LOIVE Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥5.25B
• Operating Income: ¥44M
• Net Income: ¥-17M
• EPS: ¥-1.37

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

LOIVE reported FY2026 Q2 standalone JGAAP results with strong top-line momentum but very weak profitability. Revenue rose 32.5% YoY to ¥5,252m, yet operating income collapsed 91.6% YoY to ¥44m, implying significant negative operating leverage and cost escalation. Reported gross profit was ¥1,561m, corresponding to a 29.7% gross margin; we rely on the reported gross profit and margin as the best indicators given line-item inconsistencies in cost of sales presentation. EBITDA was ¥181m (3.4% margin), highlighting a thin operating cushion relative to sales scale. Ordinary income deteriorated to a ¥12m loss, indicating non-operating headwinds beyond interest expense. Net income was a ¥17m loss, an improvement YoY in absolute terms but still negative, with an unusually large tax expense (¥134m) against a pre-tax loss likely reflecting non-recurring or non-deductible items under JGAAP. DuPont shows ROE at -0.87% driven by a slightly negative net margin (-0.32%), moderate asset turnover (0.612x), and high financial leverage (4.37x). Liquidity is tight with a current ratio of 98.2% and negative working capital of ¥52m, suggesting reliance on short-term funding or working capital efficiency to meet obligations. Balance sheet leverage is elevated: debt-to-equity is 3.19x and estimated equity ratio is ~22.9% (equity/total assets), despite the reported equity ratio being unreported in XBRL. Positively, operating cash flow was a strong ¥399m, far exceeding accounting earnings (OCF/NI of -23.46), indicating favorable working capital movements or non-cash charges. Interest coverage on an EBIT basis is 2.3x, adequate but thin in a rising-rate or stress scenario. Dividend distributions remain suspended (DPS ¥0), appropriate given earnings pressure and investment needs. The revenue growth pace is encouraging but must translate into margin recovery to improve sustainability. Key watchpoints are SG&A intensity, non-operating losses, tax normalization, and maintenance of positive OCF. Data limitations exist (e.g., cash, investing CF, inventories, shares not disclosed), so conclusions focus on disclosed non-zero items and observed relationships.

Profitability Analysis

ROE_decomposition: DuPont ROE = Net margin (-0.32%) × Asset turnover (0.612x) × Financial leverage (4.37x) = -0.87%. The negative net margin is the primary drag, while moderate turnover and high leverage amplify volatility to equity returns. margin_quality: Gross margin stands at 29.7% (gross profit ¥1,561m on revenue ¥5,252m). Operating margin is ~0.8% (¥44m/¥5,252m), and EBITDA margin is 3.4% (¥181m/¥5,252m). The spread between gross and operating margin is very wide, implying heavy SG&A and/or cost inflation overshadowing the strong top line. Ordinary loss (¥12m) vs operating income (¥44m) signals additional non-operating pressure. operating_leverage: Revenue grew 32.5% YoY but operating income fell 91.6% YoY, indicating strongly negative operating leverage in the period. With D&A at ¥137m, fixed cost load appears material; scale benefits are not yet realized due to elevated SG&A or ramp costs.

Growth Assessment

revenue_sustainability: Sales growth of 32.5% YoY is robust and suggests successful customer acquisition/expansion; sustainability hinges on retention and price/mix given the consumer services profile likely associated with the LOIVE brand. profit_quality: EBITDA of ¥181m vs OCF of ¥399m indicates cash conversion was strong this half, but accounting profitability is weak; normalized profitability requires SG&A discipline and stabilization of non-operating items. outlook: Near-term focus should be on margin recapture through cost control and utilization improvements. If revenue momentum persists and non-operating/tax items normalize, earnings could inflect; however, thin interest coverage and tight liquidity constrain flexibility.

Financial Health

liquidity: Current assets ¥2,919m vs current liabilities ¥2,972m yields a current ratio of 98.2% and working capital of -¥52m. Quick ratio is also 98.2% given inventories are unreported. Liquidity is tight and dependent on continued positive OCF and access to short-term funding. solvency: Total assets ¥8,584m, total liabilities ¥6,256m, total equity ¥1,964m imply an estimated equity ratio of ~22.9% and financial leverage (assets/equity) of 4.37x. Debt-to-equity is 3.19x, indicating high leverage for a low-margin period. capital_structure: Interest expense was ¥18.8m with EBIT coverage at ~2.3x, leaving limited buffer for shocks. Ordinary loss suggests additional non-operating drains (roughly ¥37m net beyond interest), which further pressure coverage.

Cash Flow Quality

earnings_quality: OCF of ¥399m vs net loss of ¥17m (OCF/NI -23.46) underscores strong cash generation relative to accounting results, likely from working capital inflows and non-cash charges (D&A ¥137m). This supports near-term liquidity despite weak earnings. FCF_analysis: Investing cash flow is unreported; therefore, true free cash flow cannot be reliably computed. Using only disclosed items, OCF is positive and financing CF is ¥362m, indicating reliance on external funding alongside internal cash generation. working_capital: Negative working capital (¥-52m) and OCF strength imply favorable timing (e.g., payables/accruals) in the period. Sustainability of OCF will depend on maintaining collection efficiency and avoiding payables unwind.

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0 with a payout ratio of 0%. Given negative net income and thin operating margins, distributions remain understandably suspended. FCF_coverage: FCF coverage is shown as 0.00x due to unreported investing CF; with positive OCF but unknown capex, we cannot assert coverage. Conserving cash is prudent until profitability normalizes. policy_outlook: With ROE at -0.87%, interest coverage at ~2.3x, and liquidity tight, dividend resumption appears contingent on margin recovery and clearer visibility on sustaining positive FCF.

Risk Assessment

Business Risks:

• Cost inflation (personnel, rent, utilities) compressing margins amid service-sector exposure
• Demand cyclicality in consumer discretionary services affecting membership/traffic
• Execution risk from expansion or ramping new locations increasing fixed costs
• Competitive intensity pressuring pricing and utilization
• Regulatory/health-related disruptions impacting in-person services

Financial Risks:

• Tight liquidity (current ratio 98.2%, negative working capital) raising short-term refinancing risk
• High leverage (D/E 3.19x; financial leverage 4.37x) amplifying earnings volatility
• Thin interest coverage (~2.3x EBIT) vulnerable to rate increases or profit shortfalls
• Non-operating and tax volatility (ordinary loss; ¥134m tax expense despite net loss) impacting bottom line
• Potential payables unwind reversing working capital-driven OCF

Key Concerns:

• Negative operating leverage despite 32.5% revenue growth
• Sustainability of strong OCF absent disclosed investing flows
• Non-operating losses beyond interest and atypical tax charges
• Margin recovery path and SG&A control
• Access to funding in case of cash flow normalization below needs

Investment Implications

Key Takeaways:

• Top-line growth is strong (+32.5% YoY), but profitability is weak (OP margin ~0.8%, EBITDA margin 3.4%).
• ROE is negative (-0.87%) due to a small net loss and high leverage (4.37x).
• OCF is robust (¥399m) relative to earnings, supporting near-term liquidity despite negative working capital.
• Interest coverage is thin at ~2.3x EBIT; additional non-operating losses turned ordinary income negative.
• Dividend remains suspended; resumption likely requires margin recovery and proven FCF.

Metrics to Watch:

• Gross and operating margin trajectory (cost control, SG&A as % sales)
• Ordinary income components (interest and other non-operating items)
• Cash conversion (OCF vs EBITDA) and working capital movements
• Leverage and equity ratio; interest coverage trend
• Capex and investing cash flows once disclosed; store/unit economics if applicable
• Tax expense normalization vs pre-tax income

Relative Positioning: Within consumer services peers focused on location-based offerings, LOIVE shows above-peer revenue growth but below-peer profitability and tighter liquidity; balance sheet leverage is on the high side, leaving less room for execution missteps until margins recover.

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