Voltage Incorporation FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥592M
• Operating Income: ¥-59M
• Net Income: ¥-68M
• EPS: ¥-7.91

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

FY2026 Q1 was weak for Voltage (3639), with a revenue contraction and a swing to operating and net losses. Revenue fell to 5.92 (−18.1% YoY), and the company posted operating income of −0.59 and net income of −0.51. Reported gross profit was 3.61 (gross margin 60.9%), but we note an arithmetic discrepancy as revenue minus cost of sales would imply gross profit of 2.28; we proceed using the reported gross profit and margin. SG&A was 4.10, exceeding gross profit and driving the operating loss. Operating margin was roughly −10.0% (−0.59/5.92), ordinary margin −8.5% (−0.50/5.92), and net margin −8.6% (−0.51/5.92). With YoY margin baselines not disclosed, we cannot quantify basis point changes YoY; however, the current margin profile is negative across operating and bottom-line levels. Non-operating items netted to a loss of 0.19, suggesting additional drags (e.g., valuation or other expenses) beyond de minimis interest. Liquidity remains very strong: cash and deposits of 11.27 and a current ratio of 421% provide ample near-term cushion despite losses. The balance sheet is conservative with total equity of 22.18 and D/E of 0.27x; we calculate an equity ratio of ~78.6% (22.18/28.21), despite the equity ratio being unreported in XBRL. ROE was −2.3% (DuPont: NPM −8.6%, asset turnover 0.210, leverage 1.27x), indicating margin pressure and low asset utilization as the main drags. ROIC is reported at −5.0%, well below a 5% warning threshold, implying value destruction at current returns. Earnings quality cannot be assessed vs cash flow because OCF was not disclosed this quarter; this is a material limitation. With SG&A structurally above gross profit this quarter, either top-line recovery or cost reduction is needed to return to profitability. Near-term solvency risk is low given cash and working capital, but sustained losses will erode the cushion over time. Forward-looking, the key swing factors are revenue stabilization via new title launches/live ops, marketing efficiency, and any one-time non-operating items normalizing.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin −8.6% × Asset Turnover 0.210 × Financial Leverage 1.27x = ROE −2.3% (matches reported). The dominant negative driver is the margin component (negative NPM), followed by low asset turnover; leverage is modest and neither a help nor a major risk. Business drivers: revenue declined 18.1% YoY while SG&A (4.10) exceeded reported gross profit (3.61), pushing operating income to −0.59. This indicates operating deleverage from fixed costs (personnel, development, and promotion) against a smaller revenue base. The reported gross margin of 60.9% is high for content/IP models but its sustainability is unclear given the arithmetic discrepancy with cost of sales; if true, it suggests cost pressure is less of a problem than revenue scale and overhead absorption. Sustainability: without SG&A reduction or revenue rebound (new hits, better live ops monetization), the negative NPM is not sustainable. Asset turnover at 0.210 implies annualized turnover of ~0.84x, reflecting sub-scale operations; improvement would require stronger title performance and better utilization of content assets. Concerning trend: SG&A is effectively >100% of revenue (4.10 vs 5.92 is 69% of revenue, but > gross profit), producing operating deleverage. Without prior-period SG&A and margins, we cannot quantify YoY deltas, but the structure implies fixed cost intensity relative to current scale.

Growth Assessment

Top-line declined 18.1% YoY to 5.92, indicating weaker title performance or aging catalog effects. With operating loss at −0.59, growth quality is poor this quarter, as revenue could not cover fixed costs. No segment or geographic breakdown was provided, limiting our ability to pinpoint drivers (e.g., domestic vs overseas, first-party vs platform). The reported gross margin of 60.9% suggests revenue mix may be skewed to higher-margin digital content, but the discrepancy with cost of sales clouds interpretation. Near-term growth sustainability hinges on pipeline launches, live-operations events, and user acquisition efficiency; absent these, continued contraction is a risk. Outlook: we expect management to prioritize cost control and ROI discipline on marketing, given ROIC at −5.0%. Any normalization of non-operating losses (0.19) could marginally help ordinary profit, but operating restoration remains the key swing factor. Data gaps (no R&D, D&A, SG&A breakdown) limit assessment of investment pace and scalability.

Financial Health

Liquidity is strong: current assets 19.59 vs current liabilities 4.65 yields a current ratio of 421% and quick ratio effectively the same, indicating ample short-term coverage. Working capital is 14.94, and cash and deposits of 11.27 comfortably exceed current liabilities, minimizing near-term refinancing risk. Solvency is conservative: total equity 22.18 vs total liabilities 6.04 implies D/E of 0.27x (provided), and we calculate an equity ratio of ~78.6%. Long-term loans are 0.97, noncurrent liabilities 1.39, suggesting low structural leverage. No explicit warnings on Current Ratio (<1.0) or D/E (>2.0) apply. Maturity mismatch risk appears low given cash > current liabilities; short-term loans are unreported, so we assume none disclosed. Off-balance sheet obligations are not mentioned; inability to assess lease and purchase commitments is a limitation.

Cash Flow Quality

OCF, FCF, and capex were unreported, so OCF/Net Income and FCF coverage cannot be calculated. This prevents a direct earnings quality assessment and cash conversion analysis. We infer cash runway is adequate near term: cash 11.27 vs quarterly operating loss of 0.59 indicates capacity to absorb several quarters of similar losses, though true burn depends on working capital and non-cash items. No signs of working capital manipulation can be assessed without cash flow detail; AR at 2.71 versus revenue level appears proportionate for a content business but lacks trend context. Investment securities of 5.13 add financial flexibility but could be subject to valuation volatility, affecting non-operating results and cash if liquidated.

Dividend Sustainability

Dividends were unreported, and retained earnings are negative (−2.91), implying limited capacity for cash returns until profitability and retained earnings recover. With ROIC at −5.0% and operating loss this quarter, any dividend would likely be unsustainable absent demonstrable FCF. Without OCF and FCF data, payout and coverage cannot be computed. Policy outlook likely prioritizes cash preservation and business turnaround over distributions, given current fundamentals.

Risk Assessment

Business Risks:

• Hit-driven mobile content model with title performance concentration risk
• User acquisition and marketing ROI risk amid weaker revenue scale
• Platform dependency and fee pressure from Apple/Google stores
• Aging catalog risk without timely successful new launches
• Potential content/IP impairment risk if underperforming titles persist

Financial Risks:

• Sustained operating losses (operating margin ~−10%) eroding cash over time
• ROIC at −5.0% indicates value destruction until returns improve
• Interest coverage warning (flagged at −207.75x) highlights vulnerability if financing costs rise
• Negative retained earnings (−2.91) limiting shareholder return flexibility
• Valuation risk on investment securities (5.13) impacting non-operating results

Key Concerns:

• Revenue down 18.1% YoY with SG&A exceeding gross profit, driving losses
• Low asset turnover (0.210) reflecting sub-scale operations
• Data gaps: no OCF, capex, D&A, or SG&A breakdown to evaluate cost structure and cash conversion
• Inconsistency between reported gross profit (3.61) and cost of sales (3.64) versus revenue (5.92), clouding margin precision

Investment Implications

Key Takeaways:

• Top line contracted materially and margins turned negative, resulting in operating and net losses
• Liquidity and capital structure are strong, providing runway to execute a turnaround
• ROE (−2.3%) and ROIC (−5.0%) underscore the need for revenue recovery and cost discipline
• Non-operating losses contributed modestly to bottom-line pressure; core fix is operational
• Data limitations prevent cash conversion analysis, elevating uncertainty on earnings quality

Metrics to Watch:

• Monthly/quarterly bookings, ARPDAU, and retention by key titles
• SG&A to revenue ratio and marketing ROI
• Operating cash flow and free cash flow once disclosed
• Pipeline launch schedule and post-launch performance
• ROIC and asset turnover trends
• Ordinary income composition (non-operating gains/losses, securities valuation)

Relative Positioning: Versus domestic mobile gaming small caps, Voltage exhibits a conservative balance sheet and strong liquidity but weaker profitability and efficiency metrics this quarter; recovery depends on pipeline success and SG&A discipline.

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