| Metric | Current Period | Same Period Previous Year | YoY |
|---|---|---|---|
| Revenue | ¥5.80B | ¥4.71B | +23.0% |
| Operating Income | ¥0.90B | ¥0.97B | -7.4% |
| Ordinary Income | ¥0.89B | ¥0.96B | -7.1% |
| Net Income | ¥0.53B | ¥0.66B | -21.0% |
| ROE | 7.1% | 9.0% | - |
The quarter saw an increase in revenue but a decline in profit, with growth in the top line offset by higher expenses and a heavier tax burden. Revenue rose significantly to ¥5.80B (¥4.71B in the same period of the previous year, YoY +23.0%), while Operating Income declined to ¥0.90B (-7.4%), Ordinary Income to ¥0.89B (-7.1%), and Net Income to ¥0.53B (-21.0%), with the decline becoming more pronounced at the lower levels of the income statement. Expansion of the core guarantee-related business drove revenue growth, while an increase in the SG&A ratio and a high effective tax rate pressured profit.
【Revenue】Revenue increased significantly to ¥5.80B, up +23.0% year on year. The guarantee-related business drove overall growth, with revenue of ¥5.45B (+27.1%, 92.6% of total revenue), while the IT-related business declined to ¥0.27B (-7.9%) and the real estate-related business to ¥0.06B (-59.5%), indicating a narrowing contribution from non-core businesses.
【Profit and Loss】Operating Income declined to ¥0.90B (-7.4%), while Ordinary Income declined to ¥0.89B (-7.1%). The gross margin was 68.6%, broadly unchanged from the previous year (-0.6pt), but the SG&A ratio rose +4.6pt to 53.1%. The primary factor pressuring margins was that expense growth (+34.7%) exceeded revenue growth (+23.0%). In addition, the effective tax rate remained high at 40.7%, resulting in Net Income declining to ¥0.53B (-21.0%), a greater decrease than that of Ordinary Income. By segment, the guarantee-related business generated Operating Income of ¥0.95B, while the IT-related, real estate-related, and other businesses all recorded operating losses, supporting the pattern of increased revenue but lower profit. In conclusion, the quarter saw an increase in revenue but a decline in profit.
The guarantee-related business was the effective source of overall profit, generating revenue of ¥5.45B (+27.1%, 92.6% composition ratio) and Operating Income of ¥0.95B (-1.7%, profit margin 17.4%). Meanwhile, the IT-related business generated revenue of ¥0.27B (-7.9%) and an operating loss of ¥0.03B (profit margin -11.2%), while the real estate-related business generated revenue of ¥0.06B (-59.5%) and an operating loss of ¥0.01B (profit margin -24.3%); both remained in the red. The other segment, which includes soccer team operations and comprehensive advertising, generated revenue of ¥0.11B (+195.0%) but recorded an operating loss of ¥0.01B, failing to achieve profitability despite higher revenue. The company remains highly dependent on a single business, the guarantee-related business, while delayed monetization of non-core businesses is diluting the overall company margin.
【Profitability】The Operating Income margin was 15.5%. Although the gross margin of 68.6% was broadly in line with the previous year, the increase in the SG&A ratio to 53.1% pressured the profit margin. The Net Income margin was 9.1%, and the approximately 41% reduction from Ordinary Income of ¥0.89B to Net Income of ¥0.53B was substantial, reflecting the high effective tax rate.【Cash Flow Quality】Non-operating income was ¥0.01B and extraordinary losses were ¥0.002B, both negligible. Accordingly, most of the profit was derived from core operations; however, accounts receivable and accounts payable have declined significantly from the previous year, creating a structure in which working capital fluctuations can readily generate timing differences between earnings and cash generation.【Investment Efficiency】ROE was 7.1%, with the deterioration in the Net Income margin being the primary factor behind the decline in ROE. Total assets were ¥21.79B, compared with net assets of ¥7.37B, and the total asset turnover ratio, which indicates asset efficiency, remained low.【Financial Soundness】The Equity Ratio was 33.8%, remaining broadly at the same level as the previous year. In addition to long-term borrowings of ¥2.23B, the company had short-term borrowings of ¥0.32B, indicating a degree of reliance on short-term funding. Goodwill was ¥2.05B, equivalent to 27.8% of net assets, a moderate level.
Although detailed disclosure of the statement of cash flows is not available, funding trends can be assessed from changes in the balance sheet. Cash and deposits were ¥2.66B, slightly down from ¥2.74B in the previous year. Accounts receivable declined significantly to ¥0.17B from ¥0.62B in the previous year, while accounts payable also decreased to ¥0.10B from ¥0.29B, highlighting substantial working capital fluctuations. Income taxes payable and the provision for bonuses also declined from the previous year, potentially creating short-term cash outflow factors. Overall, cash generation from operating activities appears to have remained at a certain level, supported by growth in the core business; however, the magnitude of working capital fluctuations is large, creating a structure prone to variability in quarterly cash generation.
Most of the quarter’s earnings were attributable to recurring business activities. Non-operating income of ¥0.01B (0.1% of revenue) and extraordinary losses of ¥0.002B (including impairment losses) were both immaterial, limiting the impact of temporary factors on overall profit and loss. Meanwhile, Net Income of ¥0.53B represented an approximately 41% reduction from Ordinary Income of ¥0.89B, making the high effective tax rate a key factor affecting the quality of Net Income. From an accrual perspective, the significant declines in accounts receivable and accounts payable make timing differences between earnings and cash generation more likely through working capital fluctuations. Overall, earnings quality at the Operating Income level is high, but the tax burden and working capital management determine the stability of Net Income.
Progress against the Full-Year forecast was approximately 23.3% for Revenue at ¥5.80B/¥24.86B, approximately 23.3% for Operating Income at ¥0.90B/¥3.86B, and approximately 23.2% for Ordinary Income at ¥0.89B/¥3.82B. Although these figures were slightly below the simple one-quarter progress benchmark of 25%, the shortfall is not significant when seasonality is taken into account. Meanwhile, progress for Net Income was relatively slower at approximately 20.8%, or ¥0.53B/¥2.52B, mainly due to the persistently high effective tax rate and continuing losses in non-core businesses. The Full-Year plan calls for revenue growth of +15.2% and Operating Income growth of +6.4%; achieving the plan will depend on improved cost efficiency and normalization of the tax rate in the second half. No revisions were made to the earnings forecast during the quarter.
Under the company’s plan, the Full-Year dividend forecast is ¥60.00 per share, implying a Payout Ratio of approximately 42.4% based on the Full-Year EPS forecast of ¥141.44. The dividend was ¥25 per share in the previous year, but changes in the dividend level should be evaluated on an annual basis for the Full Year. No revisions were made to the dividend forecast during the quarter. As no data on share repurchases has been disclosed, the company is evaluated based on a Payout Ratio calculated solely from dividends.
Business concentration risk: The guarantee-related business accounts for 92.6% of revenue and the majority of Operating Income, resulting in high sensitivity to market conditions and credit trends in a single business area. The IT-related, real estate-related, and other segments are all loss-making, and diversification of earnings sources has not progressed.
Funding structure risk: The company has short-term borrowings of ¥0.32B and, together with long-term borrowings of ¥2.23B, maintains a certain level of reliance on borrowings. Although the Equity Ratio remains broadly in line with the previous year at 33.8%, changes in the interest-rate environment could affect funding costs.
Goodwill and impairment risk: Goodwill was ¥2.05B, equivalent to 27.8% of net assets. Although the weighting of assets associated with M&A is moderate, the company recorded an impairment loss on property, plant and equipment of ¥0.002B in the guarantee-related segment during the quarter. If subsidiary performance falls below plan, the possibility of additional impairment losses may become a concern.
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Income Margin | 15.5% | 5.0% (-0.8%–23.5%) | +10.5pt |
| Net Income Margin | 9.1% | 3.4% (-1.2%–24.6%) | +5.7pt |
Profitability is significantly above the industry median.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (Year on Year) | 23.0% | 9.3% (2.0%–17.3%) | +13.7pt |
The revenue growth rate also exceeds the industry median and is close to the upper bound of the IQR.
※Source: Compiled by the Company
While the top line is demonstrating a high growth rate within the industry, led by the guarantee-related business, SG&A expenses are growing faster than revenue. Accordingly, the trend in cost efficiency will determine future margins.
The high effective tax rate is widening the gap between Ordinary Income and Net Income and is also appearing as a lag in Net Income progress against the Full-Year plan. The trajectory of the tax rate will remain a key point of focus in future earnings results.
Losses continue in the IT-related, real estate-related, and other segments. Together with the high dependence on a single business for earnings, the progress of monetization across the business portfolio will remain a structural point of focus.
This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly available earnings data. Investment decisions should be made at your own responsibility, after consulting with a professional as necessary.
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