Nomura Micro Science Co.,Ltd. FY2027 Q1 Earnings Report

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Executive Summary

Revenue and earnings declined sharply in Q1, as weakening demand in the core Japan segment and higher interest expenses weighed on profitability. Revenue was ¥9.20B (¥12.40B in the same period of the previous year, YoY -25.8%), Operating Income was ¥0.63B (¥1.38B, YoY -54.4%), Ordinary Income was ¥0.34B (¥0.78B, YoY -56.2%), and Net Income was ¥0.24B (¥0.46B, YoY -48.4%). Although the gross margin improved to 23.3% from the previous year, the increase in the SG&A ratio and the burden of ¥0.56B in interest paid compressed profit at the non-operating and ordinary income levels. Progress against the full-year plan was low, at 9.5% for revenue and 3.9% for Operating Income, implying a plan weighted toward the second half.

Factors Affecting Performance

【Revenue】Revenue was ¥9.20B, a 25.8% year-on-year decline. By segment, Japan was the largest segment at ¥5.31B (57.7% of total, YoY -32.9%), but recorded a substantial decline in revenue, while the United States also fell to ¥1.12B (YoY -58.1%). In contrast, Taiwan and South Korea recorded substantial revenue growth, at ¥1.73B (YoY +168.4%) and ¥1.41B (YoY +101.5%), respectively, resulting in divergent performance across regions. The company-wide revenue decline appears to have been primarily caused by delays in the acceptance of projects in Japan and the United States.

【Profit and Loss】Operating Income was ¥0.63B (YoY -54.4%), and the Operating Income margin declined to 6.8% from the previous year. While the gross margin improved to 23.3%, the SG&A ratio increased to 16.5%, and negative operating leverage weighed on profits. Ordinary Income was ¥0.34B (YoY -56.2%), deteriorating further from Operating Income primarily due to ¥0.56B in interest paid among non-operating expenses. Net Income was ¥0.24B (YoY -48.4%). The key issue is that fixed costs (SG&A expenses and interest costs) have not been sufficiently absorbed against the decline in revenue.

Segment Analysis

Japan accounted for the largest contribution to segment profit at ¥0.396B (approximately 63% of the total), but profit declined sharply by 48.1% year on year, with the margin falling to 7.5%. Taiwan maintained high profitability, with segment profit of ¥0.189B (YoY +0.5%, margin 10.9%), supporting the company-wide results. China posted an Operating Loss of ¥0.025B, turning loss-making from profit of ¥0.009B in the previous year, and was the primary cause of the deterioration in the regional mix. Profitability also declined in the United States (margin 3.6%) and South Korea (margin 1.4%). While the company remains exposed to regional concentration risk, with Japan accounting for approximately 58% of revenue, growth and high profitability in Taiwan are attracting attention as structural support factors.

Key Financial Indicators

【Profitability】The Operating Income margin declined to 6.8% (11.1% in the previous year), while the Net Profit margin declined to 2.6% (3.7% in the previous year). The gross margin improved to 23.3% (22.4% in the previous year), making the increase in the SG&A ratio to 16.5% (11.3% in the previous year) the primary cause of the deterioration in the operating-level margin. 【Cash Flow Quality】Foreign exchange gains of ¥0.21B included in non-operating income were equivalent to approximately 34% of Operating Income, indicating that a less recurring revenue component partially supported performance. 【Investment Efficiency】ROE was 0.6% and remained low due to the combination of a low Net Profit margin, low Total Asset Turnover, and financial leverage. Basic EPS was ¥6.25 (¥12.27 in the previous year, YoY -49.1%), and BPS was ¥982.15 (¥1,026.65 in the previous year). 【Financial Soundness】The Equity Ratio was 34.7% (35.6% in the previous year), with Net Assets of ¥38.54B against Total Assets of ¥111.08B. Interest paid of ¥0.56B placed significant pressure on Ordinary Income, making the heavy interest burden a bottleneck in the earnings structure.

Cash Flow Analysis

As detailed cash flow statement information has not been disclosed, funding trends are assessed based on changes in the balance sheet. Cash and deposits were ¥8.47B, down from ¥10.43B in the same period of the previous year, indicating limited cash accumulation. Trade receivables and notes receivable remained elevated at ¥83.98B, accounting for approximately 76% of Total Assets, suggesting that the length of the collection cycle may be limiting the speed of cash conversion. Accounts payable declined to ¥5.71B, down 26.4% year on year, in line with the contraction in procurement and purchasing activities. Contract liabilities (customer advances) increased to ¥2.14B, indicating advance cash inflows related to future revenue recognition, while the burden of ¥0.56B in interest paid appears to be constraining cash-generating capacity.

Earnings Quality

Operating Income, which reflects recurring earning power, was ¥0.63B, while extraordinary gains were ¥0.01B and extraordinary losses were immaterial, indicating limited impact from temporary factors. Of ¥0.28B in non-operating income, foreign exchange gains accounted for ¥0.21B, equivalent to approximately 34% of Operating Income, meaning that a highly volatile item partially boosted Ordinary Income. Non-operating expenses were ¥0.56B, the majority of which—¥0.56B—was interest paid, the primary reason Ordinary Income was significantly below Operating Income. Net Income was ¥0.24B against Ordinary Income of ¥0.34B, reflecting ¥0.11B in income taxes and other taxes (an effective tax rate of approximately 31% against Profit Before Tax of ¥0.35B). No abnormal divergence factors other than the tax burden were identified.

Earnings Forecast and Guidance

Q1 progress against the full-year plan (Revenue of ¥97.00B, Operating Income of ¥16.00B, and Ordinary Income of ¥15.00B) was 9.5% for revenue and 3.9% for Operating Income, substantially below the simple one-quarter benchmark of 25%. The company has not revised its earnings or dividend forecasts, and the plan appears to assume concentrated acceptance of large projects in the second half. While the accumulation of ¥2.14B in contract liabilities indicates potential for future revenue recognition, substantial progress from Q2 onward will be required to achieve the full-year targets.

Shareholder Returns

The company maintained its annual dividend forecast of ¥85.00 and made no revisions. Based on the full-year EPS forecast of ¥289.21, the Payout Ratio is approximately 29.4%, which can be considered a conservative level even in light of historical results. However, given the low profit progress as of Q1, the burden of interest paid, and delays in cash conversion due to the high level of trade receivables, the extent to which full-year earnings and cash flow are realized remains an important assumption underlying the dividend plan.

Risk Factors

1. Interest Burden and Funding Structure Risk: Interest paid of ¥0.56B exceeds Ordinary Income of ¥0.34B, while short-term borrowings of ¥54.54B constitute the core of liabilities. Relative to cash and deposits of ¥8.47B, the liquidity cushion is limited, and resilience to changes in the funding environment remains a challenge.

2. Deterioration in Regional Mix Risk: The China segment turned to an Operating Loss of ¥0.02B, while profitability also declined in the United States (margin 3.6%) and South Korea (margin 1.4%). The Japan segment, which accounts for approximately 58% of revenue, also recorded lower profit, and variation in profitability between regions is depressing the company-wide margin.

3. Delayed Progress and Second-Half Concentration Risk: Q1 progress against the full-year plan was substantially low, at 9.5% for revenue and 3.9% for Operating Income. Although the accumulation of ¥2.14B in contract liabilities suggests future revenue recognition, progress in the acceptance of large projects in the second half is a prerequisite for achieving the plan.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Return

Both the Operating Income margin and Net Profit margin were below the industry median, placing profitability relatively low within the industry.

Growth and Capital Efficiency

The revenue growth rate was substantially below the industry median, placing the company among the groups with the largest revenue declines in the industry during the quarter.

※Source: Compiled by the Company

Key Takeaways from the Earnings

1. Although the gross margin improved to 23.3%, the Operating Income margin and Net Profit margin declined to levels below the industry median due to the increase in the SG&A ratio and the higher interest burden. Changes in fixed-cost absorption will determine the future margin trend.

2. While the Taiwan segment’s high profitability (margin 10.9%) supports company-wide profit, the shift to losses in China and the decline in Japan represent structural burdens, with changes in the regional mix affecting earnings quality.

3. Progress against the full-year plan was substantially low for both revenue and profit. Given the accumulation of ¥2.14B in contract liabilities, visibility into project acceptance progress in the second half will be a key focus in evaluating performance.

Theoretical Stock Price (Reference Value)

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

Sensitivity: ¥1,660–¥1,762 at Cost of Equity ±1%; ¥1,689–¥1,741 at ω ±0.1.

Note:

• Net Assets as of the quarter-end were used (there is a timing difference relative to the full-year forecast).

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-07 / This figure does not predict or guarantee the future stock price)

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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, after consulting with professionals as necessary.

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