RACCOON HOLDINGS,Inc. FY2027 Q1 Earnings Report

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Executive Summary

The Company posted double-digit growth in both revenue and operating income, resulting in higher revenue and earnings; however, it should be noted that the growth in net income includes a temporary boost from gains on the sale of investment securities. Revenue was ¥17.8B (+13.9% YoY), operating income was ¥3.0B (+11.9%), ordinary income was ¥3.0B (+12.1%), and net income was ¥2.3B (+31.4%). Revenue growth in both the EC and Financial Businesses drove sales, while an increase in SG&A expenses slightly reduced the operating margin.

Factors Affecting Results

【Revenue】Revenue was ¥17.8B, representing a +13.9% YoY increase. The EC Business generated ¥10.6B (+14.4%), while the Financial Business generated ¥8.2B (+13.3%). Both businesses achieved double-digit growth, with the EC Business serving as the main business and accounting for 56.3% of the revenue mix.

【Profit and Loss】The gross margin improved to 83.9% from 81.6% in the prior year; however, SG&A expenses increased by +18.6% YoY, exceeding the pace of revenue growth, and the SG&A ratio deteriorated to 66.9% from 64.2% in the prior year. As a result, the operating margin edged down to 17.1% from 17.4% in the prior year. Ordinary income growth remained almost in line with operating income growth, while net income increased substantially by +31.4% YoY, including a ¥0.5B gain on the sale of investment securities recorded as extraordinary income. By segment, the EC Business had a segment profit margin of 26.8%, while segment profit declined by -1.6% YoY; the Financial Business had a profit margin of 18.7%, while segment profit declined by -15.4%. Thus, for both businesses, revenue growth did not directly translate into higher segment profit. Improvement in company-wide adjustments (from △¥1.98B in the prior year to △¥1.33B in the current period) supported the increase in consolidated operating income. Although the Company achieved higher revenue and earnings, weakness is evident in the underlying segment profitability.

Segment Analysis

The EC Business generated revenue of ¥10.6B (+14.4% YoY) and operating income of ¥2.8B (-1.6%), with a profit margin of 26.8%, making it the core of the Company’s profitability; nevertheless, profit declined slightly despite higher revenue. The Financial Business generated revenue of ¥8.2B (+13.3%, including ¥0.97B in intersegment revenue) and operating income of ¥1.5B (-15.4%), with a profit margin of 18.7%, making the increase in revenue and decline in earnings more pronounced. In both businesses, higher costs such as personnel expenses and promotional expenses appear to have offset the benefits of revenue growth. The fact that higher revenue has not translated into profit growth is a key point to monitor when assessing future profitability trends. Adjustments for company-wide expenses and other items improved from △¥1.98B in the prior year to △¥1.33B in the current period, contributing to the increase in consolidated operating income.

Key Financial Indicators

【Profitability】The operating margin was 17.1% (17.4% in the prior year), while the net profit margin was 12.7%, both representing high levels. However, because net income includes a ¥0.5B gain on the sale of investment securities, the operating margin and ordinary income margin (16.7%) should be emphasized when assessing recurring earnings power. The gross margin improved to 83.9% from 81.6% in the prior year, while the SG&A ratio deteriorated to 66.9% from 64.2%; operating leverage therefore had a negative effect in the current period.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥4.3B, or 1.89 times net income of ¥2.3B, indicating strong cash conversion.【Investment Efficiency】ROE was 5.4%, basic EPS was ¥11.70 (¥8.49 in the prior year, +37.8%), and BPS was ¥206.70 (down from ¥215.86 in the prior year). Total asset turnover remained low, while high financial leverage (total assets/equity) provides structural support for ROE.【Financial Soundness】The equity ratio was 22.4% (21.3% based on total assets), and the current ratio was approximately 133.6%, indicating that short-term payment capacity is secured. On the liabilities side, accounts payable of ¥106.0B represented the largest component, while convertible bonds with stock acquisition rights of ¥20.0B are a consideration in the capital structure.

Cash Flow Analysis

Operating Cash Flow (OCF) was ¥4.3B, a significant improvement from negative ¥0.7B in the same period of the prior year (an effective level of negative ¥2.1B), providing coverage of 1.89 times net income of ¥2.3B. The main factor behind the improvement was a ¥2.7B decrease in trade receivables, partly offset by a ¥3.2B decrease in trade payables. Investing Cash Flow was negative ¥1.7B, with the acquisition of investment securities representing the main cash outflow; capital expenditures themselves remained minimal. Financing Cash Flow was negative ¥3.3B, primarily due to dividend payments of ¥3.3B. Although free cash flow was positive at ¥2.6B, dividends exceeded free cash flow during the period. Cash and cash equivalents decreased by ¥0.7B, but cash and deposits remained substantial at ¥52.1B.

Earnings Quality

The +31.4% YoY increase in net income to ¥2.3B was significantly supported by the temporary contribution of a ¥0.5B gain on the sale of investment securities. Accordingly, operating income (+11.9%) and ordinary income (+12.1%) are more appropriate benchmarks for measuring recurring earnings power. Non-operating income was negligible (¥0.0B), while non-operating expenses were also limited at ¥0.1B; consequently, the difference between ordinary income and operating income was minimal. Meanwhile, comprehensive income was ¥1.5B, below net income of ¥2.3B, due to a negative ¥0.8B change in valuation difference on available-for-sale securities. This indicates a decline in the fair value of investment securities and is a point to consider when assessing earnings quality, as the increase in net assets was not commensurate with the level of net income.

Earnings Forecasts and Guidance

The full-year forecast calls for revenue of ¥75.0B (+14.1% YoY), operating income of ¥6.0B (-54.6%), and ordinary income of ¥5.5B (-55.6%). Thus, while revenue is expected to increase, a substantial decline in earnings is forecast. Q1 progress was approximately standard for revenue at 23.7%, but was extremely high relative to the full-year forecast for operating income at 50.5% and net income at 75.3% (actual EPS of ¥11.70 versus forecast EPS of ¥15.47). The high Q1 progress rate amid a forecast for a substantial full-year earnings decline may reflect anticipated increases in expenses and earnings volatility toward the second half, or the incorporation of conservative assumptions into the plan. Quarterly progress should therefore be closely monitored. No revisions were made to the earnings or dividend forecasts during the quarter.

Shareholder Returns

The full-year dividend forecast is ¥22.0 per share. Based on average shares outstanding during the period of 1,938.9万 shares, the annual total dividend is estimated at approximately ¥4.3B, resulting in a payout ratio of approximately 142% relative to the full-year net income forecast of ¥3.0B. This represents a dividend policy exceeding the level of earnings. Dividend payments during the quarter were ¥3.3B, exceeding free cash flow of ¥2.6B for the same period; however, OCF of ¥4.3B exceeded dividend payments, and short-term payment capacity is secured given cash and deposits of ¥52.1B. The sustainability of the annual dividend depends not on Q1 net income, which includes a temporary gain on the sale of investment securities, but on the Company’s recurring operating cash flow generation over the full year.

Risk Factors

1. Revenue concentration risk in the EC Business: The EC Business is the core business, accounting for 56.3% of the revenue mix; however, segment profit declined by -1.6% YoY despite revenue growth of +14.4%. Intensifying competition and increases in promotional and personnel expenses could have a significant impact on consolidated earnings.

2. Receivables-related risk in the Financial Business: Trade receivables of ¥104.3B account for 55.4% of total assets, while segment profit in the Financial Business declined by -15.4% YoY. The management of receivables associated with payment and credit functions will affect future profitability.

3. Risk of margin pressure from higher SG&A expenses: SG&A expenses increased by +18.6% YoY, exceeding the revenue growth rate of +13.9%, and the operating margin edged down to 17.1%. If this trend continues, it may constrain full-year margin improvement.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

The Company’s operating margin and net profit margin both substantially exceed the industry median, placing its profitability at a high level within the industry.

Growth and Capital Efficiency

The revenue growth rate also exceeds the industry median, although it remains below the upper end of the IQR at 16.9%, placing the Company in the upper tier of the industry.

※Source: Compiled by the Company

Key Takeaways from the Results

1. Although the Company achieved higher revenue and earnings, the deterioration in the SG&A ratio (+263bp) exceeded the improvement in the gross margin (+232bp), resulting in a slight YoY decline in the operating margin. Whether the increase in SG&A expenses continues to outpace revenue growth will be a key inflection point for the margin trend.

2. The +31.4% increase in net income was significantly supported by the temporary contribution of a ¥0.5B gain on the sale of investment securities. Operating income growth of +11.9% and ordinary income growth of +12.1% are closer to the Company’s recurring earnings power.

3. While the full-year forecast anticipates a substantial -54.6% YoY decline in operating income, the Q1 progress rate for operating income was high at 50.5%. Accordingly, expense plans and earnings trends in the second half will determine the full-year outcome.

Theoretical Share Price (Reference Value)

Sensitivity: ¥193–¥204 at cost of equity ±1%, and ¥198–¥199 at ω±0.1.

Notes:

• Because net income progress against the full-year forecast (75%) exceeds the standard level (25%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies with progress ahead of plan tend to exceed forecasts; the adjustment may be excessive for businesses with strong seasonality).
• Net income is substantially compressed relative to operating income due to tax burden, acquisition-related expenses, and non-controlling interests, among other factors (net income ÷ operating income 50%). This figure reflects that compression at face value, and if the factors are temporary, underlying earning power may be higher.
• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the end of the quarter are used (there is a timing difference relative to the full-year forecast).

（Calculation model: Residual income model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated using only publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict 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. Investment decisions should be made at your own responsibility, after consulting with a professional as necessary.

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