SORACOM,INC. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥4.99B
• Operating Income: ¥311M
• Net Income: ¥44M
• EPS: ¥5.17

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

SORACOM, Inc. (147A0) reported strong top-line momentum for FY2026 Q2 with revenue of ¥4,988 million, up 35.9% YoY, indicating sustained demand and effective expansion of its IoT connectivity/platform business. Operating income rose to ¥311 million (+204.3% YoY), evidencing clear operating leverage as fixed costs are spread over a larger revenue base. Net income of ¥233 million increased 429.7% YoY, outpacing revenue growth and highlighting improved cost discipline and scale benefits. The reported gross profit margin of 43.1% and EBITDA margin of 7.3% reflect a model that blends service-led margins with some hardware or traffic cost components; the margin profile appears to be improving alongside growth. DuPont analysis shows an ROE of 2.12% (NPM 4.67%, asset turnover 0.366x, financial leverage 1.24x), which is modest but moving in the right direction given the profit inflection. Liquidity is robust with a current ratio of 530.5% and working capital of ¥9,988 million, implying a strong buffer to support growth and seasonality. Leverage appears low (debt-to-equity 0.28x) and interest coverage is very high at 152x, reducing refinancing and interest-rate risk. Despite the earnings improvement, operating cash flow was negative at -¥242 million and OCF/Net income was -1.04, indicating weaker cash conversion in the half (likely due to working capital investment). Financing cash inflow of ¥1,413 million suggests reliance on external funding in the period, consistent with growth-stage scaling. The effective tax rate shown as 0.0% in the derived metrics conflicts with the disclosed income tax expense (¥55.7 million), which implies an approximate tax rate in the high teens; we rely on the disclosed yen figures over the derived percentage. Certain items are undisclosed or appear inconsistent (e.g., gross profit vs cost of sales; equity ratio, cash and equivalents), so interpretations prioritize the provided margins and calculated ratios over reconstructing missing lines. Dividend is not disclosed (DPS shown as 0); with growth priorities and negative OCF, distributions are unlikely near term, but there is no explicit policy detail provided. Overall, the quarter demonstrates a compelling growth profile with improving profitability and ample liquidity, tempered by cash conversion that lags accounting earnings and a continued need to monitor working capital dynamics. The balance sheet capacity appears adequate to fund near-term growth, with minimal interest burden. Sustainability of the revenue trajectory, churn/retention metrics, and visibility on unit economics will be key to the medium-term margin path. Data limitations (zeros indicating non-disclosure) warrant caution in interpreting certain ratios and cash flow coverage metrics.

Profitability Analysis

ROE decomposition indicates a 2.12% ROE driven by a 4.67% net margin, 0.366x asset turnover, and modest leverage (1.24x). The margin uplift YoY (Operating income +204.3%, Net income +429.7%) points to operating leverage materializing as revenue scales. Gross margin is 43.1%, consistent with a services/platform mix but still below pure software levels, suggesting cost of connectivity and/or hardware pass-through moderates margin. EBITDA margin of 7.3% vs operating margin of 6.2% (311/4,988) implies limited D&A intensity (¥52.6 million), which supports future margin expansion as scale grows. Interest expense is minimal (¥2.0 million), and coverage is 152x, indicating that financing costs are not a drag on profitability. Ordinary income (¥297 million) is close to operating income, suggesting limited non-operating swings. The implied tax burden from ¥55.7 million tax expense (vs ordinary income) is in the high-teens, despite the derived effective tax ratio showing 0.0% (likely a data artifact). Overall profit quality is improving as operating leverage builds, but net margin at 4.67% remains in early expansion mode vs mature software peers. Continued growth without proportional opex increases will be key to sustaining the margin trajectory. We note an inconsistency between reported cost of sales and gross profit; we rely on the disclosed gross margin (43.1%) for margin assessment.

Growth Assessment

Revenue growth of 35.9% YoY to ¥4,988 million indicates strong demand and likely healthy net additions/expansion in the installed base. Profit growth far exceeds revenue (OP +204%, NI +430%), indicating that scale benefits and opex efficiency gains are being realized. The mix of recurring services vs hardware is not disclosed, but gross margin at 43.1% suggests a meaningful services component with some lower-margin elements remaining. Sustainability hinges on customer retention, net revenue retention, and onboarding of larger enterprise deployments; these metrics are not disclosed, so growth visibility is inferred from headline YoY performance. Asset turnover at 0.366x (for the period) is modest, consistent with a cash-rich balance sheet and growth investments. Outlook is constructive given demonstrated operating leverage, but we need confirmation via subsequent quarters on churn, AR expansion, and sales efficiency. Near-term growth could remain robust if pipeline conversion holds and international expansion continues (not disclosed but typical for IoT platforms). Investment in working capital (as implied by negative OCF) may accompany growth, particularly if hardware or receivables expand alongside services. Overall, growth quality looks solid but requires ongoing evidence of recurring revenue durability and disciplined customer acquisition costs.

Financial Health

Liquidity is very strong: current ratio 530.5%, quick ratio 530.5%, and working capital ¥9,988 million. This suggests ample near-term funding capacity for growth and contingencies. Solvency profile is conservative: debt-to-equity at 0.28x and interest coverage at 152x indicate low financial risk. Total assets are ¥13,620 million vs total liabilities of ¥3,048 million and equity of ¥11,004 million, reflecting a strong equity cushion; the reported equity ratio of 0.0% is clearly not reflective of these figures and should be treated as undisclosed. Capital structure appears equity-heavy, with recent financing inflow of ¥1,413 million supporting growth and cash needs. No material inventory is disclosed (inventory shown as 0), which aligns with a service-led model; the quick ratio equals the current ratio. Overall balance sheet resiliency is high, with low leverage and significant liquidity.

Cash Flow Quality

Operating cash flow was -¥242 million despite net income of ¥233 million, yielding an OCF/NI ratio of -1.04, implying weak cash conversion in the half. This likely reflects working capital outflows (e.g., higher receivables, prepayments, or timing of payables) rather than earnings quality issues, given improving profitability; specific drivers are not disclosed. Free cash flow is shown as 0 due to undisclosed investing cash flows; we cannot conclude on true FCF without capex/Intangibles detail. D&A is modest at ¥52.6 million, suggesting low capital intensity; however, software capitalization or network investments, if any, are undisclosed. Financing cash inflow of ¥1,413 million funded the period’s cash needs and growth investments, indicating reliance on external capital during scaling. We will monitor the trajectory of OCF relative to operating income, changes in receivables and deferred revenue (not disclosed), and the conversion of EBITDA to cash.

Dividend Sustainability

Dividend per share is shown as 0.00 and payout ratio 0.0%, but zeros indicate non-disclosure; no explicit dividend policy is provided. Given growth-stage characteristics, negative OCF in the half, and ongoing investment, internal signals suggest reinvestment is prioritized over distributions. FCF coverage is shown as 0.00x, but FCF is not derivable due to missing investing cash flows; thus, payout sustainability cannot be quantitatively assessed. Balance sheet strength and low leverage would allow policy flexibility in the future, but current cash generation does not support distributions on a conservative basis. We will reassess when full-year cash flows and any policy statements are available.

Risk Assessment

Business Risks:

• Sustainability of 30%+ revenue growth amid macro or customer budget changes
• Customer concentration and churn risk in IoT deployments (not disclosed)
• Gross margin pressure from connectivity costs or hardware mix
• Sales efficiency and payback periods for customer acquisition (undisclosed)
• Competition from global IoT connectivity/platform providers
• Pricing pressure from telecom partners and platform commoditization
• Execution risk in scaling international operations (if applicable)

Financial Risks:

• Negative operating cash flow and potential need for continued external financing
• Working capital volatility affecting cash conversion
• Foreign exchange exposure on costs or revenues (not disclosed)
• Potential dilution from equity financing to fund growth
• Limited disclosure on investing cash flows and capitalized development

Key Concerns:

• OCF/Net income at -1.04 indicates weak cash conversion in the period
• Inconsistencies in cost of sales vs gross profit; reliance on provided margin figures
• Undisclosed cash and equivalents, investing CF, and key per-share metrics
• Equity ratio reported as 0.0% conflicts with balance sheet totals, indicating data gaps

Investment Implications

Key Takeaways:

• Strong revenue growth (+35.9% YoY) with clear operating leverage (OP +204%)
• Improving profitability with 43.1% gross margin and 7.3% EBITDA margin
• Low leverage and exceptional liquidity (current ratio 530%) reduce financial risk
• Cash conversion lagging earnings (OCF -¥242m; OCF/NI -1.04) due to working capital
• External financing (¥1,413m) supported growth; monitoring dilution/usage is important
• ROE at 2.12% leaves room for improvement as margins scale and asset turnover rises

Metrics to Watch:

• Net revenue retention, churn, and cohort expansion (undisclosed)
• Operating cash flow vs operating income; receivables and deferred revenue trends
• Gross margin stability and mix of services vs hardware/connectivity
• Sales efficiency (CAC payback, LTV/CAC) and opex growth vs revenue
• Capital expenditure/intangibles and resulting free cash flow
• Share count changes and dilution from financing

Relative Positioning: Within TSE growth and IoT/software-adjacent peers, SORACOM exhibits above-market revenue growth and visible operating leverage with a conservative balance sheet, but trails best-in-class peers on cash conversion and current net margin; sustained scale and improved working capital discipline are key to narrowing the gap.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis