KOZO KEIKAKU ENGINEERING HOLDINGS Inc. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥4.20B
• Operating Income: ¥-115M
• Net Income: ¥-289M
• EPS: ¥-12.54

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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

FY2026 Q1 shows solid top-line momentum but an operating loss due to elevated SG&A, with limited visibility on cash flows due to undisclosed items. Revenue grew 17.1% YoY to 4,197 million yen, while gross profit reached 1,370 million yen, implying a healthy gross margin of 32.7%. Despite this, operating income was a loss of 115 million yen (an improvement of 10.6% YoY in the loss), indicating fixed-cost pressure or upfront investment outweighing gross profit gains this quarter. Ordinary income was a loss of 124 million yen, reflecting modest non-operating net expenses, including 3.3 million yen of interest. Net income was a loss of 132 million yen (EPS -12.54), with the reported income tax line a net benefit of 84.9 million yen, suggesting tax effects that partially offset losses. The gap between ordinary income (-124 million yen) and the implied pre-tax result derived from the tax and net income figures indicates the presence of extraordinary items or classification differences under JGAAP. DuPont analysis points to ROE of -1.35%, driven by a -3.15% net margin, asset turnover of 0.210x, and financial leverage of 2.05x. The business exhibits reasonable operating efficiency at the gross level, but operating leverage currently works against profitability due to SG&A exceeding gross profit. Liquidity appears adequate with a current ratio of 138%, and capital structure is moderate with total liabilities at 1.22x of equity. Based on total assets of 19,948 million yen and equity of 9,744 million yen, the computed equity ratio is approximately 48.9% (the disclosed equity ratio of 0.0% is unreported, not zero). Cash flow data (operating, investing, financing) are not disclosed, limiting assessment of earnings quality and free cash flow. Depreciation and EBITDA are not disclosed; hence EBITDA-based metrics are not reliable this quarter. No dividend is reported for the period (DPS 0; payout ratio 0%), and FCF coverage cannot be assessed without operating cash flow. Working capital is positive at 2,611 million yen, which supports near-term liquidity. Overall, revenue growth and gross margin are encouraging, but the quarter’s loss and absence of cash flow disclosure temper visibility on near-term earnings quality. Outlook hinges on the company’s ability to convert backlog to revenue, manage SG&A, and translate earnings into cash amid potential project timing and seasonality effects typical of project-based businesses.

Profitability Analysis

ROE_decomposition: ROE -1.35% = Net margin -3.15% × Asset turnover 0.210 × Financial leverage 2.05. The negative net margin is the dominant drag; asset turnover is moderate for a knowledge/services-heavy model; leverage is moderate and not a principal driver. margin_quality: Gross margin is 32.7% (1,370,456 / 4,197,000), indicating solid pricing and project-level economics. Operating margin is -2.7% (operating loss of 115 million yen), reflecting SG&A of roughly 1,485 million yen (≈35.4% of revenue), which exceeded gross profit. Ordinary margin is -3.0%, and net margin is -3.15%. A sizable tax benefit (-84.9 million yen) partially cushioned the bottom line, implying tax effects (e.g., deferred tax movements) rather than core operational improvements. operating_leverage: Revenue rose 17.1% YoY while operating loss improved by 10.6% YoY, suggesting some incremental operating leverage but not enough to reach breakeven due to elevated SG&A. With gross margin stable-to-healthy, the path to profitability depends on scaling revenue and controlling fixed costs. Interest burden is minimal (3.3 million yen), so the P&L is primarily driven by operating performance.

Growth Assessment

revenue_sustainability: Top-line growth of 17.1% YoY is robust for Q1 and likely reflects healthy order intake and execution. Given the project-based nature implied by the revenue profile, sustainability will depend on backlog conversion, win rates, and timing of project milestones. profit_quality: The quarter shows a mismatch between solid gross profit and operating loss due to SG&A intensity. The reported tax benefit complicates the read-through of after-tax profitability. With cash flows undisclosed, earnings quality (cash conversion) cannot be validated. outlook: If revenue momentum persists and SG&A is managed, breakeven at the operating level appears attainable as volumes scale. Potential seasonality and project timing could skew quarterly results; back-half weighting would be consistent with many project-driven businesses. Key to improved outlook: maintaining gross margin, converting backlog efficiently, and tightening cost discipline.

Financial Health

liquidity: Current assets of 9,444 million yen vs. current liabilities of 6,834 million yen yield a current ratio of 1.38x and a quick ratio effectively the same (inventories not disclosed). Working capital stands at 2,611 million yen, indicating adequate near-term liquidity. solvency: Total liabilities are 11,899 million yen against equity of 9,744 million yen (D/E 1.22x). Interest expense is low (3.3 million yen), suggesting conservative financial risk and manageable debt service. capital_structure: Total assets of 19,948 million yen and equity of 9,744 million yen imply an equity ratio of roughly 48.9% (computed). Leverage is moderate (financial leverage ~2.05x), providing balance sheet flexibility if growth investments are disciplined.

Cash Flow Quality

earnings_quality: Operating cash flow is undisclosed for the quarter, preventing assessment of cash conversion vs. net income (OCF/NI reported as 0 reflects non-disclosure, not actual zero). The negative net income alongside lack of OCF data raises visibility risks on earnings quality. FCF_analysis: Investing and financing cash flows are undisclosed; therefore, free cash flow cannot be computed. Capex intensity and working capital swings, common in project businesses, cannot be evaluated this period. working_capital: Working capital is positive at 2,611 million yen, supporting liquidity. Inventories are not disclosed; project work-in-progress may be embedded in receivables/contract assets. Monitoring DSOs and unbilled receivables would be important once disclosed.

Dividend Sustainability

payout_ratio_assessment: No dividend is reported for the period (DPS 0; payout ratio 0%). With net loss in Q1, distributions would typically be constrained absent retained earnings deployment policy. FCF_coverage: FCF coverage cannot be assessed due to undisclosed operating and investing cash flows. Any dividend resumption would depend on restoring profitability and demonstrable cash generation. policy_outlook: Given early-year loss and lack of cash flow disclosure, a conservative stance on dividends would be typical until earnings normalization and cash visibility improve. Management guidance and full-year outlook (if provided later) will be pivotal.

Risk Assessment

Business Risks:

• Project timing and seasonality causing quarterly volatility in revenues and margins
• Execution risk on complex engineering/consulting projects impacting gross margin
• Human capital constraints and wage inflation elevating SG&A
• Client concentration risk typical of project-based businesses (not disclosed but relevant)
• Pricing pressure in competitive bids potentially compressing margins

Financial Risks:

• Limited visibility on cash flows due to non-disclosure of OCF/ICF/FCF
• Working capital swings (receivables/unbilled) potentially stressing cash in growth periods
• Potential extraordinary items or tax effects causing volatility between ordinary and net income
• Moderate leverage; while interest burden is low, sustained losses could erode equity if prolonged

Key Concerns:

• Operating loss despite strong revenue growth indicates SG&A absorption challenges
• Undisclosed cash flow metrics hinder assessment of earnings quality and dividend capacity
• Discrepancy between tax benefit and ordinary income suggests classification effects that obscure core run-rate profitability

Investment Implications

Key Takeaways:

• Revenue up 17.1% YoY with gross margin at 32.7% demonstrates healthy demand and pricing.
• Operating loss of 115 million yen driven by SG&A at ~35% of sales; breakeven hinges on cost control and scale.
• ROE of -1.35% primarily reflects negative net margin; leverage is not the issue.
• Liquidity is adequate (current ratio 1.38x; working capital 2.61 billion yen); interest burden is minimal.
• Cash flows, D&A, and share count are not disclosed, limiting valuation and quality-of-earnings analysis.

Metrics to Watch:

• Order backlog and book-to-bill
• SG&A as a percentage of sales and operating breakeven progress
• Gross margin trajectory by segment/project mix
• Operating cash flow and DSO/unbilled receivables once disclosed
• Extraordinary items and tax effects impacting the bridge from ordinary to net income

Relative Positioning: Within domestic engineering/consulting peers, the company shows solid gross margins and moderate leverage but weaker operating profitability this quarter due to SG&A intensity; visibility is below peers with fuller cash flow disclosure.

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
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