1Q revenue down and operating loss; key issue is whether the full-year forecast can be achieved without revision

The latest 1Q results were revenue of ¥47.405 billion, down 5.2% year on year, an operating loss of ¥983 million, an ordinary loss of ¥339 million and a quarterly net loss attributable to owners of the parent of ¥756 million. In addition to the decline in revenue, operating profit, ordinary profit and net profit all fell into the red, with the deterioration in profitability exceeding the decline in revenue.

The full-year forecasts are revenue of ¥232.5 billion, operating profit of ¥23.5 billion, ordinary profit of ¥23.5 billion and net profit attributable to owners of the parent of ¥15.0 billion, with no revisions made as of 1Q. Revenue progress in 1Q was approximately 20.4%, about 4.6 percentage points below the simple elapsed-quarter benchmark of 25%. To achieve full-year operating profit of ¥23.5 billion from the 1Q loss of ¥983 million, the company will need to generate approximately ¥24.483 billion in operating profit over the remaining nine months, making it necessary to quantify the pace of recovery from 2Q onward.

In terms of margins, the 1Q gross margin improved by 1.1 percentage points year on year to 53.7%, while selling, general and administrative expenses were ¥26.442 billion and SG&A as a percentage of revenue was 55.8%. Accordingly, the next results announcement should be assessed not only for further gross-margin improvement but also for how much SG&A can be absorbed during a period of declining revenue. The FY2027 company forecast calls for revenue to decline 1.1% year on year while operating profit is expected to increase 25.4%, so the key points will be whether the company returns to an operating profit in the six months through 2Q, and whether it provides additional disclosure supporting the unchanged full-year forecast and the effects of its company-wide profitability reforms.