AIPHONE CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

Although revenue declined, Q1 of the fiscal year ending March 2027 recorded a substantial increase in profit, with the sharp recovery in profitability being the key highlight. Revenue declined to ¥136.3B (¥143.3B in the prior year, YoY -4.9%), while Operating Income rose substantially to ¥8.7B (¥1.9B in the prior year, YoY +353.8%), Ordinary Income to ¥10.9B (+307.7%), and Net Income to ¥8.3B (+286.0%). Gross margin improved to 51.1%, and higher profitability in North America and Thailand drove up consolidated profit. Meanwhile, the Japan segment remained loss-making, making the polarization of regional earnings structures a defining feature of the current period.

Factors Driving Performance Changes

【Revenue】Revenue was ¥136.3B, representing a 4.9% year-on-year decline. The Japan segment, which accounts for more than half of revenue, declined substantially to ¥110.7B (-10.1%), weighing on overall results. In contrast, North America maintained a growth trend at ¥28.9B (+16.2%), while Thailand maintained a generally positive trend at ¥28.0B (-7.5%, including internal sales in its composition). Europe was approximately flat year on year (+0.1%), while Vietnam declined to ¥13.8B (-16.2%). Japan accounted for approximately 56% of the regional composition, indicating that the Company remains highly dependent on the domestic market.

【Profit and Loss】Cost of sales declined substantially to ¥66.6B (-18.7% year on year), while gross margin improved to 51.1% (42.8% in the prior year). SG&A expenses increased to ¥60.9B (+2.4%), but the expansion in gross profit absorbed this increase despite the decline in revenue, resulting in an expansion of the Operating Income margin to 6.4% (1.3% in the prior year). Non-operating income was ¥2.3B, consisting mainly of dividend income of ¥1.4B and foreign exchange gains of ¥0.2B, among other items, and lifted Ordinary Income to ¥10.9B. Extraordinary items consisted solely of extraordinary income of ¥0.04B, and the impact of one-off factors was limited. The difference between Ordinary Income and Net Income was primarily attributable to income taxes and other taxes of ¥2.7B, with no other major divergence factors besides the tax burden. The primary drivers of increased profit despite lower revenue were the improvement in the cost ratio and higher profitability in North America and Thailand, indicating a qualitative improvement in the earnings structure.

Segment Analysis

By segment, North America became the Company’s primary earnings contributor, with Operating Income of ¥6.9B (YoY +821.3%) and a margin of 24.0%, representing a substantial improvement from the low profitability recorded in the prior year. Thailand also improved, reporting Operating Income of ¥2.4B (YoY +780.0%) and a margin of 8.5%, and together with North America drove the increase in profit. In contrast, Japan, which accounts for more than half of revenue, continued to report an Operating Loss of ¥3.0B (49.5% wider loss year on year), with a margin of -2.7%, weighing on consolidated profit. Europe also posted an Operating Loss of ¥0.1B (YoY -236.4%), falling into the red from a profit in the prior year. Vietnam maintained profitability, but its margin declined to 0.2%. The polarized structure of high profitability in North America and Thailand versus low profitability in Japan and Europe characterized the increase in profit during the quarter.

Key Financial Metrics

【Profitability】The Operating Income margin was 6.4%, a substantial improvement from 1.3% in the prior year, while the Net Income margin also expanded to 6.1% (1.5% in the prior year). Gross margin improved to 51.1% (42.8% in the prior year), indicating that the improvement in the cost structure was the starting point for the increase in profit.【Cash Quality】Although the statement of cash flows has not been disclosed, non-operating income was stable, consisting primarily of dividend income of ¥1.4B and interest income of ¥0.5B. Extraordinary items were small at ¥0.04B, indicating that most of the profit was generated by improvements in the core business.【Investment Efficiency】Total asset turnover was 0.171 (Revenue of ¥136.3B / total assets of ¥796.5B), while ROE was 1.2% (quarterly, not annualized). Capital efficiency is constrained by the low level of total asset turnover.【Financial Soundness】The Equity Ratio improved to 88.6% (87.6% in the prior year), while the current ratio remained high at 745% (current assets of ¥561.8B / current liabilities of ¥75.4B), indicating an extremely sound financial foundation.

Cash Flow Analysis

As the statement of cash flows has not been disclosed, cash trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥259.8B, an increase of ¥23.8B from ¥235.98B in the prior year, indicating a trend of accumulating funds. Notes and accounts receivable were ¥84.4B, a substantial 28.1% year-on-year decline, which is considered to have had a positive short-term impact on cash collection, either through progress in collections or as a reflection of the slowdown in domestic sales. Meanwhile, inventories, consisting of raw materials of ¥77.4B, work in process of ¥26.8B, and finished goods of ¥71.9B, have accumulated from the prior year, indicating a structure in which it will take time to convert inventory into cash. Property, plant and equipment increased to ¥116.6B, and investment activities, including construction in progress of ¥26.8B, have continued. Lease liabilities were limited at ¥1.8B current and ¥2.9B non-current, with no significant burden observed from financing activities.

Quality of Earnings

The increase in current-period profit was primarily attributable to improvements in the core business, and earnings quality was generally favorable. Non-operating income was ¥2.3B, only 1.7% of revenue, and consisted of stable items such as dividend income of ¥1.4B, interest income of ¥0.5B, and foreign exchange gains of ¥0.2B. Extraordinary income consisted solely of gains on sales of fixed assets of ¥0.04B, with no extraordinary losses recorded, meaning that the impact of one-off factors on profit was extremely limited. The difference between Ordinary Income of ¥10.9B and Net Income of ¥8.3B was primarily attributable to income taxes and other taxes of ¥2.7B, with no unusual divergence besides the tax burden. Comprehensive income was ¥11.3B, exceeding Net Income of ¥8.3B, with valuation items such as foreign currency translation adjustments of ¥2.5B and valuation differences on securities of ¥0.9B contributing positively.

Earnings Forecast and Guidance

Progress against the full-year plan was 20.7% for revenue, at ¥136.3B / ¥658.0B; 21.9% for Operating Income, at ¥8.7B / ¥40.0B; 24.3% for Ordinary Income, at ¥10.9B / ¥45.0B; and 25.8% for Net Income, at ¥8.3B / ¥32.0B. Compared with the 25% benchmark for quarterly progress, revenue and Operating Income were somewhat behind schedule, while Ordinary Income and Net Income were approximately on track. There were no revisions to the earnings forecast or dividend forecast during the quarter, and the Company maintained its current plan. Continued high profitability in North America and Thailand is expected, while reducing losses in Japan will be the key to recovering progress.

Shareholder Returns

The Company forecasts an annual dividend of ¥130 per share, with no revision during the quarter. Based on the average number of shares outstanding during the period of 16,366,749 shares, the annual total dividend is estimated at approximately ¥21.3B, resulting in a Payout Ratio of approximately 66.5% against the full-year Net Income plan of ¥32.0B. Although the Payout Ratio is relatively high, the sound financial foundation—cash and deposits of ¥259.8B and an Equity Ratio of 88.6%—supports the dividend.

Risk Factors

1. Profitability of the Japan segment: The Japan segment, which accounts for more than half of revenue (56.5%), continued to report an Operating Loss of ¥3.0B, with losses widening from the prior year. The pace of recovery in domestic demand will have a significant impact on consolidated earnings.

2. Inventory levels and capital efficiency: Total inventories, comprising raw materials, work in process, and finished goods, increased from the prior year and are one factor behind the low total asset turnover of 0.171. Inventory accumulation could create future risks of valuation losses and constrain capital efficiency.

3. Polarization of regional earnings and foreign exchange fluctuations: While North America and Thailand maintain high profitability, Europe has fallen into an Operating Loss. The Company’s operations across multiple currencies, including the U.S. dollar, Thai baht, Vietnamese dong, and euro, are creating variations in profitability.

Industry Benchmark (Reference; Compiled by the Company)

Profitability and Returns

Although the Company’s Operating Income margin and Net Income margin improved substantially from the prior year, they remain in the lower range compared with the industry median.

Growth and Capital Efficiency

The Company’s revenue growth rate was substantially below the industry median, placing it among the declining-revenue companies in an industry where many companies recorded revenue growth.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. The Operating Income margin improved by approximately 5.1pt, from 1.3% in the prior year to 6.4%, confirming a recovery trajectory in profitability originating from the expansion in gross margin (42.8%→51.1%). Higher profitability in North America and Thailand led this improvement.

2. The earnings gap between segments has widened, with a clear contrast between North America (24.0% margin) and Thailand (8.5%) versus Japan (-2.7%) and Europe (-1.4%). Consolidated profit is becoming increasingly dependent on North America.

3. Progress against the full-year plan was close to the standard benchmark at 25.8% for Net Income, while revenue was somewhat behind schedule at 20.7%. No revisions were made to the earnings forecast or dividend forecast, and the Company maintained its current plan.

Theoretical Share 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 five-year fade period). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥3,663–¥3,869 at ±1% for the cost of equity, and ¥3,746–¥3,775 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 end of the quarter are used (there is a time lag relative to the full-year forecast).
• Because 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 the future share price)

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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 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 discretion and responsibility, with consultation with a professional adviser as necessary.

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