ELECOM CO.,LTD. Q1 FY2026 earnings call

• Corporate Overview and Purpose

  • Elecom will celebrate its 40th anniversary next year, starting from furniture manufacturing and expanding into IT, mobile, and consumer electronics products, with 1,936 consolidated employees.
  • Adopted "Better being" as its corporate purpose 1.5 years ago, focused on continuous improvement of products, services, and contributions to society, with active community and sustainability initiatives.
  • The company has grown more than 4x over the past 20 years via expansion into E-Commerce, BtoB, and strategic M&A.

• Core Strategic Priorities

  • BtoC: Expand product assortment to include more home electronics and beauty appliances, add products to major convenience store chains starting in fall 2025, and leverage the "showroom at mass retail, purchase online" consumer purchasing pattern via integrated omnichannel strategy.
  • BtoB: Overhaul sales processes and go-to-market, maintaining over 90% sales through partners while adding direct sales for targeted segments. Targets 120% year-over-year first half sales growth for the standalone BtoB business, and is building out a recurring revenue model through long-term prepaid maintenance contracts for products like surveillance cameras, network storage, and industrial PCs.
  • Overseas Business: Currently over 3 billion yen in scale. Pursues M&A-led expansion in Europe and North America, and pilot market development in ASEAN (Malaysia, Indonesia, Philippines, Vietnam) via existing Japanese mass retail store footprints in the region. Preparing for 2026 European expansion, evaluating a new London office alongside the existing Düsseldorf location, and sells the NESTOUT brand via its existing Los Angeles-area subsidiary in the U.S. Greater China is already profitable and continues to deliver double-digit growth.

• Core Competencies

  • Fast new product development: Launches new products in 3-4 months, compared to the industry average 12-month development cycle. Strengths include attractive design, in-house R&D centers in Japan and China, robust in-house logistics capabilities, and an established brand in Japanese mass retail.

• Sustainability and Governance

  • Achieved an FTSE ESG score of 3.3 or higher, and was added to the FTSE Blossom Japan Index, giving it inclusion in 4 separate ESG indices adopted by GPIF. Prioritizes strict quality control to deliver safe products, following a competitor's power supply safety incident.

By product category (year-over-year first quarter comparison): 1. BtoB Solutions: Positive year-over-year revenue growth, with early results from expansion efforts; recorded 1.814 billion yen in contract liabilities (for prepaid multi-year maintenance services), a metric signaling growing recurring BtoB revenue. Full-year planned revenue for the BtoB segment is 45 billion yen, which accounts for approximately 34.6% of the full-year target total revenue of 130 billion yen. 2. Home Appliances: Revenue grew driven by the M&A of Tescom Electric, which brought the company into the beauty and personal care appliance segment, where it holds 2nd/3rd position overall and 1st position among professional users. 3. Power & I/O Devices: Strong growth, led by high demand for mobile chargers that outpaces current supply. 4. Peripherals & Accessories: Revenue saw a slight year-over-year decline, but gross profit improved significantly from prior periods and now contributes positively at the gross profit level. By sales channel: BtoB is growing, while home electronics mass retail and E-Commerce channels held broadly steady year-over-year. Currently, BtoB accounts for just under 40% of total revenue, and BtoC accounts for just over 60% of total revenue.

• Full-year FY2026 guidance is maintained at 130 billion yen in total revenue and 14.9 billion yen in operating profit.
• The mid-term management plan maintains targets of average annual operating profit growth of 10%+, ROE maintained at 13%+, and a minimum 30% payout ratio for dividends (current payout is ~40%, in line with Prime Market averages).
• Capital policy targets a positive cycle of investment and return: the company will actively pursue growth investment in people, M&A, and logistics, with a major logistics facility redevelopment investment in Kanagawa starting in the second half of FY2026.
• Dividend policy is maintained as progressive: no annual dividend cuts, with a planned 4 yen dividend increase for FY2026 (2 yen increase for the interim dividend, which is on track to be delivered, extending the company's consecutive annual dividend increase streak to 16 years). The company still has room for further dividend increases given its large cash holdings.
• The company targets reaching over 200 billion yen in total revenue in a future mid-term plan, and aims to raise operating margin to the 12-13% range from the current 11.5%.

• Foreign exchange risk: Most procurement is denominated in USD, and 35% of full-year planned procurement is unhedged. A 1 JPY per USD depreciation of the yen would increase annual costs by 129 million yen, while yen appreciation would add an equivalent amount to profit.
• The proposed share-swap merger with Nippon Antenna requires a two-thirds majority vote at its October 2025 extraordinary general meeting, and there is uncertainty about final approval (though management sees approval as likely, with the founding family and key stakeholder shareholders already supportive).
• The top-line revenue target for the first quarter was missed, which management notes likely contributed to a post-result share price adjustment.
• Intensifying competition in core product categories from large domestic competitors and low-cost overseas brands.

Q: If the Nippon Antenna merger is approved, how much share dilution will occur, and what is the timeline for post-merger integration (PMI)? What drove Nippon Antenna's recent improved profitability? / A: Dilution is expected to be 6-7% based on the planned share issuance. Negotiations have been ongoing for over 2 years, and antitrust review took longer than the planned 6 months, extending to over 1 year. Nippon Antenna already achieved its first full-year operating profit in 4 years during the review period, driven by pre-merger restructuring. PMI will now accelerate post-approval. The merger will combine overlapping broadcast business lines, consolidate sales teams to improve productivity, add Nippon Antenna's strong construction capabilities and new (to Elecom) communication infrastructure antenna business, and create a scaled combined player with only one major domestic competitor. Nippon Antenna's improved performance was driven by the sale of unprofitable overseas assets and a non-core factory, and no large future losses are expected.

Q: What are Elecom's priorities for growth: top-line sales growth, profit growth, or both? / A: Management's core belief is that growth is required to develop people and create new opportunities, so the top priority is growing sales to the 200 billion yen level as quickly as possible. Simultaneously, the company targets raising operating margin from the current 11.5% to 12-13% as soon as possible. This will be achieved by accelerating BtoB expansion, delivering 5-10% annual growth from combined mass retail and E-Commerce, and laying groundwork for long-term growth via overseas market expansion over the next 3-4 years. Both top-line growth and profit growth are key priorities.

Q: How will Elecom establish competitive advantage against domestic and low-cost overseas competitors in core categories like network devices? / A: Management acknowledges that B-basedomestic competitor and low-cost overseas brands like TP-Link hold dominant shelf space in mass retail network categories, and revitalizing Elecom's network business is a key priority. The company is focusing on 6 core product categories, shifting from pure new product rollout to targeted marketing focused on capturing market share from key competitors. Elecom is already gaining share in network devices, as it has an early lead in Wi-Fi 7 products against B, while also executing promotional campaigns for Wi-Fi 6 products. The company will leverage its existing strength in E-Commerce to compete against category leaders like Anker (in power supplies) and Logicool (in peripherals), matching strong retail channels with strong online go-to-market.