H.I.S.Co.,Ltd. FY2026 Q3 Earnings Report

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Executive Summary

The most important point in these results is that, despite maintaining revenue growth, the Company fell into a ¥49.9B net loss attributable to owners of the parent due to deteriorating profitability in its core travel business and substantial extraordinary losses. Revenue was ¥2793.0B (+4.9% YoY), Operating Income was ¥51.3B (-18.1%), Ordinary Income was ¥46.0B (-23.8%), and Net Income was ¥-42.0B (deteriorating from ¥24.4B in the previous year). The primary reason for the decline in Operating Income was deteriorating profitability in the Travel Business, which accounts for 81.5% of the revenue mix, while the shift to a net loss was largely attributable to the one-time factor of ¥61.1B in extraordinary losses, including a ¥59.4B loss on lease contract cancellations.

Factors Affecting Results

【Revenue】Revenue was ¥2793.0B, representing an increase of +4.9% YoY. By segment, the Travel Business (81.5% of the revenue mix) increased by +4.3%, the Hotel Business by +10.0%, the Kyushu Sanko Group by +6.3%, and Other Businesses by +5.3%, with all segments reporting revenue growth. The Hotel Business grew faster than the Company-wide average and led the increase in revenue.

【Profit and Loss】Operating Income declined to ¥51.3B (-18.1%), while Ordinary Income declined to ¥46.0B (-23.8%). The Operating Income Margin was 1.8%, down from 2.4% in the same period of the previous year, and the gross profit margin also declined to 31.1%. The primary factor was a significant decline in Operating Income from the Travel Business to ¥28.4B (-40.1%), with its profit margin falling from 2.2% to 1.2%. Meanwhile, the Hotel Business secured increased profit at ¥34.1B (+14.6%), with a profit margin of 16.8%, making it the largest contributor to segment profit. The deterioration from Ordinary Income of ¥46.0B to Profit Before Tax of ¥-13.0B was primarily attributable to ¥61.1B in extraordinary losses, centered on the ¥59.4B loss on lease contract cancellations, a one-time factor. Net Income was ¥-42.0B, including ¥-49.9B attributable to owners of the parent. The result was revenue growth but profit decline, with a final loss due to extraordinary losses.

Segment Analysis

The Travel Business reported revenue of ¥2276.7B (81.5% mix, YoY +4.3%) and Operating Income of ¥28.4B (YoY -40.1%, 1.2% margin), resulting in a significant profit decline despite revenue growth and becoming the primary cause of the Company-wide profit decline. The Hotel Business achieved revenue growth and profit growth, with revenue of ¥202.9B (YoY +10.0%) and Operating Income of ¥34.1B (YoY +14.6%, 16.8% margin), making it the largest contributor to segment profit and surpassing the Travel Business. The Kyushu Sanko Group reported revenue of ¥200.8B (YoY +6.3%) and Operating Income of ¥7.3B (YoY +18.3%), with profit growth exceeding revenue growth. Consolidated Operating Income was ¥51.3B after deducting Company-wide expense adjustments of ¥-20.9B from total segment Operating Income of ¥72.2B, indicating a structure in which Company-wide expenses consume approximately 29% of segment profit.

Key Financial Indicators

【Profitability】The Operating Income Margin was 1.8%, down from 2.4% in the same period of the previous year, while the gross profit margin also declined to 31.1% (32.2% in the previous year). The SG&A expense ratio improved to 29.3% (29.8% in the previous year), but this was insufficient to offset the decline in gross profit.【Cash Flow Quality】Because data from the cash flow statement, including Operating Cash Flow, has not been provided, the analysis is limited to the income statement and balance sheet. The primary cause of the net loss was extraordinary losses, including the ¥59.4B loss on lease contract cancellations; the fact that the Company maintained profitability at the operating level supports an assessment of the quality of accounting earnings.【Investment Efficiency】ROE (annualized) was -8.5%, deteriorating from the previous year. Against total assets of ¥4040.6B, revenue was ¥2793.0B, indicating limited asset efficiency relative to business scale.【Financial Soundness】The Equity Ratio was 16.3%, down from the previous year, while net assets declined by ¥12.0B YoY to ¥660.0B. Current liabilities of ¥2628.9B exceeded current assets of ¥1970.3B, indicating a structure in which the importance of liquidity management is high.

Cash Flow Analysis

Because the respective figures for Operating Cash Flow, Investing Cash Flow, and Financing Cash Flow cannot be confirmed from this material, cash trends are analyzed based on movements in the income statement and balance sheet. Cash and deposits increased by ¥248.0B YoY to ¥1168.9B, while short-term borrowings also increased substantially from the previous year; therefore, it should be noted that the increase in cash does not necessarily indicate improved financial capacity. Accounts receivable and notes receivable were ¥312.4B, increasing at a pace exceeding revenue growth, and trends in the collection cycle require continued monitoring. The primary cause of the ¥49.9B net loss attributable to owners of the parent was a non-cash extraordinary loss, namely the ¥59.4B loss on lease contract cancellations; therefore, it does not directly indicate a deterioration in the Company’s cash-generation capacity during the period.

Quality of Earnings

The earnings structure for the period requires distinguishing recurring earning power from one-time factors, as the Company maintained profitability at the operating level but ultimately recorded a loss primarily due to extraordinary losses. Non-operating income of ¥22.9B included ¥7.8B in dividend income, while non-operating expenses of ¥28.1B included ¥16.5B in interest expense and ¥3.1B in foreign exchange losses. Against Ordinary Income of ¥46.0B, extraordinary losses of ¥61.1B were recorded, including ¥59.4B in losses on lease contract cancellations, causing Profit Before Tax to turn negative at ¥-13.0B. These extraordinary losses are strongly non-recurring in nature, and it would not be appropriate to equate the net loss for the period with a deterioration in recurring earning power. However, Comprehensive Income was ¥-3.5B, including ¥-12.4B attributable to owners of the parent; although foreign currency translation adjustments of +¥41.3B made a positive contribution, they were insufficient to fully offset the deterioration in net income, which should be noted when evaluating earnings quality.

Earnings Forecast and Guidance

The full-year Company forecast is revenue of ¥3950.0B (YoY +5.9%), Operating Income of ¥120.0B (YoY +3.2%), and Ordinary Income of ¥115.0B (YoY +1.0%), with no revisions to the earnings or dividend forecasts. The Q3 cumulative progress rates were 70.7% for revenue, 42.8% for Operating Income, and 40.0% for Ordinary Income, indicating a pronounced delay in profit progress compared with the standard 75% progress level. Achieving the full-year plan will require Q4 Operating Income of ¥68.7B, representing a significant improvement from the cumulative-period margin of 1.8%. The full-year forecast for net loss attributable to owners of the parent is ¥-10.0B, assuming a recovery from the cumulative ¥-49.9B; this outlook can be interpreted as assuming that the extraordinary losses will not recur in Q4.

Shareholder Returns

The Q2 dividend was ¥0 per share, while the full-year Company forecast remains ¥25 per share, with no revision. Based on the average number of shares outstanding during the period, the annual total dividend is estimated at approximately ¥18.7B. Since the full-year forecast is a ¥-10.0B net loss attributable to owners of the parent, the Payout Ratio cannot be calculated assuming a net loss, and dividend coverage by current-period earnings is not expected. The Q3 cumulative net loss attributable to owners of the parent was ¥-49.9B; from the perspective of dividend funding, profit recovery and cash holdings or financing capacity in Q4 will be important. No data on share repurchases is available, and the Total Return Ratio is not evaluated.

Risk Factors

1. Revenue Dependence on the Travel Business: Although the Travel Business, which accounts for 81.5% of the revenue mix, reported revenue growth (+4.3%), its Operating Income declined by -40.1% to ¥28.4B. The Company has a structure in which changes in the profitability of this business directly affect Company-wide profit, resulting in high sensitivity to pricing, procurement conditions, and demand trends.

2. Liquidity and Financing Structure Risk: Current liabilities of ¥2628.9B exceed current assets of ¥1970.3B, while short-term interest-bearing liabilities—including short-term borrowings, current maturities of long-term borrowings, and bonds due within one year—are substantial relative to cash and deposits of ¥1168.9B. The Equity Ratio has declined from the previous year to 16.3%, requiring continued monitoring of the stability of the financing structure.

3. Risk Regarding the Non-Recurrence of Extraordinary Losses: During the period, the Company recorded ¥61.1B in extraordinary losses, centered on a ¥59.4B loss on lease contract cancellations, which became the primary cause of the net loss. The full-year forecast assumes that extraordinary factors will not recur in Q4, and whether additional costs associated with the reorganization of locations or similar measures arise will require monitoring.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Return

The Company’s profitability is significantly below the industry median, and its Net Profit Margin is at a loss-making level within the industry.

Growth and Capital Efficiency

The revenue growth rate is also below the industry median, placing the Company at a relative disadvantage within the industry in both growth and profitability.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. Although the Company maintained its revenue growth trend, consolidated Operating Income declined by -18.1% due to a -40.1% decline in Operating Income from the Travel Business, which accounts for 80% of revenue. The Hotel Business secured profit growth with an Operating Income Margin of 16.8%, clearly demonstrating the difference in profitability across the business portfolio.

2. Extraordinary losses of ¥61.1B, including ¥59.4B in losses on lease contract cancellations, were the primary cause of the ¥49.9B net loss attributable to owners of the parent, meaning that the net loss for the period contains a significant one-time component. The full-year forecast net loss of ¥-10.0B assumes that this extraordinary factor will not recur in Q4.

3. Progress toward the full-year Operating Income forecast was 42.8%, below the standard progress level of 75%, requiring Q4 Operating Income of ¥68.7B, equivalent to more than 30% of the cumulative figure. The achievement of the full-year plan depends on the extent to which profitability in the Travel Business improves.

Theoretical Share Price (Reference Value)

Sensitivity: ¥486–¥514 at ±1% for the Cost of Equity, and ¥493–¥504 at ±0.1 for ω.

Notes:

• Because forecast ROE is below the Cost of Equity, the theoretical value is below Book Value per Share.
• Net assets as of the quarter-end are used (there is a timing gap relative to the full-year forecast).

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-08 / Mechanically calculated value based solely on publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not recommend investment in any specific security. The industry benchmark is 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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