TENPOS HOLDINGS Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥25.55B
• Operating Income: ¥1.50B
• Net Income: ¥1.32B
• EPS: ¥80.16

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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

Tenpos Holdings (2751) delivered FY2026 Q2 consolidated results under JGAAP showing solid top-line growth but compressed bottom-line performance. Revenue rose 10.9% YoY to 255.54, indicating resilient demand across its core restaurant-related businesses and services. Gross profit reported at 88.94 implies a gross margin of 34.8%, while operating income grew modestly by 1.7% YoY to 15.01, placing the operating margin at roughly 5.9%. Ordinary income was stable at 15.88 (+0.3% YoY), with limited contributions from non-operating items (income 1.14, expenses 0.08). Net income declined 18.9% YoY to 9.64, despite an effective tax rate of 18.1%, suggesting either a tougher comparison base, higher minority interests, or a mix shift in profitability that was not offset by non-operating items. On a DuPont basis, calculated ROE is 5.3% (net margin 3.8%, asset turnover 0.914x, financial leverage 1.54x), indicating middle-single-digit returns on equity—adequate but below typical Japanese service-sector leaders. EBITDA of 16.69 (margin 6.5%) and D&A of 1.68 highlight an asset-light to moderately capital-intensive model with limited depreciation drag. Operating cash flow was 8.08, at 0.84x net income, implying some working capital consumption during the half. The balance sheet is conservative: total assets 279.71 and equity 181.16 imply low leverage, backed by cash and deposits of 96.17 and working capital of 110.46. Liquidity is strong (current ratio 260.2%, quick ratio 182.1%), and interest coverage is very high at 300x, with limited interest-bearing debt disclosed. SG&A of 74.17 (29.0% of sales) constrained operating leverage against double-digit revenue growth, suggesting wage, logistics, or store-related costs rose. Intangibles (including goodwill 10.71 and other intangible assets 11.90) total 22.61, which is manageable relative to equity but requires monitoring for impairment risk if earnings soften. Equity per share is solid (book value per share calculated at 1,504.58 yen vs. XBRL 1,386.04 yen), consistent with a net-cash, asset-light positioning. Dividend details are largely unreported, but a calculated payout ratio of 13.4% suggests a conservative distribution policy and capacity for reinvestment. Data gaps exist in SG&A detail, investing cash flows, and dividend disclosures; still, the overall portrait is of a financially healthy company with robust liquidity and stable ordinary income, facing near-term margin pressure and weaker net profit YoY.

Profitability Analysis

ROE decomposition (DuPont): Net profit margin is 3.8%, asset turnover 0.914x, and financial leverage 1.54x, producing a calculated ROE of 5.3% (in line with the reported figure). Operating margin is approximately 5.9% (operating income 15.01 / revenue 255.54), down versus revenue growth given operating income grew only +1.7% YoY against +10.9% sales growth. Gross margin is reported at 34.8%; while cost of sales is listed at 141.57, the reported gross profit (88.94) and gross margin imply additional cost classifications or timing effects—our analysis relies on the reported gross margin. EBITDA margin is 6.5%, with D&A of 1.68 indicating modest capital intensity. Non-operating items were a small net positive (+1.06), insufficient to offset weaker net profit. The effective tax rate was 18.1%, not a major driver of net income compression YoY. Operating leverage was limited this period, as SG&A rose to 29.0% of sales, consuming much of the incremental gross profit from higher revenue. Interest burden is negligible (interest expense 0.05), reflecting strong interest coverage (300x) and underscoring that financing costs do not materially impact profitability. Overall, profitability is adequate but not robust; margin expansion would require tighter SG&A control, improved mix, or efficiencies in procurement and logistics.

Growth Assessment

Revenue increased 10.9% YoY to 255.54, a healthy pace for mid-cycle conditions in restaurant equipment/services, pointing to resilient demand for new openings, refurbishments, and related services. Operating income grew only 1.7% YoY and ordinary income 0.3% YoY, implying negative operating leverage from higher SG&A and potentially lower gross profit per unit or an adverse mix. Net income declined 18.9% YoY, suggesting either one-offs last year, higher minority interests, or reduced non-operating gains; given limited disclosure, we ascribe the decline primarily to margin pressure. Profit quality remains acceptable: EBITDA grew (implied by higher operating income plus stable D&A), but conversion to net income weakened. Asset turnover of 0.914x indicates efficient use of assets for a service/retail hybrid business, but below 1x, leaving room for productivity gains. Looking forward, sustainability of revenue growth will hinge on new restaurant openings, secondhand equipment supply, and ancillary service uptake; near-term growth quality depends on stabilizing SG&A ratio and maintaining gross margin discipline. With strong cash reserves, the company can support growth initiatives (store network, refurbishment pipelines, service add-ons) without stressing the balance sheet. However, absent margin improvements, incremental sales may not translate into stronger earnings growth, highlighting the importance of cost controls and pricing power.

Financial Health

Liquidity is strong: current ratio 260.2% and quick ratio 182.1%, supported by cash and deposits of 96.17 and receivables of 26.06 against current liabilities of 68.95. Working capital is 110.46, providing ample operational flexibility. Solvency is robust: total equity is 181.16 vs total liabilities 89.96; assets/equity = 1.54x, implying moderate financial leverage. While a reported Debt-to-Equity ratio of 0.50x is provided, disclosed interest-bearing debt totals approximately 16.42 (0.02 short-term + 16.40 long-term), which equates to about 0.09x of equity—differences may reflect inclusion of lease liabilities or broader obligations in the reported ratio. Interest coverage is very high at 300x, reflecting minimal interest expense (0.05) and healthy operating income. Cash comfortably exceeds all short-term borrowings, and long-term debt is modest relative to cash and equity. Intangible assets total roughly 22.61 (goodwill 10.71 and other intangibles 11.90), manageable relative to equity but a potential source of impairment risk under earnings stress. Overall, the capital structure is conservative with significant liquidity headroom.

Cash Flow Quality

Operating cash flow was 8.08, equating to 0.84x of net income (9.64), indicating some working capital outflow in the period (likely inventory build or receivables growth tied to sales expansion). Depreciation and amortization totaled 1.68, consistent with the asset base and EBITDA bridge. Investing cash flow is unreported; however, capital expenditures were -3.86, suggesting an estimated free cash flow (OCF – Capex) of roughly 4.22; this is an analyst-derived estimate given the data gap and may differ from actual FCF once full investing cash flows (including disposals or investment securities flows) are considered. The OCF/NI ratio below 1.0 is acceptable for a growth period but should normalize toward or above 1.0 over time to support higher distributions and reinvestment without incremental leverage. Working capital components show meaningful inventory (53.83) and payables (30.59); inventory management and turnover will be key to improving cash conversion. Non-operating cash impacts cannot be fully assessed due to unreported investing and dividend cash flows.

Dividend Sustainability

Dividend per share and total dividends paid are unreported; however, a calculated payout ratio of 13.4% implies a conservative distribution policy relative to net income. If we apply the 13.4% payout to net income of 9.64, indicative dividends would be approximately 1.29 (analyst estimate), which appears comfortably covered by estimated free cash flow of roughly 4.22. The company’s substantial cash position (96.17) and low leverage provide additional coverage and flexibility around dividends. Absent full disclosure of DPS timing (Q1, Q3) and financing cash flows, we rely on the payout ratio signal and balance sheet strength to infer sustainability. Policy outlook likely remains conservative, prioritizing reinvestment and liquidity, with room for gradual increases if cash conversion improves and margin headwinds ease. Key to future dividend capacity will be maintaining OCF/NI at or above 1.0 and avoiding material swings in working capital.

Risk Assessment

Business Risks:

• Cyclical demand from restaurant openings/closures affecting equipment and services sales
• Gross margin volatility due to procurement costs, used-equipment mix, and pricing power
• Inventory obsolescence and valuation risk in secondhand equipment
• Execution risk in SG&A control amid wage inflation and logistics costs
• Goodwill and intangible asset impairment risk if profitability softens
• Competitive intensity from peers in equipment resale, fixtures, and services
• Dependence on broader foodservice industry health and consumer spending trends
• Supply availability of quality used equipment impacting sales mix

Financial Risks:

• Working capital swings (inventory and receivables) pressuring OCF
• Potential hidden leverage from leases or off-balance obligations affecting leverage metrics
• Interest rate increases could raise financing and lease costs, albeit from a low base
• Tax rate variability and any non-recurring items impacting net income

Key Concerns:

• Net income down 18.9% YoY despite strong revenue growth
• Limited operating leverage as SG&A rose to 29.0% of sales
• OCF/Net income at 0.84x, indicating weaker cash conversion this period
• Data gaps in SG&A details and investing cash flows hinder granular analysis

Investment Implications

Key Takeaways:

• Top-line growth is solid (+10.9% YoY), but margins compressed, limiting operating leverage
• ROE at 5.3% is modest; improvements hinge on margin expansion and asset productivity
• Balance sheet strength (net cash, high liquidity) provides resilience and optionality
• Cash conversion lagged (OCF/NI 0.84x); inventory and receivables discipline will be critical
• Dividend capacity appears adequate given low payout ratio and cash reserves, though details are limited

Metrics to Watch:

• SG&A ratio and operating margin trajectory
• Gross margin by product/service mix and procurement costs
• Inventory turnover days and receivables collection
• OCF/NI and estimated FCF trends
• Intangible assets and any impairment indicators
• Leverage including lease liabilities and interest coverage
• Revenue growth sustainability across core segments

Relative Positioning: Within Japan small/mid-cap service and retail-adjacent peers, Tenpos exhibits above-average liquidity and conservative leverage, with mid-single-digit ROE and solid sales growth but softer earnings momentum due to SG&A pressure; execution on cost control and cash conversion will be key to closing the gap with higher-ROE peers.

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