Cross Marketing Group Inc. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥6.71B
• Operating Income: ¥286M
• Net Income: ¥142M
• EPS: ¥6.29

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

Cross Marketing Group (TSE: 3675) reported FY2026 Q1 consolidated results under JGAAP with revenue of ¥6.708 billion, down 0.8% year over year, indicating a modest topline contraction amid likely softer demand or project timing effects. Gross profit was ¥2.523 billion, translating to a 37.6% gross margin, which is healthy for a marketing/data-services model and suggests resilient pricing and service mix. Operating income declined 19.5% YoY to ¥286 million, compressing operating margin to roughly 4.3%, highlighting negative operating leverage as small revenue pressure flowed through disproportionately to profits. Ordinary income came in at ¥290 million, slightly above operating income, implying ¥4 million in net non-operating gains offsetting ¥16 million of interest expense, and interest coverage was strong at 17.9x. Net income was ¥122 million (down 14.2% YoY), with net margin at 1.82%, suggesting heavier below-the-line burdens including taxes and potentially non-controlling interests. Using the provided DuPont figures, ROE was 1.50% (net margin 1.82% × asset turnover 0.418 × leverage 1.98), a low level for the sector and indicating scope for margin and/or turnover improvement. Liquidity appears solid with current assets of ¥12.87 billion versus current liabilities of ¥5.42 billion, yielding a current ratio of 2.38x and working capital of ¥7.45 billion. Balance sheet strength looks robust; despite an equity ratio field marked as 0% (undisclosed), the implied equity ratio is approximately 50.6% (equity ¥8.118 billion over total assets ¥16.057 billion), suggesting conservative capitalization. Debt-to-equity of about 1.04x (liabilities to equity) indicates moderate leverage that is manageable given the earnings profile. SG&A was approximately ¥2.24 billion (gross profit minus operating income), equating to about 33.3% of revenue; this level, together with the decline in operating income, points to cost pressure and limited short-term scalability. The tax expense reported (¥153 million) implies an elevated effective tax rate near the low-50% range versus ordinary income, which contributed to net margin compression this quarter. Cash flow data (operating, investing, financing) and cash balance were not disclosed this period, limiting assessment of earnings-to-cash conversion and capital deployment. Dividend per share information was also not disclosed; thus, payout and FCF coverage cannot be assessed from this dataset. EPS was ¥6.29; back-solving implies roughly 19.4 million shares outstanding, consistent with recent historical share counts, though this is an estimate given the lack of reported share figures. Overall, the quarter reflects resilient gross profitability but weaker operating leverage and higher tax drag, with liquidity and solvency remaining comfortable. Data gaps (cash flows, DPS, depreciation/amortization, share counts) temper confidence, but the available balance sheet and income statement support a view of a fundamentally sound, if margin-pressured, quarter.

Profitability Analysis

ROE_decomposition: Net profit margin 1.82% × asset turnover 0.418 × financial leverage 1.98 = ROE 1.50%. Implied ROA is approximately 0.76% (1.82% × 0.418), and leverage is modest at ~2.0x, indicating that ROE is chiefly constrained by low net margin and modest asset turnover rather than capital structure. margin_quality: Gross margin of 37.6% (¥2,523m GP on ¥6,708m revenue) is solid and suggests pricing power/mix resilience. Operating margin of 4.3% (¥286m OI) declined faster than revenue (-19.5% OI vs. -0.8% revenue), indicating fixed cost absorption issues or higher SG&A. Net margin at 1.82% is pressured by elevated tax expense (¥153m) and minor non-operating items. operating_leverage: Negative operating leverage evident: a 0.8% revenue decline led to a 19.5% drop in operating income. SG&A of ~¥2,237m equates to 33.3% of sales; even small revenue shortfalls can significantly impact profits until costs are recalibrated.

Growth Assessment

revenue_sustainability: Revenue declined 0.8% YoY to ¥6.708b, indicating flat-to-slightly softer demand or project timing effects. The limited decline suggests core demand remains intact, but sustained growth will likely require new client wins or expansion in higher-value analytics/insight offerings. profit_quality: Gross margin strength contrasts with compressed operating margin, implying the issue lies in operating cost intensity rather than pricing. Ordinary income modestly exceeded operating income (+¥4m net non-operating), and interest burden is low, so the quality of profit is primarily driven by core operations and tax effects. outlook: If management can moderate SG&A growth and normalize the tax rate, incremental margin recovery is plausible even on stable revenue. However, absent disclosed cash flows and D&A, visibility into investment pace and cost flexibility is limited. Near-term growth likely hinges on execution in higher-margin digital research/insight services and utilization improvements.

Financial Health

liquidity: Current assets ¥12,870m vs. current liabilities ¥5,417m yields a current ratio of 2.38x and working capital of ¥7,453m. Quick ratio prints the same due to undisclosed inventories; actual quick ratio is likely slightly lower but still comfortable. solvency: Implied equity ratio ~50.6% (¥8,118m equity / ¥16,057m assets) despite the undisclosed field. Debt-to-equity proxied by total liabilities/equity is ~1.04x, indicating moderate leverage. Interest coverage at 17.9x (OI/interest) is strong, supporting solvency. capital_structure: Assets ¥16,057m funded roughly half by equity and half by liabilities, leaving balance sheet flexibility for investment. Absence of detailed debt maturity and cash balance disclosure constrains a precise view on near-term refinancing risk.

Cash Flow Quality

earnings_quality: Operating cash flow was not disclosed this quarter (reported as 0, which denotes undisclosed). Consequently, OCF-to-net income, accrual intensity, and conversion metrics cannot be robustly assessed. FCF_analysis: Investing and financing cash flows were also undisclosed; free cash flow cannot be computed. Without D&A disclosure, EBITDA and maintenance capex estimates are unavailable, limiting visibility on true cash earnings. working_capital: With current assets substantially exceeding current liabilities, headline liquidity is strong; however, without the cash balance and receivable/payable movements, we cannot determine whether the quarter’s earnings benefitted from working-capital releases or faced headwinds.

Dividend Sustainability

payout_ratio_assessment: Dividend per share was not disclosed, and the reported payout ratio and FCF coverage fields show as zero due to non-disclosure. Based on EPS of ¥6.29, any payout assessment would be speculative without declared DPS. FCF_coverage: Undisclosed OCF and capex prevent assessment of free cash flow coverage of dividends. policy_outlook: No update to dividend policy can be inferred from the data provided. Sustainability would depend on cash generation and capital allocation priorities once disclosed.

Risk Assessment

Business Risks:

• Revenue sensitivity to client marketing budgets and research project timing, which can drive quarterly volatility.
• Negative operating leverage due to fixed-cost base (SG&A ~33% of sales), amplifying profit swings on small revenue changes.
• Competitive pressure in digital research, data analytics, and panel-based services potentially weighing on pricing/mix.
• Execution risk in shifting toward higher-margin services to restore operating margins.

Financial Risks:

• Visibility on cash and debt structure is limited due to undisclosed cash flow and cash balance data.
• Elevated effective tax rate (~53% vs. ordinary income) compresses net profitability and could persist depending on one-offs or tax items.
• Moderate leverage (liabilities/equity ~1.04x) requires maintaining interest coverage if profits weaken further.

Key Concerns:

• Operating income decline (-19.5% YoY) against a modest revenue dip (-0.8% YoY) indicates adverse operating leverage.
• Limited disclosure on cash flows, cash balance, D&A, and dividends constrains assessment of cash generation and returns.
• Low ROE (1.50%) underscores the need for margin and asset efficiency improvement.

Investment Implications

Key Takeaways:

• Topline essentially flat YoY (-0.8%), but operating income down sharply (-19.5%), signaling cost pressure.
• Gross margin solid at 37.6%, but SG&A at ~33% of sales limits operating margin to ~4.3%.
• ROE of 1.50% is low; margin and asset turnover need improvement to lift returns.
• Liquidity strong (current ratio 2.38x; working capital ¥7.45b) and capitalization conservative (implied equity ratio ~50.6%).
• Interest burden modest with 17.9x coverage, reducing near-term solvency risk.
• Tax expense elevated, weighing on net margin and EPS.
• Cash flow and dividend data not disclosed; assessment of cash conversion and shareholder returns is constrained.

Metrics to Watch:

• Operating margin trend versus SG&A ratio (targeting improved cost efficiency).
• Gross margin stability as a gauge of pricing/mix resilience.
• Effective tax rate normalization and its impact on net margin.
• Asset turnover improvement via project throughput and utilization.
• Disclosure of operating cash flow, capex, and cash balance to validate earnings quality.
• Any announced DPS and payout policy updates.

Relative Positioning: Relative to domestic marketing/data-service peers, the company shows comparable gross margins but weaker operating leverage this quarter, with a stronger balance sheet profile (implied equity ratio ~51%) yet lower ROE; improved cost discipline and clearer cash flow disclosure would be needed to close the return gap.

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