AUCNET INC. FY2026 Q2 Earnings Report

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Executive Summary

Aucnet’s cumulative Q2 for the fiscal year ending December 2026 concluded with higher revenue and profit, driven by the high growth of its core Lifestyle Products Business and improved SG&A efficiency. Revenue was ¥379.8B (+16.8% from ¥325.3B in the same period of the previous year), Operating Income was ¥70.8B (+21.3%), and Ordinary Income was ¥71.5B (+25.1%). Consolidated Net Income, including Net Income attributable to non-controlling interests, was ¥48.8B (+29.5% from ¥37.7B in the previous year), of which Net Income attributable to owners of the parent was ¥48.2B (+30.2% from ¥37.0B in the previous year). EPS was ¥53.11 (+31.6% from ¥40.37 in the previous year). Although the gross margin declined, the reduction in absolute SG&A expenses improved the Operating Income margin to 18.6% (+0.7pt from 17.9% in the previous year). The simultaneous progress in revenue growth and margin improvement is a key feature of these results.

Factors Affecting Performance

【Revenue】Revenue of ¥379.8B represented a year-on-year increase of +16.8%, with Lifestyle Products leading overall performance at ¥279.1B (73.5% of the total, YoY+21.2%). Mobility & Energy recorded ¥85.1B (22.4% of the total, YoY+6.2%), a relatively moderate rate of growth, but supported company-wide margins by maintaining high profitability with an Operating Income margin of 28.4%. Other Businesses (including Agri and Circular Commerce) amounted to only ¥19.0B (YoY+10.0%), while Operating Income/Loss deteriorated to -¥2.1B (a year-on-year deterioration of -66.1%).

【Profit and Loss】The gross profit margin declined to 41.4%, down -4.1pt from 45.4% in the previous year, as the rising proportion of revenue related to the sale of low-gross-margin products in Lifestyle Products weighed on the product mix. Meanwhile, SG&A expenses decreased -3.5% year on year to ¥86.3B, and the SG&A ratio improved significantly to 22.7% (-4.8pt from 27.5% in the previous year), resulting in an improvement in the Operating Income margin to 18.6% (+0.7pt). Although a foreign exchange loss of ¥0.9B was recorded in non-operating items, it was largely offset by dividend income and other non-operating income, allowing Ordinary Income to reach ¥71.5B (+25.1%), exceeding the growth in Operating Income. Extraordinary losses were minimal at ¥0.1B, including losses on disposal of fixed assets, and the impact of temporary factors was limited. Consolidated Net Income of ¥48.8B (+29.5%) therefore represents higher revenue and profit reflecting improved earning power in the core business.

Segment Analysis

Lifestyle Products generated revenue of ¥279.1B (YoY+21.2%) and Operating Income of ¥56.3B (YoY+11.9%), with a profit margin of 20.2% (a slight decline from the previous year). It remains the company’s core pillar in terms of both revenue and profit, but profit growth has slowed relative to revenue growth, and the expansion of low-gross-margin product sales has weighed on profitability. Mobility & Energy generated revenue of ¥85.1B (YoY+6.2%) and Operating Income of ¥24.2B (YoY+28.5%), with profit growth substantially exceeding revenue growth. Its 28.4% profit margin was the highest among the three segments. Growth in auction-related revenue and contributions from high-value-added transactions are inferred to have supported the increase, making this segment a driver of company-wide margin expansion. Other Businesses generated revenue of ¥19.0B (YoY+10.0%), while Operating Income/Loss was -¥2.1B (a -66.1% year-on-year expansion in the loss), reflecting the impact of upfront investment and launch costs on profitability. Against total segment profit of ¥78.4B, an adjustment of -¥7.6B for company-wide expenses not attributable to reportable segments resulted in Operating Income of ¥70.8B.

Key Financial Indicators

【Profitability】The Operating Income margin improved to 18.6%, up +0.7pt from 17.9% in the previous year, while the Net Income margin (on a consolidated basis) rose to 12.9%, up +1.3pt from 11.6% in the previous year. Although the gross margin declined to 41.4%, down -4.1pt from 45.4% in the previous year, the substantial decline in the SG&A ratio to 22.7% (27.5% in the previous year) improved the operating-level margin. Cost efficiency improvements were the primary driver of enhanced profitability.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥81.8B, approximately 1.7 times consolidated Net Income of ¥48.8B, indicating strong cash backing for earnings.【Investment Efficiency】ROE was 16.3%, maintaining a high level of capital efficiency. Total assets were ¥597.3B and net assets were ¥299.5B, with both assets and capital continuing to expand.【Financial Soundness】The Equity Ratio was 50.1%, a slight decline from 52.4% in the previous year, but this represented natural dilution accompanying the expansion of total assets and revenue. The company continues to maintain a high level of financial soundness, remaining above 50%. Cash and deposits were ¥289.0B, accounting for approximately 48% of total assets, indicating substantial liquidity.

Cash Flow Analysis

Operating Cash Flow (OCF) was ¥81.8B, down -28.0% from ¥113.7B in the previous year, but remained approximately 1.7 times consolidated Net Income of ¥48.8B, indicating solid earnings-to-cash conversion. The subtotal before changes in working capital was ¥102.5B, while an increase in corporate income tax payments to ¥22.0B (+75% from ¥12.6B in the previous year) was one factor behind the decline. In working capital, an increase in trade payables contributed +¥7.5B in cash, while an increase in trade receivables made a negative contribution of -¥1.2B, and a decrease in inventories contributed +¥3.7B. Investing Cash Flow was -¥6.1B, with capital expenditures kept relatively low at ¥1.4B. Free Cash Flow (OCF + Investing Cash Flow) was ample at ¥75.7B. Financing Cash Flow was -¥18.1B, primarily reflecting shareholder returns such as dividend payments. Ample FCF has established a financial foundation capable of supporting both business expansion and shareholder returns.

Earnings Quality

The current period’s profit growth was attributable to improved earning power in the core business for both Operating Income and Ordinary Income. Extraordinary items were limited to an extraordinary loss of ¥0.1B (including losses on disposal of fixed assets), and the impact of temporary factors was limited. Non-operating income and expenses were largely offset, with the foreign exchange loss of ¥0.9B being mostly offset by dividend income of ¥0.5B and other items. The difference between Ordinary Income of ¥71.5B and Operating Income of ¥70.8B therefore remained small. Comprehensive Income was ¥49.0B, only +¥0.2B above Net Income attributable to owners of the parent of ¥48.2B. The impact of other comprehensive income items, including foreign currency translation adjustments of +¥0.4B, was also limited. This small divergence indicates that structural noise from valuation changes in foreign-currency assets and securities has a limited impact on results, suggesting that current-period earnings relatively faithfully reflect the underlying performance of the core business.

Earnings Forecast and Guidance

The first-half progress rates against the full-year plan (Revenue of ¥750.0B, Operating Income of ¥120.0B, Ordinary Income of ¥120.0B, and EPS of ¥85.91) were 50.6% for Revenue, 59.0% for Operating Income, 59.6% for Ordinary Income, and 61.8% for EPS (¥53.11/¥85.91). Progress on profit metrics exceeded progress on Revenue, indicating that if the margin improvement driven primarily by the SG&A efficiencies achieved in the first half continues, profit performance is running ahead of the full-year plan. During the current quarter, revisions were made to the earnings and dividend forecasts, and the accuracy of the full-year outlook is considered to have moved closer to actual performance than at the time of the initial plan.

Shareholder Returns

The first-half dividend was ¥21 per share, resulting in a Payout Ratio of approximately 39.5% against first-half EPS attributable to owners of the parent of ¥53.11. The full-year dividend forecast is ¥82 (consisting of a planned ordinary year-end dividend of ¥22 and a special dividend of ¥39), resulting in a Payout Ratio of approximately 95.4% against forecast full-year EPS of ¥85.91. The special dividend is the primary factor increasing the ratio. First-half Free Cash Flow of ¥75.7B was sufficient to cover first-half dividend payments, and given the substantial cash and deposits of ¥289.0B, there is limited concern regarding the company’s ability to execute shareholder returns in the near term. In addition, a 2-for-1 stock split was implemented effective April 1, 2026, and the full-year dividend forecast of ¥82 was disclosed based on the post-split number of shares.

Risk Factors

1. Segment concentration risk: Lifestyle Products accounts for 73.5% of Revenue and the majority of Operating Income, meaning that changes in product supply and demand or pricing trends in this business could have a significant impact on company-wide performance. Although Mobility & Energy has a high profit margin of 28.4%, it accounts for only 22.4% of Revenue.

2. Gross margin decline and inventory turnover: The gross margin was 41.4%, down -4.1pt from the previous year, while the rising proportion of revenue related to the sale of low-gross-margin products has exerted pressure through the product mix. Inventories were ¥41.0B, and annualized inventory turnover days were approximately 67 days, requiring monitoring for valuation losses and discounting pressure should supply and demand conditions deteriorate.

3. Investment restraint and volatility in non-operating income and expenses: Capital expenditures of ¥1.4B remained below depreciation and amortization expense of ¥4.0B, indicating a continued tendency toward restrained investment. In addition, a foreign exchange loss of ¥0.9B was recorded, leaving room for non-operating income and expenses to fluctuate in response to changes in the external environment.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Growth and Capital Efficiency

※Source: Compiled by the Company

Key Points from the Financial Results

1. Higher revenue and profit and an improved Operating Income margin progressed simultaneously, confirming a structure in which the decline in the gross margin (-4.1pt) was absorbed through SG&A efficiency improvements (-4.8pt). Whether this change in the earnings structure represents temporary cost reductions or the emergence of sustainable economies of scale will be an important point to assess going forward.

2. First-half progress against the full-year plan was 59.0% for Operating Income and 59.6% for Ordinary Income, exceeding the 50.6% progress for Revenue. The rapid pace of progress in profit metrics is a notable feature evident from the financial results.

3. The decline in the gross margin, inventory turnover days (approximately 67 days), and the fact that capital expenditures remain below depreciation and amortization expense are items that should be continuously monitored for consistency with the pace of investment supporting business expansion.

Theoretical Share Price (Reference Value)

This is a reference range mechanically calculated solely from publicly disclosed data using a residual income model (Ohlson model with an explicit 5-year fade period). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥487–¥512 at ±1% for the Cost of Equity, and ¥496–¥504 at ±0.1 for ω.

Notes:

• Goodwill amortization of ¥1.4 per share has been added back to earnings (as a non-cash expense and for comparability with IFRS companies).
• Because progress in Net Income against the full-year forecast (62%) exceeds the standard level (50%), forecast EPS has been adjusted upward within a range of up to +10% (because companies running ahead of plan tend to exceed forecasts. The adjustment may be excessive for businesses with strong seasonality).
• Net assets as of the quarter-end have been used (there is a timing difference relative to the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-06 / This value does not forecast 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 discretion and responsibility, after consulting with a professional as necessary.

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