SAYLOR ADVERTISING INC. FY2026 Q2 Earnings Report

Financial Highlights

• Operating Income: ¥-133M
• Net Income: ¥-134M
• EPS: ¥-21.92

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

Sailor Advertising Co., Ltd. (2156) reported a consolidated FY2026 Q2 loss with negative operating, ordinary, and net income, despite a solid reported gross profit. While headline revenue is shown as zero in the dataset, the combination of cost of sales (¥205.8m) and gross profit (¥642.6m) implies revenue of approximately ¥848.4m for the period, which we use for analysis given the instruction to rely on non-zero data. The implied gross margin is a high 75.7%, suggesting either a mix shift toward higher-margin creative/production and agency fee income or timing effects in cost recognition. Operating income was -¥133m, indicating SG&A of roughly ¥775.6m, which fully consumed gross profit and drove the operating loss. Ordinary income improved relative to operating income (ordinary: -¥118m vs. operating: -¥133m), implying approximately ¥15m in net non-operating gains despite ¥1.94m in interest expense, likely from investment income, subsidies, or other non-operating factors. Net income of -¥98m benefited from a tax credit/deferred tax benefit of ¥38.25m, indicating a negative effective tax rate typical of loss periods. The gap between ordinary income and implied pre-tax income suggests possible extraordinary/one-off losses (~¥18m), although details are not disclosed. Liquidity appears adequate with current assets of ¥2,217m and current liabilities of ¥1,743m, yielding a current ratio of 127% and positive working capital of ¥474m. The balance sheet shows total assets of ¥4,105m, liabilities of ¥2,201m, and equity of ¥2,137m, implying an equity ratio near 52% (the reported 0% should be treated as undisclosed), and financial leverage (assets/equity) of ~1.92x. Operating cash flow was a modest outflow of ¥9.6m, much smaller than the net loss, implying some non-cash charges (e.g., depreciation of ¥15.0m) and potentially favorable working capital movements; investing cash flow is undisclosed, preventing a robust free cash flow assessment. Interest expense is low in absolute terms, and while EBIT interest coverage is negative due to losses, the balance sheet does not appear over-levered. EPS was -¥21.92; shares outstanding and book value per share were undisclosed, limiting per-share diagnostics. The company paid no dividend in the period (DPS = 0), consistent with losses and the need to preserve liquidity. Overall, the first half shows weak profitability driven by elevated SG&A relative to gross profit, partially offset by non-operating gains and tax effects. With an implied gross margin that is high for the sector, the key issue appears to be operating cost absorption and scale, rather than pricing/fee compression at the gross level. Data limitations (notably revenue, cash, investing CF, and share counts) constrain precision, but the direction of travel is clear: losses, adequate liquidity, moderate leverage, and negative but contained operating cash burn.

Profitability Analysis

ROE_decomposition_DuPont: Using inferred revenue of ¥848.4m and period-end balance sheet as a proxy: Net margin ≈ -98m / 848.4m = -11.6%; Asset turnover ≈ 848.4m / 4,105m = 0.21x; Financial leverage ≈ 4,105m / 2,137m = 1.92x; Implied ROE ≈ -11.6% × 0.21 × 1.92 ≈ -4.6% for the half-year (directional only; average equity not disclosed and revenue is inferred). Annualizing mechanically would worsen to roughly -9% ROE, but this is sensitive to H2 seasonality. margin_quality: Implied gross margin is 75.7% (642.6m / 848.4m), unusually high for a traditional media agency mix and suggestive of greater fee-based or creative components, or timing in cost accruals. Operating margin is -15.7% (-133.0m / 848.4m), highlighting overhead absorption issues. Ordinary margin improves to -13.9% on non-operating gains (~¥15m). Net margin is -11.6% aided by a ¥38.3m tax benefit. operating_leverage: SG&A of approximately ¥775.6m exceeded gross profit by roughly ¥133m, indicating insufficient scale to cover fixed costs. With depreciation at ¥15.0m and EBITDA at -¥118.0m, the business exhibits negative operating leverage in H1; incremental revenue growth or SG&A rationalization is required to restore break-even.

Growth Assessment

revenue_sustainability: Headline revenue is undisclosed; inferred revenue of ¥848.4m is used for H1, but we cannot assess YoY growth without a comparable figure. The elevated gross margin suggests mix effects that may not be repeatable if large high-margin projects were recognized in H1. profit_quality: Non-operating income (¥15m) and tax benefits (¥38.3m) cushioned the bottom line, while recurring operating performance was weak. EBITDA remained negative despite non-cash D&A, indicating underlying earnings pressure. outlook: To improve in H2, the company must either sustain high-margin project flow or reduce SG&A. Given sector seasonality (ad spend often stronger in fiscal H2 around campaign cycles), a sequential improvement is possible but uncertain. Visibility is limited by lack of order backlog, segment data, and YoY comparatives.

Financial Health

liquidity: Current assets ¥2,216.9m vs. current liabilities ¥1,742.9m yields a current ratio of 127% and working capital of ¥474.1m, indicating adequate short-term liquidity. Cash and equivalents are undisclosed, which tempers confidence in immediate liquidity buffers. solvency: Total liabilities ¥2,200.8m vs. equity ¥2,137.0m implies a liabilities-to-equity ratio of ~1.03x and an equity ratio of roughly 52% (using disclosed totals). Financial leverage (A/E) is about 1.92x, moderate for the industry. capital_structure: Interest expense is low at ¥1.94m, and although EBIT coverage is negative due to losses, absolute interest burden is light. No information on maturities, covenants, or composition (bank loans vs. leases) is provided.

Cash Flow Quality

earnings_quality: OCF of -¥9.6m compared with net income of -¥98.0m yields an OCF/NI ratio of ~0.10 (less negative OCF than NI), implying non-cash charges and/or working capital tailwinds mitigated cash burn. D&A of ¥15.0m supports this. FCF_analysis: Investing cash flow is undisclosed (0 placeholder), preventing a reliable FCF calculation. If capex was minimal, adjusted FCF would approximate OCF at -¥9.6m, but this is an assumption given missing data. working_capital: With inventories undisclosed and receivables/payables not provided, we cannot parse drivers. However, the small OCF outflow relative to the operating loss suggests either receivable collections or payable stretching contributed positively in H1.

Dividend Sustainability

payout_ratio_assessment: DPS is 0 and payout ratio is reported as 0% in a loss-making period (EPS -¥21.92), which is consistent with capital preservation. Sustaining dividends would not be feasible without profits or distributable reserves. FCF_coverage: FCF is undisclosed due to missing investing CF data; based on OCF alone, coverage of any dividend would be inadequate. A reinstatement would require restoration to positive OCF and earnings. policy_outlook: Given negative EBITDA and net income, the near-term dividend outlook appears restrained. Resumption would likely follow a return to consistent profitability and clearer cash generation.

Risk Assessment

Business Risks:

• Cyclicality of advertising demand tied to macro trends and client marketing budgets
• Potential client concentration given regional agency dynamics (not disclosed)
• Shift from traditional media to digital requiring continuous capability investment
• Project timing/seasonality causing revenue and margin volatility
• Execution risk in cost control and SG&A rationalization to reach break-even
• Dependence on non-operating income and tax benefits to mitigate losses

Financial Risks:

• Negative EBIT and EBITDA leading to weak interest coverage despite low absolute interest costs
• Potential working capital strain if receivables collection slows (details undisclosed)
• Limited visibility on cash balances and capex due to undisclosed investing CF and cash position
• Possible extraordinary losses not fully detailed, adding earnings volatility

Key Concerns:

• Operating losses despite high implied gross margin point to structural overhead issues
• Reliance on non-operating gains and tax benefits to narrow net losses
• Data gaps (revenue, cash, investing CF, share count) limit precision of analysis and trend assessment

Investment Implications

Key Takeaways:

• Implied H1 revenue ~¥848m with a high gross margin of ~76%, but operating loss of ¥133m shows cost absorption challenges
• Liquidity appears adequate (current ratio 127%, working capital ¥474m) and leverage moderate (equity ratio ~52%)
• OCF outflow (-¥9.6m) is small relative to the net loss (-¥98m), indicating mitigating non-cash/working capital effects
• Non-operating gains (~¥15m) and tax benefits (¥38m) cushioned net loss; sustainability uncertain
• Visibility is constrained by undisclosed revenue headline, cash, and investing cash flows

Metrics to Watch:

• H2 revenue run-rate and booking momentum (to validate scale recovery)
• SG&A trend and cost-reduction execution to target operating break-even
• EBITDA trajectory and interest coverage
• OCF and capex to gauge true FCF and dividend capacity
• Any extraordinary items and non-operating gains/losses recurring nature
• Equity ratio and net debt (once cash is disclosed) for solvency headroom

Relative Positioning: Within Japan’s advertising and marketing services cohort, the company shows weaker profitability (negative EBITDA/EBIT) but acceptable balance sheet strength and liquidity; sustaining the high gross margin while reducing SG&A is critical to converge toward peers’ operating margins.

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