GLORY LTD. FY2027 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥80.59B
• Operating Income: ¥4.85B
• Net Income: ¥3.59B
• EPS: ¥67.30

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Segment Information

Full Year Forecast

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AI Financial Analysis

Executive Summary

FY2027 Q1 was a solid beat on profitability with healthy top-line growth and strong cash generation. Revenue rose 11.6% YoY to 805.9億円 while operating income jumped 49.8% to 48.5億円 and net income attributable to owners surged 125.3% to 34.9億円. Gross margin expanded to 47.4%, up about 220bps YoY, reflecting better mix/pricing and cost control. Operating margin improved to 6.0%, up roughly 150bps YoY, as gross profit growth outpaced SG&A increases. Net margin improved to 4.3%, up about 230bps YoY, supported by lower finance costs and despite an equity‑method loss of 1.34億円. Overseas Market remained the growth and profit engine, contributing 66.2% of revenue and 46.7億円 of operating income with an 8.7% margin. Domestically, Retail & Transportation posted a loss of 7.85億円 despite revenue growth, weighing on overall domestic profitability. Operating cash flow was 132.8億円, 3.81x net income, driven by strong receivables collection (+102.5億円) partially offset by inventory build (−32.4億円). Free cash flow of 119.7億円 comfortably covered dividends (28.7億円) and buybacks (42.4億円) in the quarter. The balance sheet remains sound with an equity ratio of 46.8% and current ratio around the healthy range; interest coverage is solid at ~7.3x. That said, debt/EBITDA is elevated near ~8x, and working capital intensity is high as flagged by extraordinarily long DSO/DIO/CCC. Intangible assets are sizable at ~27.6% of total assets, consistent with a solutions/maintenance-heavy profile under IFRS. Q1 progress versus full-year guidance is mixed: revenue tracking slightly below a typical 25% Q1 pace and operating income at ~15% suggests back-half weighting. Execution focus should remain on stabilizing the Retail & Transportation segment, managing inventory, and sustaining overseas momentum.

Profitability Analysis

ROE (1.6% for the quarter, DuPont) = Net Profit Margin (4.3%) × Asset Turnover (0.174) × Financial Leverage (2.13x). The largest YoY change was in Net Profit Margin, which roughly doubled from the prior-year level, driven by ~220bps gross margin expansion and sharply lower finance costs (6.6億円 vs 13.7億円). Overseas Market mix and improved pricing/service mix underpinned the gross margin lift, while SG&A rose 13.4% YoY, modestly above revenue growth, tempering operating leverage. Interest burden improved (EBT/EBIT 0.975) alongside a normal tax burden (0.739). These drivers appear partly sustainable given structural overseas strength, but some elements are cyclical (currency, project timing) and equity-method swung to a small loss, which is a headwind to repeatability. A point to monitor is cost discipline: SG&A growth outpacing revenue implies operating leverage could reverse if top-line momentum slows.

Growth Assessment

Revenue grew 11.6% YoY to 805.9億円, led by Overseas Market (+16.1% YoY) and Financial Market (+21.9% YoY). Operating income increased 49.8% to 48.5億円 on stronger gross profit and lower finance costs. Net income attributable to owners rose 125.3% to 34.9億円, with effective tax rate at 23.9%. Profit growth quality is supported by segment breadth (notably Overseas and Amusement), but domestic Retail & Transportation losses offset part of the upside. The revenue mix continues to tilt toward overseas cash-handling/solutions, supporting margins. Outlook hinges on sustained overseas orders, normalization in Retail & Transportation, and disciplined inventory management.

Financial Health

Liquidity is comfortable: current assets 2,283.2億円 vs current liabilities 1,350.1億円 support a healthy current ratio. Equity ratio stands at 46.8%. Borrowings total 7,964億円 (流動2,739億円、非流動5,225億円). Interest coverage is strong at ~7.3x (EBIT 48.5億円 / finance costs 6.6億円). Debt/EBITDA is elevated at ~7.9x using Q1 EBITDA (~100億円 annualized caution advised), indicating higher leverage relative to cash earnings. Lease liabilities are material (流動73.9億円、非流動145.6億円), consistent with significant right‑of‑use assets (217.9億円). No immediate maturity mismatch: cash and cash equivalents 568.9億円 and robust current assets provide coverage for short‑term obligations.

Notable B/S Changes

Treasury stock: −2,057.8億円 → −997.5億円 (+51.5%) – Share cancellations and transactions reduced contra‑equity; no impact on total equity but signals active capital return. Other noncurrent financial liabilities: +39.4億円 (+272%) – Increase in long-term financial obligations; monitor terms and covenants. Noncurrent lease liabilities: +30.2億円 (+26%) – Higher lease commitments aligned with ROU asset growth; raises fixed-charge burden.

Cash Flow Quality

OCF was 132.8億円, 3.81x net income, indicating high earnings quality. Key drivers: strong collection of receivables (+102.5億円), partially offset by inventory build (−32.4億円) and higher income taxes paid (−36.0億円). Free cash flow was 119.7億円 after modest capex (9.78億円) and intangible investments (11.98億円). FCF covered dividends (28.7億円) and buybacks (42.4億円) with headroom. Working capital remains intensive, with inventory accumulation a watchpoint; however, there are no clear signs of aggressive working capital management beyond normal project timing effects.

Dividend Sustainability

On full-year guidance, DPS is 154円 vs EPS 385.52円, implying a payout ratio of ~40%, well within a sustainable range. Q1 free cash flow of 119.7億円 covered dividends (28.7億円) and buybacks (42.4億円). The quarterly total return (dividends + buybacks) exceeded quarterly net income, but coverage by FCF was adequate. With capex light and OCF robust, dividend capacity appears supported by operating cash generation, contingent on managing working capital and maintaining Overseas momentum.

Risk Assessment

Business risks include Overseas concentration: Overseas Market accounts for 66.2% of revenue, increasing exposure to external macro and geopolitical factors., Structural shift toward cashless payments could dampen medium-term demand for cash-handling hardware and affect installed-base economics., Domestic Retail & Transportation losses (−7.85億円) reflect pricing/installation timing or cost pressures, risking margin drag if prolonged., Equity-method income volatility (−1.34億円 in Q1) adds earnings variability..

Financial risks include High working capital intensity with extremely long DSO/DIO/CCC increases cash tie-up and obsolescence risk., Debt/EBITDA around ~8x signals elevated leverage versus cash earnings, reducing financial flexibility if earnings soften., Material lease obligations (合計約219.4億円 ROU assets; 219.4億円 liabilities current+noncurrent) add fixed charges sensitivity..

Key concerns include Execution risk to turn around Retail & Transportation margin while sustaining overseas growth., Inventory build amid long DIO raises risk of write-downs if demand mix shifts., Guidance back-half weighting requires delivery of higher OI run-rate in H2..

Investment Implications

Key takeaways include Margin inflection: GM +~220bps and OP margin 6.0% on stronger mix and lower finance costs., Cash generation strong: OCF 132.8億円 (3.81x NI) and FCF 119.7億円 cover shareholder returns., Overseas Market is the core profit engine (OI 46.7億円, 8.7% margin)., Domestic Retail & Transportation weakness is the primary drag; remediation is pivotal., Leverage vs EBITDA is high; continued deleveraging via earnings and WC normalization is desirable..

Metrics to watch include Retail & Transportation segment margin trajectory and order intake, Inventory levels and DIO normalization, Overseas order momentum and currency effects, Debt/EBITDA and interest coverage, OCF conversion and receivables collection.

Regarding relative positioning, Stronger-than-peer margin rebound and cash conversion this quarter, offset by elevated working capital intensity and leverage versus cash earnings; overseas-led profile remains a differentiator if execution on domestic recovery and inventory control continues.