CROSS CAT CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥8.22B
• Operating Income: ¥881M
• Net Income: ¥583M
• EPS: ¥47.47

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

Cross Cat Co., Ltd. reported steady topline growth and resilient profitability for FY2026 Q2 under JGAAP on a consolidated basis. Revenue grew 2.3% year over year to ¥8.223 billion, while operating income increased 1.8% to ¥881 million, indicating disciplined cost control despite modest growth. Gross profit of ¥1.927 billion translated into a gross margin of 23.4%, suggesting stable project execution and pricing in the systems integration/services mix. Operating margin stood at 10.7%, consistent with mid-tier Japanese IT services peers and indicative of healthy utilization and SG&A discipline. Ordinary income of ¥914 million exceeded operating income, implying small net non-operating gains and negligible interest burden. Net income rose 14.1% YoY to ¥665 million, outpacing operating profit growth, likely aided by improved non-operating items and/or tax effects. The DuPont decomposition yields an ROE of 11.06%, driven by an 8.09% net margin, 0.888x asset turnover, and 1.54x financial leverage—an efficient and conservatively levered profile. Liquidity is strong with a current ratio of 220.5% and working capital of approximately ¥4.46 billion, providing ample buffer for project timing variability. Total liabilities are ¥4.673 billion against equity of ¥6.011 billion (implying an equity-to-asset ratio of roughly 65% based on provided figures), denoting a solid capital base even though the listed equity ratio field is unreported. Operating cash flow was ¥789.6 million, 1.19x net income, supporting earnings quality; however, investing cash flow and cash balances are unreported, limiting free cash flow assessment. Financing cash outflow of ¥1.634 billion suggests shareholder returns and/or debt repayments, but the absence of dividend per share and share count disclosures prevents precise distribution analysis. EBITDA of ¥954 million (11.6% margin) alongside modest D&A of ¥73 million underscores an asset-light model typical of IT services. Interest expense is minimal at ¥1.7 million, and interest coverage is extremely comfortable at over 500x, reflecting very low financial risk from leverage. Tax expense of ¥290 million implies an effective tax rate around 30% on a simple calculation basis, despite an unreported consolidated effective tax rate in the summary metrics. Overall, the company shows stable growth, solid profitability, conservative leverage, and good operating cash conversion, though limited disclosure on cash, investing flows, dividends, and share data constrains some conclusions. Seasonality and second-half skew common in domestic SIers should be considered when extrapolating first-half results to the full year.

Profitability Analysis

ROE_decomposition: ROE 11.06% = Net margin 8.09% x Asset turnover 0.888x x Financial leverage 1.54x. This indicates moderate profitability, efficient asset use for an SI business, and conservative leverage amplifying returns. margin_quality: Gross margin 23.4% and operating margin 10.7% (¥881m/¥8,223m) are consistent with stable pricing and utilization; ordinary margin of 11.1% benefits slightly from non-operating items. EBITDA margin at 11.6% with low D&A (¥73m) reflects an asset-light delivery model. operating_leverage: Revenue grew 2.3% YoY while operating income grew 1.8% YoY, indicating neutral-to-slightly-negative operating leverage in the period, likely due to wage inflation or subcontracting rates partially offsetting pricing/utilization gains. The structure suggests manageable fixed costs with limited drop-through at current growth.

Growth Assessment

revenue_sustainability: Revenue increased to ¥8.223bn (+2.3% YoY), a modest pace consistent with steady demand in core verticals. Absent backlog or order intake data, sustainability appears reasonable but not high-growth. profit_quality: Net income growth of +14.1% outpaced operating income (+1.8%), implying contributions from non-operating items and/or tax normalization. Core profit quality remains sound given stable gross/operating margins. outlook: With stable utilization and conservative leverage, the company is positioned for gradual growth; however, H2 seasonality in SI businesses can lift full-year profitability. Key dependencies include hiring retention, billable rates, and demand for DX/financial systems. Lack of disclosed backlog and client mix data limits precision on the outlook.

Financial Health

liquidity: Current assets ¥8.161bn vs. current liabilities ¥3.701bn yield a current ratio of 220.5% and working capital of ¥4.460bn, indicating robust liquidity. Quick ratio equals current ratio due to unreported inventories. solvency: Total liabilities ¥4.673bn vs. equity ¥6.011bn imply a calculated equity ratio near 65.0% (equity/assets), despite the equity ratio field being unreported. Debt-to-equity is 0.78x on a total liabilities basis; interest coverage is >500x, signaling low solvency risk. capital_structure: Leverage is conservative (financial leverage 1.54x). Financing CF outflow of ¥1.634bn suggests active balance sheet management (debt reduction and/or shareholder returns), though the split is not disclosed.

Cash Flow Quality

earnings_quality: OCF of ¥789.6m equals 1.19x net income, supportive of earnings quality and limited accrual build. Low interest expense aligns with strong cash coverage. FCF_analysis: Investing CF is unreported; therefore, free cash flow cannot be reliably calculated despite a placeholder FCF of zero. Given low D&A, capex is likely modest, but this remains an assumption without disclosed investing cash flows. working_capital: Strong working capital of ¥4.460bn provides buffer for project timing. The OCF/NI ratio suggests no significant adverse working capital drag in the period.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio are unreported in the dataset (zeros are placeholders). Net income of ¥665m and strong liquidity suggest capacity for distributions, but actual policy and paid amounts cannot be assessed here. FCF_coverage: FCF coverage cannot be determined due to unreported investing cash flows. OCF of ¥790m provides a baseline, but without capex and other investing outlays, coverage conclusions would be speculative. policy_outlook: With conservative leverage and stable profitability, the company likely has flexibility in shareholder returns; however, absent explicit dividend policy and share data, we cannot comment on payout stability or trajectory.

Risk Assessment

Business Risks:

• Wage inflation and subcontractor cost pressure potentially compressing margins
• Talent acquisition and retention affecting utilization and delivery capacity
• Project timing and milestone acceptance risk leading to revenue/OCF lumpiness
• Customer concentration in financial/public sectors (typical for domestic SIers), if applicable
• Price competition on commoditized integration work vs. higher-value consulting/analytics
• Seasonality with potential second-half weighting creating interim volatility
• Execution risk on DX/cloud migration and cybersecurity projects

Financial Risks:

• Limited visibility on cash and investing cash flows constrains assessment of liquidity buffers
• Potential off-balance commitments (e.g., subcontracting, leases) not detailed here
• Financing CF outflows (¥1.634bn) without breakdown could include significant buybacks/dividends or repayments

Key Concerns:

• Modest revenue growth (2.3% YoY) limiting operating leverage near term
• Lack of backlog/order intake disclosure to gauge sustainability
• Unreported cash, investing CF, and dividend data limiting FCF and payout analysis

Investment Implications

Key Takeaways:

• Steady growth with resilient margins: operating margin ~10.7%, EBITDA margin ~11.6%
• Healthy ROE at 11.06% driven by solid net margin and conservative leverage
• Strong liquidity (current ratio ~221%, working capital ~¥4.46bn) and minimal interest burden
• OCF/NI of 1.19 indicates solid earnings-to-cash conversion
• Net income growth (+14.1% YoY) outpacing operating income (+1.8%), aided by non-operating/tax factors

Metrics to Watch:

• Order backlog and book-to-bill to assess revenue visibility
• Headcount, utilization rate, and average billing rate
• Subcontracting ratio and wage inflation impact on gross margin
• SG&A trajectory vs. revenue to gauge operating leverage
• Capex and investing cash flows to refine FCF and dividend coverage
• Receivables days and unbilled work to monitor cash conversion

Relative Positioning: Appears consistent with a mid-tier Japanese SI exhibiting stable margins, conservative leverage, and sound cash generation, though growth is modest and disclosure gaps (cash/investing/dividends/backlog) limit comparative depth.

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