AUCNET (3964) FY2026 Q1 Earnings Report

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Executive Summary

The first quarter of the fiscal year ending December 2026 saw increases in both revenue and profit; however, the key point is that the rate of profit growth fell below the rate of revenue growth. Revenue was ¥181.9B (+13.8% YoY), Operating Income was ¥32.3B (+4.6%), Ordinary Income was ¥32.2B (+7.5%), and Net Income attributable to owners of the parent was ¥21.6B (+7.2%). The 17.8% increase in cost of sales exceeded revenue growth, and the gross margin declined by approximately 2.0pt YoY, which was the primary factor behind the slowdown in profit growth. Meanwhile, progress against the full-year company forecasts was 25.3% for revenue and 28.1% for Operating Income, exceeding standard levels and indicating solid initial progress.

Factors Affecting Results

【Revenue】Revenue was ¥181.9B, up +13.8% YoY. By segment, Lifestyle Products was ¥131.9B (72.5% of total, +16.5% YoY), serving as the core business, followed by Mobility & Energy at ¥42.0B (23.1% of total, +8.0%). By revenue category, product sales-related revenue accounted for the largest share at ¥92.1B (+13.3% YoY), while auction-related revenue recorded relatively strong growth of ¥73.9B (+16.1%).

【Profit and Loss】Operating Income was limited to ¥32.3B (+4.6% YoY), below revenue growth. The primary factor was an approximately 2.0pt decline in the gross margin to 41.3% from 43.3% in the prior-year period, as the 17.8% increase in cost of sales exceeded revenue growth. The SG&A ratio improved to 23.5% from 24.0%, indicating progress in fixed-cost efficiency, but this was insufficient to offset the increase in costs. By segment, the profit margin of the core Lifestyle Products segment declined by approximately 2.4pt from 20.5% to 18.1%, becoming the primary factor behind the decline in the consolidated margin, while Mobility & Energy maintained a high margin of 28.6%. Ordinary Income was ¥32.2B (+7.5%), as the non-operating foreign exchange loss of ¥0.6B was largely offset by interest and dividend income. Extraordinary losses were limited to a ¥0.1B loss on the disposal of fixed assets, indicating limited impact from one-time factors. Net Income was ¥21.6B (+7.2%), resulting in a structure in which profit margins declined slightly despite increases in both revenue and profit.

Segment Analysis

Lifestyle Products generated revenue of ¥131.9B (+16.5% YoY) and segment profit of ¥23.8B (+2.4%), with a profit margin of 18.1% versus 20.5% in the prior-year period, indicating that profit growth has failed to keep pace with revenue expansion. Mobility & Energy generated revenue of ¥42.0B (+8.0%) and segment profit of ¥12.0B (+8.2%), maintaining a high profit margin of 28.6%, roughly in line with the prior-year level. Other Businesses, including Agri and Circular Commerce, generated revenue of ¥7.9B (+3.5% approximately) and recorded a segment loss of ¥0.5B, shifting into the red from a small profit in the prior year. The adjustment for company-wide expenses and other items was negative ¥3.1B, improving from negative ¥3.6B in the prior year and partially mitigating the decline in the consolidated profit margin.

Key Financial Indicators

【Profitability】The Operating Income margin of 17.7% (19.3% in the prior year) and Net Income margin of 11.8% (12.6% in the prior year) both declined YoY, but the Company continues to maintain a high level of absolute profitability.【Cash Quality】Comprehensive Income of ¥26.9B exceeded Net Income of ¥21.6B. The difference was primarily attributable to foreign currency translation adjustments of ¥2.7B and valuation difference on securities of ¥1.5B, representing an increase attributable to factors outside the core business.【Investment Efficiency】Annualized ROE was high at 32.4%, achieved under a conservative capital structure with an Equity Ratio of 51.5%.【Financial Soundness】Cash and deposits were ¥212.3B, the Equity Ratio was 51.5%, and goodwill was ¥0.1B (0.4% of total assets), indicating a stable financial foundation and limited balance-sheet risk from goodwill impairment and similar factors.

Cash Flow Analysis

Although detailed disclosure of the cash flow statement is limited, funding trends can be inferred from changes in the balance sheet. Cash and deposits were ¥212.3B, down from ¥231.0B in the same period of the prior year. The increase in working capital associated with business expansion, including an increase in accounts payable of ¥12.6B (+32.6% YoY) and the accumulation of inventories, is presumed to have been a use of funds. Meanwhile, income taxes payable declined substantially YoY, with the impact of tax payment timing reflected in the composition of current liabilities. Total assets increased to ¥527.2B from ¥507.8B in the prior year, indicating continued expansion of the asset base in line with business growth.

Earnings Quality

Profit for the current period was primarily generated by operating activities, while extraordinary losses were limited to a small ¥0.1B loss on the disposal of fixed assets, resulting in limited impact from one-time factors. Non-operating income and expenses were broadly neutral to Ordinary Income, as non-operating income of ¥0.6B, including interest and dividend income, nearly offset the ¥0.6B foreign exchange loss. Comprehensive Income of ¥26.9B exceeded Net Income of ¥21.6B by ¥5.4B. This difference was attributable to other comprehensive income resulting from market and foreign exchange factors, such as foreign currency translation adjustments and valuation difference on securities. Accordingly, although the quality of Net Income for the current period is based on the core business, it should be noted that the divergence from Comprehensive Income could reverse depending on market movements.

Earnings Forecasts and Guidance

The full-year company forecasts are revenue of ¥720.0B (+12.3% YoY), Operating Income of ¥115.0B (+20.8%), and Ordinary Income of ¥113.5B (+19.2%). During the quarter, revisions were made to the earnings and dividend forecasts. Q1 progress was 25.3% for revenue, 28.1% for Operating Income, and 28.7% for Net Income, all representing favorable progress above the simple 25% benchmark. However, the full-year forecast Operating Income margin of 15.97% is below the Q1 actual result of 17.7%, suggesting a plan that assumes a decline in profit margins over the remaining 3 quarters, including the continuation of higher costs.

Shareholder Returns

The dividend forecast is ¥42.00 per share (after taking the stock split into account), an increase from ¥22 in the same period of the prior year. The Company implemented a 1-for-2 stock split effective April 1, 2026; therefore, the dividend forecast before taking the split into account is separately stated in parentheses. The Payout Ratio based on Net Income is approximately 50.8%, calculated as the dividend forecast of ¥42.00 against full-year forecast EPS of ¥82.60.

Risk Factors

1. Decline in the profit margin of the core segment: Lifestyle Products recorded revenue growth of +16.5%, while segment profit increased by only +2.4%, causing the profit margin to decline by approximately 2.4pt from 20.5% to 18.1%. Continued margin pressure resulting from changes in product mix or procurement costs could constrain consolidated profit growth.

2. Deterioration in the earnings of Other Businesses: Other Businesses, including Agri and Circular Commerce, recorded revenue of ¥7.9B and a segment loss of ¥0.5B, moving into the red from a small profit in the same period of the prior year. Although the segment is small, continued delays in monetization could impede improvement in the profit margin.

3. Risk of continued gross margin deterioration due to higher costs: The 17.8% increase in cost of sales exceeded revenue growth of 13.8%, resulting in an approximately 2.0pt decline in the gross margin. Cost control will be key to profit growth as product sales-related revenue expands.

Industry Benchmark (Reference; Company Analysis)

Key Takeaways from the Earnings Results

1. Although revenue and profit both increased, the gross margin and the profit margin of the core segment both declined from the prior year, indicating a structural change in which revenue expansion is not necessarily translating into profit growth at the same rate.

2. Q1 profit progress against the full-year forecasts was in the 28% range, exceeding standard levels; however, the full-year forecast Operating Income margin of 15.97% is set below the Q1 actual result of 17.7%, making this a conservative plan that assumes a decline in the profit margin over the remaining period.

3. Financial soundness remains high, with an Equity Ratio of 51.5% and a current ratio exceeding 180%. The post-stock-split dividend forecast of ¥42 increased from ¥22 in the prior year, confirming a strengthened commitment to shareholder returns.

Theoretical Share Price (Reference Value)

Sensitivity: ¥463–¥490 at ±1% for the cost of equity, and ¥472–¥483 at ±0.1 for ω.

Notes:

• Net assets as of the quarter-end have been used (there is a timing difference from the full-year forecasts).
• 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: 2026-07 / This is a 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 predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI through analysis of 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 responsibility, after consulting with a professional as necessary.

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