Funai Soken Holdings Incorporated 2Q Earnings Preview

Confirming sustained double-digit growth in monthly retainer services and expansion of mid-tier corporate consulting; focus is on whether front-loaded investment pressure on margins eases in 2Q

PublishedAugust 5, 2026 at 15:30 GMT+9

Summary

For the 2Q results of the first year under the medium-term management plan (FY2026–2028), the key checkpoint is whether growth momentum in monthly retainer consulting—the core business—has been maintained. In addition to its SME consulting base, the company aspires to become the leading player in "mid-tier corporate consulting" and "mid-tier corporate transformation consulting," areas where government policy provides a tailwind. The sustainability of client unit price increases—driven by AX/DX consulting expansion and strengthened intra-group alliances—will be tested. In 1Q, higher SG&A from human capital investment, M&A-related spending, and office investment weighed on OPM. However, the company's 1H cumulative plan calls for operating income of JPY 4.7B (+0.3% YoY), implying a return to profit growth—making this a critical juncture to assess whether the balance between top-line acceleration and cost absorption is tracking to plan. How M&A and organizational restructuring initiatives—including the group integration of Logicreate and the consolidation of intra-group FAS operations—translate into financial results also warrants close attention.

Key Points for Next Quarter

Key Points & Focus	Implications
Revenue GrowthProgress toward 1H cumulative revenue plan of JPY 17.5B	1Q came in at JPY 7,944M (45.4% achievement rate), requiring JPY 9,556M in 2Q standalone. Whether monthly retainer services sustain double-digit growth (1Q: +10.2%) is the key
Margin ImprovementOPM trend YoY	1Q was 26.4% (vs. 29.7% in the prior-year period, -3.3pt). To recover toward the 1H cumulative planned OPM of 26.9% (4,700/17,500), deceleration in SG&A growth needs to be confirmed
Front-Loaded Investment ImpactSG&A breakdown (personnel costs, goodwill amortization, office-related)	1Q SG&A was JPY 1,285M (+47.6% YoY); goodwill amortization was JPY 89M (+230.8% YoY). Stabilization of the growth pace in 2Q is a prerequisite for achieving profit targets
Order TrendsConsulting orders received and order backlog trends	1Q order backlog of JPY 9,640M (+9.1% YoY) was solid, but recovery in orders received of JPY 5,234M (-7.0% YoY) will determine whether growth momentum is sustained
Mid-Tier Corporate StrategyRevenue and client count for mid-tier corporate consulting	The company positions mid-tier corporate and mid-tier corporate transformation consulting as growth drivers under its mid-term plan; worth confirming whether KPI disclosure for this segment is provided
AX/DX ConsultingProgress of AX (AI Transformation) and DX-related services	As major consulting firms ramp up their AI agent offerings, monitoring the company's specific differentiation strategies through partnerships with global platform providers is critical
Capital EfficiencyEquity ratio and ROE trends	Equity ratio stands at 78.2% (vs. 72.4% at prior FY-end), a high level. With full-year net income guidance of JPY 6,550M against equity of ~JPY 24,500M, our estimated ROE is ~26%. Assessing the balance with shareholder return policies is warranted

Key Issues from Previous Results (FY2026/12 1Q)

1Q results showed revenue of JPY 7,944M (+2.2% YoY) and operating income of JPY 2,100M (-9.0% YoY)—top-line growth but profit decline. Monthly retainer services and management study groups expanded steadily, while the policy-driven contraction of logistics BPO and higher front-loaded investment costs weighed on profits. As the first year of the FY2026–2028 medium-term plan, this is a phase where growth investment takes priority, and the timing of when returns from these investments materialize will be a key debate going forward.

1. Sustainability of Monthly Retainer Consulting Growth

Prior Quarter:
Monthly retainer revenue of JPY 4,620M (+10.2% YoY), comprising 58.2% of total revenue
This Quarter Checkpoints:
Continuation of the upward trend in contract unit prices and new client acquisition; change in mid-tier corporate mix
Key Metrics:
Monthly retainer YoY growth rate (double-digit maintenance as benchmark), client unit price and client count trends

Monthly retainer services are the core business, accounting for 58.2% of revenue. In 1Q, higher contract unit prices and client count growth drove +10.2% double-digit growth. If the expansion strategy targeting mid-tier corporates gains traction, there is a strong probability of continued growth on both the unit price and client count axes.

2. Balancing Front-Loaded Investment and OPM

Prior Quarter:
OPM 26.4% (vs. 29.7% in the prior-year period); SG&A JPY 1,285M (+JPY 414M YoY)
This Quarter Checkpoints:
Whether 1H cumulative OPM approaches the company plan of 26.9%; deceleration in SG&A growth
Key Metrics:
SG&A YoY growth rate (change from 1Q's +47.6%), goodwill amortization level

1Q SG&A reached JPY 1,285M, up +47.6% from JPY 871M in the prior-year period, dragging OPM down by 3.3pt. Human capital investment, M&A-related costs, and new office investment were the primary drivers, with office relocation costs of JPY 138M also booked as extraordinary losses.

3. Strategic Contraction of Logistics BPO and Logicreate Integration Effects

Prior Quarter:
Logistics BPO revenue JPY 610M (-30.2% YoY); Logicreate group integration (January 2026)
This Quarter Checkpoints:
Progress of logistics BPO contraction and profitability improvement; incremental SCM consulting revenue from Logicreate integration
Key Metrics:
Logistics BPO revenue YoY, goodwill balance of JPY 1,298M (vs. JPY 1,125M at prior FY-end) trajectory

Logistics BPO revenue was deliberately scaled down (-30.2%, JPY 610M), and the segment structure was consolidated into a single "Management Consulting" segment. Meanwhile, Logicreate joined the group in January 2026, strengthening the SCM consulting framework.

4. Recovery Trajectory for Orders Received

Prior Quarter:
Orders received JPY 5,234M (-7.0% YoY); order backlog JPY 9,640M (+9.1% YoY)
This Quarter Checkpoints:
Whether orders received return to positive YoY growth; presence of large-scale M&A advisory or project mandates
Key Metrics:
Orders received YoY growth rate, book-to-bill ratio (orders received / quarterly revenue)

1Q orders received were JPY 5,234M (-7.0% YoY), declining from the prior year. While order backlog of JPY 9,640M (+9.1% YoY) continues to build, a sustained decline in orders received would weigh on future revenue growth.

5. M&A-Related Revenue and FAS Reorganization Effects

Prior Quarter:
M&A revenue JPY 237M (-12.9% YoY); FAS consolidation planned for July 2026
This Quarter Checkpoints:
Post-FAS consolidation pipeline expansion, recovery in M&A deal closings
Key Metrics:
M&A revenue YoY trend, business succession/M&A inquiry volume and close rate

M&A revenue declined to JPY 237M in 1Q (-12.9% YoY). However, an intra-group FAS consolidation (Funai Soken Agata FAS × MI Consulting) is scheduled for July 2026, creating an integrated advisory capability spanning M&A advisory, valuation, and PMI.

Timely Disclosure & Industry Trends

2026/06/05
Funai Soken acquired S-Adviser qualification for Sapporo PRO Frontier Market — expanding IPO advisory capabilities for regional professional markets, following its existing J-Adviser and F-Adviser qualifications. This can be viewed as a broadening of the growth support menu for mid-tier corporates. Notice Regarding S-Adviser Qualification

Previous Quarter Results (FY2026/12 1Q Actual)

Funai Soken Holdings is an independent consulting group focused on management consulting for SMEs and mid-tier corporates, offering monthly retainer services, management study groups, M&A advisory, DX solutions, and other services. Under its medium-term management plan (FY2026–2028), announced in February 2026, the company aims to become the leading player in mid-tier corporate consulting while advancing AX/DX consulting initiatives. The 1Q results showed top-line growth with profit decline, though steady growth in monthly retainer services and management study groups was confirmed. Quarterly net income surged due to the base effect from JPY 2,155M in impairment losses booked in the prior-year period.

Item	Amount	YoY	vs. Company Plan	Remarks
Revenue	JPY 7,944M	+2.2%	-	Led by monthly retainer +10.2%; logistics BPO -30.2% was a drag
Operating Income	JPY 2,100M	-9.0%	-	Driven by SG&A +47.6% increase; OPM 26.4% (-3.3pt)
Recurring Profit	JPY 2,136M	-8.0%	-	Interest income +JPY 19M; information security costs +JPY 7M
Net Income Attributable to Owners of Parent Company	JPY 1,391M	+1,658.8%	-	Base effect from JPY 2,155M impairment loss in prior-year period
EPS	JPY 15.31	+1,700.0%	-	Post stock split (1:2) basis

Guidance Achievement Rate for Full Year: Revenue 21.5% (vs. 23.3% in prior-year period, per our estimates), Operating Income 23.1% (vs. 26.2% in prior-year period, per our estimates)

Funai Soken Holdings Incorporated