Vector HOLDINGS (2656) FY2026 Q3 Earnings Report

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Executive Summary

Despite Revenue declining 38.5% year on year, the reduction in SG&A expenses failed to keep pace, limiting the improvement in the operating loss and once again highlighting the vulnerability of the earnings structure. Revenue was ¥0.7B (¥1.1B in the previous year), Operating Income was negative ¥4.2B (negative ¥4.4B in the previous year), Ordinary Income was negative ¥4.5B (negative ¥4.4B in the previous year), and Net Income was negative ¥4.5B (negative ¥4.4B in the previous year). The primary reason for the decline in Revenue was the transfer of shares in subsidiaries engaged in the Renewable Energy Business and other businesses and their exclusion from consolidation. The continuing ICT Business increased Revenue year on year but remained loss-making.

Factors Affecting Performance

【Revenue】Consolidated Revenue was ¥0.7B, down 38.5% year on year. The primary reason was the transfer of shares in subsidiaries engaged in the Renewable Energy Business and Other Businesses and their exclusion from consolidation as of June 30, 2025. Revenue from the continuing ICT Business was ¥0.69B, up 4.2% year on year, accounting for almost all consolidated Revenue.

【Profit and Loss】The Operating Loss was ¥4.2B, improving by ¥0.2B from ¥4.4B in the same period of the previous year; however, the Operating Profit Margin deteriorated to negative 611.6% due to the contraction in Revenue (negative 392.0% in the previous year). SG&A expenses were ¥4.9B, down only 10.0% year on year, failing to keep pace with the decline in Revenue and resulting in a relatively heavier fixed-cost burden. The Ordinary Loss expanded to ¥4.5B due to the recognition of ¥0.4B in non-operating expenses, including interest expenses, deteriorating from the Operating Loss. Although ¥0.1B in extraordinary income from gains on sales of fixed assets was recorded, it was not large enough to change the underlying earnings trend, and Net Income was negative ¥4.5B. As both Revenue and the loss remained at elevated levels, the results are classified as a decline in Revenue and earnings.

Segment Analysis

The ICT Business recorded Revenue of ¥0.69B, up 4.2% year on year, and a segment loss of ¥0.53B, improving from ¥0.56B in the previous year. Despite higher Revenue, the business remained loss-making. Revenue from Other Businesses almost disappeared due to the transfer of shares in subsidiaries and their exclusion from consolidation, plunging from ¥0.47B in the previous year to ¥0.00B. Corporate adjustments not attributable to reportable segments expanded to negative ¥3.47B from negative ¥2.83B in the previous year, making the reduction of company-wide common expenses a key challenge going forward.

Key Financial Indicators

【Profitability】The Operating Profit Margin was negative 611.6% (negative 392.0% in the previous year), while the Net Profit Margin was negative 649.3%, indicating that the loss increased as a percentage of Revenue alongside the contraction in Revenue. Annualized ROE was negative 128.7%, primarily due to the extremely negative Net Profit Margin. 【Cash Flow Quality】Gross Margin was high at 100.8% because the business structure generates almost no Cost of Sales; however, the SG&A Expense Ratio of 713.3% significantly impaired profitability. 【Investment Efficiency】The Total Asset Turnover Ratio remained low, indicating limited Revenue-generating capacity relative to the asset base. 【Financial Soundness】The Equity Ratio was high at 81.4%, while the debt-to-equity ratio was also low, indicating a stable short-term financial base. However, Retained Earnings expanded to negative ¥42.0B, with continued losses placing pressure on capital accumulation.

Cash Flow Analysis

Although detailed disclosure of the cash flow statement is unavailable, an examination of funding trends based on changes in the balance sheet shows that Cash and Deposits increased by ¥1.21B, from ¥0.80B in the previous year to ¥2.01B. Meanwhile, Short-Term Loans Receivable decreased by ¥0.60B, from ¥2.00B to ¥1.40B, suggesting that the collection of loans receivable and other factors contributed to the increase in cash. Net Assets increased by ¥2.28B, from ¥2.37B to ¥4.65B, as the expansion of Share Capital and Capital Surplus exceeded the reduction in Capital Surplus resulting from the operating deficit. This represents an accumulation of cash through financing under continuing Operating Losses, and the company’s ability to generate cash through operating activities themselves appears limited.

Earnings Quality

The current-period loss includes ¥0.1B in extraordinary income from gains on sales of fixed assets and ¥0.0B in extraordinary losses, including losses on disposal of fixed assets. Their net impact was small and did not change the underlying earnings trend. Non-operating income of ¥0.1B consisted of interest income and other income and was lower than non-operating expenses of ¥0.4B, including interest expenses; consequently, the Ordinary Loss was worse than the Operating Loss. Although the Gross Margin is nominally high because the business structure generates almost no Cost of Sales, actual earnings power is determined by the heavy SG&A burden, and recurring profit-generating capacity remains vulnerable.

Earnings Forecast and Guidance

Cumulative Q3 Revenue reached 69.0% of the full-year Revenue forecast of ¥1.0B, below the standard progress rate of 75%. Cumulative losses reached 81.0% of the full-year Operating Loss forecast of ¥5.2B and approximately 82% of the Net Loss forecast of ¥5.5B, indicating that losses are being recognized ahead of Revenue. Achieving the remaining plan in Q4 will require the ICT Business to maintain Revenue and further reduce company-wide fixed costs.

Shareholder Returns

The Q2 dividend was ¥0 per share, and the full-year dividend forecast is also ¥0, with the company continuing to pay no dividends. Given the cumulative Net Loss of ¥4.5B and the full-year Net Loss forecast of ¥5.5B, continuing to pay no dividends is consistent with capital preservation in the absence of available funds for dividends. As no dividends are being paid, the Payout Ratio is not applicable, and no data regarding share repurchases has been disclosed.

Risk Factors

1. Unestablished profitability in the core ICT Business: The ICT Business recorded a segment loss of ¥0.53B against Revenue of ¥0.69B, and higher Revenue has not translated into profitability. As the business portfolio is concentrated in ICT, any delay in improving the profitability of this business will affect overall consolidated performance.

2. Loss amplification caused by the fixed-cost structure: Corporate adjustments not attributable to reportable segments expanded to negative ¥3.47B, while the SG&A Expense Ratio reached 713.3%. Fixed costs are excessive relative to the scale of Revenue, creating a risk that losses will expand further if Revenue does not recover.

3. Continued erosion of capital: Retained Earnings expanded to negative ¥42.0B, and annualized ROE remained negative 128.7%, reflecting continued substantial erosion of shareholders’ equity. Although the Equity Ratio itself was high at 81.4% due to capital increases, continued losses may increase dependence on additional capital raising in the future.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (retail)

Profitability and Returns

The company’s profitability metrics are substantially below the industry median and are positioned at the lowest level within the industry.

Growth and Capital Efficiency

The Revenue Growth Rate also fell significantly below the industry median, with the business contraction standing out within the industry.

※Source: Compiled by the Company

Key Takeaways from the Earnings Results

1. Although the ICT Business increased Revenue by 4.2% year on year, a segment loss of ¥0.53B remained, indicating from the earnings data that Revenue growth alone has not led to improved profitability.

2. Revenue from Other Businesses almost disappeared due to the transfer of shares in subsidiaries and their exclusion from consolidation, resulting in a de facto concentration of the business in the ICT Business. Going forward, the progress of fixed-cost reductions, including corporate adjustments of negative ¥3.47B, will determine the direction of performance.

3. Cash and Deposits increased by ¥1.21B, and the Equity Ratio remained high at 81.4%, while Retained Earnings expanded to negative ¥42.0B. The coexistence of financial-base stability and continued capital erosion is a defining feature of the current-period results.

Theoretical Share Price (Reference Value)

Sensitivity: -¥8 to -¥8 for Cost of Equity ±1%, and -¥8 to -¥8 for ω±0.1.

Notes:

• As forecast ROE is below the Cost of Equity, the theoretical value will be below Book Value per Share.
• Net Assets as of the quarter-end are used (there is a timing gap 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 (Ohlson-type; explicit 5-year fade) / Interest rate reference month: 2026-08 / Mechanically calculated value based solely on publicly disclosed data; it is not a forecast of the market share price or a recommendation of any specific investment action, and does not forecast or guarantee future share prices.)

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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. You should make investment decisions at your own discretion and, where necessary, consult a professional advisor.

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