ACCESS CO.,LTD. FY2027 Q2 Earnings Report

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Executive Summary

This earnings period reflects a situation of higher revenue and reduced losses, with both the operating loss and net loss narrowing significantly year on year due to gross profit expansion accompanying revenue growth and the containment of SG&A expenses. Revenue was ¥10.58B (+16.8% year on year), Operating Income was negative ¥0.78B (an improvement of ¥1.21B from negative ¥1.99B in the previous year), Ordinary Income was negative ¥0.53B, and Net Income attributable to owners of the parent was negative ¥0.59B (an improvement of ¥2.13B from negative ¥2.72B in the previous year). The doubling of revenue and higher gross margin in the Network segment were the primary drivers of earnings improvement; however, all segments remain in operating loss, and the Company has not yet achieved a return to profitability.

Factors Affecting Performance

【Revenue】Revenue was ¥10.58B, representing a 16.8% year-on-year increase. Network (54.3% of the composition, ¥5.75B, YoY +116.1%) drove overall Company growth through the expansion of license sales and service provision, while IoT (¥3.86B, YoY -26.9%) and GlobalWebPlatform (¥0.97B, YoY -13.1%) continued to record declines in revenue. Product sales were ¥1.08B, down 62.6% year on year, and the shift in the revenue mix toward licenses and services is considered one factor behind the higher gross margin.

【Profit and Loss】Gross profit increased substantially to ¥4.33B (gross margin of 40.9%, up +8.5pt from 32.4% in the previous year), while SG&A expenses increased only 3.8% year on year to ¥5.11B, indicating progress in the absorption of fixed costs through revenue growth. The operating loss narrowed to ¥0.78B (operating margin of -7.4%), and foreign exchange gains of ¥0.19B recorded below operating income contributed to an improvement in the ordinary loss to ¥0.53B. An impairment loss of ¥0.05B (¥0.12B in the previous year) was temporarily recorded as an extraordinary loss in the Network Business. The period can be assessed as one of higher revenue and reduced losses, in which the loss幅 narrowed substantially alongside revenue growth.

Segment Analysis

Network recorded revenue of ¥5.75B (54.3% of the composition, YoY +116.1%) and an operating loss of ¥0.59B (margin of -10.3%). Although its loss was the largest Company-wide, it narrowed substantially from ¥2.69B in the previous year. An impairment loss of ¥0.05B was recorded because the originally anticipated revenue could no longer be expected, and the key focus will be whether rapid expansion leads directly to improved profitability. IoT recorded revenue of ¥3.86B (YoY -26.9%) and an operating loss of ¥0.11B (margin of -2.9%), continuing its declining revenue trend. GlobalWebPlatform recorded revenue of ¥0.97B (YoY -13.1%) and an operating loss of ¥0.09B (margin of -9.3%); all three segments remain in operating loss.

Key Financial Indicators

【Profitability】The operating margin was -7.4% (compared with -22.0% in the previous year), the net profit margin was -5.6% (compared with -30.0% in the previous year), and the gross margin was 40.9% (compared with 32.4% in the previous year). All indicators improved substantially, but the Company has not yet reached profitability. 【Cash Flow Quality】Operating Cash Flow (OCF) was positive at ¥2.41B, but the primary factor was a ¥2.35B decrease in accounts receivable and contract assets. The significant divergence from the ¥0.59B net loss warrants attention when assessing earnings quality. 【Investment Efficiency】Annualized ROE was -19.3%, while total asset turnover was approximately 1.26x. Although asset efficiency remained at a certain level, the loss substantially impaired capital efficiency. 【Financial Soundness】The Equity Ratio was 36.4% (down from 39.6% in the previous year), and the current ratio was approximately 141%, indicating that short-term payment capacity has been secured. However, net assets declined by ¥0.69B year on year to ¥6.09B, while deterioration in foreign currency translation adjustments put pressure on capital.

Cash Flow Analysis

Operating Cash Flow was ¥2.41B, a substantial improvement from negative ¥3.32B in the previous year. After deducting investment cash flow of negative ¥0.78B, including capital expenditures of ¥0.23B, free cash flow was positive at ¥1.63B. However, the primary factor behind the improvement in OCF was the ¥2.35B decrease in accounts receivable and contract assets, and the cash inflow exceeding the ¥0.59B net loss was largely attributable to a temporary release of working capital. Contract liabilities decreased by ¥0.18B, with the release of deferred revenue acting as a factor depressing cash flow, while inventories increased by ¥0.13B, tying up funds. Financing cash flow was almost flat at negative ¥0.01B, and cash and cash equivalents accumulated to ¥6,827 million at period-end. The cash generation in this period was highly dependent on changes in working capital, and the reproducibility of normalized OCF will need to be confirmed in future quarters.

Earnings Quality

Part of the improvement in ordinary income depended on foreign exchange gains of ¥0.19B (compared with foreign exchange losses of ¥0.28B in the previous year), meaning that improvement at the ordinary income level was somewhat boosted relative to the improvement in operating income alone. The ¥0.05B impairment loss recorded as an extraordinary loss in the Network Business was a non-recurring factor resulting from the inability to generate the originally anticipated revenue. Non-operating income was primarily composed of foreign exchange gains and cannot be considered a sustainable source of earnings. Although OCF exceeded net loss, the primary reason was a temporary change in working capital due to the collection of accounts receivable, resulting in a substantial accrual—the divergence between accounting profit and cash flow. The increase in inventories, particularly work in process (+73.3% year on year), suggests a risk of delays in future revenue recognition and acceptance, and is a monitoring point when assessing earnings quality.

Earnings Forecast and Guidance

The full-year Company forecast remains unchanged at revenue of ¥23.00B (YoY +19.7%), Operating Income of ¥0.80B, and Ordinary Income of ¥0.84B. The revenue progress rate was 46.0%, slightly below the standard 50% level. Meanwhile, since cumulative Q2 Operating Income was negative ¥0.78B, achieving the full-year forecast will require approximately ¥1.58B in Operating Income during the second half alone. The plan requires a substantial improvement from the first-half operating margin of -7.4% in the second half, making the extent to which profitability can be achieved in the second half a key focus going forward.

Shareholder Returns

The Q2 dividend was ¥0 per share, and the full-year dividend forecast is also ¥0, indicating that the no-dividend policy continues. The Company recorded a net loss attributable to owners of the parent of ¥0.59B during the period and is not in a position to calculate a Payout Ratio. No cash outflow indicating new purchases of treasury shares was identified, and the Company is not in a position to assess the Total Return Ratio.

Risk Factors

1. Concentration of dependence on the Network Business: Network accounted for 54.3% of revenue and achieved rapid growth of YoY +116.1%, but its operating margin was -10.3% and it recorded an impairment loss of ¥0.05B. The Company’s performance is structurally subject to substantial effects from changes in project acceptance timing and customer concentration.

2. Operating losses in all segments and a fragile earnings base: All three segments, including IoT (YoY -26.9%, operating margin -2.9%) and GlobalWebPlatform (YoY -13.1%, operating margin -9.3%), remain in operating loss. A stable structure for generating profits from multiple businesses is still under development.

3. Cash flow quality and dependence on working capital: Of the ¥2.41B in OCF, the majority resulted from the ¥2.35B decrease in accounts receivable and contract assets. An increase in inventories, particularly work in process (+73.3%), was also confirmed. Confirming the Company’s ability to generate OCF after changes in working capital have run their course remains a challenge.

Industry Benchmark (For Reference; Based on Our Analysis)

Profitability and Returns

Profitability is substantially below the industry median and remains at a pre-profitability level.

Growth and Capital Efficiency

The revenue growth rate is at the upper end of the industry range, and top-line expansion ranks among the stronger levels within the industry.

※Source: Our analysis

Key Earnings Highlights

1. Against a backdrop of higher revenue and an improved gross margin (40.9%, +8.5pt), the operating loss narrowed by ¥1.21B year on year. The extent to which fixed costs are absorbed during the revenue growth phase will determine the pace of future earnings improvement.

2. Achieving the full-year Operating Income forecast of ¥0.80B requires approximately ¥1.58B in Operating Income during the second half, making rapid improvement in profitability from the first-half result (negative ¥0.78B) a prerequisite. This is an important point to confirm in the earnings results.

3. The improvement in OCF depended heavily on the working capital change resulting from the collection of accounts receivable. Together with the earnings structure characterized by rapid growth in the Network Business and operating losses in all segments, the sustainability of cash generation will be tested in future earnings results.

Theoretical Stock Price (Reference Value)

Sensitivity: ¥156–¥165 at ±1% for the cost of equity, and ¥160–¥161 at ±0.1 for ω.

Notes:

• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the quarter-end 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 / This is a mechanically calculated value based solely on publicly disclosed data and is not a forecast of the market price, a recommendation of any specific investment action, or a prediction or guarantee of 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. Industry benchmarks are reference information aggregated by our 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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