains and losses were zero in the current first quarter, compared with a special loss of ¥0.004B related to losses on disposal of fixed assets and other items in the same period of the previous year. Accordingly, earnings distortion from temporary factors was limited, and the earnings composition was rooted in operating activities. Non-operating income was ¥0.02B, while non-operating expenses were ¥0.08B, including ¥0.06B in interest expenses, resulting in a ¥0.06B reduction from Operating Income to Ordinary Income. Income taxes were ¥0.04B, and the effective tax rate remained low at 6.2% relative to pretax profit of ¥0.68B, with the lower tax burden supporting Net Income. The downward divergence from Operating Income to Net Income was approximately 14%, indicating a structure in which financial expenses and fluctuations in the effective tax rate at the Ordinary Income stage influence earnings quality. Comprehensive Income was ¥0.64B, broadly in line with Net Income attributable to owners of the parent of ¥0.64B, indicating a limited impact from other comprehensive income items, such as adjustments related to retirement benefits.

Earnings Forecast and Guidance

Progress against the full-year earnings forecast was 25.6% for Revenue (¥7.94B/¥31.0B), 21.8% for Operating Income (¥0.74B/¥3.40B), 21.2% for Ordinary Income (¥0.68B/¥3.20B), and 32.6% for Net Income (¥0.64B/¥1.95B). While Revenue is progressing at a pace above the simple pro rata benchmark of 25%, Operating Income and Ordinary Income are slightly below that benchmark, making cost efficiency improvements in the second half a key issue for achieving the full-year plan. The relatively high progress rate for Net Income appears to reflect the low effective tax rate. No revisions were made to the earnings forecast or dividend forecast during the quarter.

Shareholder Returns

The full-year dividend forecast is ¥120 per share, with no revisions made as of the end of the quarter. Based on the Company’s forecast Net Income of ¥1.95B and forecast EPS of ¥350.92, the Payout Ratio is approximately 34%, calculated as ¥120/¥350.92, representing a reasonable level. No disclosure has been made regarding share repurchases, and dividends remain the primary form of shareholder returns. Considering cash and deposits of ¥3.93B and the level of interest-bearing debt, the Company appears to retain sufficient financial resilience to sustain dividend payments for the time being.

Risk Factors

1. Liquidity Risk: The Current Ratio was 74.6%, with current assets of ¥8.07B versus current liabilities of ¥10.81B, resulting in negative working capital of ¥2.75B. The status of short-term liquidity management should be monitored.

2. Changes in Segment Profitability Mix: Segment profit in the Resol no Mori Business declined to ¥0.05B (-39.8%, 4.6% margin), while the high-margin Hotel Operations Business also reported lower profit, resulting in a decline in the Company-wide Operating Margin to 9.3% from 12.0% in the previous year.

3. Increased Interest Burden: Interest expenses increased to ¥0.06B from ¥0.05B in the same period of the previous year. Interest-bearing debt totaled ¥11.66B, comprising short-term borrowings of ¥1.70B, the current portion of long-term borrowings of ¥2.80B, and long-term borrowings of ¥7.16B. Depending on the interest-rate environment, financial expenses may increase going forward.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

In terms of profitability, both the Operating Margin and Net Profit Margin exceed the industry median, placing the Company’s relative earnings power in a favorable position within the industry.

Growth and Capital Efficiency

The Revenue Growth Rate is below the industry median, placing the Company at a somewhat disadvantageous position within the industry in terms of growth momentum.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. The fact that the SG&A expense growth rate (+6.5%) exceeded the revenue growth rate (+3.6%), resulting in a 2.7pt decline in the Operating Margin to 9.3% from 12.0% in the previous year, warrants close attention as a change in the cost structure.

2. By segment, the high-margin Hotel Operations Business reported lower profit, while the margin of the Resol no Mori Business declined to 4.6%, indicating that changes in the segment mix are affecting Company-wide profitability.

3. Full-year progress was relatively solid, with Revenue at 25.6% and Net Income at 32.6%. However, Operating Income at 21.8% and Ordinary Income at 21.2% were slightly below the simple pro rata benchmark of 25%, making progress in improving cost efficiency in the second half a key determinant of the Company-wide profit margin.

Theoretical Share Price (Reference Value)

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

Sensitivity: ¥3,246–¥3,432 at ±1% for the Cost of Equity, and ¥3,336–¥3,338 at ±0.1 for ω.

Notes:

• Net assets as of the end of the quarter are used (there is a timing mismatch with the full-year forecast).

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-07 / This value does not forecast or guarantee future share prices)

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This report is an earnings analysis document automatically generated by AI based on XBRL financial results data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed financial results data. Investment decisions should be made at your own responsibility, after consulting with professionals as necessary.

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