| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥17.3B | ¥18.6B | -6.6% |
| Operating Income / Operating Profit | ¥2.7B | ¥5.9B | -53.9% |
| Ordinary Income | ¥2.2B | ¥5.7B | -60.1% |
| Net Income / Net Profit | ¥1.1B | ¥3.9B | -72.2% |
| ROE | 0.7% | 2.2% | - |
2026 FY Q1 results showed significant profit declines: Revenue ¥17.3B (YoY -¥1.2B, -6.6%), Operating Income ¥2.7B (YoY -¥3.2B, -53.9%), Ordinary Income ¥2.2B (YoY -¥3.4B, -60.1%), Net Income ¥1.1B (YoY -¥2.8B, -72.2%). Revenue in the core CPA Solution Business fell 17.1%, and gross margin declined from 89.2% to 78.7% (a 10.5pt drop), driving operating margin down sharply from 32.0% to 15.8% (16.2pt). Strategic businesses under growth investment expanded revenue 43.6% to ¥4.9B but recorded an operating loss of ¥2.5B, diluting consolidated profitability. Non-operating items included foreign exchange loss ¥0.3B and partnership investment losses ¥0.8B, pressuring ordinary income; a high effective tax rate of 51% further weighed on earnings, reducing net margin from 21.0% to 6.2% (14.8pt).
[Revenue] Revenue ¥17.3B, down ¥1.2B YoY (-6.6%). By segment, the core CPA Solution Business declined sharply to ¥13.1B (share 75.7%, YoY -17.1%) due to weakened advertiser demand and softer delivery pricing. The Strategic Business grew to ¥4.9B (share 28.3%, YoY +43.6%) but remained too small to offset overall revenue decline. With the CPA business accounting for over 70% of revenue, deterioration in that business directly impacts top-line performance.
[Profitability] Cost of sales ¥3.7B, gross margin 78.7%, down 10.5pt from 89.2% a year ago. Worsened traffic mix and higher media costs pressured gross profit. SG&A was ¥10.9B, up ¥0.3B from ¥10.6B a year ago; fixed costs did not adjust sufficiently to the revenue decline, resulting in negative operating leverage. Operating Income was ¥2.7B (margin 15.8%) versus ¥5.9B (32.0%) a year ago, a decrease of ¥3.2B and 16.2pt deterioration in margin. Non-operating items included interest income ¥0.2B, but foreign exchange loss ¥0.3B and partnership investment loss ¥0.8B led to net non-operating expense of -¥0.5B. Ordinary Income was ¥2.2B, down ¥3.4B YoY (-60.1%). Extraordinary items were minor: loss on disposal of fixed assets ¥0.1B and impairment on investment securities ¥0.1B. Pre-tax income ¥2.2B incurred income taxes ¥1.1B (effective tax rate 51%), resulting in Net Income ¥1.1B (net margin 6.2%), down ¥2.8B YoY (-72.2%). In summary, a quarter of declining revenue and profits.
The CPA Solution Business reported Revenue ¥13.1B (YoY -17.1%), Operating Profit ¥8.5B (YoY -18.9%) with a segment profit margin of 64.5%. Slower advertiser demand and lower delivery pricing reduced revenue and depressed gross margin. The Strategic Business grew Revenue to ¥4.9B (YoY +43.6%) but expanded its operating loss to ¥2.5B (prior year -¥1.4B). Due to upfront investment burden, its margin was -51.8%, materially diluting consolidated profitability. Unallocated corporate costs were ¥3.2B, up from ¥3.0B a year ago; after deducting these from combined segment profits of ¥5.9B, consolidated Operating Income remained at ¥2.7B.
[Profitability] Operating margin 15.8% deteriorated 16.2pt from 32.0%, driven by a 10.5pt decline in gross margin and widening losses in the Strategic Business. Net margin 6.2% contracted 14.8pt from 21.0% due to non-operating losses and a high 51% effective tax rate. ROE 0.7% reflects Net Income ¥1.1B against Equity ¥162.3B, a substantial drop from prior year. [Cash Quality] Days Sales Outstanding (DSO) is elongated at 556 days, reflecting long collection cycles characteristic of advertising transactions; however, Accounts Payable ¥39.1B exceeds Accounts Receivable ¥26.4B, which eases working capital funding pressure. [Investment Efficiency] Total Asset Turnover 0.081x (annualized 0.32x) is low; holdings of Cash and Deposits ¥126.3B and Investment Securities ¥39.9B weigh on asset efficiency. [Financial Soundness] Equity Ratio 75.9% and Current Ratio 321.6% indicate a very conservative balance sheet. Cash and short-term securities totaling ¥131.3B far exceed Current Liabilities ¥50.3B, ensuring short-term liquidity.
The cash flow statement is not disclosed, but balance sheet movements inform liquidity trends. Cash and deposits decreased ¥20.6B from ¥146.9B to ¥126.3B year-on-year, while short-term investment securities increased ¥1.1B from ¥3.9B to ¥5.0B, leaving total liquid assets down ¥19.5B. Retained earnings fell from ¥159.5B to ¥148.0B (¥11.5B decrease) despite Net Income ¥1.1B, implying dividends and valuation changes reduced equity. Total assets decreased ¥15.5B from ¥229.3B to ¥213.8B; Net Assets decreased ¥13.5B from ¥175.8B to ¥162.3B. Current liabilities slightly declined from ¥52.3B to ¥50.3B, while Accounts Payable remained high at ¥39.1B (from ¥39.4B), indicating continued working capital management utilizing payment deferral to suppliers. Investment securities increased ¥3.0B from ¥36.9B to ¥39.9B, suggesting part of surplus cash was allocated to securities investments.
Operating Income ¥2.7B versus Net Income ¥1.1B shows earnings reduced by roughly 60% due to non-operating items and tax expense. Non-operating income totaled ¥0.4B including interest income ¥0.2B, while non-operating expenses were ¥0.9B including partnership investment loss ¥0.8B and foreign exchange loss ¥0.3B, yielding a net non-operating deficit of ¥0.5B. Partnership investment losses are linked to investment securities performance and are variable; foreign exchange losses largely reflect valuation swings on foreign-currency assets/liabilities and are temporary. The gap between Ordinary Income ¥2.2B and Pre-tax Income ¥2.2B is minimal; extraordinary items were limited to loss on disposal of fixed assets ¥0.1B and valuation loss on investment securities ¥0.1B totaling ¥0.1B. The 51% effective tax rate significantly exceeds statutory rates, possibly due to tax-effect accounting adjustments or deferred tax asset recognition deferral. Comprehensive income ¥1.2B is nearly identical to Net Income ¥1.1B, with other comprehensive income from valuation of securities ¥0.1B being minor. Divergence between operating cash flow and net income is driven by elongated receivables (DSO 556 days) and a payables-driven working capital structure, though actual cash collection pressure is limited.
Full Year / FY guidance is unchanged: Revenue ¥78.0B (YoY +9.9%), Operating Income ¥21.8B (YoY +10.9%), Ordinary Income ¥22.0B (YoY +9.2%), Net Income ¥14.3B. Q1-to-full-year progress rates are: Revenue 22.2%, Operating Income 12.5%, Ordinary Income 10.2%, Net Income 7.6% — versus a standard 25% benchmark, there is underperformance of -2.8pt on Revenue, -12.5pt on Operating Income, -14.8pt on Ordinary Income, and -17.4pt on Net Income. Profit-related progress is particularly delayed; if Q1 issues (gross margin decline, Strategic Business losses, non-operating losses, elevated effective tax rate) do not improve in H2, achieving full-year guidance will be difficult. To meet the full-year plan, H2 would need Revenue ¥55.7B (vs. Q1 +222%), Operating Income ¥19.1B (vs. Q1 +600%), and Net Income ¥13.2B (vs. Q1 +1,122%), reinforcing a heavily back-loaded assumption.
A dividend of ¥8.0 per share was paid. Against a full-year forecast dividend of ¥10.5, progress is 76.2%, implying an interim dividend was likely distributed. Expected payout ratio against forecast EPS ¥21.57 is 48.7%, a reasonable level. With Cash and Deposits ¥126.3B and ample liquidity, dividend-paying capacity is secured; however, annualized Q1 Net Income ¥4.4B (¥1.1B x4) is well below the full-year forecast Net Income ¥14.3B, so the sustainability of dividends depends on achieving full-year profit targets. No share buyback has been disclosed; shareholder returns comprise dividends only.
Concentration risk in the core business: The CPA Solution Business represents 75.7% of revenue, so fluctuations in advertiser demand, delivery pricing, and media traffic quality in that business directly affect consolidated results. Q1 saw -17.1% YoY revenue and a 10.5pt drop in gross margin, indicating high downside sensitivity to adverse external conditions.
Continued losses in Strategic Business: Revenue ¥4.9B versus operating loss ¥2.5B (margin -51.8%) shows widening deficits. If the investment-led growth phase prolongs, dilution of consolidated profitability may persist. Timing to reach breakeven and expected investment payback are critical monitoring points.
Volatility in non-operating items: Holdings of Investment Securities ¥39.9B expose the company to partnership investment losses (¥0.8B in Q1) and valuation losses (¥0.1B), while foreign exchange losses (¥0.3B) also affected results, destabilizing profit below the ordinary income line. Market and FX volatility materially influence quality of earnings.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 15.8% | 6.2% (4.2%–17.2%) | +9.5pt |
| Net Margin | 6.2% | 2.8% (0.6%–11.9%) | +3.4pt |
Operating margin exceeds the industry median by 9.5pt but has declined significantly from 32.0% a year ago; Net margin, while +3.4pt versus median, has contracted 14.8pt from 21.0% last year.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -6.6% | 20.9% (12.5%–25.8%) | -27.5pt |
Revenue growth of -6.6% lags the industry median of +20.9% by 27.5pt, indicating marked underperformance within the IT & Communications sector.
※ Source: Company compilation
A 10.5pt decline in gross margin for the core CPA business and a 16.2pt deterioration in operating margin have substantially changed the profitability structure. Determining whether this is a Q1-specific temporary factor or a structural change in traffic quality/pricing requires monitoring gross margin recovery and advertiser demand trends from Q2 onward.
Large delays in progress toward full-year profit forecasts (Operating Income progress 12.5%, Net Income progress 7.6%) imply H2 must deliver over +600% YoY recovery in Operating Income. Realization depends on improvement in CPA pricing/conversion rates, narrowing of Strategic Business losses, stabilization of non-operating losses, and normalization of effective tax rate; the extent of progress on these elements will determine the feasibility of the full-year outlook.
Financial soundness is very high (Equity Ratio 75.9%, Cash and Deposits ¥126.3B), and dividend-paying capacity is secured, but the high ratio of cash and securities depresses Total Asset Turnover 0.081x and ROE 0.7%. Strategic use of surplus funds and acceleration of business investment are key to improving capital efficiency.
This report was automatically generated by AI analyzing XBRL financial statement data. It is not a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the firm from public financial statements. Investment decisions are your responsibility; consult a professional as appropriate.