Profit recovery after headquarters relocation costs roll off is the key issue for FY2027-H1

In the first quarter of the fiscal year ending March 2027, revenue rose 14.9% to ¥568.150 million from ¥494.405 million in the prior-year quarter, while operating profit changed from ¥61.753 million to an operating loss of ¥47.467 million. The calculated operating margin also fell by approximately 20.8 percentage points, from approximately 12.5% in the prior-year quarter to approximately negative 8.4%, indicating that revenue growth has not translated directly into profit growth. In the next FY2027-H1, it will be necessary to assess not only whether revenue growth is continuing but also the extent of operating profit recovery, including the cost burden.

The main driver of the deterioration in profits was SG&A, which totaled ¥594.045 million in the first quarter, up 43.0% year on year. The earnings presentation materials identified the year-on-year changes as ¥58 million in headquarters relocation costs, a ¥65 million increase in other SG&A, a ¥28 million increase in rent and lease expenses, a ¥13 million increase in commissions paid, a ¥26 million increase in personnel and related expenses, and a ¥47 million increase in advertising expenses. Outsourcing and related expenses, meanwhile, decreased by ¥2 million. The company explained that relocation costs had been fully recognized in the first quarter, but advertising, personnel and rent expenses are recurring costs. Next time, it will be important to distinguish whether these increases are one-off or will remain throughout the year as growth investments.

Simply adding back the ¥58 million relocation cost to operating results produces adjusted first-quarter operating profit of approximately ¥11 million. The company also explained that operating profit excluding relocation costs was in line with expectations. However, this figure does not exclude the ¥47 million increase in advertising expenses, ¥28 million increase in rent and lease expenses, or ¥26 million increase in personnel and related expenses. Accordingly, the next earnings release will need to verify whether adjusted profit after the relocation costs roll off can be reproduced and whether the development of new customer acquisition channels is generating user numbers and total usage value commensurate with the additional costs.

The full-year forecasts remain unchanged as of the first quarter at revenue of ¥2,400 million, operating profit of ¥72 million, ordinary profit of ¥67 million and net income of ¥55 million. On a reported basis, the company recorded a ¥47 million operating loss in the first quarter, meaning that it would need to generate ¥119 million in operating profit over the remaining 3 quarters on a simple calculation. Starting from adjusted operating profit of ¥11 million excluding relocation costs, the remaining amount required would be ¥61 million. Next time, it will be important to confirm whether operating results turn profitable on a first-half cumulative basis and whether a path toward achieving the full-year forecast becomes visible.