Summary of Wacom's <6727> earnings.
2. Overview of performance by segment.
(1) Brand product business.
Sales revenue decreased by 17.8% YoY to 33,814 million yen, and segment loss expanded to 4,520 million yen (compared to a loss of 3,981 million yen in the previous year). While the sales revenue benefited from the depreciation of the yen (an increase of approximately 2 billion yen), sales of display and pen tablet products decreased due to changes in market environment caused by the deterioration of consumer sentiment, especially for its core product of 'Creative Solutions'. Meanwhile, Business Solutions succeeded in outperforming the previous year despite the influence of changeable market trends and progress of projects. In terms of profit and loss, in addition to the re-entry gain from the inventory asset depreciation loss booked in the previous year (approximately 1.9 billion yen), cost-cutting efforts related to selling and administrative expenses, etc., the loss was exacerbated by significant declines in revenue, the additional expenses for reserve for purchase contracts and valuations of evaluation allowances (about 2 billion yen), etc. In terms of activities, while the company adopted new products in refreshing its commodity portfolio, including liquid crystal pen tablets with new functions and services announced in August 2023 for the Wacom One entry model as well as the Wacom Cintiq Pro, which launched Wacom Cintiq Pro 17 and Wacom Cintiq Pro 22 in October 2023, the start was slow due to balance with inventory reduction promotions (price reduction sales) for existing models.
※ In the Wacom One entry model, the company announced liquid crystal pen tablets with new functions and services in August 2023, and it also launched Wacom Cintiq Pro 17 and Wacom Cintiq Pro 22 in October 2023 with Wacom Cintiq Pro (for professionals).
a) Sales revenue of Creative Solutions.
Total sales revenue decreased by 21.1% YoY to 29,170 million yen. Sales of display products contributed to sales revenue for professionals and low-priced new products, but sales decreased due to decreased demand for existing models. For pen tablet products, sales also decreased due to decreased demand for professional models and low-priced existing models despite sales contribution from new products in the middle price range.
b) Sales revenue of Business Solutions.
Total sales revenue increased by 10.2% YoY to 4,644 million yen. Despite the impact of changeable market trends and progress of projects, sales revenue exceeded that of the previous year.
(2) Technology Solutions business.
Sales revenue increased by 18.7% YoY to 84,981 million yen, and segment profit increased by the same percentage to 16,481 million yen. Sales revenue benefited from the depreciation of the yen (an increase of approximately 5.4 billion yen) and increased sales contributions from 'EMR Technology Solutions', thanks to the increase in demand from OEM providers. 'AES Technology Solutions' also secured increased revenue despite changes in market environment. In terms of profit and loss, in addition to the absence of the expense for reserve for purchase contract evaluations (about 2 billion yen), which was booked as cost in the previous year but not in the current year, profitability increased significantly due to the increase in revenue, the depreciation of the yen (an increase of approximately 1.3 billion yen), etc.
3. Summary of the fiscal year ending March 2024.
When summarizing the March 2024 term, it can be said that the company achieved an increase in revenue and profit due to the growth of the 'Technology Solutions Business' backed by strong OEM demand; however, the difficult evaluation was mixed with the positive factor of the weak yen effect and the negative factor of 'temporary expenses'. Excluding those factors, it would be appropriate to view that the company faced a tough environment centered around the 'Brand Product Business'. As mentioned later, it is necessary to distinguish between the effects of 1) delayed 'preemptive demand' resolution during the COVID-19 pandemic, 2) continued buying restraint, and 3) a shift in demand to other categories (diversification of options), as to whether they are due to cyclical economic factors or structural changes. Attention also needs to be paid to mega-trends such as the penetration of new technologies and the flow of DX. Looking back at the 'Brand Product Business' since the March 2021 term, the size of the wave of rapid expansion due to the pandemic and subsequent slowdown due to its backlash is noteworthy, but it would be better to think about it calmly. Therefore, it should have been a major theme of Wacom Chapter 3 to determine the market domain that should be targeted while looking at the movement of mega-trends, and to prepare for it. In that sense, it is a positive point that certain prospects have been established for clearing negative legacies, and the direction for the future has become clearer. Furthermore, specific examples are accumulating in terms of infrastructure development for the future, such as proposals for new use cases, DX support for creative workflows, and the launch of digital ink services, which can also be evaluated positively.
(Written by Fisco Guest Analyst Ikuo Shibata)