RIZAP Group, Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥80.67B
• Operating Income: ¥2.98B
• Net Income: ¥-1.86B
• EPS: ¥-7.08

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

RIZAP Group (TSE: 2928) reported FY2026 Q2 consolidated results under IFRS with revenue of 806.7 and operating income of 29.85, showing a 3.5% YoY revenue decline but a sharp operating profit recovery (+484% YoY). Gross profit was 413.0 with a strong gross margin of 51.2%, indicating pricing power and/or mix benefits despite top-line softness. SG&A was 434.9, still exceeding gross profit, but fixed-cost discipline and EBITDA of 138.6 (17.2% margin) underpinned the operating turnaround. Notably, profit before tax was positive at 13.07 with an effective tax rate of 27.5%, yet net income was a loss of -42.23, implying material below-the-line losses (e.g., discontinued operations, impairments, or non-controlling interest effects) not detailed in the disclosed line items. DuPont analysis shows ROE at -7.1% driven by a negative net margin (-5.2%) despite reasonable asset turnover (0.502) and elevated financial leverage (2.70x). Operating cash flow was positive at 47.88, but free cash flow was negative at -15.20, reflecting continued investment (investing CF -63.08, capex -52.57) and some working capital needs. The balance sheet shows total assets of 1,607.96 and total equity of 596.08, implying an equity ratio of 29.2% and a debt-to-equity ratio of 1.80x (based on total liabilities to equity). Liquidity indicators are partially unavailable (current and quick ratios not calculable), but current assets are 720.92 including accounts receivable of 201.36 and inventories of 242.15, while accounts payable is 208.75. Financing cash inflow of 85.89 suggests ongoing reliance on external capital to support operations and investment. EPS was -7.08 JPY, consistent with the reported net loss, while book value per share was approximately 99.9 JPY, supported by capital surplus of 293.71 and accumulated losses (retained earnings -135.64). The discrepancy between positive operating profit and negative bottom line is the key feature of the quarter and central to forward-looking risk assessment. Margin dynamics are improving at the operating level, but earnings quality is clouded by non-operating/one-off items that reversed the pretax profit into a net loss. With ROE negative and leverage relatively high, a sustained pathway to positive net margins and free cash flow is essential to improve equity returns. Data gaps (e.g., interest expense, detailed non-operating items, current liabilities) limit precision, but the available figures support a narrative of operational repair offset by exceptional or below-the-line charges. Near-term outlook hinges on stabilizing revenue, maintaining gross margin, executing SG&A discipline, and reducing earnings volatility below operating income. Dividend visibility remains low given the net loss and negative FCF in the period.

Profitability Analysis

ROE_decomposition: Net profit margin -5.2% x asset turnover 0.502 x financial leverage 2.70x = ROE -7.1% (matches reported). The negative margin is the primary drag; asset efficiency and leverage are within a typical range for a multi-business consumer/services group. margin_quality: Gross margin 51.2% is solid, suggesting resilient unit economics and mix. Operating margin of ~3.7% (29.85 / 806.7) marks a recovery versus last year, reflecting SG&A restraint and operating efficiency. However, the translation to net margin is weak due to sizeable below-the-line losses (details not disclosed), undermining overall profitability. operating_leverage: Revenue declined 3.5% YoY while operating income surged 484%, evidencing strong operating leverage from cost actions and/or improved utilization. EBITDA margin at 17.2% provides a cushion, but sustaining this requires stable volumes and continued SG&A control.

Growth Assessment

revenue_sustainability: Revenue of 806.7 fell 3.5% YoY, indicating softness in core segments or deliberate pruning of unprofitable lines. With gross margin stable, the revenue dip appears more volume than pricing-driven. Sustained recovery will depend on traffic conversion in fitness/healthcare and sell-through in consumer goods. profit_quality: Operating profit is improving, but net profit is negative due to significant non-operating or non-recurring items. Profit before tax was positive (13.07), implying that items below operating income—potentially discontinued operation losses, impairments, or equity-method losses (-0.41 reported)—drove the net loss. outlook: If the company can maintain a >50% gross margin and keep SG&A growth below sales growth, operating margin should hold in the low single digits with potential upside. The key swing factor is the normalization of below-the-line items to allow pretax profit to flow to net income. Continued investment (-63.08 investing CF) suggests ongoing business development, which may support medium-term growth if returns exceed cost of capital.

Financial Health

liquidity: Current assets are 720.92, including AR 201.36 and inventories 242.15; cash and near-cash are partially unreported, but cash & equivalents at period-end were 200.58. Current liabilities are unreported, so standard liquidity ratios are not calculable; thus near-term liquidity assessment relies on cash balance and OCF generation (47.88 in the period). solvency: Total liabilities are 1,071.03 versus equity of 596.08, yielding an equity ratio of 29.2% and a liabilities-to-equity ratio of 1.80x. Interest-bearing debt is unreported, preventing interest coverage analysis. The leverage position is moderate-to-high for a consumer/service mix and puts a premium on stable cash generation. capital_structure: Capital surplus of 293.71 and retained earnings of -135.64 point to a history of equity raises and past losses. Financing CF of +85.89 indicates recent reliance on external funding (debt and/or equity). With book value per share ~99.9 JPY and negative EPS, preserving equity through avoidance of further losses is a priority.

Cash Flow Quality

earnings_quality: OCF of 47.88 versus net income of -42.23 yields an OCF/NI ratio of -1.13x, indicating cash generation is healthier than accounting earnings this quarter due to non-cash/one-off items. Depreciation and amortization of 108.75 supports the gap between EBITDA (138.6) and operating income (29.85). FCF_analysis: Free cash flow was -15.20, reflecting OCF 47.88 and capex/intangible investments totaling at least -52.57 (capex) and broader investing CF of -63.08. Negative FCF amidst improved OCF indicates the company is still in an investment phase, relying on financing inflows (+85.89) to fund the cash deficit. working_capital: AR 201.36 and inventories 242.15 against AP 208.75 suggest meaningful capital tied up in the operating cycle. Without current liabilities detail, precise CCC cannot be derived, but inventory discipline and receivables collection will be key to sustaining positive OCF.

Dividend Sustainability

payout_ratio_assessment: Dividends are unreported for the period; with net income negative and FCF negative, sustainable cash dividends would be constrained if contemplated. FCF_coverage: Not calculable from disclosed dividends (unreported). On a standalone basis, FCF is negative (-15.20), implying internal coverage is currently insufficient for distributions without drawing on cash or financing. policy_outlook: Given the net loss, negative FCF, and ongoing investment needs, a conservative stance on shareholder returns is implied until consistent positive net income and FCF are demonstrated.

Risk Assessment

Business Risks:

• Top-line softness (-3.5% YoY) amid competitive and macro pressures in fitness/healthcare and consumer products
• Execution risk in cost control; SG&A still exceeds gross profit, leaving limited buffer if revenue weakens
• Dependence on mix/pricing to sustain >50% gross margin
• Potential impairment or restructuring risk associated with portfolio optimization (implied by below-the-line losses)

Financial Risks:

• Elevated leverage (liabilities/equity 1.80x) with partial disclosure of interest-bearing debt
• Earnings volatility below operating income leading to negative net income despite positive pretax profit
• Negative free cash flow requiring external financing (+85.89 financing CF) to fund investments
• Liquidity visibility limited due to unreported current liabilities and interest expense

Key Concerns:

• Large gap between operating income (29.85) and net income (-42.23) driven by undisclosed non-operating items
• Sustainability of operating margin recovery in the face of declining revenue
• Working capital intensity (inventories and receivables) and potential impact on OCF
• Capital allocation discipline while investing (-63.08 investing CF) with negative FCF

Investment Implications

Key Takeaways:

• Operating turnaround evident: operating income +484% YoY with EBITDA margin 17.2%
• Bottom-line loss (-42.23) driven by significant below-the-line items despite positive pretax profit
• Gross margin remains robust at 51.2%, supporting core unit economics
• Negative FCF (-15.20) and reliance on financing cash inflows (+85.89) highlight funding needs
• Equity ratio 29.2% and liabilities/equity 1.80x imply moderate-to-high leverage, raising sensitivity to cash generation

Metrics to Watch:

• Non-operating items detail (discontinued operations, impairments, equity-method results) and their normalization
• Revenue trajectory and same-store/segment growth to arrest the -3.5% YoY decline
• SG&A-to-sales ratio and operating margin sustainability (>3.5%)
• OCF and FCF trend, with focus on inventory turns and receivables collection
• Leverage metrics (net debt if disclosed, interest coverage) and refinancing activities

Relative Positioning: Within diversified consumer and wellness peers, RIZAP shows stronger gross margins but weaker net profitability due to sizable non-operating charges and higher leverage; successful normalization of below-the-line items and continued SG&A discipline would be needed to converge toward peer net margins and cash conversion.

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
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