RUNSYSTEM CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥3.36B
• Operating Income: ¥99M
• Net Income: ¥23M
• EPS: ¥6.46

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

Ransystem Co., Ltd. (33260) reported FY2026 Q2 consolidated results under JGAAP with modest top-line growth and strong operating leverage. Revenue rose 1.2% YoY to ¥3,363 million, while operating income increased 54.7% YoY to ¥99 million, indicating meaningful cost discipline and fixed-cost absorption. Gross profit was ¥510 million, equating to a gross margin of 15.2%, which remains thin but appears stable given the low revenue growth. Ordinary income of ¥86 million trails operating income, reflecting net non-operating costs, including interest expense of ¥19.8 million. Net income was ¥27 million (+19.6% YoY), with EPS of ¥6.46, pointing to a still modest absolute earnings base. DuPont analysis shows ROE of 10.93%, driven by very high financial leverage (15.26x) and moderate asset turnover (0.892x), while net profit margin remains slim at 0.80%. The sharp YoY improvement in operating income despite only a 1.2% revenue increase evidences operating leverage and expense control as key drivers of profit growth. Cash generation is solid relative to earnings: operating cash flow (OCF) was ¥116.7 million, with an OCF/Net Income ratio of 4.32, suggesting supportive working capital dynamics and/or non-cash charges aiding cash conversion. EBITDA was ¥192.5 million, yielding an EBITDA margin of 5.7% and an interest coverage ratio of 5.0x, which is adequate but leaves some sensitivity to profit volatility. The balance sheet is highly leveraged with total equity of ¥247 million against total assets of ¥3,769 million, implying a thin equity cushion and a debt-to-equity ratio of 14.49x. Liquidity appears reasonable with a current ratio of 133.9% and quick ratio of 123.2%, supported by working capital of ¥363 million. The reported equity ratio is shown as 0.0% in the data set, but based on disclosed equity and assets, we estimate an equity ratio of roughly 6.6% (247/3,769), highlighting limited solvency headroom. Dividend distribution is absent (DPS ¥0, payout ratio 0.0%), aligning with the need to preserve capital and service obligations amid high leverage. Free cash flow and investing cash flows are not disclosed in the data (values shown as zero), limiting assessment of reinvestment intensity and FCF coverage. Overall, the quarter evidences improving profitability quality and cash conversion, but the capital structure remains a key constraint and risk factor. Our analysis relies on provided non-zero metrics; items shown as zero are treated as undisclosed per instructions, and conclusions reflect these limitations.

Profitability Analysis

ROE of 10.93% is the product of a 0.80% net margin, 0.892x asset turnover, and 15.26x financial leverage, indicating that leverage is the dominant driver. Gross margin of 15.2% is low, consistent with a business model with significant direct costs or pricing pressure. Operating margin is approximately 2.9% (¥99m/¥3,363m), up sharply YoY given the +54.7% operating income on +1.2% revenue, confirming positive operating leverage and expense control. Ordinary margin of 2.6% (¥86m/¥3,363m) reflects financing costs; interest expense of ¥19.8m weighs on profitability. Net margin at 0.80% is thin, implying limited buffer for shocks. EBITDA margin at 5.7% indicates some non-cash add-backs (depreciation and amortization of ¥93.5m) supporting cash earnings. The spread between gross and operating margins suggests meaningful fixed SG&A, which improved sequentially/YoY given operating leverage. Margin quality is acceptable with improved operating efficiency, but dependency on cost containment persists given modest growth.

Growth Assessment

Revenue growth of 1.2% YoY to ¥3,363m is modest, indicating a mature or competitive market environment. Profit growth outpaced sales as operating income rose 54.7% YoY to ¥99m, driven by fixed-cost leverage and cost optimization rather than pricing or volume expansion. Ordinary and net income growth lag operating income due to financing costs and a still-low net margin. Sustainability of earnings growth hinges on maintaining cost discipline and realizing further efficiency gains; without stronger top-line momentum, further margin expansion may be harder to achieve. Asset turnover at 0.892x is decent but not high enough to offset the very low net margin without leverage. The EPS of ¥6.46 reflects a still small absolute earnings base, implying sensitivity to small changes in revenue or costs. Outlook depends on demand normalization and capacity utilization; even low-single-digit revenue growth could support additional operating leverage, but interest burden could cap bottom-line gains. With limited disclosure on investing cash flows and capex, visibility into growth investments is constrained. Overall, revenue momentum looks tepid; profit improvements are currently quality-enhanced by cost control and cash conversion rather than by robust demand.

Financial Health

Total assets are ¥3,769m against total equity of ¥247m, implying an estimated equity ratio of about 6.6% despite the reported 0.0% figure, and highlighting thin capitalization. Total liabilities of ¥3,579m drive high leverage, with a debt-to-equity ratio of 14.49x. Liquidity is acceptable: current ratio 133.9%, quick ratio 123.2%, and working capital of ¥363m suggest near-term obligations are covered. Interest coverage of 5.0x is adequate but could compress if operating income softens. The high financial leverage (15.26x assets/equity) underpins ROE but elevates solvency risk. Inventories of ¥115m are modest relative to current assets (¥1,434m), indicating limited inventory risk; receivables and cash composition are undisclosed in detail. The capital structure leaves limited room for adverse shocks; prudent cash retention and liability management remain important. Absence of disclosed cash and equivalents in the dataset should not be interpreted as zero cash; actual liquidity buffers are not fully visible.

Cash Flow Quality

Operating cash flow of ¥116.7m versus net income of ¥27m yields an OCF/NI ratio of 4.32, indicating strong cash conversion, likely aided by non-cash D&A (¥93.5m) and supportive working capital movements. EBITDA of ¥192.5m versus OCF suggests an OCF/EBITDA conversion of roughly 61%, reasonable for the mid-year period but with room for improvement depending on seasonality. Free cash flow is not disclosed; investing cash flow is shown as zero and should be treated as undisclosed, so true capex and FCF can’t be assessed. Working capital stands at ¥363m and appears to be a source of stability; detailed components beyond inventories are not provided, limiting granular analysis of receivables/payables dynamics. Earnings quality appears improved given the alignment of profit growth with cash generation and the presence of non-cash charges supporting OCF. However, without capex data, sustainability of cash generation after reinvestment is uncertain.

Dividend Sustainability

DPS is reported as ¥0.00 with a payout ratio of 0.0%, implying no dividends in the period. Given high leverage (D/E 14.49x) and a thin equity base (estimated equity ratio ~6.6%), retaining earnings to strengthen the balance sheet appears prudent. OCF of ¥116.7m supports internal funding needs, but without disclosed capex/FCF, we cannot confirm coverage for sustained dividends. Interest obligations (¥19.8m) and the need to maintain liquidity buffers further constrain distribution capacity. Policy-wise, continuation of a conservative stance is likely until leverage moderates and FCF visibility improves. FCF coverage is shown as 0.00x in the dataset but should be interpreted as not disclosed rather than zero coverage.

Risk Assessment

Business Risks:

• Low gross and net margins (15.2% and 0.80%) leave limited buffer against demand or cost shocks
• Modest revenue growth (+1.2% YoY) suggests competitive or mature markets limiting pricing power
• Reliance on operating leverage and cost control for profit growth may be hard to sustain
• Potential sensitivity to input costs and wages given thin margins

Financial Risks:

• High leverage: financial leverage 15.26x and D/E 14.49x increase solvency risk
• Interest burden (¥19.8m) constrains ordinary income; coverage 5.0x could compress in downturns
• Thin equity base (¥247m) and estimated equity ratio ~6.6% provide limited shock absorption
• Visibility on cash, capex, and FCF is limited due to undisclosed items

Key Concerns:

• Sustainability of profit gains without stronger top-line growth
• Balance sheet resilience under adverse scenarios given low equity
• Potential need for deleveraging versus investment and shareholder returns

Investment Implications

Key Takeaways:

• Earnings leverage evident: +54.7% operating income on +1.2% revenue
• ROE 10.93% primarily leverage-driven; underlying margin remains thin
• OCF robust relative to net income (4.32x), supporting near-term liquidity
• Capital structure is stretched (D/E 14.49x), limiting flexibility
• Dividend remains suspended/undisclosed; cash retention likely prioritized

Metrics to Watch:

• Top-line growth trajectory (quarterly revenue YoY and same-store/volume indicators if available)
• Operating margin and SG&A ratio to confirm sustained cost discipline
• Interest coverage and finance costs amid rate and spread changes
• Capex and investing cash flows to assess true FCF and reinvestment needs
• Equity ratio and net debt trends to track deleveraging progress
• Working capital turns and OCF/EBITDA conversion

Relative Positioning: Compared to domestic small-cap consumer/service peers, the company demonstrates better near-term operating leverage but operates with thinner margins and higher financial leverage, leaving it more sensitive to revenue volatility and financing conditions.

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