This article first appeared on GuruFocus .
Release Date: July 30, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Record-high new sell-side deal inquiries of 347 in Q1, up 20.1% year-over-year, indicating strong future revenue pipeline.
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Revenue grew 9.7% to 9.891 billion, with ordinary profit up 20% to 3.039 billion, driven by strong M&A performance.
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Robust balance sheet with net assets of 477.32 billion and an equity ratio of 87.7%, ensuring financial stability.
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Successful integration of J-Capital, contributing 780 million in special profits from A to G catalyst investments, diversifying income streams.
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Strategic initiatives like 'Vision 300' and expansion into new markets (e.g., Fukuoka, overseas) position the company for long-term growth.
Negative Points
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Completed M&A deals declined 11% year-over-year to 188, reflecting a slowdown in transaction closures.
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Operating expenses rose, with IT-related costs up 22.5% and advertising expenses up 62.5%, pressuring margins.
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The company faces regulatory uncertainty with the upcoming M&A intermediary registration system, which may increase compliance costs.
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Reliance on special profits from J-Capital (780 million) suggests core business profitability may be overstated.
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The process of due diligence has lengthened to 56 days, potentially delaying deal completions and impacting revenue timing.
Q & A Highlights
Q: What were the key financial results for the first quarter of fiscal year 2027, and what is the outlook for the rest of the year? A: The company reported record-high sales of 9.1 billion, up 0.9% year-on-year, and ordinary profit of 2.25 billion, up 11%. However, these figures include a special profit of 780 million from the A to G fund. Excluding this, core sales reached 9.891 billion (up 9.7%), and ordinary profit was 3.039 billion (up 20%). The company is confident that the second, third, and fourth quarters will show strong performance, driven by a record-high pipeline of deals in progress.
Q: What is the status of the M&A deal pipeline, and how does it support future performance? A: The number of new sell-side deals in Q1 reached a record high of 347, up 20.1% year-on-year. The total number of deals in progress at the end of June was also at a record high, up 17% year-on-year. The company believes this robust pipeline will translate into strong performance in the second and third quarters, with the highest-ever sales and profits expected for the full year.
Q: Can you explain the recent organizational changes and the new "Second Founding" initiative? A: The company has entered its "Second Founding" phase, a succession plan for a new generation. This involves a major reorganization, including the creation of a Business Management Division to strengthen oversight and ensure high-quality M&A. The company is also focusing on expanding from its traditional SME base to include mid-sized companies, requiring new strategies and structures to serve this larger market segment.
Q: What is the company's strategy regarding AI and data utilization? A: The company views AI as a major opportunity and is building its own proprietary data platform. They are collecting and organizing data from client interviews and deal processes to create a data-based foundation. This is considered crucial for leveraging AI effectively in the future, and they are also collaborating with academic institutions like Kansai University on joint research.
Q: What are the details of the shareholder return policy and the mid-term plan? A: The company plans to continue its dividend policy, targeting a payout ratio of over 60% during the mid-term plan period ending March 2028. For the fiscal year ending March 2027, they project a total dividend of 29 per share, including a special dividend of 4. The projected payout ratio for this year is 71.3%, and they aim to maintain a ROE of around 24% through the mid-term plan period.
Q: How is the company addressing the new M&A registration and examination system in Japan? A: The company sees the new registration system as a positive development that will formalize the industry. They believe it will be advantageous for established, compliant firms like Nihon M&A Center, as it will raise the barrier for entry and potentially reduce competition from less qualified players. The examination system is expected to start in 2027.
Q: What is the progress and strategy for the company's overseas business? A: The overseas business is in its 10th year and is expanding steadily. The company recently announced a business alliance with a US-based organization, Generation. They are focusing on the ASEAN-5 region and see significant potential for M&A involving Japanese companies with partners in India. The overseas business is a key growth driver for the future.
Q: Can you elaborate on the company's PMI (Post-Merger Integration) services and its importance? A: The company recognizes PMI as a critical service and believes it is a leader in this area. The number of PMI service contracts has been growing, from 55 to 66 to 93 and now to 132 cases. They aim to increase this to 200, 250, and 300 cases, and are investing in research and development to enhance their PMI capabilities.
Q: What is the company's strategy for the "A to G" fund and its investment business? A: The company established a mid-term subsidiary, J-Capital, to manage the "A to G" fund, which focuses on investments in Japanese companies. This fund generated a profit of approximately 780 million in Q1. The company views this as a complementary business to its core M&A advisory, expanding its service offerings and creating synergies.
Q: How is the company addressing the trend of M&A becoming more of a B2C business? A: The company acknowledges that M&A is shifting from a purely B2B transaction to one with more B2C characteristics. This is due to the increasing number of SME owners looking to sell their businesses as they age. The company is adapting its marketing and sales strategies to reach these individual business owners more effectively, using both regional and industry-specific approaches.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
