[In-Depth Analysis] Solvvy (7320) FY2026 Earnings Report: Record-High Performance and a Robust Stock Growth Story Driven by ¥17.3 Billion in Deferred Revenue

1. Introduction: Executive Summary of FY2026 Earnings

Solvvy Co., Ltd. (Securities Code: 7320) concluded its fiscal year ending June 2026 (FY2026) with a remarkably strong performance, achieving record highs in both revenue and all profit categories . This success was driven by the solid momentum of its core segments: the housing sector (HomeworthTech) and the non-residential/renewable energy sector (ExtendTech).

Although the company faced temporary scheduling delays at the start of the fiscal year and in the first half due to terminal warranty support related to the GIGA School Concept, a dramatic recovery in the second half enabled significant year-on-year growth in both revenue and profit for the full year. Furthermore, the balance of "Deferred Revenue + Long-term Deferred Revenue," which represents the company's "future confirmed revenue" and serves as its hallmark, surpassed ¥17.3 billion , further strengthening the foundation for medium- to long-term earnings.

Regarding growth strategy, the company has steadily expanded into new areas such as home renovations, used home sales, and culture schools, leveraging powerful alliances, including a capital and business partnership with JACCS Co., Ltd. In terms of shareholder returns, the company has demonstrated a virtuous cycle of growth and distribution by committing to a 30% dividend payout ratio and a progressive dividend policy, including a 50% dividend increase (planned at ¥30 per share annually) for the next fiscal year (FY2027) .

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2. Anatomy of Full-Year Consolidated Results: Growth Trends Behind Record-High Revenue and Profit

Reviewing the FY2026 consolidated results, revenue reached ¥7,679 million (+14.5% YoY) , operating profit was ¥1,860 million (+14.8% YoY) , ordinary profit was ¥2,552 million (+29.1% YoY) , and net profit attributable to owners of the parent was ¥1,743 million , marking record highs across all major financial lines.

Of particular note is the explosive growth in the second half, especially in the fourth quarter (4Q). The slide below summarizes the overall picture of these earnings and the achievement status against the full-year plan.

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This slide clearly illustrates the company's growth momentum and its high capability to execute plans . While revenue (93.6% against the ¥8,200 million target) and operating profit (88.6% against the ¥2,100 million target) fell slightly short of the full-year plan, ordinary profit achieved 102.1% (¥2,552 million), exceeding the ¥2,500 million target .

Looking at the fourth quarter alone (April–June 2026), the company recorded extremely high growth rates with revenue of ¥2,437 million (+119.1% YoY) , operating profit of ¥791 million (+138.2% YoY) , and ordinary profit of ¥929 million (+150.6% YoY) . Because the company's business structure is influenced by factors such as housing delivery timing, it exhibits a "second-half-weighted" seasonality (clearly visible in the quarterly revenue trend graph). By successfully absorbing the first-half delays in the second half and achieving record highs on both a quarterly and full-year basis, the company has proven the underlying strength of its business.

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3. Factors Behind Operating Profit Changes and Segment Trends

A waterfall analysis of the FY2026 operating profit increase (+14.8% YoY to ¥1,860 million) reveals a structure where the company secured double-digit profit growth while continuing large-scale upfront investments for the future .

• Increase in gross profit due to revenue growth : +¥973 million (primary driver of profit growth)
• Increase in cost of sales (including product revisions and efficiency gains from AI utilization) : -¥131 million
• Increase in personnel expenses (investment in recruitment and training) : -¥277 million
• Increase in other SG&A expenses (AI investment, new business development, system depreciation, etc.) : -¥324 million

This is a high-quality earnings report, as the profit growth was achieved after absorbing over ¥700 million in active upfront investments , including digitalization through AI, strengthening human capital, and infrastructure development in anticipation of a market transition to the Prime Market.

Segment Performance

1. HomeworthTech Business (Housing Sector)
   • Revenue: ¥4,399 million (+16.5% YoY)
   • Operating Profit: ¥1,880 million (+27.5% YoY)
   • Centered on long-term housing equipment warranty contracts, the sequential revenue recognition of accumulated warranty fees (deferred revenue) has contributed to maintaining high profit margins and driving company-wide profit growth.
2. ExtendTech Business (Non-residential/Renewable Energy Sector)
   • Revenue: ¥2,626 million (+7.6% YoY)
   • Operating Profit: ¥1,832 million (+6.6% YoY)
   • Despite delays in the first half, the segment saw a rapid recovery in 4Q, with revenue up 127.4% and operating profit up 140.0% YoY, ensuring growth in both revenue and profit for the full year.
3. LifeTech Business (SI, etc.)
   • Revenue: ¥620 million (+35.6% YoY)
   • Operating Profit: ¥172 million (+27.1% YoY)

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4. An Ultra-Solid Business Foundation: The Significance of Surpassing ¥17.3 Billion in "Deferred Revenue"

To understand Solvvy's business model, it is essential to grasp the unique accounting treatment and accumulation of deferred revenue inherent in the warranty business.

In the company's long-term warranty contracts (e.g., 10-year equipment warranties), the warranty fee is received in a lump sum in cash at the time of the contract. However, for accounting purposes, this fee is not recognized as revenue all at once; instead, it is recognized in equal installments over the warranty period. The portion not yet recognized as revenue is pooled on the balance sheet (B/S) under the liability items "Deferred Revenue" and "Long-term Deferred Revenue."

The slide below shows the trend of this stock balance.

[Why this slide is important: Data-driven context]

This slide is the primary evidence proving the high predictability (visibility) of Solvvy's future earnings and the soundness of its financial cash flow .

As the graph shows, the total balance of deferred revenue and long-term deferred revenue has continued to trend upward, surpassing ¥17,337 million (approx. ¥17.3 billion) at the end of FY2026 . This represents a "stock of revenue that is guaranteed to be recognized sequentially as sales in the future." This amount is more than double the annual revenue (approx. ¥7.68 billion).

Although the equity ratio on the financial statements appears low at approximately 16%, this is not due to high interest-bearing debt, but rather an accounting characteristic resulting from the expansion of "deferred revenue (a liability that does not require repayment)," which serves as the source for future revenue. The company generates abundant cash from lump-sum receipts, and this "cash-first" business model—where these funds serve as the source for interest-free, aggressive growth investment—is the wellspring of the company's sustainable growth.

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5. Future Growth Strategy: Exploring New Areas and Evolving the Stock Business

Solvvy is accelerating its strategy to horizontally deploy the "Membership-based Business OS (Engagement Platform)" and stock business know-how cultivated in its core new housing and renewable energy sectors into various adjacent and new fields.

Key Alliances and Expansion Areas

1. Housing Renovation Sector (Capital and Business Alliance with JACCS Co., Ltd.)
   • In response to the growing social need for renovations due to soaring new home prices, the company is co-developing a "DX Platform for Renovation Contract Operations" utilizing JACCS's powerful merchant network. By integrating credit functions and warranty services into a one-stop solution, the company aims for rapid market penetration.
2. Used Home Sales Sector (Partnership with Branding Technology Inc.)
   • Leveraging marketing support know-how for real estate brokerage firms, the company is introducing after-warranty services for buyers through these brokers to capture the expanding used home market.
3. Culture School Sector (MediaSeek Inc.'s "MyClass App")
   • Based on technology that holds the top domestic market share for core systems for culture schools, the company is deploying the "MyClass App." By utilizing the member database for joint marketing, it is promoting stock business in the non-residential sector.

The overall picture of these initiatives is illustrated in the strategy diagram below.

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This slide conceptualizes the "multi-layered customer DB access structure through stock business consulting" that the company aims to achieve.

In addition to traditional new housing providers, the company is diversifying its client base to include renovations, used real estate, and culture schools. It expands its client count through "Revenue Layer 1: BtoB Business (Outsourcing model)" and accumulates data on the end-users (homeowners, senior members, etc.) behind these clients on its platform.

By approaching this accumulated customer data stock with new BtoC products and services, it creates "Revenue Layer 2: BtoC Business (Profit-sharing model)." This multiplication of BtoB and BtoC to dramatically increase the LTV (Lifetime Value) per customer is the core of the company's medium- to long-term growth scenario .

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6. FY2027 Earnings Outlook and Shareholder Return (Dividend Increase) Policy

FY2027 (Fiscal Year Ending June 2027) Full-Year Plan

Regarding the earnings outlook for FY2027, the company has formulated a "conservative plan composed only of highly probable figures," taking into account risks such as prolonged delivery times due to revisions to the Building Standards Act, uncertainty in housing supply due to the situation in the Middle East, and plan changes following the withdrawal from NextGIGA projects.

• Revenue: ¥8,000 million (+4.2% / +¥320 million YoY)
• Operating Profit: ¥1,900 million (+2.1% / +¥39 million YoY)
• Ordinary Profit: ¥2,700 million (+5.8% / +¥147 million YoY)

While the current plan is conservative, the company maintains a medium- to long-term goal of over 20% CAGR in revenue . It aims to further increase earnings by deepening its two main sectors, monetizing the renovation sector through the JACCS partnership, deploying the MyClass App, and executing strategic M&A.

Shareholder Return Policy: 30% Payout Ratio Target and 50% Dividend Increase

Regarding shareholder returns, the company has clearly stated its basic policy of "gradual increases targeting a 30% dividend payout ratio" and "progressive dividends (sustainable dividend increases)."

• FY2026 (Current Year) : Maintained an annual dividend of ¥20 (¥10 interim, ¥10 year-end) (13.0% payout ratio).
• FY2027 (Next Year Planned) : Following a ¥15 interim dividend, the company plans a significant increase to an annual dividend of ¥30 (+50% YoY) (payout ratio rising to 19.3%).

This embodies the policy of gradually increasing dividend amounts in line with profit growth, demonstrating a strong commitment to returning value to investors.

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7. Conclusion

Solvvy's FY2026 earnings were highly robust, not only because the company overcame external environmental changes and temporary delays to achieve record-high performance , but also because it expanded its growth engine—the deferred revenue balance—to ¥17.3 billion.

The strategy of not shying away from upfront investment and transplanting its business OS into new markets such as "home renovations," "used home sales," and "culture schools" through partnerships with influential partners like JACCS will expand future revenue opportunities in a multi-layered manner. The solid stock accumulation behind the conservative FY2027 plan and the policy of a significant dividend increase to ¥30 per share are clear expressions of the company's strong confidence in its medium- to long-term corporate value enhancement.