eole Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥3.53B
• Operating Income: ¥67M
• Net Income: ¥61M
• EPS: ¥1.97

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

Eole Inc. (23340) reported standalone JGAAP FY2026 Q2 results showing revenue of ¥3,529m, down 16.2% YoY, amid a challenging topline environment. Despite the revenue contraction, operating income held at ¥67m (flat YoY), indicating meaningful cost discipline and/or mix improvements that helped defend profitability. Gross profit was ¥404m, implying an 11.4% gross margin; this margin level, coupled with muted D&A of ¥31.6m, yielded EBITDA of ¥98.6m (2.8% margin). Ordinary income of ¥60m was slightly below operating income, reflecting small net non-operating costs despite negligible interest expense of ¥0.07m. Net income came in at ¥61m (flat YoY), implying an NPM of 1.73% and EPS of ¥1.97. DuPont analysis indicates ROE of 7.63%, driven by a modest margin (1.73%), decent asset turnover (1.32x), and relatively high financial leverage (assets/equity of ~3.35x). Liquidity appears sound with a current ratio of 154% and quick ratio of 154%, supported by positive working capital of ¥324m. The balance sheet shows total assets of ¥2,674m and equity of ¥799m; although the reported equity ratio is shown as 0.0% (undisclosed), a simple estimate suggests ~30% (¥799m/¥2,674m). Cash flow quality is soft: operating cash flow was negative at -¥9.4m despite positive earnings, producing an OCF/NI of -0.15, which points to working capital outflow or timing effects in receivables/payables. Investing cash flow was not disclosed, and free cash flow is shown as 0 (undisclosed), limiting visibility on capital intensity; however, D&A is modest at ~¥32m. Financing cash inflow of ¥240m suggests reliance on external funding during the period, either via debt or equity, to support operations or strategic initiatives. Interest coverage is strong at 957x (OI/interest), indicating low interest burden and headroom against rate or credit spread changes. The company’s operating leverage looks contained given flat operating profit despite a double-digit revenue decline, suggesting variable cost alignment or SG&A control. Dividend metrics (DPS, payout, FCF coverage) are shown as zeros and should be treated as undisclosed rather than actual zeros; no dividend policy inference can be made from the data provided. Notably, there are internal data limitations (e.g., the provided cost of sales and gross profit figures are not arithmetically consistent), so gross margin conclusions rely on the disclosed gross profit and margin rather than derived values from cost of sales. Overall, the profile is of a low-margin, asset-light model with adequate liquidity and moderate leverage, but with near-term cash conversion challenges and revenue headwinds.

Profitability Analysis

roe_decomposition: ROE 7.63% = Net margin 1.73% × Asset turnover 1.32x × Financial leverage 3.35x. The ROE is primarily supported by leverage and asset efficiency rather than margin strength. margin_quality: Gross margin is 11.4% (¥404m gross profit on ¥3,529m sales). Operating margin is ~1.9% (¥67m/¥3,529m). EBITDA margin is 2.8%. The margin stack indicates limited pricing power and/or high variable costs, but stable operating profit YoY despite a 16.2% revenue decline suggests improved cost control or mix shifts. operating_leverage: Operating income remained flat while revenue fell 16.2%, implying that fixed cost absorption pressure was offset by cost reductions or efficiency gains. D&A is low (¥31.6m), consistent with a relatively asset-light cost base, which tempers operating leverage risk.

Growth Assessment

revenue_sustainability: Topline declined 16.2% YoY to ¥3,529m, indicating end-market softness or deliberate pruning of low-margin volumes. Sustainability hinges on stabilizing demand, improving client retention, and product mix improvements. profit_quality: Net income of ¥61m and ordinary income of ¥60m are close, suggesting limited non-operating distortion. However, the negative OCF highlights weaker cash conversion, likely from working capital. Interest burden is negligible, supporting underlying earnings quality. outlook: With margins thin and revenue under pressure, near-term earnings depend on continued SG&A discipline and mix upgrades. If revenue stabilizes, incremental operating profit could improve given evidence of cost flexibility; conversely, further revenue declines would pressure profits given low starting margins.

Financial Health

liquidity: Current ratio 154.4% and quick ratio 154.4% indicate comfortable near-term liquidity. Working capital is ¥324m, providing buffer despite negative OCF this period. solvency: Estimated equity ratio ~29.9% (¥799m/¥2,674m) versus the undisclosed 0.0% presented. Debt-to-equity (using total liabilities) is 0.92x, indicating moderate balance sheet leverage. capital_structure: Interest expense is minimal (¥0.07m) with interest coverage of 957x (operating income basis), implying low reliance on expensive debt. Financing inflow of ¥240m suggests incremental funding during the period.

Cash Flow Quality

earnings_quality: OCF/NI is -0.15, signaling weak cash conversion relative to reported profits, likely due to working capital outflows or timing effects. fcf_analysis: Investing CF and capex are not disclosed; free cash flow is shown as 0 (undisclosed). With D&A at ¥31.6m, underlying capital intensity may be modest, but absent capex data, true FCF cannot be assessed. working_capital: Positive working capital of ¥324m supports liquidity, but the negative OCF suggests period-specific increases in receivables or decreases in payables. Monitoring receivable days and contract billings will be important.

Dividend Sustainability

payout_ratio_assessment: Payout ratio and DPS are shown as 0.0 but should be treated as undisclosed. With EPS at ¥1.97 and modest net income, capacity for dividends depends on cash generation and capital needs rather than accounting earnings alone. fcf_coverage: FCF coverage is shown as 0.00x (undisclosed). Given negative OCF and unknown capex, we cannot assess dividend coverage from free cash flow. policy_outlook: No dividend policy information is provided. Given external financing this period and thin margins, a conservative stance on shareholder returns would be consistent until cash conversion improves; however, no definitive conclusion can be drawn from the disclosed data.

Risk Assessment

Business Risks:

• Revenue volatility evidenced by a 16.2% YoY decline
• Thin margins (gross 11.4%, operating ~1.9%, EBITDA 2.8%) leaving limited shock absorption
• Dependence on cost control and mix to maintain profitability
• Potential client concentration or end-market cyclicality (not disclosed)
• Execution risk in stabilizing topline while preserving margins

Financial Risks:

• Negative operating cash flow despite positive earnings
• Moderate leverage (liabilities/equity ~0.92x) increases sensitivity to earnings downturns
• Reliance on external financing in the period (¥240m inflow)
• Data gaps on cash, capex, and detailed working capital composition

Key Concerns:

• Sustainability of cost discipline if revenue pressure persists
• Cash conversion and working capital management
• Visibility on investment needs and capex due to limited disclosure

Investment Implications

Key Takeaways:

• Topline down 16.2% YoY to ¥3,529m but operating income held at ¥67m, indicating cost/mix resilience
• ROE of 7.63% driven more by asset turnover and leverage than margin strength
• Negative OCF (-¥9.4m) contrasts with positive NI (¥61m), highlighting cash conversion risk
• Liquidity adequate (current ratio 154%) and estimated equity ratio ~30%
• External financing of ¥240m supports liquidity but underscores the importance of FCF generation

Metrics to Watch:

• Revenue trajectory and order/backlog indicators
• Gross margin and SG&A-to-sales ratio
• OCF/NI and working capital turns (DSO/DPO)
• Capex and investment CF disclosure to gauge true FCF
• Leverage and interest coverage under varying earnings scenarios

Relative Positioning: Within small-cap, asset-light service models on the TSE, the company exhibits average ROE supported by leverage and efficiency, below-average margin quality, adequate liquidity, and weaker cash conversion in the latest period.

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