NAC CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

During the quarter, the Company recorded a decline in revenue and an operating loss. Profitability improvements in the two core businesses were offset by corporate expenses and the burden of unprofitable businesses. Revenue was ¥125.3B (¥130.8B in the same period of the previous year, -4.1%), Operating Income was ¥-0.6B (¥-0.4B in the previous year), Ordinary Income was ¥-0.6B (¥-0.3B in the previous year), and Net Income was ¥-2.7B (¥-0.2B in the previous year). The primary causes of the revenue decline were downturns in Architectural Consulting (-29.0%) and the Housing Business (-27.6%), which could not be offset by higher revenue and profit in the Crecla and Rental businesses.

Factors Affecting Results

【Revenue】Revenue was ¥125.3B, representing a year-on-year decline of -4.1%. While Crecla at ¥38.8B (+2.8%) and Rental at ¥45.7B (+2.2%) remained solid and secured higher revenue, Architectural Consulting at ¥7.9B (-29.0%) and Housing at ¥13.3B (-27.6%) posted substantial revenue declines, weighing on the overall result.

【Profit and Loss】Losses widened, with an Operating Loss of ¥0.6B (¥-0.4B in the previous year), an Ordinary Loss of ¥0.6B (¥-0.3B in the previous year), and a Net Loss of ¥2.7B (¥-0.2B in the previous year). Crecla (Operating Income of ¥4.3B, +35.9%) and Rental (¥3.6B, +34.7%) improved their margins to 11.2% and 8.0%, respectively. However, losses in Architectural Consulting (¥-2.4B) and Housing (¥-2.3B) widened, offsetting the earnings power of the businesses together with approximately ¥3.6B in corporate expenses. The recognition of ¥1.9B in income taxes and other taxes resulted in the Net Loss widening from a pretax loss of ¥0.7B to ¥2.7B. Accordingly, the Company can be characterized as having lower revenue and lower profit (with higher revenue and profit in the core businesses, but lower revenue and profit overall).

Segment Analysis

By segment, a pronounced polarization in profit margins is evident. Crecla (revenue of ¥38.8B, Operating Income of ¥4.3B, margin of 11.2%) and Rental (revenue of ¥45.7B, Operating Income of ¥3.6B, margin of 8.0%) form the core earnings base, with both segments improving their profit margins from the previous year. Beauty and Health recorded revenue of ¥15.8B, representing higher revenue, but Operating Income of ¥0.7B was nearly flat (margin of 4.7%). In contrast, Housing (revenue of ¥13.3B, Operating Income of ¥-2.3B, margin of -17.5%) and Architectural Consulting (revenue of ¥7.9B, Operating Income of ¥-2.4B, margin of -30.7%) experienced substantial revenue declines and widening losses, and are the primary causes of pressure on overall profit and loss. Unallocated corporate expenses were approximately ¥3.6B, exceeding the total segment profit of ¥3.1B and resulting in a shift to an operating loss.

Key Financial Indicators

【Profitability】The Operating Margin was -0.4% and the Net Profit Margin was -2.1%, both deteriorating from the previous year. ROE was -1.2%, primarily due to the deterioration in the Net Profit Margin. The Gross Margin remained at a high level of 51.5% (approximately 52.0% in the previous year). 【Cash Quality】Cash and deposits were ¥49.3B, a substantial decrease from ¥78.5B in the previous year. This was attributable to capital allocation, including the repurchase of treasury shares (6,240 thousand treasury shares relative to issued shares), as well as the accumulation of working capital. 【Investment Efficiency】Total assets declined to ¥366.4B (¥388.8B in the previous year), while Accounts Receivable of ¥49.9B and Inventories of ¥36.7B remained at high levels from an asset-efficiency perspective. 【Financial Soundness】The Equity Ratio was 58.5% (59.5% in the previous year), remaining at a high level, and the financial foundation was stable. However, relative to interest-bearing debt comprising Long-Term Borrowings of ¥22.9B and Short-Term Borrowings of ¥27.0B, the Company’s ability to absorb interest payments has declined amid an operating loss.

Cash Flow Analysis

Although the Company does not disclose a cash flow statement, trends in funds can be assessed based on changes in the balance sheet. Cash and deposits declined significantly to ¥49.3B from approximately ¥78.5B in the previous year. Treasury shares increased to ¥-29.1B (¥-21.65B in the previous year), indicating that capital allocation toward shareholder returns was one factor contributing to cash outflows. Contract liabilities increased to ¥14.8B (¥8.2B in the previous year), and the cash flow benefit of receiving revenue in advance served as a supporting factor. Meanwhile, Accounts Receivable of ¥49.9B and Inventories of ¥36.7B remained high, indicating that funds continue to be tied up in working capital.

Quality of Earnings

The impact of extraordinary items on profit and loss for the period was limited (Extraordinary Income of ¥0.03B and Extraordinary Loss of ¥0.15B), and both the Operating Loss and Ordinary Loss appear to represent recurring results reflecting the earnings power of the underlying businesses. Although non-operating income included stable sources of income such as dividends received of ¥0.1B, interest expenses of ¥0.2B and foreign exchange losses of ¥0.1B were recorded on the expense side, resulting in non-operating expenses exceeding non-operating income. The significant divergence between the Ordinary Loss of ¥0.6B and the Net Loss of ¥2.7B resulted from the recognition of ¥1.9B in income taxes and other taxes, with the loss widening from a pretax loss of ¥0.7B due to the tax burden. This tax burden may include the impact of valuation allowances and other factors, and normalization of the effective tax rate on a full-year basis will affect future trends in Net Income.

Earnings Forecast and Guidance

The Full-Year plan calls for Revenue of ¥635.0B (前年比+7.8%), Operating Income of ¥28.0B (+12.7%), Ordinary Income of ¥28.0B (+12.6%), EPS of ¥40.67, and a dividend of ¥22.00, with no revisions to the forecast during the period. Revenue for the quarter was ¥125.3B against the full-year plan of ¥635.0B, representing progress of 19.7%, below the simple one-quarter level of 25%. Both Operating Income and Ordinary Income were losses, and achievement of the full-year plan will depend on profit and loss improvement in the Housing and Architectural Consulting businesses during the second half, as well as the continuation of the upward profit trend in Crecla and Rental.

Shareholder Returns

The Company’s annual dividend plan is ¥22.00 (¥5 in the previous year), resulting in a Payout Ratio of approximately 54% against planned EPS of ¥40.67. As the Company recorded a Net Loss for the quarter, calculating the Payout Ratio on an actual-results basis is not meaningful. However, the substantial capital base, reflected in an Equity Ratio of 58.5%, provides a cushion for dividends. Treasury shares had increased to 6,240 thousand shares (equivalent to 13.4% of issued shares), indicating that capital was allocated as part of shareholder returns in addition to dividends.

Risk Factors

1. Risk of continued losses in unprofitable segments: The Housing Business (Operating Income of ¥-2.3B, margin of -17.5%) and Architectural Consulting (¥-2.4B, margin of -30.7%) recorded substantial losses, placing pressure on overall profit and loss. Demand trends and fixed-cost absorption in both businesses will be key areas of focus going forward.

2. Changes in funding liquidity and interest burden: Cash and deposits declined substantially year on year (¥49.3B), and the Company’s relative reliance on interest-bearing debt, including Short-Term Borrowings of ¥27.0B, has increased. Interest expenses were ¥0.2B, up from ¥0.17B in the previous year.

3. Prolonged working capital cycle: Accounts Receivable of ¥49.9B and Inventories of ¥36.7B account for high proportions of Total Assets, and funds remain tied up in the operating cycle. Inventory and receivables management will affect future cash-generation capacity.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

Compared with the industry median, both the Operating Margin and Net Profit Margin are substantially lower, placing the Company in the lower tier of the industry in terms of profitability.

Growth and Capital Efficiency

While the industry median is on a revenue-growth trend, the Company recorded a revenue decline and ranks in the lower tier of the industry in terms of growth.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. The improvement in profit margins in the Crecla and Rental businesses (11.2% and 8.0%, respectively) represents a clear increase from the previous year, confirming a structure in which the subscription-based earnings base supports company-wide earnings.

2. Widening losses in the Housing and Architectural Consulting businesses are the primary causes of the Company’s overall profit and loss shifting to an operating loss. Improving the breakeven points of both businesses is a structural issue that will determine the progress of full-year results.

3. Q1 progress against the full-year plan was 19.7% for revenue, while profit was a loss. In addition to improving the loss-making segments, normalization of the temporary burden from income taxes and other taxes will be required to achieve the plan, which is weighted toward the second half.

Theoretical Stock Price (Reference Value)

Sensitivity: ¥492–¥520 for ±1% in the cost of equity, and ¥505–¥506 for ±0.1 in ω.

Notes:

• Because 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 gap relative to the full-year forecast).

(Valuation 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; it is not a forecast of the market stock price or a recommendation of any specific investment action, and does not predict or guarantee future stock prices.)

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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, with consultation with a professional as necessary.

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