WOWOW INC. FY2027 Q1 Earnings Report

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Executive Summary

Although revenue and operating income declined, ordinary income and net income remained resilient, supported by non-operating factors such as foreign exchange gains. Revenue was ¥17.64B (¥18.69B in the previous year, YoY-5.6%), while operating income was ¥0.92B (¥1.18B in the previous year, YoY-21.7%). Meanwhile, ordinary income was ¥1.37B (YoY-3.8%) and net income was ¥0.99B (YoY-0.5%), with lower-level profits remaining approximately in line with the previous year compared with the decline at the operating level. The primary factors were revenue declines in both core segments, Media & Content and Telemarketing, and a reversal of operating leverage caused by the increase in the SG&A ratio amid declining revenue.

Factors Affecting Performance

【Revenue】The core Media & Content segment (90.8% of revenue composition) generated ¥16.02B (YoY-4.9%), while Telemarketing generated ¥2.36B (YoY-11.0%). Both segments reported lower revenue, resulting in total company revenue of ¥17.64B (YoY-5.6%).

【Profit and Loss】Operating income was ¥0.92B (YoY-21.7%), and the operating margin declined to 5.2% from 6.3% in the previous year, down 1.1pt. The gross margin declined slightly to 33.2% from 33.6% in the previous year, while the SG&A ratio increased to 28.0% from 27.3% as revenue declined, weakening fixed-cost absorption. Meanwhile, foreign exchange gains contributed significantly, accounting for ¥0.31B of non-operating income of ¥0.48B (¥0.27B in the previous year), narrowing the decline in ordinary income to ¥1.37B (YoY-3.8%). After recording ¥0.01B in extraordinary losses (loss on disposal of fixed assets) and deducting income taxes of ¥0.36B, net income was ¥0.99B (YoY-0.5%), remaining approximately in line with the previous year. In conclusion, the Company experienced lower revenue and operating income at the operating level, but non-operating factors provided support, resulting in relatively resilient declines in ordinary income and net income.

Segment Analysis

Media & Content generated revenue of ¥16.02B (YoY-4.9%), operating income of ¥1.00B (YoY-9.1%), and a 6.2% margin (6.5% in the previous year), driving overall profits. Telemarketing generated revenue of ¥2.36B (YoY-11.0%), while operating income fell from a profit of ¥0.07B in the previous year to a loss of ¥0.08B (YoY-208.3%), resulting in a margin of -3.3%. Total company operating income of ¥0.92B was composed such that Media & Content’s profit absorbed Telemarketing’s loss, indicating a deterioration in the profit mix between segments.

Key Financial Indicators

【Profitability】The operating margin declined to 5.2% from 6.3% in the previous year, down 1.1pt, while the net profit margin improved to 5.6% from 5.3% in the previous year. The gross margin was 33.2%, slightly down from 33.6% in the previous year.【Cash Flow Quality】Cash and deposits were ¥26.02B, down from ¥29.68B in the previous year, while accounts payable were ¥31.90B, up ¥16.20B from ¥16.20B in the previous year, representing an increase of +96.9%. Accounts receivable were ¥5.57B, down from slightly less than ¥6.15B in the previous year, indicating improvement in collections.【Investment Efficiency】ROE remained at 1.4% (quarterly result).【Financial Soundness】The equity ratio declined to 63.4% from 73.6% in the previous year. Total assets increased to ¥109.77B (¥94.55B in the previous year), while net assets remained approximately flat at ¥69.55B, indicating that the increase in assets was primarily funded by an increase in liabilities (accounts payable). The current ratio remained high at approximately 203% (current assets of ¥77.25B / current liabilities of ¥37.98B).

Cash Flow Analysis

As cash flow statement items have not been disclosed, fund movements are analyzed based on changes in the balance sheet. Cash and deposits were ¥26.02B, down ¥3.66B from ¥29.68B in the previous year. Accounts payable increased by ¥15.69B year on year to ¥31.90B, representing an increase of +96.9%, suggesting that temporary working-capital benefits may have arisen from changes in purchasing and payment terms. Accounts receivable were ¥5.57B, slightly down from slightly less than ¥6.15B in the previous year, indicating progress in collections. Total assets increased from ¥94.55B to ¥109.77B, mainly due to an increase in current assets (¥77.25B, compared with ¥61.41B in the previous year). As net assets remained approximately flat, the increase in assets was primarily funded by an increase in liabilities.

Quality of Earnings

Ordinary income of ¥1.37B exceeded operating income of ¥0.92B by ¥0.45B, primarily due to non-operating income of ¥0.48B, of which foreign exchange gains accounted for ¥0.31B and dividends received accounted for ¥0.07B. These are earnings that fluctuate in line with market conditions and foreign exchange rates and differ in nature from operating income, which reflects the earning power of the core business. Extraordinary losses were limited to ¥0.01B in loss on disposal of fixed assets, and their impact as a temporary factor was limited. Comprehensive income was ¥0.86B, below net income of ¥0.99B, reflecting deductions for valuation items such as valuation differences on available-for-sale securities of -¥0.09B and deferred hedge gains or losses of -¥0.03B. The divergence between net income and comprehensive income was attributable to changes in the market value of securities held and other assets and does not directly reflect the profitability of the core business.

Earnings Forecast and Guidance

Progress against the full-year forecast varied by indicator. Revenue of ¥17.64B represented progress of 23.7% against the full-year forecast of ¥74.50B, slightly below the quarterly benchmark of 25%. Meanwhile, operating income of ¥0.92B represented progress of 122.8% against the full-year forecast of ¥0.75B, while ordinary income of ¥1.37B represented progress of 136.7% against the full-year forecast of ¥1.00B; both exceeded the full-year plan as of Q1. This suggests that the full-year forecast is based on conservative assumptions that anticipate substantial year-on-year declines in income (operating income YoY-49.2%, ordinary income YoY-56.1%). No revisions were made to the earnings forecast or dividend forecast on this occasion.

Shareholder Returns

The annual dividend forecast remains ¥30.00, with no revisions to the interim and year-end breakdowns. Based on the Company’s forecast net income attributable to owners of the parent of ¥0.60B and approximately 28,337 thousand shares outstanding after deducting treasury shares, total dividends are calculated at approximately ¥0.85B, resulting in a payout ratio of approximately 141.7%. Although the payout ratio is high relative to the planned profit level, the Company has a solid financial base, including an equity ratio of 63.4% and cash and deposits of ¥26.02B, suggesting room to make payments from retained earnings. However, consistency with the profit level under the full-year plan warrants monitoring alongside future earnings trends.

Risk Factors

1. Segment revenue concentration: Media & Content accounts for 90.8% of revenue (¥16.02B / ¥17.64B), while Telemarketing fell into an operating loss of ¥0.08B. The business portfolio is confirmed to be dependent on a specific segment.

2. Working-capital fluctuation risk: Accounts payable increased by +96.9% year on year to ¥31.90B. A temporary cash benefit may have resulted from changes in purchasing terms or extensions of payment periods, requiring attention to the timing of cash outflows when settlements become concentrated in the future.

3. Dependence on non-operating income: Foreign exchange gains accounted for ¥0.31B of ordinary income of ¥1.37B, equivalent to 34.2% of operating income of ¥0.92B. Fluctuations in foreign exchange rates may increase the volatility of profit at and below the ordinary income level.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

Both the operating margin and net profit margin are below the industry median, indicating that profitability is somewhat below the industry level.

Growth and Capital Efficiency

The revenue growth rate is substantially below the industry median, highlighting that the Company is in a revenue-decline phase relative to peers that continue to achieve revenue growth.

※Source: Compiled by the Company

Key Points from the Financial Results

1. The operating margin declined to 5.2% from 6.3% in the previous year, down 1.1pt, while the SG&A ratio increased to 28.0% from 27.3% amid declining revenue, reducing fixed-cost absorption. The decline in profitability at the operating level should be viewed as a structural factor.

2. Foreign exchange gains and other non-operating factors narrowed the declines in ordinary income and net income. Compared with operating income (YoY-21.7%), ordinary income (YoY-3.8%) and net income (YoY-0.5%) remained relatively resilient. A notable feature of earnings quality is the greater contribution from non-operating factors than from the core business.

3. As of Q1, progress in both operating income and ordinary income exceeded the full-year plan, at 122.8% and 136.7%, respectively. This indicates that the assumptions underlying the full-year forecast (operating income YoY-49.2%, ordinary income YoY-56.1%) are set at conservative levels.

Theoretical Share Price (Reference Value)

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

Sensitivity: ¥1,849–¥1,951 at ±1% for the cost of equity, and ¥1,882–¥1,910 at ±0.1 for ω.

Notes:

• Since progress in net income against the full-year forecast (165%) exceeds the standard benchmark (25%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies with progress ahead of plan tend to exceed forecasts; the adjustment may be excessive for businesses with strong seasonality).
• Since 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 gap relative to the full-year forecast).
• As 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 future share prices)

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This report is an earnings analysis document automatically generated by AI based on XBRL financial results summary data. It does not recommend investment in any specific security. 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 with a professional as necessary.

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