KOSAIDO Holdings Co.,Ltd. FY2027 Q1 Earnings Report

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Executive Summary

The first quarter posted lower revenue and lower profit, as weakness in the core Information and Human Resources segments pressured both the top line and earnings. Revenue was ¥75.5B (down -7.3% YoY), Operating Income was ¥11.3B (down -22.2%), Ordinary Income was ¥11.4B (down -16.2%), and Net Income was ¥9.8B (previous-year attributable net income was ¥11.1B, down -12.4%). The Operating Income margin was 15.0%, down approximately 2.9pt from the previous year (approximately 17.9%), with deterioration in the gross margin and an increase in the SG&A expense ratio progressing simultaneously.

Factors Affecting Performance

【Revenue】Revenue was ¥75.5B, representing a decline of -7.3% YoY. By segment, Human Resources declined sharply by -21.0%, Asset Consulting by -87.8%, while Information also remained weak at -2.7%. The core Funeral Services business (revenue composition ratio: 32.3%) remained almost flat at -0.1%, while Public Funeral Services was contained at -3.7%.

【Profit and Loss】Operating Income was ¥11.3B, down -22.2% YoY. The gross margin deteriorated from the previous year to 37.6%, while the SG&A expense ratio increased to 22.6%, weakening cost absorption. Ordinary Income was ¥11.4B (down -16.2%), with non-operating income and expenses almost offsetting each other. Net Income was ¥9.8B (down -12.4%); even after recording ¥1.7B in income taxes and other taxes, the decline from Ordinary Income was smaller than the decline in Operating Income. In conclusion, the Company posted lower revenue and lower profit.

Segment Analysis

By segment, the polarization in profitability is clear. The core Funeral Services business generated revenue of ¥24.4B (down -0.1% YoY) and Operating Income of ¥7.5B (down -4.1%), with a 30.6% profit margin, serving as the core of consolidated earnings. Public Funeral Services generated revenue of ¥12.4B (down -3.7%) and Operating Income of ¥1.9B (up +0.5%), indicating a slight improvement in profitability. Meanwhile, Information generated revenue of ¥26.3B (down -2.7%) but continued to post a loss, with Operating Income of -¥0.8B (the loss narrowed by 34.5% YoY). Human Resources generated revenue of ¥12.3B (down -21.0%) and Operating Income of ¥0.0B (down -95.5%), with profits almost entirely disappearing. Asset Consulting generated revenue of ¥0.2B (down -87.8%) and Operating Income of ¥0.1B (down -93.6%), indicating a contraction in scale. Dependence on the core Funeral Services business for consolidated Operating Income has increased further.

Key Financial Indicators

【Profitability】The 15.0% Operating Income margin declined by approximately 2.9pt from the previous year, while both the gross margin of 37.6% and the SG&A expense ratio of 22.6% moved in an unfavorable direction from a cost perspective. The Net Income margin remained high at 12.8%, but the decline in revenue exerted downward pressure on overall results.【Cash Quality】The gap between Ordinary Income of ¥11.4B and Net Income of ¥9.8B was attributable to ¥1.7B in income taxes and other taxes and ¥0.1B attributable to non-controlling interests. The impact of extraordinary gains and losses was limited, and earnings quality was generally stable.【Investment Efficiency】ROE was 2.0%, primarily due to what is believed to be a low total asset turnover ratio. EPS was ¥6.55, down -16.3% from ¥7.83 in the previous year.【Financial Soundness】With an Equity Ratio of 69.9%, cash and deposits of ¥223.3B, and long-term borrowings of ¥96.1B, the capital structure is conservative and short-term funding resilience is high.

Cash Flow Analysis

As individual data from the statement of cash flows have not been disclosed, fund trends are assessed based on changes in the balance sheet. Accounts receivable and notes receivable were ¥33.1B, a significant decrease from the previous year, suggesting progress in the collection of receivables. Cash and deposits were ¥223.3B, remaining at approximately the same level as the previous year (¥224.2B), and liquidity remained stable. Long-term borrowings were ¥96.1B, down from ¥104.9B in the previous year, indicating progress in reducing interest-bearing debt. Work in process inventory was ¥7.0B, up from ¥2.3B in the previous year; attention is warranted because a time lag in project progress could delay conversion into cash.

Earnings Quality

Non-operating income for the current period was ¥1.4B and non-operating expenses were ¥1.3B, almost offsetting each other. Their contribution to revenue was small, and most earnings were generated by recurring business activities. Non-operating income consisted primarily of ¥0.1B in dividend income and was highly stable. The gap between Ordinary Income of ¥11.4B and Net Income of ¥9.8B was mainly attributable to ¥1.7B in income taxes and other taxes. Extraordinary gains and losses recorded in the previous period (an extraordinary gain of ¥1.0B and an extraordinary loss of ¥0.8B in the previous year) were not present in the current period, indicating that the impact of one-off factors was limited. Comprehensive Income was ¥10.0B, broadly in line with Net Income of ¥9.8B; the impact of foreign currency translation adjustments and other items was small, and earnings quality can be assessed as relatively stable.

Earnings Forecast and Guidance

Progress against the full-year plan was 19.2% for Revenue (¥75.5B/¥394.0B), 15.9% for Operating Income (¥11.3B/¥71.0B), and 16.6% for Ordinary Income (¥11.4B/¥69.0B), below the simple one-quarter benchmark of 25%. The lag was particularly pronounced at the Operating Income level, apparently reflecting the continued loss in the Information segment and lower utilization in Human Resources. No revision to the earnings forecast has been made. Under a plan premised on a concentration of earnings in the second half, progress in recognizing projects will be a key point to monitor going forward.

Shareholder Returns

The Company’s annual dividend plan is ¥13.34, implying a Payout Ratio of approximately 42.7% based on the initial full-year EPS plan of ¥31.24. The previous-year dividend was ¥6.67 (the Payout Ratio based on EPS of ¥7.83 at that time was approximately 85.2%), representing a dividend increase plan premised on full-year earnings growth. Against the backdrop of cash and deposits of ¥223.3B and a conservative capital structure, the foundation supporting dividend sustainability remains intact.

Risk Factors

1. Polarization of segment earnings: The Information segment continued to post a loss, with Operating Income of -¥0.8B, while profits in the Human Resources segment also almost disappeared, with Operating Income of ¥0.0B (down -95.5% YoY). Dependence of consolidated earnings on the core Funeral Services business (30.6% profit margin) has increased.

2. Delay in full-year progress: Revenue progress of 19.2% and Operating Income progress of 15.9% are below the standard quarterly progress benchmark of 25%. If acceleration in project recognition or cost optimization in the second half cannot be achieved, the variance from the full-year plan could widen.

3. Working capital efficiency: Work in process inventory increased to ¥7.0B from ¥2.3B in the previous year, and delays in project progress could result in a time lag before conversion into cash. The decline in accounts receivable (-32.0%) represents a material improvement in collections, but the turnover ratio for total assets (equivalent to a total asset turnover ratio of 0.107x) remains low.

Industry Benchmark (For Reference; Company Analysis)

Industry Benchmark (manufacturing)

Profitability and Returns

The Company’s Operating Income margin and Net Income margin both exceed the industry median, placing its profitability among the higher levels within the industry.

Growth and Capital Efficiency

The Company’s Revenue growth rate is significantly below the industry median, indicating an inferior position within the industry in terms of top-line growth.

※Source: Company analysis

Key Takeaways from the Earnings Results

1. Polarization in the earnings structure is progressing. While the core Funeral Services business (30.6% profit margin) is driving consolidated earnings, weakness in the Information and Human Resources segments is weighing on the Company-wide profit margin. Trends in segment-level improvement will be a key focus going forward.

2. Full-year progress is below the standard pace, at 19.2% for Revenue and 15.9% for Operating Income. Under a plan premised on a concentration of earnings in the second half, progress in project recognition and cost optimization will be key areas to monitor.

3. The financial foundation is robust, with an Equity Ratio of 69.9% and cash and deposits of ¥223.3B. Progress in receivables collection, reflected in a 32% decline in accounts receivable, was also confirmed, while the increase in work in process inventory will be monitored from the perspective of working capital efficiency.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson-type model with an explicit 5-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥326–¥345 at ±1% for the cost of equity, and ¥335–¥335 at ±0.1 for ω.

Notes:

• Net assets as of the end of the quarter are 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 / Interest rate reference month: 2026-07 / This value 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 release 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 with a professional as necessary.

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