| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥83.6B | ¥81.6B | +2.4% |
| Operating Income | ¥23.8B | ¥23.5B | +1.2% |
| Ordinary Income | ¥24.3B | ¥24.0B | +1.2% |
| Net Income | ¥17.0B | ¥16.5B | +2.7% |
| ROE | 6.1% | 6.0% | - |
For FY2026 Q2, Revenue was ¥83.6B (YoY +¥2.0B +2.4%), Operating Income was ¥23.8B (YoY +¥0.3B +1.2%), Ordinary Income was ¥24.3B (YoY +¥0.3B +1.2%), and Net Income was ¥17.0B (YoY +¥0.4B +2.7%). Revenue increased for the second consecutive period, and all profit measures exceeded the prior-year period. Operating margin remained high at 28.5% (down 0.3pt from 28.8% a year ago), while SG&A ratio rose to 5.9% (up 0.3pt from 5.6%), slightly compressing margins. Net margin improved slightly to 20.3% (up 0.1pt from 20.2%) due to stable tax burden. Progress against full-year guidance is 50.7% for Revenue, 60.4% for Operating Income, 60.3% for Ordinary Income, and 61.6% for Net Income, indicating profits are running ahead of schedule.
[Revenue] Revenue increased to ¥83.6B (YoY +2.4%). Cost of sales was ¥54.8B (prior ¥53.5B, +2.4%), increasing in line with sales; gross profit was ¥28.8B (YoY +2.5%), and gross margin remained flat at 34.4% (prior 34.4%). Efficiency on the cost side has been maintained due to stable utilization and scale benefits in the classroom business.
[P&L] Operating Income rose to ¥23.8B (YoY +1.2%), but the growth lagged Revenue growth of +2.4%. SG&A was ¥5.0B (prior ¥4.5B, +9.1%), growing much faster than sales; SG&A ratio rose to 5.9% (up 0.3pt from 5.6%), which contributed to the 0.3pt reduction in operating margin. Non-operating income was ¥1.0B (including ¥0.2B in interest on marketable securities), non-operating expenses were ¥0.5B (interest expense ¥0.0B), yielding net non-operating income of ¥0.5B. Ordinary Income was ¥24.3B (YoY +1.2%). A gain on sale of fixed assets of ¥0.3B was recorded as extraordinary income, bringing Profit Before Tax to ¥24.6B (YoY +2.4%). Income taxes were ¥7.6B (effective tax rate 30.9%, nearly unchanged from 31.1% a year ago), and Net Income was ¥17.0B (YoY +2.7%), resulting in a year of both revenue and profit growth.
[Profitability] Operating margin 28.5% (down 0.3pt from 28.8%), Net margin 20.3% (up 0.1pt from 20.2%), and EBITDA margin 31.8% all remain at high levels. ROE is 6.1%, composed of Net margin 20.3% × Asset turnover 0.27 × Financial leverage 1.10. Although the rise in SG&A ratio pressured operating margin, Net margin edged up due to stable tax burden. [Cash Quality] Operating Cash Flow / Net Income is 0.93x, OCF/EBITDA is 0.59x, and cash conversion efficiency has slightly declined due to working capital build-up. Accrual ratio is 0.4%, indicating high earnings quality. [Investment Efficiency] Capex / Depreciation is 0.59x, indicating restrained renewal investment and maintained asset efficiency, while suggesting room for mid-to-long-term capex for renewal/expansion. [Financial Soundness] Equity Ratio is 90.6%, Current Ratio 407%, interest-bearing debt ¥0.2B (Debt/EBITDA 0.01x), effectively net-debt free with an extremely strong financial base. Cash and deposits are ¥75.9B, and interest coverage is over ~10,000x, indicating excellent solvency.
Operating Cash Flow was ¥15.8B (YoY +1.4%), or 0.93x of Net Income ¥17.0B, slightly below benchmark but within acceptable range. Working capital increases (Accounts receivable increase -¥1.6B, Inventories increase -¥0.5B, Deferred revenue decrease -¥1.6B) pressured cash generation, resulting in OCF/EBITDA of 0.59x. Investing Cash Flow was -¥16.3B, driven mainly by acquisition of investment securities -¥5.0B and time deposits placed -¥10.0B; capital expenditures were limited to -¥1.6B. Financing Cash Flow was -¥12.1B, reflecting shareholder returns: dividend payments -¥7.1B and share buybacks -¥6.7B. Free Cash Flow was -¥0.5B (Operating CF + Investing CF), indicating that cash generation during the period did not cover shareholder returns and part of the abundant cash balance was used. Ending cash was ¥63.2B (down ¥12.6B from opening ¥75.8B), and liquidity remains ample.
Of Net Income ¥17.0B, Operating Income ¥23.8B forms the core of recurring earnings, supplemented by net non-operating income +¥0.5B (including ¥0.2B interest on marketable securities) and extraordinary income ¥0.3B (gain on sale of fixed assets), indicating the majority of profits are from core operations. Of non-operating income ¥1.0B, ¥0.2B is interest on held investment securities, representing stable income with high recurrence. The extraordinary income ¥0.3B is a one-off with low sustainability. Accrual ratio is very low at 0.4% ((Operating CF ¥15.8B - Net Income ¥17.0B) / Total assets ¥306.2B × 100), indicating profits are backed by cash. However, working capital increases (Accounts receivable +¥1.4B, Inventories +¥0.5B) led to Operating CF / Net Income of 0.93x (<1), slightly slowing cash conversion. Comprehensive income is roughly equivalent to Net Income, with minor changes in other comprehensive income from marketable securities, indicating a clean earnings profile from a quality perspective.
Full-year guidance is unchanged: Revenue ¥164.9B (YoY +4.1%), Operating Income ¥39.4B (YoY +4.3%), Ordinary Income ¥40.2B (YoY +4.0%), Net Income ¥27.5B (YoY +2.4%). H1 progress rates are Revenue 50.7%, Operating Income 60.4%, Ordinary Income 60.3%, Net Income 61.6%, indicating profit progress exceeding 60% and running ahead. The company assumes H2 Revenue ¥81.3B (below H1 ¥83.6B) and H2 Operating Income ¥15.6B (well below H1 ¥23.8B), incorporating seasonality and higher H2 costs into the full-year plan. Given current progress, the probability of achieving the full-year plan is high, with upside potential.
An interim dividend of ¥44 per share was paid. Based on average shares outstanding of 15,636 thousand shares during the period, total dividends amount to approximately ¥6.9B. The dividend payout ratio against Net Income ¥17.0B is about 41%, a healthy level. Additionally, share buybacks of ¥6.7B were executed, bringing total shareholder returns to ¥13.6B and Total Return Ratio to approximately 80% ((dividends ¥6.9B + buybacks ¥6.7B) / Net Income ¥17.0B), representing a high level of shareholder returns. Full-year dividend forecast remains ¥44 (prior ¥44, unchanged), which implies a full-year payout ratio of about 25% against full-year Net Income forecast ¥27.5B, a conservative stance. Although Free Cash Flow is negative ¥0.5B, the substantial cash balance ¥75.9B and low leverage reduce short-term concerns about sustaining dividends and buybacks. Medium-term, recovery of Operating CF and balance in investment allocation will be key to sustaining total returns.
Margin pressure risk from rising SG&A: SG&A ¥5.0B (YoY +9.1%) grew far faster than Revenue growth +2.4%, raising SG&A ratio to 5.9% (up 0.3pt from 5.6%). Continued rises in labor and operating costs could compress the currently high Operating margin of 28.5%. Cost control and productivity improvements are required.
Cash conversion efficiency risk from working capital increases: Accounts receivable ¥2.4B (prior ¥1.0B, +150%), Inventories ¥0.9B (prior ¥0.4B, +145%) show rapid working capital growth, resulting in low OCF/EBITDA 0.59x. Continued delays in receivables collection or inventory obsolescence could reduce cash generation and constrain shareholder returns and investment capacity.
Future cash outflow risk from asset retirement obligations: Asset retirement obligations ¥6.0B represent 20.9% of Total Liabilities ¥28.8B, a relatively large proportion, and may lead to cash outflows upon classroom exits or renovations. Aging facilities and contract renewals may increase costs and become mid-to-long-term financial burdens.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 28.5% | 14.0% (3.8%–18.5%) | +14.5pt |
| Net Margin | 20.3% | 9.2% (1.1%–14.0%) | +11.1pt |
Profitability metrics significantly exceed industry medians, highlighting strong earnings power.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 2.4% | 21.0% (15.5%–26.8%) | -18.6pt |
Revenue growth trails the industry median substantially, placing the company in the lower ranks for growth.
※Source: Company compilation
Profit progress ahead of schedule and upside to full-year: Operating Income progress 60.4%, Net Income progress 61.6% exceed 60%, indicating high probability of achieving full-year plan with upside potential. High Operating margin 28.5% and EBITDA margin 31.8% are expected to persist, and the effectively net-debt-free balance sheet supports stable earnings generation.
Cash conversion efficiency and allocation of investment are key issues: OCF/EBITDA 0.59x, FCF -¥0.5B, and continued restrained capex (Capex/Depreciation 0.59x) point to declining cash conversion efficiency. Working capital increases may reflect timing shifts, but the timing of restoring investment allocation—important for capex for renewals/new openings and medium-to-long-term growth drivers—should be monitored. The presence of asset retirement obligations ¥6.0B (20.9% of total liabilities) should also be noted as a potential future capex/cash-outflow.
This report was automatically generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company from public financial statements. Investment decisions are your responsibility; consult professionals as needed.