Kioxia Holdings Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥791.14B
• Operating Income: ¥130.82B
• Net Income: ¥58.94B
• EPS: ¥109.26

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

Kioxia Holdings (285A0) reported FY2026 Q2 consolidated results under IFRS showing a sharp cyclical recovery in profitability versus prior downturns but with notable year-on-year pressure at the operating and bottom-line levels. Revenue was 7,911.45, declining 13.0% YoY, indicating ongoing pricing/mix headwinds despite likely volume recovery in memory end-markets. Gross profit was 3,530.43 with a strong gross margin of 44.6%, highlighting improved cost position and/or better fab utilization; however, reported cost of sales and gross profit presentation may reflect IFRS classification nuances. Operating income came in at 1,308.20, down 55.2% YoY, implying significant operating deleverage as ASPs declined or as hedging and one-off cost factors rolled off. EBITDA was 2,885.05 (36.5% margin), supported by substantial non-cash depreciation and amortization of 1,576.85, underscoring the capital-intensive nature of the business. Net income was 589.46, down 66.5% YoY, with an unusually high effective tax rate of 86.8%, likely influenced by valuation allowance movements, regional tax effects, or one-time tax items. DuPont decomposition shows a calculated ROE of 7.2% (net margin 7.5%, asset turnover 0.265x, financial leverage 3.64x), consistent with reported ROE and driven primarily by leverage rather than asset efficiency. Operating cash flow was robust at 2,418.65 (OCF/NI 4.10x), and free cash flow was positive at 1,790.23 after capex of 872.52, indicating strong earnings-to-cash conversion and disciplined capital spending. Total assets were 29,822.19 with equity of 8,193.42 (equity ratio 27.5%), pointing to a still levered balance sheet (liabilities/equity 2.66x) but improved liquidity through internal cash generation. Working capital efficiency appears tight: DSO around 55 days, DIO roughly 116 days, and DPO about 165 days suggest a short cash conversion cycle of approximately 6 days. Retained earnings remain negative at -1,895.47, constraining capital allocation flexibility and likely limiting dividends in the near term. Cash and equivalents were 1,679.32, supported by positive OCF and moderated capex. The reduction in financing cash flows (-2,217.18) indicates repayments or reduced external funding reliance, consistent with improved FCF. Despite the YoY profit compression, margin structure at the gross and EBITDA levels appears healthier than the bottom line suggests, given tax and below-OP items. Data gaps (e.g., non-operating items, interest expense, current liabilities) limit precise ratio analysis and interest coverage assessment. Overall, the quarter reflects a recovering but volatile earnings profile typical of the memory cycle, better cash discipline, and ongoing balance sheet repair from accumulated losses.

Profitability Analysis

ROE_decomposition: Calculated ROE 7.2% = Net profit margin 7.5% × Asset turnover 0.265 × Financial leverage 3.64x. The ROE is primarily leverage-driven, with modest asset efficiency and mid-single-digit net margin for the period. margin_quality: Gross margin 44.6% and EBITDA margin 36.5% indicate improved manufacturing economics and cost absorption; operating margin of ~16.5% (1,308.20/7,911.45) narrowed sharply YoY, suggesting price/mix pressure and operating deleverage. The very high effective tax rate (86.8%) depressed net margin vs operating performance, likely due to one-offs or valuation allowance effects. operating_leverage: YoY revenue -13.0% vs operating income -55.2% implies high negative operating leverage in the period. High fixed-cost base (D&A 1,576.85) magnifies earnings sensitivity to price/volume. EBITDA remained comparatively resilient, but the drop from EBITDA to EBIT reflects substantial D&A typical of a fab-intensive model.

Growth Assessment

revenue_sustainability: Revenue of 7,911.45 declined 13.0% YoY, pointing to continued ASP pressure or slower recovery in certain end markets despite likely bit growth. Inventory at 3,528.63 (~45% of sales for the period) is manageable but warrants monitoring for price risk if market conditions soften. profit_quality: EBITDA margin 36.5% and strong OCF/NI (4.10x) indicate solid cash profitability relative to accounting earnings. The gap between EBIT and NI is influenced by a high effective tax rate and unreported non-operating items, suggesting that normalized net income could differ materially from reported NI. outlook: Given the cyclical memory backdrop, a continued recovery would hinge on ASP stabilization, disciplined supply, and sustained utilization. With positive FCF and improved gross margin, the company is positioned to benefit from any pricing upturn, but high fixed costs mean downside risk if demand softens. Data limitations preclude precise guidance calibration.

Financial Health

liquidity: Cash and equivalents 1,679.32 and OCF 2,418.65 support near-term liquidity. Current assets are 8,067.09; current liabilities are unreported, preventing calculation of current/quick ratios. Working capital metrics derived from turnover suggest an efficient cash conversion cycle. solvency: Equity 8,193.42 with an equity ratio of 27.5% and liabilities/equity of 2.66x indicate a leveraged capital structure. Negative retained earnings (-1,895.47) point to historical losses; continued profitability and FCF are important to rebuild equity. capital_structure: Noncurrent liabilities and interest-bearing debt are unreported; however, financing CF of -2,217.18 suggests debt repayment or net outflows to creditors. Without interest expense disclosure, interest coverage cannot be assessed. Capital surplus of 8,666.65 provides cushion, but accumulated deficits constrain distributions.

Cash Flow Quality

earnings_quality: OCF/Net income of 4.10x signals strong cash conversion and limited accrual risk in the period. EBITDA (2,885.05) and OCF (2,418.65) are directionally aligned with D&A levels, supporting the quality of operating earnings. FCF_analysis: Free cash flow was positive at 1,790.23 after capex of 872.52 (capex intensity ~11.0% of revenue). Positive FCF alongside negative financing CF implies deleveraging and reduced reliance on external funding. working_capital: AR 2,385.94 (DSO ~55 days), inventories 3,528.63 (DIO ~116 days), and AP 5,040.11 (DPO ~165 days) yield a short cash conversion cycle (~6 days), reflecting strong supplier terms and efficient collections. Continued monitoring is needed given data presentation differences in cost of sales.

Dividend Sustainability

payout_ratio_assessment: Dividends are unreported; payout ratios are not calculable. Given negative retained earnings (-1,895.47), capital allocation is likely focused on balance sheet repair and reinvestment rather than distributions. FCF_coverage: With positive FCF (1,790.23), the capacity to fund dividends exists in cash terms, but policy constraints from accumulated deficits and leverage likely limit distributions. policy_outlook: Absent disclosed DPS and given equity rebuilding needs, a conservative stance on shareholder returns appears likely until sustained profitability restores retained earnings. Formal policy clarity is not available from the provided data.

Risk Assessment

Business Risks:

• Memory price volatility (ASP swings) impacting revenue and margins
• High operating leverage due to fixed-cost fab base, amplifying cyclical swings
• Inventory price risk if demand weakens or supply increases
• Customer concentration risk common in memory markets
• Execution risk in capacity ramp, yield improvement, and technology transitions

Financial Risks:

• Leverage (liabilities/equity 2.66x) and equity ratio of 27.5%
• Negative retained earnings constraining capital flexibility
• Unusually high effective tax rate (86.8%) causing earnings volatility
• Information gaps on interest-bearing debt and interest expense impede coverage assessment
• Reliance on working capital financing via extended payables (DPO ~165 days)

Key Concerns:

• Sustaining gross and EBITDA margins amid potential ASP pressure
• Normalizing the effective tax rate and below-operating items to stabilize net income
• Maintaining positive FCF while funding technology/capacity investments
• Rebuilding retained earnings to strengthen equity and support future distributions

Investment Implications

Key Takeaways:

• Revenue down 13.0% YoY to 7,911.45, indicating ongoing market softness despite operational recovery
• Gross margin robust at 44.6%; EBITDA margin 36.5% demonstrates improved cost structure
• Operating income fell 55.2% YoY to 1,308.20, highlighting high operating leverage
• Net income 589.46 with an 86.8% effective tax rate; normalized NI may be higher than reported
• Strong cash generation: OCF 2,418.65 and FCF 1,790.23; deleveraging evident via negative financing CF
• Equity ratio 27.5% and liabilities/equity 2.66x underscore a still-levered balance sheet
• Retained earnings negative (-1,895.47), limiting near-term dividends
• Working capital efficiency strong with a short cash conversion cycle (~6 days)

Metrics to Watch:

• ASP trends and bit growth (top-line trajectory)
• Utilization rates and cost per bit (gross margin sustainability)
• EBITDA-to-OCF conversion and OCF/NI ratio
• Capex intensity vs. FCF (investment discipline)
• Inventory days and write-downs (price risk)
• Effective tax rate normalization
• Equity ratio and net debt (once disclosed), interest coverage when available

Relative Positioning: Within Japan-listed semiconductor and memory peers, Kioxia exhibits improving cash generation and margin recovery but remains more exposed to memory-cycle volatility and leverage than diversified chipmakers; equity rebuilding is a priority before shareholder returns normalize.

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
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