DMS Co., Ltd. (9782) Q1 FY2027 Earnings Deep Dive Report

1. Analysis of Business Structure and Competitive Advantage

The Four Business Segments and the "Total Support" Mechanism

DMS Co., Ltd. provides solutions connecting corporations and public institutions with consumers and the general public, centered on four business segments: Direct Mail (DM) Business , Logistics Business , Sales Promotion Business , and Event Business . The company has established a one-stop system that integrates planning, production, printing, information processing, envelope insertion, and mailing services, providing a business foundation capable of flexibly responding to diverse customer needs.

Unique Positioning Targeting Value-Added Scale

The company maintains high market competitiveness through a clear business positioning strategy.

The slide above is a critical document illustrating the market segments the company targets and the sources of its competitive advantage. With an annual handling volume exceeding 300 million pieces—one of the largest in Japan—the company leverages its economies of scale to benefit customers while maintaining a sophisticated management system backed by four major certifications (Privacy Mark, JIS Q 9001, JIS Q 27001, and PCI DSS) regarding personal information and data management.

By focusing on the "Value-Added × Scale" domain —defined as "advanced initiatives that combine digital technology and peripheral services against a backdrop of large-scale customer databases" —rather than merely "mass-distribution" or "small-scale simple" initiatives, the company differentiates itself from competitors and builds high barriers to entry.

---

2. Recent Performance Trends and Progress of the Mid-Term Management Plan

Performance Trajectory and Early Achievement of the Mid-Term Management Plan

Looking at the performance trends from the fiscal year ended March 2017 to the fiscal year ended March 2026, the company has maintained a solid expansion trend in both net sales and operating profit. Based on this growth trajectory, the company achieved its mid-term management plan targets ( net sales of 28.0 billion yen , operating profit of 1.3 billion yen , and net income of 900 million yen ) one year ahead of schedule for the fiscal year ending March 2027 .

The mid-term management plan promotes the following strategic pillars:

• Deepening the Core DM Business : Expanding market share through new market development and service offerings, based on the stable growth of the existing DM business.
• Building Second and Third Pillars : Cultivating the logistics, sales promotion, and event businesses into major segments through quantitative expansion and efficiency improvements.
• Creating Next-Generation Businesses : Deploying new businesses and proprietary system products in the digital field that create synergies with existing operations.
• DX Promotion and Foundation Strengthening : Improving productivity through digital technology, engaging in sustainability/SDGs, and promoting health-conscious management.

Through these initiatives, the company is evolving from a mere DM mailing agent into a "comprehensive information solution company that transcends the framework of direct mail."

---

3. Overview of Q1 FY2027 Financial Results

Earnings Highlights: Significant Profit Growth Despite Lower Revenue

In the first quarter of the fiscal year ending March 2027, although some projects shifted in timing, the company achieved a significant increase in profit margins due to higher value-added services and improved cost structures.

As shown in the slide above, the key financial figures for Q1 FY2027 are as follows:

• Net Sales : 6.547 billion yen ( -3.8% YoY)
• Operating Profit : 299 million yen ( +27.3% YoY)
• Quarterly Net Income : 222 million yen ( +15.4% YoY)

The most notable aspect of these results is that despite a 3.8% year-on-year decline in net sales, operating profit achieved a double-digit increase of 27.3% . While sales dipped slightly due to uncertainties in the scale and timing of individual projects, profitability was significantly boosted by the provision of high value-added services , productivity improvements through mechanization and labor-saving in logistics operations , and the success of price negotiations in response to rising material costs .

---

4. In-depth Segment Analysis

① Direct Mail Business: Significant Profit Growth via Value-Addition and Price Negotiations

• Net Sales : 5.452 billion yen ( -5.6% YoY)
• Segment Profit : 462 million yen ( +24.7% YoY)

Although sales declined due to the postponement of promotional projects by some customers and demand uncertainty, the company successfully expanded its transaction windows with existing clients and secured new orders. Furthermore, the expansion of high value-added orders and the success of price negotiations to reflect rising material and logistics costs led to a 24.7% surge in segment profit , strongly driving company-wide profit growth.

② Logistics Business: Revenue Growth and Significant Profit Improvement to Profitability

• Net Sales : 758 million yen ( +17.5% YoY)
• Segment Profit : 18 million yen (vs. 2 million yen loss in the same period last year)

Driven by the expansion of the e-commerce and mail-order market, various projects, including mail-order shipments, performed very strongly . By promoting labor-saving and efficiency through the introduction of automated and mechanized equipment, and successfully negotiating increases in logistics warehouse storage fees with clients , the segment achieved double-digit revenue growth of 17.5% and turned a profit of 18 million yen , reversing the previous year's loss. This business is steadily becoming a profit source as a "second or third pillar."

③ Sales Promotion Business: Impacted by the Reactionary Decline in Spot Projects

• Net Sales : 69 million yen ( -24.3% YoY)
• Segment Profit : 6 million yen ( -78.9% YoY)

Despite focusing on support services for local governments and corporations utilizing call centers and back-office functions, the segment experienced a reactionary decline from spot projects present in the same period last year and the downsizing of certain projects. Consequently, the operating rate of the business division temporarily declined, resulting in decreased revenue and profit .

④ Event Business: Impacted by Reactionary Decline and Upfront Costs for System Strengthening

• Net Sales : 242 million yen ( -8.0% YoY)
• Segment Profit : 14 million yen ( -18.3% YoY)

Although the company focused on operation and security services for sports and promotional events, it was affected by the reactionary decline from large-scale spot events in the previous year and the downsizing of some projects. Additionally, an increase in SG&A expenses associated with strengthening internal systems for future order expansion led to decreased revenue and profit .

---

5. Business Environment, Risk Factors, and Full-Year Forecast

External Environment and Strategic Approach

The business environment surrounding the company includes the following positive factors and risks to monitor:

• DM Market Trends : According to Japanese advertising expenditure data, the DM market is on a downward trend at 94.6% year-on-year based on postage. However, expectations for the behavioral-triggering power of DM among large and mid-sized companies remain high, and this is viewed as an opportunity to expand market share through market consolidation .
• Middle East Situation and Raw Material Risks : Concerns regarding soaring prices and stable procurement of DM packaging materials (such as film) have emerged due to tight supply and demand for naphtha. While current material procurement and price pass-through negotiations have been successful, future trends require careful monitoring.
• Creation of Next-Generation Businesses : The company is developing proprietary system products that create synergies with existing businesses in the digital field, advancing the construction of new business models.

Full-Year Earnings Forecast and Outlook

As shown in the slide above, the full-year consolidated earnings forecast for the fiscal year ending March 2027 is as follows:

• Net Sales : 30.7 billion yen ( +1.3% YoY)
• Operating Profit : 1.53 billion yen ( +2.0% YoY)
• Ordinary Profit : 1.59 billion yen ( +0.5% YoY)
• Net Income : 1.1 billion yen ( +0.2% YoY)

Regarding progress toward the full-year plan, the company recorded an operating profit of 299 million yen in the first quarter, marking a solid start toward the full-year target of 1.53 billion yen . For the first half, the company expects net sales of 13.9 billion yen (+0.3%) and operating profit of 555 million yen (+4.8%). The company aims to achieve full-year revenue and profit growth through the high value-added strategy in the core DM business and the scale expansion of the logistics business.

---

6. Summary

In the first quarter of the fiscal year ending March 2027, DMS Co., Ltd. (9782) achieved a significant 27.3% increase in operating profit , despite some uncertainty in sales, driven by price revisions and value-addition in the DM business and the profitability and high growth of the logistics business .

Facing challenges such as market environmental changes and rising material costs, the company is adapting flexibly through its unique "Value-Added × Scale" positioning , strong price negotiation power, and operational efficiency through automation. It continues to build a sustainable growth foundation following the early achievement of its mid-term management plan targets.