ANRITSU CORPORATION FY2027 Q1 Earnings Report

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Executive Summary

All segments and regions recorded revenue growth, resulting in substantial profit growth as operating leverage and improved net financial income coincided. Revenue was ¥325.8B (+38.0% YoY), Operating Income was ¥42.8B (+219.5%), and Net Income was ¥32.9B (+463.5%). The main drivers of revenue growth were the recovery in demand for the core Communications Measurement Business (TestAndMeasurement) and the rapid expansion of EV/battery testing equipment and other products in the Environmental Measurement Business (+323.0%). As the gross margin improved to 53.2%, the Operating Income margin rose significantly to 13.1% (5.7% in the same period last year).

Factors Affecting Performance

【Revenue】All reported segments recorded revenue growth, led by Communications Measurement (¥193.8B, 59.5% composition ratio, YoY +33.6%). Environmental Measurement expanded rapidly to ¥36.0B (YoY +323.0%), while PQA achieved moderate revenue growth to ¥78.9B (+15.7%). By region, Asia and Other Regions grew the most, reaching ¥116.4B (YoY +63.1%), while the Americas (+38.2%), Japan (+22.2%), and EMEA (+18.9%) all recorded double-digit revenue growth, confirming a demand recovery that was not dependent on any specific region.

【Profit and Loss】 The Operating Income margin was 13.1%, improving by +7.5pt from 5.7% in the same period last year, as fixed costs were absorbed at a pace exceeding revenue growth. Financial income of ¥4.2B exceeded financial expenses of ¥0.6B, and Profit Before Tax of ¥46.4B exceeded Operating Income by ¥3.6B. The effective tax burden rate for income taxes and other taxes declined significantly to 29.1% from 56.9% in the same period last year, supporting Net Income of ¥32.9B (YoY +463.5%). This was a period of both revenue and profit growth, driven by higher revenue, improved gross profit, and a lower tax burden.

Segment Analysis

Communications Measurement generated revenue of ¥193.8B (59.5% composition ratio) and Operating Income of ¥31.5B (16.3% margin), making it the core business and accounting for 73.7% of total Operating Income of ¥42.8B. PQA posted revenue of ¥78.9B (YoY +15.7%) and Operating Income of ¥7.7B (9.8% margin), demonstrating stable growth. Environmental Measurement expanded rapidly to revenue of ¥36.0B (YoY +323.0%), but Operating Income was limited to ¥2.0B and a 5.5% margin, as upfront costs during the expansion phase restrained profitability. Other businesses outside the reported segments, including Sensing & Devices and Logistics, contributed to overall profit with Operating Income of ¥6.0B and a high margin of 35.4%.

Key Financial Metrics

【Profitability】 The Operating Income margin was 13.1%, improving by +7.5pt from 5.7% in the same period last year, while the Net Income margin also expanded by +7.6pt to 10.1% from 2.5%. The gross margin remained high at 53.2%, with an improved product mix serving as the primary driver of the higher profit margin. 【Cash Flow Quality】 Operating Cash Flow (OCF) of ¥65.1B was 1.98 times Net Income of ¥32.9B, confirming cash generation commensurate with earnings. 【Investment Efficiency】 ROE was 2.5% on a quarterly basis and should be viewed as a single-period level calculated using quarterly profit. 【Financial Soundness】 The Equity Ratio was 75.8% (slightly down from 76.6% at the end of the previous fiscal year), while total interest-bearing debt remained limited to ¥35.7B. Cash and cash equivalents of ¥509.4B substantially exceeded interest-bearing debt, representing a balance sheet structure close to being debt-free on a net basis.

Cash Flow Analysis

Operating Cash Flow was ¥65.1B, up +50.3% year on year, confirming cash generation exceeding Profit Before Tax of ¥46.4B. In terms of working capital, the increase in inventories reduced OCF by ¥23.7B, while the decrease in trade receivables contributed ¥23.5B and the increase in trade payables contributed ¥5.8B as cash flow factors. Investing Cash Flow was an outflow of ¥14.4B, of which capital expenditures of ¥7.0B were below depreciation and amortization expense of ¥16.5B, indicating that replacement investment remained restrained. Financing Cash Flow was an outflow of ¥41.5B, primarily due to dividend payments of ¥38.4B, with no share repurchases conducted. Free Cash Flow was ¥50.7B, exceeding the combined ¥45.4B of dividend payments and capital expenditures, indicating that shareholder returns and investments can be funded with internal resources.

Earnings Quality

Against Operating Income of ¥42.8B, Profit Before Tax was ¥46.4B. The primary reason for the ¥3.6B difference was net financial income (financial income of ¥4.2B − financial expenses of ¥0.6B), while equity-method income was negligible at ¥0.04B. No notable extraordinary or one-time items were identified, and the majority of current-period profit consisted of Operating Income from the core business and net financial income. Comprehensive income was ¥43.4B, with the difference from Net Income of ¥32.9B limited to ¥10.5B. This difference was primarily attributable to other comprehensive income, including foreign currency translation adjustments, and the divergence between Net Income and comprehensive income was limited. The small size of this divergence indicates that current-period profit was not significantly dependent on fluctuations in foreign exchange rates, securities valuations, or other such factors.

Earnings Outlook and Guidance

Progress against the full-year forecast was 23.3% for Revenue (¥325.8B/¥1400.0B), 21.4% for Operating Income (¥42.8B/¥200.0B), and 21.9% for Net Income (¥32.9B/¥150.0B). Progress for Operating Income and Net Income was slightly below the simple one-quarter benchmark of 25%; however, considering Q1 seasonality and upfront measures such as inventory buildup, the start-up pace can be considered within an acceptable range. No revisions were made to the earnings forecast or dividend forecast during the current quarter.

Shareholder Returns

The full-year dividend forecast is ¥25 per share, representing an increase from the previous fiscal year's actual dividend of ¥20. The Payout Ratio against forecast EPS of ¥117.20 is approximately 21.3% (¥25/¥117.20), which is within a sustainable range even in light of the level of Free Cash Flow. The ¥38.4B dividend payment during Q1 was based on the previous fiscal year's results. Share repurchases were ¥0 in the current period, compared with ¥13.4B in the same period last year, resulting in shareholder returns centered on dividends during the current period.

Risk Factors

1. Segment concentration risk: The Communications Measurement Business accounts for 59.5% of Revenue and 73.7% of Operating Income, creating a structure in which demand fluctuations in this field have a significant impact on consolidated performance.

2. Accumulation of working capital: Inventories increased to ¥288.6B, up +9.8% from the end of the previous fiscal year, and reduced OCF by ¥23.7B. Although the increase was intended to respond to demand, inventory trends require monitoring.

3. Regional mix and foreign exchange sensitivity: Asia and Other Regions and the Americas together account for approximately 60% of Revenue, making yen-denominated earnings susceptible to foreign exchange fluctuations. During Q1, a ¥7.0B foreign currency translation adjustment in the direction of yen depreciation made a positive contribution.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

Both the Operating Income margin and Net Income margin exceeded the industry median, placing profitability in the upper tier of the industry.

Growth and Capital Efficiency

The Revenue growth rate substantially exceeded the industry median, placing the current period among the industry's high-growth performers.

※Source: Compiled by the Company

Key Takeaways from the Earnings Results

1. The Operating Income margin improved by 7.5pt to 13.1%, while the gross margin remained high at 53.2%, indicating a qualitative improvement in profitability. However, full-year progress remained at a conservative pace in the 21% range, making the accumulation of results in the second half a key point to monitor.

2. The Environmental Measurement Business expanded rapidly, with revenue up YoY +323.0%, while its profit margin remained limited to 5.5%, indicating upfront costs associated with business expansion and a time lag before monetization.

3. The dividend forecast was increased by ¥5 from the previous fiscal year (¥20→¥25), while the forecast Payout Ratio remained at a restrained level of approximately 21.3%. Based on the levels of OCF and FCF, sufficient capacity to make the payments has been secured.

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 5-year fade). It is not a forecast of the market share price or a recommendation to take any specific investment action.

Sensitivity: 1,102円〜1,168円 at Cost of Equity ±1%, and 1,132円〜1,138円 at ω±0.1.

Note:

• Net assets as of the end of the quarter are used (there is a timing difference from the full-year forecast).

（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, after consulting with a professional adviser as necessary.

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