FY2027 Q1: Profit margins plunged despite higher revenue, putting the focus on a recovery in H1

First-quarter revenue rose 6.0% year on year to ¥2,372 million, while operating profit fell 37.8% to ¥90 million and ordinary profit fell 30.8% to ¥105 million. Net profit attributable to owners of the parent rose 29.1% to ¥125 million, partly because the company recognized a ¥64 million gain on the sale of investment securities, making the weakness at the operating level less apparent in final profit. The operating margin fell from approximately 6.5% in the year-earlier quarter to approximately 3.8%.

On the profit side, the company explained that lower software amortization costs were offset by higher personnel expenses associated with wage increases, marketing costs and one-time expenses, which reduced operating profit. However, based solely on the information disclosed in the earnings summary, it is not possible to confirm a monetary bridge showing by how many millions of yen each of these cost increases reduced operating profit. The second-quarter disclosure needs to distinguish between one-off cost increases and a structural increase in fixed costs.

For the fiscal year ending March 2027, the company forecasts revenue of ¥10,700 million, operating profit of ¥1,240 million, ordinary profit of ¥1,240 million and net profit attributable to owners of the parent of ¥844 million. First-quarter operating profit represents only approximately 7.3% of the full-year forecast. Assuming a simple 50% contribution in H1, operating profit of at least ¥620 million in H1, or approximately ¥530 million in the second quarter alone, would be required. This 50% is a mechanical benchmark for measuring progress, not a half-year plan presented by the company.

In the previous fiscal year, revenue rose 16.0% to ¥9,923 million, but operating profit fell 2.5% to ¥997 million, reducing the operating margin from 12.0% to 10.1%. The FY2027 operating profit plan of ¥1,240 million assumes an operating margin of approximately 11.6% on planned revenue. In FY2027-H1, it will be necessary to confirm not only whether revenue growth continues, but also how far the margin recovers from 3.8% in the first quarter and whether the burden of personnel expenses, marketing costs and one-time expenses normalizes.