Quants Research Institute Holdings,Inc. FY2026 Q3 Earnings Report

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Executive Summary

Against the backdrop of strong closing performance in the core M&A advisory business, the company delivered a high-quality set of results characterized by revenue and profit growth, with profit growth exceeding revenue growth. Revenue was ¥15.93B (+37.3% YoY), Operating Income was ¥4.45B (+42.0%), and Net Income was ¥2.64B (+45.5%). The Operating Margin improved by +90bp YoY to 27.9%, with SG&A efficiency driving profit growth. Meanwhile, the gross margin declined from the previous year to 56.4%, indicating the burden associated with launching new businesses.

Factors Affecting Performance

【Revenue】Revenue of ¥15.93B represented a substantial increase of +37.3% YoY. The core M&A advisory business remained solid at ¥12.90B (+20.3%, representing 81.0% of total revenue), while Consulting increased sharply to ¥2.71B (+211.1%) and Operating Lease generated ¥0.32B following its launch during the current period. These new businesses accelerated overall revenue growth.

【Profit and Loss】Operating Income increased to ¥4.45B (+42.0%) and Net Income to ¥2.64B (+45.5%), resulting in higher revenue and profit. Although the gross margin declined to 56.4% from the previous year, the SG&A ratio improved to 28.4% (-490bp YoY), resulting in positive operating leverage. By segment, M&A advisory maintained high profitability, generating Operating Income of ¥5.19B (40.3% margin), while Consulting recorded a loss of ¥0.70B and Operating Lease recorded a loss of ¥0.05B. This indicates a structure in which earnings from the core business absorbed the upfront investment burden of the new businesses. Against Profit Before Tax of ¥4.40B, the company recorded income taxes of ¥1.75B (effective tax rate of 39.9%), resulting in Net Income of ¥2.64B. In conclusion, the company achieved both revenue and profit growth.

Segment Analysis

By segment, M&A advisory remained the earnings core, generating revenue of ¥12.90B (+20.3%) and Operating Income of ¥5.19B (+31.8%, 40.3% margin). Consulting expanded rapidly, with revenue of ¥2.71B (+211.1%), but recorded an operating loss of ¥0.70B (the loss widened by +20.4% YoY), indicating that expenses are increasing ahead of the expansion in business scale. Operating Lease is still in the business launch phase, and initial cost burdens have emerged, with revenue of ¥0.32B against an operating loss of ¥0.05B. Revenue composition was 81.0% for M&A advisory, 17.0% for Consulting, and 2.0% for Operating Lease, indicating that earnings remain highly dependent on a single business.

Key Financial Indicators

【Profitability】The Operating Margin improved by +90bp YoY to 27.9%, while the Net Profit Margin also improved by +90bp to 16.6%, supported by improved SG&A efficiency accompanying revenue expansion.【Cash Flow Quality】Operating Cash Flow was ¥4.85B, approximately 1.8 times Net Income of ¥2.64B, indicating strong cash-generation capacity supporting reported earnings.【Investment Efficiency】ROE was exceptionally high at 70.5%. However, the Equity Ratio declined to 29.4% from 62.8% in the previous year, and it is important to note that increased financial leverage resulting from share repurchases and higher interest-bearing debt was a contributing factor.【Financial Soundness】Total assets were ¥12.78B, while net assets were ¥3.75B, resulting in a capital structure that utilizes interest-bearing debt (short-term debt of ¥3.29B and long-term debt of ¥1.99B). Current assets of ¥5.94B were below current liabilities of ¥6.78B, resulting in a current ratio below 1x and making monitoring of short-term liquidity an important priority.

Cash Flow Analysis

Cash flow from operating activities was ¥4.85B, a significant improvement from -¥0.81B in the same period of the previous year, generating cash in excess of Profit Before Tax of ¥4.40B. Cash flow from investing activities was -¥5.53B, of which the acquisition of property, plant and equipment—believed to be primarily Operating Lease assets—accounted for ¥5.35B, indicating an active acceleration of growth investment. Cash flow from financing activities was +¥0.78B. This included an increase in short-term borrowings of ¥1.94B and proceeds from long-term borrowings of ¥3.99B, while ¥3.80B was allocated to share repurchases and ¥0.27B to dividend payments. As a result, Free Cash Flow, combining Operating CF and Investing CF, was -¥0.68B. This indicates a structure in which large-scale investment preceded internally generated funds and was supplemented by external financing. Cash and cash equivalents increased by only +¥0.11B from the end of the previous fiscal year to ¥4.23B.

Quality of Earnings

Current-period earnings were primarily driven by Operating Income of ¥4.45B. Financial income of ¥0.01B, financial expenses of ¥0.06B, and other income and expenses were insignificant, indicating low dependence on non-operating profit and loss and that earnings were generated primarily by the core business. No material one-off factors corresponding to extraordinary gains or losses were identified, suggesting high sustainability in the earnings structure. Against Profit Before Tax of ¥4.40B, the company recorded income taxes of ¥1.75B (effective tax rate of 39.9%), resulting in Net Income of ¥2.64B; the difference was attributable to the recurring tax burden. Operating Cash Flow at approximately 1.8 times Net Income indicates strong cash-generation capacity supporting earnings, and earnings quality can also be viewed favorably from an accrual perspective, which considers the divergence between accounting profit and cash flows. Comprehensive Income was ¥2.67B, broadly in line with Net Income of ¥2.64B, with no significant divergence attributable to Other Comprehensive Income, such as foreign currency translation differences.

Earnings Forecast and Guidance

Progress toward the Full-Year forecast was 159.3B/222.9B for Revenue, or 71.4%, and 44.5B/57.8B for Operating Income, or 77.0%. Compared with the standard progress rate of 75% as of Q3, Revenue was slightly below the benchmark, while Operating Income exceeded it, indicating that profit is progressing ahead of revenue. This difference is believed to reflect improved SG&A efficiency, which absorbed fluctuations in the gross margin. Although the delay in Revenue progress may be recovered depending on the timing of closing large-scale transactions in Q4, the pace of improvement in the profitability of the new businesses—Consulting and Operating Lease—will be key to achieving the top-line target. No revisions to the earnings forecast were made during the current quarter.

Shareholder Returns

Dividend payments during the current period were ¥0.27B, while the forecast for the year-end dividend is ¥0 (no dividend). Meanwhile, share repurchases of ¥3.80B were conducted, resulting in a shareholder return structure centered on buybacks. Considering dividends alone, dividend payments were minimal relative to Operating Cash Flow of ¥4.85B, and sustainability is not a concern. However, total shareholder returns of ¥4.07B, consisting of dividends of ¥0.27B and share repurchases of ¥3.80B, represented 40.7% relative to Net Income of ¥2.64B and exceeded Net Income. The current period was therefore one in which funding needs expanded alongside investment activities. Going forward, the balance between continued large-scale investment and shareholder returns will require attention from the perspective of financial soundness.

Risk Factors

1. Revenue Concentration Risk: The M&A advisory business accounts for 81.0% of Revenue and substantially all Operating Income, creating a structure in which fluctuations in market conditions and transaction-closing timing can have a significant impact on overall performance.

2. Liquidity and Financial Leverage: The Equity Ratio declined to 29.4% from 62.8% in the previous year, while current assets of ¥5.94B were below current liabilities of ¥6.78B, resulting in a current ratio below 1x. Short-term borrowings of ¥3.29B represent a major portion of current liabilities, making monitoring of cash management and refinancing trends necessary.

3. Profitability Risk in New Businesses: Consulting (operating loss of ¥0.70B) and Operating Lease (operating loss of ¥0.05B) remain loss-making as business expansion precedes profitability. Delayed monetization could dilute the company-wide profit margin.

Industry Benchmark (Reference; Company Analysis)

Industry Benchmark (it_telecom)

Profitability and Returns

Profitability significantly exceeds the industry median, positioning the company in the high-profitability group within the industry.

Growth and Capital Efficiency

The Revenue growth rate also significantly exceeds the industry median, positioning the company in the high-growth group within the industry.

※Source: Company calculations

Key Takeaways from the Financial Results

1. The core M&A advisory business maintained high growth and profitability in both Revenue and profit, with the Full-Year progress rate of Operating Income at 77.0%, exceeding the standard pace. Meanwhile, the new businesses—Consulting and Operating Lease—remain loss-making, making progress toward earnings diversification an important structural focus going forward.

2. Operating Cash Flow reached ¥4.85B, approximately 1.8 times Net Income, indicating favorable cash conversion. However, due to large-scale capital investment of ¥5.35B and share repurchases of ¥3.80B, the Equity Ratio declined to 29.4% and the current ratio fell below 1x, making monitoring of liquidity an important priority.

3. The gross margin declined from the previous year to 56.4%, confirming changes in the cost structure associated with launching new businesses. Determining whether this trend is temporary or structural in the coming quarters will be important for understanding the profitability trend.

Theoretical Share Price (Reference Value)

Sensitivity: 207円–221円 at Cost of Equity ±1%, and 208円–222円 at ω±0.1.

Notes:

• Because forecast ROE is high, ROE is capped at 50% for calculation purposes (differences between scenarios may therefore appear small).
• Net assets as of the quarter-end are used (there is a timing difference relative to the Full-Year forecast).

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated using only publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, nor does it predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI through analysis of 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 discretion and responsibility, after consulting with a professional where necessary.

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