DATA HORIZON CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.09B
• Operating Income: ¥-392M
• Net Income: ¥-574M
• EPS: ¥-4.66

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

Data Horizon Co., Ltd. (36280) reported FY2026 Q2 consolidated results under JGAAP showing revenue of ¥2.086bn, down 8.0% YoY, with a gross profit of ¥487.3mn (gross margin 23.4%). Operating income was a loss of ¥392mn (operating margin −18.8%), broadly unchanged YoY per the disclosure, indicating persistent pressure from a fixed-cost base against softer topline. Ordinary income was a loss of ¥391mn, and net income narrowed to a loss of ¥59mn (net margin −2.83%), aided by a tax credit/benefit (income tax −¥24.6mn) and likely non-operating/extraordinary factors. EBITDA was negative at ¥146.6mn despite sizable depreciation and amortization of ¥245.4mn (D&A equal to roughly 11.8% of revenue), underscoring weak core cash earnings. Operating cash flow was deeply negative at −¥1.731bn, far exceeding the accounting net loss and pointing to heavy working capital outflows and/or timing of receipts and project advances. Financing cash flow was positive at ¥1.940bn, implying reliance on external funding to bridge operating cash burn in the period. On the balance sheet, current assets were ¥4.109bn against current liabilities of ¥3.319bn, yielding a current ratio of 123.8% and positive working capital of ¥790mn, but the capital structure is stretched with total liabilities of ¥5.874bn versus reported total equity of ¥151mn (debt-to-equity 38.9x). Calculated asset turnover is 0.427x and financial leverage 32.3x, delivering a calculated ROE of −39.1%, driven primarily by the negative net margin. Interest expense was modest at ¥11.9mn, but with negative EBIT the interest coverage ratio is −33.1x, highlighting lack of operating profit headroom. The equity ratio field is shown as 0.0% (likely not disclosed under the provided tags), but based on available totals, equity appears to be in the very low single digits as a percent of assets. Dividends were not paid (DPS ¥0), consistent with the loss-making position and negative operating cash flow. Several data items appear unreported (e.g., cash and equivalents, inventories, investing cash flow, shares outstanding), which limits precision on per-share and free cash flow analyses; zeros in these fields should be interpreted as undisclosed rather than actual zero. Overall, the mid-year profile reflects revenue softness, negative operating leverage, heavy cash outflows, and a thin equity buffer, implying a need for a stronger H2 ramp or continued external funding to support operations.

Profitability Analysis

ROE decomposition (DuPont): Net profit margin −2.83% × asset turnover 0.427 × financial leverage 32.32 = ROE −39.07%. The negative margin is the primary driver of negative ROE, while high leverage materially amplifies the downside. Gross margin is 23.4%, indicating some value-add above cost of sales but insufficient scale to cover operating costs, resulting in an operating margin of −18.8%. EBITDA margin is −7.0%, showing that even before non-cash charges, the core earnings base is negative. D&A of ¥245.4mn (≈11.8% of revenue) suggests an asset- and development-heavy model; with operating losses, this exacerbates reported net loss. Interest burden is low in absolute yen terms (¥11.9mn), but with negative EBIT, interest coverage is negative (−33.1x), indicating no buffer from operations. Operating leverage appears unfavorable this half: an 8% drop in revenue coincided with sustained operating losses, implying fixed costs did not flex down sufficiently. The marginal gap between operating and ordinary losses hints limited non-operating offsets. A tax benefit reduced bottom-line losses, but it is non-core and non-cash in nature, and does not improve operating quality.

Growth Assessment

Revenue declined 8.0% YoY to ¥2.086bn, suggesting softer demand or timing delays in project recognition or renewals in H1. Given the company’s service profile, revenue timing can be lumpy; however, the concurrent deterioration in operating metrics points to revenue insufficiency relative to fixed costs rather than purely timing. Profit quality is weak: despite a relatively stable gross margin, operating losses persisted and EBITDA remained negative. The small net loss relative to large operating loss likely reflects temporary non-operating/tax effects and is not indicative of improved core profitability. Sustainability into H2 depends on backlog conversion, new contracts, and renewal rates; without acceleration, negative operating leverage could continue. Management secured financing inflows (¥1.94bn) to support operations, but continued dependence would signal growth investments not yet monetizing or receivable collection/timing issues. Outlook hinges on restoring topline growth and improving utilization; watch for sequential revenue growth, gross margin stability, and evidence of cost containment. With limited disclosed KPIs (e.g., no backlog/ARR data in the provided set), near-term growth visibility is modest.

Financial Health

Liquidity: Current assets ¥4.109bn vs current liabilities ¥3.319bn yields a current (and quick) ratio of 1.24x and working capital of ¥790mn, providing short-term coverage but with caveats given negative OCF. Solvency: Total liabilities ¥5.874bn against reported equity ¥151mn implies a highly leveraged position (debt-to-equity 38.9x) and a very low equity buffer; calculated financial leverage (assets/equity) is 32.3x. Interest expense is ¥11.9mn, but with operating losses, there is no EBIT cover. Capital structure: Reliance on financing cash inflow in the half (¥1.94bn) indicates external funding supports operations; headroom depends on undetailed debt terms, covenants, and maturity ladders (not provided). Equity ratio was shown as 0.0% in the data extract (likely undisclosed), but using available totals suggests low-single-digit equity as a percentage of assets. Overall solvency risk is elevated unless profitability and operating cash flow normalize in H2.

Cash Flow Quality

Earnings quality is weak: OCF of −¥1.731bn contrasts with a relatively small net loss of −¥59mn, implying substantial cash outflows tied to working capital and/or revenue recognition timing. The OCF/Net Income ratio is 29.34, but because both figures are negative, this ratio should be interpreted cautiously; the key takeaway is that cash burn substantially exceeds the accounting loss. EBITDA was −¥146.6mn while D&A was ¥245.4mn, suggesting non-cash charges are significant but not the core driver of the cash deficit—working capital movements likely are. Free cash flow cannot be properly assessed because investing cash flow was not disclosed (shown as 0, which indicates unreported under the provided instruction). Financing inflow of ¥1.94bn effectively funded the OCF shortfall in the period. Key working capital indicators (accounts receivable, contract assets, payables, deferred revenue) were not disclosed here; monitoring these is critical to diagnose the OCF draw.

Dividend Sustainability

No dividend was paid (DPS ¥0; payout ratio 0%). With negative operating income and negative operating cash flow, internal capacity to fund dividends is absent at mid-year. Free cash flow coverage cannot be evaluated due to undisclosed investing cash flows, but the sizable OCF deficit argues against near-term distributions. Any future dividend policy would likely require a return to positive EBITDA/OCF, improved balance sheet resilience (higher equity ratio), and reduced reliance on external financing. Until then, retention of cash (and/or continued funding) will likely be prioritized to stabilize operations.

Risk Assessment

Business Risks:

• Revenue timing and project acceptance risk leading to lumpy topline and utilization swings
• High fixed-cost base causing negative operating leverage when revenue softens
• Customer concentration or contract renewal risk typical in specialized data/services markets
• Execution risk on new product rollouts and monetization of development spend
• Pricing pressure and competition in healthcare/insurtech data services

Financial Risks:

• Thin equity buffer (very low equity ratio) and high leverage (debt-to-equity 38.9x)
• Negative operating cash flow (−¥1.731bn) requiring external financing
• Negative interest coverage (−33.1x), with no operating profit headroom
• Potential covenant and refinancing risks if losses persist
• Working capital volatility impacting cash conversion

Key Concerns:

• Sustained operating losses despite only mid-single-digit revenue decline
• Heavy cash burn versus accounting losses, indicating WC/timing stress
• Dependence on financing inflows to fund operations
• Low calculated ROE (−39.1%) driven by negative margins and high leverage
• Limited disclosure of cash, investing flows, and per-share metrics

Investment Implications

Key Takeaways:

• Revenue softness (−8% YoY) combined with fixed costs drove an operating margin of −18.8%
• EBITDA negative (−¥147mn) despite sizable D&A (¥245mn), highlighting weak core earnings
• OCF deeply negative (−¥1.731bn), indicating material working capital outflows or timing effects
• Leverage elevated (debt-to-equity 38.9x) and equity ratio appears very low, compressing financial flexibility
• External funding (¥1.94bn inflow) bridged cash burn; ongoing access to capital is critical
• Calculated ROE −39.1%: margin weakness is the key driver, magnified by leverage

Metrics to Watch:

• Sequential revenue growth and order backlog/renewal rates
• Gross margin trend and cost containment (SG&A as % of sales)
• EBITDA and operating margin inflection in H2
• Operating cash flow, receivable/contract asset days, and deferred revenue
• Equity ratio and net debt levels; covenant headroom and refinancing timetable
• Capital expenditure and development spend once investing cash flows are disclosed

Relative Positioning: Versus TSE-listed information services peers, the company exhibits lower profitability (negative operating and EBITDA margins), significantly higher leverage, and weaker cash conversion in the period, implying below-peer financial resilience until revenue scaling and cash generation improve.

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