TOMY COMPANY,LTD. FY2027 Q1 Earnings Report

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Executive Summary

In Q1, the Company posted higher revenue and earnings, starting the fiscal year with high-quality profit growth accompanied by an improvement in gross margin. Revenue was ¥640.5B (¥594.8B in the same period of the previous year, YoY +7.7%), Operating Income was ¥55.1B (¥46.0B in the previous year, YoY +19.9%), Ordinary Income was ¥56.3B (¥49.6B in the previous year, YoY +13.4%), and Net Income attributable to owners of the parent was ¥40.6B (¥33.9B in the previous year, YoY +19.6%). The primary factor behind the earnings increase was an improvement in gross margin resulting from a lower cost-of-sales ratio (42.3%, up +3.0pt from 39.3% in the previous year). This absorbed the increase in SG&A expenses (+15.0%), expanding the operating margin to 8.6% (7.7% in the previous year). By region, growth in Japan and Asia served as the main drivers, while Europe continued to report losses.

Factors Affecting Business Performance

【Revenue】Revenue was ¥640.5B (YoY +7.7%), driven by stable growth in domestic Japan and strong growth in Asia. Segment revenue (including intersegment transactions) was Japan ¥564.3B (YoY +8.0%), Asia ¥204.6B (YoY +20.9%), Americas ¥51.0B (YoY -6.7%), Europe ¥14.7B (YoY +45.3%), and Oceania ¥7.3B (YoY +40.3%). While Asia, Europe, and Oceania posted double-digit growth, the Americas was the only segment to record a revenue decline.

【Profit and Loss】Operating Income was ¥55.1B (YoY +19.9%). The improvement in gross margin to 42.3% (39.3% in the previous year) absorbed the increase in SG&A expenses (+15.0%, equivalent to 33.7% of revenue), expanding the operating margin to 8.6% (7.7% in the previous year). By region, Japan Operating Income of ¥61.6B (YoY +5.3%, profit margin 10.9%) was the core contributor to company-wide profit. Asia improved to ¥8.4B (YoY +29.8%, profit margin 4.1%), while the Americas achieved a significant improvement in profitability to ¥3.97B (YoY +256.3%, profit margin 7.8%). Europe continued to report a loss of -¥1.3B (profit margin -8.8%). Ordinary Income was ¥56.3B (YoY +13.4%) and Net Income was ¥40.6B (YoY +19.6%). Extraordinary items were immaterial (only an extraordinary loss of ¥0.03B), leading to the conclusion that the Company achieved both revenue and earnings growth.

Segment Analysis

Segment-level operating profitability varied significantly by region. The core Japan segment reported Operating Income of ¥61.6B (YoY +5.3%), accounting for the majority of company-wide profit. However, its profit growth was slower than the company-wide rate (+19.9%), and while its 10.9% profit margin remained at a high level, further improvement was limited. Asia reported Operating Income of ¥8.4B (YoY +29.8%) and a profit margin of 4.1%, showing improvement commensurate with revenue growth (+20.9%). The Americas achieved a substantial improvement in profitability, with Operating Income of ¥3.97B (YoY +256.3%) and a profit margin rising to 7.8%; however, revenue itself declined 6.7%, which warrants attention. Europe continued to report an operating loss of ¥-1.3B. Although revenue expanded by +45.3%, this did not lead to an improvement in profitability. Oceania posted a small profit of ¥0.4B. The high dependence on Japan and the delayed improvement in Europe’s profitability represent structural characteristics of the regional portfolio.

Key Financial Indicators

【Profitability】Operating margin of 8.6% (7.7% in the previous year), gross margin of 42.3% (39.3% in the previous year), and net profit margin of 6.3% (5.7% in the previous year) all improved from the previous year. Growth in gross profit exceeding the increase in costs supported the expansion of profit margins.【Cash Flow Quality】Accounts receivable increased to ¥334.7B (YoY +14.0%), while inventories rose to ¥267.6B (YoY +16.1%). Both increased at a faster pace than the 7.7% revenue growth, indicating that the Company’s ability to generate cash on hand has become somewhat more constrained relative to earnings growth.【Investment Efficiency】ROE was 3.7%, and Net Income as a percentage of total assets was approximately 2.5%, comprising a total asset turnover ratio of 0.40x and financial leverage of 1.47x.【Financial Soundness】The equity ratio was 67.9% (68.0% in the previous year). Current assets of ¥1122.5B versus current liabilities of ¥444.7B indicate ample liquidity. The ratio of goodwill of ¥48.0B to tangible and intangible assets was also limited, and the financial base was generally stable.

Cash Flow Analysis

Cash and deposits amounted to ¥386.3B, a decrease of ¥124.6B (-24.4%) from ¥510.9B at the end of the same period of the previous year. The primary factors were the accumulation of operating assets, including an increase in accounts receivable of +¥41.2B (+14.0%) and inventories of +¥37.1B (+16.1%). Although this was partially offset by an increase in accounts payable of +¥39.9B (+33.7%), working capital as a whole acted as a use of funds. In addition, treasury stock increased by ¥43.7B to ¥171.5B (¥127.8B in the previous year), suggesting that progress in shareholder returns also contributed to the decline in cash balances. While the expansion of working capital partly reflects seasonality, namely the buildup of inventories ahead of the peak sales season, the progress of accounts receivable collections and inventory liquidation will determine the Company’s future cash-generation capacity.

Quality of Earnings

Current-period profit was primarily generated by operating activities, with virtually no extraordinary gains or losses (only an extraordinary loss of ¥0.03B and extraordinary gains of ¥0.0B). Non-operating income was ¥3.7B (0.6% of revenue), primarily consisting of interest and dividend income of ¥2.2B, indicating limited dependence on non-core income. Meanwhile, a foreign exchange loss of ¥0.8B was recorded as a non-operating expense, leaving Ordinary Income (¥56.3B) only slightly above Operating Income (¥55.1B). The difference between Ordinary Income and Net Income (¥40.6B) was attributable to income taxes of ¥15.7B. The effective tax rate was 27.9% (income taxes of ¥15.7B ÷ profit before tax of ¥56.3B), with no significant anomaly, indicating a consistent structure centered on the tax burden. Comprehensive income was ¥50.8B, exceeding Net Income of ¥40.6B due to a +¥9.2B foreign currency translation adjustment, and no temporary downward factors undermining earnings quality were observed.

Earnings Forecast and Guidance

Progress toward the Full-Year plan in Q1 was 22.5% for Revenue (¥640.5B/¥2,850.0B), 21.2% for Operating Income (¥55.1B/¥260.0B), 21.6% for Ordinary Income (¥56.3B/¥260.0B), and 22.5% for Net Income (¥40.6B/¥180.0B). Although these figures were approximately 1~4 percentage points below the 25% benchmark for even quarterly progress, no revisions were made to the earnings forecast or dividend forecast during the quarter. Against the Full-Year plan of +5.4% revenue growth and +7.2% Operating Income growth, Q1 was already progressing above plan, with revenue up +7.7% and Operating Income up +19.9%. The achievement of the Full-Year plan will depend on the progress of inventory liquidation and improvements in regional profitability toward the second half of the year.

Shareholder Returns

The Company’s annual dividend forecast is ¥70/share, implying a payout ratio of approximately 33.8% based on the Full-Year forecast EPS of ¥207.26. No revision was made to the dividend forecast during the quarter. Treasury stock increased by ¥43.7B to ¥171.5B (¥127.8B in the previous year), suggesting that share repurchases are progressing. Given the financial base of cash and deposits of ¥386.3B and an equity ratio of 67.9%, the Company has secured the capacity to continue paying dividends.

Risk Factors

1. Declining cash-generation capacity due to the accumulation of working capital: Accounts receivable increased YoY by +14.0% and inventories by YoY +16.1%, both exceeding revenue growth of 7.7%. As a result, cash and deposits decreased by ¥124.6B from the end of the same period of the previous year, and the progress of inventory liquidation and accounts receivable collection will determine future cash flow.

2. Concentration of the regional portfolio and profitability challenges in Europe: While Japan is the core contributor to company-wide profit, Europe continues to report an operating loss of -¥1.3B (profit margin -8.8%). The Americas also recorded a revenue decline of YoY -6.7%, making the strengthening of the earnings base outside Japan a key challenge.

3. Impact of foreign exchange fluctuations: The Company recorded a foreign exchange loss of ¥0.8B as a non-operating expense during the quarter. Given the structure in which overseas sales account for a certain proportion of total sales, foreign exchange fluctuations may affect non-operating income and expenses as well as consolidated business performance.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

Although both the operating margin and net profit margin were slightly below the industry median, they were positioned within the middle range of the IQR, with no unusual underperformance within the industry.

Growth and Capital Efficiency

The revenue growth rate exceeded the industry median by +1.4pt, positioning the Company relatively near the top of the industry in terms of growth.

※Source: Compiled by the Company

Key Points in the Earnings Results

1. The improvement in gross margin (42.3%, 39.3% in the previous year) progressed at a faster pace than the increase in SG&A expenses, leading to an expansion of the operating margin to 8.6%. Whether this margin improvement resulted from price and product-mix factors or temporary stability in the cost environment can be assessed by monitoring the sustainability of the gross margin in the next quarter and thereafter.

2. By region, Japan and Asia drove revenue and earnings growth, while Europe continued to post an operating loss (-¥1.3B). The Americas presented a contrasting profile, with improved profitability (YoY +256.3%) despite lower revenue. The disparity in profitability among regions is a structural observation point that will influence the degree of diversification in future consolidated earnings.

3. Progress toward the Full-Year plan was 22.5% for both Revenue and Net Income, slightly below the 25% benchmark for even quarterly progress. The fact that accounts receivable and inventories are increasing faster than revenue growth is also an item to monitor with respect to progress in inventory liquidation and cash collection during the second half of the year.

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

Sensitivity: ¥1,529–¥1,621 at Cost of Equity ±1%, and ¥1,566–¥1,586 at ω±0.1.

Notes:

• Net assets as of the end of the quarter are used (there is a timing difference relative to the Full-Year forecast).

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-06 / This value does not predict 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 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 discretion and responsibility, after consulting with professionals as necessary.

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