FIT EASY Inc. FY2026 Q2 Earnings Report

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Executive Summary

For the six months ended Q2 of the fiscal year ending October 2026, the Company delivered higher revenue and profit, maintaining substantial revenue growth through aggressive store openings, while profit margins declined slightly due to the upfront increase in SG&A expenses. Revenue was ¥67.05B (+58.2% YoY), Operating Income was ¥16.07B (+48.2%), Ordinary Income was ¥16.25B (+49.6%), and Net Income was ¥11.05B (+52.9%). The primary reason that the growth in Operating Income and Net Income slightly lagged the revenue growth rate was that SG&A expenses increased +74.9% YoY, exceeding revenue growth.

Factors Affecting Performance

【Revenue】Revenue was ¥67.05B, sustaining strong growth of +58.2% YoY. The growth appears to have been driven by the expansion of store openings and the enlargement of the membership base. Contract liabilities (deferred revenue) increased 31.4% YoY to ¥4.48B, providing a certain degree of support for future revenue.

【Profit and Loss】Cost of sales increased +59.4% YoY, slightly exceeding the growth in revenue, and the gross profit margin declined by approximately 50bp to 35.7% from 36.2% in the same period of the previous year. SG&A expenses increased 74.9% YoY to ¥7.87B, significantly exceeding revenue growth, and the Operating Income margin declined by approximately 160bp to 24.0% from 25.6%. Ordinary Income and Net Income both grew at rates close to that of Operating Income, indicating limited divergence caused by non-operating or extraordinary income and expenses. Although the Operating Income margin declined against revenue growth of 58.2%, all profit indicators achieved high YoY growth of +48–53%; accordingly, the Company posted higher revenue and profit.

Key Financial Indicators

【Profitability】The Operating Income margin of 24.0% and Net Income margin of 16.5% declined slightly from the same period of the previous year (25.6% and 17.1%, respectively), but remained at high levels. Annualized ROE was 33.6%. Based on the decomposition into a Net Income margin of 16.5% × total asset turnover of 1.245x × financial leverage of 1.64x, the high Net Income margin and asset efficiency were the primary drivers of ROE, indicating limited reliance on leverage.【Cash Quality】Operating Cash Flow (OCF) was 1.01x Net Income, indicating sound cash support for earnings. However, the OCF/EBITDA ratio remained at 0.64x, suggesting further room to improve cash conversion efficiency due to tax payments and increases in working capital.【Investment Efficiency】Capital expenditures of ¥4.05B reached 2.94x depreciation and amortization expense of ¥1.38B, indicating that the Company is in a growth investment phase. Free cash flow was ¥2.95B.【Financial Soundness】The Equity Ratio improved to 61.1% from 58.4% in the same period of the previous year. Interest-bearing debt was negligible, indicating a conservative financial foundation.

Cash Flow Analysis

Operating Cash Flow was ¥11.11B, achieving cash generation at nearly the same level as Net Income of ¥11.05B, and cash support for earnings was generally sound. However, due to working capital burdens such as tax payments of ¥6.25B and an increase in accounts receivable of ¥0.77B, the OCF/EBITDA ratio remained at 0.64x, indicating further room to improve cash conversion efficiency relative to EBITDA of ¥17.45B. Investing Cash Flow was an outflow of ¥8.16B, primarily consisting of capital expenditures of ¥4.05B and acquisitions of intangible fixed assets of ¥0.66B. Reflecting store-opening and growth investments, capital expenditures reached 2.94x depreciation and amortization. As a result, Free Cash Flow, including Investing Cash Flow, remained positive at ¥2.95B. Financing Cash Flow was an outflow of ¥5.15B, mainly due to dividend payments of ¥4.13B and repayments of borrowings and bonds. Although cash and cash equivalents decreased by ¥2.20B from the beginning of the period, liquidity remained ample, with an ending balance of ¥30.55B.

Quality of Earnings

The difference between Ordinary Income of ¥16.25B and Net Income of ¥11.05B was primarily attributable to income taxes of ¥5.19B. Temporary factors from non-operating or extraordinary income and expenses were limited, with non-operating income of ¥0.2B and non-operating expenses of ¥0.0B. Accordingly, earnings for the period were primarily derived from recurring income generated by operating activities, with no evidence of significant enhancement from temporary factors. The accrual ratio was a small negative 0.1%, indicating limited signs of discretionary earnings accumulation through increases in trade receivables or inventories. Meanwhile, the OCF/EBITDA ratio of 0.64x was slightly below the benchmark of 0.7x, indicating room to improve cash generation efficiency relative to the high accounting profitability. The 31.4% increase in contract liabilities provides advance support for future revenue, while the pace of their realization and continuation will be a factor affecting future earnings quality.

Earnings Forecast and Guidance

The full-year Company forecast is revenue of ¥143.22B (+47.2% YoY), Operating Income of ¥35.06B (+51.7%), Ordinary Income of ¥35.58B (+53.5%), and Net Income of ¥24.73B (+61.8%). Progress rates for the cumulative Q2 results were 46.8% for revenue, 45.8% for Operating Income, and 44.7% for Net Income. Although all were slightly below the standard progress rate of 50%, the deviation remained limited to approximately 3–5 percentage points. The progress indicates that the full-year forecast assumes an acceleration in revenue and profit growth in the second half, driven by the effects of new store openings and expansion of the membership base.

Shareholder Returns

The forecast dividend for the end of Q2 is ¥26.00 per share, consisting of an ordinary dividend of ¥20 plus a ¥6 commemorative dividend marking the listing transfer to the TSE Prime Market and the Nagoya Stock Exchange Premier Market. The total interim dividend is approximately ¥4.34B, resulting in a Payout Ratio of 39.3% against quarterly Net Income of ¥11.05B. The full-year forecast dividend is ¥51.00, and the forecast Payout Ratio calculated from forecast EPS of ¥148.58 is approximately 34.3%. The total interim dividend of approximately ¥4.34B exceeded Free Cash Flow of ¥2.95B, resulting in FCF coverage of 0.68x. However, short-term payment capacity remains secured by cash and deposits of ¥30.55B and low levels of interest-bearing debt.

Risk Factors

1. Recovery risk associated with store openings and capital expenditures: Capital expenditures of ¥4.05B reached 2.94x depreciation and amortization expense. If member acquisition or utilization rates at investment-target stores fall below plan, this could pressure profit margins and Free Cash Flow.

2. Margin decline risk due to increases in SG&A expenses: SG&A expenses increased +74.9% YoY, exceeding revenue growth of +58.2%, and the Operating Income margin declined by approximately 160bp YoY. Continued cost increases could lead to a further decline in profit margins.

3. Cash conversion efficiency risk: The OCF/EBITDA ratio remained at 0.64x. If tax payments and increases in working capital continue, the Company’s ability to generate Operating Cash Flow as a source of funding for investments and dividends could weaken.

Industry Benchmark (For Reference; Company Analysis)

Industry Benchmark (it_telecom)

Profitability and Returns

Both the Operating Income margin and Net Income margin exceeded the industry median, indicating that profitability was at a superior level within the industry.

Growth and Capital Efficiency

The revenue growth rate significantly exceeded the industry median, positioning the Company as a high-growth company within the industry.

※Source: Company compilation

Key Points in the Earnings Results

1. SG&A expenses increased 74.9%, exceeding the 58.2% increase in revenue, and the Operating Income margin declined by approximately 160bp YoY. Revenue and profit growth continue, but the trend in the pace of cost increases will be key to the recovery of profit margins going forward.

2. Operating Cash Flow was 1.01x Net Income, indicating sound cash support, while the OCF/EBITDA ratio remained at 0.64x. Capital expenditures reached 2.94x depreciation and amortization, making the balance between investment, dividends, and cash flow an item requiring continued monitoring.

3. Progress against the full-year forecast was 46.8% for revenue, 45.8% for Operating Income, and 44.7% for Net Income, slightly below the standard progress rate. The pace of acceleration in revenue and profit growth during the second half will be the focus going forward.

Theoretical Share Price (Reference Value)

Sensitivity: ¥786–¥835 at ±1% for the cost of equity, and ¥797–¥828 at ±0.1 for ω.

Notes:

• Net assets as of the end of the quarter are used (there is a timing gap relative to the full-year forecast).
• Since net assets include non-controlling interests, the theoretical value may be calculated somewhat on the high side.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / These are mechanically calculated values based solely on publicly disclosed data and are not forecasts of market prices or recommendations of any specific investment action, nor do they predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting professionals as necessary.

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