Profit recovery from revenue growth is the key inflection point for FY2027-H1

First-quarter revenue rose 6.6% year on year to ¥33,147 million, while operating profit was ¥125 million and ordinary profit was ¥84 million, down 71.5% and 79.1%, respectively. Profit attributable to owners of the parent turned from a ¥78 million profit in the same quarter last year to a ¥124 million loss. The company cited higher personnel costs, the integration of its customer management platform and higher system-related costs associated with improving existing systems as the reasons for the increase in revenue but decline in profit, but it did not disclose the increase by expense category.

The operating margin fell by approximately 1.0 percentage point from approximately 1.4% in the same quarter last year to 0.4%. First-quarter EBITDA was ¥936 million and operating profit was ¥125 million, a difference of ¥811 million, but this difference does not represent the increase in personnel or system costs. Gross profit margin, total selling, general and administrative expenses, and the breakdown of personnel and system costs within SG&A were not provided. In the first-half results, it will therefore be necessary to confirm not only whether margins recover, but also the amount and persistence of the cost increases.

The full-year forecasts are revenue of ¥136,000 million, operating profit of ¥3,000 million, ordinary profit of ¥2,700 million and profit attributable to owners of the parent of ¥1,000 million. As of the first quarter, progress was 24.4% for revenue, compared with only 4.2% for operating profit and 3.1% for ordinary profit. Simply subtracting first-quarter results from the full-year forecasts means that the company would need, over the remaining 9 months, revenue of ¥102,853 million, operating profit of ¥2,875 million, ordinary profit of ¥2,616 million and profit attributable to owners of the parent of ¥1,124 million to meet its forecasts. These are mechanical differences that do not account for seasonality.

In FY2027-H1, we will seek to determine whether the increase in personnel costs represents recurring costs from hiring and improved employee compensation, and how long the customer management platform integration costs among system-related expenses will continue. In particular, whether the operating margin has improved from 0.4%, whether the year-on-year decline in operating profit has narrowed, and whether the amounts attributable to each factor behind the profit recovery are disclosed will help assess the likelihood of achieving full-year operating profit of ¥3,000 million.