Insight Co., Ltd. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥613M
• Operating Income: ¥46M
• Net Income: ¥24M
• EPS: ¥19.64

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

Verdict: Solid top-line growth with resilient bottom-line expansion, but slight operating margin compression and limited disclosure on cash flows temper conviction. Revenue rose 11.8% YoY to 6.13, with operating income up 2.1% to 0.46 and net income up 37.1% to 0.31, indicating stronger below-the-line support and tax effects. Operating margin is approximately 7.5% this quarter (0.46/6.13), while net margin is roughly 5.1% (0.31/6.13). Based on disclosed growth rates, we estimate operating margin compressed by about 72 bps YoY, whereas net margin expanded by roughly 94 bps YoY, aided by a lighter non-operating burden and a favorable gap between ordinary and pre-tax numbers. Gross profit and cost of sales lines show a data anomaly versus operating profit (gross profit 1.35 appears inconsistent with revenue–cost math), so we anchor margin interpretation on operating income and net income as more reliable signals. Ordinary income declined 1.1% YoY to 0.47 despite higher operating income, implying a modestly negative non-operating contribution versus last year or rounding effects. Effective tax rate approximated 35.7%, elevated but consistent with small-cap profiles and regional tax impacts. Liquidity remains strong (current ratio 225%, quick ratio 225%) with ample cash (4.89) relative to short-term loans (1.00), mitigating near-term refinancing risk. Leverage is moderate (D/E 0.76x), and interest coverage is effectively non-constraining given de minimis interest expense. DuPont ROE is 3.9% (NPM 5.1% × ATO 0.432 × leverage 1.76x), pointing to a return profile driven more by asset efficiency leverage than by high margins. ROIC is cited at 7.1%, around the lower end of a typical target band, suggesting value creation is modest but positive. Earnings quality cannot be confirmed due to missing cash flow statements; OCF/NI and FCF coverage of dividends are not calculable. Accounts receivable are sizable at 5.01, implying ~74 days of receivables, which is reasonable but bears monitoring for collection risk in a growth phase. Forward-looking, sustaining double-digit revenue growth while stabilizing operating margins will be key to lifting ROE above mid-single digits. The payout ratio is calculated at 62.1%, slightly above a conservative threshold, so dividend sustainability hinges on underlying OCF generation and working capital discipline. Overall, execution looks steady with room to improve margin quality and returns, but disclosure gaps on cash flows limit visibility.

Profitability Analysis

ROE = 3.9% = 5.1% Net Margin × 0.432x Asset Turnover × 1.76x Leverage. The net margin improved YoY (est. +94 bps), asset turnover is reasonable for a quarterly snapshot (annualized ~1.7x), and leverage is moderate. The largest change driver vs last year appears to be net margin, aided by below-the-line items and tax effects, while operating margin likely compressed (~72 bps) due to cost pressures or mix. This improvement may not be fully sustainable unless operating efficiencies catch up. Watch for SG&A growth outpacing revenue, which would further hinder operating leverage.

Growth Assessment

Revenue growth of 11.8% YoY is healthy and suggests demand resilience. However, operating income increased only 2.1%, pointing to negative operating leverage and likely cost pressure. Net income expanded 37.1%, benefiting from non-operating/tax dynamics not guaranteed to recur. To sustain growth quality, the company needs to stabilize margins via pricing, mix, or cost control, and convert growth to cash (OCF). Lack of segment and cash flow disclosure restricts visibility.

Financial Health

Liquidity is robust with a current ratio of 225% and quick ratio of 225%. Solvency is comfortable (D/E 0.76x), and interest burden is minimal (coverage ~852x). Current assets (12.74) comfortably exceed current liabilities (5.66), and cash (4.89) more than covers short-term loans (1.00), minimizing near-term refinancing risk. No off-balance sheet obligations disclosed; data limitations apply.

Cash Flow Quality

OCF, capex, and FCF are unreported; therefore, OCF/NI and FCF coverage cannot be evaluated. Earnings quality remains unverified, with receivables (~74 days) a key variable for cash conversion. No clear signs of working-capital manipulation, but monitoring is necessary.

Dividend Sustainability

Calculated payout ratio of ~62.1% sits slightly above conservative thresholds. Without OCF and FCF data, coverage cannot be confirmed; sustainability relies on maintaining net income growth and improving working capital efficiency. Policy commentary is not disclosed.

Risk Assessment

Business Risks:

• Operating cost inflation and mix shifting toward lower-margin work
• Client/project concentration typical of small-cap services firms
• Demand cyclicality tied to marketing/advertising budgets
• Talent retention risk amid rising labor costs

Financial Risks:

• Unreported cash flows create uncertainty around cash earnings
• Potential increase in tax burden affecting net margins
• Receivables concentration and timing risk
• Exposure to short-term financing if working capital expands

Key Concerns:

• Inconsistency between gross profit and operating income figures; rely on OI/NI for trend analysis
• Payout ratio around 62% with unknown FCF coverage
• ROE at 3.9% is modest and needs operating leverage to improve
• Disclosure gaps limit assessment of long-term investment needs and cash coverage

Investment Implications

Key Takeaways:

• Revenue growth strong; operating leverage weak this quarter
• Net margin benefited from below-the-line items; durability uncertain
• Balance sheet solid; liquidity ample and leverage moderate
• Return profile modest (ROE 3.9%, ROIC ~7.1%); room for improvement via margin stabilization
• Cash flow disclosure absence is the core constraint on conviction

Metrics to Watch:

• OCF/NI and FCF once reported
• Operating margin and SG&A growth vs revenue
• Receivables days and cash conversion
• Tax rate and non-operating income/expense trajectory
• Debt tenor mix and interest sensitivity

Relative Positioning: Compared with domestic small-cap service peers, liquidity and leverage are favorable, but operating margin pressure and modest ROE place it mid-pack; improved cost control and cash conversion would enhance standing.

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