[Earnings Analysis] F&M Co., Ltd. (4771) Q1 FY2027 Deep Dive Report

F&M Co., Ltd. (Securities Code: 4771), a provider of back-office support services, consulting for SMEs, and cloud-based HR and labor management software, has released its financial results for the first quarter of the fiscal year ending March 31, 2027. This report provides a comprehensive analysis of the company's performance trends, growth drivers by segment, progress on key KPIs, and growth strategies aligned with its medium-term management plan, based on the disclosed earnings presentation materials.

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1. Q1 FY2027 Consolidated Financial Highlights

In the first quarter, the company achieved significant growth in both revenue and profit , driven by steady increases in member counts across major segments and contributions from subsidy acquisition fees in the consulting business.

• Net Sales : 5,264 million JPY ( +24.6% YoY)
• Gross Profit : 3,424 million JPY ( +23.0% YoY)
• Operating Profit : 797 million JPY ( +82.4% YoY)
• Ordinary Profit : 813 million JPY ( +81.8% YoY)
• Profit Attributable to Owners of Parent : 514 million JPY ( +84.8% YoY)
• EBITDA : 1,381 million JPY ( +50.8% YoY)

Summary and Key Takeaways

The slide above (Consolidated Financial Summary) demonstrates that the company has made a very strong start to the fiscal year. Net sales increased by 1,040 million JPY compared to the same period last year, recording a sales growth rate of 24.6% . The operating profit margin rose significantly from 10.3% in the previous year to 15.1% , highlighting the clear impact of operating leverage resulting from increased sales.

Earnings per share (EPS) also jumped from 18.82 JPY in the same period last year to 34.77 JPY , confirming that the creation of shareholder value is progressing steadily.

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2. Analysis of Operating Profit Variance and Financial Foundation

The increase in consolidated operating profit by 360 million JPY—from 437 million JPY in the previous year to 797 million JPY—is rooted in clear changes in the revenue and cost structure.

Main Factors for Profit Variance

1. Revenue Expansion Effect (+1,040 million JPY) : The expansion of the member base and the acquisition of subsidy application fees were the primary drivers of profit growth.
2. Increase in Personnel Expenses (-268 million JPY) : Costs rose due to a 57-person increase in staff compared to the same period last year, primarily in the sales department.
3. Increase in Outsourcing and Commission Fees (-367 million JPY) : Business expansion led to higher utilization of external resources and system-related costs (outsourcing fees -193 million JPY, commission fees -174 million JPY).
4. Increase in Depreciation and Advertising Expenses (-172 million JPY) : Depreciation costs (-123 million JPY) from ongoing development investments and promotional expenses (-49 million JPY) were incurred.

By achieving revenue growth that outpaced the aggressive expansion of sales personnel, the company realized an 82.4% increase in profit .

Financial Soundness

Total assets at the end of the first quarter stood at 19,705 million JPY (a decrease of 936 million JPY from the end of the previous fiscal year), but net assets grew steadily to 15,493 million JPY due to a reduction in current liabilities. The equity ratio remains at an extremely high level of 78.6% , providing sufficient financial flexibility for future growth investments.

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3. Segment Performance and Key KPIs

The company's business is primarily composed of three segments: "Accounting Service," "Consulting," and "Business Solution."

(1) Accounting Service Business

This segment, which provides bookkeeping and accounting services to sole proprietors and corporations, offers a stable revenue base.

• Net Sales : 1,177 million JPY ( +12.0% YoY)
• Operating Profit : 349 million JPY ( +18.6% YoY, Operating Margin 29.7% )
• Number of Members : 117,377 (Life Insurance Channel: 107,429; Other Channels: 9,948)

The shift to online training in the life insurance channel and the introduction of inside sales allowed field sales teams to focus on negotiations, leading to an expansion in membership. Furthermore, the AI coverage rate for bookkeeping processing has reached 93.4% , underpinning high gross and operating margins through operational efficiency.

(2) Consulting Business

This segment is anchored by the "F&M Club," a back-office support service for SMEs.

• Net Sales : 2,342 million JPY ( +29.2% YoY)
• Operating Profit : 781 million JPY ( +58.2% YoY, Operating Margin 33.3% )
• F&M Club Members : 15,132 companies (steady growth YoY)

Contract retention rates improved after transitioning the organizational structure from a role-based model (new sales vs. customer follow-up) to a "comprehensive regional" model. Additionally, 440 million JPY was recorded as acquisition fees for subsidies such as the Manufacturing Subsidy and Large-Scale Growth Investment Subsidy, significantly boosting profits. In July 2026, the company signed a business referral agreement with MUFG Bank, "F&M Club for MUFG." By strengthening ties with 237 partner financial institutions nationwide, the company is deeply embedding itself in solving back-office challenges for mid-sized and small enterprises.

(3) Business Solution Business

This is the company's growth driver, featuring the cloud-based HR and labor management software "Office Station."

• Net Sales : 1,648 million JPY ( +33.6% YoY)
• Operating Profit : -23 million JPY (loss narrowed from -40 million JPY in the previous year)
• "Office Station" Users : 58,054 (Companies: 54,314; Professional Firms: 3,740)

Analysis of "Office Station" Key Metrics

The slide above shows the core metrics for the Business Solution business. MRR (Monthly Recurring Revenue) has reached 489 million JPY , and ARR (Annual Recurring Revenue) has reached 5.872 billion JPY . The company has maintained a very high CAGR (Compound Annual Growth Rate) of 37.0% in sales over the past few years.

Churn rates are kept at extremely low levels : 1.01% for Labor, 1.32% for Payroll, 1.82% for Attendance, 1.01% for Year-end Adjustment, and 0.32% for the Pro version for professionals. While quarterly operating profit is slightly negative (-23 million JPY) due to upfront investments in sales personnel for new acquisitions, the accumulation of recurring revenue is proceeding very smoothly, placing the company on an ideal growth trajectory toward the mid-to-long-term monetization phase. Furthermore, the company is promoting value-added measures using the latest technology, such as the release of "SRAISE," a generative AI tool specialized for labor and social security attorney tasks, and the "AI Study Group" for tax accountants (with 456 firms enrolled).

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4. Progress on Full-Year Plan and Medium-Term Management Plan (FY2026–FY2028)

Building on the strong Q1 results, the company is making steady progress toward achieving its full-year and medium-term management plan targets.

FY2027 (Full-Year) Plan

• Net Sales : 24,694 million JPY ( +18.7% YoY)
• Operating Profit : 4,156 million JPY ( +7.7% YoY)
• Net Profit : 2,875 million JPY ( +1.7% YoY)

The progress rate against the full-year plan at the end of Q1 is 21.3% for net sales and 19.2% for operating profit. Since the company's performance typically skews toward the second half (especially Q3 and Q4), achieving an operating profit of 797 million JPY in Q1 represents excellent progress.

Medium-Term Management Plan (3-Year Plan) Analysis

The slide above shows the trends in performance and service membership targets over the three-year plan from FY2026 to FY2028.

The company has set ambitious targets of "30 billion JPY in net sales" and "6 billion JPY in operating profit" by the final year, FY2028 . The key KPIs supporting this are as follows:

• Accounting Service Members : FY2026 Actual 113,502 → FY2027 Budget 117,288 → FY2028 Plan 120,000
• F&M Club Members : FY2026 Actual 14,817 → FY2027 Budget 18,867 → FY2028 Plan 20,000
• Office Station Users : FY2026 Actual 56,335 → FY2027 Budget 67,272 → FY2028 Plan 70,000

As of the end of Q1, Office Station has already reached 58,054 users and F&M Club has 15,132 companies, visually confirming that the expansion of the customer base required for the first and second years of the medium-term plan is proceeding as expected.

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5. Conclusion and Future Focus Points

F&M's Q1 FY2027 results were strong, significantly exceeding the previous year in both net sales and operating profit due to membership growth across all segments and the overlap of spot revenue such as subsidy fees .

Points to Watch

1. Further Accumulation of Recurring Revenue (ARR/MRR) : Whether the number of contracts for "Office Station" and "F&M Club" continues to grow at the expected pace and when the Business Solution segment will cross the break-even point.
2. Results of Partnerships with Major Financial Institutions : The pace of customer acquisition through partner financial institutions (237 banks/credit unions), including MUFG Bank, and the resulting progress in cross-selling and up-selling.
3. Differentiation Strategy in Generative AI : How initiatives like "SRAISE" for labor attorneys and the "AI Study Group" for tax accountants will create synergies in increasing unit prices, reducing churn, and acquiring new members.

Guided by its "Water Utility Philosophy of Services," the company is promoting the digital transformation (DX) of back-office support operations. With a solid customer base and a high-margin recurring business model, these financial results confirm that the company is steadily laying the groundwork for its medium-term management plan (30 billion JPY in sales, 6 billion JPY in operating profit).