| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥216.2B | ¥281.9B | -23.3% |
| Operating Income | ¥56.1B | ¥120.7B | -53.5% |
| Ordinary Income | ¥59.0B | ¥131.5B | -55.1% |
| Net Income | ¥65.8B | ¥96.3B | -31.7% |
| ROE | 4.9% | 7.0% | - |
The Q3 results for the fiscal year ending March 2026 showed Revenue of ¥216.2B (YoY -¥65.7B, -23.3%), Operating Income of ¥56.1B (YoY -¥64.6B, -53.5%), Ordinary Income of ¥59.0B (YoY -¥72.5B, -55.1%), and Net Income of ¥65.8B (YoY -¥30.6B, -31.7%), marking declines in both revenue and profit. A decrease in income from investment securities for management (¥233.8B → ¥179.7B) coupled with an increase in cost of sales ratio caused gross margin to deteriorate from 56.2% to 48.9% (-7.3pt). In addition, SG&A remained flat despite lower revenue, producing negative operating leverage and contracting operating margin from 42.8% to 25.9% (-16.9pt). Special gains of ¥24.9B (mainly gains on sale of investment securities ¥21.4B) provided support to the bottom line, so the decline in Net Income was relatively smaller than at the Operating and Ordinary stages.
[Revenue] Revenue of ¥216.2B was down -23.3% YoY, primarily due to a decrease in income from investment securities for management from ¥233.8B to ¥179.7B (-23.1%). By component, investment partnership management fees decreased from ¥47.9B to ¥36.4B, and other operating income contracted from ¥1.8B to ¥0.1B. A stagnation in exit markets such as IPOs and M&A reduced the number and price per recovery, compressing the top line. Cost of sales decreased from ¥123.4B to ¥110.4B (-10.5%), but the rate of revenue decline outpaced this, driving gross margin down from 56.2% to 48.9% (-7.3pt). The rise in cost ratio of investment securities from 46.3% to 55.3% was the main driver of gross margin compression.
[Profitability] Gross profit was ¥105.8B (prior year ¥158.5B) while SG&A remained largely flat at ¥40.4B (prior year ¥41.0B, -1.4%), indicating fixed-cost stickiness that worsened operating leverage. Operating Income of ¥56.1B halved from ¥120.7B last year (-53.5%), and operating margin contracted from 42.8% to 25.9% (-16.9pt). Non-operating activities produced net +¥3.0B (non-operating income ¥26.6B, including dividend income ¥26.3B, less non-operating expenses ¥23.6B, including foreign exchange losses ¥2.2B), resulting in Ordinary Income of ¥59.0B (prior year ¥131.5B), down -55.1%. Extraordinary items were net +¥23.3B (extraordinary gains ¥24.9B — gains on sale of investment securities ¥21.4B, gains on sale of subsidiary shares ¥3.5B — less extraordinary losses ¥1.6B), bringing profit before tax to ¥82.3B (prior year ¥131.5B). After deduction of income taxes of ¥16.6B (effective tax rate 20.1%), Net Income amounted to ¥65.8B, down -31.7% YoY. Extraordinary gains partially mitigated the decrease from the ordinary stage. Conclusion: lower revenue and lower profit.
[Profitability] Operating margin of 25.9% worsened by 16.9pt from 42.8% last year, driven by lower gross margin and reverse operating leverage on fixed costs. Net margin of 30.4% declined 3.8pt from 34.2% the prior year, but the contribution of extraordinary gains limited the decline compared with operating stages. ROE of 4.9% declined 2.2pt from 7.1%, attributable to lower net margin and deceleration in total asset turnover (0.137x). ROA (Ordinary Income/Total Assets) was 3.7%, down 4.5pt from 8.2% last year.
[Cash Quality] Operating Cash Flow / Net Income was 0.85x, slightly below the 1.0x standard, but the accrual ratio of 0.6% is low, indicating that cash backing of profits is generally good. OCF/EBITDA of 0.99x shows a high cash conversion at the operating income stage, and the company maintains the ability to generate Operating CF relative to EBITDA.
[Investment Efficiency] Total asset turnover of 0.137x declined from 0.172x last year, driven by accumulation of investment securities balance (¥28.97B → ¥364.5B, +1,158%), causing asset stagnation. Capital expenditures were effectively zero at -¥0.0B, keeping a light fixed-asset structure.
[Financial Soundness] Equity Ratio of 85.0% improved 1.0pt from 84.0% last year, indicating a very conservative capital structure. Current ratio 7,175% and quick ratio 7,175% are extremely high, with cash and deposits of ¥611.8B versus current liabilities of ¥16.8B, giving very strong short-term payment capacity. Interest-bearing debt is virtually zero (long-term borrowings ¥0.15B), and Interest Coverage is approximately 561x, indicating minimal interest burden. Debt-to-equity ratio is low at 0.18x, reflecting very high financial resilience.
Operating Cash Flow was positive at ¥55.9B. From Operating CF subtotal of ¥78.3B, net of corporate tax payments of ¥48.9B, the net equals 0.85x of Net Income ¥65.8B. Non-operating income including dividend income ¥26.3B is adjusted at the Operating CF stage, and cash generation is centered on business activities. Investing Cash Flow was a net inflow of ¥38.5B, primarily due to proceeds from sale of investment securities of ¥27.7B, while capital expenditures were effectively zero at -¥0.0B, showing a clear focus on controlling fixed costs. Free Cash Flow was positive at ¥94.3B (Operating CF + Investing CF), sufficient to cover dividends and share buybacks. Financing Cash Flow was an outflow of -¥116.1B, comprising dividend payments of ¥65.7B and share repurchases of ¥50.1B, and total shareholder return was executed within available Free Cash Flow of ¥94.3B. Cash at period-end was ¥611.8B, down -¥49.1B from ¥660.95B at prior fiscal year-end, but liquidity remains ample and short-term funding risk is very low.
Net Income of ¥65.8B exceeding Ordinary Income of ¥59.0B was due to special gains of ¥24.9B (mainly gains on sale of investment securities ¥21.4B and gains on sale of subsidiary shares ¥3.5B), indicating one-off factors lifted the bottom line. The bulk of non-operating income of ¥26.6B was dividend income ¥26.3B, which appears to be recurring income from investment securities, but foreign exchange losses of ¥2.2B raised non-operating expenses and pressured ordinary profit. Operating CF of ¥55.9B being lower than Net Income of ¥65.8B is because cash inflows from special gains (sale of investment securities ¥27.7B) are recorded in Investing CF; given the low accrual ratio of 0.6%, the quality of core business profits is generally sound. However, dependence on special gains has increased, and the repeatability in subsequent periods warrants attention.
The annual dividend forecast for the period is ¥133 (interim ¥66.5, year-end ¥66.5 planned), determined under the new dividend policy (DOE 6% or payout ratio 50%, whichever is larger). For this period, DOE 6% based on prior fiscal year-end consolidated shareholders' equity exceeded the 50% payout ratio, so the DOE criterion was applied. The payout ratio (dividends only/Net Income) is 107.6%, exceeding 100%, but dividend sources are sufficiently covered by the ample cash position (¥611.8B) and Free Cash Flow of ¥94.3B. Share repurchases of ¥50.1B (cash flow statement) were executed, and the Total Return Ratio (dividends + share repurchases/Net Income) was 176.9%, exceeding Free Cash Flow, but were carried out without issue given the strong opening cash position. Regarding dividend sustainability, in periods where the DOE 6% criterion is prioritized, payout ratio may remain elevated during profit volatility, so long-term sustainability will depend on recovery in exits and FCF generation.
Exit market risk: A slowdown in the IPO and M&A markets reduced income from investment securities for management to ¥179.7B (prior year ¥233.8B, -23.1%), contracting operating margin from 42.8% to 25.9% (-16.9pt). The investment securities balance of ¥364.5B is stagnating, and prolonged weakness in exit conditions could further slow asset turnover (0.137x) and impair profitability.
Valuation volatility risk: Investment securities balance increased substantially from ¥28.97B to ¥364.5B (+1,158%), making unrealized gains/losses directly affect equity and deferred tax liabilities (¥66.7B). In adverse market conditions, mark-to-market declines or impairment risks could materialize, causing equity fluctuations and downside to earnings.
Dividend sustainability risk: Under the DOE 6% dividend policy, the payout ratio reached 107.6% this period, exceeding 100%, creating a structural risk where payout ratio can remain elevated during profit weakness. Although Free Cash Flow of ¥94.3B and cash ¥611.8B secure dividend sources for the near term, delayed profit recovery could lead to the sum of dividends and share buybacks continuing to exceed FCF.
Profitability & Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 25.9% | 19.9% (6.5%–38.3%) | +6.0pt |
| Net Margin | 30.4% | 5.6% (3.8%–22.2%) | +24.8pt |
Profitability significantly exceeds the industry median, maintaining a high-return profile.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -23.3% | -0.5% (-0.9%–13.1%) | -22.8pt |
Revenue growth is well below the industry median, reflecting headwinds in the exit market.
※Source: Company aggregation
Waiting on a recovery in exit environment: The substantial deterioration in operating margin (42.8% → 25.9%, -16.9pt) and decline in ROE (7.1% → 4.9%) were mainly caused by fewer exits and lower exit prices due to the stagnation of IPO and M&A markets. In a market recovery, the investment securities balance of ¥364.5B could serve as the source of earnings recovery. Monitoring the number of exits and total distribution amount will be key indicators for next-period revenue.
Dual nature of dividend policy clarity and sustainability: DOE 6% resulted in a high dividend this period of ¥133 (payout ratio 107.6%), but the structure makes payout ratio prone to spike during earnings volatility. Free Cash Flow of ¥94.3B and cash ¥611.8B secure dividend funds in the near term; however, sustained return policy depends on earnings recovery and continued FCF generation.
Strong financial resilience and preparedness for volatility: With an Equity Ratio of 85.0%, Current Ratio 7,175%, and Interest Coverage approximately 561x, financial health is very strong and can withstand short-term market downturns. On the other hand, the accumulation of investment securities (+1,158%) increases the impact of portfolio market value volatility on financial statements through unrealized gains and deferred tax liabilities, making monitoring of unrealized gains/losses and currency/interest rate environments important.
This report is an AI-generated earnings analysis document produced by analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company based on public financial statements. Investment decisions are your own responsibility; consult a professional as necessary before making investment decisions.