Quants Research Institute Holdings (9552) FY2025 FY

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Executive Summary

FY2025 results showed higher revenue but a significant deterioration in profitability, with the focus shifting from quantitative revenue expansion to qualitative changes. Revenue was nearly flat at ¥16.60B (+0.3% YoY), while Operating Income declined sharply to ¥4.78B (-42.1%) and Net Income to ¥2.75B (-51.4%). The main factors were lower transaction values and slower deal closures in the core M&A advisory business, an expanding loss in the newly established Consulting Business, and company-wide increases in personnel expenses. Due primarily to financial activities centered on the acquisition of ¥6.71B in treasury shares, cash and cash equivalents decreased from ¥10.17B to ¥4.12B.

Factors Affecting Performance

【Revenue】Consolidated revenue was ¥16.60B, essentially flat at +0.3% YoY. By segment, revenue from M&A advisory declined to ¥15.15B (91.2% of total, -7.1% YoY), while the newly established Consulting Business surged to ¥1.45B (up from ¥0.25B in the previous year), offsetting the decline in the core business. Although revenue diversification progressed, the business remains heavily dependent on the core segment in terms of scale.

【Profit and Loss】Operating Income was ¥4.78B (-42.1% YoY), and Net Income was ¥2.75B (-51.4%). The cost-of-sales ratio increased from 27.7% to 39.6%, while the gross profit margin declined from 72.3% to 60.4%. SG&A expenses also expanded by +41.3% YoY, mainly due to increases in salaries and bonuses (+39.5% YoY), causing the SG&A ratio to rise from 22.3% to 31.5%. The M&A advisory operating margin declined from 52.5% to 38.0%, while the Consulting Business recorded an operating loss of ¥0.79B, an expansion from the ¥0.25B loss in the previous year, including an impairment loss of ¥0.01B. The difference between Profit Before Tax and Net Income consisted of income taxes of ¥2.03B, representing an effective tax rate of 42.4%, a slightly higher-than-normal burden. The results qualify as higher revenue but lower profit.

Segment Analysis

M&A advisory generated revenue of ¥15.15B (-7.1% YoY) and Operating Income of ¥5.75B (-32.8%), with an operating margin of 38.0% (52.5% in the previous year). Although it remains highly profitable, profitability is entering a normalization phase. The Consulting Business expanded revenue to ¥1.45B (¥0.25B in the previous year), while its operating loss widened to ¥0.79B (a ¥0.25B loss in the previous year), and it also recorded an impairment loss of ¥0.01B. Although revenue diversification is progressing, dependence on the core business has instead increased in terms of profit contribution.

Key Financial Indicators

【Profitability】The Operating Income margin declined significantly to 28.8% (49.9% in the previous year), while the Net Income margin fell to 16.5% (approximately 34.2% in the previous year). ROE remained high at 39.2% based on the period-end balance, but this was primarily due to the deterioration in the profit margin from the previous year; the denominator effect from the reduction in equity capital (equity of ¥5.10B versus ¥8.91B in the previous year) also contributed.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥1.30B, representing only 0.47x Net Income of ¥2.75B. The ¥0.60B increase in accounts receivable and ¥2.53B in income tax payments weighed on cash conversion. The OCF-to-EBITDA ratio was also low at 0.25x, indicating that earnings quality requires monitoring.【Investment Efficiency】Capital expenditures of ¥0.13B compared with depreciation and amortization of ¥0.52B indicate a low level of investment, reflecting an asset-light business structure.【Financial Soundness】The Equity Ratio was 62.8% (71.2% in the previous year), interest-bearing borrowings were extremely small at ¥0.015B, and the current ratio was high at 234.1%. The contraction in total assets and net assets was primarily attributable to treasury share acquisitions, and financial risk remains limited.

Cash Flow Analysis

Operating Cash Flow was ¥1.30B, a significant decrease of -77.2% YoY. The ¥0.60B increase in accounts receivable, an increase in deposits, and ¥2.53B in income tax payments were sources of cash outflow, restricting the conversion of the ¥3.83B subtotal of operating cash flows into realized cash. Investing Cash Flow was -¥0.35B, consisting mainly of capital expenditures of ¥0.13B and security deposits paid, with the overall scale of investment remaining small. Financing Cash Flow was -¥7.01B, primarily due to the acquisition of ¥6.71B in treasury shares. Although Free Cash Flow remained positive at ¥0.95B, cash and cash equivalents decreased from ¥10.17B to ¥4.12B as a result of substantial shareholder returns. The defining feature of the period’s funding dynamics was the implementation of proactive capital returns while the cash-generating capacity of the core business itself was weakening.

Earnings Quality

Of Current Period Net Income of ¥2.75B, extraordinary or otherwise one-time factors were limited, with the ¥0.01B impairment loss in the Consulting Business being the primary item. Most earnings therefore originated from recurring operating results. However, OCF/Net Income was 0.47x and the accrual ratio was 17.8%, indicating a significant divergence between accrual-based earnings and cash flows. The primary factor was the 162.2% increase in accounts receivable, requiring confirmation of the concentration of deal closures and billings around the period-end as well as collection-period trends. Non-operating income and expenses—financial income of ¥0.002B, financial expenses of ¥0.002B, and total other income and expenses of -¥0.003B—were small, and the divergence between Profit Before Tax and Net Income was primarily attributable to the income tax burden (effective tax rate of 42.4%). Comprehensive Income was ¥2.75B, approximately equal to Net Income, and the impact of Other Comprehensive Income (foreign currency translation adjustment of ¥0.0003B) was immaterial.

Earnings Forecast and Guidance

The full-year company plan calls for Revenue of ¥22.18B, Operating Income of ¥5.99B, and Net Income of ¥3.53B. Current-period actual results represented 74.8%, 79.7%, and 77.8% of the respective plan figures, indicating that profit progress slightly exceeded revenue progress. The planned Operating Income margin is 27.0%, slightly below the current-period actual result of 28.8%. Achievement of the plan will depend on deal trends in the core M&A advisory business and the cessation of further losses in the Consulting Business.

Shareholder Returns

The year-end dividend was ¥5 per share, with no interim dividend. The Payout Ratio, using dividends alone as the numerator, was low relative to earnings at 10.4%, while total dividends of ¥0.27B remained within Free Cash Flow of ¥0.95B. Meanwhile, treasury share acquisitions reached ¥6.71B, and the Total Return Ratio, including dividends, amounted to approximately 254% of Net Income and approximately 7.3x Free Cash Flow. Cash and cash equivalents decreased by ¥6.06B due to the large-scale share buyback, making a recovery in Operating Cash Flow a prerequisite for continuing shareholder returns at the current scale.

Risk Factors

1. Concentration risk in the core business: M&A advisory accounted for 91.2% of consolidated revenue, while revenue from the business declined by -7.1% YoY and Operating Income declined by -32.8%. The consolidated results are directly affected by the timing of deal closures and fluctuations in transaction values.

2. Weak cash conversion of earnings: OCF/Net Income was only 0.47x, while OCF/EBITDA was 0.25x. Accounts receivable increased sharply by +162.2% YoY, requiring monitoring of collection conditions.

3. Delay in achieving profitability in the new business: Although revenue from the Consulting Business expanded to ¥1.45B, its operating loss widened to ¥0.79B, and it also incurred an impairment loss of ¥0.01B. The timing of recovery on growth investments remains a key focus.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Return on Equity, Operating Income margin, and Net Income margin all substantially exceeded the industry median, placing profitability in the upper tier of the industry.

Growth and Capital Efficiency

The Revenue growth rate was below the industry median, indicating relatively weaker growth.

※Source: Compiled by the Company

Key Points in the Financial Results

1. Although the Operating Income margin of 28.8% and Net Income margin of 16.5% substantially exceeded industry levels, both declined significantly from the previous year. Trends in transaction values, cost burdens, and personnel expenses will determine the future trajectory of profit margins.

2. While financial soundness characterized by virtually no borrowings was maintained, cash and cash equivalents decreased by ¥6.06B as a result of ¥6.71B in treasury share acquisitions. The Total Return Ratio reached approximately 254% of Net Income, making the relationship between the scale of shareholder returns and the pace of Operating Cash Flow recovery a key capital allocation issue.

3. The Consulting Business significantly increased revenue, but its losses also expanded. The fact that revenue diversification has not yet translated into profit diversification represents a structural issue.

Theoretical Share Price (Reference Value)

Sensitivity: ¥264–¥282 for a ±1% change in the Cost of Equity, and ¥266–¥283 for a ±0.1 change in ω.

Notes:

• Because forecast ROE is high, ROE is capped at 50% for calculation purposes (the difference between scenarios may therefore appear small).

(Calculation model: Residual Income Model (Ohlson-type, explicit five-year fade) / Interest rate reference month: 2026-07 / These are mechanically calculated values based solely on publicly disclosed data and do not constitute a forecast of the market share price or a recommendation of any specific investment action, nor do they forecast or guarantee the future share price.)

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This report is an earnings analysis document automatically generated by AI through analysis of XBRL earnings flash report 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 professionals as necessary.

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