Scroll Corporation FY2027 Q1 Earnings Report

Quick View

Executive Summary

The Company posted a quarter in which net income increased substantially due to the recognition of extraordinary income, while operating income declined slightly. Revenue was ¥223.4B (+3.0% year on year), operating income was ¥16.5B (-2.1%), ordinary income was ¥18.6B (+1.6%), and net income attributable to owners of the parent was ¥16.4B (+33.6%). Revenue growth was driven by BusinessSolutions (+14.1%) and GroupJurisdiction (+18.6%), while ECommerce (-19.6%) exerted downward pressure. The decline in operating income was primarily attributable to a decrease in the gross profit margin (41.5%, -2.0pt year on year), which could not be fully offset by the improvement in the SG&A ratio (34.1%, -1.6pt). The substantial increase in net income resulted from the recognition of ¥5.6B in gains on sales of investment securities as extraordinary income, and was largely attributable to a nonrecurring factor.

Factors Affecting Business Performance

【Revenue】Revenue increased 3.0% year on year to ¥223.4B. The segment composition ratio (gross basis) was MailOrder 42.8%, BusinessSolutions 41.9%, ECommerce 10.7%, and GroupJurisdiction 4.7%. BusinessSolutions grew 14.1% and GroupJurisdiction grew 18.6%, while ECommerce declined 19.6% and MailOrder decreased slightly by 0.7%. The primary driver of revenue growth was the accumulation of BusinessSolutions revenues, which was partially offset by the contraction in ECommerce.

【Profit and Loss】Operating income declined 2.1% year on year to ¥16.5B, and the operating margin decreased by -0.4pt to 7.4% from 7.8% in the previous year. The gross profit margin declined by -2.0pt to 41.5% from 43.6%, apparently mainly due to an increase in the cost ratio. Meanwhile, the SG&A ratio improved by -1.6pt to 34.1% from 35.8%, indicating progress in cost efficiency. Ordinary income increased 1.6% to ¥18.6B, supported by an increase in non-operating income of ¥2.1B, including ¥0.7B in dividends received. Net income increased substantially by 33.6% to ¥16.4B; however, this was attributable to the nonrecurring factor of ¥5.6B in gains on sales of investment securities, which contributed to an increase in profit before tax to ¥24.2B. The Company experienced higher revenue but lower operating income, while revenue, ordinary income, and net income all increased at their respective stages. Core earnings power was broadly flat, and the increase in bottom-line profit depended on a nonrecurring factor.

Segment Analysis

On a segment profit basis (ordinary income basis), BusinessSolutions recorded a substantial 124.7% increase in profit to ¥6.2B (¥2.8B in the previous year), with its segment profit margin improving to 6.3% (3.2% in the previous year). In contrast, MailOrder reported a 15.5% decline in profit to ¥13.4B (¥15.8B in the previous year), and its profit margin decreased to 13.2% (15.6% in the previous year). ECommerce returned to profitability, recording ¥0.6B in profit (compared with a ¥0.8B loss in the previous year), indicating improved profitability despite contraction. GroupJurisdiction slipped into a loss of ¥1.5B (compared with a profit of ¥0.5B in the previous year), suggesting an increase in the burden of common costs. The increase in BusinessSolutions’ profit absorbed the decline in MailOrder’s profit and the shift of GroupJurisdiction into the red, enabling consolidated ordinary income to achieve a modest increase.

Key Financial Metrics

【Profitability】The operating margin was 7.4%, down -0.4pt from 7.8% in the previous year, while the net profit margin was 7.4%, up +1.7pt from 5.7% in the previous year. The gross profit margin was 41.5% (43.6% in the previous year), and the SG&A ratio was 34.1% (35.8% in the previous year). 【Cash Quality】Accounts receivable were ¥129.4B (+5.3% year on year), and inventories were ¥78.5B (+1.5%), with both increasing at a pace exceeding the revenue growth rate of +3.0%, indicating an accumulation of working capital. Cash and deposits were ¥101.1B, down -5.7% year on year. 【Investment Efficiency】ROE was 4.3% (3.3% in the previous year), total asset turnover was approximately 0.38x, and financial leverage was approximately 1.5x, indicating limited contributions from asset efficiency and leverage. 【Financial Soundness】The equity ratio was 66.1%, improving from 63.9% in the previous year. The current ratio was 216.5%, interest-bearing debt was virtually zero, and D/E was 0.51x, indicating a conservative financial foundation.

Cash Flow Analysis

As individual data from the statement of cash flows was not disclosed, funding trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥101.1B, a decrease of ¥6.1B (-5.7%) from ¥107.2B in the same period of the previous year. Accounts receivable increased to ¥129.4B (+¥6.5B year on year, +5.3%), and inventories increased to ¥78.5B (+¥1.2B, +1.5%). Both increased at a pace exceeding revenue growth (+3.0%), suggesting that funds tied up in working capital contributed to the decline in cash. Meanwhile, accounts payable decreased to ¥25.1B (-¥3.2B year on year), and accrued income taxes also decreased by ¥5.3B, with cash outflows associated with trade payables and tax payments also contributing to the decline in cash. The sale of investment securities accompanied by extraordinary income may have contributed to a certain degree of cash recovery; overall, however, the accumulation of working capital appears to have affected cash generation capacity.

Earnings Quality

It should be noted that the quarter’s earnings benefited significantly from nonrecurring factors in addition to recurring earnings. Non-operating income was ¥2.1B, equivalent to only 1.0% of revenue, and consisted primarily of ¥0.7B in dividends received, indicating limited dependence on non-core operations. Meanwhile, the ¥5.6B in extraordinary income was a nonrecurring gain on sales of investment securities and accounted for approximately 23% of profit before tax of ¥24.2B. Excluding this extraordinary income, the level of profit before tax would have been close to ordinary income of ¥18.6B, indicating that most of the increase in net income was attributable to nonrecurring items. Comprehensive income was ¥16.5B, nearly in line with net income of ¥16.4B, with no significant divergence arising from OCI items such as valuation differences on other securities or hedge gains and losses. The fact that accounts receivable and inventories are increasing at a pace exceeding revenue growth indicates the need to continue monitoring the speed at which earnings are converted into cash.

Earnings Forecast and Guidance

The Q1 progress rates against the Company’s full-year forecasts were 24.8% for revenue (full-year forecast of ¥900.0B), 27.1% for operating income (forecast of ¥61.0B), 28.7% for ordinary income (forecast of ¥65.0B), and 35.0% for net income (forecast of ¥47.0B). Progress in revenue, operating income, and ordinary income was at a standard level, close to the simple seasonal allocation of 25%. The unusually high progress rate for net income was primarily due to the boost from the nonrecurring factor of ¥5.6B in extraordinary income; this one-off factor must be excluded when assessing progress against the full-year plan. The Company revised its earnings forecast during the quarter (with no revision to the dividend forecast), and the full-year plan itself has been reviewed, which should also be taken into account.

Shareholder Returns

The Company’s full-year dividend forecast is ¥102, consisting of an interim dividend of ¥48 and 50 sen (ordinary) + ¥2 and 50 sen (commemorative), and a year-end dividend of ¥48 and 50 sen (ordinary) + ¥2 and 50 sen (commemorative). Compared with the dividend of ¥29.5 in the same period of the previous year, the Company appears to be pursuing a dividend increase policy including commemorative dividends. The payout ratio based on the Company’s forecast EPS of ¥141.48 is 72.1% (¥102/¥141.48), indicating a somewhat high level of shareholder returns relative to earnings. Given the conservative financial foundation represented by cash and deposits of ¥101.1B and an equity ratio of 66.1%, the Company appears to have sufficient capacity to maintain dividend payments for the time being. However, the high payout ratio requires continued monitoring in light of future earnings progress and working capital trends.

Risk Factors

1. Decline in gross profit margin and changes in segment mix: The gross profit margin declined by -2.0pt to 41.5% from 43.6% in the previous year. While ECommerce revenue contracted by -19.6%, changes in the product and channel mix may affect future profitability.

2. Accumulation of working capital: Accounts receivable were ¥129.4B (+5.3% year on year), and inventories were ¥78.5B (+1.5%), with both increasing at a pace exceeding revenue growth (+3.0%). Delays in collections or inventory turnover could affect cash generation capacity and credit and valuation loss risk.

3. Level of capital efficiency: ROE remained at 4.3% (improving from 3.3% in the previous year), while total asset turnover was approximately 0.38x, indicating that asset efficiency is not high. Given that the primary driver of the increase in net income was temporary extraordinary income, improvement in core return on capital remains a work in progress.

Industry Benchmark (Reference; Compiled by the Company)

Profitability and Returns

Both the Company’s operating margin and net profit margin exceed the industry median, indicating that profitability is relatively high within the industry.

Growth and Capital Efficiency

The revenue growth rate is below the industry median, indicating that the pace of revenue growth is relatively moderate within the industry.

※Source: Compiled by the Company

Key Takeaways from the Results

1. The increase in net income (+33.6%) was largely attributable to the nonrecurring factor of ¥5.6B in gains on sales of investment securities, while operating income declined by -2.1%; core earnings power is therefore flat or slightly deteriorating.

2. While the gross profit margin declined by -2.0pt, the SG&A ratio improved by -1.6pt, with cost efficiency serving as a supporting factor for operating income. Future trends in the gross profit margin will determine operating leverage.

3. At the segment profit level, BusinessSolutions recorded a substantial 124.7% increase in profit, while MailOrder reported a 15.5% decline and GroupJurisdiction shifted from profitability to a loss, indicating that fluctuations in segment earnings have a significant impact on consolidated profit.

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 model with an explicit five-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥1,200–¥1,266 at ±1% for the cost of equity, and ¥1,230–¥1,235 at ±0.1 for ω.

Notes:

• 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 does not forecast or guarantee the future share price)

---

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 professionals as necessary.

---End of Report---