E-Guardian (6050) FY2026 Q1 Earnings Report

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Executive Summary

In Q1 of the fiscal year ending September 2026, the Company reported declines in both revenue and earnings, primarily due to a sharp decrease in revenue from existing customers and a deterioration in the gross profit margin. Revenue was ¥2.64B (down -9.1% YoY), Operating Income was ¥0.22B (down -46.4%), Ordinary Income was ¥0.23B (down -44.5%), and Net Income was ¥0.11B (down from ¥0.25B in the prior year). The gross profit margin declined to 25.8% from 30.9% in the prior year. Although SG&A expenses decreased, they declined at a slower rate than revenue, resulting in an increase in the SG&A ratio. Management explained that upfront investments associated with large-scale projects and negotiations to normalize pricing were factors behind the earnings decline, while maintaining its full-year plan for revenue and earnings growth.

Factors Affecting Business Performance

【Revenue】Revenue declined 9.1% YoY to ¥2.64B. The primary factor was a sharp decline in revenue from existing customers, particularly in segments such as Social Support, while the upfront investment phase associated with launching large-scale projects also had an impact. Progress against the full-year revenue forecast of ¥12.01B was 22.0%, below the standard 25%.

【Earnings】Operating Income was ¥0.22B (down -46.4%), while Ordinary Income was ¥0.23B (down -44.5%). The gross profit margin declined to 25.8%, down 5.1pt from 30.9% in the prior year, while the SG&A ratio increased to 17.5%; consequently, the Operating Income margin contracted to 8.3% from 14.1% in the prior year. Net Income was ¥0.11B, with the high tax burden represented by an effective tax rate of 51.5% limiting the conversion of pre-tax earnings into net income. Extraordinary gains and losses were very small, consisting primarily of losses on the disposal of fixed assets and other items, and the gap between Ordinary Income and Net Income was mainly attributable to the tax burden. In conclusion, the Company reported declines in both revenue and earnings.

Segment Analysis

Although the disclosure of detailed segment-level Operating Income data is limited, Social Support and related businesses constitute the core business in terms of revenue composition. The sharp decline in revenue from existing customers and the deterioration in the gross profit margin resulting from upfront investments in large-scale projects drove the earnings decline in the current period. The Company states that negotiations with major customers to normalize pricing have largely reached agreement and expects profitability to recover from the second half onward. The Cybersecurity Business has not disclosed specific performance figures, and brand rebuilding through enhanced marketing is underway.

Key Financial Indicators

Profitability: ROE (annualized) 3.8%, Operating Income margin 8.3% (14.1% in the prior year)
Cash quality: No detailed disclosure of Operating Cash Flow data
Investment efficiency: No detailed disclosure of capital expenditures/depreciation
Financial soundness: Equity Ratio 88.8% (87.8% in the prior year), cash and deposits ¥10.49B

Cash Flow Analysis

As this report does not include detailed breakdowns from the statement of cash flows, the Company’s financial foundation appears to be extremely conservative based on its period-end cash and deposits balance of ¥10.49B and its high cash ratio relative to total assets (approximately 79%). This ample cash balance provides a structure that supports financial stability even amid short-term fluctuations in earnings.

Earnings Quality

Against Ordinary Income of ¥0.23B, Net Income was ¥0.11B. The primary reason for this gap was the high tax burden of ¥0.12B in income taxes and other taxes, resulting in an effective tax rate of 51.5%. Non-operating income and expenses were minor, totaling in the ¥0.01B range, and had a limited impact on Ordinary Income. Extraordinary gains and losses, including a loss on the disposal and sale of fixed assets of ¥0.00B, were also small, indicating that the impact of temporary factors was limited. Accordingly, the earnings decline in the current period was primarily attributable to deterioration in the gross profit margin in the core business and does not itself undermine earnings quality; however, the high tax burden suppressing the Net Income margin warrants attention.

Earnings Forecast and Guidance

The full-year forecast remains unchanged at Revenue of ¥12.01B (up +6.1% YoY) and Operating Income of ¥1.60B (up +6.7%). Q1 progress was 22.0% for Revenue and 13.7% for Operating Income, with Operating Income in particular falling 11.3pt below the standard progress level of 25%. The Company expects the gross profit margin to improve from the second half onward through agreement on pricing normalization negotiations, improved labor productivity through AI implementation, and site optimization, including the absorption-type merger of its Tohoku subsidiary. It also expects new projects for political parties, real estate companies, and government agencies to contribute to revenue from Q2 onward.

Shareholder Returns

The full-year dividend forecast is ¥38.0 per share, resulting in a Payout Ratio of 42.5% based on the full-year EPS forecast of ¥89.36. There has been no disclosure regarding share buybacks, and shareholder returns are evaluated solely on the basis of dividends. The ample internal reserves represented by cash and deposits of ¥10.49B provide the financial capacity to support continued dividend payments even amid fluctuations in earnings during the current period.

Catalysts

【Short term】The effects of implementing the agreement reached in negotiations with major customers to normalize pricing, as well as the start of revenue contributions from the SNS risk detection service for political parties, developed in collaboration with PoliPoli, and projects related to real estate and government agencies, will be key areas of focus from Q2 onward.

【Long term】The rollout of automation and labor-saving services by the AI promotion division, with 3 services planned during the current fiscal year, and the site optimization effects from the absorption-type merger of E Guardian Tohoku are expected to serve as medium-term catalysts for improved profitability.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (healthcare)

Profitability and Returns

As median data have not been prepared, the Company’s relative positioning within the industry cannot be determined.

Growth and Capital Efficiency

As median data have not been prepared, the Company’s relative positioning within the industry cannot be determined.

Source: Compiled by the Company

Risk Factors

1. Risk of declining revenue from existing customers: A sharp decline in revenue from existing customers materialized in Q1, resulting in a 9.1% YoY decline in Revenue. If similar customer trends continue, the achievement of the full-year plan may be affected.

2. Risk of delayed profitability recovery: The full-year progress rate for Operating Income was 13.7%, significantly below the standard 25%. If the improvement in the gross profit margin during the second half, through pricing normalization and the effects of AI implementation, does not proceed as planned, achieving the full-year earnings growth plan may become difficult.

3. Pressure on Net Income due to the high tax burden: The effective tax rate is high at 51.5% and could constrain the pace of recovery in Net Income and ROE even if pre-tax earnings recover.

Key Points from the Earnings Results

1. The earnings decline in the current period was primarily due to deterioration in the gross profit margin (30.9% in the prior year → 25.8%). Management cites the agreement reached in negotiations to normalize pricing for existing customers and productivity improvements through AI implementation as the basis for improvement in the second half. Trends in the gross profit margin from the second half onward will be key to achieving the plan.

2. The conservative financial structure, with an Equity Ratio of 88.8% and cash and deposits of ¥10.49B, demonstrates financial resilience during periods of business volatility. At the same time, annualized ROE of 3.8% is at a level with room for improvement in terms of capital efficiency.

3. The Company indicates that new projects for political parties, real estate companies, and government agencies are progressing from Q2 onward. The extent to which structural changes in the existing business, including the shift toward AI-BPO, are reflected in the revenue and earnings mix will be an area to monitor going forward.

Theoretical Share Price (Reference Value)

Sensitivity: ¥972–¥1,028 at ±1% for the cost of equity, and ¥999–¥1,000 at ±0.1 for ω.

Notes:

• As forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the quarter-end are used; there is a timing difference relative to the full-year forecast.
• As net assets include non-controlling interests, the theoretical value may be calculated at a somewhat higher level.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; it is not a forecast of the market share price or a recommendation of any specific investment action, nor does it predict or guarantee future share prices)

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This report is an earnings analysis document automatically generated through AI-integrated analysis of XBRL earnings summary data and PDF earnings presentation materials. 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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