Accelerating growth investment on dual engines of Co.HUB and PromOS; facility consolidation to deliver JPY 100M in annual cost savings, shareholder benefits program launched to enhance returns

Summary

In Q1 FY2027 (ending March 2027), substantive revenue (excluding postage pass-through) rose +17.0% YoY to JPY 3,374M, while operating income grew +8.4% YoY to JPY 348M, achieving top- and bottom-line growth. Management emphasized that excluding the one-time cost of the new logistics center contract (~JPY 26M), operating income growth would have been equivalent to ~+17%. Four initiatives were positioned as offensive growth investments: facility consolidation yielding ~JPY 100M in annual cost savings, establishment of a Sapporo development office, headcount and compensation enhancements, and AI-related investment. In addition to a 40% dividend payout ratio, a new shareholder benefits program was introduced, targeting a maximum total yield of 7.02%.

Key Points (Earnings Highlights and Growth Actions)

• Business Strategy and Market Positioning
  • Targeting revenue CAGR above 10% and recurring profit margin above 10% as growth guidelines, aiming for early achievement of Prime Market listing criteria
  • Digital-physical convergence in retail promotions is accelerating, with labor shortages serving as a tailwind for expanding demand for 360° full-service offerings
  • Proprietary metric V/(BI+SR) disclosed for the first time, currently at 1.19 with a management target to raise it to 1.30
• Current Business Progress and Drivers
  • Revenue growth achieved across all three segments (IT & Services +39%, Manufacturer +15%, Retail +8%)
  • Cross-selling centered on Co.HUB and expansion of digital media-related services drove growth in IT & Services and Manufacturer segments
  • COGS increased +19.7%, primarily driven by strategic investments (headcount: +JPY 41M, new facility contract: +JPY 26M, etc.)
  • Fulfillment labor cost-to-revenue ratio improved by 1pt from 10.8% in Q4 of the prior fiscal year to 9.8%
• Strategic Initiatives and Inflection Points
  • Fulfillment center consolidation expanded total floor area from 10,500 tsubo to 14,000 tsubo (over +30%), while simultaneously achieving ~JPY 100M in annual facility operating cost savings
  • New PromOS development office established in Sapporo, creating a dual-site in-house SaaS development structure
  • Shareholder benefits program introduced with a record date of end-September 2026 (eligible from 200 shares; 90,000 points for 700+ shares)
  • Co.HUB launched joint delivery with Sugi Holdings in July, expanding into the consumer electronics retail sector

Outlook and Strategy

• Full-year guidance maintained: revenue JPY 15,400M (+2.0% YoY; +16.7% on a substantive basis), operating income JPY 2,040M (+21.0%), EBITDA JPY 2,390M (+22.8%)
• Revenue seasonality skews toward H2 (H1 46.9% / H2 53.1%); Q1 progress rate is tracking in line with plan
• PromOS client count reached 35 companies at Q1-end (+30% YoY), with contracts confirmed through 38 companies by fiscal year-end, with further upside targeted
• Pursuing horizontal expansion of Co.HUB beyond drugstores into consumer electronics retailers, restaurant chains, and other sectors
• Continued investment in automation and labor-saving in fulfillment operations, positioned as the top margin improvement theme
• Management explained that excluding one-time costs, both revenue and profit grew at an equivalent +17% rate, expressing confidence in achieving the full-year plan

Positive Factors

• Co.HUB penetration has reached 65% of nationwide drugstore locations (13,208 stores / 34 chains), with 714 contracted manufacturers, establishing its position as a platform
• PromOS client count at 35 companies (+30% YoY), with ~27,000 user accounts, strengthening the foundation for expanding revenue per customer
• On-site embedded headcount of 105 (+13% YoY), continuing to deepen client touchpoints
• Value-added ratio maintained at a high level of 63.5%, with all segments sustaining value-added ratios above 60%
• Generative AI adoption achieved a 50% reduction in creative production man-hours (on specific projects), contributing to broader business expansion
• Facility consolidation simultaneously delivered ~JPY 100M in annual cost savings and 30%+ capacity expansion

Concerns and Risks

• Fulfillment labor cost-to-revenue ratio improved to 9.8% from 10.8% in Q4 of the prior fiscal year, but rose +1.2pt versus 8.6% in Q1 of the prior year; timing of automation investment payback is a key focus
• Gross profit margin declined 1.6pt YoY from 35.8% to 34.2%, impacted by a higher outsourcing ratio (35.7% → 36.5%)
• Short-term borrowings increased by JPY 990M from JPY 710M to JPY 1,700M due to new logistics center expansion
• Strategic segment operating expenses rose +24.6% YoY; front-loaded personnel cost investment may weigh on margins
• H2-heavy revenue structure (53%) persists, making it difficult to assess plan achievability at the H1 stage
• The accounting treatment change for DM postage pass-through causes headline revenue to appear -1.8% YoY, potentially distorting external growth assessments

Performance Highlights

Q1 FY2027 delivered revenue of JPY 3,374M (+17.0% YoY on a substantive basis excluding postage pass-through), operating income of JPY 348M (+8.4%), and EBITDA of JPY 415M (+9.7%), achieving top- and bottom-line growth. Q1 progress rates against the full-year plan were 21.9% for revenue and 17.1% for operating income, tracking in line with plan given H2-weighted seasonality.

Segment Performance

• PromOS Client Count: 35 companies (+30% YoY), contracts confirmed through 38 companies by fiscal year-end
• On-Site Embedded Headcount: 105 (+13% YoY)
• Co.HUB Drugstore Chain Coverage: 34 chains (65% nationwide store coverage)
• Co.HUB Contracted Manufacturer Count: 714 companies (446 active users)
• V/(BI+SR): 1.19 (target: 1.30)
• Fulfillment Labor Cost-To-Revenue Ratio: 9.8% (improved 1pt from 10.8% in Q4 of the prior fiscal year)

Q&A List

No Q&A session was held during the earnings call. However, the following six items were included as FAQs in the Appendix of the earnings presentation materials.

• Q: What was the rationale for launching the shareholder benefits program?
  A: In addition to dividends, the program was introduced as a shareholder return initiative to help shareholders experience the appeal of holding MIC shares, and to deepen understanding and awareness of the company, thereby expanding the base of shareholders and fans who support the company over the medium to long term.
• Q: What is driving the strong revenue growth?
  A: Two factors: first, cross-selling to new and existing manufacturers centered on joint delivery has deepened (PromOS client count, a key engine for revenue expansion, grew +30% YoY); second, orders for digital marketing-related services increased in the services segment.
• Q: Why did margins not keep pace with revenue growth?
  A: While securing profitability, the company also made offensive investments to support sustained future growth. Specifically, these included new logistics center contract costs, Sapporo development office setup costs, headcount expansion and compensation enhancement costs, and capex for AI and productivity improvement.
• Q: What was the reason for the accounting treatment change?
  A: Previously, DM postage pass-through was recorded as revenue with an equivalent amount in COGS, resulting in no impact on profit. However, in order to more accurately reflect revenue generated by the company's value-added services, the accounting treatment was changed from this fiscal year. This change has no impact on profit.
• Q: What was the rationale for selecting these key KPIs?
  A: PromOS client count was chosen because it serves as a foundation for expanding client touchpoints and sustained transactions, and drives cross-selling of 360° full-service offerings. On-site embedded headcount was selected because on-site presence deepens understanding of client challenges and enables faster, more responsive proposals.
• Q: What was the rationale for the compensation increase investment?
  A: In an increasingly competitive environment, the company views talent as its core competitive advantage. Compensation levels were revised to strengthen recruitment and retention of top talent, and to enhance employee motivation and engagement. Investment in human capital is positioned as a critical management investment that drives medium- to long-term revenue growth and profitability improvement.