J-LEASE CO.,LTD. FY2026 FY Earnings Report

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Executive Summary

For the fiscal year ended March 2026, Revenue was ¥215.7B (YoY +¥43.0B +24.9%), Operating Income was ¥36.2B (YoY +¥5.2B +16.8%), Ordinary Income was ¥35.9B (YoY +¥4.9B +15.9%), and Net Income attributable to owners of the parent was ¥25.8B (YoY +¥3.2B +14.3%), achieving double-digit revenue and profit growth across all stages. Expansion of guarantee-related businesses and contributions from three newly consolidated subsidiaries drove Revenue, while increased goodwill amortization (¥2.2B, prior ¥0.6B) and higher SG&A (¥109.9B, prior ¥85.9B) reduced the Operating Margin to 16.8% (prior 18.0%, -120bp). Non-operating items were minor; although interest expense increased to ¥0.6B (prior ¥0.3B), Ordinary Income also recorded growth. Extraordinary items were slightly negative (including impairment losses ¥0.2B), and after income taxes of ¥11.2B (effective tax rate 31.1%), Net Income rose 14.3%, resulting in a solid finish.

Drivers of Performance

[Revenue] Revenue of ¥215.7B (YoY +¥43.0B +24.9%) was driven by growth in the core guarantee-related business and expansion of the consolidated scope. By segment, the guarantee-related business recorded ¥193.2B (+26.7%), accounting for 89.6% of Revenue, with expansion of credit supplementation for real estate lease contracts and rent-guarantee services contributing. The Real Estate-related Business grew significantly to ¥6.9B (+130.4%) as outsourced rental management increased. The IT-related Business declined to ¥15.3B (-17.4%), with sales of environmental inspection systems and similar products below prior year. Other segments (soccer team operation, integrated advertising) recorded ¥3.2B due to new consolidation. Gross Profit was ¥146.1B (gross margin 67.7%, prior 67.7%), remaining almost flat.

[Profitability] Operating Income of ¥36.2B (+16.8%) increased with Revenue, but Operating Margin declined due to higher SG&A. SG&A of ¥109.9B (prior ¥85.9B, +28.0%) was driven by increased goodwill amortization of ¥2.2B (prior ¥0.6B, +247.2%), expanded personnel costs, and IT investment. Operating Margin was 16.8% (prior 18.0%, -120bp) as SG&A growth outpaced Revenue growth, compressing profitability. Ordinary Income was ¥35.9B (+15.9%) with minor non-operating income of ¥0.5B (interest income ¥0.1B, dividend income ¥0.0B, etc.) and non-operating expenses of ¥0.8B (interest expense ¥0.6B, etc.), resulting in a similar growth rate to the operating stage. Ordinary Income Margin was 16.6% (prior 17.9%, -130bp). Pre-tax Income was ¥35.9B (+17.1%); after corporate taxes of ¥11.2B (effective tax rate 31.1%, prior 31.8%), Net Income attributable to owners of the parent was ¥25.8B (+14.3%). Net Margin was 12.0% (prior 13.1%, -110bp) but in absolute terms profits increased. In conclusion, growth was driven by the guarantee-related business and expansion of the consolidated scope through M&A.

Segment Analysis

The core guarantee-related business posted Revenue of ¥193.2B (+26.7%), Operating Income of ¥35.4B (+7.9%), and Operating Margin of 18.3% (prior 21.5%, -320bp); while Revenue expanded, margins declined. Dependency is high with a Revenue mix of 89.6%, and growth was driven by capturing credit supplementation demand for real estate lease contracts. The IT-related business recorded Revenue of ¥15.3B (-17.4%) but turned profitable with Operating Income of ¥0.9B (+199.5%), improving Operating Margin to 6.1% (prior 1.7%, +440bp). The Real Estate-related business achieved Revenue of ¥6.9B (+130.4%), Operating Income ¥0.1B (+130.9%), and Operating Margin 1.7% (prior -13.1%, +1,480bp), becoming profitable due to expanded rental management outsourcing. Other segments recorded Revenue ¥3.2B (material increase from near-zero prior), Operating Loss ¥0.0B, reflecting new consolidation of soccer team operations and integrated advertising. Of consolidated Operating Income ¥36.2B after intersegment adjustments, the guarantee-related business accounted for 97.8%, indicating an extremely high concentration in the business portfolio.

Key Financial Metrics

[Profitability] Operating Margin 16.8% (prior 18.0%, -120bp) and Net Margin 12.0% (prior 13.1%, -110bp) declined. EBITDA margin is 18.8% (Operating Income ¥36.2B + Depreciation ¥2.2B + Goodwill Amortization ¥2.2B = ¥40.6B / Revenue ¥215.7B), down -80bp from prior year 19.6%. ROE is 34.9% (prior 39.6%, -470bp) — very high but trending down due to lower Net Margin and increased equity. ROA is 19.0% (prior 22.8%, -380bp) also declined. [Cash Quality] Operating Cash Flow (OCF) was ¥9.4B, which is only 0.36x of Net Income ¥25.8B; increases in corporate tax payments (¥15.6B) and accounts receivable (¥7.1B) pressured cash. Free Cash Flow (FCF) was -¥6.4B (OCF ¥9.4B - Investing CF ¥15.8B), negative due to upfront capital expenditures ¥8.7B and M&A-related investments. OCF/EBITDA was 0.23x, indicating low cash conversion efficiency. [Investment Efficiency] Total Asset Turnover was 0.97x (prior 1.10x), impacted by asset expansion from M&A (Total Assets ¥221.4B, prior ¥156.4B). [Financial Soundness] Equity Ratio was 33.4% (prior 37.8%, -440bp) and has decreased, but Debt/EBITDA is 1.30x (Net interest-bearing debt ¥22.6B = short-term borrowings ¥26.6B + long-term borrowings ¥23.4B - cash ¥27.4B / EBITDA), and Interest Coverage is 57.5x (EBITDA ¥40.6B / interest expense ¥0.6B), indicating maintained soundness. Current Ratio 123.2% and Quick Ratio 122.5% secure minimum short-term liquidity, but increased short-term borrowings raise dependence on short-term liabilities.

Cash Flow Analysis

OCF was ¥9.4B (prior ¥20.6B, -54.4%), a significant decline. From OCF subtotal ¥25.6B (prior ¥30.9B), increased corporate tax payments ¥15.6B (prior ¥10.0B), increase in accounts receivable ¥7.1B (prior ¥4.0B), and inventory increase ¥1.9B (prior ¥0.6B) pressured funds, while increases in advance receipts ¥5.4B (prior ¥3.0B) and allowance for doubtful accounts ¥10.1B (prior ¥4.3B) contributed positively. Investing CF was -¥15.8B (prior -¥12.8B), driven by capital expenditures ¥8.7B (prior ¥3.0B), acquisition of subsidiary shares ¥8.3B, and intangible asset acquisitions ¥1.4B (prior ¥2.1B). FCF was -¥6.4B (prior ¥7.7B), turning negative. Financing CF was ¥10.3B (prior ¥1.4B), funded by net increase in short-term borrowings ¥15.4B (prior -¥1.6B) and long-term borrowings procured ¥18.0B (prior ¥12.7B), while repaying long-term borrowings ¥12.4B (prior ¥1.2B), paying dividends ¥8.6B (prior ¥8.0B), and repurchasing treasury stock ¥1.4B (prior ¥0.0B). Cash and cash equivalents at period-end were ¥27.4B (period-begin ¥23.5B, +¥3.9B), indicating external funding secured during an investment-leading phase. The fact that OCF was far below Net Income is a note on earnings quality; normalization of working capital and transition to an investment recovery phase are future challenges.

Earnings Quality

Earnings quality is generally high; profits at the ordinary income stage account for the bulk of Net Income. Extraordinary items were negligible (impairment loss ¥0.2B, valuation losses on investment securities ¥0.1B, gains on sale of fixed assets ¥0.0B), indicating limited impact from one-off items. Non-operating income ¥0.5B (interest income ¥0.1B, other ¥0.2B) and non-operating expenses ¥0.8B (interest expense ¥0.6B, other ¥0.1B) are below 0.3% of Revenue, so operating results represent core earnings. Goodwill amortization under JGAAP of ¥2.2B (prior ¥0.6B) compresses Net Income; pre-goodwill-amortization EBITDA (Operating Income ¥36.2B + Goodwill Amortization ¥2.2B + Depreciation ¥2.2B = ¥40.6B) yields an EBITDA margin of 18.8%, indicating higher core earning power. However, OCF is only 0.36x of Net Income and the accrual ratio ((Net Income ¥25.8B - OCF ¥9.4B) / Total Assets ¥221.4B = 7.4%) is somewhat high, highlighting cash conversion issues. Comprehensive Income ¥24.7B approximates Net Income ¥25.8B, with minimal impact from Other Comprehensive Income such as valuation differences on securities. Profit sustainability is high, but weak OCF and continued goodwill amortization warrant attention regarding earnings quality.

Forecasts & Guidance

Full year guidance is Revenue ¥248.6B (YoY +15.2%), Operating Income ¥38.6B (YoY +6.4%), Ordinary Income ¥38.2B (YoY +6.5%), Net Income attributable to owners of the parent ¥25.2B (YoY -0.1%), EPS ¥141.44, and dividend ¥30. Progress against year-end results: Revenue 86.8%, Operating Income 93.8%, Ordinary Income 94.0%, Net Income 102.2%, EPS 97.5%, indicating results largely in line with or slightly above plan on profit stages. Revenue progress is slightly lower, but SG&A control and low interest burden supported profit progress. Net Income slightly exceeded the full-year forecast; against a plan of marginal YoY decline, actuals rose +14.3%. In addition to the year-end dividend forecast of ¥30, an interim dividend of ¥25 was paid for an annual dividend of ¥55, maintaining a payout ratio of 38.4% (dividend ¥55 / EPS ¥137.93) and a stable return policy. Compared to the full-year forecast, the actual Operating Margin is 16.8% versus forecast 15.5% (forecast Operating Income ¥38.6B / forecast Revenue ¥248.6B), indicating current profitability is outpacing expectations.

Shareholder Returns

Dividends are ¥55 per year (interim ¥25, year-end ¥30), with a payout ratio of 38.4% (dividend ¥55 / EPS ¥137.93), within a reasonable range. The dividend was doubled from prior year ¥22.5, highlighting a clear uptrend. Share buybacks of ¥1.4B were executed, making total return amount dividend ¥8.6B + buybacks ¥1.4B = ¥10.0B, resulting in a Total Return Ratio of 38.8% (total return ¥10.0B / Net Income ¥25.8B). While the payout ratio is at a sustainable level, FCF is -¥6.4B (negative), meaning dividends and buybacks were funded by external financing (net borrowings increase ¥10.3B). With cash and deposits ¥27.4B vs. short-term borrowings ¥26.6B, dependence on short-term liabilities is high; medium-term dividend sustainability depends on recovery of OCF and a slowdown in investment burden. Dividend policy appears to prioritize growth investment while aiming for stable dividends around a 40% payout ratio.

Risk Factors

1. Business concentration risk: The guarantee-related business accounts for 89.6% of Revenue and 97.8% of Operating Income, indicating extremely high dependency on a single business. A downturn in the real estate market, a decrease in lease contract volumes, or an increase in rent delinquencies could raise guarantee fulfillment costs and reduce earnings. Allowance for doubtful accounts increased by ¥10.1B this period, suggesting that in a recessionary scenario credit costs could further increase and pressure profits.

2. Short-term liability dependence and refinancing risk: Short-term borrowings increased significantly to ¥26.6B (prior ¥11.0B, +141.8%), and short-term liabilities account for 53.0% of total liabilities, a high level. Although Current Ratio is 123.2% providing minimum safety, in a rising interest rate environment or widening credit spreads refinancing costs could rise, increasing financial expenses and pressuring liquidity. With OCF weak at ¥9.4B, maturity management of short-term debt is reliant on external funding.

3. Goodwill impairment risk: Goodwill balance is ¥21.1B (28.6% of equity), reflecting expanded M&A-related intangible assets. If future business conditions deteriorate or integration is delayed and expected returns are not achieved, impairment losses may occur, eroding equity and earnings. Annual goodwill amortization of ¥2.2B is a recurring profit-reducing factor, making monitoring the profitability of acquired businesses important.

Industry Benchmark (Reference — Company Data)

Profitability & Returns

The company's profitability substantially exceeds the industry median, driven by high profitability in the guarantee-related business.

Growth & Capital Efficiency

Revenue growth is outstanding within the industry, driven by M&A and expansion of the guarantee-related business.

※ Source: Company aggregation

Key Points from the Financial Results

1. While double-digit Revenue growth was achieved through expansion of the guarantee-related business and new consolidations, Operating Margin fell by 120bp due to goodwill amortization and higher SG&A. Going forward, realization of synergies and leveraging fixed costs will be key to margin recovery. On an EBITDA basis the margin remains high at 18.8%, indicating resilient core earnings excluding goodwill amortization.

2. OCF is only 0.36x of Net Income, with increased corporate tax payments and working capital movements weakening cash conversion efficiency. FCF was -¥6.4B, negative due to upfront capital expenditures and M&A investments. Short-term borrowings increased to ¥26.6B, raising short-term liability dependence; recovery of OCF and transition to long-term funding are prerequisites for sustainable growth and shareholder returns.

3. ROE remains very high at 34.9%, reflecting leverage-enhanced profitability, while Debt/EBITDA of 1.30x and Interest Coverage of 57.5x indicate sound financial health. With a payout ratio of 38.4% the company continues a dividend-uptrend, balancing growth investment and shareholder returns. Operating Income and Ordinary Income are at approximately 94% progress toward full-year forecasts, and growth scenarios going forward include deeper market penetration of the guarantee-related business and monetization of Real Estate and IT-related businesses.

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This report is an earnings analysis document automatically generated by AI based on XBRL financial statement data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information aggregated by our firm based on public financial statements. Investment decisions are your responsibility; please consult a professional as necessary before making any investment choices.