Ateam Holdings Co.,Ltd. FY2026 FY Earnings Report

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Executive Summary

Although Revenue declined 3.8%, Operating Income increased as a result of selling, general and administrative expense reductions; however, Net Income fell significantly due to higher non-operating expenses and an increased tax burden. Revenue was ¥229.97B (-3.8% YoY), Operating Income was ¥10.95B (+29.6%), Ordinary Income was ¥5.84B (-63.2%), and Net Income attributable to owners of the parent was ¥3.59B (-65.3%). The improvement at the operating level was primarily attributable to cost reductions, while non-operating expenses of ¥6.28B and a high effective tax rate of 50.9% weighed on bottom-line profit.

Factors Affecting Performance

【Revenue】Revenue was ¥229.97B, down 3.8% YoY. The core MediaSolutions business, which accounted for 70.4% of the Revenue mix, declined to ¥161.92B (-7.3% YoY), weighing on consolidated Revenue. Entertainment also declined to ¥38.58B (-8.1% YoY), while D2C grew significantly to ¥29.46B (+31.0% YoY); however, its smaller scale was insufficient to offset the consolidated decline in Revenue.

【Profit and Loss】Operating Income was ¥10.95B (+29.6% YoY), supported by a 6.8% decline in selling, general and administrative expenses to ¥183.45B (¥196.76B in the previous year). MediaSolutions’ Operating Income increased to ¥17.45B (+31.5% YoY), with its profit margin improving to 10.8%, driving the overall increase in profit; meanwhile, Entertainment’s Operating Income declined to ¥3.09B (-40.3% YoY). Although profit increased at the operating level, Ordinary Income declined to ¥5.84B (-63.2% YoY) due to non-operating expenses of ¥6.28B, equivalent to 57.4% of Operating Income, and Net Income remained at ¥3.59B (-65.3% YoY). Extraordinary income of ¥2.20B, including a gain on the sale of investment securities of ¥0.67B, provided some support to final profit, but the high tax burden reflected in the 50.9% effective tax rate weighed on Net Income. Overall, the results represent declining Revenue but higher profit at the operating level; at the Ordinary Income and Net Income levels, however, the company recorded declining Revenue and profit, and therefore cannot be characterized as a result of both Revenue and profit growth.

Segment Analysis

MediaSolutions recorded Revenue of ¥161.92B (-7.3% YoY), Operating Income of ¥17.45B (+31.5% YoY), and a profit margin of 10.8%, improving profitability despite lower Revenue and serving as the main pillar of consolidated profit. Entertainment recorded Revenue of ¥38.58B (-8.1% YoY), Operating Income of ¥3.09B (-40.3% YoY), and a profit margin of 8.0%, reflecting deteriorating profitability. D2C recorded Revenue of ¥29.46B (+31.0% YoY), Operating Income of ¥1.86B (+2557.1% YoY), and a profit margin of 6.3%, demonstrating the highest growth; however, its small scale limited its contribution to consolidated profit. Total segment profit increased 20.9% YoY to ¥22.41B, while company-wide expenses increased to ¥11.46B (¥10.08B in the previous year), offsetting part of the improvement.

Key Financial Metrics

【Profitability】The Operating Profit Margin was 4.8%, improving by 130bp from 3.5% in the previous year, while the Net Profit Margin remained low at 1.6%. ROE was 4.4%, with higher non-operating expenses and the 50.9% effective tax rate weighing on bottom-line profitability.【Cash Flow Quality】Operating Cash Flow (OCF) was -¥4.67B, below Net Income attributable to owners of the parent of ¥3.59B. The primary reason was that income taxes paid of ¥9.77B exceeded the OCF subtotal of ¥4.43B.【Investment Efficiency】Capital expenditures of ¥0.74B were below depreciation and amortization expense of ¥1.68B, while the primary driver of investing cash flow was the acquisition of investment securities and related items. Intangible assets increased to ¥23.51B and goodwill increased to ¥18.34B, while goodwill amortization of ¥2.42B represents a structural factor that continues to weigh on Operating Income.【Financial Soundness】The Equity Ratio was 60.1%, and current assets of ¥99.00B significantly exceeded current liabilities of ¥36.70B, maintaining short-term financial stability. Long-term borrowings increased to ¥8.53B, providing financing to offset deficits in OCF and FCF.

Cash Flow Analysis

OCF was -¥4.67B, deteriorating significantly from ¥16.24B in the previous year. The primary reason was that income taxes paid of ¥9.77B exceeded the OCF subtotal of ¥4.43B. In addition, increases in working capital, including a ¥1.41B increase in inventories and a ¥0.70B increase in accounts receivable, also put downward pressure on OCF. Investing cash flow was -¥11.13B; in addition to capital expenditures of ¥0.74B, the acquisition of investment securities and related items contributed to the cash outflow, resulting in FCF of -¥15.80B when combined with OCF. Financing cash flow was +¥2.54B, with ¥10.00B in financing raised through long-term borrowings offsetting outflows such as dividend payments. In effect, the company supported investment and shareholder returns through borrowings during the period. As a result, cash and cash equivalents decreased by ¥12.62B to ¥50.38B; however, given the 60.1% Equity Ratio and low level of interest-bearing debt, concerns regarding short-term liquidity remain limited.

Earnings Quality

Pre-tax income of ¥8.04B included extraordinary income of ¥2.20B, primarily consisting of a ¥0.67B gain on the sale of investment securities and a ¥1.53B gain on the sale of shares in a subsidiary. These should be distinguished from recurring operating earnings as non-recurring factors. Non-operating income was ¥1.16B, equivalent to only 0.5% of Revenue. Although this included a foreign exchange gain of ¥0.69B, its contribution to the earnings structure was limited, whereas non-operating expenses of ¥6.28B had a significant negative effect on Ordinary Income. OCF was below Net Income attributable to owners of the parent of ¥3.59B, at -¥4.67B. Although the temporary cash outflow of ¥9.77B for income taxes paid contributed to this result, accounts receivable and inventories also increased, indicating room for improvement in earnings-to-cash conversion. Goodwill amortization of ¥2.42B is a non-cash cost specific to JGAAP that continues to weigh on Operating Income; this impact should be considered when evaluating profitability.

Earnings Forecast and Guidance

The full-year company forecast calls for Revenue of ¥240.00B (+4.4% YoY), Operating Income of ¥6.00B (-45.2% YoY), Ordinary Income of ¥6.00B (+2.7% YoY), and a dividend of ¥28. The current-period results—Revenue of ¥229.97B, Operating Income of ¥10.95B, and Ordinary Income of ¥5.84B—require confirmation in light of consistency with the forecast period and forecast date. In particular, the actual Operating Income exceeded the forecast, which is a notable feature. Reversing the declining Revenue trend in MediaSolutions and sustaining D2C growth will be key to achieving the forecast Revenue growth of +4.4% YoY.

Shareholder Returns

The annual dividend was ¥28 per share (¥14 interim and ¥14 year-end), with total dividend payments of approximately ¥5.22B. Based on Net Income attributable to owners of the parent of ¥3.59B, the Payout Ratio was approximately 145% (disclosed value: 146.7%), indicating that dividends were not covered by current-period profit alone. FCF was also -¥15.80B, meaning that the dividend for the period was supported by cash balances and borrowings rather than internally generated cash. Although short-term payment capacity remains supported by cash and deposits of ¥50.38B and a low level of interest-bearing debt, continued OCF deficits and dividends exceeding profit could increase reliance on cash balances or external financing.

Risk Factors

1. Declining earnings-to-cash conversion: OCF was -¥4.67B, below Net Income attributable to owners of the parent of ¥3.59B, while income taxes paid of ¥9.77B exceeded the OCF subtotal of ¥4.43B. FCF was also -¥15.80B, confirming that accounting profit was not being converted into cash.

2. High Payout Ratio combined with negative cash flow: The Payout Ratio was approximately 145%, while FCF was -¥15.80B, meaning that the dividend for the period relied on cash balances and borrowings. Improving OCF will be a challenge if the annual dividend of ¥28 is to be maintained.

3. Continued Revenue decline in the core segment: MediaSolutions, which accounted for 70.4% of the Revenue mix, recorded a 7.3% YoY decline in Revenue. Although the segment’s profit margin continues to improve, continued Revenue declines could constrain consolidated Revenue growth.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

The company’s profitability metrics are both below the industry median, and its Operating Profit Margin and Net Profit Margin are relatively low within the industry.

Growth and Capital Efficiency

The Revenue Growth Rate was significantly below the industry median, indicating that the company is lagging in growth relative to its industry peers.

Source: Compiled by the Company

Key Takeaways from the Financial Results

1. The Operating Profit Margin improved from 3.5% in the previous year to 4.8%, an improvement of 130bp, primarily due to selling, general and administrative expense reductions, while Revenue continued to contract by 3.8%. The sustainability of profitability improvements without a recovery in the top line will be a key point to monitor.

2. While core MediaSolutions increased Operating Income by 31.5% despite lower Revenue and improved profitability, Entertainment recorded declining profit and D2C achieved high growth, resulting in divergent performance across segments. The high degree of dependence on MediaSolutions, which accounts for 70.4% of Revenue, is a notable feature of the portfolio structure.

3. OCF of -¥4.67B and FCF of -¥15.80B indicate that cash generation was not commensurate with current-period profit, while the Payout Ratio reached approximately 145%. The conversion of profit into cash and the funding sources for shareholder returns should be monitored continuously in future financial results.

Theoretical Share Price (Reference Value)

Sensitivity: ¥414–¥436 at Cost of Equity ±1%, and ¥424–¥426 at ω±0.1.

Notes:

• Goodwill amortization of ¥13.0 per share has been added back to profit (to reflect a non-cash expense and comparability with IFRS companies).
• Net Income is significantly compressed relative to Operating Income due to the tax burden, acquisition-related expenses, minority interests, and other factors (Net Income ÷ Operating Income 50%). This value reflects that compression at face value; if the factors are temporary, underlying earnings power may be higher.
• Because forecast ROE is below the Cost of Equity, the theoretical value is below Book Value per Share.

(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; this is not a forecast of the market share price or a recommendation of any specific investment action, and 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. Industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting a professional as necessary.

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