CORE CORPORATION FY2027 Q1 Earnings Report

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Executive Summary

All three business segments posted revenue growth during the quarter, resulting in higher revenue and income accompanied by an improved gross margin. Revenue was ¥66.7B (¥59.3B in the same period of the previous year, +12.4% YoY), Operating Income was ¥8.3B (+21.6%), Ordinary Income was ¥8.8B (+23.5%), and Net Income attributable to owners of the parent was ¥5.9B (+18.8%). The Operating Income margin improved to 12.5% (11.6% in the previous year), primarily due to margin improvements in the core Industrial Technology Solutions Business and the high-growth Future Society Solutions Business.

Factors Affecting Business Performance

【Revenue】Revenue was ¥66.7B (¥59.3B in the previous year, +12.4%), with all three segments posting growth. The Industrial Technology Solutions Business, which accounts for 51.2% of the composition, grew +9.4%; the Customer Co-Creation Business, accounting for 32.4%, grew +13.3%; and the Future Society Solutions Business, accounting for 16.7%, grew +20.9%. All three expanded in a balanced manner, with the particularly strong growth of the Future Society Solutions Business serving as the primary growth driver.

【Profit and Loss】Gross profit was ¥19.1B, and the gross margin improved to 28.6% (26.9% in the previous year, +1.7pt). SG&A expenses increased to ¥10.7B (16.1% of revenue, compared with 15.4% in the previous year, +0.7pt); however, the benefit of the gross margin improvement exceeded this increase, causing the Operating Income margin to expand to 12.5% (11.6% in the previous year, +0.95pt). In the same period of the previous year, a gain on the sale of investment securities of ¥0.19B was recorded as extraordinary income. No similar one-off gain or loss occurred in the current period, and therefore Ordinary Income of ¥8.8B (+23.5%) and Net Income of ¥5.9B (+18.8%) consist more substantially of earnings generated by recurring operating activities. In conclusion, the Company achieved higher revenue and income.

Segment Analysis

The Industrial Technology Solutions Business generated revenue of ¥34.2B (+9.4%) and Operating Income of ¥5.8B (+31.9%), with a margin of 16.9% (14.1% in the previous year, +2.8pt). As the core business generating approximately 69% of total Company-wide Operating Income, it also served as a driver of margin improvement. The Future Society Solutions Business recorded revenue of ¥11.1B (+20.9%) and Operating Income of ¥1.1B (+72.0%), with a margin of 10.2% (7.1% in the previous year, +3.1pt), representing the strongest growth and the largest margin improvement. Meanwhile, the Customer Co-Creation Business secured revenue growth to ¥21.6B (+13.3%), but profitability declined, with Operating Income of ¥1.4B (-21.1%) and a margin of 6.7% (9.6% in the previous year, -2.9pt), becoming a factor weighing down the Company-wide margin. The segment mix contributed to improvement in the Company-wide profit margin, as expansion in the high-margin businesses exceeded deterioration in the low-margin business.

Key Financial Metrics

【Profitability】The Operating Income margin improved to 12.5% (11.6% in the previous year, +0.95pt), the Net Income margin to 8.9% (8.4% in the previous year, +0.5pt), and the gross margin to 28.6% (26.9% in the previous year, +1.7pt). Profitability improved across the board, raising the earnings base while absorbing higher costs. 【Cash Quality】Cash and deposits increased to ¥95.9B (¥82.0B in the previous year, +17.0%), while accounts receivable declined to ¥67.0B (¥91.9B in the previous year, -27.1%), indicating improvement in working capital health through progress in collections. Inventories were only ¥1.4B, representing 0.5% of total assets, and the inventory burden was minimal. 【Investment Efficiency】ROE (based on Net Income attributable to owners of the parent, quarterly) was 2.9%. Total asset turnover and financial leverage showed no significant change from the previous year, making improved profitability the primary driver. 【Financial Soundness】The Equity Ratio was high at 74.0% (73.5% in the previous year), while the current ratio was 268.0% (current assets of ¥172.3B / current liabilities of ¥64.3B). Interest-bearing debt remained below ¥0.9B in total, consisting of ¥0.8B in short-term borrowings and ¥0.1B in long-term borrowings, while cash of ¥95.9B substantially exceeded this amount, maintaining a virtually debt-free balance sheet.

Cash Flow Analysis

Although individual data from the cash flow statement were not provided, the changes in the balance sheet suggest improved capital efficiency. Cash and deposits increased +17.0% to ¥95.9B from ¥82.0B in the same period of the previous year, while short-term borrowings decreased -50.6% to ¥7.8B from ¥15.7B in the previous year. This indicates a trend of reducing interest-bearing debt while building up on-hand liquidity. Accounts receivable declined -27.1% to ¥67.0B from ¥91.9B in the previous year, and the progress in collections likely eased working capital requirements. Inventories remained at a modest ¥1.4B, indicating limited cash tied up in inventory. Taken together, earnings generated from operating activities contributed both to the accumulation of cash on hand and to debt reduction, and the quality of cash management can be assessed as stable.

Quality of Earnings

The current-period earnings consist more substantially of recurring operating activities. In the same period of the previous year, a gain on the sale of investment securities of ¥0.19B was recorded as extraordinary income, creating a difference between Ordinary Income and Profit Before Tax. No such one-off item was recorded in the current period, and the near alignment of Ordinary Income of ¥8.8B and Profit Before Tax of ¥8.8B is positive from a quality-of-earnings perspective. Other operating income of ¥0.5B consisted primarily of dividend income of ¥0.3B and did not include highly volatile items. Comprehensive Income was ¥7.0B, exceeding Net Income of ¥5.9B. The main reason for the difference was a ¥1.1B increase in the valuation difference on securities, with unrealized gains from the increase in the market value of held shares constituting part of the accrual-based earnings. The substantial -27.1% decrease in accounts receivable suggests that earnings are being converted into cash, providing support for the quality of earnings.

Earnings Forecast and Guidance

Progress against the full-year earnings forecasts (Revenue of ¥290.0B, Operating Income of ¥42.0B, Ordinary Income of ¥43.0B, and Net Income of ¥30.0B) was 23.0% for Revenue, 19.9% for Operating Income, 20.4% for Ordinary Income, and 19.8% for Net Income in Q1. Although all were below the standard quarterly progress rate of 25%, the levels can be viewed as within an acceptable range at this stage, taking into account the second-half concentration characteristic of SI and contract-based businesses, where customer acceptance is concentrated in the second half. There was no revision to the earnings forecast figures themselves; however, a revision to the dividend forecast (in the direction of an increase) was announced during the quarter.

Shareholder Returns

The full-year dividend forecast is ¥15.00 per share, and a revision to the dividend forecast (an increase) was announced during the quarter. Based on the full-year forecast EPS of ¥208.81, the Payout Ratio is approximately 7.2% (¥15.00 / ¥208.81), remaining at a conservative level. Based on the number of shares outstanding (approximately 14.36M shares after deducting treasury shares), the total annual dividend is estimated at approximately ¥0.22B, representing a minimal burden relative to cash and deposits of ¥95.9B. Given the Company’s net cash position and high Equity Ratio of 74.0%, constraints on funding remain limited even following the revision of its dividend policy.

Risk Factors

1. Segment concentration risk: The Industrial Technology Solutions Business accounts for 51.2% of revenue and approximately 69% of Operating Income contribution, meaning that fluctuations in demand for this business have a relatively significant impact on Company-wide performance.

2. Declining profitability in the Customer Co-Creation Business: The segment margin declined -2.9pt from 9.6% to 6.7%, and Operating Income decreased -21.1%. This was a decline in earnings despite revenue growth, suggesting that changes in the cost mix or project composition may be pressuring margins.

3. Full-year progress and second-half concentration: Progress against the full-year forecast was 23.0% for Revenue, 19.9% for Operating Income, and 19.8% for Net Income, all below the standard progress rate of 25%. Accelerated progress in the second half will therefore be necessary to achieve the plan, which assumes customer acceptance will be concentrated in the second half.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

The Company’s Operating Income margin and Net Income margin both exceed the industry median and are positioned within the upper range of the industry.

Growth and Capital Efficiency

The Revenue growth rate also exceeds the industry median, but has not reached the upper limit of the IQR (16.9%), placing the Company from the middle to upper range of the industry.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. The +1.7pt improvement in gross margin was the primary factor behind the +0.95pt improvement in the Operating Income margin. Improved profitability in the Industrial Technology Solutions Business (margin +2.8pt) and the Future Society Solutions Business (margin +3.1pt) lifted the Company-wide profit margin.

2. The margin of the Customer Co-Creation Business declined from 9.6% to 6.7%; whether profitability in this business reverses will be a focus in determining future expansion of the Company-wide margin.

3. The Company has a virtually debt-free balance sheet, with cash of ¥95.9B versus interest-bearing debt of less than ¥1B. Against the backdrop of a conservative 7.2% Payout Ratio, the announcement of a revision to the dividend forecast (an increase) during the quarter is noteworthy as a change in the Company’s approach to shareholder returns.

Theoretical Share Price (Reference Value)

This is a reference range mechanically calculated solely from publicly disclosed data using a residual income model (Ohlson-type model with an explicit 5-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥1,644–¥1,746 at cost of equity ±1%, and ¥1,687–¥1,703 at ω±0.1.

Notes:

• Net assets as of the end of the quarter are used (there is a timing difference relative to the full-year forecast).
• As net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: residual income model / interest rate reference month: 2026-06 / this value does not predict or guarantee the future share price)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, and you should consult a professional advisor as necessary.

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