AUCNET (3964) FY2026 Q2 Earnings Report

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Executive Summary

For the cumulative Q2 period of the fiscal year ending December 2026, revenue and profit increased, driven by the expansion of product sales-related revenue in the core Lifestyle Products segment. Revenue was ¥379.8B (+16.8% YoY), Operating Income was ¥70.8B (+21.3%), Ordinary Income was ¥71.5B (+25.1%), and interim Net Income attributable to owners of the parent was ¥48.2B (+30.2%). The reason profit growth exceeded revenue growth was that the 3.5% decrease in SG&A expenses offset the decline in the gross profit margin (41.4%, compared with 45.4% in the previous year).

Factors Affecting Performance

【Revenue】Revenue was ¥379.8B (+16.8% YoY). By segment, the core Lifestyle Products segment led company-wide growth with revenue of ¥279.1B (+21.2%), while Mobility & Energy generated ¥85.1B (+6.2%) and Other generated ¥19.0B (+10.0%). By revenue breakdown, product sales-related revenue increased 24.8%, exceeding the 10.8% growth in auction-related revenue, with the expansion of transaction value and distribution volume serving as the main drivers.

【Profit and Loss】Operating Income was ¥70.8B (+21.3%), and Ordinary Income was ¥71.5B (+25.1%). Segment profit was ¥56.3B for Lifestyle Products (+11.9%, margin of 20.2%, down from 21.8% in the previous year) and ¥24.2B for Mobility & Energy (+28.5%, margin of 28.4%, improving from 23.5% in the previous year). Other reported an Operating Loss of ¥2.1B, with the loss widening from ¥1.3B in the previous year. In non-operating items, a foreign exchange loss of ¥0.9B was recorded, but this was offset by non-operating income, including dividend income, resulting in Ordinary Income exceeding Operating Income. Extraordinary losses consisted solely of a ¥0.1B loss on retirement of fixed assets, indicating that temporary factors were limited. The Net Income margin improved to 12.7% from 11.4% in the previous year, representing a result characterized by both revenue and profit growth.

Segment Analysis

The reporting segments comprise Lifestyle Products and Mobility & Energy. Lifestyle Products recorded revenue of ¥279.1B (+21.2%) and segment profit of ¥56.3B (+11.9%), with its profit margin declining approximately 1.6pt to 20.2% from 21.8% in the previous year. The rising composition ratio of product sales-related revenue may have put downward pressure on the gross profit margin. Meanwhile, Mobility & Energy recorded revenue of ¥85.1B (+6.2%) and segment profit of ¥24.2B (+28.5%), with profit growth significantly exceeding revenue growth. Its profit margin improved approximately 4.9pt to 28.4% from 23.5% in the previous year. Adjustments for company-wide expenses and other items amounted to negative ¥7.6B, representing the factor reconciling total reported segment profit of ¥78.4B to consolidated Operating Income of ¥70.8B.

Key Financial Indicators

【Profitability】The Operating Income margin was 18.6%, improving from 17.9% in the previous year, while the Net Income margin was 12.7%, improving from 11.4% in the previous year. Meanwhile, the gross profit margin declined to 41.4% from 45.4% in the previous year, reflecting changes in the revenue mix, including the expansion of product sales-related revenue.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥81.8B, approximately 1.7 times Net Income attributable to owners of the parent of ¥48.2B, indicating strong cash backing for earnings.【Investment Efficiency】Annualized ROE was high at 32.6%, supported by both asset turnover and profitability.【Financial Soundness】The Equity Ratio was 50.1%, while cash and deposits of ¥289.0B accounted for approximately 48% of total assets, indicating high liquidity.

Cash Flow Analysis

Operating Cash Flow was ¥81.8B, substantially exceeding Net Income attributable to owners of the parent of ¥48.2B, indicating strong cash conversion of earnings. Investing Cash Flow represented an outflow of ¥6.1B. Capital expenditures were ¥1.4B, only 0.36 times depreciation and amortization of ¥4.0B, indicating limited investment in tangible assets. Financing Cash Flow represented an outflow of ¥18.1B, mainly due to dividend payments of ¥16.6B. As a result, free cash flow was strongly positive at ¥75.7B, and cash and deposits increased ¥58.0B from the previous year to ¥289.0B. In terms of working capital, accounts payable increased ¥7.5B, supporting OCF and reflecting the increase in procurement and settlement transactions accompanying the expansion of product sales.

Quality of Earnings

Ordinary Income exceeded Operating Income because non-operating income, including dividend income of ¥0.5B, exceeded non-operating expenses, including the foreign exchange loss of ¥0.9B. Extraordinary gains and losses consisted solely of a ¥0.1B loss on retirement of fixed assets, limiting the impact of temporary factors on profit. OCF reached approximately 1.7 times Net Income attributable to owners of the parent, providing cash-based support for earnings quality. However, the decline in the gross profit margin reflects a structural change in the revenue mix, namely the rising composition ratio of product sales-related revenue. The fact that efficiency gains from the 3.5% decrease in SG&A expenses offset this decline and enabled profit growth is a structural factor that should be considered when assessing earnings sustainability.

Earnings Forecasts and Guidance

Progress against the full-year forecast was 50.6% for revenue (¥379.8B/¥750.0B), 59.0% for Operating Income (¥70.8B/¥120.0B), and 59.6% for Ordinary Income (¥71.5B/¥120.0B). While revenue progress was close to the standard first-half progress rate of 50%, Operating Income and Ordinary Income were approximately 9pt ahead. The full-year Operating Income forecast assumes growth of +26.1% YoY, indicating a plan that anticipates acceleration in profit growth in the second half compared with +21.3% in the first half.

Shareholder Returns

The Q2 dividend was ¥21.00 per share. The full-year dividend forecast is ¥82.00, including a regular dividend of ¥22.00 and a special dividend of ¥39.00 in the year-end dividend. The Payout Ratio against forecast full-year EPS of ¥85.91 is approximately 95.4%, indicating plans for substantial earnings distribution through the special dividend in addition to the regular dividend. As of the first half, cash and deposits of ¥289.0B and free cash flow of ¥75.7B had been secured, confirming the company’s capacity to provide shareholder returns from a funding perspective.

Risk Factors

1. Decline in gross profit margin: The Lifestyle Products segment profit margin declined to 20.2% from 21.8% in the previous year, a decrease of approximately 1.6pt. If the rising composition ratio of product sales-related revenue continues, further downward pressure on the company-wide gross profit margin (41.4%, compared with 45.4% in the previous year) may persist.

2. Low investment level: Capital expenditures of ¥1.4B remained at only 0.36 times depreciation and amortization of ¥4.0B. Although this is a short-term factor supporting free cash flow growth, insufficient renewal investment related to systems and platforms could affect medium- to long-term competitiveness.

3. Dependence on working capital factors: Accounts payable increased 80.3% YoY to ¥17.1B, contributing to the increase in OCF. Although this appears to reflect an increase accompanying the expansion of product sales transaction volume, a slowdown in transaction volume could result in a reversal in OCF.

Industry Benchmark (For Reference; Company Research)

Industry Benchmark (it_telecom)

Profitability and Returns

The Operating Income margin exceeds the industry median, while the Net Income margin is generally at the same level.

Growth and Capital Efficiency

The revenue growth rate is slightly below the industry median and the lower bound of the IQR.

※Source: Company research

Key Takeaways from the Earnings Results

1. Profitability remains high, with an Operating Income margin of 18.6%, a Net Income margin of 12.7%, and annualized ROE of 32.6%. Cash-based support for earnings is also strong, with OCF reaching approximately 1.7 times Net Income.

2. While revenue in the core Lifestyle Products segment grew by more than 20%, its segment profit margin declined. The improvement in the Mobility & Energy profit margin (+4.9pt) supported company-wide profit growth. Going forward, the continued impact of the rising product sales ratio on the gross profit margin will be a key point of focus.

3. Capital expenditures remained at 0.36 times depreciation and amortization. While this contributes to short-term free cash flow generation, the allocation of investment to systems infrastructure and other areas should be monitored continuously based on the earnings data.

Theoretical Stock Price (Reference Value)

Sensitivity: ¥485–¥510 at ±1% for the cost of equity, and ¥494–¥502 at ω±0.1.

Notes:

• Goodwill amortization of ¥1.4 per share is added back to profit (due to its nature as a non-cash expense and to enhance comparability with IFRS companies).
• Since Net Income progress against the full-year forecast (62%) exceeds the standard level (50%), forecast EPS is adjusted upward within a maximum range of +10% (because companies with leading progress tend to exceed forecasts. The adjustment may be excessive for businesses with strong seasonality).
• Net assets as of the quarter-end are used (there is a timing difference relative to the full-year forecast).
• Since non-controlling interests are included in net assets, 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 stock price or a recommendation of any specific investment action, and does not predict or guarantee future stock 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, consulting professionals as necessary.

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