GAKKEN HOLDINGS CO.,LTD. FY2026 Q3 Earnings Report

Quick View

Executive Summary

While Revenue, Operating Income, and Ordinary Income increased year on year, Net Income attributable to owners of the parent declined, resulting in a financial performance characterized by higher revenue and operating-level profits but sluggish bottom-line growth. Revenue was ¥1,559.4B (+6.3% YoY), Operating Income was ¥58.6B (+14.3%), and Ordinary Income was ¥55.9B (+18.0%). Meanwhile, Net Income attributable to owners of the parent was ¥26.5B (¥27.4B in the same period last year, -3.2% YoY) (consolidated Net Income including non-controlling interests was ¥27.3B, -2.3% YoY). The primary factor behind the increase in operating-level profit was cost efficiency resulting from SG&A expenses growing (+4.9%) more slowly than Revenue (+6.3%), while the decline in bottom-line profit was attributable to a higher tax burden and the recognition of extraordinary losses.

Factors Affecting Financial Performance

【Revenue】Revenue was ¥1,559.4B, up +6.3% year on year. The Education field generated ¥831.5B (+3.4% YoY, composition ratio 53.3%), while the Medical and Welfare field generated ¥706.3B (+9.9% YoY, composition ratio 45.3%), with both fields driving Revenue growth. Growth in the Medical and Welfare field exceeded that of the Education field, raising the overall growth rate. Other businesses recorded Revenue of ¥72.5B (-9.6% YoY), representing a decline.

【Profit and Loss】Operating Income was ¥58.6B (+14.3% YoY). By maintaining a gross margin of 26.8% while controlling the SG&A expense ratio at 23.0%, the operating margin improved to 3.8% (3.5% in the same period last year). Ordinary Income increased at a rate exceeding that of Operating Income, reaching ¥55.9B (+18.0% YoY); however, interest expense increased to ¥4.9B (¥3.5B in the same period last year), indicating a higher interest burden. Extraordinary income totaled ¥2.6B (including ¥2.4B in gains on the sale of investment securities), while extraordinary losses totaled ¥8.3B (including ¥3.1B in impairment losses and ¥2.5B in valuation losses on investment securities), resulting in a net temporary negative factor of ¥5.7B. In addition, the effective tax rate increased, resulting in a decline in Net Income attributable to owners of the parent to ¥26.5B (-3.2% YoY). In conclusion, Revenue and operating-level profits increased, but bottom-line profit declined due to temporary factors and a higher tax burden.

Segment Analysis

The Education field recorded Revenue of ¥831.5B (+3.4% YoY) and Operating Income of ¥40.0B (+1.5% YoY), with a profit margin of 4.8%, making it the largest contributor to profit. The Medical and Welfare field recorded Revenue of ¥706.3B (+9.9% YoY) and Operating Income of ¥26.9B (+10.9% YoY), with a profit margin of 3.8%, demonstrating growth exceeding the Education field in both Revenue and profit. Other businesses contracted, recording Revenue of ¥72.5B (-9.6% YoY) and Operating Income of ¥2.7B (-14.2% YoY). Childcare and overseas-related businesses were reclassified into the Education field from Q1, and the expanded scope of the Education field has had an impact. Across the Company, the high profitability of the Education field determines the overall margin structure, while the high rate of profit growth in the Medical and Welfare field will be a key area to monitor in assessing future changes in the earnings mix.

Key Financial Indicators

【Profitability】The Operating Income margin improved to 3.8% from 3.5% in the same period last year; however, under the structure of a 26.8% gross margin and a 23.0% SG&A expense ratio, the absolute level of profitability remains limited. The Net Income margin, based on income attributable to owners of the parent, was 1.7%, down from 1.9% in the same period last year, as the tax burden and extraordinary losses pressured Net Income margins.【Cash Flow Quality】There is a significant gap between Ordinary Income of ¥55.9B and Net Income attributable to owners of the parent of ¥26.5B. The primary factors were the increase in the effective tax rate (income taxes of ¥22.9B / profit before tax of ¥50.2B, or approximately 45.6%) and extraordinary losses of ¥8.3B.【Investment Efficiency】ROE was 4.5%. Given a sound capital base with an Equity Ratio of 42.4%, there is room for improvement, suggesting a structural challenge in terms of capital efficiency.【Financial Soundness】The Equity Ratio was 42.4% (equivalent to approximately 42.7% in the same period last year), remaining almost flat, while total assets of ¥1,440.3B and net assets of ¥611.2B increased, indicating expansion in both assets and capital.

Cash Flow Analysis

As detailed disclosure of the statement of cash flows is not provided in this financial report, cash flow trends are analyzed based on changes in the balance sheet. Cash and deposits increased to ¥240.1B (¥229.2B in the same period last year), indicating an expansion in short-term financial capacity. Meanwhile, short-term borrowings increased substantially to ¥95.5B (¥27.5B in the same period last year), suggesting a shift toward short-term funding. Long-term borrowings declined slightly to ¥184.1B (¥190.5B in the same period last year), indicating a change in the balance between short- and long-term funding, which may be related to working capital requirements and the progress of investment activities. Accounts receivable and notes receivable increased to ¥271.4B (¥260.4B in the same period last year), and trends in collection periods associated with Revenue growth will be an area to monitor when assessing future cash-generation capacity.

Quality of Earnings

Recurring earnings consist of Operating Income of ¥58.6B and non-operating income and expenses (non-operating income of ¥5.8B and non-operating expenses of ¥8.6B, resulting in a net negative ¥2.8B). Non-operating income was limited to approximately 0.4% of Revenue, with no apparent dependence on non-recurring earnings. Meanwhile, extraordinary income of ¥2.6B (including ¥2.4B in gains on the sale of investment securities) and extraordinary losses of ¥8.3B (including ¥3.1B in impairment losses and ¥2.5B in valuation losses on investment securities) resulted in a net temporary negative factor of ¥5.7B, depressing bottom-line profit. The gap between Ordinary Income of ¥55.9B and Net Income attributable to owners of the parent of ¥26.5B reached approximately 53%, primarily due to extraordinary losses and the higher effective tax rate (approximately 45.6%). Comprehensive Income was ¥36.5B (¥31.1B attributable to owners of the parent), exceeding Net Income, with an improvement of +¥9.0B in foreign currency translation adjustments contributing to the result. While the gap between Net Income and Comprehensive Income suggests that the underlying performance for the period may be more stable than indicated by the figures in the income statement, attention should be paid to the inclusion of non-operating fluctuations arising from foreign exchange factors.

Earnings Forecast and Guidance

Progress against the full-year plan (Revenue of ¥2,050.0B, Operating Income of ¥85.0B, and Ordinary Income of ¥83.0B) was 76.1% for Revenue, 68.9% for Operating Income, and 67.3% for Ordinary Income. Revenue is on track with the plan, while profit is somewhat behind schedule. Progress against the Net Income plan of ¥40.0B was 66.3% based on Net Income attributable to owners of the parent, as extraordinary losses and the higher tax burden incurred through Q3 pushed down progress. Neither the earnings forecast nor the dividend forecast has been revised, and management has maintained its current plans. Cost control and the normalization of temporary factors in Q4 will be the determining factors in achieving the full-year plan.

Shareholder Returns

An interim dividend of ¥14.5 was paid, and the full-year dividend forecast is ¥29.0 (a planned increase from ¥13 in the previous year), with no revision to the dividend forecast for the same period last year. Based on the full-year Net Income plan of ¥40.0B and average shares outstanding of 414.96 million shares (41,495,820 shares), the Payout Ratio is estimated at approximately 32%, representing a conservative level. Cash and deposits of ¥240.1B are substantially greater than the total annual dividend amount, indicating that sufficient financial capacity has been secured to support dividend sustainability.

Risk Factors

1. Persistently high effective tax rate and extraordinary losses: The effective tax rate for the period was high at approximately 45.6%, while extraordinary losses of ¥8.3B, including impairment losses of ¥3.1B and valuation losses on investment securities of ¥2.5B, pressured Net Income. The normalization of the tax rate and extraordinary losses is a prerequisite for the recovery of the Net Income margin from the next fiscal year onward.

2. Sharp increase in short-term borrowings: Short-term borrowings increased substantially to ¥95.5B from ¥27.5B in the same period last year. The shortening of the interest-bearing debt maturity structure, combined with long-term borrowings of ¥184.1B, could lead to higher funding costs in a rising-interest-rate environment and rollover risk.

3. Concentration of the business portfolio and rising labor costs: The Education field accounts for 53.3% of Revenue, making performance susceptible to demand trends in that field. In the Medical and Welfare field, rising labor costs and trends in securing human resources may affect profit margins.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

The Company's profitability is below the industry median and is at a level close to the lower bound of the IQR.

Growth and Capital Efficiency

The Revenue growth rate is also below the industry median, but remains within the IQR and is not extremely underperforming.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. The Operating Income margin improved to 3.8% from 3.5% in the same period last year, reflecting cost efficiency in which the restraint of the SG&A expense ratio exceeded Revenue growth. Although operating-level momentum lags the industry comparison, it is improving on an intra-company basis.

2. The gap between Ordinary Income of ¥55.9B and Net Income attributable to owners of the parent of ¥26.5B was primarily caused by extraordinary losses and the high tax rate, and can be viewed as the difference from the Company's potential earnings power if these factors normalize.

3. The sharp increase in short-term borrowings (+247% YoY) indicates a change in the funding structure, making future trends in interest expense and funding costs key points for financial monitoring.

Theoretical Share Price (Reference Value)

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

Sensitivity: ¥1,314–¥1,390 at ±1% in the cost of equity, and ¥1,347–¥1,354 at ±0.1 in ω.

Notes:

• Net Income is substantially compressed relative to Operating Income due to the tax burden, acquisition-related expenses, and non-controlling interests, among other factors (Net Income ÷ Operating Income 47%). This value reflects that compression at face value; if these factors are temporary, the underlying earnings power may be higher.
• As forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• 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 on the high side.

(Model used: Residual income model / Interest rate reference month: 2026-07 / This value is not a forecast or guarantee of the future share price)

---

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 professionals as necessary.

---End of Report---