istyle Inc. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥18.44B
• Operating Income: ¥1.04B
• Net Income: ¥609M
• EPS: ¥7.01

Income Statement

Balance Sheet

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

Verdict: FY2026 Q1 was a solid beat on profitability with healthy top-line momentum and improved operating leverage. Revenue grew 22.6% YoY to 184.42, driven by continued strength in core businesses, while operating income rose 36.4% YoY to 10.39, outpacing sales growth. Gross profit margin is reported at 36.8%, indicating healthy unit economics, and SG&A was contained at 60.16 (32.6% of sales), enabling margin expansion. Operating margin improved to 5.6%, implying roughly 57 bps YoY expansion based on implied prior-year levels. Ordinary income increased 25.1% YoY to 10.50, with non-operating items only a modest tailwind (net +0.78), pointing to primarily operating-driven improvement. Net income was 6.48 (+7.6% YoY), with an effective tax rate of 27.5% (tax 2.31 on PBT 8.39). Net margin printed at 3.5%, consistent with the DuPont net profit margin calculation. Balance sheet quality remains a strength: current ratio is 198.8% and cash and deposits are 83.28 versus short-term loans of 12.00, indicating ample liquidity. Leverage is moderate with total liabilities/equity at approximately 0.80x and assets/equity (financial leverage) at 1.80x, supporting a stable capital structure. Interest coverage is robust at 86.6x (OI/interest expense), indicating minimal refinancing or interest-rate risk near term. DuPont ROE is 3.1% (3.5% margin × 0.486 asset turnover × 1.80 leverage), broadly aligning with the reported figure, but still modest relative to market cost of equity. ROIC is flagged at 4.3%, below the 5% warning threshold, underscoring the need for continued returns improvement. Earnings quality assessment is constrained because operating cash flow was not disclosed this quarter; OCF/NI and FCF metrics are therefore not assessable. With a low implied payout ratio of 15.8% and strong liquidity, dividend capacity appears conservative, though confirmation requires OCF/FCF data. Forward-looking, sustained operating discipline and ROIC enhancements will be key to lifting ROE above mid-single digits, while maintaining growth without diluting margins.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin (3.5%) × Asset Turnover (0.486) × Financial Leverage (1.80x) = ROE 3.1%. The biggest delta driver this quarter appears to be margin expansion: operating income grew 36.4% YoY versus revenue at 22.6%, implying operating margin expansion of roughly 57 bps to 5.6%. Business reason: better SG&A efficiency (SG&A at 32.6% of sales) and scale benefits likely from stronger platform monetization and retail efficiency, with limited reliance on non-operating gains (net non-op +0.78). Sustainability: operating leverage can persist if revenue growth continues and cost discipline holds; however, margin gains may normalize as marketing and investments resume for growth. Asset turnover at 0.486 (annualized view implied by quarterly snapshot) is stable; no evidence of major asset intensity changes this quarter. Financial leverage at 1.80x is unchanged and not a key ROE swing factor. Watch for SG&A growth outpacing revenue—currently OI growth > revenue growth (positive operating leverage), but if user acquisition or offline expansion accelerates, SG&A could reflate. Also note ROIC at 4.3% (<5% warning), indicating returns are below desired thresholds despite better margins.

Growth Assessment

Top-line growth of 22.6% YoY to 184.42 demonstrates solid demand and/or improved monetization across segments. Profit growth outpaced sales (OI +36.4%), indicating healthy operating leverage and improved efficiency. Non-operating items were modest (non-op income 0.92; expense 0.14), so growth quality is mainly operating-driven rather than one-off gains. Net income grew 7.6% to 6.48, with the tax rate of 27.5% acting as a moderate drag on bottom-line growth. Gross margin is reported at 36.8%, a level consistent with scalable platform/retail mix; however, historical comparatives are not provided, so gross margin trend precision is limited. Revenue sustainability hinges on continued traffic/engagement and advertiser/brand spend; the current mix suggests resilience but also cyclicality to marketing budgets. Outlook: if management maintains SG&A discipline and grows high-margin services, the operating margin could drift higher into the 6% range over time, but ROIC improvement is necessary to translate growth into higher ROE. Absence of OCF data this quarter limits validation of growth-to-cash conversion; monitoring AR and deferred items next quarter is key. Given cash of 83.28 and limited short-term debt (12.00), the company has room to invest to support growth without over-leveraging.

Financial Health

Liquidity is strong: current assets 239.61 vs current liabilities 120.51 yields a current ratio of 198.8% (well above the 1.5x benchmark). Quick ratio is also 198.8% given limited inventory disclosure and sizeable cash position (83.28). Solvency is comfortable: total liabilities 168.77 vs equity 210.42 implies a D/E of ~0.80x; interest-bearing debt disclosed (ST 12.00, LT 35.64) appears manageable relative to cash and profitability. No explicit current ratio <1.0 or D/E >2.0 warnings apply. Maturity mismatch risk is low: cash and current assets comfortably exceed current liabilities, and ST debt (12.00) is well covered by cash. Interest coverage is very strong at 86.6x, suggesting low refinancing risk. Off-balance sheet obligations are not disclosed; no specific guarantees/commitments are available from the provided data.

Cash Flow Quality

Operating cash flow was not reported, so OCF/Net Income and free cash flow cannot be assessed this quarter. As a result, we cannot flag or clear OCF/NI <0.8; earnings quality remains unverified on a cash basis. Working capital snapshot: accounts receivable is 56.83 versus quarterly revenue of 184.42, implying an indicative DSO of ~28 days (assuming a 90-day quarter), which is reasonable and not suggestive of aggressive revenue recognition. With cash of 83.28 and modest ST debt of 12.00, near-term liquidity for capex/dividends appears adequate. There are no explicit signs of working capital manipulation in the disclosed figures, but absence of cash flow statements and inventory details limits depth of assessment. FCF sustainability for dividends and capex cannot be concluded without OCF and capex data; monitor next quarter’s cash flow statement for confirmation.

Dividend Sustainability

The payout ratio is calculated at 15.8%, indicating a conservative distribution stance. However, DPS, total dividends paid, and FCF are unreported, so cash coverage cannot be verified. Given strong liquidity (cash 83.28) and low interest burden, baseline dividend capacity appears supportable under current earnings. Sustainability will depend on maintaining OI growth and ensuring OCF conversion; absent OCF data, we cannot confirm FCF coverage. Policy outlook likely remains conservative with room for incremental increases if OCF normalizes in line with NI and ROIC trends improve.

Risk Assessment

Business Risks:

• Advertising/brand marketing spend cyclicality impacting monetization and margins
• Execution risk in platform engagement and retail footprint profitability
• Competitive intensity from e-commerce, beauty platforms, and offline retail
• Potential mix shifts that pressure gross margin if lower-margin channels grow
• Dependence on key brand partnerships and product pipeline cycles

Financial Risks:

• ROIC at 4.3% (<5%) indicates suboptimal capital efficiency
• Absence of OCF/FCF data obscures earnings-to-cash conversion risk
• Potential working capital swings (AR/contract liabilities) impacting cash timing
• Interest rate normalization risk is low but present; limited given strong coverage

Key Concerns:

• ROE at 3.1% is modest despite growth; requires sustained margin and asset efficiency gains
• Non-operating income ratio reported at 14.2% suggests some reliance on below-the-line items in certain periods
• Data limitations (cash flow, capex, DPS) hinder full assessment of dividend and investment capacity

Investment Implications

Key Takeaways:

• Solid quarter with revenue +22.6% and operating income +36.4%, indicating positive operating leverage
• Operating margin improved to ~5.6%, implying ~57 bps YoY expansion
• Net margin at 3.5% and ROE at 3.1% remain modest; returns improvement is a key medium-term task
• Liquidity and solvency are strong (current ratio ~199%, interest coverage ~87x)
• ROIC at 4.3% is below threshold; efficiency and capital allocation need focus
• Earnings quality unverified due to missing OCF/FCF; monitor cash conversion

Metrics to Watch:

• Operating cash flow and OCF/NI ratio (target ≥1.0)
• ROIC trajectory toward >7% over the medium term
• SG&A as a % of sales and operating margin sustainability
• AR days and working capital trends
• Non-operating income/expense mix vs operating profit
• Capex and investment payback to lift asset turnover

Relative Positioning: Within Japan’s digital/retail beauty ecosystem, the company shows above-market revenue growth with improving operating leverage and strong liquidity, but lags on capital efficiency (ROIC/ROE) versus high-quality peers; closing the returns gap while sustaining growth is the central equity narrative.

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