Linical Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥4.86B
• Operating Income: ¥-511M
• Net Income: ¥-281M
• EPS: ¥-41.07

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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

Linical Co., Ltd. (2183) reported FY2026 Q2 consolidated results under JGAAP showing a revenue decline and continued operating losses, albeit with positive operating cash flow. Revenue was ¥4,859 million, down 10.4% year on year, indicating pressure on project volume or pricing in its CRO/clinical development services. Gross profit was ¥1,314 million, implying a gross margin of 27.1%, which is reasonable for a CRO but below best-in-class levels and insufficient to cover fixed costs given the operating loss. Operating income was a loss of ¥511 million and ordinary income a loss of ¥543 million; net income was a loss of ¥927 million (EPS -¥41.07). Despite the loss, operating cash flow was positive at ¥541 million, suggesting working capital tailwinds and reasonable cash conversion from ongoing contracts. Depreciation and amortization totaled ¥84 million, and EBITDA was negative at ¥427 million, reflecting a still-underutilized cost base. The DuPont framework indicates a negative ROE of -15.33%, driven by a negative net margin (-19.08%) and modest asset turnover (0.337×), while leverage (2.38×) amplifies the loss. Liquidity appears adequate with a current ratio of 155.5%, and working capital of about ¥4,150 million provides a buffer. Leverage, measured by total liabilities to equity at 1.57×, is moderate but interest coverage is negative given operating losses. Financing cash outflows of ¥663 million indicate capital allocation or debt service outflows; however, the cash and equivalents figure is undisclosed in the feed and should not be inferred as zero. Several indicators in the feed show as zero due to non-disclosure (e.g., cash, inventories, investing CF, equity ratio, share count), so conclusions rely on the disclosed non-zero items. The reported balance sheet totals show internal inconsistencies (sum of liabilities and equity exceeds total assets), which may reflect timing or taxonomy differences; therefore, solvency conclusions are based on ratios provided rather than reconstructing the balance sheet. Dividend per share was undisclosed in this dataset; with losses, capacity for distributions is constrained unless supported by retained earnings or balance sheet strength. Operating leverage remains a key issue: mid-20s gross margins cannot absorb fixed SG&A at current revenue levels. Overall, the quarter exhibits stabilizing losses (flat YoY operating loss) and stronger cash conversion, but the profit trajectory and revenue sustainability remain the central uncertainties.

Profitability Analysis

ROE_decomposition: ROE -15.33% = Net margin (-19.08%) × Asset turnover (0.337×) × Financial leverage (2.38×). The negative net margin is the primary drag; asset turnover is modest for a service business, and leverage magnifies losses. margin_quality: Gross margin at 27.1% suggests pricing power and utilization are under pressure versus peers; operating loss of ¥511 million implies SG&A absorption issues. EBITDA margin of -8.8% indicates insufficient scale to cover fixed costs. operating_leverage: Revenue declined 10.4% YoY while the operating loss was flat YoY, implying some cost-flexing and variable cost control. Nonetheless, the cost base remains too fixed-heavy; incremental revenue recovery would have a high contribution margin but current volumes are below breakeven.

Growth Assessment

revenue_sustainability: The 10.4% YoY decline points to weaker backlog conversion or project delays/cancellations. Asset turnover at 0.337× suggests slow revenue generation versus asset base. profit_quality: Ordinary loss (¥543 million) and net loss (¥927 million) reflect ongoing structural margin pressure. Positive OCF despite losses indicates revenue is generating cash via advance billings/collections, but this may not be repeatable without top-line stabilization. outlook: Near-term recovery hinges on order intake/backlog visibility and utilization. If revenue stabilizes, modest gross margin expansion and better SG&A absorption could narrow losses. Absent clear catalysts for new wins and geographic/therapeutic diversification, growth visibility is limited.

Financial Health

liquidity: Current assets ¥11,627 million vs current liabilities ¥7,477 million yields a current ratio of 155.5% and working capital of ~¥4,150 million, indicating adequate short-term coverage. Quick ratio equals current ratio due to undisclosed inventories. solvency: Debt-to-equity (using total liabilities/equity) is 1.57×, indicative of moderate leverage for a services company. Interest expense is ¥8.4 million; interest coverage is negative (-60.8×) due to operating losses. capital_structure: Total equity is ¥6,047 million per feed. The equity ratio is undisclosed in the dataset (reported as 0.0% placeholder). Given the internal inconsistency between total assets and liabilities+equity, rely on provided leverage ratios rather than reconstructing totals.

Cash Flow Quality

earnings_quality: OCF of ¥541 million vs net income of -¥927 million yields an OCF/NI of -0.58; cash generation outperforms accounting earnings due to non-cash items (¥84 million D&A) and likely working capital inflows. FCF_analysis: Investing CF is undisclosed (shown as 0), so statutory free cash flow cannot be determined. On an OCF basis, cash generation is positive; if capex is structurally light (typical for CROs), underlying FCF could be positive in this period. working_capital: Positive OCF alongside losses implies favorable timing: receivables collection and/or advance receipts outpaced outflows. Sustainability depends on backlog quality and billing milestones; reversal risk exists if collections normalize while losses persist.

Dividend Sustainability

payout_ratio_assessment: With negative net income, a conventional payout ratio is not meaningful; distributions would rely on retained earnings and balance sheet capacity rather than current profits. FCF_coverage: FCF is not ascertainable from the dataset (investing CF undisclosed). Even if OCF is positive, recurring dividends would require consistent positive FCF. policy_outlook: Given operating losses and negative ROE, conservative capital returns would be prudent until profitability recovers. The dataset shows DPS as 0.00, but per data policy this should be treated as undisclosed; historical policy and guidance should be consulted.

Risk Assessment

Business Risks:

• Project delays/cancellations impacting revenue visibility and utilization
• Pricing pressure in CRO contracts compressing gross margins
• Geographic and therapeutic area concentration risk
• Talent acquisition/retention in clinical operations
• Regulatory and compliance risks across jurisdictions
• FX volatility affecting global contract values and costs

Financial Risks:

• Sustained operating losses leading to erosion of equity and covenant headroom
• Negative interest coverage despite modest absolute interest expense
• Working capital reversal risk if collections slow or advances normalize
• Potential need for refinancing or equity issuance if losses persist
• Data inconsistencies in reported totals complicating external assessment

Key Concerns:

• Negative net margin (-19.08%) and EBITDA margin (-8.8%) indicate sub-scale operations
• Revenue decline of 10.4% YoY undermines operating leverage recovery
• ROE of -15.33% reflects value dilution absent turnaround
• Reliance on working capital timing for positive OCF may be transient

Investment Implications

Key Takeaways:

• Top line contracted 10.4% YoY to ¥4,859 million; backlog conversion appears weaker
• Gross margin at 27.1% is insufficient to cover fixed SG&A at current scale
• Operating loss of ¥511 million was flat YoY, suggesting some cost discipline
• Positive OCF of ¥541 million contrasts with a net loss of ¥927 million, implying working capital tailwinds
• Leverage is moderate (D/E 1.57×) but interest coverage is negative
• ROE is -15.33% driven by a -19.08% net margin and modest asset turnover
• Liquidity is adequate with a current ratio of 155.5% and ~¥4.15 billion working capital

Metrics to Watch:

• Order intake and backlog coverage vs next 12 months revenue
• Utilization rates and billable headcount
• Gross margin progression and mix by service/region
• SG&A run-rate and breakeven revenue level
• DSO/working capital movements to assess cash sustainability
• EBITDA turnaround and interest coverage
• Any updates on dividend/capital allocation policy

Relative Positioning: Within CRO and clinical development peers, Linical currently exhibits below-peer profitability and scale efficiency, with adequate liquidity but weaker earnings quality; recovery depends on restoring revenue momentum and margin 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