Amazia (4424) FY2026 Q1 Earnings Report

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Executive Summary

Although revenue was essentially flat, the key point this quarter was the substantial reduction in the operating loss, driven by an improvement in the gross profit margin and company-wide cost reductions. Revenue was ¥7.57B (+0.9% YoY), operating income was ¥-0.63B (an improvement of ¥+0.51B from ¥-1.14B in the same period of the previous year), ordinary income was ¥-0.60B (¥-1.11B in the same period of the previous year), and quarterly net income attributable to owners of the parent was ¥-0.61B (¥-1.15B in the same period of the previous year). The gross profit margin rose from 18.6% to 23.6%, while SG&A expenses decreased 5.0% YoY, which were the primary factors behind the reduction in losses.

Factors Affecting Performance

【Revenue】Revenue increased marginally to ¥7.57B, up +0.9% YoY. Revenue from the Entertainment Business was ¥7.33B (-1.6% YoY); user-facing revenue declined to ¥4.81B (-6.2% YoY), while business-to-business revenue expanded to ¥2.53B (+8.3% YoY). The IT Solutions Business achieved rapid growth of +355.7% YoY, with revenue of ¥0.24B, although its absolute size remains small. Overall, growth in business-to-business revenue and the IT Solutions Business offset the decline in user-facing revenue.

【Profit and Loss】Gross profit was ¥1.78B, compared with ¥1.39B in the same period of the previous year, and the gross profit margin rose approximately 5.0pt to 23.6%. SG&A expenses decreased 5.0% YoY to ¥2.41B, and the SG&A ratio also declined to 31.9%. As a result, the operating loss narrowed to ¥0.63B (¥-1.14B in the same period of the previous year), while the ordinary loss was limited to ¥0.60B. The net loss was ¥0.61B, and the impact of non-operating and extraordinary gains and losses was limited, meaning that the improvement in operating results translated directly into an improvement in net results. The results reflected higher revenue and lower losses.

Segment Analysis

The Entertainment Business generated revenue of ¥7.33B (96.8% composition ratio) and segment income of ¥0.23B, turning profitable from a loss of ¥0.21B in the same period of the previous year. The IT Solutions Business achieved substantial revenue growth to ¥0.24B (3.2% composition ratio), but recorded a segment loss of ¥0.05B, an improvement from the ¥0.10B loss in the same period of the previous year. While the combined profit of the two segments was ¥0.17B, unallocated company-wide expenses were substantial at ¥0.80B, the primary cause of the consolidated operating loss of ¥0.63B. The profitability of the core Entertainment Business is encouraging, but absorbing company-wide expenses remains a challenge for improving consolidated earnings.

Key Financial Indicators

【Profitability】The operating margin improved approximately 6.9pt to -8.3%, from -15.2% in the same period of the previous year, while the net profit margin also improved approximately 7.4pt to -8.1%, from -15.5%. The gross profit margin rose to 23.6%, from 18.6% in the same period of the previous year, and was the primary driver of the improvement in profitability.【Cash Flow Quality】Non-operating income was small at ¥0.02B, primarily consisting of a foreign exchange gain of ¥0.02B. The difference between the ordinary loss and net loss was limited to approximately ¥0.01B, indicating little distortion in earnings from temporary factors.【Investment Efficiency】ROE (annualized) was -28.9%, with the net loss significantly depressing capital efficiency.【Financial Soundness】The equity ratio remained high at 61.2% (roughly flat to slightly lower than approximately 59.7% in the previous year), while current assets of ¥10.5B compared with current liabilities of ¥5.2B indicate ample liquidity. However, retained earnings declined to ¥1.85B from ¥2.46B in the same period of the previous year, as continuing net losses are putting pressure on internal reserves.

Cash Flow Analysis

Although detailed disclosure of the statement of cash flows is not provided in these financial results, cash trends can be analyzed based on changes in the balance sheet. Cash and deposits decreased to ¥4.0B from ¥4.6B in the same period of the previous year, suggesting that the net loss and an increase in inventories placed pressure on cash. Inventories nearly doubled to ¥0.31B from ¥0.16B in the same period of the previous year, and the build-up of inventory associated with the expansion of product sales, including cross-border EC, affected working capital. Meanwhile, current assets of ¥10.5B compared with current liabilities of ¥5.2B resulted in a current ratio of 201.0%, providing a reasonable buffer for short-term funding. Fixed liabilities were only ¥0.11B, indicating low reliance on borrowings and a conservative financing structure.

Quality of Earnings

The operating loss was ¥0.63B, compared with an ordinary loss of ¥0.60B and a net loss before income taxes of ¥0.61B. Accordingly, fluctuations in earnings from non-operating and tax items were small, and the quality of earnings generally reflects the underlying operating results. Non-operating income was limited to ¥0.02B, primarily consisting of a foreign exchange gain of ¥0.02B, equivalent to a minor 0.3% of revenue. An extraordinary loss of ¥0.05B was recorded in the same period of the previous year, whereas no extraordinary loss was recorded in the current period. The improvement in net loss was therefore primarily attributable to the reduction in the operating loss. Comprehensive income was ¥-0.61B, almost equal to the net loss attributable to owners of the parent of ¥-0.61B, with no significant divergence from other comprehensive income.

Earnings Forecast and Guidance

Against the full-year revenue forecast of ¥30.76B, Q1 actual revenue of ¥7.57B represented a progress rate of 24.6%, approximately in line with the standard 25%. On the other hand, Q1 operating loss of ¥0.63B represented 48.1% of the full-year operating loss forecast of ¥1.31B, while progress against the full-year ordinary loss forecast of ¥1.37B was similarly high. Q1 net loss of ¥0.61B represented a progress rate of 41.9% against the full-year net loss forecast of ¥1.46B. Revenue progress is proceeding smoothly, but in terms of earnings, losses must be reduced from Q2 onward through the absorption of company-wide expenses and improved profitability in the IT Solutions Business.

Shareholder Returns

The dividend forecast per share is ¥0 for both the current period and the full year, and no dividend payments are planned. With net losses continuing, capital allocation is aimed at avoiding additional outflows from retained earnings through dividend payments. Since the dividend amount is zero, the payout ratio is effectively not applicable (0%).

Risk Factors

1. Shrinking revenue base in the core business: User-facing revenue in the Entertainment Business was ¥4.81B, down -6.2% YoY. If recovery is delayed, achieving full-year revenue growth of +8.2% will become more challenging.

2. Insufficient absorption of fixed costs: Company-wide expenses of ¥0.80B substantially exceeded the combined segment income of ¥0.17B. If fixed-cost absorption does not progress, the achievement of consolidated operating profitability will be delayed.

3. Profitability challenges and rising inventory in the IT Solutions Business: The IT Solutions Business achieved rapid revenue growth of +355.7% but recorded a loss of ¥0.05B. In addition, inventories increased +99.4% YoY (+¥0.16B), making it necessary to monitor the pace at which inventory is sold through.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

Profitability remains at a loss-making level and substantially below the industry median.

Growth and Capital Efficiency

Revenue growth also fell below the industry median and did not reach the lower bound of the IQR (3.6%).

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. The gross profit margin rose approximately 5.0pt YoY, while the operating margin improved approximately 6.9pt. This was attributable to the core Entertainment Business turning profitable, with segment income reaching ¥0.23B.

2. The primary cause of the consolidated operating loss was company-wide expenses of ¥0.80B, substantially exceeding combined segment income of ¥0.17B. Progress in fixed-cost absorption will be key to achieving consolidated profitability.

3. Progress against the full-year revenue forecast was a standard 24.6%, but Q1 losses accounted for a high 48.1% of the full-year operating loss forecast. The extent of loss reduction from Q2 onward will therefore be closely monitored in terms of meeting the earnings forecast.

Theoretical Share Price (Reference Value)

Sensitivity: ¥50–¥53 at ±1% cost of equity, and ¥50–¥53 at ω±0.1.

Notes:

• 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: 2026-08 / Mechanically calculated solely from 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 future share prices.)

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This report is an automatically generated financial results analysis document in which AI analyzes XBRL financial summary data. It does not recommend investment in any specific securities. The industry benchmarks are reference information compiled by the Company based on publicly disclosed financial results data. Investment decisions should be made at your own responsibility, after consulting professionals as necessary.

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