Y.A.C.HOLDINGS CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

Although earnings improved significantly on higher revenue, losses continued at both the operating and ordinary income levels, indicating that profitability recovery remains underway. Revenue was ¥6.02B (¥4.70B in the previous year, +28.2%), Operating Income was ¥-0.05B (¥-0.32B in the previous year, +83.8%), Ordinary Income was ¥-0.20B (¥-0.40B in the previous year, +50.1%), and Net Income was ¥-0.31B (¥-0.40B in the previous year, +22.4%). The main drivers of revenue growth were the doubling of sales related to the Environment and Social Infrastructure businesses and growth in the Semiconductor and Mechatronics businesses. The improvement in operating earnings was attributable to operating leverage resulting from a higher gross margin (21.8%→25.1%) and a lower SG&A ratio (28.6%→26.0%).

Factors Affecting Earnings

【Revenue】Revenue was ¥6.02B, up +28.2% year on year. By segment, the Environment and Social Infrastructure businesses expanded sharply to ¥2.41B (+83.9%), while the Semiconductor and Mechatronics businesses maintained the largest revenue scale at ¥2.59B (+18.9%). Meanwhile, the Medical and Healthcare businesses declined to ¥1.14B (-7.1%), indicating that growth remains limited to two of the three businesses.

【Earnings】Operating Income was ¥-0.05B, an improvement of ¥0.27B from ¥-0.32B in the previous year, and the operating margin improved by 590bp from -6.8% to -0.9%. By segment, the Semiconductor and Mechatronics businesses maintained their position as the largest contributor to segment earnings at ¥0.20B, although earnings declined by -16.0% year on year. The Environment and Social Infrastructure businesses generated ¥0.01B, turning profitable from a loss in the previous year, while the Medical and Healthcare businesses recorded ¥-0.04B, shifting from a profit in the previous year to a loss. The consolidated operating loss resulted from adjustments of ¥-0.23B, including corporate administrative expenses, against total segment earnings of ¥0.18B. Ordinary Income deteriorated by ¥-0.15B relative to Operating Income, primarily due to non-operating expenses of ¥0.17B, including interest expense of ¥0.07B and foreign exchange losses of ¥0.07B. Net Income was ¥-0.31B, reflecting a loss before tax of ¥0.24B and income taxes of ¥0.07B. Although the Company has not fully escaped the pattern of higher revenue but lower earnings, the direction of earnings improvement is clear, leading to the conclusion that higher revenue is improving earnings.

Segment Analysis

The Semiconductor and Mechatronics businesses recorded revenue of ¥2.59B (+18.9%) and Operating Income of ¥0.20B (-16.0% year on year). Despite higher revenue, the profit margin declined to 7.9%, highlighting that revenue growth has not translated directly into earnings. The Environment and Social Infrastructure businesses posted revenue of ¥2.41B (+83.9%) and Operating Income of ¥0.01B, turning profitable from a loss in the previous year; however, the profit margin remained low at 0.5%, indicating that profitability improvement is still at an early stage. The Medical and Healthcare businesses recorded revenue of ¥1.14B (-7.1%) and Operating Income of ¥-0.04B, shifting from a profit in the previous year to a loss, with a profit margin of -3.6%, the weakest profitability among the three businesses. Against total segment earnings of ¥0.18B, adjustments of ¥-0.23B, including corporate administrative expenses not attributable to individual segments, were recorded, resulting in a consolidated operating loss of ¥-0.05B.

Key Financial Indicators

【Profitability】The operating margin was -0.9% (previous year: -6.8%), while the net profit margin was -5.2% (previous year: -8.6%). Both improved from the previous year but remained negative. Annualized ROE was -7.7%, primarily due to the net loss. 【Cash Quality】Annualized DSO was 98 days, annualized DIO was 240 days, and annualized CCC was 286 days, all exceeding generally cautious levels. Work in process accounted for 64.4% of inventories, suggesting that funds remain tied up in the manufacturing process. 【Investment Efficiency】Annualized ROIC remained negative, making the recovery of returns on invested capital a key issue. R&D expenses were ¥0.08B, equivalent to 1.3% of revenue. 【Financial Soundness】The Equity Ratio declined to 36.1% (previous year: 38.7%), while interest-bearing debt was ¥14.70B against net assets of ¥16.12B, resulting in a D/E ratio of 1.77x. The current ratio was 176.6%, indicating that short-term liquidity was secured; however, short-term liabilities represented a high proportion, including short-term borrowings of ¥7.95B and long-term borrowings due within one year of ¥3.00B.

Cash Flow Analysis

As figures from the statement of cash flows are not included in the disclosed data, cash trends are analyzed based on changes in the balance sheet. Cash and deposits increased by +23.3% year on year (+¥2.03B) to ¥10.78B, expanding short-term financial flexibility. Meanwhile, accounts receivable declined by -19.7% year on year to ¥6.49B, suggesting that collections may have progressed. However, inventories remained high, centered on work in process of ¥7.63B, indicating that inventories comprising raw materials, work in process, and finished goods continue to tie up funds. Short-term borrowings increased by +10.7% year on year to ¥7.95B, suggesting that part of the increase in cash and deposits was supported by debt financing. Accounts payable increased by +21.8% year on year to ¥2.57B, indicating greater use of payment terms, although this has not been sufficient to fully offset the accumulation of inventories and accounts receivable.

Earnings Quality

Although operating earnings improved substantially from the previous year, non-operating expenses weighed on ordinary earnings, warranting attention to earnings quality. Non-operating income was ¥0.02B, compared with non-operating expenses of ¥0.17B, primarily comprising interest expense of ¥0.07B and foreign exchange losses of ¥0.07B, both of which are financial and foreign exchange factors with limited operating relevance. A ¥0.04B loss on the disposal and sale of fixed assets and other items was recorded as an exceptional loss, further deteriorating profit before tax. The difference between ordinary earnings and net earnings resulted from the recognition of income taxes of ¥0.07B, creating a structure in which a tax burden arises even during a loss-before-tax period. Comprehensive income was ¥-0.24B, close to the net loss of ¥-0.31B, with no significant divergence attributable to valuation differences on securities or foreign currency translation adjustments.

Earnings Forecast and Guidance

The Full-Year earnings forecast is revenue of ¥35.00B (+32.3% compared with the previous fiscal year), Operating Income of ¥3.30B (+150.0%), and Ordinary Income of ¥3.00B (+145.6%). There were no revisions to the earnings or dividend forecasts as of Q1. Revenue progress was 17.2% (¥6.02B/¥35.00B), below the 25% benchmark for simple even quarterly progress. As the Company recorded an operating loss in Q1, achieving the full-year Operating Income forecast of ¥3.30B will require substantial earnings expansion from Q2 onward. Key points to monitor for the realization of the plan, which is weighted toward the second half, include the establishment of profitability in the Environment and Social Infrastructure businesses and improved profitability in the Semiconductor and Mechatronics businesses.

Shareholder Returns

The Full-Year dividend forecast is ¥45.00 per share, with no revision to the dividend forecast as of the current quarter. As the previous-year dividend was ¥20 per share, the full-year plan represents an increase in dividends. Based on the full-year Net Income forecast of ¥2.00B and average shares outstanding during the period of 17.599M shares, the Payout Ratio is approximately 39.6%, below the general benchmark of 60% based solely on dividends. However, the Company recorded a net loss of ¥0.31B in Q1, meaning that the Payout Ratio under the full-year plan depends on earnings recovery in subsequent quarters. No figures for the implementation of share repurchases were disclosed, and therefore the Total Return Ratio was not evaluated.

Risk Factors

1. Earnings recovery capacity: The operating margin improved to -0.9%, but the Semiconductor and Mechatronics businesses recorded a -16.0% year-on-year decline in earnings despite higher revenue, indicating a structure in which revenue growth does not translate directly into earnings growth. Adjustments of ¥-0.23B, including corporate administrative expenses, exceeded total segment earnings of ¥0.18B and were a direct factor behind the consolidated operating loss.

2. Working capital accumulation: Work in process amounted to ¥7.63B, accounting for 64.4% of total inventories and suggesting prolonged manufacturing and acceptance processes. The length of the cash collection cycle, when combined with accounts receivable of ¥6.49B, indicates that it may take time for improved Operating Income to translate into cash generation.

3. Financial structure and interest rate/foreign exchange sensitivity: Short-term liabilities represent a high proportion, centered on short-term borrowings of ¥7.95B and long-term borrowings due within one year of ¥3.00B, while the Equity Ratio declined to 36.1% from 38.7% in the previous year. Non-operating expenses included interest expense of ¥0.07B and foreign exchange losses of ¥0.07B, indicating that the improvement in operating earnings has not fully flowed through to ordinary earnings.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

The Company’s profitability metrics are substantially below the industry median and remain in negative territory.

Growth and Capital Efficiency

The Revenue Growth Rate is substantially above the industry median, indicating high growth within the industry.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. The operating margin improved by 590bp from -6.8% in the previous year to -0.9%, confirming progress in fixed-cost absorption resulting from a higher gross margin (+330bp) and a lower SG&A ratio (-260bp). The fact that higher revenue contributed not only to the top line but also to an improvement in the earnings structure is a key point of the earnings results.

2. By segment, different trends are occurring simultaneously: the Environment and Social Infrastructure businesses turned profitable, the Semiconductor and Mechatronics businesses recorded lower earnings, and the Medical and Healthcare businesses shifted to a loss. This indicates changes in the profitability structure within the business portfolio.

3. The full-year revenue progress rate of 17.2% is below the benchmark for even quarterly progress, and achieving the full-year Operating Income forecast of ¥3.30B will require accelerated earnings improvement in the second half. The inventory composition, with work in process accounting for 64.4%, should be monitored as a factor that may influence future earnings trends through the conversion of projects into sales and progress in acceptance.

Theoretical Share Price (Reference Value)

Sensitivity: ¥983–¥1,041 at ±1% Cost of Equity, and ¥1,009–¥1,015 at ω±0.1.

Notes:

• Net assets as of the end of the quarter are used (there is a timing difference 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 (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / This is a mechanically calculated value based solely on publicly disclosed data and is not a forecast of the market share price or a recommendation of any specific investment action, nor does it predict or guarantee future share prices.)

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

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