AVIX (7836) FY2026 Q3 Earnings Report

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Executive Summary

The Company posted higher revenue but lower earnings for the period, with the key characteristic being that revenue expansion did not translate into profit growth. Revenue increased to ¥33.1B (¥27.7B in the previous year, YoY +19.4%), while Operating Income fell significantly to ¥0.6B (¥1.3B in the previous year, YoY -50.4%), Ordinary Income to ¥0.6B (¥1.4B in the previous year, YoY -53.7%), and Net Income attributable to owners of the parent to ¥0.2B (¥0.9B in the previous year, YoY -76.3%). The primary factor was that the gross profit margin declined to 26.7% from 30.8% in the previous year, a decrease of 4.1pt, with the impact of higher costs exceeding the improvement in the SG&A expense ratio (24.8%, down 1.4pt year on year).

Factors Affecting Performance

【Revenue】Revenue increased 19.4% year on year to ¥33.1B. By segment, DigitalSignageRelated accounted for ¥31.2B (94.1% of total), while ValueCreating generated ¥2.0B. Expansion of the core digital signage-related business drove revenue growth.

【Profit and Loss】The gross profit margin declined to 26.7% from 30.8% in the previous year, a decrease of 4.1pt, and the increase in the cost ratio pressured profitability. SG&A expenses increased to ¥8.2B (up 13.2% year on year), but the SG&A expense ratio improved to 24.8% from 26.2% in the previous year, indicating that expense management itself became more efficient than in the previous year. However, this was insufficient to absorb the deterioration in the gross profit margin, and the Operating Income margin contracted by 2.7pt to 1.9% from 4.6% in the previous year. Extraordinary losses of ¥0.1B (¥0.05B in the previous year) also pressured profit before tax. After corporate income taxes and other taxes of ¥0.2B and profit attributable to non-controlling interests of ¥0.1B, Net Income attributable to owners of the parent remained at ¥0.2B. Higher revenue but lower earnings.

Segment Analysis

The segments comprise DigitalSignageRelated (revenue of ¥31.2B, Operating Income of ¥0.6B, profit margin of 1.8%) and ValueCreating (revenue of ¥2.0B, Operating Income of ¥0.1B, profit margin of 3.7%). The core DigitalSignageRelated segment accounts for 94.1% of total revenue, but its profit margin has declined to 1.8%; therefore, the deterioration in Company-wide profitability is attributable to weaker profitability in the core business. ValueCreating maintains a relatively high profit margin of 3.7%, but its small scale limits its impact on overall Company performance.

Key Financial Indicators

【Profitability】The Operating Income margin declined by 2.7pt to 1.9% from 4.6% in the previous year, while the Net Income margin also contracted significantly to approximately 0.7% from approximately 3.4% in the previous year. The gross profit margin was 26.7% (30.8% in the previous year), with the increase in the cost ratio being the primary cause of the deterioration in profitability.【Earnings Quality】Net Income attributable to owners of the parent was ¥0.2B against Ordinary Income of ¥0.6B, representing a significant gap. Corporate income taxes and other taxes of ¥0.2B, extraordinary losses of ¥0.1B, and profit attributable to non-controlling interests of ¥0.1B compressed final earnings.【Investment Efficiency】ROE (annualized) was 2.4%, while EPS declined significantly to ¥0.64 (¥2.68 in the previous year).【Financial Soundness】The Equity Ratio improved to 56.8% from 54.5% in the previous year, with Net Assets of ¥17.8B against Total Assets of ¥31.3B. Cash and deposits stood at ¥7.4B, maintaining short-term financial capacity.

Cash Flow Analysis

Although direct data from the statement of cash flows is limited, trends in funds can be inferred from changes in the balance sheet. Cash and deposits increased to ¥7.4B from ¥6.6B in the previous year, with the cash position maintained. Accounts receivable and notes receivable decreased to ¥5.3B from ¥8.7B in the previous year, indicating progress in reducing operating receivables. Meanwhile, inventories increased to ¥4.2B from ¥3.2B in the previous year, with a notable buildup particularly in finished goods inventory. Long-term borrowings decreased to ¥1.4B from ¥2.3B in the previous year, indicating reduced leverage through repayments. However, current liabilities account for 68.9% of total liabilities, and the Company continues to exhibit a relatively high dependence on short-term funding.

Earnings Quality

Non-operating income was minimal at ¥0.04B, with interest income and foreign exchange gains also limited, resulting in little impact on Ordinary Income. Non-operating expenses were also small at ¥0.04B (including interest expenses of ¥0.03B), and the interest burden remains manageable. Meanwhile, extraordinary losses of ¥0.1B represented approximately 19% of profit before tax of ¥0.5B and increased from ¥0.05B in the previous year, contributing to the decline in final earnings. Net Income attributable to owners of the parent was ¥0.2B against Ordinary Income of ¥0.6B, representing a significant gap due to the combined impact of corporate income taxes and other taxes of ¥0.2B, profit attributable to non-controlling interests of ¥0.1B, and extraordinary losses. The magnitude of this gap indicates that final earnings attributable to shareholders are more volatile relative to recurring earnings power; therefore, caution is warranted from an earnings quality perspective.

Earnings Forecast and Guidance

The full-year Company forecast remains unchanged at Revenue of ¥48.0B (YoY +10.4%), Operating Income of ¥2.9B (YoY +6.0%), and Ordinary Income of ¥2.8B (YoY +14.7%). The Q3 cumulative progress rate is 69.0% for Revenue, compared with only 22.1% for Operating Income and 22.4% for Ordinary Income. To achieve the full-year plan, Q4 alone will need to generate Revenue of ¥14.9B and Operating Income of ¥2.2B, requiring an Operating Income margin of approximately 14.9%. The gap versus the cumulative Operating Income margin of 1.9% is substantial, making profitability improvement in Q4 the key focus for achieving the plan.

Shareholder Returns

The Q2 dividend was ¥0 per share, and the full-year Company forecast also remains at ¥0 per share, indicating that the no-dividend policy continues. The Payout Ratio is 0%, and Net Income attributable to owners of the parent of ¥0.2B will not be distributed as dividends. Whether shareholder returns resume is expected to depend on the recovery of the Operating Income margin and progress toward achieving the full-year plan.

Risk Factors

1. Profitability deterioration risk: The gross profit margin declined by 4.1pt year on year to 26.7%. This could not be offset by the improvement in the SG&A expense ratio (-1.4pt), and the Operating Income margin contracted to 1.9%; improving costs and project profitability remains a challenge.

2. Short-term funding dependence risk: Current liabilities account for 68.9% of total liabilities, and dependence on short-term funding, including short-term borrowings of ¥3.0B, is high. Although liquidity itself is sound, with cash and deposits of ¥7.4B and a current ratio exceeding 260%, continued monitoring of refinancing conditions is necessary.

3. Full-year plan achievement risk: The progress rates for both Operating Income and Ordinary Income remain in the 22% range, substantially below the standard progress rate of 75%. Achieving the full-year plan requires an Operating Income margin of approximately 14.9% in Q4, making the likelihood of achievement a key performance issue.

Industry Benchmark (Reference; Company Analysis)

Industry Benchmark (manufacturing)

Profitability and Returns

The Company's profit margins are substantially below the industry median, placing it toward the lower end of the industry in terms of profitability.

Growth and Capital Efficiency

The Revenue growth rate is substantially above the industry median, placing top-line expansion in a favorable position within the industry.

※Source: Company analysis

Key Takeaways from the Earnings Results

1. While Revenue increased 19.4% year on year, Operating Income declined 50.4% as the gross profit margin fell by 4.1pt, resulting in a structure characterized by the coexistence of revenue growth and earnings decline.

2. Progress toward the full-year Company plan shows a significant divergence, with Revenue at 69.0% versus Operating Income at 22.1%; the extent to which the profit margin recovers in Q4 will be a major determinant of performance fluctuations.

3. Financial soundness is maintained, with a current ratio exceeding 260% and an Equity Ratio of 56.8%. However, the fact that current liabilities account for 68.9% of total liabilities warrants attention as a short-term funding structure issue.

Theoretical Share Price (Reference Value)

Sensitivity: ¥53–¥56 at Cost of Equity ±1%, and ¥54–¥55 at ω±0.1.

Notes:

• Net Assets as of the quarter-end 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 (Ohlson type; explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated using only publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not forecast or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release 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, after consulting with professionals as necessary.

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