Vector HOLDINGS Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥46M
• Operating Income: ¥-272M
• Net Income: ¥-302M
• EPS: ¥-15.03

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

Verdict: FY2026 Q2 was very weak, marked by a deep operating loss, negative net income, and cash burn despite a strong reported liquidity position. Revenue was 0.46 (100M JPY), down 16.4% YoY, while SG&A of 3.19 dwarfed gross profit of 0.46, resulting in operating income of -2.72 and ordinary income of -3.05. Net income was -3.01 (EPS -15.03 JPY), with non-operating income of 0.06 unable to offset 0.38 in non-operating expenses. Operating margin stands at approximately -5910 bps on the reported revenue base; YoY margin delta is not available due to lack of prior-period margin disclosure. The reported gross margin of 100.4% likely reflects the non-disclosure of cost of sales rather than true economics for a services-heavy model. Cash flow was weaker than earnings: operating cash flow was -4.07 versus net income of -3.01, implying higher cash burn than the accrual loss. Financing cash inflow of 5.76 bridged the cash deficit, with period-end cash and deposits at 2.48, highlighting reliance on external capital. Balance sheet shows total assets of 6.45 and total equity of 5.53 (owners’ equity 5.43), implying an equity ratio around the mid-80% range, though the XBRL equity ratio itself is unreported. Retained earnings remain deeply negative at -40.50, evidencing accumulated losses despite sizeable paid-in capital (capital stock 21.49, capital surplus 25.38). Liquidity optics are strong (current assets 5.76 vs current liabilities 0.70; current ratio 828.8%), but the quality of current assets and ongoing cash burn temper comfort. ROE is highly negative at -54.4% on a DuPont basis, driven primarily by a severely negative net margin and low asset turnover (0.071). ROIC is reported at -89.1%, well below any acceptable threshold and indicative of value destruction in the current period. Earnings quality is mixed: OCF/NI is 1.35x on a mechanical basis, but both figures are negative and OCF is more negative than NI, which is a red flag for cash-based quality. Looking ahead, stabilizing revenue and cutting fixed SG&A are essential, as the business currently lacks operating leverage and consumes cash; absent a meaningful turnaround, further equity funding or cost restructuring appears likely. Data limitations (numerous unreported items such as cost of sales detail, SG&A components, and investing cash flows) constrain precision, but the overall picture is a stressed P/L, cash burn, and dependence on financing inflows to sustain liquidity.

Profitability Analysis

ROE decomposition (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = (-654.4%) × 0.071 × 1.17 ≈ -54.4%. Key driver: the largest negative impact comes from Net Profit Margin, which is deeply negative due to revenue contraction and SG&A far exceeding gross profit. Asset turnover is also weak at 0.071, reflecting a small revenue base relative to assets, while financial leverage is modest at 1.17x (i.e., low gearing), providing little boost to ROE. Business reason: revenue fell 16.4% YoY to 0.46 while SG&A remained high at 3.19 (including directors compensations of 0.58), producing an operating loss of -2.72; limited non-operating gains (0.06, mainly interest income 0.04) could not offset non-operating expenses (0.38). Sustainability: the current margin compression appears structural rather than one-off, stemming from fixed cost overhang; absent rapid revenue recovery or cost cuts, poor profitability will likely persist. Concerning trends: the scale mismatch—SG&A at ~694% of revenue—signals negative operating leverage; with limited disclosure, we cannot confirm whether SG&A grew faster than revenue YoY, but the current cost base is unsustainable relative to the revenue level.

Growth Assessment

Revenue declined 16.4% YoY to 0.46, indicating contraction in the top line without offsetting cost adjustments. Operating profit deteriorated to -2.72, and ordinary profit to -3.05, as non-operating income (0.06) was insufficient. With gross profit equal to reported revenue due to unreported cost of sales, the apparent gross margin is not informative for assessing growth quality. The profit shortfall is driven by fixed SG&A and a diminished revenue base, suggesting demand softness or execution issues. Outlook hinges on restoring sales volume and/or resetting the SG&A base; near-term growth visibility is low given cash burn and reliance on financing cash inflows.

Financial Health

Liquidity is optically strong: current assets 5.76 vs current liabilities 0.70 yield a current ratio of 828.8% and quick ratio of 828.8%. No warning for Current Ratio (<1.0 does not apply). Solvency: total liabilities 0.92 vs equity 5.53 implies a D/E around 0.17x (conservative). Maturity mismatch risk appears low given current assets materially exceed current liabilities; cash and deposits of 2.48 cover 3.5x current liabilities’ interest expense proxy (interest expense 0.01 for the period), but ongoing OCF burn is the greater risk. Retained earnings are -40.50, signaling cumulative deficits and potential constraints on dividend capacity. Interest-bearing debt is unreported; however, the modest interest expense suggests limited leverage. Off-balance sheet obligations: none disclosed in the provided data.

Cash Flow Quality

OCF was -4.07 versus NI of -3.01, producing an OCF/NI ratio of 1.35x but with both negative; this indicates weaker cash generation than accrual earnings and is a quality concern. FCF proxy is approximately -4.08 (OCF -4.07 plus capex -0.01), noting that full investing CF is unreported and other investing flows could alter this. The company relied on financing CF of 5.76 to fund operations, indicating dependence on external capital. Working capital signals are mixed: accounts receivable 0.18 versus H1 revenue 0.46 implies high DSO in the absence of other detail, but without period-to-period changes we cannot assess manipulation; no clear signs of one-time WC release supporting OCF—indeed, OCF is more negative than NI. Cash runway (rough proxy): with cash 2.48 and H1 OCF burn 4.07, monthly burn ~0.68 (100M JPY), implying roughly 3–4 months of cash if the burn rate persisted and absent additional financing; this is partially mitigated by other current assets but highlights urgency to improve cash generation or secure further funding.

Dividend Sustainability

No dividends are reported for the period, and payout ratios are not calculable. Given negative NI (-3.01) and negative FCF proxy (~-4.08), there is no coverage for dividends. Retained earnings are significantly negative (-40.50), constraining distributable reserves under JGAAP. Policy outlook: absent a profitable turnaround and positive FCF, dividends appear unlikely in the near term.

Risk Assessment

Business Risks:

• Demand softness and revenue contraction (-16.4% YoY) in core operations
• High fixed SG&A relative to revenue causing negative operating leverage
• Execution risk in cost restructuring and business model adjustment
• Client budget cyclicality typical in marketing/communications services

Financial Risks:

• Sustained cash burn (OCF -4.07) requiring ongoing external financing
• Potential equity dilution risk given financing CF reliance (5.76 inflow)
• Cumulative deficits (retained earnings -40.50) limiting financial flexibility
• ROIC of -89.1% indicating value destruction if trends persist

Key Concerns:

• Severely negative ROE (-54.4%) driven by margin collapse and low asset turnover
• Interest coverage deeply negative on EBITDA basis (quality alert)
• Liquidity quality vs quantity: high current ratio but modest cash (2.48) against high burn
• Limited disclosure (cost of sales detail, segment data, investing CF) obscures drivers

Investment Implications

Key Takeaways:

• Top-line decline with outsized SG&A produced a -2.72 operating loss and -3.01 net loss
• Cash burn exceeded accrual loss; OCF -4.07 funded by 5.76 financing inflow
• Balance sheet leverage is low (D/E ~0.17x) but cumulative deficits are large
• ROE (-54.4%) and ROIC (-89.1%) signal significant value erosion in the period
• Short cash runway absent continued financing or rapid operating improvement

Metrics to Watch:

• Monthly/quarterly revenue run-rate and backlog/pipeline indicators
• SG&A run-rate, especially fixed components (e.g., directors compensation 0.58)
• Operating cash flow and working capital movements (receivables, advances)
• Cash balance and additional financing activities (equity/debt issuance)
• ROIC/ROE trajectory and any restructuring charges or one-offs

Relative Positioning: Versus domestic small-cap services peers, the company exhibits weaker profitability and cash generation, with higher dependence on external financing; balance sheet leverage is conservative, but operational underperformance and negative retained earnings place it at a disadvantage until cost base and revenue trajectory improve.

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