Funai Soken Holdings Incorporated

Business Details

Centered on consulting operations providing guidance, research, and diagnostics related to corporate management, the company operates membership-based management study groups and seminars. In addition to the three pillars of monthly support consulting (recurring-revenue model), project consulting, and management study group membership fees, the segment also encompasses ad operation and logistics BPO. From 1Q FY2026, the previous three segments (Management Consulting, Logistics, and Digital Solutions) were consolidated into a single segment. In January 2026, Logi Create Co., Ltd., which provides logistics improvement and center construction support, joined the group.

Recent Overview

Revenue rose 2.2% year-on-year, but operating profit declined 9.0% due to expanded upfront investment.

In 1Q FY2026 (January-March), revenue increased to ¥7,944 million, but expanding upfront costs from human capital investment, M&A investment, and office investment drove SG&A expenses sharply higher, from ¥871 million to ¥1,286 million, resulting in a decline in operating profit to ¥2,100 million (down 9.0%). On the other hand, the absence of the ¥2,156 million impairment loss recorded in the same period last year led to record-high quarterly net profit of ¥1,392 million. The order backlog grew to ¥9,641 million (up 9.1% year-on-year), a favorable leading indicator for recurring revenue. In January 2026, Logi Create joined the group, strengthening SCM support capabilities. The reporting segment was changed to a single segment.

Key Products

Growth Drivers

• Continued expansion of recurring revenue from monthly support consulting driven by rising contract unit prices and growing client numbers (up 10.2% in 1Q)
• Improved visibility into future revenue from the buildup of the order backlog to ¥9,641 million (up 9.1% year-on-year)
• Stable growth in membership fee income driven by increasing membership in management study groups (up 7.6% in 1Q)
• Expansion of target areas into mid-sized enterprise consulting and consulting to support SME transition to mid-sized status (Medium-Term Management Plan 2026-2028)
• Promotion of AX (AI Transformation) and DX consulting in partnership with global platform providers
• Strengthened SCM support capabilities and shift of the logistics business toward consulting following Logi Create joining the group
• Full-year forecast maintained: revenue of ¥37,000 million (up 11.0% year-on-year) and operating profit of ¥9,100 million (up 3.3% year-on-year)

Risks

• 1Q operating profit margin declined to 26.4% (from 29.7% in the same period last year) due to expanding upfront costs from human capital investment, M&A investment, and office investment, with a risk that cost absorption may take time
• 1Q orders received declined 7.0% year-on-year, requiring close monitoring of new order momentum
• Logistics BPO revenue declined sharply by 30.2% due to deliberate downsizing, creating temporary downward pressure on revenue during the business portfolio transition period
• M&A consulting revenue declined 12.9%, reflecting volatility risk in deal flow
• Risk of client base erosion among small and medium enterprises due to difficulty passing on rising raw material, energy, and labor costs, and chronic labor shortages
• Heightened uncertainty from renewed inflation and surging energy prices amid Middle East tensions
• Reduced transparency into the individual performance of the former Logistics and Digital Solutions businesses following the shift to a single segment
• As a subsequent event, stock acquisition rights for 264,240 shares as stock-based compensation were issued in May 2026, a future dilution factor

Business Details

From 1Q of FY2026 (ending December 2026), the previous three-way classification of "Management Consulting Business," "Logistics Business," and "Digital Solutions Business" was changed to a single segment, "Management Consulting Business." The Logistics Business ceased to be disclosed as an independent segment. Logistics BPO revenue is being deliberately scaled down as a matter of policy, with 1Q FY2026 revenue at ¥610 million (down 30.2% year-on-year).

Recent Overview

Single-segment consolidation completed; deliberate downsizing of Logistics BPO continues.

From 1Q FY2026, the reporting segment was consolidated into a single segment (Management Consulting Business), ending standalone disclosure for the Logistics Business. Logistics BPO revenue fell sharply to ¥610 million in 1Q FY2026 (down 30.2% year-on-year), reflecting a deliberate policy of downsizing. Meanwhile, in January 2026, Logi Create Co., Ltd., a specialist firm in logistics improvement and center construction support, joined the group, strengthening SCM support capabilities for shipper companies.

Key Products

Growth Drivers

• Logi Create Co., Ltd. joining the group (January 2026), gaining specialized SCM consulting expertise and strengthening support capabilities
• Shift under the medium-term management plan (2026-2028) toward focusing the Logistics Business on the consulting field as well
• Improved profitability from the shift in revenue mix away from Logistics BPO toward higher-margin logistics consulting
• Growing demand for consulting from shipper companies driven by labor-saving and DX needs within the logistics industry

Risks

• From 1Q FY2026 onward, standalone performance disclosure for the Logistics Business ended, making segment-level performance monitoring by investors no longer possible
• Short-term revenue decline resulting from the deliberate downsizing of Logistics BPO (down 30.2% year-on-year in 1Q FY2026)
• Risk of loss of major clients in Logistics BPO operations (a major existing client relationship was terminated during FY2025 (ended December 2025))
• Risk of reduced client investment capacity due to deteriorating business conditions among small and medium enterprises (difficulty passing on rising raw material, energy, and labor costs)

Business Details

This segment comprises four areas: SPX (Sales Process Transformation) operations centered on outsourced web advertising operation, cloud solutions operations including cloud development and operation, IT consulting operations providing implementation support ranging from DX grand design formulation to Zoho CRM deployment, and HR solutions operations centered on AI recruitment cloud services. Key affiliated companies include Funai Consulting Incorporated (Digital Solutions Business), HRForce Co., Ltd., Apparel Web Co., Ltd., and AWSG Pte. Ltd.

Recent Overview

Revenue rose 13.7% year-on-year, but the segment swung to an operating loss due to increased personnel costs.

Revenue for FY2025 (ended December 2025) rose to ¥4,504 million (up 13.7% year-on-year). Implementation support projects in IT consulting, ranging from DX grand design formulation to Zoho CRM deployment, increased, and outsourced web advertising operation also performed well. On the other hand, HR solutions was affected by advertising budget cuts at some major clients, and cloud solutions saw a reduction in subcontracted outsourcing projects. On the profit side, an increase in operating expenses driven primarily by personnel costs caused the segment to swing from operating profit of ¥159 million in the prior period to an operating loss of ¥96 million. Separately, the board of directors resolved on January 29, 2026 to change the reporting segment to a single segment, "Management Consulting Business," from 1Q FY2026 (ending December 2026), after which this segment is scheduled to be discontinued.

Key Products

Growth Drivers

• Increase in implementation support projects in IT consulting, ranging from DX grand design formulation to Zoho CRM deployment (revenue surged to ¥650 million from ¥154 million in the prior period)
• Continued strong performance in outsourced web advertising operation (SPX) (revenue of ¥2,407 million, up 21.1% year-on-year)
• Strengthened web marketing capabilities for the apparel industry following Apparel Web Co., Ltd. joining the group (April 2025)
• Significant improvement in leading indicators, with orders received up 200.8% year-on-year (¥1,935 million) and order backlog up 792.2% year-on-year (¥1,137 million)

Risks

• An operating loss of ¥96 million was recorded in FY2025 (ended December 2025), versus operating profit of ¥159 million in the prior period, due to increased operating expenses driven primarily by personnel costs
• Risk of advertising budget cuts at major clients in HR solutions (revenue of ¥973 million, down 12.0% year-on-year)
• Reduction in subcontracted outsourcing projects in cloud solutions (revenue of ¥472 million, down 33.7% year-on-year)
• Scheduled consolidation and elimination into the single "Management Consulting Business" segment from 1Q FY2026 (ending December 2026), which will make independent performance monitoring difficult
• Amortization of goodwill of ¥70 million was incurred in the current period (versus zero in the prior period), with M&A-related acquisition costs weighing on profit