SHINGAKUKAI HOLDINGS CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥3.40B
• Operating Income: ¥-607M
• Net Income: ¥-501M
• EPS: ¥-44.31

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Shingakukai Holdings (TSE:9760) posted FY2026 Q2 consolidated results under JGAAP showing strong top-line momentum but continued losses. Revenue rose 21.1% YoY to ¥3,397m, indicating successful enrollment gains, price mix, or expansion of service lines. Despite this, cost of sales of ¥2,921.6m exceeded revenue, resulting in a negative reported gross profit of -¥117.3m and a gross margin of -3.5%, an unusual outcome for an education services operator and a key focus area. Operating loss remained sizable at -¥607m (flat YoY per disclosure), suggesting weak incremental margins and cost absorption despite revenue growth. Ordinary loss was -¥633m, with limited financial burden as interest expense was only ¥6.8m (interest coverage -88.8x driven by operating loss rather than finance costs). Net loss widened to -¥771m, with EPS of -¥44.31. DuPont decomposition indicates ROE of -9.17%, driven by a -22.7% net margin, modest asset turnover of 0.197x, and financial leverage of 2.05x. The balance sheet shows total assets of ¥17,226m and current assets of ¥15,700m, versus total liabilities of ¥14,303m (current liabilities ¥14,028m), supporting a current ratio of 111.9% and working capital of ¥1,671.8m. Equity is disclosed at ¥8,411m; the reported equity ratio is shown as 0.0% (treated as undisclosed rather than actual). Liquidity appears adequate near term, but solvency hinges on restoring operating profitability. Cash flow statement items are undisclosed in this dataset (zeros), limiting assessment of cash conversion and FCF coverage. Dividends are currently suspended (DPS ¥0), which is consistent with ongoing losses and the need to preserve liquidity. Overall, the quarter demonstrates revenue traction but insufficient cost control, with negative gross margin and operating loss implying elevated teacher personnel costs, classroom expenses, or pricing pressure. Seasonality in education could explain some first-half weakness, but the negative gross margin is still concerning and should normalize in the peak exam season if pricing and utilization improve. Key monitoring points are gross margin recovery, SG&A efficiency, and enrollment/ARPU trends into 2H. Data limitations (notably CF, D&A, and per-share base details) constrain precision, but the available metrics point to a business still in turnaround mode.

Profitability Analysis

ROE of -9.17% decomposes into net profit margin -22.70%, asset turnover 0.197x, and financial leverage 2.05x. The principal drag is margin: reported gross margin is -3.5% (gross profit -¥117.3m on revenue ¥3,397m), signaling cost of sales above revenue in the period. Operating loss of -¥607m implies negative operating margin of roughly -17.9%, with weak operating leverage despite 21.1% YoY revenue growth; incremental profitability appears near zero as the operating loss was flat YoY. Ordinary loss -¥633m indicates limited additional drag from non-operating items; interest expense was modest at ¥6.8m. The interest coverage ratio of -88.8x reflects the operating loss, not high financing costs. The flat YoY operating loss alongside strong sales growth suggests either price discounting, a shift in revenue mix with lower contribution margins, elevated instructional personnel costs, or capacity ramp-up costs that have not yet been absorbed. Effective tax expense of ¥52.6m despite a loss likely represents inhabitant taxes and non-deductible items; it further suppresses net margin. Overall, profitability is constrained at the gross level, and margin recovery is the critical lever for ROE improvement.

Growth Assessment

Revenue grew 21.1% YoY to ¥3,397m, indicating robust demand or expanded capacity. However, profit growth lagged significantly, with operating loss unchanged YoY, implying low or negative incremental margins during the period. The negative gross margin points to cost pressures (e.g., teacher wages, classroom occupancy, materials) or revenue recognition seasonality outpacing cost recognition timing. Given education seasonality, second-half performance typically benefits from peak exam preparation and higher utilization; thus, revenue growth could be sustainable if enrollments and ARPU hold. Nonetheless, profit quality is weak: losses at both operating and net levels, and a tax charge despite losses, dilute earnings quality. Without disclosed cash flows, it is unclear whether growth is cash-consuming; prudent assumption is that current growth has been accompanied by elevated working costs. Outlook hinges on management’s ability to normalize gross margins, drive SG&A efficiency, and improve utilization into 2H; absent that, revenue growth may not translate into earnings.

Financial Health

Total assets are ¥17,226m and total liabilities ¥14,303m, implying leverage is meaningful but not excessive; financial leverage used in DuPont is 2.05x. Current assets of ¥15,700m versus current liabilities of ¥14,028m produce a current ratio of 111.9% and quick ratio of 111.8%, aided by low inventories (¥11.1m), suggesting near-term liquidity coverage is adequate. Working capital stands at ¥1,671.8m, providing some buffer for seasonal swings. Interest expense of ¥6.8m is small relative to the operating loss, indicating funding costs are not the primary issue. Debt-to-equity is 1.70x, which is elevated for an education operator, increasing sensitivity to earnings volatility. The reported equity ratio is shown as 0.0% in the feed and should be treated as undisclosed; based on provided equity of ¥8,411m, equity supports solvency, but sustained losses could erode this cushion over time. Overall, liquidity is acceptable, but solvency resilience depends on restoring positive operating cash flow.

Cash Flow Quality

Operating, investing, and financing cash flows are undisclosed in this dataset (zeros). Accordingly, OCF/Net Income and Free Cash Flow cannot be assessed from reported cash flows; the presented ratios default to zero due to non-disclosure, not actual results. Earnings quality appears weak given the negative gross and operating margins, which typically correlate with negative operating cash flow absent working capital releases. Working capital appears positive (¥1,671.8m), but without detail we cannot judge cash conversion cycles, tuition prepayment behavior, or receivables trends. Depreciation and amortization are undisclosed; therefore, EBITDA cannot be evaluated. In sum, cash flow quality cannot be confirmed; the base case is that cash burn persists until margins recover, but confirmation requires the full CF statement.

Dividend Sustainability

Annual DPS is ¥0 with a payout ratio of 0%, consistent with ongoing losses (net income -¥771m). With undisclosed OCF and FCF, coverage analysis cannot be performed; given negative operating profit, internal funding capacity for dividends is likely insufficient. Capital allocation prudence suggests maintaining suspension until operating cash flow turns positive and margins normalize. Policy outlook likely prioritizes turnaround and balance sheet stability over distributions in the near term. A resumption would require sustained profitability, visible FCF, and leverage reduction.

Risk Assessment

Business Risks:

• Negative gross margin indicating pricing pressure or cost overruns in instructional delivery
• Seasonality risk in education services leading to first-half weakness and utilization volatility
• Enrollment and ARPU variability due to competitive dynamics among cram schools and online alternatives
• Cost inflation in teacher wages and facility expenses
• Execution risk in capacity ramp-up or curriculum changes impacting margins

Financial Risks:

• Elevated debt-to-equity of 1.70x amid operating losses
• Potential cash burn absent margin recovery; undisclosed CFs limit visibility
• Interest coverage negative due to operating losses, reducing flexibility if rates rise
• Tax and non-operating charges despite losses further pressuring net results

Key Concerns:

• Gross margin reported at -3.5% with cost of sales exceeding revenue
• Operating loss -¥607m unchanged YoY despite 21.1% revenue growth (weak incremental margins)
• Lack of disclosed cash flow data impedes assessment of runway and FCF
• Need for rapid cost normalization and utilization improvement into 2H

Investment Implications

Key Takeaways:

• Top-line growth is strong (+21.1% YoY) but not translating into profits
• Gross margin is negative, making margin recovery the pivotal issue
• Operating leverage is weak; expenses are scaling with or faster than revenue
• Liquidity is adequate near term (current ratio ~1.12x), but solvency depends on restoring OCF
• Dividend suspension is appropriate until profitability and FCF return

Metrics to Watch:

• Gross margin and cost of sales ratio per student
• Operating margin and SG&A-to-sales trajectory
• Enrollments, ARPU, retention, and classroom occupancy/utilization rates
• Interest-bearing debt levels and interest expense trend
• Operating cash flow and free cash flow once disclosed
• Seasonal 2H performance versus plan (exam season contribution)

Relative Positioning: Within Japan’s education services/cram school space, the company shows stronger recent revenue growth than many peers but materially weaker profitability, evidenced by a negative gross margin and persistent operating losses; peers with positive gross margins and leaner cost structures currently hold a more favorable operating position.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
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