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

ZIGExN Co., Ltd. (3679) reported FY2026 Q2 consolidated IFRS results showing solid topline expansion alongside modest profit growth and robust cash generation. Revenue rose 12.3% YoY to 137.76, supported by a high gross margin of 73.3%, indicative of a scalable, platform-like model with low cost of sales. Operating income increased 2.2% YoY to 28.52, implying some operating margin compression as SG&A spending outpaced revenue growth. Net income rose 5.1% YoY to 19.82, translating to a net margin of 14.4% and EPS of 19.82 yen on 100.03 million average shares. DuPont decomposition yields a calculated ROE of 9.6% (net margin 14.4%, asset turnover 0.350x, financial leverage 1.91x), in line with the reported ROE. Operating cash flow of 37.73 was strong at 1.90x net income, underscoring high earnings quality. Free cash flow, defined as operating plus investing cash flows, was 23.52 despite a moderate investing outflow of -14.21, while capex remained light at -1.14. The balance sheet is conservatively capitalized with an equity ratio of 52.4% and liability-to-equity of 0.86x; loans total 32.74 against cash and equivalents of 142.95, leaving the company in a net cash position. Profit before tax of 28.79 and an effective tax rate of 30.3% are consistent with the reported net income. Working capital assessment is constrained by unreported current liabilities, but cash plus receivables materially exceed reported short-term obligations. Dividend payments of -6.75 and share repurchases of -23.40 were comfortably funded by FCF and existing cash, reflecting disciplined capital allocation. The calculated payout ratio is 58.3%, with FCF coverage of 2.04x, suggesting near-term dividend sustainability. Asset turnover of 0.350 indicates a capital-light but not highly asset-intensive model; improvements here could enhance ROE further. Interest coverage cannot be calculated due to unreported interest expense, though low leverage and net cash provide ample cushion. Several balance sheet line items (e.g., goodwill, current liabilities detail) are unreported, which limits granularity in certain ratio analyses. Overall, the company exhibits strong gross profitability, positive but moderating operating leverage, healthy cash generation, and a solid balance sheet.

Profitability Analysis

ROE_decomposition: ROE 9.6% = Net profit margin 14.4% x Asset turnover 0.350 x Financial leverage 1.91x. This reflects strong margins, moderate asset intensity, and prudent leverage. margin_quality: Gross margin 73.3% demonstrates robust unit economics. Operating margin is approximately 20.7% (28.52 / 137.76), down versus revenue growth (+12.3% YoY) and operating income growth (+2.2% YoY), indicating higher SG&A intensity (SG&A 53.1% of revenue). EBITDA margin is 25.6%, implying modest D&A burden (D&A 6.74, about 4.9% of revenue). Net margin at 14.4% remains healthy after a 30.3% tax rate. operating_leverage: Revenue grew 12.3% YoY while operating income grew 2.2%, signaling negative operating leverage in the period, likely due to growth investments in sales/marketing or product. Cost of sales scaled well; the drag originates from SG&A. If SG&A growth normalizes, margins could expand given the high gross margin base.

Growth Assessment

revenue_sustainability: Topline growth of 12.3% YoY suggests resilient demand across the company’s matching/platform businesses. High gross margin and low cost of sales support scalability, though sustainability will depend on client activity in core verticals and macro conditions. profit_quality: Net income grew 5.1% vs. revenue 12.3%, reflecting investment-led margin pressure. However, OCF of 37.73 at 1.90x net income confirms earnings are backed by cash. Effective tax rate of 30.3% is stable, and minimal capex (-1.14) supports cash conversion. outlook: With a net cash balance and continued FCF generation, the company is positioned to invest in growth and shareholder returns. Key to sustaining EPS growth will be stabilizing SG&A intensity and improving asset turnover; potential M&A or product investments (implied by investing CF) may influence trajectory.

Financial Health

liquidity: Cash and equivalents of 142.95 provide significant coverage relative to short-term loans of 26.57 and accounts payable of 38.31. Current ratio and quick ratio are not calculable due to unreported current liabilities, but liquidity appears ample given the net cash position and positive OCF. solvency: Equity ratio is 52.4% (equity 206.09 / assets 394.03). Liability-to-equity is 0.86x. Loans total 32.74 (short-term 26.57, long-term 6.17); with cash of 142.95, the company is in a net cash position (~110.2). Interest coverage cannot be computed, but solvency risk looks low. capital_structure: Financial leverage used in DuPont is 1.91x (assets/equity), consistent with a balanced structure. Treasury shares of 10.21 million reduce share count, supporting per-share metrics; continued buybacks (-23.40) further optimize capital.

Cash Flow Quality

earnings_quality: OCF/Net Income is 1.90x (37.73 / 19.82), indicating strong cash realization and limited accrual build. This supports the quality of reported earnings. FCF_analysis: Free cash flow defined as OCF + Investing CF equals 23.52 (37.73 + -14.21). Capex is modest at -1.14, so the majority of investing outflow likely reflects intangibles or investments/M&A. FCF comfortably funds dividends and a portion of buybacks. working_capital: Accounts receivable of 50.29 versus six-month revenue of 137.76 implies AR days of roughly mid-60s (approx. 66–70 days), reasonable for a platform/advertising model; full working capital analysis is limited by unreported current liabilities and inventory.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio is 58.3% of net income, within a moderate range for a cash-generative, asset-light business. EPS of 19.82 yen aligns with net income and average shares. FCF_coverage: Dividend cash outflow (-6.75) is covered 2.04x by FCF (23.52), indicating good near-term sustainability. The strong net cash position further underpins flexibility. policy_outlook: While DPS is unreported, the company’s simultaneous dividends and buybacks (-23.40) suggest an active shareholder return stance. Continuation will depend on sustaining OCF and managing investment outlays; absence of interest burden and low capex support ongoing returns.

Risk Assessment

Business Risks:

• Revenue sensitivity to client activity and advertising spend in core matching/platform verticals
• Potential margin pressure from continued SG&A investments and customer acquisition costs
• Execution risk in M&A or intangible investments implied by investing cash flows
• Competitive intensity in online marketplaces and recruitment/real estate domains
• Macroeconomic slowdown affecting hiring and transaction volumes

Financial Risks:

• Limited visibility on interest expense and current liabilities due to unreported items
• Potential working capital swings affecting OCF despite strong current performance
• Concentration risk if revenue is dependent on a few verticals or large clients
• Goodwill/intangible impairment risk (balance unreported) if acquisitions underperform

Key Concerns:

• Negative operating leverage in the period (OP +2.2% vs sales +12.3%)
• SG&A at 53% of sales; need for cost discipline to protect margins
• Data gaps (current liabilities, goodwill, interest) constrain precise ratio analysis

Investment Implications

Key Takeaways:

• Topline growth of 12.3% with strong gross margin (73.3%) confirms scalable economics
• Operating leverage softened; OP growth (2.2%) lagged sales due to higher SG&A
• ROE of 9.6% driven by solid margins and moderate leverage; asset turnover is the key bottleneck
• Cash generation is strong (OCF/NI 1.90x), yielding positive FCF of 23.52
• Net cash balance (~110) and equity ratio 52.4% provide resilience and strategic flexibility
• Shareholder returns are active (dividends and sizable buybacks), well covered by FCF

Metrics to Watch:

• Operating margin trajectory vs. SG&A intensity
• OCF/Net income ratio and working capital movements (AR days)
• Revenue growth by vertical and client acquisition costs (where disclosed)
• Investing CF composition (M&A vs. organic capex) and any goodwill trends
• Asset turnover improvement and impact on ROE
• Share count changes from ongoing buybacks and DPS disclosure

Relative Positioning: Within Japan’s internet/platform peers, ZIGExN exhibits above-average gross margins, moderate ROE, strong cash conversion, and a conservative balance sheet; near-term margin expansion depends on SG&A normalization while maintaining double-digit revenue growth.

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