YOKOWO CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

The April–June 2026 period (Q1) resulted in higher revenue and earnings, primarily due to the rapid expansion of the CTC Business, with profitability also improving significantly. Revenue was ¥259.2B (¥210.0B in the previous year, YoY +23.4%), Operating Income was ¥20.0B (¥7.3B, YoY +172.7%), Ordinary Income was ¥21.9B (¥3.1B, YoY +601.8%), and Net Income attributable to owners of the parent was ¥17.1B (¥3.2B, YoY +433.1%). The Operating Income margin expanded to 7.7% (3.5% in the previous year), driven by improved profitability in the CTC segment and a decline in the SG&A expense ratio. In addition, the shift from a foreign exchange loss in the previous year to a foreign exchange gain in the current period boosted Ordinary Income. Although the previous year same period included the one-time gain on negative goodwill, the current period saw virtually no extraordinary gains or losses, resulting in higher earnings repeatability than in the previous year.

Factors Affecting Earnings

【Revenue】Revenue increased 23.4% YoY to ¥259.2B. By segment, CTC showed exceptional growth, reaching ¥74.5B (28.8% of total revenue, YoY +70.4%) and driving company-wide growth. VCCS, the largest segment, remained at ¥142.5B (55.0% of total revenue, YoY +4.7%), indicating slower growth. FCMD was ¥31.9B (YoY +19.6%), while Incubation was ¥10.2B (YoY +195.1%, reflecting the effect of business succession). By region, revenue increased in all three regions: Europe and the Americas ¥100.6B (YoY +11.2%), Asia ¥78.2B (YoY +44.4%), and Japan ¥80.3B (YoY +22.9%), with Asia recording the strongest growth.

【Profit and Loss】Operating Income was ¥20.0B (YoY +172.7%), supported by both an improvement in the gross profit margin to 21.6% (+3.4pt from 18.1% in the previous year) and a decline in the SG&A expense ratio to 13.8% (-0.8pt from 14.6% in the previous year). CTC generated ¥19.7B in Operating Income (YoY +799.5%, margin 26.4%), accounting for the majority of company-wide earnings, while VCCS profitability deteriorated to ¥0.12B (YoY -81.1%, margin 0.8%). Ordinary Income was ¥21.9B (YoY +601.8%); in addition to the growth in Operating Income, the shift from a foreign exchange loss in the previous year (approximately ¥4.5B) to a foreign exchange gain in the current period (¥1.7B) contributed a swing of approximately +¥6.2B. Extraordinary gains and losses were minor, consisting of an extraordinary gain of ¥0.03B and an extraordinary loss of ¥0.10B, with no one-time factor in the current period comparable to the ¥3.1B gain on negative goodwill recorded in the previous year. Revenue and earnings both increased, with the principal drivers of earnings growth being both the structural improvement in CTC’s business mix and the positive impact of foreign exchange.

Segment Analysis

Segment profit is notably concentrated in CTC. CTC became the core business, with revenue of ¥74.5B (YoY +70.4%) and Operating Income of ¥19.7B (YoY +799.5%, margin 26.4%), accounting for approximately 98% of company-wide Operating Income of 2001 million yen. VCCS was the largest segment by revenue at ¥142.5B (YoY +4.7%), but Operating Income fell sharply to ¥0.12B (YoY -81.1%, margin 0.8%), indicating that revenue growth was not accompanied by profit growth. FCMD recorded revenue of ¥31.9B (YoY +19.6%) and Operating Income of ¥0.9B (YoY -3.4%, margin 2.7%), while Incubation recorded revenue of ¥10.2B (YoY +195.1%) and an Operating Loss of ¥1.7B, improving from a loss of ¥2.0B in the previous year. Regional revenue consisted of Europe and the Americas at ¥100.6B (38.8% of total revenue, YoY +11.2%), Asia at ¥78.2B (30.2% of total revenue, YoY +44.4%), and Japan at ¥80.3B (31.0% of total revenue, YoY +22.9%), with Asia’s strong growth reflecting the overseas expansion of CTC and FCMD. While VCCS accounts for more than half of revenue, profit is extremely concentrated in CTC, and the disparity in profitability among segments is a factor driving fluctuations in company-wide profitability.

Key Financial Indicators

【Profitability】The Operating Income margin was 7.7%, improving by +4.2pt from 3.5% in the previous year. The Ordinary Income margin was 8.4%, improving by +7.0pt from 1.5% in the previous year, while the Net Income margin attributable to owners of the parent was 6.6%, improving by +5.1pt from 1.5% in the previous year. The gross profit margin also increased to 21.6%, up +3.4pt from 18.1% in the previous year. The shift toward higher margins in CTC and the decline in the SG&A expense ratio to 13.8% (14.6% in the previous year) were the two key drivers of improved profitability.【Cash Flow Quality】While Revenue increased by +23.4%, accounts receivable increased by only +5.2% and inventories by +2.4%, indicating that the pace of growth in working capital was below that of revenue and cost of sales.【Investment Efficiency】ROE was 2.8% (based on quarterly results), and EPS was ¥73.20 (¥13.73 in the previous year).【Financial Soundness】The Equity Ratio was 66.3%, slightly lower than 67.4% in the previous year, primarily due to the expansion of total assets. Cash and deposits remained almost flat year-on-year at ¥181.7B.

Cash Flow Analysis

Although the company has not disclosed a statement of cash flows, trends in the balance sheet suggest that the quality of cash generation has been broadly maintained. Cash and deposits were ¥181.7B, almost unchanged from ¥181.7B in the previous year same period, indicating stable on-hand liquidity even amid substantial growth in revenue and earnings. Accounts receivable increased to ¥193.3B (+5.2%), while inventories rose to ¥86.0B (+2.4%), both below the growth rates of Revenue (+23.4%) and cost of sales (+18.2%), respectively, indicating no deterioration in working capital efficiency. Meanwhile, investment securities increased to ¥59.2B (+37.5%), and short-term borrowings rose to ¥42.2B (+31.6%), suggesting that the expansion of strategic investments was flexibly financed through short-term borrowings. The current portion of long-term borrowings (repayable within one year) declined substantially from ¥1.4B to ¥16.4B in the previous year, indicating progress toward extending repayment maturities.

Earnings Quality

The majority of current-period profit was generated by recurring business operations, and earnings quality was higher than in the previous year. Non-operating income of ¥2.7B (approximately 1.0% of Revenue) consisted primarily of a foreign exchange gain of ¥1.7B and dividend income of ¥0.6B, among other items, and substantially exceeded non-operating expenses of ¥0.8B, including interest expense of ¥0.6B, thereby boosting Ordinary Income. Since non-operating expenses in the previous year included a foreign exchange loss of approximately ¥4.5B, the foreign exchange swing alone boosted Ordinary Income by approximately ¥6.2B in the current period. This factor should be noted as a non-structural element associated with market fluctuations. Extraordinary gains and losses were negligible, consisting of an extraordinary gain of ¥0.03B and an extraordinary loss of ¥0.10B, so the impact of one-time items on Net Income was extremely limited. The ¥3.1B gain on negative goodwill recorded in the previous year same period, associated with business succession through a corporate demerger, did not recur in the current period. Accordingly, current-period Net Income was based more heavily on recurring business earnings. The fact that accounts receivable and inventories grew more slowly than revenue and costs of sales also suggests that the divergence between earnings and cash conversion remained limited.

Earnings Forecast and Guidance

The Q1 progress rates against the full-year plan (Revenue ¥1,010.0B, Operating Income ¥80.0B, Ordinary Income ¥79.0B, EPS ¥240.17, dividend ¥64.00) were 25.7% for Revenue, 25.0% for Operating Income, 27.7% for Ordinary Income, and 30.5% for Net Income attributable to owners of the parent. Net Income progress exceeded the standard quarterly progress rate of 25% by 5.5pt, driven by CTC’s high profitability and the contribution from foreign exchange gains. Although the earnings forecast was revised during the current quarter, there was no revision to the dividend forecast, and the full-year dividend plan remains unchanged. The sustainability of CTC’s high margin and the extent of profitability recovery at VCCS will be the primary variables determining achievement of the full-year plan.

Shareholder Returns

The company’s forecast dividend is ¥64.00 per share, representing a Payout Ratio of approximately 26.6% against forecast EPS of ¥240.17. Based on 23,316,854 shares, calculated by deducting 533,024 treasury shares from 23,849,878 issued shares, the total annual dividend is estimated at approximately ¥14.9B. The Payout Ratio against forecast Net Income of ¥56.0B is likewise approximately 26.6%. Relative to the financial base of ¥181.7B in cash and deposits and an Equity Ratio of 66.3%, the burden of the total dividend is limited, and the Payout Ratio is consistent under a single definition based on forecast EPS.

Risk Factors

1. Segment earnings concentration risk: While VCCS accounts for 54.7% of the revenue mix, its Operating Income margin is only 0.8% (down from the equivalent of 4.4% in the previous year), and the majority of company-wide Operating Income depends on the CTC1 segment, which has a 26.4% margin. Deterioration in CTC’s profitability or delays in VCCS’s recovery could significantly affect company-wide profitability.

2. Sustainability of CTC’s high margin: CTC’s Operating Income margin rose sharply to 26.4%, and the growth in Operating Income (+799.5%) substantially exceeded revenue growth (+70.4%). Whether this level reflects structural improvement attributable to product and customer mix or utilization rates, or temporary supply-and-demand factors, must be assessed through trends in subsequent quarters.

3. Foreign exchange sensitivity: At the Ordinary Income level, the shift from a foreign exchange loss in the previous year (approximately ¥4.5B) to a foreign exchange gain in the current period (¥1.7B) generated a positive impact of approximately ¥6.2B. This foreign exchange swing could reverse depending on market conditions and should therefore be monitored as a factor affecting Ordinary Income.

Industry Benchmark (Reference; Compiled by the Company)

Profitability and Returns

Growth and Capital Efficiency

※Source: Compiled by the company

Key Takeaways from the Earnings Results

1. The sharp improvement in profitability is notable for its high dependence on the CTC1 segment. Most of the +4.2pt year-on-year improvement in the company-wide Operating Income margin was attributable to CTC’s margin rising to 26.4%, although the company remains -1.0pt below the industry average.

2. The margin of VCCS, the largest segment by revenue (55.0% of total revenue), declined to 0.8%, creating a divergence between revenue scale and profitability. Whether this divergence narrows or widens in subsequent quarters will be an important observation point in determining the trend in company-wide profitability.

3. Accounts receivable and inventories increased at a moderate pace relative to the growth in revenue and costs, indicating that working capital efficiency has not deteriorated. This provides one indication that earnings growth has been achieved without compromising cash flow quality.

Theoretical Share Price (Reference Value)

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

Sensitivity: ¥2,599–¥2,752 at ±1% for the Cost of Equity, and ¥2,673–¥2,674 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 timing gap 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: 2026-07 / This value is not intended to predict or guarantee the future share price.)

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This report is an earnings analysis document automatically generated by AI through analysis of 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 professionals as necessary.

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