SHOFU (7979) FY2027 Q1 Earnings Report

Quick View

Executive Summary

For Q1 of the fiscal year ending March 2027, Shofu posted higher revenue and higher profit, driven primarily by revenue growth and improved profitability in the Dental-Related Business. Net income increased substantially, also benefiting from a one-time gain on the sale of investment securities. Revenue was ¥107.9B (+13.5% YoY), Operating Income was ¥19.4B (+30.0%), Ordinary Income was ¥20.7B (+39.7%), and Net Income was ¥21.4B (+151.0%). While the Operating Margin improved to 18.0% from 15.7% in the same period of the previous year, the sharp increase in Net Income was significantly aided by a ¥11.2B gain on the sale of investment securities. Accordingly, it is necessary to distinguish between core business growth and one-time factors when evaluating performance.

Factors Affecting Performance

【Revenue】Revenue of ¥107.9B increased +13.5% YoY. The core Dental-Related Business generated ¥102.5B (+14.3%), accounting for 95.0% of consolidated revenue and driving growth. The Nail-Related Business was ¥5.2B (-0.4%), essentially flat. By region, Japan generated ¥46.2B (+11.5%), Europe ¥23.2B (+18.7%), North America and Latin America ¥14.1B (+16.5%), and Asia ¥22.6B (+11.5%), with double-digit growth in all regions. The overseas revenue ratio reached approximately 57.2%.

【Profit and Loss】Operating Income was ¥19.4B (+30.0%), and the Operating Margin expanded to 18.0% from 15.7% in the previous year. The segment profit margin of the Dental-Related Business improved to 19.6% from 17.1% in the previous year, becoming the primary driver of profit growth. Meanwhile, the Nail-Related Business's segment loss widened to ¥0.6B, compared with a ¥0.4B loss in the previous year. Ordinary Income of ¥20.7B (+39.7%) was boosted by dividend income of ¥1.1B and a foreign exchange gain of ¥0.6B. Net Income of ¥21.4B (+151.0%) was significantly affected by the recognition of a ¥11.2B gain on the sale of investment securities as extraordinary income, representing 35.1% of Profit Before Tax of ¥32.0B. In conclusion, the Company achieved higher revenue and higher profit, with both core business improvement and one-time factors contributing.

Segment Analysis

The Dental-Related Business generated Revenue of ¥102.5B (+14.3% YoY) and segment profit of ¥20.0B (+30.6%), with its margin improving to 19.6% from 17.1% in the previous year. It is the substantive core of consolidated profit. The Nail-Related Business generated Revenue of ¥5.2B (-0.4%), remaining essentially flat, while its segment loss widened to ¥0.6B, compared with a ¥0.4B loss in the previous year, resulting in a margin of -11.8%. By region, revenue increased in all regions: Japan ¥46.2B, Europe ¥23.2B, Asia ¥22.6B, and North America and Latin America ¥14.1B. The overseas revenue ratio reached approximately 57.2%. While improved profitability in the Dental Business drove consolidated performance, the widening loss in the Nail Business weighed on the overall margin.

Key Financial Metrics

【Profitability】The Operating Margin was 18.0% (15.7% in the previous year), the Ordinary Income Margin was 19.2% (15.6% in the previous year), and the Net Income Margin was 19.9% (9.0% in the previous year), all showing improvement. However, it should be noted that the sharp rise in the Net Income Margin includes the impact of the gain on the sale of investment securities. The Gross Margin was 62.3%, reflecting a high value-added product mix.【Cash Flow Quality】The gain on the sale of investment securities of ¥11.2B accounted for 35.1% of Profit Before Tax of ¥32.0B. Earnings sustainability should therefore be evaluated with a focus on Ordinary Income and Operating Income. Inventories were ¥98.2B, representing 15.8% of total assets, making the accumulation of funds in inventory a point of concern in terms of capital efficiency.【Investment Efficiency】ROE was 4.2% (simple calculation), but a simplified estimate annualizing quarterly profit would be approximately in the 16% range. EPS was ¥60.28 (¥24.03 in the previous year, +150.9% YoY), and BPS was ¥1,433.31 (¥1,363.94 in the previous year).【Financial Soundness】The Company has an extremely conservative financial structure, with an Equity Ratio of 82.1%, Cash and Deposits of ¥124.0B, and interest-bearing debt consisting solely of ¥9.9B in long-term borrowings. It also maintains substantial liquidity, with Current Assets of ¥316.8B versus Current Liabilities of ¥64.2B.

Cash Flow Analysis

Although the Company does not disclose a cash flow statement, its funding position can be assessed from balance sheet trends. Cash and Deposits increased to ¥124.0B from ¥101.2B in the same period of the previous year, apparently aided by increased Operating Income and the recovery of funds through the sale of investment securities. Meanwhile, Inventories remained high at ¥98.2B, representing 15.8% of total assets, suggesting that funds may be tied up in working capital. Interest-bearing debt remained limited to ¥9.9B, and interest expense was also modest at ¥0.1B, indicating limited pressure from cash outflows related to financing activities. Investment securities increased to ¥121.6B from ¥101.1B in the same period of the previous year, suggesting that the Company continued investment activities alongside the recognition of gains on sales. Overall, in addition to cash generation from the core business, the sale of investment securities increased cash on hand, while the high inventory level remains a point of concern in terms of cash efficiency.

Earnings Quality

Profit growth for the current period consisted of both core business improvement and one-time factors. Operating Income of ¥19.4B (+30.0% YoY) reflected the effects of operating leverage resulting from higher revenue and the absorption of SG&A expenses, and can be viewed as recurring earnings improvement. Meanwhile, Ordinary Income of ¥20.7B included dividend income of ¥1.1B and a foreign exchange gain of ¥0.6B as non-operating income; these items are subject to volatility depending on market conditions and exchange rates. In addition, Net Income of ¥21.4B included a ¥11.2B gain on the sale of investment securities as extraordinary income, representing 35.1% of Profit Before Tax of ¥32.0B. Accordingly, the Net Income growth rate of +151.0% YoY substantially exceeded the core business growth rate, represented by the +30.0% increase in Operating Income. It is therefore appropriate to assess underlying earnings power based on the levels of Operating Income and Ordinary Income, excluding this one-time factor. Comprehensive Income of ¥39.2B exceeded Net Income of ¥21.4B by ¥17.7B. Other securities valuation difference of ¥14.6B and foreign currency translation adjustment of ¥3.6B increased net assets; these should also be noted as accrual-like elements that may reverse in response to market fluctuations.

Earnings Forecasts and Guidance

The full-year Company plan calls for Revenue of ¥429.6B (+7.4% YoY), Operating Income of ¥60.0B (+14.9%), and Ordinary Income of ¥58.9B (+0.5%). Q1 progress rates were 25.1% for Revenue, 32.4% for Operating Income, and 35.2% for Ordinary Income. Operating Income and Ordinary Income are therefore progressing at a pace above the standard quarterly allocation of 25%. However, the full-year Ordinary Income plan assumes only +0.5% YoY growth, or essentially flat growth, indicating that the high +39.7% growth recorded in Q1 is not expected to continue throughout the full year. The dividend forecast was revised upward (increased) during the current quarter, representing an upward revision to the shareholder return policy from the initial plan.

Shareholder Returns

The annual dividend forecast is ¥67.00 per share, implying a Payout Ratio of approximately 50.1% based on the full-year EPS forecast of ¥133.66. The dividend forecast was revised upward (increased) during the current quarter, and the interim dividend for the fiscal year ending March 2027 includes a special dividend of ¥12.00. The year-end dividend for the fiscal year ending March 2026 also included a special dividend of ¥5.00, indicating continued enhancement of shareholder returns through special dividends in addition to ordinary dividends. The financial base of Cash and Deposits of ¥124.0B and interest-bearing debt of ¥9.9B supports the Company's capacity to pay dividends.

Risk Factors

1. Inventory and Working Capital Efficiency: Inventories were ¥98.2B, representing 15.8% of total assets, with finished goods inventories of ¥98.2B accounting for the majority. The high inventory level entails risks of inventory write-downs and discount sales during periods of demand fluctuations, and requires monitoring from the perspective of working capital efficiency.

2. Concentration of Business Profit Structure: The Dental-Related Business accounts for 95.0% of consolidated Revenue, meaning that demand trends and competitive conditions in this business directly affect consolidated performance. The Nail-Related Business's segment loss widened to ¥0.6B, compared with a ¥0.4B loss in the previous year, making progress in reducing the loss an area of focus.

3. Dependence on One-Time Profit Factors: Of Net Income of ¥21.4B, the ¥11.2B gain on the sale of investment securities, equivalent to 35.1% of Profit Before Tax, was a significant contributor. Valuation fluctuations in investment securities of ¥121.6B, representing 19.5% of total assets, may affect future profit and Comprehensive Income.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

Both the Operating Margin and Net Income Margin substantially exceeded the industry median, placing profitability in the upper tier of the industry.

Growth and Capital Efficiency

The Revenue Growth Rate also exceeded the industry median, but remained slightly below the upper end of the industry range (14.6%).

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. Revenue in the Dental-Related Business increased +14.3% YoY, while its segment profit margin improved to 19.6% from 17.1% in the previous year, confirming from the financial results data that it is the core driver of consolidated profitability improvement.

2. The +151.0% YoY increase in Net Income includes a ¥11.2B gain on the sale of investment securities, representing 35.1% of Profit Before Tax. The core business growth rate was +30.0% for Operating Income, making it important to understand earnings quality in light of the divergence between the two figures.

3. Inventories were ¥98.2B, representing 15.8% of total assets. The trend in inventory levels is confirmed in the financial results data as a factor that will affect capital efficiency and profitability going forward.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,413–¥1,494 at ±1% in the Cost of Equity, and ¥1,452–¥1,453 at ω±0.1.

Notes:

• Since Net Income progress against the full-year forecast (45%) exceeds the standard level (25%), Forecast EPS has been adjusted upward within a maximum range of +10% (because companies progressing ahead of plan tend to outperform forecasts. For businesses with strong seasonality, the adjustment may be excessive).
• 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 (Ohlson type; explicit 5-year fade) / Interest Rate Reference Month: 2026-07 / Mechanically calculated value based solely on 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 the future share price.)

---

This report is an earnings analysis document automatically generated by AI based on 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, and after consulting with a professional as necessary.

---End of Report---

---

AI Financial Analysis

Executive Summary

Shofu delivered a strong FY2027 Q1 operating performance, while the exceptionally high net-income growth was materially assisted by a securities-sale gain. Revenue increased 13.5% year on year to ¥10.79bn. Operating income rose 30.0% to ¥1.94bn, materially outpacing sales growth. Ordinary income increased 39.7% to ¥2.07bn, supported by higher dividend income and a ¥58mn foreign-exchange gain. Gross profit expanded 16.2% to ¥6.72bn. The gross margin improved by 144bp year on year to 62.3%. Operating margin expanded by 227bp to 18.0%, exceeding the 15% level generally associated with excellent profitability. The Dental-related business was the earnings engine, generating ¥10.25bn of sales and ¥2.00bn of segment profit. Its segment margin improved by 244bp to 19.6%. In contrast, the Nail-related business recorded a segment loss of ¥61mn, compared with a ¥42mn loss in the prior-year quarter. Reported net income more than doubled to ¥2.15bn, producing a 19.9% net margin, up 1,091bp year on year. However, pre-tax profit included ¥1.12bn of extraordinary gain on sales of investment securities, equivalent to 52.4% of quarterly net income. Excluding this securities gain, profit before tax would have been broadly aligned with ordinary income at approximately ¥2.07bn, indicating that the operating improvement is real but reported bottom-line growth is not fully recurring. The annualized ROE of 16.8% is strong and reflects high margins, although the quarterly result includes the non-recurring disposal gain. The balance sheet remains exceptionally liquid, with a 493.8% current ratio and only ¥0.99bn of interest-bearing debt. The principal operational watchpoint is inventory efficiency, as quality alerts indicate elevated inventory days and a long cash conversion cycle. Full-year guidance implies Q1 operating-income progress of 32.4%, ahead of the typical 25% first-quarter pace, but management has not revised its earnings forecast. The revised dividend forecast of ¥67 per share, including a ¥12 special interim dividend, implies a forecast dividend payout ratio of 50.1%, which appears well covered by forecast earnings.

Profitability Analysis

The annualized DuPont ROE is 16.8%, decomposed into a 19.9% net profit margin, 0.692x annualized asset turnover, and 1.22x financial leverage. The low financial leverage confirms that returns are being generated principally from profitability and asset utilization rather than balance-sheet gearing. The largest year-on-year improvement was in margin performance: gross margin increased 144bp to 62.3%, while operating margin rose 227bp to 18.0%. Revenue growth of 13.5% exceeded the 11.4% increase in SG&A expenses, creating positive operating leverage and supporting the faster 30.0% increase in operating income. The Dental-related business is the core business by operating-profit contribution, accounting for ¥2.00bn of segment profit versus consolidated operating income of ¥1.94bn after eliminations. Dental sales rose 14.3% to ¥10.25bn and its segment margin reached 19.6%, from 17.1% a year earlier. The Nail-related business posted sales of ¥0.52bn, down 0.4%, and its segment loss widened to ¥61mn from ¥42mn; its negative margin widened to 11.8% from 8.1%. Geographically, Dental-related sales grew across all disclosed regions: Japan rose 12.9% to ¥4.29bn, North and Latin America increased 16.5% to ¥1.38bn, Europe grew 18.7% to ¥2.32bn, and Asia increased 11.4% to ¥2.26bn. The broad regional growth profile supports the view that the Dental margin expansion is not dependent on a single market. The 19.9% reported net margin is flattered by the ¥1.12bn securities-sale gain. This extraordinary gain lifted profit before tax to ¥3.20bn, 54.2% above ordinary income, whereas ordinary income itself was ¥2.07bn. The tax burden was 0.671, corresponding to a 33.0% effective tax rate; this is moderately heavier than the 0.70 tax-burden reference point but does not undermine the operating result. The interest burden exceeded 1.0 because extraordinary income increased pre-tax earnings above EBIT, rather than because of debt financing. Interest coverage was extremely strong at 242.75x, consistent with minimal funding costs. Sustainability of operating-margin gains should be assessed against the continuing loss in the Nail-related operation and the need to maintain Dental sales momentum internationally.

Growth Assessment

Q1 revenue growth of 13.5% was ahead of the 7.4% full-year sales-growth rate embedded in guidance. Q1 revenue represented 25.1% of the ¥42.96bn full-year forecast, essentially in line with the standard 25% first-quarter progress rate. Operating-income progress was stronger at 32.4% of the ¥6.00bn full-year target, 7.4 percentage points ahead of the standard seasonal benchmark. Ordinary-income progress was 35.2% of the ¥5.89bn forecast, 10.2 percentage points ahead of the standard benchmark, aided by non-operating income. Net-income progress was 45.1% of the ¥4.76bn full-year forecast, substantially above the standard benchmark because Q1 included the ¥1.12bn gain on sale of investment securities. The core earnings trend is better represented by operating income, which rose ¥0.45bn year on year, and ordinary income, which rose ¥0.59bn. Dental-related sales increased by ¥1.28bn and segment profit increased by ¥0.47bn, making it the primary source of consolidated growth. European Dental sales were the fastest-growing disclosed regional stream, up 18.7% year on year. North and Latin American Dental sales also increased 16.5%, while Japan and Asia each recorded double-digit expansion. The diversified regional growth profile moderates single-market demand risk. The Nail-related segment remains a drag on consolidated profit, and its loss expansion means group growth is currently dependent on Dental-related execution. The annualized asset turnover of 0.692x reflects a business model with substantial cash, securities and manufacturing assets relative to revenue; future returns will depend more on sustaining margins than on rapid asset turnover. Management retained its full-year earnings guidance despite Q1 operating outperformance, which leaves room for normal quarterly variability in overseas demand, currencies and costs.

Financial Health

Financial health is very strong. Current assets of ¥31.68bn were 4.94 times current liabilities of ¥6.42bn, producing a current ratio of 493.8%. The quick ratio was also exceptionally high at 340.7%. Cash and deposits of ¥12.40bn alone covered current liabilities by 1.93x. Working capital was ¥25.26bn, providing a substantial liquidity buffer for working-capital needs and capital allocation. Total liabilities were only ¥11.13bn, equal to 17.9% of total assets, while total equity was ¥51.22bn. Interest-bearing debt was ¥0.99bn and debt-to-equity was a conservative 0.22x, well below the 2.0x risk threshold. Debt-to-capital was only 1.9%, and interest coverage of 242.75x indicates negligible debt-service pressure. Current liabilities include a ¥0.33bn current portion of long-term loans; available current assets substantially exceed both current liabilities and this near-term borrowing obligation, so there is no evident maturity mismatch. Investment securities were ¥12.16bn, or 19.5% of total assets, and increased by ¥2.05bn, or 20.3%, year on year. The securities portfolio contributed to Q1 extraordinary income through a ¥1.12bn gain on sale and also leaves equity exposed to market-value movements. Total comprehensive income of ¥3.92bn exceeded net income of ¥2.15bn by ¥1.78bn, reflecting positive valuation and translation movements, including ¥1.46bn of valuation difference on securities OCI and ¥0.36bn of foreign-currency translation OCI. Total liabilities increased ¥2.32bn, or 25.7%, year on year, but leverage remains low in absolute and relative terms. Treasury stock decreased in absolute value by ¥0.71bn to negative ¥0.13bn, a 36.2% reduction in the treasury-stock balance, modestly supporting equity per share. Intangible assets were only 1.0% of total assets, indicating no material intangible-asset concentration.

Notable B/S Changes

Investment securities: +¥2.05bn (+20.3%) to ¥12.16bn, representing 19.5% of total assets. The larger portfolio supported the Q1 ¥1.12bn realized securities-sale gain but increases sensitivity of equity and comprehensive income to market valuations. Total liabilities: +¥2.32bn (+25.7%) to ¥11.13bn. This increase warrants monitoring, although the impact on credit risk is limited by 0.22x debt-to-equity, 1.9% debt-to-capital and substantial liquidity. Treasury stock: ¥0.71bn reduction in absolute balance, from negative ¥0.20bn to negative ¥0.13bn (+36.2% movement in the reported negative balance). This modestly supports per-share equity.

Cash Flow Quality

The operating earnings profile is strong at the P&L level, with operating income up 30.0% and SG&A growing more slowly than revenue. Reported net income, however, should not be treated as entirely recurring because ¥1.12bn of gain on sales of investment securities represented 52.4% of Q1 net income. Ordinary income of ¥2.07bn provides a more useful indicator of the period's recurring earnings base than the ¥2.15bn reported net-income figure. Working-capital quality warrants close monitoring. The quality alerts identify inventory days of 311 days and 220 days under the reported alert calculations, both well above the relevant 90-day and 60-day warning levels. The same alerts identify a 321-day cash conversion cycle, substantially above the 120-day warning level. Elevated inventory duration increases the risk of capital being tied up in products, carrying costs and potential obsolescence, particularly for manufactured dental and nail products with product-cycle and demand risks. Inventories were ¥9.82bn, equivalent to 15.8% of total assets, while raw materials were ¥1.72bn and work in process was ¥2.31bn. Receivables declined 6.8% year on year to ¥4.29bn despite sales growth, which is constructive for collection discipline. Accounts payable decreased 12.3% to ¥1.14bn, limiting supplier financing and contributing to the extended cash conversion profile. The balance-sheet cash position of ¥12.40bn provides ample capacity to absorb working-capital volatility. Future earnings quality will improve if profit growth is increasingly translated into cash while inventory days and the cash conversion cycle normalize.

Dividend Sustainability

The full-year dividend forecast is ¥67 per share. Against forecast EPS of ¥133.66, the implied dividend payout ratio is 50.1%, within the sub-60% range generally viewed as sustainable. The forecast includes a ¥12 special interim dividend, so the indicated distribution contains a non-recurring component. The prior-year period dividend per share was ¥21, while the company has announced a dividend-forecast revision upward for FY2027. Strong profitability, a ¥51.22bn equity base, ¥12.40bn of cash and deposits, and only ¥0.99bn of interest-bearing debt support dividend capacity. The Q1 securities-sale gain strengthens reported earnings but should not be regarded as a permanent funding source for ordinary dividends. The recurring operating base is nevertheless robust, with ¥1.94bn of Q1 operating income and an 18.0% operating margin. The indicated payout level leaves a meaningful share of forecast earnings available for investment, balance-sheet resilience and potential shareholder returns. Dividend sustainability should be evaluated primarily against full-year recurring earnings and working-capital requirements, especially inventory normalization.

Risk Assessment

Business risks include Inventory efficiency is the highest operational concern: quality alerts show inventory days of 311 days and 220 days, and a 321-day cash conversion cycle. This signals a long production-to-cash cycle, heightening risks of inventory carrying costs, demand mismatches and obsolescence., The Nail-related business remained loss-making, with segment loss widening from ¥42mn to ¥61mn despite broadly stable sales of ¥0.52bn. Continued losses could dilute group margin gains generated by Dental-related operations., Dental-related demand is internationally diversified, but overseas sales expose the company to regional healthcare spending cycles, distributor execution and regulatory requirements. Europe and North/Latin America together accounted for ¥3.69bn of Q1 Dental sales., As a manufacturer, Shofu is exposed to raw-material availability and pricing, manufacturing yield, product quality and potential recall risk. High inventory duration increases the financial impact if product specifications or demand patterns change., Foreign-exchange sensitivity remains relevant given overseas revenue exposure. Q1 included a ¥58mn foreign-exchange gain, equivalent to 3.0% of operating income, demonstrating that currency movements can affect earnings..

Financial risks include Investment securities of ¥12.16bn equal 19.5% of total assets. Realized security gains supported Q1 pre-tax income, while unrealized valuation movements also affect comprehensive income and equity., The ¥1.12bn gain on sale of investment securities was 52.4% of Q1 net income. Reliance on portfolio disposals would make reported net-income growth more volatile than operating-income growth., Total comprehensive income was boosted by ¥1.78bn of OCI above net income, including securities valuation and currency translation movements. These gains may reverse with financial-market or exchange-rate changes., No material leverage risk is evident: debt-to-equity is 0.22x, debt-to-capital is 1.9%, and interest coverage is 242.75x..

Key concerns include Highest priority: reduce inventory days and the 321-day cash conversion cycle without impairing service levels or Dental growth., High priority: demonstrate a credible path to profitability or loss containment in the Nail-related segment., High priority: distinguish recurring operating and ordinary earnings from gains on sales of investment securities when assessing profit growth., Medium priority: monitor the market-value sensitivity of the large investment-securities portfolio and its contribution to equity volatility., Medium priority: sustain the Dental-related segment's 19.6% margin as international sales continue to expand..

Investment Implications

Key takeaways include Core operating momentum was strong: revenue rose 13.5%, operating income increased 30.0%, and operating margin expanded 227bp to 18.0%., Dental-related operations are the clear core business, contributing ¥2.00bn of segment profit and achieving a 19.6% segment margin., Reported net-income growth of 151.3% overstates recurring growth because Q1 included a ¥1.12bn gain on sale of investment securities., The balance sheet is conservative, with a 493.8% current ratio, 0.22x debt-to-equity and ¥12.40bn of cash and deposits., The main counterweight to strong profitability is inefficient working capital, as indicated by elevated inventory-day and cash-conversion-cycle alerts., Q1 operating-income progress of 32.4% is ahead of the normal 25% seasonal benchmark, while unchanged guidance retains an element of prudence..

Metrics to watch include Dental-related sales growth and segment margin, particularly in Europe and North/Latin America, Nail-related segment loss and actions to restore profitability, Inventory days, work-in-process management and cash conversion cycle, Operating-income progress against the ¥6.00bn full-year forecast, Recurring ordinary income excluding investment-security disposal gains, Investment-securities balance, realized gains and valuation movements in OCI, Execution of the ¥67-per-share dividend forecast and the recurring basis for distributions.

Regarding relative positioning, Shofu combines an excellent 18.0% operating margin, annualized ROE of 16.8% and very conservative leverage, placing its financial profile favorably versus typical manufacturing benchmarks. Its relative weakness is working-capital efficiency: the reported inventory-day and cash-conversion-cycle alerts are materially above manufacturing reference ranges. Compared with the reported net-income result, operating income and ordinary income offer the clearer basis for comparing underlying performance because Q1 included a significant securities-sale gain.