Can the company absorb the loss of education projects and recover from FY2027-H1 to its full-year forecast?

Revenue in Q1 FY2027 was ¥971 million, down 3.7% year on year. The operating loss was approximately ¥253 million, the ordinary loss approximately ¥222 million and the net loss attributable to owners of the parent approximately ¥177 million, with losses widening from the previous year. The company attributed the revenue decline to the loss of large-scale entrance-examination revision and initial implementation projects in its education operations that had been recorded in the previous fiscal year, as well as the end of mock-examination-related services.

The company has consistently explained that revenue and profit from university entrance-examination operations tend to be concentrated in Q4, resulting in losses through the first half. In fact, first-half revenue and operating loss were ¥2,108 million and ¥376.784 million, respectively, in FY2025, and ¥2,101 million and ¥423.979 million in FY2026. Accordingly, a loss in the first half of FY2027 is expected, but the key distinction between ordinary seasonality and deterioration in the business will be whether the loss falls further below the prior-year level or narrows as the impact of lost education projects runs its course.

The full-year forecasts remain unchanged at ¥7,000 million in revenue, ¥460 million in operating profit, ¥500 million in ordinary profit and ¥300 million in net profit attributable to owners of the parent. Q1 revenue represented only approximately 13.9% of the full-year revenue forecast, while the company has already posted an operating loss of approximately ¥253 million, meaning that substantial profit will be required in the second half, particularly Q4. Revenue and operating profit were ¥6,657 million and ¥606 million, respectively, in FY2026. Thus, the FY2027 plan calls for higher revenue but a 24.1% decline in operating profit, and the first-half results should clarify whether this assumed decline reflects front-loaded costs or weaker earnings power.

Q1 operating losses were also widened by directly expensing new-service development costs for the human-resource development support business and by higher research and development expenses. In the next results announcement, it will be important to disclose, to the extent possible, the revenue lost from education projects, new-service-related costs, research and development expenses, and the revenue increase from price adjustments for existing services separately. If first-half revenue exceeds the previous first-half figure of ¥2,101 million and the operating loss narrows from ¥423.979 million, the likelihood of maintaining the full-year forecast will increase. If both revenue and the loss are worse than in the previous first half, the result should be viewed as a delay in progress that cannot be explained solely by the concentration of earnings in the second half.