Laxus Technologies Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.09B
• Operating Income: ¥51M
• Net Income: ¥46M
• EPS: ¥1.81

Income Statement

Balance Sheet

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: Weak quarter with sharp profit compression; headline pre-tax profit was propped up by one-off/extraordinary gains while core profitability deteriorated markedly. Revenue fell to 10.93 (−14.9% YoY), with operating income plunging to 0.51 (−84.9% YoY) and ordinary income to 0.57 (−83.0% YoY). Net income was 0.46 (−83.6% YoY), implying a current net margin of 4.2% versus an estimated ~21.8% in the prior period. Gross margin remained very high at 90.6%, reflecting an asset-light/service-like model, but operating margin collapsed to 4.7% from an estimated ~26.3% a year ago (−2,160 bps). Ordinary income margin similarly contracted to 5.2% from ~26.1% (−2,090 bps), and net margin compressed by ~1,760 bps. Profit before tax surged to 3.27, far above ordinary income (0.57), indicating approximately 2.7 of extraordinary gains that masked underlying weakness. Effective tax rate was low at 13.3%, likely influenced by the nature of non-recurring gains. Non-operating income ratio was high at 58.0%, underscoring increased reliance on below-the-line items. Liquidity is strong (current ratio 245.5%, cash 15.22 versus current liabilities 7.72), and leverage appears manageable (D/E 0.56x) with equity/asset ratio estimated at ~67.7%. However, capital efficiency is weak: ROE is just 1.5% and ROIC is 1.8% (warning threshold <5%), reflecting low asset turnover (0.245) amid profit compression. Interest coverage is borderline at 4.82x, leaving limited cushion if rates rise or profits weaken further. Earnings quality cannot be validated due to unreported cash flow data; OCF/NI is not calculable. With retained earnings still negative (−3.50), capital allocation flexibility and dividend capacity appear constrained. Forward-looking, the company must restore operating leverage, improve asset turnover, and lift ROIC above 5% to support sustainable value creation; absent that, reliance on non-recurring gains is a key risk.

Profitability Analysis

ROE decomposition (DuPont): ROE 1.5% = Net Profit Margin (4.2%) × Asset Turnover (0.245) × Financial Leverage (1.48x). The largest deterioration came from the margin component: operating income fell 84.9% vs revenue −14.9%, compressing the operating margin from an estimated ~26.3% to 4.7% (−2,160 bps). Asset turnover at 0.245 is low for a consumer/platform model and likely declined YoY given revenue contraction against a relatively steady asset base (44.67). Financial leverage at 1.48x (Assets/Equity) is moderate and not the driver of ROE change. Business reason: revenue softness combined with limited ability to flex SG&A (6.51 against gross profit 9.91) caused operating deleverage, while higher non-operating/extraordinary items inflated PBT but did not translate into sustainably higher ROE. Sustainability assessment: the extraordinary gain (implied ~2.7) is one-time; margin pressure from demand and fixed cost absorption could persist unless cost actions or growth re-accelerate. Concerning trends: SG&A intensity appears elevated (SG&A/revenue ~59.6%); given revenue decline, SG&A likely grew faster than revenue on a relative basis, signaling negative operating leverage.

Growth Assessment

Top-line contracted 14.9% YoY to 10.93, indicating demand softness or lower monetization. Operating profit fell 84.9% YoY to 0.51, a much steeper decline than revenue, evidencing operating deleverage. Ordinary income dropped 83.0% to 0.57, but PBT rose to 3.27 due to one-off gains, distorting the headline. Net income of 0.46 (−83.6% YoY) mirrors core weakness after normalizing for non-operating items. Gross margin stayed extremely high at 90.6%, suggesting unit economics at the gross level remain intact, but fixed/semi-fixed SG&A weighed heavily. With ROIC at 1.8% (well below 5% warning threshold), current growth and investment are not covering the cost of capital. Near-term outlook hinges on stabilizing revenue and tightening SG&A; absent that, profitability is likely to remain subdued, and ROE/ROIC improvements will be limited. Visibility is low due to lack of cash flow, capex, and segment disclosure.

Financial Health

Liquidity is strong: current ratio 245.5% and quick ratio 245.5% (no inventories reported), with cash and deposits at 15.22 versus current liabilities of 7.72. No warning on current ratio (<1.0) or D/E (>2.0); D/E is 0.56x, conservative. Equity/asset ratio is approximately 67.7% (30.26/44.67), indicating a solid solvency buffer. Interest-bearing debt is primarily long-term (9.22) with short-term loans at 1.00; maturity mismatch risk appears low given cash on hand. Interest coverage at 4.82x is moderately thin relative to best-practice thresholds (>5x) and could deteriorate if operating income weakens further. Off-balance sheet obligations are not disclosed; cannot assess lease or contingent liabilities. Negative retained earnings (−3.50) signal accumulated deficits, which may limit shareholder return flexibility until earnings accumulate.

Cash Flow Quality

Operating cash flow is unreported; OCF/Net Income cannot be calculated, so earnings quality cannot be validated. Free cash flow is also unreported; dividend/capex coverage cannot be assessed. Working capital indicators: cash 15.22 and accounts receivable 2.43 provide substantial current asset coverage versus current liabilities 7.72, but without OCF we cannot confirm cash conversion. Potential risk indicators include the large gap between PBT (3.27) and ordinary income (0.57), implying one-off gains; without OCF, we cannot determine underlying cash generation. No signs of working capital manipulation can be identified from available data, but disclosure is insufficient for a firm conclusion.

Dividend Sustainability

Dividend information is unreported. With net income at 0.46 for the period, negative retained earnings (−3.50), and unreported OCF/FCF, dividend capacity appears constrained. Conservative stance is implied until retained earnings turn positive and core operating cash flows are visibly sufficient. Policy outlook cannot be inferred from available disclosures; any potential payout would need to be covered by sustainable FCF given modest interest coverage and low ROIC.

Risk Assessment

Business Risks:

• Revenue contraction (−14.9% YoY) indicating demand softness or competitive pressure
• Operating deleverage due to high SG&A intensity (~59.6% of revenue)
• Dependence on non-operating/extraordinary gains to support headline PBT
• Execution risk in cost control and monetization needed to restore margins
• Platform/consumer demand variability (subscription/churn risk typical for asset-light services)

Financial Risks:

• Low ROIC (1.8%) and ROE (1.5%) imply weak capital efficiency
• Interest coverage at 4.82x provides limited buffer if profits decline or rates rise
• Negative retained earnings constrain capital allocation flexibility
• Potential volatility in non-operating items affecting earnings visibility

Key Concerns:

• Margin compression: operating margin down ~2,160 bps YoY
• Large gap between PBT (3.27) and ordinary income (0.57) suggests one-off gains driving results
• Unreported cash flow statements prevent verification of earnings quality and FCF
• Asset turnover is low (0.245), dragging overall returns

Investment Implications

Key Takeaways:

• Core profitability deteriorated sharply despite very high gross margins
• Headline PBT benefited from non-recurring gains; underlying earnings power is weak
• Liquidity and solvency are solid, but capital efficiency is poor (ROIC 1.8%)
• Interest coverage is only moderate, necessitating profit recovery or cost actions
• Negative retained earnings likely limit near-term shareholder returns

Metrics to Watch:

• Operating margin recovery toward double digits
• OCF/Net income (>1.0) and FCF to validate earnings quality
• ROIC progression toward >5% (minimum) and ideally >7–8%
• Revenue trend and churn/retention (if disclosed) to gauge demand stabilization
• SG&A trajectory versus revenue to assess operating leverage
• Composition of non-operating and extraordinary items

Relative Positioning: Versus domestic asset-light consumer/platform peers, the company exhibits superior gross margins but weaker scale efficiency, resulting in low ROIC/ROE; liquidity is strong, leverage is moderate, yet profitability and earnings quality trail peers that generate consistent OCF and maintain double-digit operating margins.

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