R.C.CORE (7837) FY2026 Q3 Earnings Report

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Executive Summary

For the cumulative Q3 period of the fiscal year ending March 2026, the Company reported an increase in its operating loss amid lower revenue, with deteriorating profitability continuing. Revenue was ¥7.98B (¥8.25B in the same period of the previous year, down -3.3% YoY), operating income was ¥-0.38B (¥-0.26B in the same period of the previous year, down -44.3%), ordinary income was ¥-0.31B (¥-0.22B in the same period of the previous year, down -42.7%), and the quarterly net loss attributable to owners of the parent was ¥0.32B (¥-0.25B in the same period of the previous year, down -26.0%). The gross profit margin improved slightly to 28.8% from 28.6% in the same period of the previous year; however, selling, general and administrative expenses increased 2.3% YoY, exceeding the decline in revenue, causing the operating margin to deteriorate by approximately 1.6pt to -4.8%. While lower revenue in the Direct Sales Division was the main factor behind the overall decline, increased revenue and a reduced loss in the BP Company Division provided partial offset.

Factors Affecting Results

【Revenue】Revenue was ¥7.98B, a decline of -3.3% YoY. By segment, the Direct Sales Division recorded ¥2.86B (35.8% of total, down -15.5% YoY), the Dealer Division recorded ¥3.22B (40.4% of total, down -4.3%), and the BP Company recorded ¥3.22B (40.4% of total, up +12.2%; ¥3.11B on an external revenue basis excluding intersegment sales). The decline in the Direct Sales Division weighed on overall performance, while the BP Company's double-digit revenue growth provided support.

【Profit and Loss】Against total segment profit of ¥0.42B, unallocated corporate expenses reached ¥0.79B (up +15.4% YoY), resulting in a consolidated operating loss of ¥0.38B. Although the gross profit margin improved, the increase in SG&A expenses could not be absorbed, and the operating margin deteriorated from -3.2% in the previous year to -4.8%. Foreign exchange gains of ¥0.03B were recorded in non-operating income, reducing the ordinary loss to ¥0.31B; however, the recognition of ¥0.01B in income taxes resulted in a net loss of ¥0.32B. Lower revenue and lower profit.

Segment Analysis

The Direct Sales Division, the core business with the largest profit contribution, recorded external revenue of ¥2.86B (down -15.5% YoY) and segment profit of ¥0.28B (down -31.1% YoY), resulting in a substantial decline in both revenue and profit. The Dealer Division recorded external revenue of ¥3.22B (down -4.3% YoY) and segment profit of ¥0.28B (up +1.1% YoY), defending its profit margin despite lower revenue (profit margin of 8.6%, versus 8.3% in the previous year). The BP Company Division recorded external revenue of ¥3.22B (up +12.2% YoY) and a segment loss of ¥0.14B. Although it remained loss-making, the loss narrowed from ¥0.22B in the previous year (profit margin of -4.3%, an improvement of -4.2pt from the previous year). Against combined profit of ¥0.42B for the three divisions, unallocated corporate expenses of ¥0.79B (up +15.4% YoY) exceeded segment profit and were the primary cause of the consolidated operating loss.

Key Financial Indicators

【Profitability】The operating margin was -4.8%, deteriorating from -3.2% in the same period of the previous year, while the net profit margin also remained negative at approximately -4.0%. Annualized ROE was -20.1%; the negative net profit margin combined with financial leverage of 2.8x resulted in a significant deterioration in capital efficiency.【Cash Flow Quality】Non-operating income included foreign exchange gains of ¥0.03B, which provided a boost from outside the core business. Although the ordinary loss was smaller than the operating loss, this does not indicate an improvement in the profitability of the core business.【Investment Efficiency】Intangible assets increased +1,460.3% YoY (+¥0.098B), requiring confirmation of the effectiveness of the investment and future amortization and impairment risks.【Financial Soundness】The equity ratio was 35.6%, slightly down from 37.0% in the same period of the previous year. The current ratio remained at a sound level of 178.2%, indicating healthy short-term liquidity; however, retained earnings declined -23.0% YoY and net assets declined -12.6%, demonstrating that accumulated losses continue to erode shareholders' equity.

Cash Flow Analysis

As no cash flow statement has been disclosed, funding trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥2.54B, down ¥0.57B from ¥3.11B in the same period of the previous year, representing 43.2% of total assets. Current assets were ¥4.33B, down from ¥4.85B in the same period of the previous year, suggesting that the continued operating loss and changes in working capital weighed on the cash balance. Long-term borrowings were ¥0.50B, slightly down from ¥0.55B in the same period of the previous year, indicating limited reliance on interest-bearing debt. The current ratio of 178.2% and quick ratio of 167.0% remained at sound levels, preserving capacity to manage short-term funding needs; however, if losses continue, the pace of decline in cash balances will require close monitoring.

Quality of Earnings

The ordinary loss narrowed to ¥0.31B from an operating loss of ¥0.38B, due to ¥0.08B in non-operating income, including foreign exchange gains of ¥0.03B. This represents a temporary boost and does not indicate an improvement in the profitability of the core business. Extraordinary income and losses consisted solely of a ¥0.01B gain on the sale of fixed assets, which was not material. Income taxes of ¥0.01B were recognized against a loss before tax of ¥0.30B; because a tax burden arose despite the loss, the net loss of ¥0.32B exceeded the loss before tax. Comprehensive income was -¥0.32B, approximately the same level as the net loss, with no significant divergence attributable to other comprehensive income items. No factors that materially distort earnings quality were identified.

Earnings Forecast and Guidance

Progress toward the full-year revenue forecast of ¥11.70B was 68.2%, 6.8pt below the standard progress pace of 75%, requiring revenue of ¥3.72B in Q4. Against the full-year operating loss forecast of ¥-0.42B, the cumulative operating loss was ¥-0.38B, representing a progress rate of 90.7%; therefore, the additional loss allowable in Q4 is limited to ¥0.04B. Progress toward the full-year net loss forecast of ¥-0.56B was 56.3% based on the cumulative net loss. No revisions were made to either the earnings forecast or the dividend forecast, and achieving the plan will depend on balancing the pace of revenue recovery with cost control.

Shareholder Returns

Both the Q2 dividend and the full-year dividend forecast were ¥0 per share, and no dividend was paid in the same period of the previous year. Given the cumulative net loss of ¥0.32B and the full-year net loss forecast of ¥0.56B, the payout ratio is not applicable. The Company continues to prioritize the retention of internal reserves and the maintenance of net assets in its capital allocation policy. No disclosure regarding share repurchases has been made.

Risk Factors

1. Declining revenue and profit in the core business: External revenue in the Direct Sales Division declined -15.5% YoY, while segment profit declined -31.1% YoY, making it the primary cause of the deterioration in consolidated performance. A delay in sales recovery in this division would directly affect consolidated earnings.

2. Declining fixed-cost absorption capacity: Unallocated corporate expenses were ¥0.79B (up +15.4% YoY), exceeding combined segment profit of ¥0.42B. The structure in which the Company incurs an operating loss on a consolidated basis even when individual businesses secure profits continues.

3. Vulnerability in profitability and funding: The Company remains unable to cover interest expenses of ¥0.01B with operating income. Continued losses could reduce financial flexibility through declines in cash and deposits (¥2.54B) and net assets (¥2.09B, down -12.6% YoY).

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

The Company is substantially below the industry median, placing its profitability toward the lower end of the industry.

Growth and Capital Efficiency

Revenue growth also remains below the industry median, contrasting with peers that continue to report revenue growth.

Source: Compiled by the Company

Key Points from the Financial Results

1. Although the gross profit margin improved slightly to 28.8%, the increase in SG&A expenses and unallocated corporate expenses exceeded the improvement, resulting in an expanded operating loss. This highlights the need to review the fixed-cost structure.

2. The extent to which increased revenue and a reduced loss in the BP Company Division, together with improved profitability in the Dealer Division, can offset the substantial decline in revenue and profit in the Direct Sales Division will determine the full-year results.

3. Under the full-year plan, the Company must secure revenue of ¥3.72B in Q4 while limiting the additional operating loss to ¥0.04B or less. Progress should be monitored in future earnings disclosures.

Theoretical Share Price (Reference Value)

Sensitivity: ¥138–¥145 at cost of equity ±1%; ¥135–¥146 at ω±0.1.

Notes:

• As forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the quarter-end are used (there is a timing difference from the full-year forecast).

(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 predict or guarantee 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. 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 a professional as necessary.

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