名南Ｍ＆Ａ (7076) FY2026 Q1 Earnings Report

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Executive Summary

During the quarter, the closing and revenue recognition of M&A advisory engagements remained sluggish, resulting in a substantial expansion of losses from the deficit recorded in the same period of the previous year. Revenue was ¥1.6B (down 35.3% year on year), Operating Income was ¥-1.7B (deteriorating from ¥-0.7B in the previous year), Ordinary Income was ¥-1.8B (deteriorating from ¥-0.7B), and Net Income attributable to owners of the parent was ¥-1.7B (deteriorating from ¥-0.5B). The rapid emergence of fixed-cost burdens due to an increase in SG&A expenses amid declining revenue, together with the shift into a gross-loss position, was the defining feature of the current fiscal period.

Factors Driving Earnings Changes

【Revenue】Revenue was ¥1.6B, down 35.3% year on year. The Company operates in a single M&A advisory segment, and its business model is highly dependent on the timing of engagement closings and transaction completions; consequently, quarterly revenue is strongly affected by the timing of engagement recognition. Progress against the full-year Company forecast of ¥2065B was only 7.9%, significantly below the standard Q1 progress rate of 25%.

【Profit and Loss】Cost of sales was ¥1.8B, exceeding Revenue, resulting in a gross loss of ¥-0.2B (gross margin of -12.1%). SG&A expenses were ¥1.5B, up 23.9% year on year, and the increase in fixed costs amid declining revenue expanded the operating loss. Operating Income deteriorated to ¥-1.7B (¥-0.7B in the previous year), while the Operating Margin deteriorated to -105.5% (-26.6% in the previous year). Ordinary Income was ¥-1.8B and Net Income was ¥-1.7B. The impact of non-operating and extraordinary gains and losses was limited, with the primary cause of the expanded loss being deterioration in the profitability of the core business. In conclusion, this represented a decline in both revenue and earnings.

Segment Analysis

The Company operates in a single M&A advisory business segment and does not disclose a segment-level breakdown.

Key Financial Indicators

【Profitability】The Operating Margin was -105.5%, the Net Profit Margin was -102.5%, and the gross margin was -12.1%, all substantially negative, as increased cost and SG&A burdens amid declining revenue weighed on profitability.【Cash Quality】Non-operating income was a negligible ¥0.0B, and earnings were determined by the profitability of the core business, with no dependence on non-operating income. Income taxes and other taxes resulted in an excess refund of ¥0.1B, partially mitigating the loss before tax.【Investment Efficiency】Annualized ROE was -41.7%, while the total asset turnover ratio remained low, indicating that the Company is unable to monetize its capital effectively.【Financial Soundness】The Equity Ratio was extremely high at 90.0%, and liquidity was ample, with current assets of ¥10.8B versus current liabilities of ¥1.8B. Cash and deposits were ¥9.5B, representing 53.6% of total assets, indicating strong short-term financial resilience.

Cash Flow Analysis

Although the cash flow statement is not disclosed separately, cash trends can be confirmed from changes in the balance sheet. Cash and deposits remained broadly flat, at ¥9.5B in the current period compared with slightly less than ¥9.5B in the same period of the previous year, and no significant cash outflow was observed despite the recording of a net loss. Accounts payable declined from ¥0.4B to ¥0.2B, while total liabilities also decreased 28.0% year on year, indicating progress in reducing payment-side obligations. Retained earnings decreased 15.3% year on year, and the fact that the recorded loss is reducing net assets through retained earnings warrants attention regarding future financial flexibility.

Quality of Earnings

The loss for the current period was not attributable to non-operating or extraordinary gains and losses, but rather to recurring factors consisting of the core business shifting into a gross-loss position and an increase in SG&A expenses. Non-operating income was ¥0.0B, and non-operating expenses were also ¥0.0B, both negligible; the difference between Ordinary Income and Net Income was limited to the ¥0.1B excess refund of income taxes and other taxes. No extraordinary gains or losses were recorded, and comprehensive income of ¥-1.7B was broadly consistent with Net Income of ¥-1.7B, with no divergence arising from other comprehensive income. Accordingly, the quality of the loss for the current period is not attributable to “temporary factors,” but can be assessed as a structural result directly reflecting operating conditions in the business, namely a decline in the number of engagements closed.

Earnings Forecast and Guidance

The full-year Company forecast calls for Revenue of ¥20.6B (up 38.8% year on year), Operating Income of ¥2.1B, Ordinary Income of ¥2.1B, and forecast EPS of ¥43.26. Revenue progress in Q1 was 7.9%, while the Company had already recorded a loss of ¥1.7B in Operating Income; achieving the full-year forecast will therefore require additional Revenue of approximately ¥19.0B and Operating Income of approximately ¥3.8B from Q2 onward. M&A advisory businesses are susceptible to quarterly earnings fluctuations due to the uneven timing of engagement closings, and low progress does not immediately imply failure to achieve the full-year forecast. However, given that gross-margin deterioration and increased SG&A expenses are occurring simultaneously, the recovery of the earnings structure over the remaining 3 quarters will be the key focus in assessing future progress.

Shareholder Returns

The full-year Company forecast for the dividend per share is ¥8.65, while forecast EPS is ¥43.26, resulting in a forecast Payout Ratio of 20.0% when dividends alone are used as the numerator. This is below the general sustainability benchmark of 60%. However, the Company recorded a net loss per share of ¥37.86 in Q1, meaning that the feasibility of the full-year dividend depends on the extent to which the profit plan is achieved over the remaining 3 quarters. No data are available regarding share repurchases; therefore, the Payout Ratio presented here is based solely on dividends and is not the Total Return Ratio.

Risk Factors

1. Engagement Closing Dependence Risk: The M&A advisory business is highly dependent on the timing of engagement closings and transaction completions. Q1 Revenue declined 35.3% year on year, while progress against the full-year forecast was only 7.9%. Delays or cancellations of engagements could materially affect quarterly earnings.

2. Cost and Fixed-Cost Absorption Risk: A cost-of-sales ratio of 112.1% resulted in a gross loss, while SG&A expenses increased 23.9% year on year even as Revenue declined, resulting in negative operating leverage. The extent to which contribution profit can improve when Revenue recovers will be a key focus.

3. Retained Earnings Decline Risk: Retained earnings decreased 15.3% year on year due to the net loss of ¥1.7B. Although the Equity Ratio is a robust 90.0% and financial capacity is ample, continued losses could affect both capital efficiency and the capacity for shareholder returns.

Industry Benchmark (For Reference; Company Analysis)

Profitability and Returns

Because industry median data have not been prepared, direct comparison is not possible; however, the Company’s margin levels are substantially negative in absolute terms.

Growth and Capital Efficiency

Similarly, comparison with the median is limited, but the Company recorded a substantial year-on-year decline in Revenue.

※Source: Company analysis

Key Points from the Financial Results

1. In Q1, the decline in Revenue, shift into a gross-loss position, and increase in SG&A expenses coincided, causing the operating loss to widen by ¥1.05B year on year. Revenue progress against the full-year forecast was 7.9%, substantially below the standard level, making the status of engagement recognition from Q2 onward the focus of earnings evaluation.

2. The financial foundation remained conservatively maintained despite the recorded loss, as evidenced by cash and deposits of ¥9.5B, an Equity Ratio of 90.0%, and a 28.0% year-on-year decline in total liabilities. The key point to monitor going forward is not financial soundness, but the recovery capacity of the earnings structure.

3. The forecast Payout Ratio is set at a low level of 20.0%, but Q1 recorded a net loss per share of ¥37.86; the feasibility of the dividend will be linked to progress against the full-year profit plan.

Theoretical Share Price (Reference Value)

Sensitivity: ¥469–¥497 at ±1% for the Cost of Equity, and ¥482–¥483 at ±0.1 for ω.

Notes:

• As forecast ROE is below the Cost of Equity, the theoretical value is below Net Assets per Share.
• 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 above the appropriate level.

(Calculation model: Residual Income Model (Ohlson type; explicit 5-year fade) / Interest rate reference month: 2026-08 / Mechanically calculated value based solely on publicly disclosed data; this is neither a forecast of the market share price nor a recommendation of any specific investment action, and it does not forecast 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 flash report data. It does not recommend investment in any specific securities. 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 a professional as necessary.

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