UNITED,Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥4.31B
• Operating Income: ¥-690M
• Net Income: ¥1.63B
• EPS: ¥-16.48

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 Integrated Analysis

Analysis integrating XBRL data (GPT-5) and PDF earnings presentation (Claude)

Executive Summary

United Inc. (TSE: 2497) reported FY2026 Q2 consolidated results under JGAAP marked by a sharp top-line contraction and a continued operating loss, offset by strong operating cash flow and a very solid balance sheet. Revenue was ¥4.313bn, down 31.8% YoY, reflecting meaningful pressure on the core business environment and/or portfolio-related revenue normalization. Despite the revenue decline, reported gross profit was ¥4.138bn and the gross margin metric shown (95.9%) is unusually high for typical operating businesses, suggesting classification effects (e.g., net vs gross reporting or inclusion of other operating income) and/or data mapping differences; note that the gross profit figure is not arithmetically consistent with revenue and cost of sales disclosed. Operating income was a loss of ¥0.69bn, and ordinary income was a loss of ¥0.72bn, indicating that financial items had limited incremental impact. Net income was a loss of ¥0.626bn (EPS: -¥16.48), with a large positive tax expense disclosed (¥0.864bn), which is atypical in a loss-making quarter and likely reflects deferred tax and/or non-recurring tax effects under JGAAP. DuPont-based ROE was -3.28%, driven by a negative net margin (-14.5%), modest asset turnover (0.205x), and low financial leverage (1.10x). Liquidity remains strong: current assets greatly exceed current liabilities, and working capital is ample at approximately ¥18.87bn, with a reported current ratio of 757%. The capital structure is conservative, with total liabilities of ¥3.07bn against total equity of ¥19.06bn; the implied equity ratio (equity/total assets) is about 90.7%, which appears inconsistent with the reported 0.0% figure and likely reflects a reporting/mapping anomaly. Operating cash flow was solidly positive at ¥1.201bn despite the net loss, indicating meaningful non-cash items and/or favorable working capital dynamics; interest expense remains de minimis (¥1.08m), and financing cash outflows of ¥0.533bn suggest repayments and/or share-related outlays. Several cash flow and per-share fields show as zero (e.g., cash and equivalents, investing CF, outstanding shares, BVPS), which should be interpreted as undisclosed rather than truly zero. Dividend per share is reported at ¥0 with a payout ratio of 0%, consistent with a loss-making period and a cautious capital return stance. Overall, the quarter highlights pressure on earnings capacity amid top-line contraction, but with substantial liquidity and low leverage cushioning near-term financial risk. Data limitations (notably zeros for some items and internal inconsistencies in margins) require cautious interpretation, and the sustainability of positive operating cash flow will depend on normalization of taxes and working capital as revenue trends stabilize.

From Earnings Presentation: United Corporation's H1 FY2026 financial results presentation materials supplement the context behind the significant revenue decline and expanding losses captured in XBRL analysis, along with future growth drivers. The investment business anticipates no major securities sales this fiscal year, resulting in significant YoY revenue decline, but suggests mid- to long-term potential through unplanned divestment gains and ¥7.8 billion in held asset valuations. The education business (Bestco Co., Ltd.) exceeded plan with increased student enrollment and demonstrates growth foundation through classroom expansion and technology utilization under its mission to resolve regional educational disparities. The talent matching business achieved revenue growth and loss reduction through expanding startup recruitment demand and growth in recruitment and RPO services. The ad-tech and content business saw revenue and profit decline due to Fog Inc.'s IT training business deviating from plan, but pursues revenue diversification through online lottery area expansion and launch of new business 'Jump LAB.' Management acknowledges short-term profit deterioration while presenting structural growth initiatives including: qualitative transformation of investment business through 'Zenshin Investment' (lead investments in startups balancing social issue resolution and business viability) and value-up support; provision of high-quality, low-cost services through direct education business operations; operational efficiency through AI utilization; and new service launches in both talent and content fields. Dividends maintained at ¥11.5/share based on DOE 5% standard, suggesting balance between shareholder returns and growth investment. PDF materials complement the cost flexibility, asset efficiency, and revenue recovery points raised by GPT analysis with specific business strategies and qualitative information on investment partners, customer base, and technological capabilities, contributing to increased probability of mid-term profitability recovery scenario. However, the timeline for resolving short-term operating loss structure and execution risks of Fog Inc.'s pivot to app development business remain points requiring continued attention.

Financial Analysis

Profitability

ROE decomposition (DuPont): Net profit margin = -14.51%, Asset turnover = 0.205x, Financial leverage = 1.10x, yielding ROE ≈ -3.28% (consistent with the reported figure). The negative margin is the primary drag on returns, while leverage is low and does not amplify losses. Reported gross margin is 95.9%, which is atypically high versus many service/tech peers and is not reconcilable with the presented revenue and cost of sales figures; this likely reflects category mapping issues (e.g., other operating income included in gross profit) rather than true unit economics. Operating margin is negative given the ¥0.69bn operating loss; implied operating expense burden (SG&A and other operating costs) is roughly ¥4.83bn (gross profit of ¥4.14bn minus operating loss), indicating significant fixed-cost pressure and operating deleverage on a reduced revenue base. EBITDA was -¥0.616bn (margin -14.3%), and interest burden is negligible, with interest coverage negative due solely to operating weakness rather than financing costs. The ordinary loss is close to the operating loss, suggesting limited non-operating swings. Overall, profitability is constrained by operating leverage on lower revenue and possibly a cost base that has not yet fully flexed with activity levels.

Growth

Revenue declined 31.8% YoY to ¥4.313bn, indicating a material contraction in demand or portfolio contribution versus the prior year. The operating loss of ¥0.69bn represents a 52.1% YoY change in the operating income line; given the loss status, the direction (improvement vs deterioration) is ambiguous from the percentage alone, but absolute losses remain sizable. Ordinary and net losses track closely with operating trends, implying limited external income support. Given the combination of lower revenue and negative EBITDA, near-term growth quality appears pressured and sensitive to cost discipline and mix. Sustainability hinges on stabilizing the top line, potential recovery in core advertising/marketing or investment-related revenues (depending on business mix), and improved operating efficiency. The large positive tax expense in a loss quarter suggests non-recurring or timing effects that may normalize and are not indicative of underlying growth. Outlook-wise, recovering utilization and monetization rates, along with any portfolio rebalancing, are key; however, the current data set lacks segment detail to ascribe drivers confidently. Without investing cash flow details, visibility into organic vs inorganic growth investments is limited.

Financial Health

Total assets are ¥21.03bn and total equity is ¥19.06bn, implying an equity ratio near 90.7% (vs the reported 0.0%, likely a data anomaly). Total liabilities are modest at ¥3.07bn. Liquidity is robust: current assets of ¥21.74bn vs current liabilities of ¥2.87bn yield a current ratio of 757% and quick ratio of 756%, underscoring significant liquid resources; working capital stands at approximately ¥18.87bn. Debt-to-equity is 0.16x, consistent with conservative leverage. Interest expense is just ¥1.08m, and financial risk from borrowing costs is minimal. Financing cash outflow of ¥0.533bn suggests repayments and/or equity-related actions, but detail is not disclosed. Overall solvency and liquidity positions are strong, providing ample buffer to absorb operating volatility.

Cash Flow

Operating cash flow was +¥1.201bn against a net loss of ¥0.626bn, yielding an OCF/Net Income ratio of -1.92 (positive cash flow versus negative earnings). This gap implies significant non-cash items (D&A ¥74m, tax effects) and/or favorable working capital movements (e.g., collections or inventory reduction; inventories are small at ¥30m). The large tax expense disclosed despite a loss likely reflects deferred tax movements that can materially affect OCF. Investing cash flow is shown as ¥0, which likely indicates non-disclosure; thus free cash flow cannot be reliably computed (the presented FCF of 0 should not be interpreted as true zero). The negative EBITDA suggests core cash generation from operations (before working capital and non-cash tax effects) is weak; hence, current OCF strength may not be durable if working capital tailwinds reverse. Monitoring the persistence and drivers of OCF (receivables, payables, tax settlements, and any one-offs) is critical to assess earnings quality.

Dividend Sustainability

DPS is reported at ¥0.00 with a payout ratio of 0%, consistent with a net loss and a likely conservative return policy during earnings pressure. Given the absence of disclosed investing cash flow and the non-reliability of the reported FCF figure (0), free cash flow coverage of dividends cannot be assessed quantitatively this period. Balance sheet strength (high equity ratio, low leverage, ample working capital) would allow flexibility over the medium term, but near-term dividend capacity is constrained by negative earnings and uncertain cash flow sustainability. Policy outlook appears cautious until profitability normalizes and cash flow visibility improves.

Business Outlook

Full-year FY2026 plan: revenue ¥10 billion, operating loss ¥1,200 million, net loss ¥1,400 million. H1 evaluated as progressing according to plan, with H2 expectations: ①Investment business progressing exits at planned pace, ②Education business revenue growth through peak demand period (winter courses and exam preparation), accelerated opening of 6+ new classrooms, ③Talent matching business continued growth through AI utilization and new services, ④Ad-tech & content business recovery expected through online lottery expansion in manga/anime areas and Jump LAB contribution. Mid-term: improved investment efficiency through increased Zenshin Investment ratio (lead investments and hands-on support), education business expansion of classroom count and students per classroom (technology utilization, enhanced high school instruction), talent matching business RPO/recruitment know-how × AI efficiency, content business transformation from online lottery → IP monetization platform (short-term: area expansion, mid-term: new business and overseas expansion), targeting revenue recovery and profit improvement through operating leverage. Also addresses GPT analysis points with references to improved asset efficiency (reduction of non-core assets, visibility of investment returns) and cost flexibility (AI utilization, outsourcing cost optimization).

Management Guidance

Management acknowledges short-term revenue decline and operating losses while positioning this as a structural transformation period toward realizing the purpose 'Maximize the power of will and accelerate society's Zenshin.' Investment business maintains ¥1,500 million/year investment execution plan (¥600 million executed in H1), emphasizing large deal acquisition in Zenshin Investment and value-up support for social issue-solving startups. Education business clarifies mission to 'resolve educational opportunity disparities in regional areas,' promoting competitive advantage through quality standardization and low-cost provision via all directly-operated classrooms, and corporate culture penetration. Talent matching business expects accelerated growth through AI utilization and new service launches against backdrop of structural expansion in startup talent demand. Ad-tech & content business aims to expand IP monetization areas with new businesses like Jump LAB based on Fog Inc.'s online lottery business track record (1,000+ implementations, customer base, data accumulation, operational excellence), with future IPO in view. Dividend policy change (DOE 4% → 5%) signals enhanced shareholder return commitment, ensuring sustainability backed by operating CF generation and strong equity. Suggests stance toward mid-term profitability and ROE improvement through cost management, SG&A variabilization, stricter investment selection (pivot to Zenshin Investment).

Strategic Initiatives

• Investment Business: Focus on Zenshin Investment (lead investments and value-up support for startups balancing social issue resolution and business viability), larger per-deal investment amounts, maintaining reach network to 1,000+ companies through 48 LP fund commitments
• Education Business (Bestco Co., Ltd.): Q1 6 classrooms and Q4 similar or larger new openings, continued expansion in Tohoku, North Kanto, Chugoku, Shikoku regions, enhanced technology utilization (online classes, AI utilization), strengthened high school instruction (responding to increased recommendation-based entrance exams)
• Talent Matching Business: Operational efficiency through AI utilization, launch of new services (RPO/recruitment know-how × AI)
• Ad-Tech & Content Business (Fog Inc.): Online lottery area expansion (artists → manga/anime), 'Jump LAB' joint venture with Shueisha Inc. (users customize and purchase original items, launched October 30), future IPO in view
• Company-wide: Cost variabilization and SG&A optimization leveraging high operating leverage, reduction of non-core assets and visibility of investment returns, enhanced IR efforts (transcripts, third-party reports, individual investor seminars)

Risk Assessment

Business Risks:

• Revenue volatility given a 31.8% YoY decline and potential exposure to cyclicality in digital marketing/advertising and investment-related activities.
• Operating deleverage from a relatively fixed cost base, driving negative operating and EBITDA margins on lower revenue.
• Margin measurement uncertainty due to classification/mapping issues (e.g., reported gross margin 95.9% not reconciling with cost of sales), complicating performance tracking.
• Dependence on working capital timing and non-cash tax effects to support operating cash flow.
• Potential competitive pressures and pricing dynamics impacting monetization.

Financial Risks:

• Sustained operating losses could erode equity over time if not addressed.
• Large tax expense in a loss period may reverse in cash terms later, potentially depressing future OCF.
• Limited visibility on capex/M&A (investing CF undisclosed), creating uncertainty around future cash commitments.
• Potential for financing cash outflows (¥0.533bn) to continue, affecting cash balances if operating recovery lags.

Key Concerns:

• Top-line contraction of 31.8% YoY with negative EBITDA (-14.3% margin).
• Inconsistencies in reported margin figures and equity ratio, indicating data quality/mapping limitations.
• Positive OCF alongside a net loss relies on factors that may not be sustainable (working capital and tax effects).

Risk Factors from Presentation:

• Investment Business: Timing uncertainty of large exit deals, risk of prolonged recovery period for Zenshin Investments, performance volatility of LP fund commitments
• Education Business: Declining potential demand due to regional demographics (declining birthrate), difficulty in instructor recruitment and training, competitive conditions in new expansion areas
• Talent Matching Business: Fluctuation in startup recruitment demand, risk of reversal in talent outflow trend from large corporations
• Ad-Tech & Content Business: Fog Inc.'s IT training business deviation from plan causing short-term profit deterioration, impact of lost large online lottery deals, risk of delayed ramp-up for new businesses like Jump LAB
• Company-wide: High income sensitivity to revenue fluctuations due to operating leverage, possibility of continued tax accounting (valuation allowance) impact

Investment Implications

Key Takeaways:

• Earnings under pressure: operating loss of ¥0.69bn and EBITDA margin of -14.3% on a materially lower revenue base.
• Balance sheet resilience: implied equity ratio ~90.7% and minimal interest burden support financial flexibility.
• Cash flow optics favorable near term (OCF +¥1.201bn) but quality uncertain due to non-cash and timing effects.
• Data anomalies (gross margin, equity ratio, investing CF, cash balance, share counts) warrant careful reconciliation before trend extrapolation.

Metrics to Watch:

• Revenue trajectory and order/backlog indicators to gauge stabilization.
• Operating and EBITDA margins as cost actions progress.
• Working capital movements (receivables/payables) and tax cash impact to validate OCF sustainability.
• Investing cash flows (capex, M&A, asset sales) to assess true FCF and capital allocation.
• Ordinary income versus operating income to detect non-operating swings.
• Equity ratio (recomputed) and any changes in financing cash flows (debt, buybacks).

Relative Positioning: Financially conservative with strong liquidity and low leverage relative to many small/mid-cap peers, but currently weaker on operating profitability and growth momentum due to a sharp revenue decline and negative EBITDA.

Supplementary Insights (Key Highlights)

• Investment Business: 138 unlisted companies held with ¥7.8 billion valuation, demonstrating holding potential (larger per-deal investment amounts through focus on Zenshin Investment)
• Education Business: Bestco exceeded plan, differentiated by mission to resolve regional educational disparities, planned expansion to 122 classrooms
• Talent Matching Business: Revenue growth driven by expanding startup recruitment demand trends (job transition rate from large corporations to startups rising to 26.8%)
• Ad-Tech & Content Business: 'Jump LAB' new joint venture with Shueisha Inc. launched October 30, expanding IP monetization area
• Dividend Policy: Changed from DOE 4% to 5%, maintaining ¥11.5/share demonstrating commitment to enhanced shareholder returns
• Employee base of 488 (including 1,642 temporary employees) maintained, organizational foundation expanded through education business consolidation
• Operating CF positive at ¥1,200 million largely due to working capital management and non-cash expenses, securing investment capacity

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