ZIGExN Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥13.78B
• Operating Income: ¥2.85B
• Net Income: ¥1.99B
• EPS: ¥19.82

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

Verdict: Solid top-line growth with modest operating profit increase, but margin compression and weaker cash conversion temper the quarter. Revenue rose 12.3% YoY to 137.76, while operating income increased 2.2% YoY to 28.52 and net income rose 5.1% YoY to 19.82. Gross profit reached 111.20, implying a robust gross margin of 80.7%. Operating margin stands at 20.7% (28.52/137.76), down from an estimated 22.7% a year ago, signaling approximately 204 bps of compression. Net margin was 14.4% (19.82/137.76), roughly stable due to a lower growth in operating profit offset by a broadly steady effective tax rate of 30.9%. EBITDA was 36.46, with an EBITDA margin of 26.5%, indicating decent operating efficiency before depreciation and amortization of 7.94. SG&A intensity was high at 60.0% of revenue (82.61/137.76), likely the key driver of operating margin pressure. Cash conversion was soft: operating cash flow was 14.47 versus net income of 19.82 (OCF/NI 0.73x), below the 0.8 threshold, warranting caution. Free cash flow was negative at -16.30, primarily due to sizable investing outflows (-30.77) despite modest capex (-0.93), suggesting M&A or investment activity. The balance sheet remains sound with total equity of 206.09 and a D/E ratio of 0.91x, supported by a net cash position when comparing cash and equivalents (123.99) to total interest-bearing debt inferred at 48.41. Intangible-heavy capital structure persists: goodwill (131.73) and intangible assets (35.39) together represent 167.12, or roughly 81% of equity, implying impairment risk sensitivity. ROE calculated via DuPont is 9.6% (NPM 14.4% × asset turnover 0.350 × leverage 1.91x), in line with the reported figure and broadly on track. ROIC was 7.7%, within the typical target range (7–8%), indicating investments are meeting management’s hurdle but with limited buffer vs. potential WACC. Dividends appear within a conservative payout policy (58.3% payout), but current FCF coverage is negative (-1.41x) given investment cash outflows; however, normalized FCF (excluding M&A) would likely be adequate. Looking ahead, sustaining double-digit revenue growth while normalizing SG&A and improving cash conversion will be key to defend ROE near 10% and maintain capital return capacity.

Profitability Analysis

ROE decomposition: 9.6% = 14.4% net profit margin × 0.350 asset turnover × 1.91x financial leverage. The biggest driver of change this quarter versus last year is the net profit margin, pressured by operating margin compression as SG&A grew faster than revenue (+12.3% revenue vs. OI +2.2%). Operating margin fell from an estimated 22.7% to 20.7% (~204 bps compression), pointing to increased cost intensity (notably SG&A at 60.0% of revenue). Asset turnover at 0.350 remains modest for an asset-light digital platform due to large cash balances and significant goodwill/intangibles dampening the denominator; there is no evidence of a material change this quarter. Financial leverage at 1.91x is moderate and stable, providing some ROE support without excessive balance-sheet risk. Business reasons for margin pressure likely include higher personnel and marketing investments to drive growth, integration costs from acquisitions, or mix effects within verticals. Sustainability: investment-led SG&A can be optimized; thus some margin recovery is plausible if revenue scale benefits accrue, but if growth requires sustained promotion spend, margins may remain capped. Watch for any trend where SG&A growth persistently exceeds revenue growth; this quarter’s data suggest that dynamic and warrants monitoring.

Growth Assessment

Revenue growth of +12.3% YoY to 137.76 indicates healthy demand across the portfolio. Operating income growth of +2.2% lagged revenue, implying negative operating leverage as SG&A intensity rose to 60.0%. Net income grew +5.1% to 19.82, aided by below-the-line stability (tax rate ~30.9%), but not fully translating from top-line expansion. EBITDA of 36.46 (26.5% margin) suggests the core engine remains profitable before non-cash charges. Given investing CF of -30.77 with capex only -0.93, inorganic growth via acquisitions likely contributed to scale; near-term integration costs can dilute margins. Outlook hinges on balancing growth marketing and personnel additions with monetization efficiency; if the company can improve conversion and ARPU in key verticals while moderating SG&A growth below revenue, operating margin could re-expand. Conversely, if customer acquisition costs remain elevated or macro slows hiring demand, growth could decelerate and margins could remain under pressure.

Financial Health

Liquidity: Current assets are 186.89, but current liabilities are unreported, so the current ratio and quick ratio cannot be calculated; no explicit warning is triggered. Cash & equivalents are 123.99, providing a strong liquidity cushion relative to short-term loans of 28.45. Solvency: Total liabilities are 187.95 versus equity of 206.09, yielding a D/E ratio of 0.91x, within conservative bounds. Interest-bearing debt (short-term 28.45 + long-term 19.96) totals 48.41, implying Debt/EBITDA of ~1.33x, a comfortable level. Maturity mismatch risk appears low given sizable current assets against short-term loans, though full current liabilities are not disclosed. Capital structure quality is tempered by high intangibles: goodwill 131.73 and other intangibles 35.39 comprise 167.12, or ~81% of equity, indicating sensitivity to impairment in downturns. No off-balance sheet obligations are disclosed in the provided data.

Cash Flow Quality

OCF/Net Income is 0.73x, below the 0.8 threshold, indicating weaker earnings quality this quarter, likely driven by working capital build (e.g., higher receivables at 57.27) or timing effects. Free cash flow is -16.30, driven by heavy investing cash outflows (-30.77) despite modest capex (-0.93), suggesting M&A or financial investments; this depresses headline FCF but does not necessarily reflect core cash generation. OCF of 14.47 covered dividends of 10.53 but not dividends plus buybacks plus capex (total ~15.50), leaving a small funding gap likely met from cash on hand. No explicit signs of working capital manipulation are evident from the disclosed snapshot; however, the OCF shortfall versus NI warrants monitoring of AR days, deferred revenue, and payables trends when disclosed.

Dividend Sustainability

Payout ratio is 58.3%, near the upper bound of the sustainable range, but acceptable given profitability. FCF coverage is -1.41x due to acquisition-related investing, so near-term coverage appears weak on a headline basis; excluding M&A, OCF comfortably covers dividends and capex. With cash & equivalents of 123.99 and modest leverage (Debt/EBITDA ~1.33x), balance-sheet capacity supports maintenance of the current dividend. Future sustainability depends on improving cash conversion (OCF/NI back to ≥1.0) and avoiding prolonged heavy inorganic outflows without returns; ROIC of 7.7% indicates investments are meeting internal targets, supporting dividend policy continuity if maintained.

Risk Assessment

Business Risks:

• Operating margin pressure from elevated SG&A (60.0% of revenue) and potential ongoing marketing/personnel investments
• Execution and integration risk from M&A, implied by large investing outflows and high goodwill
• Demand cyclicality in recruitment and lifestyle verticals affecting revenue growth
• Platform/traffic dependency risk (e.g., search algorithm changes) impacting lead generation and monetization

Financial Risks:

• Earnings quality risk: OCF/NI at 0.73x below the 0.8 threshold
• High intangibles/goodwill (167.12 total) at ~81% of equity, raising impairment sensitivity
• Potential reliance on cash reserves to fund shareholder returns during investment-heavy periods
• Limited disclosure of interest expense and current liabilities makes coverage and liquidity assessments incomplete

Key Concerns:

• Operating margin compression of ~204 bps YoY to 20.7%
• Negative FCF (-16.30) driven by heavy investing outflows
• SG&A growth likely exceeding revenue, risking sustained negative operating leverage if not addressed
• Visibility gap due to multiple unreported items (non-operating income/expenses, SG&A breakdown, current liabilities)

Investment Implications

Key Takeaways:

• Healthy top-line growth (+12.3% YoY) but subdued operating profit growth (+2.2%) as cost intensity rose
• Operating margin fell to 20.7%, compressing ~204 bps YoY; SG&A at 60.0% is the pressure point
• OCF/NI at 0.73x flags softer cash conversion; FCF negative due to investment outflows
• Balance sheet remains resilient: net cash versus debt and Debt/EBITDA ~1.33x
• High goodwill/intangibles (~81% of equity) elevate impairment risk; ROIC at 7.7% is acceptable but close to the threshold
• Dividend payout (58.3%) appears maintainable with current liquidity, though FCF coverage is temporarily weak
• Improving SG&A efficiency and cash conversion are pivotal for defending ROE at ~9.6%

Metrics to Watch:

• OCF/Net Income and working capital turns (AR days, payables days) for cash conversion improvement
• Operating margin trend and SG&A growth vs. revenue growth
• ROIC by project/vertical versus WACC to validate M&A effectiveness
• Goodwill impairment testing indicators and segment profitability
• Debt/EBITDA and net cash trajectory post-investments
• Revenue mix shifts across verticals impacting monetization

Relative Positioning: Within domestic digital media/HR-tech peers, the company exhibits strong gross margins and moderate leverage with a solid cash buffer, but it is more exposed to goodwill impairment and short-term cash conversion risk due to active investment and elevated SG&A, leaving it mid-pack on quality and execution pending evidence of margin re-expansion.

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