Vector HOLDINGS Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥46M
• Operating Income: ¥-272M
• Net Income: ¥-332M
• 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

Vector Holdings (TSE:26560) reported FY2026 Q2 consolidated results under JGAAP with significant operating and bottom-line losses despite modest scale revenue. Revenue was 46.0 million yen, down 16.4% YoY, while operating income was a loss of 272.0 million yen (flat YoY), ordinary loss was 305.0 million yen, and net loss was 301.0 million yen (EPS -15.03). The DuPont-based ROE is deeply negative at -54.43%, driven primarily by a very large negative net margin (-654.35%), modest asset turnover (0.071x), and low financial leverage (1.17x). Gross profit is stated at 45.864 million yen, implying an extremely high gross margin (99.7%), which suggests either a largely fee-based/service revenue mix or accounting classification effects this quarter. EBITDA was -269.3 million yen, indicating a heavy fixed-cost burden relative to the small revenue base. The company generated negative operating cash flow of -204.964 million yen; financing cash flow was +91.662 million yen, implying reliance on external funding to support operations. Liquidity appears strong on a current ratio basis at 3.28x with working capital of 196.0 million yen, and leverage is low with debt-to-equity at 0.21x, providing solvency headroom despite losses. Interest expense was minimal (74 thousand yen), and interest coverage is deeply negative due to operating losses. Total assets were 645.0 million yen, liabilities 116.232 million yen, and total equity 553.0 million yen, indicating a largely equity-funded balance sheet. The equity ratio was not disclosed (reported as 0.0%, which should be treated as unreported). Dividend policy remains conservative, with DPS at 0 and payout at 0%, appropriate given negative earnings and OCF. Cash and equivalents were reported as 0 due to non-disclosure, limiting cash runway analysis from the statement alone. Overall, the quarter reflects constrained top line, heavy fixed costs, and persistent operating losses; however, the balance sheet shows low leverage and ample short-term liquidity relative to current liabilities. Near-term priorities appear to be cost discipline, revenue stabilization, and securing sufficient funding until operations turn cash-flow neutral. Data gaps (notably cash balance, equity ratio, investing cash flow, and share count) limit precision in several metrics; conclusions are therefore framed with these limitations in mind.

Profitability Analysis

ROE decomposition indicates profitability as the primary drag: Net margin (-654.35%) x Asset turnover (0.071x) x Financial leverage (1.17x) = ROE of -54.43%. Revenue of 46.0m yen against an operating loss of 272.0m yen underscores severe negative operating margin, and EBITDA of -269.3m yen points to a sizable fixed cost base relative to revenue. The reported gross profit of 45.864m yen yields a gross margin of 99.7%, suggesting a high-value service/fee mix or expense classification timing; however, the gap between gross profit and operating loss indicates heavy SG&A and other operating expenses. Ordinary loss (-305.0m yen) widened versus operating loss, reflecting modest non-operating expenses (interest 74k yen) and possibly other non-operating items. Effective tax rate is effectively zero, consistent with losses. Operating leverage appears high: a relatively small revenue base combined with substantial fixed SG&A results in large swings in operating income. With asset turnover at 0.071x, the asset base is large relative to current revenue, which depresses return metrics even absent leverage. Margin quality is weak at the operating and net levels; near-term profitability would require either substantial cost reductions or a material revenue ramp. Given the minimal interest burden and low leverage, financing costs are not the primary issue—core operations are.

Growth Assessment

Top-line contracted 16.4% YoY to 46.0m yen, indicating demand softness or portfolio pruning. Profit trends are flat at a deeply negative level (operating and net losses both +0.0% YoY), suggesting limited progress on structural cost containment or monetization. The very high gross margin (99.7%) implies the revenue that is earned carries strong unit economics before overhead, but scale is insufficient to absorb fixed costs. Sustainability of revenue hinges on stabilizing the core service lines that generate high gross margins and re-accelerating volumes; lack of disclosed segment detail constrains deeper attribution. Profit quality is weak with losses at all levels and negative OCF (-204.964m yen), implying limited near-term self-funding. Outlook: absent a clear revenue inflection or SG&A reset, FY trajectory points to continued losses; however, the low leverage affords time to execute. Key to growth durability will be client retention, pipeline conversion, and any productized services that can scale without proportional cost increases. The small absolute revenue base magnifies volatility—both upside and downside. With calculated asset turnover at 0.071x, the company needs to either streamline assets or expand revenue to restore returns. Near-term guidance is not provided; thus, expectations should anchor to stabilization rather than rapid growth until evidence of bookings and cost actions emerges.

Financial Health

Liquidity is strong on a current ratio basis at 3.28x (current assets 282.035m yen vs current liabilities 86.040m yen) with working capital of 195.995m yen. The quick ratio equals the current ratio due to inventories reported as unreported (0); hence, near-cash/current receivables appear to cover short-term obligations. Solvency appears sound with low leverage: debt-to-equity is 0.21x, and financial leverage in DuPont terms is 1.17x. Interest expense is negligible (74k yen), and there is no immediate interest burden risk. Total assets are 645.0m yen against total liabilities of 116.232m yen, implying a largely equity-funded structure, though there is a minor inconsistency with the sum of liabilities and equity vs assets likely due to reporting taxonomy or rounding. The reported equity ratio is unreported (shown as 0.0%) and should not be interpreted as zero; based on totals, equity appears to represent the majority of financing. Financing cash inflow (+91.662m yen) indicates ongoing access to capital markets or borrowings to bridge operating needs. Overall, the balance sheet provides a buffer against operational losses, but persistent negative OCF will erode this cushion absent further financing or loss reduction.

Cash Flow Quality

Earnings quality is weak with OCF negative at -204.964m yen versus a net loss of -301.0m yen, yielding an OCF/NI ratio of 0.68; cash burn is somewhat smaller than the accounting loss, possibly due to non-cash charges (D&A 2.652m yen) and working capital movements. EBITDA is -269.3m yen, so operating cash shortfall is primarily driven by underlying losses rather than one-off working capital spikes. Free cash flow is reported as 0 due to non-disclosure of investing cash flows; given OCF is negative and CapEx is undisclosed, underlying FCF is likely negative. Investing CF is unreported (0), limiting assessment of capital intensity and reinvestment needs. Working capital quality cannot be fully evaluated without receivables/payables details; however, strong current assets vs current liabilities suggests some cushion. With cash & equivalents unreported (0), runway analysis must use working capital and financing access as proxies. The company supplemented cash needs with +91.662m yen financing CF in the period, partially offsetting OCF burn. Overall, cash conversion is poor given deep operating losses, and sustained funding will be required until OCF improves.

Dividend Sustainability

Annual DPS is 0 and payout is 0%, appropriate given negative earnings and negative operating cash flow. With OCF at -204.964m yen and FCF effectively negative (investing CF unreported), there is no coverage for dividends. Policy outlook likely remains preservation of liquidity and balance sheet until profitability/OCF turns positive. Any future distributions would require a clear and sustained improvement in earnings and cash generation or excess balance sheet capacity, neither of which is evident this quarter. Given financing CF of +91.662m yen and ongoing losses, capital allocation priority is expected to be funding operations rather than shareholder returns.

Risk Assessment

Business Risks:

• Revenue scale risk: small absolute revenue base (46.0m yen) amplifies volatility and operating leverage.
• Customer/demand risk: -16.4% YoY revenue decline suggests potential weakness in client activity.
• Execution risk: need to materially reduce fixed SG&A or accelerate sales to reach break-even.
• Margin classification risk: extremely high reported gross margin (99.7%) may reflect classification/timing, complicating planning.
• Competitive/intensity risk in core services potentially pressuring volumes and pricing.

Financial Risks:

• Sustained operating losses (operating loss -272.0m yen) driving negative OCF (-204.964m yen).
• Dependence on external financing (+91.662m yen financing CF) to fund operations.
• Limited visibility on cash balance and investing needs due to non-disclosure.
• Potential erosion of equity base if losses persist, impacting covenant/financing flexibility.
• Low asset turnover (0.071x) dampens returns and may indicate underutilized assets.

Key Concerns:

• Persistent negative ROE (-54.43%) and deeply negative margins.
• High fixed cost base implied by EBITDA -269.3m yen on 46.0m yen revenue.
• Negative OCF with incomplete visibility on cash runway.
• Revenue contraction without evidence of offsetting cost reductions.
• Reliance on financing inflows to sustain operations.

Investment Implications

Key Takeaways:

• Severe profitability pressure: operating loss of 272.0m yen and ROE -54.43%.
• Revenue base contracted 16.4% YoY to 46.0m yen; scale insufficient to cover fixed costs.
• Liquidity cushion appears adequate near term (current ratio 3.28x; working capital ~196.0m yen) with low leverage (D/E 0.21x).
• Cash burn persists (OCF -204.964m yen); supported by financing inflows (+91.662m yen).
• Reported gross margin of 99.7% highlights potential for high unit economics if scale improves, but overhead dominates currently.

Metrics to Watch:

• Quarterly revenue growth and bookings/pipeline to assess scale trajectory.
• Operating expense run-rate (SG&A) and break-even revenue level.
• Operating cash flow trend and external financing reliance.
• Asset turnover improvements via revenue growth or asset optimization.
• Disclosure on cash balance, investing cash flows (CapEx/M&A), and segment profitability.

Relative Positioning: Compared with typical TSE small-cap service-oriented peers, Vector Holdings exhibits lower scale, much weaker operating profitability, and significantly negative ROE, but with lower financial leverage and a stronger current ratio. The balance sheet offers some resilience, yet operational efficiency and revenue scale lag peers, resulting in inferior cash flow generation.

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