Gendai Agency (2411) Q1 FY2027 Earnings Deep Dive Report: Driving Digital Shift and Shareholder Returns

Gendai Agency Inc. (Securities Code: 2411) announced its financial results for the first quarter of the fiscal year ending March 2027 (April 1, 2026 – June 30, 2026). During this quarter, while high-profit services such as internet advertising and in-store promotion planning grew, a decrease in paper media advertising and a reactionary decline from a large real estate project in the prior year led to a decrease in net sales and all profit stages compared to the previous year. However, the company has maintained its full-year consolidated earnings forecast and aims to achieve its targets through strengthened sales activities and further expansion of high-value-added services from the second quarter onwards. Furthermore, the company has decided to acquire and cancel treasury stock with the aim of improving capital efficiency and increasing shareholder value, demonstrating a proactive stance towards shareholder returns.

Overview of Q1 Consolidated Performance and Key Factors

For the first quarter, consolidated performance showed net sales of 1,784 million JPY (down 10.5% year-on-year) , gross profit of 669 million JPY (down 4.7%) , operating profit of 137 million JPY (down 34.9%) , ordinary profit of 137 million JPY (down 34.6%) , and net profit attributable to owners of the parent of 89 million JPY (down 35.7%) . Net sales decreased by 209 million JPY and operating profit by 73 million JPY compared to the previous year.

The main factors contributing to this performance fluctuation include:

• Greater-than-expected decrease in paper media advertising : Demand for folded advertisements, in particular, significantly declined due to the digital shift.
• Reactionary decline from a large real estate transaction in the prior year : The previous year included a large real estate brokerage fee project, and the current period saw a decline in real estate business sales and profits as a reaction.
• Stagnant housing-related advertising due to 'Nafusa shortage' : In the housing-related advertising sector, instability in paint procurement affected advertising demand.

Conversely, high-value-added internet advertising showed steady growth, partially offsetting the overall decline. Selling, general, and administrative expenses increased year-on-year due to increased investment in human capital.

Status of Business Segments

Gendai Agency's business is primarily divided into two segments: advertising and real estate. The status of each segment in the first quarter is as follows:

Advertising Business

The advertising business recorded net sales of 1,767 million JPY (down 9.0% year-on-year) and segment profit of 198 million JPY (down 19.3%). While the significant decrease in paper media advertising impacted both sales and profit, high-value-added internet advertising continued to grow.

To understand the advertising business in more detail, the following overview of segment profit and loss is crucial: This slide illustrates the net sales and segment profit for both the advertising and real estate businesses, along with their year-on-year changes. It clearly shows that the advertising business accounts for the majority of consolidated net sales, and its decline significantly impacted overall performance. Notably, the advertising business saw a decrease of 173 million JPY in net sales and 47 million JPY in segment profit. The real estate business also recorded a substantial year-on-year decrease, primarily due to the reactionary decline from a large project in the previous year.

Looking at the trend of sales by item within the advertising business, the acceleration of the digital shift is evident. This slide presents the breakdown of advertising business sales by item, their composition ratio, and year-on-year changes, clearly illustrating the transformation of the business structure . Of particular note is the steady growth of internet advertising to 863 million JPY (up 6.6% year-on-year), with its composition ratio expanding to 48.9% . This suggests that the promotion of high-value-added DSP advertising and other initiatives have been successful. Conversely, folded advertisements significantly decreased to 276 million JPY (down 43.9%) , strongly indicating the progression of the digital shift. This data is extremely important for understanding the company's need to accelerate its transition from paper media to digital and the progress made in this area.

Demand for high-value-added services in the pachinko hall advertising sector remained solid, but overall, it saw a slight decrease. In non-pachinko hall advertising, customer acquisition efforts in areas such as fitness facility advertising and buyout advertising progressed, but a decrease in housing-related advertising led to an overall revenue decline in this segment.

Real Estate Business

The real estate business recorded net sales of 17 million JPY (down 66.8% year-on-year) and segment profit of 6 million JPY (down 77.2%). The primary factor was the reactionary decline from a large real estate brokerage fee project recorded in the prior year.

Consolidated Earnings Forecast and Future Strategy

The first quarter performance fell behind the initial plan due to the decrease in paper media advertising and the impact of the large real estate project from the previous year. However, the company announced that there is no change to the full-year consolidated earnings forecast (net sales of 8,000 million JPY, operating profit of 800 million JPY, ordinary profit of 800 million JPY, and net profit attributable to owners of the parent of 520 million JPY) announced on April 17, 2026 . The company aims to achieve its full-year targets through further expansion of high-value-added services and strengthened sales activities from the second quarter onwards.

The progress towards the full-year earnings forecast is as follows: This slide compares the full-year consolidated earnings forecast with the actual results for the first quarter, showing the progress rate. Net sales achieved 22.3% of the target, and each profit item achieved 17.2%, indicating a lag against the full-year target based on simple calculation. However, it is important that the company acknowledges this delay but maintains its full-year forecast . This suggests management's confidence and strategic commitment to recover through the expansion of high-value-added services and strengthened sales in the second quarter and beyond. For investors, how this plan will be executed and progress in the coming quarters will be a key point of interest.

Future growth strategies include the following initiatives:

• Development and promotion of customer acquisition measures in line with the latest guidelines.
• Expansion of high-value-added DSP advertising and proprietary 'Pachi7' original services to address the decline in paper media advertising.
• Proactive customer development in sectors where advertising demand is expected to grow (e.g., fitness, buyout businesses).

Financial Position and Shareholder Returns

As of the end of the first quarter, the consolidated balance sheet showed cash and deposits of 3,004 million JPY, a decrease of 221 million JPY from the end of the previous fiscal year, primarily due to dividend payments. Total assets stood at 5,068 million JPY, and net assets at 3,848 million JPY.

The company decided to acquire and cancel treasury stock , deeming it beneficial for improving capital efficiency and increasing shareholder value. Specifically, at the Board of Directors meeting held on July 17, 2026, the following decisions were made:

• Cancellation of Treasury Stock : The company decided to cancel 940,000 shares of common stock , representing 7.64% of the total outstanding shares (scheduled cancellation date: July 24, 2026). This contributes to an increase in per-share value.
• Acquisition of Treasury Stock : The company decided to acquire up to 700,000 shares of common stock (with a maximum total value of 350 million JPY) , representing 6.36% of the total outstanding shares (excluding treasury stock) (acquisition period: July 21, 2026 – March 24, 2027). The acquisition method includes market purchases via the Tokyo Stock Exchange's Off-Auction Own Share Repurchase Trading System (ToSTNeT-3).

These shareholder return measures clearly demonstrate the company's shareholder-centric approach in its capital policy , raising expectations for future corporate value enhancement.

Summary

Gendai Agency's Q1 FY2027 results showed a decrease in revenue and profit due to temporary factors such as the decline in paper media advertising and the reactionary impact of a large project from the previous year. However, the growth of internet advertising indicates progress in the digital shift , which is expected to be a future growth driver. The company has maintained its full-year earnings forecast and aims to achieve its targets through the expansion of high-value-added services and strengthened sales, making its execution capabilities a key focus going forward. Furthermore, aggressive shareholder return measures through treasury stock cancellation and acquisition demonstrate a strong commitment to improving capital efficiency and enhancing shareholder value. How these strategic initiatives will be reflected in future performance remains a point of continued attention.