CELM (7367) FY2026 Q3 Earnings Report

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Executive Summary

While the establishment of the Stakeholder Relations Business, originating with KYT, which joined the Group in December 2024, boosted revenue, the decline in gross profit margin caused the growth rate of operating income to fall below revenue growth. Revenue was ¥7.98B (¥5.89B in the same period last year, YoY +35.6%), operating income was ¥1.14B (up +17.4%), ordinary income was ¥1.11B (up +24.9%), and net income was ¥0.70B (up +23.0%). The gross profit margin was 50.0%, down 2.7pt from 52.7% in the same period last year, indicating margin dilution in terms of the quality of revenue growth.

Factors Affecting Performance

【Revenue】Revenue was ¥7.98B, up +35.6% year on year. The core Organizational and Human Resources Development Business generated ¥6.02B (75.4% of total revenue), while the newly established Stakeholder Relations Business generated ¥1.96B (24.6%), with the addition of the latter being the primary driver of growth.

【Profit and Loss】Operating income was ¥1.14B, up +17.4%, significantly below the revenue growth rate. The segment profit margin was 22.0% for the Organizational and Human Resources Development Business versus 8.4% for the Stakeholder Relations Business, and the expansion of the business portfolio is diluting the consolidated margin. The gross profit margin declined to 50.0% from 52.7%, a decrease of 2.7pt, which could not be offset by the improvement in the SG&A expense ratio to 35.7% from 36.1%. Ordinary income was ¥1.11B after reflecting non-operating expenses (interest expense of ¥0.04B), while net income was ¥0.70B after taxes. Although the same period last year included a one-time gain on the sale of investment securities of ¥0.015B, net income increased 23.0% in the current period without such one-time factors. Accordingly, the results can be characterized as revenue and profit growth accompanied by margin deterioration.

Segment Analysis

The Organizational and Human Resources Development Business is the core business, reporting revenue of ¥6.02B and segment profit of ¥1.33B (a profit margin of 22.0%), accounting for 89.0% of total reported segment profit. The Stakeholder Relations Business reported revenue of ¥1.96B and segment profit of ¥0.16B (a profit margin of 8.4%) and was newly established following the formation of the KYT Group in December 2024. The difference in profit margins between the two businesses is 13.6pt, and continued revenue expansion in the latter could become a factor diluting the consolidated profit margin. Consolidated operating income was ¥1.14B, calculated by deducting corporate expenses and other adjustments of ¥0.34B from total segment profit of ¥1.49B.

Key Financial Indicators

【Profitability】The operating margin was 14.3%, down 2.2pt from 16.5% in the same period last year, while the net profit margin also declined 0.9pt to 8.8% from 9.7%. The primary reason for the decline was the decrease in the gross profit margin from 52.7% to 50.0%, which could not be offset by the improvement in the SG&A expense ratio to 35.7% from 36.1%.【Cash Quality】Accounts receivable were ¥1.28B (up +18.3% year on year), and accounts payable were ¥0.86B (up +17.7%). Both growth rates were below the +35.6% revenue growth rate, indicating no excessive expansion of receivables relative to revenue growth.【Investment Efficiency】Annualized ROE was 29.0%, achieved through a combination of an 8.8% net profit margin, total asset turnover of 1.41x, and financial leverage of 2.34x.【Financial Soundness】The equity ratio improved to 42.8% from approximately 38.5% in the same period last year, while the current ratio was 153.5%. Cash and deposits of ¥2.06B substantially exceeded short-term borrowings of ¥0.29B. Long-term borrowings were ¥1.98B, down from ¥2.45B in the same period last year, indicating progress in reducing interest-bearing debt.

Cash Flow Analysis

As the cash flow statement is disclosed only on a limited basis, cash flow trends are analyzed from changes in the balance sheet. Cash and deposits increased 20.9% year on year to ¥2.06B, maintaining a strong liquidity position. Accounts receivable increased 18.3% year on year and accounts payable increased 17.7%; both rates were below the +35.6% revenue growth rate, indicating that working capital has not expanded excessively relative to revenue growth. Long-term borrowings declined by ¥0.46B from ¥2.45B to ¥1.98B, demonstrating progress in debt reduction. Meanwhile, treasury stock decreased from negative ¥1.75B in the same period last year to negative ¥0.58B (a reduction in the book-value deficit), contributing to an increase in net assets. Retained earnings decreased by ¥0.79B from ¥2.35B to ¥1.56B, warranting attention from a capital policy perspective because capital movements exceeding the accumulation of current-period profit occurred.

Quality of Earnings

The current-period profit growth was centered on the expansion of operating income and was not accompanied by the one-time gain on the sale of investment securities of ¥0.015B recorded in the same period last year, reinforcing the quality of earnings growth. Non-operating income and expenses represented a net expense of ¥0.036B, of which interest expense accounted for ¥0.036B, indicating that interest costs are not materially constraining earnings. The difference between ordinary income of ¥1.11B and net income of ¥0.70B was primarily attributable to income taxes of ¥0.41B (an effective tax rate of 36.6%), with no significant divergence caused by extraordinary income or expenses. Comprehensive income was ¥0.70B, broadly in line with net income, and no significant fluctuations arose from valuation differences on other securities or foreign currency translation adjustments. Goodwill of ¥3.24B exceeds net assets of ¥3.22B, and under JGAAP, the risk of impairment as an accrual-related factor could affect earnings quality if future earnings plans are not achieved.

Earnings Forecast and Guidance

Cumulative Q3 progress against the full-year company plan was 76.6% for revenue, 105.8% for operating income, 107.6% for ordinary income, and 111.0% for net income. Operating income, ordinary income, and net income have all already exceeded the full-year plan. While the company expects revenue to increase +27.3% year on year, operating income is projected to increase only +0.5%, suggesting a conservative plan incorporating margin deterioration associated with M&A and integration-related costs. Since cumulative Q3 results have already exceeded the full-year plan, the level of Q4 earnings and whether the plan will be revised will be key areas of focus.

Shareholder Returns

The Q2 dividend was ¥7.00 per share, and the company forecasts an annual dividend of ¥15.00, implying a year-end dividend of ¥8.00. The payout ratio based solely on dividends was 23.1% against cumulative Q3 net income of ¥0.70B. Based on the annual dividend of ¥15.00 and the full-year net income plan of ¥0.63B, the expected payout ratio is approximately 51%, remaining below the generally accepted sustainability guideline of 60%. Retained earnings decreased 33.7% year on year, so dividend capacity must be evaluated from both future earnings growth and capital policy perspectives.

Risk Factors

1. Goodwill and Intangible Asset Concentration Risk: Goodwill was ¥3.24B, equivalent to 100.4% of net assets of ¥3.22B, while intangible assets were ¥3.49B, accounting for 46.3% of total assets. If the acquired businesses fail to meet their earnings plans, impairment losses could have a significant impact on the financial base and period earnings.

2. Margin Dilution Risk from Business Portfolio Expansion: The segment profit margin of the Stakeholder Relations Business was 8.4%, 13.6pt below that of the core Organizational and Human Resources Development Business (22.0%). If the former’s revenue mix, which was 24.6% in the current period, continues to rise, consolidated margin dilution could persist.

3. Leverage Risk in the Capital Structure: The Debt/Capital ratio was 41.3%, slightly exceeding the 40% guideline. Although long-term borrowings have declined year on year, leverage could rise again if additional M&A and deteriorating profitability occur simultaneously.

Industry Benchmarks (Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

Profitability is clearly above the industry median.

Growth and Capital Efficiency

The revenue growth rate is significantly above the industry median, placing the company among the industry’s high-growth companies.

※Source: Compiled by the Company

Key Takeaways from the Earnings Results

1. Revenue increased +35.6% year on year and net income increased +23.0%, indicating that business expansion is contributing to scale growth. However, the operating margin declined 2.2pt, making recovery in the gross profit margin a key challenge for improving profitability going forward.

2. Full-year operating income, ordinary income, and net income had already exceeded the company’s plan based on cumulative Q3 results. The level of Q4 earnings and whether the plan will be revised will therefore be key areas of focus.

3. Goodwill exceeds net assets in the capital structure. The achievement of post-acquisition business plans and trends in the goodwill/intangible asset ratio are structural monitoring items that can be identified from the earnings data.

Theoretical Share Price (Reference Value)

Sensitivity: ¥191–¥202 at ±1% for the cost of equity, and ¥195–¥198 at ±0.1 for ω.

Notes:

• Because progress of net income against the full-year forecast (111%) exceeds the standard level (75%), forward EPS has been adjusted upward within a maximum range of +10% (because companies ahead of plan tend to outperform their forecasts; the adjustment may be excessive for businesses with strong seasonality).
• The goodwill-to-net-assets ratio is high, and the assumptions would change significantly if impairment occurs.
• Net assets as of the quarter-end have been used (there is a timing difference from the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated solely from publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. 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 professionals as necessary.

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