Japan Medical Dynamic Marketing,INC. FY2027 Q1 Earnings Report

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Executive Summary

The first quarter was characterized by declining revenue and earnings, as both the Japan and U.S. segments posted double-digit revenue declines and operating income fell from a profit in the previous year to a loss. Revenue was ¥5.32B (¥5.92B in the previous year, YoY -10.0%), Operating Income was ¥-0.53B (¥0.15B in the previous year), Ordinary Income was ¥-0.54B (¥0.11B in the previous year), and Net Income attributable to the consolidated group was ¥-0.42B (¥0.07B in the previous year, YoY -715.9%). The gross margin deteriorated by 6.5pt to 55.1% from 61.6% in the previous year, while the SG&A ratio rose by 5.8pt to 64.9%, accelerating the deterioration in earnings due to insufficient fixed-cost absorption amid declining revenue. Earnings per share were ¥-15.85 (based on net income attributable to owners of the parent; ¥+2.50 in the previous year).

Factors Affecting Results

【Revenue】Revenue was ¥5.32B, down -10.0% year on year, with both the Japan segment (¥2.77B, -13.4%) and U.S. segment (¥3.62B, -11.2%) posting double-digit revenue declines. Demand appeared weak across regions, indicating a broad-based revenue decline rather than a temporary factor limited to a specific region.

【Profitability】The gross margin deteriorated to 55.1% (61.6% in the previous year, -6.5pt), suggesting lower profitability due to a combination of pricing, product mix, and cost factors. SG&A expenses were ¥3.46B, approximately flat year on year (¥3.50B in the previous year); however, the SG&A ratio rose to 64.9% (59.1% in the previous year, +5.8pt) as revenue declined, and insufficient fixed-cost absorption resulted in an Operating Loss of ¥-0.53B. In non-operating items, a foreign exchange gain of ¥0.06B was generated, but this was almost entirely offset by ¥0.06B in interest expense, resulting in Ordinary Loss of ¥-0.54B. Extraordinary losses, including losses on disposal of fixed assets, were minor at ¥0.01B, indicating limited impact from temporary factors. Net loss was reduced to ¥-0.42B as income taxes and other taxes were ¥-0.13B due to tax effects. The company recorded lower revenue and earnings as operating leverage worked in reverse.

Segment Analysis

Both the Japan and U.S. segments fell into the red on an operating basis, indicating that the deterioration in profitability extended across both regions. The U.S. segment generated revenue of ¥3.62B (down -11.2% year on year) and an Operating Loss of ¥-0.50B (from ¥+0.09B in the previous year, YoY -633.2%), with a -13.7% operating margin, making it the primary driver of the company-wide loss. The Japan segment also posted revenue of ¥2.77B (-13.4%) and an Operating Loss of ¥-0.03B (from ¥+0.08B in the previous year, YoY -133.0%), resulting in a -1.0% operating margin and a marginal move into the red. The U.S. segment accounted for the majority of the consolidated Operating Loss of ¥-0.53B, and the company’s high dependence on the U.S. business represents a source of earnings volatility risk by region.

Key Financial Metrics

【Profitability】The Operating Margin deteriorated significantly to -9.9% (from +2.5% in the previous year), while the gross margin declined to 55.1% (61.6% in the previous year), and ROE also turned negative at -1.7%. 【Cash Quality】Inventories were ¥13.59B, representing 38.4% of total assets. Together with accounts receivable of ¥4.60B, this indicates a high level of working capital and a structure prone to divergence between earnings and cash generation. 【Investment Efficiency】Research and development expenses were ¥0.27B (5.1% of revenue, up from 3.7% in the previous year), indicating that the level of development investment has been maintained. 【Financial Soundness】The Equity Ratio remained high at 70.2% (71.2% in the previous year), while cash and deposits declined by -17.5% from ¥3.11B in the previous year to ¥2.56B, and short-term borrowings increased by +17.1% from ¥4.89B in the previous year to ¥5.72B.

Cash Flow Analysis

Because cash flow statement figures have not been disclosed, funding trends are assessed using key balance sheet items. Cash and deposits were ¥2.56B, down ¥0.54B (-17.5%) from ¥3.11B in the same period of the previous year, suggesting that the operating loss and working capital burden placed pressure on liquidity. Inventories remained elevated at ¥13.59B, up +3.8% year on year. Accounts receivable declined somewhat to ¥4.60B, down -12.2% year on year; however, delays in converting inventory into cash may have weighed on cash generation. Meanwhile, short-term borrowings increased +17.1% to ¥5.72B from ¥4.89B in the previous year, indicating a growing reliance on short-term borrowings to fund working capital. Long-term borrowings were ¥0.70B (¥0.77B in the previous year), broadly flat, suggesting a shift toward short-term financing.

Quality of Earnings

The loss for the current period resulted not from extraordinary items but from deterioration in recurring operating earnings, indicating structurally lower earnings power from a quality-of-earnings perspective. Extraordinary losses, including losses on disposal of fixed assets, were limited to ¥0.01B and had a minor impact on net loss. Non-operating income of ¥0.07B consisted primarily of a ¥0.06B foreign exchange gain and represented only 1.3% of revenue. As this was nearly offset by ¥0.08B in non-operating expenses, primarily ¥0.06B in interest expense, its impact on Ordinary Income was limited. Income taxes and other taxes were ¥-0.13B, reducing Net Loss to approximately ¥-0.42B compared with Profit Before Tax of ¥-0.55B; however, the underlying operating loss excluding tax effects has not improved. The high levels of accounts receivable and inventories suggest a condition prone to divergence between earnings and cash generation (accruals), warranting attention to the speed at which earnings are converted into cash.

Earnings Forecast and Guidance

The progress rate against the full-year plan was 21.0% for revenue (¥5.32B/¥25.37B), below the 25% implied by a simple time-elapsed basis. Against the full-year Operating Income plan of ¥0.43B, the company had already recorded an Operating Loss of ¥-0.53B as of Q1, making substantial earnings improvement over the remaining three quarters a prerequisite for achieving the plan. Similarly, against the Ordinary Income plan of ¥0.14B, a Q1 loss of ¥-0.54B had already been recorded, indicating significant underperformance. As of the current quarter, the company had made no revisions to either its earnings forecast or dividend forecast, and its full-year plan remained unchanged.

Shareholder Returns

The annual dividend forecast is ¥0, maintaining the policy of no dividend for the second consecutive year. As the company recorded a quarterly net loss (Net Income of ¥-0.42B), the Payout Ratio was not calculable, indicating a conservative shareholder-return policy that prioritizes financial soundness.

Risk Factors

1. Deterioration in profitability of the Americas business: The U.S. segment generated revenue of ¥3.62B (-11.2%) and an Operating Loss of ¥-0.50B (YoY -633.2%), with a -13.7% operating margin, making it the primary driver of the company-wide loss. The high dependence on this region, which accounts for more than half of consolidated revenue, represents a risk.

2. Working capital accumulation and liquidity management: While inventories of ¥13.59B (38.4% of total assets) and accounts receivable of ¥4.60B remained high, cash and deposits declined by -17.5% year on year to ¥2.56B, while short-term borrowings increased +17.1% to ¥5.72B, indicating growing dependence on short-term financing.

3. Reduced capacity to absorb interest expense due to deteriorating profitability: Interest expense of ¥0.06B was incurred against an Operating Loss of ¥-0.53B, indicating that the company is unable to cover its interest burden through its core business. Ordinary Loss was also ¥-0.54B, and a further decline in the capacity to absorb financial costs is a concern if earnings recovery is delayed.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

Profitability was substantially below the industry median, with both the Operating Margin and Net Profit Margin ranking in the lower range of the industry.

Growth and Capital Efficiency

Growth also fell substantially below the industry median, highlighting the company’s pronounced gap with other companies in the industry that are on a revenue growth trajectory.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. Both the Japan and U.S. segments simultaneously experienced declining revenue and operating losses, causing the Operating Margin to fall by approximately 12pt from +2.5% in the previous year to -9.9%. The deterioration in earnings power across regions suggests a structural issue rather than a temporary factor.

2. Against the full-year Operating Income plan of ¥0.43B, an Operating Loss of ¥-0.53B had already been recorded in Q1, while the revenue progress rate remained at only 21.0%. The need for substantial earnings improvement in the second half of the fiscal year to achieve the plan is a key point in assessing the feasibility of the full-year outlook.

3. Inventories accounted for 38.4% of total assets, and working capital remained high together with accounts receivable. Cash and deposits declined while short-term borrowings increased, making the reduction of working capital a key factor in restoring future cash-generation capacity.

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 to take any specific investment action.

Sensitivity: ¥686–¥727 at Cost of Equity ±1%, and ¥698–¥711 at ω±0.1.

Notes:

• Due to tax burdens, acquisition-related expenses, non-controlling interests, and other factors, Net Income is significantly compressed relative to Operating Income (Net Income ÷ Operating Income 14%). This value reflects that compression at face value; if the factors are temporary, normalized earnings power may be higher.
• 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 difference 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 is not a forecast or guarantee of future share prices)

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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 responsibility, and you should consult a professional advisor as necessary.

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