High full-year net income progress, but dependent on negative goodwill

Consolidated revenue for April through June 2026 was ¥3,597 million, up 4.4% year on year, while operating income was ¥135 million, up 127.0%. The operating margin was approximately 3.8% on a simple calculation, improving by approximately 2.0 percentage points from approximately 1.7% in the same period of the previous year. Operating income grew faster than revenue, indicating that core profitability in at least the first quarter exceeded the year-earlier level.

Progress against the full-year forecast was 25.9% for revenue, 25.5% for operating income, 40.8% for ordinary income and 67.1% for net income attributable to owners of the parent. Revenue and operating income were close to a simple one-quarter run rate for the first quarter, but net income was significantly ahead. Whether cumulative second-quarter operating income exceeds ¥265 million provides a useful mechanical 50% progress benchmark without taking seasonality into account.

The lead in net income includes the impact of non-operating and extraordinary items. The first quarter included a ¥287,456 thousand gain on negative goodwill, a ¥1,879 thousand gain on the sale of fixed assets and a ¥6,539 thousand loss on the disposal of fixed assets. The gain on negative goodwill alone was approximately 2.1 times operating income of ¥135 million and cannot be ignored when assessing the scale of reported quarterly net income of ¥470 million. Accordingly, it would not be appropriate to assess the likelihood of achieving the full-year earnings forecast based solely on the 67.1% progress rate for net income.

In FY2027-H1, in addition to cumulative operating income and the operating margin, we will need to check any additional extraordinary gains and losses, acquisition-related expenses and the breakdown of the tax burden. The first-quarter disclosure did not provide a complete bridge showing how many millions of yen each earnings factor contributed. The 2Q earnings release will therefore need to distinguish core operating profit from extraordinary gains and losses to determine how much of the ¥700 million full-year net income forecast can be maintained excluding the gain on negative goodwill.