Digital Media Professionals Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥902M
• Operating Income: ¥-299M
• Net Income: ¥121M
• EPS: ¥-99.72

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

Digital Media Professional Co., Ltd. (TSE: 36520) reported FY2026 Q2 consolidated results under JGAAP showing a sharp top-line contraction and continued losses, with some signs of cost discipline and balance sheet resilience. Revenue was ¥902 million, down 41.2% YoY, indicating a substantial demand slowdown or project timing slippage in its core businesses. Despite the steep revenue decline, reported gross profit was ¥651 million, implying a gross margin of 72.1%, which suggests a favorable mix shift toward higher-margin IP/licensing or software-related revenues; however, there is an apparent inconsistency between the reported cost of sales (¥885 million) and the gross profit figure that implies cost of sales closer to ¥251 million—our analysis therefore relies on the gross profit and margin metrics provided. Operating loss was ¥299 million, an improvement of 7.3% YoY, implying effective operating cost control despite the revenue shortfall. Ordinary loss of ¥292 million was close to operating loss, indicating limited non-operating drag and minimal financial expenses. Net loss was ¥313 million (EPS: -¥99.72), essentially flat YoY (-0.3% YoY improvement noted), with limited tax effects in practice. EBITDA was -¥283 million (margin -31.4%), reflecting continued negative operating leverage at current scale. Operating cash flow was positive at ¥12.6 million, which contrasts with the net loss and indicates a working capital tailwind in the period; however, OCF/NI of -0.04 suggests this cash inflow is small relative to the accounting loss. The balance sheet remains strong: total assets were ¥3.758 billion, liabilities ¥481 million, and equity ¥3.297 billion, implying an equity ratio around 87.7% based on balance sheet arithmetic (the reported 0.0% equity ratio appears undisclosed rather than actual). Liquidity looks ample with current assets of ¥3.298 billion against current liabilities of ¥462 million, yielding a current ratio of 714% and quick ratio of 704%. Debt metrics are conservative with a debt-to-equity ratio of 0.15x and limited interest burden (interest expense undisclosed). DuPont analysis shows ROE of -9.49% driven by a -34.7% net margin and modest asset turnover of 0.240, partially cushioned by low financial leverage (1.14x). The company paid no dividend (DPS ¥0), consistent with loss-making conditions and a prudent capital preservation stance. Data limitations exist: several line items are undisclosed or inconsistent (e.g., cost of sales, equity ratio, cash balance, financing/investing cash flows, share count), so interpretations focus on the provided non-zero data and calculated metrics. Overall, DMP faces a revenue reset but is maintaining high gross margins and improving operating losses, underpinned by a robust balance sheet; the key question is the sustainability of high-margin revenue and a path back to operating breakeven. Near-term catalysts likely hinge on order intake, backlog conversion, and normalization of project deliveries.

Profitability Analysis

roe_decomposition: ROE of -9.49% = Net Profit Margin (-34.70%) x Asset Turnover (0.240) x Financial Leverage (1.14). The negative margin is the primary driver of weak ROE, while low leverage limits both upside and downside amplification. margin_quality: Gross margin of 72.1% (implied gross profit ¥650.7m on revenue ¥902m) indicates a high-value mix (likely IP licensing, software, or design services). The reported cost of sales (¥884.6m) conflicts with this; we prioritize the gross profit and margin presented in calculated metrics. Operating margin is approximately -33.1% (operating loss ¥299m), reflecting insufficient scale to absorb fixed costs despite a high gross margin. operating_leverage: Revenue fell 41.2% YoY while operating loss improved 7.3% YoY, suggesting meaningful opex control and/or mix improvement. EBITDA margin at -31.4% shows that fixed cost absorption remains a challenge; a modest top-line recovery could translate disproportionately into profit if the high gross margin is sustained.

Growth Assessment

revenue_sustainability: The 41.2% YoY revenue decline points to lumpy demand or project timing in core segments. Sustainability hinges on repeat IP royalty streams and design wins; current visibility is limited without disclosed backlog. profit_quality: Ordinary loss (-¥292m) closely tracks operating loss (-¥299m), implying minimal reliance on non-operating items. The high gross margin supports the quality of revenues booked; however, operating losses and negative EBITDA indicate profitability is not yet structurally in place. outlook: With strong liquidity and low leverage, the company has runway to pursue pipeline conversion and product/partner ramps. Near-term recovery will depend on order intake, customer project milestones, and commercialization of new IP/solutions. A return to break-even likely requires either revenue normalization toward prior-year levels or additional cost rationalization while preserving R&D capability.

Financial Health

liquidity: Current assets ¥3,297.8m vs. current liabilities ¥461.9m yields a current ratio of 714% and quick ratio of 704%, signaling very strong short-term liquidity. Cash and equivalents are undisclosed (reported as 0), but working capital is sizeable at ¥2,836.0m. solvency: Total liabilities ¥481.0m vs. equity ¥3,297.0m implies an equity ratio of roughly 87.7% (A/L/E arithmetic), despite the reported equity ratio field being undisclosed. Debt-to-equity of 0.15x indicates a conservative balance sheet with limited financial risk. capital_structure: Low leverage (financial leverage 1.14x) reduces refinancing risk and interest burden; access to additional debt capacity exists if needed, though preserving equity cushion is key given ongoing losses.

Cash Flow Quality

earnings_quality: OCF of ¥12.6m against net loss of ¥313.0m (OCF/NI -0.04) suggests cash flow benefited from working capital release rather than core profitability. EBITDA is negative (-¥283.4m), indicating underlying operating cash generation remains weak absent further mix or volume improvement. fcf_analysis: Investing and financing cash flows are undisclosed (reported as 0). Free cash flow is shown as 0 in the dataset, so a reliable FCF assessment is not possible this quarter. Given negative EBITDA, sustainable positive FCF likely requires further cost discipline or revenue rebound. working_capital: The positive OCF amid losses implies reductions in receivables, inventory, or timing benefits from payables. Inventories are modest at ¥45.5m, and current assets are large relative to current liabilities, providing flexibility but exposing cash conversion to collection timing.

Dividend Sustainability

payout_ratio_assessment: No dividend (DPS ¥0; payout ratio 0%) aligns with loss-making status (EPS -¥99.72) and the need to fund operations and R&D. fcf_coverage: With FCF unobservable this period and EBITDA negative, coverage for dividends is not present. Retaining cash is prudent until operating cash generation improves. policy_outlook: Resumption of dividends would likely require sustained profitability and positive FCF. The robust equity base supports long-term optionality, but near-term priority is operational turnaround.

Risk Assessment

Business Risks:

• Revenue concentration and project timing risk leading to lumpy sales (-41.2% YoY in the period).
• Dependence on high-margin IP/licensing streams; a mix shift could compress margins.
• Execution risk in converting pipeline to revenue and achieving customer milestones.
• Technology obsolescence and competitive intensity in GPUs/AI/embedded markets.
• Partner dependency and potential delays in ecosystem commercialization.

Financial Risks:

• Persistent operating and net losses (EBITDA margin -31.4%, net margin -34.7%).
• Cash flow reliance on working capital movements (OCF/NI -0.04).
• Limited visibility on cash balance and FCF due to undisclosed cash and investing flows.
• Potential need for future funding if losses persist, despite current low leverage.

Key Concerns:

• Sustainability of the high 72.1% gross margin amid revenue volatility.
• Path to operating breakeven given negative EBITDA.
• Data inconsistencies (e.g., cost of sales vs. gross profit) and undisclosed items constraining analysis.

Investment Implications

Key Takeaways:

• Top line contracted 41.2% YoY to ¥902m, but operating loss improved 7.3% YoY to ¥299m.
• High reported gross margin (72.1%) suggests favorable mix; verify sustainability.
• Balance sheet is strong with equity ~¥3.3bn and low leverage (D/E 0.15x).
• OCF was slightly positive (¥12.6m) despite a net loss of ¥313m, likely from working capital.
• Negative EBITDA (-¥283m) underscores ongoing operating leverage headwinds.

Metrics to Watch:

• Order intake, backlog, and revenue visibility for H2 and FY close.
• Gross margin trajectory and mix between IP/licensing vs. lower-margin hardware/services.
• Operating expense run-rate and R&D investment discipline.
• Operating cash flow and working capital trends (AR days, inventory turns, AP terms).
• Cash and equivalents disclosure, and any changes in financing needs.

Relative Positioning: Financially conservative with a strong equity cushion versus many small-cap peers, but currently weaker on growth momentum and profitability; recovery depends on sustaining high-margin mix and re-accelerating sales while holding opex flat.

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