| Metric | Current | Prior | YoY |
|---|---|---|---|
| Revenue | ¥422.3B | ¥443.9B | -4.9% |
| Operating Income | ¥12.8B | ¥22.7B | -43.5% |
| Ordinary Income | ¥12.9B | ¥22.7B | -43.2% |
| Net Income | ¥8.2B | ¥10.7B | -23.4% |
| ROE | 3.7% | 4.8% | - |
FY2026 Q3 cumulative results show Nack Corporation recording revenue of 422.3B yen (YoY -4.9%), operating income of 12.8B yen (YoY -43.5%), ordinary income of 12.9B yen (YoY -43.2%), and net income of 8.2B yen (YoY -23.4%). The substantial operating profit decline reflects a compression in operating margin to approximately 3.0% despite maintaining a high gross profit margin of 50.1%, as selling, general and administrative expenses weighed heavily on profitability. The effective tax rate stood at 39.4%. ROE declined to 3.7%, driven by low net profit margin of 1.9%, asset turnover of 1.083, and financial leverage of 1.75x. The company maintained its full-year guidance of 62.0B yen revenue and 2.9B yen operating income.
Revenue decreased 4.9% YoY to 422.3B yen, primarily driven by significant declines in the Housing Sales segment (-26.6%) and Construction Consulting segment (-15.5%). The Construction Consulting segment was impacted by delays and extensions in construction starts due to building code revisions, leading to deteriorating financial conditions among local contractor customers and reduced orders. The Housing Sales segment faced lower inventory turnover at KeidiaiI, reduced completed units at J-Wood, and declining orders at Shuwa Juken (acquired June 2024).
Operating income fell sharply by 43.5% to 12.8B yen, with operating margin compressing from approximately 5.1% to 3.0%. While gross profit margin remained stable at 50.1%, SG&A expenses increased both in absolute terms (from 189.8B yen to 198.9B yen) and as a percentage of sales, rising from approximately 42.7% to 47.1%. The company recorded approximately 10.5B yen in corporate overhead costs that were not allocated to segments, representing a 9.6B yen increase YoY and significantly pressuring group profitability. This suggests fixed cost deleverage as revenue declined.
Two segments turned to operating losses: Construction Consulting recorded an operating loss of 0.19B yen (versus 2.85B yen profit in prior year), and Housing Sales posted an operating loss of 0.15B yen (versus 1.14B yen profit). The Beauty and Health segment also saw operating profit decline 39.1% due to increased advertising investments for JIMOS and reduced sales at Toremy.
On a positive note, the core CreCla (water delivery) segment grew operating income by 10.0% to 13.93B yen on 3.3% revenue growth, benefiting from the subsidiary acquisition of Combi-Box in January 2025 and increased customers for the Putio water purification server. The Rental segment maintained stable performance with 11.43B yen operating income.
The gap between ordinary income (12.9B yen) and net income (8.2B yen) reflects an effective tax rate of 39.4%, which is elevated. Non-operating items showed net financial costs of approximately 0.6B yen. Special items included 1.67B yen in extraordinary gains (primarily 0.74B yen from investment securities sales) and 1.08B yen in extraordinary losses, resulting in minimal net impact.
This represents a "revenue down, profit down" pattern, with profit declining at a significantly faster rate than revenue due to operating deleverage and segment losses.
CreCla segment (water delivery business) is the core business, generating revenue of 120.51B yen (+3.3% YoY) and operating income of 13.93B yen (+10.0% YoY), representing an operating margin of 11.6%. This segment contributed the largest share of group operating profit and drove consolidated profit growth. The expansion was supported by increased Putio purification-type server customers and the consolidation of Combi-Box as a subsidiary in January 2025. Direct sales and franchise operations both performed solidly.
The Rental segment generated revenue of 137.27B yen (+0.3% YoY) and operating income of 11.43B yen (-7.2% YoY), with an operating margin of 8.3%. While Duskin With expanded store count and Care Services improved profitability, new store opening promotional expenses offset some gains. This segment remains the largest by revenue.
Construction Consulting segment posted revenue of 33.64B yen (-15.5% YoY) and operating loss of 0.19B yen (prior year profit of 2.85B yen). The segment was severely impacted by building code revisions that delayed construction starts and extended project timelines, leading to deteriorating conditions among local contractor customers and reduced consulting orders. The decline in high-margin consulting services drove the segment into loss territory.
Housing Sales segment recorded revenue of 68.06B yen (-26.6% YoY) and operating loss of 0.15B yen (prior year profit of 1.14B yen), with negative operating margin. KeidiaiI faced reduced condominium inventory sales, J-Wood experienced fewer completed units, and Shuwa Juken (acquired in June 2024) saw declining orders and expanded losses. This segment represents the most significant deterioration in both revenue and profitability.
Beauty and Health segment generated revenue of 51.32B yen (+2.3% YoY) but operating income declined to 2.50B yen (-39.1% YoY), yielding a 4.9% operating margin. JIMOS increased advertising and promotional investments while Toremy faced sales declines with major customers. Upsell business has been integrated into JIMOS.
Other segment (Yesmart stores, Kaitoru Daichichi buying services) posted revenue of 13.78B yen (+54.1% YoY) and operating loss of 1.98B yen as expansion investments precede profitability in these startup businesses.
Corporate overhead and adjustments totaled negative 10.50B yen in operating income, a significant 9.6B yen deterioration YoY, materially weighing on consolidated profitability. This suggests increased head office costs and unallocated expenses that scaled unfavorably with lower revenue.
Profitability: ROE 3.7% (significantly below prior periods), Operating Margin 3.0% (compressed from approximately 5.1% prior year), Net Profit Margin 1.9%, Gross Profit Margin 50.1%. The DuPont decomposition shows ROE of 3.7% comprises net margin of 1.9%, asset turnover of 1.083x, and financial leverage of 1.75x. ROE and margins are at multi-year lows.
Asset Efficiency: Asset Turnover 1.083x indicates relatively efficient asset utilization. Inventory Turnover 63 days (flagged for deterioration), with inventories increasing 20.2% to 36.32B yen. Sales for Real Estate inventory increased 29.1% to 44.32B yen, suggesting inventory buildup in housing business. Receivables Turnover appears stable.
Investment Activity: Goodwill of 6.75B yen on balance sheet, with 4.48B yen recognized from Shuwa Juken acquisition in May 2024. Total goodwill decreased 2.16B yen (-24.2%) YoY, warranting monitoring for impairment risk given housing segment losses.
Financial Health: Equity Ratio 57.3% (prior 58.6%), indicating solid capitalization though declining modestly. Current Ratio 207.8% and Quick Ratio 177.7% demonstrate strong short-term liquidity. Debt-to-Equity Ratio 0.75x and Debt-to-Capital Ratio 20.1% reflect conservative leverage overall.
Cash Position: Cash and equivalents of 51.32B yen provide a cash-to-short-term debt ratio of 2.59x, offering substantial liquidity headroom. However, short-term debt represents 48% of total liabilities (exceeding the 40% refinancing risk threshold), indicating elevated reliance on short-term funding.
Capital Efficiency: ROIC of 3.7% is low and suggests insufficient return on invested capital relative to likely cost of capital. Interest Coverage Ratio of 22.5x indicates ample capacity to service interest obligations.
Operating Cash Flow data is not disclosed in the XBRL filing, preventing calculation of OCF/Net Income ratio and assessment of earnings quality from a cash generation perspective. This represents a material limitation in evaluating the cash backing of reported profits.
Investing Cash Flow data is similarly unavailable, though balance sheet changes indicate ongoing M&A activity (Shuwa Juken acquisition generated 4.48B yen goodwill) and continued real estate inventory investments (Sales for Real Estate increased 10.0B yen or 29.1%).
Financing Cash Flow details are not provided. However, dividend payments can be inferred from guidance, and net debt position shows short-term borrowings of 27.0B yen and long-term debt of 29.22B yen (total interest-bearing debt approximately 56.2B yen).
Free Cash Flow cannot be calculated due to missing operating and investing CF data. The absence of cash flow statement data makes it impossible to verify whether the company is generating sufficient cash to support its 17 yen full-year dividend guidance (calculated payout ratio of 125.4% based on net income) or to fund the mid-term plan's announced 60B yen+ growth investments.
Working Capital increased to 130.03B yen, driven by inventory growth (inventories +6.03B yen, Sales for Real Estate +10.0B yen). The 63-day inventory turnover and quality alert on inventory deterioration suggest working capital may be consuming cash. Operating Working Capital Turnover at 63 days indicates room for efficiency improvement.
Cash Generation Assessment: Cannot be definitively assessed without operating CF data. The combination of declining profitability, rising inventory levels, and high calculated dividend payout ratio (125.4%) raises concerns about cash sustainability that cannot be resolved without full cash flow statement disclosure.
Ordinary income of 12.9B yen aligned closely with operating income of 12.8B yen, with net financial costs of approximately 0.6B yen representing normal business operations. The gap between ordinary income and net income is primarily attributable to a 39.4% effective tax rate.
Non-recurring items were modest: extraordinary gains of 1.67B yen (including 0.74B yen from investment securities sales) and extraordinary losses of 1.08B yen, netting to approximately 0.6B yen positive impact (less than 0.2% of revenue). These items do not materially distort underlying operating performance.
The substantial deterioration in operating profitability appears to reflect structural challenges rather than one-time items: (1) operating deleverage as fixed SG&A expenses increased while revenue declined, (2) corporate overhead costs rising 9.6B yen YoY, (3) segment-level operating losses in Construction Consulting and Housing Sales totaling 0.34B yen, and (4) construction market headwinds from regulatory changes.
However, earnings quality from a cash perspective cannot be assessed due to missing operating cash flow data. The inability to calculate OCF/Net Income ratio represents a significant gap. Working capital trends raise concerns: inventory increased 20.2% and Sales for Real Estate rose 29.1%, suggesting potential cash consumption in working capital buildup that cannot be confirmed without cash flow statements.
The 50.1% gross margin suggests strong pricing power or favorable product mix in core businesses (CreCla, Rental), but the inability to convert this to bottom-line profit due to SG&A burden indicates operating leverage issues that may persist absent structural cost actions.
Full-year FY2026 guidance remains unchanged at revenue of 62.0B yen and operating income of 2.9B yen. Q3 cumulative progress shows revenue achievement of 68.1% (422.3B yen / 620.0B yen) against the 75% standard for Q3, indicating the company is tracking approximately 7 percentage points behind on revenue. Operating income progress of 44.2% (12.8B yen / 29.0B yen) is significantly behind the 75% Q3 benchmark by approximately 31 percentage points, suggesting either substantial Q4 profit recovery is expected or guidance may face downside risk.
The company maintained guidance despite weak Q3 progress, implying management expects significant operating improvement in Q4. This would require operating income of approximately 16.2B yen in Q4 alone (29.0B yen full year less 12.8B yen Q3 YTD), which would exceed Q4 FY2025 by a substantial margin given full-year FY2025 operating income was 30.0B yen.
Mid-term plan targets through FY2028 call for revenue of 68.5B yen and operating income of 3.3B yen, representing modest growth from the FY2026 guidance base. Management characterizes FY2026-2028 as an investment phase prioritizing growth over near-term margin expansion, with strategic investments in human capital, new product development, CRM infrastructure, and geographic expansion. The plan allocates over 100B yen operating cash flow plus borrowings to 30B yen maintenance capex, 60B yen+ growth investments including M&A, and 30B yen+ shareholder returns over three years.
Long-term Vision 2035 targets 100.0B yen revenue and 8% operating margin (8.0B yen operating income), implying substantial acceleration beyond the mid-term plan period. Achievement depends on successful execution of last-mile delivery service expansion, customer lifetime value maximization, and reaching one million active customers across the platform.
The company paid a Q2 dividend of 5.0 yen per share and forecasts a year-end dividend of 17.0 yen, implying total annual dividend of 22.0 yen. Based on reported net income of 8.2B yen for Q3 YTD and assuming flat Q4 net income, the calculated dividend payout ratio would be approximately 125.4%, which significantly exceeds sustainable levels and the company's stated policy of maintaining payout ratio within 100%.
Management guidance indicates a full-year dividend policy targeting DOE (Dividend on Equity) of 4% and payout ratio ceiling of 100%. The apparent discrepancy between the 125.4% calculated payout and stated policy suggests either: (1) management expects substantially higher full-year net income than implied by Q3 run rate, (2) the company will pay dividends from retained earnings given priority to shareholder returns, or (3) guidance may be adjusted.
Without disclosed operating cash flow data, dividend coverage from free cash flow cannot be assessed. The combination of 125.4% calculated payout ratio, declining profitability, and increasing working capital requirements raises sustainability questions that require cash flow disclosure to resolve.
The mid-term plan commits to 30B yen+ cumulative shareholder returns over FY2026-2028 (dividends plus potential buybacks). Assuming approximately 10B yen annually in shareholder returns and projected operating CF of 100B yen+ over three years (33B yen+ annually), the total return ratio target appears achievable if operating cash generation meets plan. However, Q3 operating performance trends create uncertainty around both profit generation and cash conversion.
No share buyback activity was disclosed for the reporting period.
Near-term: (1) Q4 operating income recovery necessary to achieve full-year guidance of 29.0B yen, requiring approximately 16.2B yen Q4 profit against weak Q3 momentum; (2) Construction Consulting and Housing Sales segment return to profitability as building code revision impacts normalize and contractor customer conditions stabilize; (3) Inventory normalization in housing business as Sales for Real Estate inventory of 44.32B yen is monetized; (4) First full-year contribution from Shuwa Juken acquisition with potential turnaround execution; (5) CreCla segment continued customer growth in Putio water purification servers and Combi-Box integration synergies.
Long-term: (1) Mid-term plan FY2028 targets of 68.5B yen revenue and 3.3B yen operating income requiring CAGR of approximately 3.4% revenue and 4.3% operating income from FY2026 guidance base; (2) Geographic expansion of Rental segment with new Duskin With store openings in untapped regions and franchise M&A opportunities; (3) Long-term Vision 2035 achievement of 100.0B yen revenue and 8% operating margin through last-mile delivery platform monetization and customer base expansion to one million; (4) Cross-selling and customer lifetime value enhancement by leveraging existing customer relationships across CreCla, Rental, and Beauty segments; (5) Additional strategic M&A under 60B yen+ growth investment allocation in mid-term plan; (6) Digital transformation initiatives including CRM system implementation, franchise system deployment, and AI/DX utilization in Construction Consulting to improve operational efficiency; (7) Recovery in housing market fundamentals and normalization of construction industry conditions post-regulatory adjustment period.
Industry Position (Reference - Proprietary Analysis)
Note: The XBRL data classification may not perfectly align with industry categorization. The following presents comparative reference data from IT & Telecom sector as a directional benchmark, though Nack's multi-segment business model spans consumer services, real estate, and distribution.
Profitability: ROE 3.7% substantially trails the industry median of 8.2% (2025-Q3, IQR: 3.5%-13.3%, n=99), positioning in the bottom quartile and indicating significant underperformance. Net Profit Margin of 1.9% compares unfavorably to industry median of 5.6% (IQR: 2.2%-12.0%), ranking in the lower quartile. Operating Margin of 3.0% falls well below industry median of 8.0% (IQR: 3.4%-17.4%), confirming margin compression as a key challenge.
Growth: Revenue Growth of -4.9% YoY significantly lags industry median growth of +10.5% (IQR: -1.6% to +20.5%, n=97), placing in the bottom quartile. This negative growth contrasts sharply with sector expansion trends.
Financial Health: Equity Ratio of 57.3% slightly trails industry median of 59.5% (IQR: 43.7%-72.8%, n=99) but remains within a healthy range in the second quartile. Current Ratio of 207.8% (2.08x) compares favorably to industry median of 2.13x (IQR: 1.56x-3.58x), indicating adequate short-term liquidity at approximately the median.
Efficiency: Asset Turnover of 1.083x exceeds industry median of 0.68 (IQR: 0.52-0.95, n=99), ranking in the upper quartile and representing a relative strength. Inventory Turnover of 63 days compares less favorably to industry median of 13.17 days (IQR: 3.40-49.41 days, n=53), though this likely reflects the housing and real estate components of Nack's business model versus IT/telecom peers.
Overall Assessment: Nack's profitability metrics (ROE, margins) rank in the bottom quartile of the reference industry, indicating substantial room for improvement. Asset efficiency represents a relative strength, though inventory management warrants attention. The company's negative revenue growth sharply diverges from positive industry trends. While financial health metrics remain adequate, the profitability and growth underperformance versus sector benchmarks highlights the magnitude of operational challenges requiring management action.
Source: Proprietary analysis based on publicly available financial data. Industry: IT & Telecom sector (approximately 99 companies), comparison period: FY2025-Q3.
Construction Market Risk: Building code revisions continue to delay construction starts and extend project timelines, materially impacting the Construction Consulting segment (operating loss of 0.19B yen versus prior year profit of 2.85B yen) and Housing Sales segment (operating loss of 0.15B yen versus prior year profit of 1.14B yen). The deteriorating financial condition of small to mid-sized contractor customers represents ongoing revenue and credit risk. If regulatory headwinds persist beyond FY2026, these segments may face extended profitability challenges. Likelihood: High; Impact: High (combined segment revenue of 101.7B yen or 24% of consolidated sales).
Refinancing Risk: Short-term debt represents 48% of total liabilities, exceeding the 40% threshold that flags refinancing risk. While Interest Coverage Ratio of 22.5x indicates strong debt service capacity and the Current Ratio of 207.8% provides liquidity cushion, the company maintains 27.0B yen in short-term borrowings requiring rollover. Rising interest rates or tightening credit conditions could increase funding costs or limit access to refinancing. The concentration in short-term funding structures creates vulnerability to market conditions despite overall conservative leverage (D/E 0.75x). Likelihood: Medium; Impact: Medium to High.
Dividend Sustainability Risk: The calculated dividend payout ratio of 125.4% (based on Q3 YTD earnings run rate and announced 22 yen annual dividend) exceeds the company's stated 100% payout ceiling and sustainable levels. Without disclosed operating cash flow data, the ability to fund dividends from cash generation cannot be verified. If FY2026 full-year net income falls short of levels implied in guidance, the company may face pressure to reduce dividends or fund distributions from retained earnings, potentially constraining growth investment capacity under the mid-term plan. The stated DOE 4% policy may conflict with earnings sustainability at current profit levels (8.2B yen Q3 YTD implies approximately 10.9B yen full year, yielding 77.4% payout on 22 yen dividend, though still elevated). Likelihood: High; Impact: Medium.
Significant Profitability Deterioration: Q3 cumulative results show operating income declining 43.5% YoY with operating margin compressing to 3.0% from approximately 5.1%, driven by operating deleverage as SG&A expenses rose while revenue fell 4.9%. The 10.5B yen corporate overhead allocation (9.6B yen increase YoY) suggests structural cost challenges requiring management action. Two segments turned to operating losses (Construction Consulting -0.19B yen, Housing Sales -0.15B yen), indicating profitability is concentrated in CreCla and Rental core segments. ROE of 3.7% substantially trails historical levels and industry benchmarks, reflecting compressed margins and returns on invested capital. The sustainability of current profitability levels depends on successful cost structure optimization and segment turnarounds.
Guidance Achievement Uncertainty: Full-year operating income guidance of 29.0B yen requires approximately 16.2B yen in Q4 (56% of full-year target in single quarter), implying substantial sequential improvement from weak Q3 momentum. Q3 cumulative progress of 44.2% against the 75% benchmark indicates significant risk to guidance unless dramatic operating recovery materializes. The maintenance of guidance despite weak Q3 performance suggests either management conviction in Q4 acceleration or potential for future revision. Mid-term plan targets of 68.5B yen revenue and 3.3B yen operating income by FY2028 require reversal of current negative revenue trends and margin restoration.
Strategic Investment Phase Creates Near-Term Margin Pressure: Management explicitly positions FY2026-2028 as an investment phase prioritizing growth over near-term profitability, with investments in human capital, new products, CRM, geographic expansion, and M&A (60B yen+ growth investments planned). This strategic positioning explains tolerance for current margin compression but creates uncertainty around timing and magnitude of return on these investments. The Long-term Vision 2035 targets (100.0B yen revenue, 8% operating margin) imply substantial operating leverage improvement that has yet to manifest. Execution risk on the investment program and timeline to profitability recovery represent key uncertainties for stakeholders evaluating the franchise's long-term earnings power.
This report was automatically generated by AI integrating XBRL earnings data and PDF presentation materials as an earnings analysis tool. This is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled from publicly available earnings data. Please make investment decisions at your own responsibility and consult professionals as needed.
AI analysis of PDF earnings presentation
For the cumulative Q3 of the fiscal year ending March 2026, revenue was 42.229 billion yen (YoY ▲4.9%) and operating profit was 1.281 billion yen (▲43.5%), reflecting lower sales and a sharp decline in earnings. In the CreCla business, revenue and profit increased thanks to growth in water purifier server “putio” and the consolidation of Combi Box as a subsidiary. The Rental business also remained solid, with Duskin With continuing to expand its operating areas. Meanwhile, the Architectural Consulting business saw orders decline due to construction start delays and extended construction periods stemming from revisions to the Building Standards Act; the Housing business posted a larger loss due to lower sales in both subdivision and custom homes. The Beauty & Health business also recorded an operating loss, unable to offset weakness in consulting and housing. Higher company-wide expenses (▲0.960 billion yen) further squeezed profits. Full-year guidance is maintained at revenue of 62.0 billion yen and operating profit of 2.90 billion yen. The Medium-Term Management Plan (FY2026–FY2028) positions this period as an investment phase aimed at achieving the 2035 long-term vision, focusing on maximizing LTV, expanding operating areas, and enhancing the product and service lineup.
CreCla: Higher revenue and profit driven by the contribution from Combi Box (consolidated as a subsidiary in January 2025) and growth in putio customers; both company-operated and franchise channels remained solid. Rental: Modest revenue growth and improved operating margin due to proactive store openings of Duskin With and better profitability in care services. Architectural Consulting: Adverse impact from legal revisions led to deteriorating performance and fewer orders among local builders. A decline in sales in the high-margin consulting division pushed the segment into the red. Housing: Significant revenue decline due to reduced subdivision inventory at KDI and fewer completed units at J-wood. Shuwa Juken (consolidated in June 2024) saw a wider loss on lower orders. Beauty & Health: Profit declined due to increased advertising and promotional investment at JIMOS and lower sales at Toremy. The upsell business has been integrated into JIMOS.
Full-year guidance (revenue 62.0 billion yen, operating profit 2.9 billion yen) is maintained. Under the 2028 Medium-Term Plan, the company targets revenue of 68.5 billion yen and operating profit of 3.3 billion yen. CreCla, Rental, Beauty & Health, and Other (including new M&A) are expected to total 49.5 billion yen, while Consulting and Housing, facing a challenging environment, are planned to be maintained at 19.0 billion yen. The 2035 Long-Term Vision targets revenue of 100.0 billion yen and an operating margin of 8%, aiming to maximize LTV through last-mile utilization and to achieve a million customers.
The 2028 medium-term plan is an investment phase to achieve the long-term vision. The company will invest aggressively in human capital, new product development, marketing, and CRM build-out; as a result, profits are expected to be flat relative to top-line growth. Over the three-year period, cash allocation will utilize over 10.0 billion yen in operating CF and interest-bearing debt to execute more than 3.0 billion yen in maintenance capex, over 6.0 billion yen in growth investments, and more than 3.0 billion yen in shareholder returns. The dividend policy is DOE of 4% and a payout ratio within 100%.
CreCla: Define and embed the brand, pivot to health support services, deepen CRM, expand franchisee system rollouts, and improve delivery efficiency. Rental: Accelerate new area openings for Duskin With, improve care service margins, pursue M&A of Duskin franchisees, and enhance operational efficiency through IT investment. Architectural Consulting: Develop solutions for new target segments, expand menus for joining housing franchises, leverage AI/DX, and realize internal synergies. Housing: Focus on sourcing land information for subdivision housing, develop talent in preparation for a rising interest rate environment, and implement flexible cost control (build a sourcing scheme). Beauty & Health: Step up JIMOS advertising investment and strengthen brands, acquire new OEM cosmetics clients, and reinforce Toremy’s fulfillment services and quasi-drug development.
Continued impact on Architectural Consulting and Housing from construction start delays and extended construction periods due to revisions to the Building Standards Act (deteriorating conditions for core SME builder customers). Risk of lower sales in subdivision and custom homes due to housing market fluctuations (interest rate increases and supply-demand shifts). Churn risk associated with price revisions in the CreCla business (mitigated for existing customers through pre-emptive measures, but under continued monitoring). Risk of slower store opening pace in the Rental business due to delays in hiring and training. M&A integration risks: Potential for synergies from Combi Box, Shuwa Juken, and others not to materialize as expected.