INTERTRADE (3747) FY2026 Q1 Earnings Report

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Executive Summary

The defining feature of the quarter was the divergence in earnings quality: profitability from the core business deteriorated, while Net Income increased due to extraordinary income. Revenue was ¥4.15B (-5.7% YoY), Operating Income was ¥-0.22B (deteriorating from ¥0.26B in the previous year), and Ordinary Income was ¥-0.70B (deteriorating from ¥-0.23B in the previous year). Net Income increased substantially to ¥1.58B (+924.3% YoY), but this was attributable to a one-time extraordinary gain of ¥2.30B from gains on changes in equity interests, contrasting with the decline in the core business’s profitability.

Factors Affecting Business Performance

【Revenue】Revenue was ¥4.15B, down 5.7% year on year. The core Financial Solutions Business, which accounted for 77.1% of the revenue mix, generated ¥3.20B, down 9.8% year on year, and was the primary cause of the overall revenue decline. In contrast, the Business Solutions Business generated ¥0.60B (+9.0% YoY), while the Healthcare Business generated ¥0.35B (+16.2% YoY). Although both businesses recorded revenue growth, their combined revenue mix remained at only 22.9%, insufficient to offset the revenue decline in the core business.

【Profit and Loss】Gross Profit was ¥1.38B, down 17.7% year on year, and the gross margin declined by 4.9pt from 38.1% in the previous year to 33.2%. SG&A expenses increased 13.2% year on year to ¥1.60B, causing the SG&A ratio to rise to 38.5% from 32.1% in the previous year. As a result, Operating Income was ¥-0.22B, representing a shift from the previous year’s ¥0.26B profit to a loss. Segment profit in the Financial Solutions Business declined to ¥0.77B (-42.3% YoY), and the consolidated operating loss was directly caused by corporate expenses of ¥0.86B exceeding total reported segment profit of ¥0.64B. Ordinary Income was ¥-0.70B, deteriorating as an equity-method investment loss of ¥0.48B was added to the operating loss. Net Income increased substantially to ¥1.58B, but this was primarily attributable to the one-time extraordinary gain of ¥2.30B from gains on changes in equity interests, and therefore moved in the opposite direction from losses at the Operating Income and Ordinary Income levels. In summary, the structure was one of declining revenue and profit in the core business, combined with an increase in Net Income driven by extraordinary income.

Segment Analysis

The Financial Solutions Business was the largest contributor to profit, with Revenue of ¥3.20B (77.1% of the revenue mix) and segment profit of ¥0.77B (24.0% margin), but deteriorated year on year, with Revenue down 9.8% and profit down 42.3%. The Business Solutions Business generated Revenue of ¥0.60B (+9.0% YoY), but recorded a segment loss of ¥0.06B (-9.3% margin). The Healthcare Business generated Revenue of ¥0.35B (+16.2% YoY), but recorded a segment loss of ¥0.08B (-22.1% margin). Neither growth business was able to convert revenue growth into profit, and corporate expenses of ¥0.86B (+4.8% YoY) exceeded total reported segment profit of ¥0.64B, resulting in a consolidated operating loss of ¥0.22B.

Key Financial Indicators

【Profitability】The Operating Income margin was -5.1%, deteriorating by 11.1pt from 5.98% in the previous year, indicating a decline in the profitability of the core business. The Net Income margin was high at 38.2%, but this was due to the recognition of the extraordinary gain of ¥2.30B and does not indicate sustainable profitability.【Cash Flow Quality】Net Income of ¥1.58B depended on the one-time extraordinary gain, exceeding the operating loss of ¥0.22B and Ordinary Income loss of ¥0.70B. Accordingly, earnings quality should be assessed cautiously on a core-business basis. Work in process increased from ¥0.04B in the previous year to ¥0.21B, and its ratio of inventories was high at 55.3%.【Investment Efficiency】Annualized ROE was 51.4%, but was significantly boosted by the extraordinary gain and does not reflect improvements in the business. Investment securities increased to ¥4.46B (¥2.61B in the previous year, +70.7%), accounting for 27.4% of total assets.【Financial Soundness】The Equity Ratio remained high at 75.8% (72.6% in the previous year), while cash and deposits of ¥7.51B substantially exceeded current liabilities of ¥3.03B. Long-term borrowings were essentially flat at ¥0.77B compared with ¥0.77B, and leverage remained low.

Cash Flow Analysis

As detailed information from the statement of cash flows is not subject to analysis based on the disclosed information, cash trends are assessed from movements in the balance sheet. Cash and deposits were ¥7.51B, up from ¥7.12B in the same period of the previous year, indicating that liquidity was maintained. Meanwhile, accounts receivable decreased 34.3% year on year to ¥1.72B, suggesting progress in collections in line with the decline in Revenue. Work in process increased from ¥0.04B to ¥0.21B, indicating that funds related to development projects in progress remained tied up on the asset side. Investment securities increased 70.7% year on year to ¥4.46B, and the greater allocation of funds to investment activities was observed as a change in the asset composition. Retained earnings were negative ¥11.45B, improving by ¥1.58B from negative ¥13.04B in the same period of the previous year. However, this improvement resulted from the recognition of Net Income for the current period and was not a recovery derived from the core business.

Earnings Quality

Net Income of ¥1.58B for the quarter was generated by the extraordinary gain of ¥2.30B from gains on changes in equity interests, contrasting with the weak core business, which recorded an operating loss of ¥0.22B and an Ordinary Income loss of ¥0.70B. This extraordinary gain is a one-time factor with limited recurrence, and apparently high indicators such as a Net Income margin of 38.2% and ROE of 51.4% do not reflect the business’s sustainable profitability. In non-operating income and expenses, the ¥0.48B of non-operating expenses included an equity-method investment loss, which also weighed on earnings. The increase in work in process (¥0.04B→¥0.21B) is an accrual-based factor dependent on the timing of future revenue recognition and cost recovery, and therefore warrants attention when assessing the cash-convertibility of earnings. Overall, the increase in profit for the period was driven by special factors and does not indicate an improvement in core-business profitability.

Earnings Forecast and Guidance

Against the full-year Revenue forecast of ¥21.00B (+14.3% YoY), Revenue for the quarter was ¥4.15B, representing progress of 19.8%, below the indicative quarterly progress rate of 25%. Against the full-year Operating Income forecast of ¥1.00B, the Company recorded an operating loss of ¥0.22B for the quarter, making Revenue recovery and fixed-cost absorption in the second half of the fiscal year prerequisites for achieving the plan. Progress toward the full-year Net Income forecast of ¥2.40B was high at 65.8%, but most of this depended on the quarter’s extraordinary gain of ¥2.30B and therefore cannot be evaluated as progress in the core business. The earnings forecast was not revised during the quarter.

Shareholder Returns

The full-year dividend forecast is ¥0 per share, representing an effective Payout Ratio of 0%. Dividends were also ¥0 in the same period of the previous year. Given that Operating Income is negative and Retained Earnings are negative ¥11.45B, maintaining liquidity on hand and restoring core-business profitability are currently the priorities for capital allocation. Treasury shares of ¥0.95B are recorded, but no purchases during the quarter could be confirmed; therefore, the Total Return Ratio, including dividends, has not been calculated.

Risk Factors

1. Risk of declining revenue and profit in the core business: The Financial Solutions Business is the largest business and accounts for 77.1% of consolidated Revenue, but Revenue declined 9.8% and segment profit declined 42.3% year on year. The Company’s structure is such that order intake and profitability trends in this business directly affect overall performance.

2. Risk of monetization in growth segments: The Business Solutions Business (segment loss of ¥0.06B) and the Healthcare Business (segment loss of ¥0.08B) both continue to post losses despite revenue growth. If the inability to convert revenue growth into profit continues, recovery of investments may be delayed.

3. Risk related to the fixed-cost structure and project progress management: Corporate expenses of ¥0.86B exceeded total reported segment profit of ¥0.64B, directly causing the consolidated operating loss. In addition, the work-in-process ratio was high at 55.3%, and delays in the acceptance of development projects or deterioration in project profitability could lead to risks such as impairment losses.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

The Operating Income margin was substantially below the industry median, while the Net Income margin was substantially above the industry median due to the impact of extraordinary income.

Growth and Capital Efficiency

The Revenue growth rate was substantially below the industry median, indicating a relative disadvantage in growth within the industry.

※Source: Compiled by the Company

Key Points in the Earnings Results

1. The increase in Net Income for the quarter resulted from the one-time factor of the ¥2.30B gain on changes in equity interests. The key point in the earnings results is that the core business recorded an operating loss of ¥0.22B and an Ordinary Income loss of ¥0.70B.

2. The Financial Solutions Business, which accounts for 77.1% of consolidated Revenue, recorded declines in both revenue and profit. This confirms a structure in which the business’s profitability trends will determine future performance.

3. Full-year Revenue progress was 19.8%, below the standard quarterly progress benchmark of 25%. In addition, the Company recorded a loss for the quarter against the full-year Operating Income forecast of ¥1.00B, making performance trends in the second half of the fiscal year a key focus.

Theoretical Share Price (Reference Value)

Sensitivity: ¥123–¥130 for a ±1% change in the cost of equity, and ¥125–¥127 for a change of ±0.1 in ω.

Notes:

• Normalized EPS calculated from Ordinary Income and other figures is used to exclude the effects of temporary gains and losses (the Company’s forecast EPS is ¥33.4).
• Because progress in Net Income toward the full-year forecast (66%) exceeds the standard level (25%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies with progress ahead of schedule tend to exceed forecasts; the adjustment may be excessive for businesses with strong seasonality).
• 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 from the full-year forecast).
• Because 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: 2026-07 / 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 summary 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 professionals as necessary.

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