Kitahama Capital Partners Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥69M
• Operating Income: ¥-652M
• Net Income: ¥-310M
• EPS: ¥-1.26

Income Statement

Balance Sheet

Cash Flow Statement

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

Kitahama Capital Partners (21340) reported a very weak FY2026 Q2 with sharp top-line contraction and deep operating losses. Revenue was 69 million yen, down 83.8% YoY, highlighting significant volatility in deal flow or investment-related income. Operating income was a loss of 652 million yen and net income was a loss of 595 million yen, implying sustained negative profitability. Ordinary loss of 641 million yen indicates that non-operating items (e.g., interest, investment income/expenses) did not materially offset operating weakness. Despite the small revenue base, reported gross profit of 138 million yen implies a gross margin of 200.4%, suggesting classification nuances under JGAAP (e.g., inclusion of other operating income or negative cost of sales items) rather than true product/service margins. The DuPont framework shows a very negative net profit margin (-862.32%), very low asset turnover (0.009), and modest leverage (financial leverage 1.23x), culminating in a reported/calculated ROE of -10.01%. Cash flow from operations was negative at -163.6 million yen but less negative than net income, indicating the presence of non-cash charges and/or favorable working-capital swings. Financing cash flow was a sizable inflow of 827.5 million yen, which funded the operating burn; investing cash flow was reported as zero (likely unreported rather than truly zero). The balance sheet remains sizable with total assets of 7.306 billion yen and low liabilities of 646 million yen, implying a strong equity buffer of 5.946 billion yen. The reported equity ratio is 0.0% (unreported); mechanically, assets vs. equity indicate a high equity ratio, but we treat the disclosed 0.0% as a data limitation. Liquidity metrics appear comfortable with a current ratio of 316.2% and working capital of 1.022 billion yen, though cash and equivalents are unreported (listed as zero). Interest expense was modest at 5.94 million yen, and negative EBITDA produced a large negative interest coverage ratio; however, low absolute debt service mitigates near-term pressure. The absence of dividends (DPS 0) is consistent with losses and cash preservation. Overall, the quarter reflects a revenue drought against a relatively fixed cost base, yielding severe operating leverage to the downside. The company’s capital structure provides a cushion, but continuity of financing and rebuilding of recurring revenues or monetization events will be crucial. Data gaps (cash balance, equity ratio detail, share count) constrain precision, so conclusions are directional, based only on available non-zero disclosures.

Profitability Analysis

ROE is driven primarily by an extreme margin contraction: net profit margin of -862.32% reflects a small revenue denominator against a large net loss. Asset turnover of 0.009 is very low, indicating minimal revenue generation from the 7.306 billion yen asset base in the period; this is consistent with advisory/investment models where revenue is episodic. Financial leverage at 1.23x is modest, so leverage is not amplifying losses materially; the negative ROE (-10.01%) stems from operating performance rather than capital structure. Gross profit margin shows as 200.4%, which likely reflects classification effects under JGAAP (e.g., investment-related operating income netted within gross profit) rather than a conventional product margin; cost of sales disclosure and gross profit are not arithmetically aligned, underscoring presentation differences. EBITDA was -629.6 million yen and the EBITDA margin was -912.5%, evidencing substantial operating deleverage on a reduced revenue base. Interest coverage was -109.9x on EBITDA/interest, but the absolute interest burden (5.94 million yen) is small; the coverage signal here mainly reflects the depth of operating losses, not an onerous debt load. Operating expenses (implied from gross profit to operating loss) remain heavy relative to current activity levels, pointing to a largely fixed cost base (personnel, platform, SG&A) and high operating leverage.

Growth Assessment

Revenue fell 83.8% YoY to 69 million yen, indicating an abrupt slowdown in fee events or investment realizations. Given the business profile, revenue likely has a project- and market-timing component; sustainability depends on pipeline conversion, market liquidity, and investment exits. The disparity between revenue and gross profit suggests that other operating income streams (valuation gains, fees, or reclassifications) influenced gross profit; reliance on such items lowers visibility. Profit quality is weak with operating and ordinary losses, signaling inadequate scale to cover fixed costs in the half. With OCF better than net loss, non-cash items are present (depreciation 22.38 million yen and potentially valuation movements), but they do not change the underlying revenue shortfall. Near-term outlook hinges on reacceleration of mandates/exits and cost containment; without a rebound in top-line, losses will likely persist. The financing inflow this period indicates some access to capital, but recurring self-funded growth is not yet evident. We lack backlog/order data, so growth visibility is low. Seasonality may be material; however, the YoY decline magnitude suggests more than seasonal effects. Overall, growth prospects require demonstrable pipeline recovery and stabilization of core fee revenue.

Financial Health

Total assets of 7.306 billion yen against liabilities of 646 million yen imply a strong equity buffer of 5.946 billion yen; the reported equity ratio of 0.0% appears unreported rather than reflective of the balance sheet. Current assets of 1.495 billion yen versus current liabilities of 473 million yen produce a current ratio of 316.2% and working capital of 1.022 billion yen, indicating solid short-term liquidity on paper. The quick ratio matches the current ratio due to unreported inventories, consistent with an advisory/investment model. Debt-to-equity of 0.11x and financial leverage of 1.23x indicate conservative leverage. Interest expense is modest at 5.94 million yen, reducing immediate solvency risk despite negative coverage due to losses. However, cash and equivalents are unreported (listed as zero), limiting our ability to assess immediate liquidity runway; the presence of strong current assets provides some comfort, but the cash mix is unknown. Financing inflow of 827.5 million yen suggests reliance on external funding in the period to support operations. While solvency appears adequate given equity, sustained losses could erode equity over time if not offset by profit recovery or further capital raises.

Cash Flow Quality

Operating cash flow was -163.6 million yen versus net loss of -595.0 million yen, yielding an OCF/NI ratio of 0.27; cash burn is meaningfully smaller than accounting losses, indicating non-cash charges (e.g., depreciation of 22.4 million yen) and/or favorable working-capital movements. EBITDA was -629.6 million yen, broadly consistent with the OCF deficit magnitude after WC adjustments. Free cash flow is shown as 0 due to unreported investing cash flows; investing CF is disclosed as 0, which should be treated as not available rather than truly zero. Financing cash flow of +827.5 million yen covered the operating deficit, implying access to capital; the underlying source (equity vs. debt) is not disclosed. Working capital appears ample (1.022 billion yen), which should help buffer operating cash needs in the near term; however, the lack of a cash balance disclosure is a material limitation to runway analysis. Overall earnings quality is weak due to negative core profitability; the fact that cash burn is lower than accounting loss provides some cushion but does not offset the need for revenue normalization.

Dividend Sustainability

No dividend was paid (DPS 0.00), and payout ratio is 0% amid net losses. Given negative operating income and negative OCF, there is no FCF to cover distributions in the period (FCF coverage shown as 0x due to unreported FCF). The company appears to be in cash preservation mode, consistent with financing inflows used to fund operations. Without a clear return to sustained profitability and positive OCF, dividend capacity remains limited. Policy-wise, management is likely to prioritize balance sheet strength and growth investments over distributions until earnings normalize. Data gaps (cash balance, true FCF) prevent a precise coverage calculation, but directionally coverage is insufficient.

Risk Assessment

Business Risks:

• High revenue volatility tied to project-based/market-dependent income streams
• Execution risk on monetizing investment holdings or closing advisory mandates
• Market and macro sensitivity affecting deal flow and valuation gains/losses
• Customer/concentration risk if revenues depend on a small number of transactions
• Regulatory and compliance risk in financial services/investment activities
• Talent retention risk impacting origination and execution capability

Financial Risks:

• Sustained operating losses leading to equity erosion
• Reliance on external financing to fund cash burn, potential dilution
• Liquidity visibility is limited due to unreported cash balance
• Negative interest coverage, albeit with low absolute interest expense
• Fair value/impairment risk on assets impacting earnings and equity

Key Concerns:

• Revenue down 83.8% YoY to 69 million yen with unclear near-term recovery drivers
• Large operating loss (-652 million yen) and negative EBITDA
• Dependence on 827.5 million yen financing inflow to fund operations
• Data limitations: cash balance, equity ratio, investing CF, share information unreported
• Apparent mismatch between reported revenue, cost of sales, and gross profit suggesting classification complexity

Investment Implications

Key Takeaways:

• Severe margin compression and very low asset turnover drove -10.01% ROE
• Operating losses are large relative to the shrunken revenue base, highlighting negative operating leverage
• Balance sheet shows low leverage and substantial equity, providing a buffer
• OCF burn is smaller than net loss, but still negative; financing inflows bridged the gap
• Visibility on liquidity is constrained by unreported cash; continuity of funding is important
• Revenue normalization is the pivotal variable for earnings recovery

Metrics to Watch:

• Quarterly revenue run-rate and YoY/HoH rebound
• Operating expense trajectory and cost control (SG&A run-rate)
• Operating cash flow and working-capital movements
• Cash and equivalents (when disclosed) and net cash/debt
• Pipeline/backlog of mandates and status of investment exits
• Ordinary income trend and fair value/one-off items
• Equity ratio (when disclosed) and any new financing activity

Relative Positioning: Within TSE-listed small-cap financial advisory/investment firms, the company exhibits stronger equity capitalization and low leverage but materially weaker recent profitability and revenue traction; near-term positioning depends on restoring deal flow while maintaining liquidity discipline.

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