| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥31.7B | ¥57.0B | -44.3% |
| Operating Income / Operating Profit | ¥6.5B | ¥24.5B | -73.6% |
| Ordinary Income | ¥6.2B | ¥24.5B | -74.7% |
| Net Income / Net Profit | ¥5.0B | ¥24.0B | -79.3% |
| ROE | 4.2% | 20.2% | - |
FY2026 Q2 cumulative results: Revenue ¥31.7B (YoY -¥25.3B, -44.3%), Operating Income ¥6.5B (YoY -¥18.0B, -73.6%), Ordinary Income ¥6.2B (YoY -¥18.3B, -74.7%), Quarterly Net Income attributable to owners of parent ¥1.8B (YoY +¥0.6B, +48.8%). The substantial decline in revenue and profit for the first time in two periods was driven by the absence of recognition timing for large Investment (Fund) deals. However, at the bottom-line stage, the amount attributable to the parent increased versus the prior year due to a decrease in non-controlling interests. Consulting Business revenue expanded steadily at +21.2%, and the revenue mix shifted toward that business. While a high operating margin of 20.4% (prior year 43.0%) was maintained, it narrowed by 22.6pt from the prior year due to timing of high-margin deal recognition.
[Revenue] Revenue ¥31.7B (-44.3%) was mainly due to the timing drop-off in success fees and exit deals in the Investment Business. That segment's revenue was ¥7.0B (-80.9%), down significantly from ¥36.6B the prior year, and its revenue mix share fell to 22.1% (prior year 64.2%). Conversely, the Consulting Business expanded steadily to ¥24.7B (+21.2%), becoming the core with a 77.9% share (prior year 35.8%). The portfolio shift between segments increases top-line volatility, but a higher proportion of recurring Consulting revenue contributes to improved medium-term stability. Cost of sales was ¥16.4B yielding a gross margin of 48.3% (prior year 66.5%), a 17.2pt contraction; gross profit in absolute terms was ¥15.3B, down from ¥37.9B a year earlier.
[Profitability] Operating Income ¥6.5B (-73.6%) was mainly driven by a sharp decline in Investment Business operating profit of ¥5.4B (-81.3%, margin 77.5%). The Consulting Business turned profitable and expanded to Operating Income ¥1.0B (+122.8%, margin 4.2%), but consolidated operating margin fell to 20.4% (prior year 43.0%). SG&A ¥8.9B (27.9% of Revenue) declined from ¥13.4B the prior year but retains relatively high fixed-cost characteristics versus the revenue decline, causing operating leverage to move inversely. Ordinary Income ¥6.2B (-74.7%) was almost unchanged from operating income as non-operating items were minor (interest income ¥0.1B, interest expense ¥0.05B). Quarterly Net Income attributable to owners of parent ¥1.8B (+48.8%) results from pre-tax profit ¥6.2B (-74.6%), less income taxes ¥1.3B (effective tax rate 20.8%) and Net Income attributable to non-controlling interests ¥3.1B (prior year ¥22.7B); the large reduction in non-controlling interest increased the amount attributable to the parent. In conclusion, the company experienced a decrease in revenue and profit, but at the final profit stage, attributable profit rose due to reduced allocation to non-controlling interests.
The Consulting Business reported Revenue ¥24.7B (+21.2%), Operating Income ¥1.0B (+122.8%), margin 4.2% (prior year 2.3%). It turned from operating loss of ¥4.6B the prior year to profit, supported by project expansion and productivity improvements. The Investment Business recorded Revenue ¥7.0B (-80.9%), Operating Income ¥5.4B (-81.3%), margin 77.5% (prior year 79.5%). Both revenue and profit fell substantially due to the absence of the prior year's large exit recognition, but the high-margin structure was preserved. Operating profit contribution remains led by Investment at ¥5.4B (share 83.8%), but revenue composition has inverted with Consulting at 77.9%, revealing a trade-off between improved revenue stability and margin profile.
[Profitability] Operating margin 20.4% (prior year 43.0%), Net margin 15.6% (prior year 42.1%)—both materially down from the prior year but remain in double digits. ROE 4.2% (annualized) improved from the low level in the prior period but remains depressed due to drop-off in high-margin deal recognition. EBITDA margin 21.6% (EBITDA ¥6.8B = Operating Income ¥6.5B + Depreciation ¥0.4B) remains high but contracted from the prior year.
[Cash Quality] Operating Cash Flow (OCF) ¥4.7B equals 0.9x Net Income ¥5.0B, indicating high quality, but OCF/EBITDA is 0.68x, showing slower cash conversion. Subtotal OCF ¥7.8B less working capital changes and taxes paid ¥3.1B; accounts receivable collection progress contributed +¥0.8B. DSO 62 days (Accounts receivable ¥5.4B ÷ daily sales ¥0.018B × 180 days) lengthened slightly.
[Investment Efficiency] Total asset turnover 0.23x (annualized 0.46x) remains low. CAPEX ¥0.3B is below depreciation ¥0.4B, CAPEX/Depreciation 0.86x. Goodwill ¥2.0B (1.4% of total assets), Goodwill/EBITDA 0.29x—low, indicating limited impairment risk.
[Financial Soundness] Equity Ratio 85.2% (prior year 82.4%), current ratio 941.9%, D/E ratio 0.17x (interest-bearing debt ¥6.7B ÷ net assets ¥118.0B) show an extremely conservative balance sheet. Cash ¥56.7B vs interest-bearing debt ¥6.7B yields net cash ¥50.0B. Debt/EBITDA 0.65x, Interest Coverage 148x (Operating Income ¥6.5B ÷ interest expense ¥0.05B) indicate top-tier financial resilience.
Operating Cash Flow ¥4.7B (prior year ¥19.2B, -75.6%) remains high quality at 0.9x Net Income ¥5.0B but declined significantly year-on-year. From subtotal OCF ¥7.8B, accounts receivable decrease +¥0.8B contributed positively, while decrease in accrued expenses -¥0.9B and taxes paid ¥3.1B were cash outflows. Investing Cash Flow ¥0.3B (prior year -¥2.1B) comprised CAPEX ¥0.3B and purchase of investment securities ¥0.03B. Financing Cash Flow -¥6.7B (prior year -¥14.0B) included long-term debt repayments ¥1.1B, payments to non-controlling interests ¥0.7B, and capital contributions from non-controlling interests ¥1.6B. Free Cash Flow ¥4.9B (OCF ¥4.7B + Investing CF ¥0.3B) remained positive, supporting internal reserves for growth investment. Ending cash balance ¥56.7B (opening ¥58.4B, -¥1.8B) stayed high after taxes and debt repayments were largely absorbed by operating cash flow. OCF/EBITDA 0.68x declined from above 1.0x the prior year, impacted by working capital timing and tax payments.
Recurring earnings are composed of Operating Income ¥6.5B and interest income ¥0.1B; non-operating income ¥0.1B (0.3% of Revenue) is minor. Special gains ¥0.04B (reversal of stock acquisition rights) are non-recurring and limited. Non-operating expenses ¥0.3B (including interest expense ¥0.05B) are also minor, so Ordinary Income ¥6.2B is almost unchanged from operating stage. Pre-tax profit ¥6.2B less income taxes ¥1.3B (effective tax rate 20.8%) yields Net Income ¥5.0B, of which Net Income attributable to non-controlling interests ¥3.1B (62.9% of Net Income) is large, diluting Net Income attributable to owners of parent to ¥1.8B (36.9% of Net Income). Accrual ratio -2.0% (=(Net Income ¥5.0B - OCF ¥4.7B) ÷ Total Assets ¥138.6B) is low, indicating limited reliance on accounting estimates and good earnings quality. While OCF roughly exceeds Net Income, OCF/EBITDA 0.68x suggests room to improve cash conversion efficiency. Comprehensive income ¥4.6B (Net Income ¥5.0B - Other comprehensive income ¥0.3B) is close to Net Income with minor divergence.
No dividend for Q2 (Payout Ratio 0%). The prior-year period also had no dividend; shareholder returns are deferred for the time being. Although Free Cash Flow ¥4.9B positive, cash ¥56.7B and net cash ¥50.0B indicate ample financial flexibility, the company appears to prioritize improving full-year certainty and stabilizing cash conversion given revenue volatility from Investment deal timing. Payout Ratio 0% is low, but the company is in a phase prioritizing internal retention for growth investment and working capital; scope to initiate returns in the medium term is high.
Investment Business deal closing / exit timing risk: Revenue ¥7.0B (-80.9%), Operating Income ¥5.4B (-81.3%) fell sharply due to absence of prior-year large exit recognition. Success fees and exit revenues depend on deal close timing, causing large quarter-to-quarter volatility. Limited deal recognition this period means pipeline execution in the second half will materially affect consolidated results. Performance of portfolio companies, market conditions, and M&A environment can affect revenue recognition timing, reducing predictability.
Profit allocation structure risk due to Net Income attributable to non-controlling interests: Net Income attributable to non-controlling interests ¥3.1B (62.9% of Net Income) is large, diluting Net Income attributable to owners of parent to ¥1.8B (36.9%). Non-controlling interests ¥47.4B (40.2% of net assets) are high, and the consolidated subsidiary profit allocation structure suppresses returns to parent shareholders. If future subsidiary profit growth is largely allocated to non-controlling interests, upside to ROE and EPS will be limited. Capital policy and ownership ratio adjustments are key to enhancing parent shareholder value.
Working capital and cash conversion slowdown risk: OCF/EBITDA 0.68x declined from above 1.0x the prior year. DSO 62 days and longer receivables collection indicate room to improve working capital efficiency. Decrease in accrued expenses ¥0.9B and taxes paid ¥3.1B were cash outflows this period; while OCF ¥4.7B (-75.6%) remains high quality relative to Net Income, it fell substantially year-on-year. Shortening collection period for receivables ¥5.4B and improving working capital management are essential to stabilize cash generation.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 20.4% | 14.0% (3.8%–18.5%) | +6.5pt |
| Net Margin | 15.6% | 9.2% (1.1%–14.0%) | +6.4pt |
Profitability exceeds the industry median, maintaining a high-margin structure.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -44.3% | 21.0% (15.5%–26.8%) | -65.3pt |
Growth rate is well below the industry median, reflecting a temporary slowdown due to Investment deal timing.
※ Source: Company compilation
Progress of the Investment Business deal pipeline is key to performance recovery. Revenue and profit fell sharply due to the absence of the prior year’s large exit recognition, but the high-margin structure (77.5%) remains. Deal closings in the second half will determine consolidated performance, making improved pipeline visibility a prerequisite for investment decisions. Growth in Consulting revenue (+21.2%) and its turnaround to profitability (Operating Income ¥1.0B) shifted the revenue mix toward Consulting and relatively improved top-line stability.
Allocation of Net Income attributable to non-controlling interests suppresses parent shareholder value. Of Net Income ¥5.0B, Net Income attributable to non-controlling interests ¥3.1B (62.9%) vs Net Income attributable to owners of parent ¥1.8B (36.9%) shows a significant skew in profit allocation, limiting upside to ROE 4.2% and EPS ¥16.80. High non-controlling interests ¥47.4B (40.2% of net assets) are structural; revising capital policy or ownership ratios could drive parent shareholder value.
Cash conversion efficiency and DSO improvement will determine sustainability of earnings quality. OCF/EBITDA 0.68x and DSO 62 days show deterioration versus the prior year; improving working capital management and collection efficiency is a priority. Cash ¥56.7B and net cash ¥50.0B provide substantial financial flexibility for growth investment and shareholder returns. Although dividends are currently suspended, there is adequate scope to start returns once results stabilize and full-year visibility improves.
This report is an AI-generated financial analysis document produced by analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are company-compiled reference information based on public financial statements. Investment decisions are your responsibility; consult advisors as needed.