ESCRIT INC. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥10.41B
• Operating Income: ¥-1.17B
• Net Income: ¥-324M
• EPS: ¥-69.34

Income Statement

Balance Sheet

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

Esca Escrit (21960) reported FY2026 Q2 consolidated results under JGAAP with revenue of ¥10.414bn, down 9.1% YoY, indicating a softer demand environment and/or event timing effects in the wedding and hospitality segments. Operating income was a loss of ¥1.165bn (−80.1% YoY), reflecting pronounced negative operating leverage as a mid‑single‑digit revenue decline translated into a materially larger operating deterioration. Ordinary income was a loss of ¥1.234bn, slightly worse than operating income due to net non‑operating expenses including interest costs of ¥41.95m. Net income was a loss of ¥786m (EPS −¥69.34), broadly stable YoY, with a tax credit of ¥159m partially cushioning bottom‑line pressure. DuPont analysis indicates ROE of −14.73%, driven by a net margin of −7.55%, asset turnover of 0.508x, and financial leverage of 3.85x. The operating margin stands at approximately −11.2%, highlighting fixed‑cost rigidity and the sensitivity of earnings to top‑line fluctuations. Gross margin is reported at 62.8%; however, the disclosed gross profit and cost of sales figures appear inconsistent with the revenue disclosed, so margin interpretation should be made with caution. Liquidity appears adequate with a current ratio of 121.8% and a quick ratio of 117.1%, supported by working capital of approximately ¥1.44bn. Capital structure is moderately leveraged with total liabilities of ¥15.06bn versus equity of ¥5.34bn (debt‑to‑equity 2.82x; implied equity ratio ~26%), which amplifies ROE volatility given loss‑making operations. Interest burden remains modest for now (interest expense ~¥42m for the half), but interest coverage is negative (−27.8x) due to operating losses. Cash flow statements and cash balances were not disclosed in the data provided (values of zero denote not reported), limiting assessment of cash generation, capex, and dividend coverage. Dividend per share is zero, consistent with the current loss profile and the need to preserve liquidity. The near‑term outlook hinges on booking momentum, average spend per wedding, venue utilization, and cancellation trends into the seasonally stronger months. Cost discipline and utilization improvements are critical to restore breakeven and reduce the sensitivity of earnings to small top‑line movements. Given the gaps in cash flow disclosure and an apparent mismatch among gross profit components, our analysis focuses on the reliable non‑zero metrics provided while acknowledging data limitations.

Profitability Analysis

ROE (−14.73%) decomposes into a net margin of −7.55%, asset turnover of 0.508x, and financial leverage of 3.85x, indicating that losses at the margin level are the primary driver of negative equity returns, with leverage amplifying the impact. Operating margin is approximately −11.2% (operating loss ¥1.165bn on ¥10.414bn sales), reflecting fixed‑cost rigidity and adverse operating leverage. Ordinary margin is roughly −11.9%, modestly below operating margin due to net non‑operating costs, mainly interest expense of ~¥42m. The reported gross margin of 62.8% suggests healthy unit economics on delivered services; however, the disclosed gross profit and cost of sales do not reconcile arithmetically with revenue, so margin quality commentary is constrained. EBITDA and D&A were not disclosed (reported as zero), preventing clean assessment of cash earnings; in practice, EBITDA should be higher than operating income by the amount of D&A. The steep decline in operating income (−80.1% YoY) versus a 9.1% revenue drop evidences significant negative operating leverage; small volume or pricing shortfalls markedly depress profits. Ordinary income trailing operating income indicates limited financial income/expense impact; the loss is fundamentally operational. An effective tax rate is not meaningful due to losses and a tax benefit (−¥159m).

Growth Assessment

Revenue decreased 9.1% YoY to ¥10.414bn, pointing to softer bookings, event volumes, timing, or price/mix headwinds in core wedding/banquet services. The disproportionate decline in operating income (−80.1% YoY) underscores revenue sensitivity and potentially higher fixed‑cost intensity this period. Without segment or booking pipeline disclosure, sustainability of revenue is uncertain; seasonality and event timing can materially affect first‑half results. The reported gross margin (62.8%) would, if accurate, support a recovery pathway if utilization improves; however, gross profit inputs appear internally inconsistent, so we avoid firm conclusions on margin structure. Net loss of ¥786m (−7.55% net margin) despite a tax credit suggests profit quality remains weak, driven by core operations rather than one‑off items. Lack of D&A and cash flow data limits assessment of underlying cash profitability and reinvestment cadence (capex). Near‑term outlook hinges on booking intake, conversion, and average spend per event into the peak seasons; recovery in consumer sentiment and wedding demand would be key. Pricing power, upselling of ancillary services, and improved venue utilization could support a rebound, but the business currently exhibits negative operating leverage.

Financial Health

Total assets are ¥20.52bn, liabilities ¥15.06bn, and equity ¥5.34bn, implying leverage of 2.82x liabilities/equity and an implied equity ratio near 26% (despite a reported 0.0% equity ratio flag, which appears undisclosed rather than zero). Liquidity is adequate with current assets of ¥8.06bn versus current liabilities of ¥6.62bn (current ratio 1.22x; quick ratio 1.17x), and working capital of ¥1.44bn. Inventories are modest at ¥308m, consistent with a service‑heavy model; however, current liabilities likely include customer advances, which can elevate near‑term obligations during busy seasons. Interest expense (¥42m for the half) is manageable, but negative operating income results in a negative interest coverage (−27.8x), highlighting dependence on restoring operating profitability. Solvency risk is moderate: leverage is meaningful but not excessive for venue‑based services; persistent losses could erode equity if not reversed. Absence of cash balance disclosure limits evaluation of liquidity buffers, covenant headroom, and refinancing risk.

Cash Flow Quality

Operating, investing, and financing cash flows as well as cash and equivalents were not disclosed (zeros indicate unreported), so we cannot assess operating cash conversion, capex intensity, or free cash flow. The reported OCF/Net Income ratio of 0.00 and FCF of 0 should be treated as not available rather than true zeros. Earnings quality appears weak on a GAAP basis given operating and net losses; without D&A and working capital detail, we cannot disentangle non‑cash components. Given the business model, working capital can be materially influenced by customer deposits/advances and event delivery timing; swings around quarter‑ends are common. In the absence of data, assume capex related to venue maintenance/refresh is recurring; cash burn risk depends on the pace of operating recovery and booking inflows.

Dividend Sustainability

Annual DPS is ¥0.00 with a payout ratio of 0.0%, which is consistent with a loss‑making period and prudent for liquidity preservation. Free cash flow coverage cannot be assessed due to undisclosed cash flows; the reported 0.00x should be treated as not available. Given negative earnings and the need to stabilize operations, the near‑term dividend outlook is muted. Future resumption would require sustained positive operating income, visibility on free cash flow generation after maintenance capex, and adequate balance sheet headroom.

Risk Assessment

Business Risks:

• Demand cyclicality in weddings/banquets tied to consumer sentiment and demographic headwinds
• Event timing and seasonality creating earnings volatility and operating leverage
• Pricing and mix pressure amid competitive venues and alternative celebration formats
• Cancellation/postponement risk from exogenous shocks (health scares, natural disasters)
• Labor availability and wage inflation affecting service delivery and margins
• Facility utilization risk; fixed costs lead to high breakeven volumes

Financial Risks:

• Negative operating income leading to weak interest coverage (−27.8x)
• Moderate leverage (liabilities/equity 2.82x) amplifying equity volatility
• Potential liquidity pressure if booking inflows slow; advances and refunds can swing cash
• Limited visibility on cash balances, OCF, and capex due to undisclosed cash flow data
• Risk of further equity erosion if losses persist

Key Concerns:

• Top‑line decline (−9.1% YoY) with disproportionately larger operating loss (−¥1.165bn)
• Sustained net losses (−¥786m) despite tax benefits
• Inconsistency between reported revenue, cost of sales, and gross profit figures, limiting margin analysis
• Absence of cash flow and cash balance disclosures constraining assessment of cash runway
• Reliance on utilization improvements to restore profitability amid fixed‑cost base

Investment Implications

Key Takeaways:

• ROE is −14.7% driven by a −7.6% net margin; leverage (3.85x) magnifies the loss impact
• Operating margin ~−11.2% evidences significant negative operating leverage
• Liquidity appears adequate (current ratio 1.22x; quick 1.17x) but cash data are undisclosed
• Leverage is meaningful (L/E 2.82x) though interest burden is currently modest
• Dividend suspended (DPS ¥0) appropriately aligns with loss profile and liquidity preservation

Metrics to Watch:

• Booking intake, backlog, and average spend per event
• Venue utilization rates and cancellation/postponement trends
• Quarterly operating margin progression and SG&A control
• Working capital movements, especially customer advances and refunds
• Cash and equivalents, OCF, and maintenance capex (as soon as disclosed)
• Interest coverage and any covenant or refinancing disclosures

Relative Positioning: Versus domestic wedding and hospitality peers, current profitability is weaker with negative operating and ordinary income despite a reportedly high gross margin; leverage is within sectoral norms but leaves less cushion if losses persist. Recovery depends on demand normalization and utilization improvements; peers with steadier bookings or diversified revenue may exhibit more resilient margins in the near term.

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