TORICO Q1 FY2027 Earnings Deep Dive: Structural Reform Success and Advancements in Global BL and Crypto Asset Strategy

TORICO Co., Ltd.'s financial results for the first quarter of the fiscal year ending March 2027 demonstrate a strong start, with both revenue and operating profit/loss exceeding initial forecasts, driven by the tangible results of ongoing structural reforms . This report provides a detailed analysis of the company's earnings summary, business transformation, international growth strategy, and crypto asset operations across 10 key topics.

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1. Earnings Overview and Key Topics

The primary analytical points for this quarter are summarized in the following 10 items:

1. Performance Exceeding Forecasts : Revenue reached 693 million JPY (+42 million JPY / +6.5% vs. budget), and the operating loss was -25 million JPY (+10 million JPY vs. budget), both outperforming initial projections.
2. Overcoming Seasonality : Despite the first quarter typically being the slowest period for the publishing and e-commerce industries, the company achieved a significant earnings improvement , nearly reaching profitability compared to the -67 million JPY loss in the same period last year.
3. Dramatic Improvement in Gross Margin : Gross profit expanded to 289 million JPY (+16.7% YoY). The improvement in gross margin contributed +49.8 million JPY to the operating profit/loss.
4. Resurgence of Direct E-commerce (Honten) : Sales from the company's own e-commerce sites, including "Manga Zenkan Dot Com," surged to 94 million JPY (+59.8% YoY), marking progress in reducing reliance on third-party platforms.
5. Accelerated Global Expansion of Event Business : Overseas event revenue grew to 29.1 million JPY (approx. 2.5x YoY), with the overseas share of the event business rising to 20.6% .
6. Capturing Global BL (Boys' Love) Demand : Leveraging its world-class fandom, the company is diversifying IP exhibitions within the estimated 300 billion JPY+ global BL market.
7. Shift to Active Crypto Asset (ETH) Management : To maximize yields, the company resolved to invest in an ETH-denominated hedge fund, transitioning to active management.
8. Impact of Non-Operating Valuation Losses : Due to the decline in market prices for crypto assets (ETH), a 216.7 million JPY crypto asset valuation loss was recorded as a non-operating expense, resulting in an ordinary loss of -240 million JPY.
9. Optimization of SG&A and Financial Foundation : Through the containment of personnel and online shop operating costs, the SG&A-to-sales ratio improved to 45.43% (from 46.28% in the previous period), while maintaining a high equity ratio of 72.3% .
10. Progress Against Full-Year Forecasts : Progress toward the full-year revenue forecast of 2,910 million JPY stands at 23.8% , which is on track considering the second-half-weighted seasonality.

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2. Profitability Improvement Mechanism: Gross Margin Expansion and Cost Optimization

The greatest achievement in Q1 lies in the fundamental improvement of the company's profit structure. While revenue saw a modest increase (+1.7% YoY), the operating loss narrowed significantly from -67 million JPY to -25 million JPY.

Slide (Page 4) Commentary: The Importance of Operating Profit/Loss Bridge Analysis

The slide above breaks down the factors behind the 41.8 million JPY improvement in operating profit/loss from the same period last year (-67.6 million JPY) to the current period (-25.8 million JPY). The most critical takeaway is that "gross margin improvement" was the primary driver of profit growth (+49.8 million JPY contribution), rather than mere cost-cutting. Specifically, the following measures have borne fruit:

• Increased Sales Mix of Direct E-commerce : Reducing reliance on external e-commerce malls that charge commissions and increasing the proportion of sales through the higher-margin direct "Honten" site.
• Profit Contribution from Event Business : Increasing the overall share of the high-margin event business through store efficiency and the expansion of overseas events.

Furthermore, revenue growth (+8.6 million JPY) and fixed cost reductions (+9.6 million JPY) also contributed, successfully absorbing increases in upfront investment costs (-12.5 million JPY) to create a structure for significant earnings improvement.

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3. Manga Business (E-commerce & Events) Growth Strategy and Progress

(1) Comic E-commerce Service: Shifting from Quantity to Quality

While the overall publishing market for physical books remains sluggish (-3.1% YoY), the company's e-commerce revenue turned to positive growth at 545 million JPY (+1.7% YoY). By appropriately controlling sales promotion expenses, including advertising, the number of active users was 5.9 million (-13.2% YoY). However, through the expansion of titles and unique warehouse operations specialized in "set sales," the purchase rate rose to 1.14% (+0.2pt YoY) . Notably, the high-margin direct e-commerce (Honten) revenue grew by 59.8% YoY (94.3 million JPY) , significantly exceeding the disclosed budget by 161.4%.

(2) Event Service: Store Optimization and Accelerated Global Expansion

In the event business, the company consolidated and closed direct-managed stores, such as collaboration cafes, reducing the count from 6 to 3 to drastically cut fixed costs. Despite halving the number of stores, revenue per store remained high (25 million JPY), minimizing the decline in domestic store sales (-15.7%). Meanwhile, overseas expansion has become a powerful growth engine.

Slide (Page 11) Commentary: Potential and Strategy for the Global BL Market

This slide illustrates the scale of the global BL (Boys' Love) market the company is targeting and its expansion status in Asia. BL content, encompassing books, anime, dramas, and merchandise, has rapidly grown into a major entertainment sector in Asia, with an estimated market size of over 300 billion JPY . The company has built long-standing touchpoints with BL fans, possessing a fandom exceeding 100,000 people . In addition to domestic bases in Tokyo and Osaka, the company is promoting events in Taipei, Hong Kong, Shanghai, Chengdu, Wuhan, Beijing, Seoul, Bangkok, and Singapore. Driven by this global expansion, overseas event revenue in Q1 grew approximately 2.5x YoY to 29.1 million JPY (accounting for 20.6% of total event revenue), signaling a rapid shift away from domestic dependence and toward diversified revenue streams.

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4. Crypto Asset Business (ETH): Active Management and Financial Impact

As part of its entry into the Web3 and crypto asset space, the company is strategically purchasing and accumulating Ethereum (ETH).

Slide (Page 21) Commentary: Growth Equation and Outlook for the Crypto Asset Business

The slide above defines the growth of the crypto asset business with the equation: "Revenue = (ETH Holdings × ETH Price) × Yield." As of the end of Q1, ETH holdings reached 2,773 ETH (cumulative acquisition cost of 1,178 million JPY, the third-largest holding among Japanese companies), with a future goal of holding 6,000 ETH . Furthermore, moving beyond simple staking (approx. 3% yield), the company has decided to invest in an ETH-denominated hedge fund (Hyperithm Arbitrage Fund SP) to maximize yields (targeting 5%–10%) and has initiated active management utilizing algorithms and arbitrage. Future plans include leveraging the expertise gained from in-house management to expand into consulting and asset management (AUM) services.

Crypto Asset Valuation Loss and Impact on the P&L

Although the operating profit/loss improved significantly to -25 million JPY in Q1, the company recorded a 216.7 million JPY crypto asset valuation loss as a non-operating expense because the market price of ETH at the end of the quarter was below the company's average acquisition cost (425,000 JPY/ETH). Consequently, the ordinary loss was -240 million JPY, and the net loss was -241 million JPY. Note that this valuation loss is a non-cash accounting adjustment and does not involve any actual cash outflow.

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5. Financial Soundness and Full-Year Outlook

Financial Position Summary

• Total Assets : 2,022 million JPY (down 217 million JPY from the end of the previous period)
• Net Assets : 1,479 million JPY (down 155 million JPY from the end of the previous period)
• Equity Ratio : 72.3% (maintaining an extremely high level of financial soundness, consistent with the previous period)

Supported by factors such as the exercise of stock acquisition rights, the company maintains a high equity ratio, providing a sufficient cushion against price volatility in crypto assets.

Full-Year Earnings Forecast and Progress

• Full-Year Revenue Forecast : 2,910 million JPY (Q1 actual: 693 million JPY / 23.8% progress )
• Full-Year Operating Profit Forecast : 0 million JPY (Q1 actual: -25 million JPY)
• Ordinary Profit/Net Income Forecast : Not Disclosed

The company's performance is characterized by seasonality, with revenue and profit concentrated in the second half due to the year-end peak season and event schedules. Achieving 23.8% progress in the first quarter—typically the lowest revenue period—and nearly reaching operating profitability indicates that progress toward the full-year plan is very steady. The decision not to disclose forecasts for ordinary profit and below is due to the difficulty in calculating reasonable figures, given the significant impact of market-to-market valuations of held crypto assets (ETH) at the end of the fiscal year.

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6. Conclusion

TORICO's Q1 FY2027 results demonstrate clear success across three strategic pillars: "gross margin improvement in existing comic e-commerce," "store optimization and overseas event expansion," and "active crypto asset management." Despite a bottom-line loss due to accounting valuation losses on crypto assets, the core operating profit/loss has improved significantly. Considering the second-half-weighted seasonality, the foundation for achieving an operating profit for the full fiscal year is being firmly established.