Comseed Co., Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.09B
• Operating Income: ¥49M
• Net Income: ¥-229M
• EPS: ¥2.41

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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

Comseed Co., Ltd. (TSE: 3739) posted FY2026 Q2 consolidated results showing resilience in profitability despite a contraction in top line. Revenue was ¥1,087 million, down 10.6% YoY, yet operating income rose 3.5% YoY to ¥49 million as cost control offset softer sales. Gross profit was ¥389.9 million, implying a gross margin of 35.9%, which remains healthy for a content/services mix with limited inventories (¥12.6 million). Ordinary income reached ¥58 million and net income was ¥32 million, translating to a net margin of 2.94%. DuPont decomposition shows ROE of 4.43% = 2.94% net margin × 0.650x asset turnover × 2.31x financial leverage, indicating moderate profitability driven more by efficiency and leverage than margin strength. Operating margin improved to roughly 4.5% (¥49m/¥1,087m) despite lower sales, evidencing disciplined SG&A management. EBITDA was ¥89.2 million, with an 8.2% EBITDA margin, providing a reasonable buffer above interest expense of ¥7.4 million. Interest coverage of 6.6x indicates manageable financial cost burden at current earnings levels. Cash generation was strong with operating cash flow (OCF) of ¥192 million, equating to 6.0x net income, suggesting high earnings-to-cash conversion this period, likely aided by working capital releases. The balance sheet shows total assets of ¥1,673 million and equity of ¥723 million, implying an equity ratio around 43.2% (computed from non-zero data) and debt-to-equity of 1.28x, a moderate leverage profile. Liquidity appears solid with a current ratio of 156% and quick ratio of 154.5%, underpinned by large current assets (¥1,294 million) versus current liabilities (¥830 million). Dividend distributions remain suspended (DPS ¥0), consistent with reinvestment or balance sheet consolidation. While reported equity ratio and certain per-share fields are undisclosed (zero placeholders), the available figures allow a robust assessment of earnings quality and financial health. Key watchpoints include the sustainability of cost savings, the persistence of negative revenue momentum, and the durability of OCF if working capital tailwinds fade. The effective tax burden implied by income tax of ¥21.6 million versus pre-tax income approximates a mid-to-high 30% rate, though the reported tax rate metric is undisclosed. Overall, Comseed demonstrates improved operating efficiency and strong cash conversion against a backdrop of softer demand, leaving the company reasonably positioned but dependent on stabilizing revenues to lift ROE above the mid-single-digit range.

Profitability Analysis

ROE_decomposition: ROE 4.43% = Net Profit Margin 2.94% × Asset Turnover 0.650 × Financial Leverage 2.31. The modest ROE is constrained by a low net margin, with efficiency (turnover) and leverage providing incremental lift. margin_quality: Gross margin 35.9% supports the model, and operating margin ~4.5% indicates effective cost control amid a 10.6% YoY sales decline. EBITDA margin at 8.2% provides a cushion for interest and tax. Net margin at 2.94% remains thin, sensitive to revenue volatility and any cost drift. operating_leverage: Despite revenue down 10.6% YoY, operating income increased 3.5% YoY, implying positive operating leverage from SG&A efficiencies and mix. However, with margins still low at the bottom line, incremental revenue recovery would be needed to drive more pronounced profit growth.

Growth Assessment

revenue_sustainability: Revenue of ¥1,087 million decreased 10.6% YoY, signaling demand softness or fewer successful titles/projects in the period. Inventories are minimal, suggesting a services/content model where pipeline and releases drive sales rather than stock build. profit_quality: Operating income grew 3.5% YoY on lower sales, evidencing improved cost discipline and potential mix benefits. Ordinary income (¥58 million) exceeded operating income, aided by non-operating items, but the sustainability of such contributions should be monitored. outlook: For growth to re-accelerate, a stronger content pipeline, partner/IP monetization, or platform expansion will be necessary. Absent top-line recovery, further margin expansion may be incremental. Sustaining current profitability will likely depend on maintaining SG&A control and avoiding project delays.

Financial Health

liquidity: Current ratio 156% and quick ratio 154.5% reflect ample near-term liquidity, supported by ¥1,294 million in current assets versus ¥830 million in current liabilities. Working capital stands at ¥465 million. solvency: Total liabilities are ¥926.5 million against equity of ¥723 million, yielding debt-to-equity of 1.28x. Interest coverage of 6.6x indicates manageable debt service capacity at present earnings. capital_structure: Assets of ¥1,673 million and equity of ¥723 million imply an equity ratio around 43.2% (computed). Financial leverage (assets/equity) is 2.31x, consistent with the DuPont input and a moderate risk posture for a content/service business.

Cash Flow Quality

earnings_quality: OCF/Net Income of 6.0x (¥192m/¥32m) suggests strong cash realization and limited accrual drag this period, likely aided by favorable working capital movements. FCF_analysis: Investing cash flow is undisclosed as zero; hence FCF cannot be precisely determined from capex data. Using available data, OCF of ¥192 million before investment outlays indicates capacity to fund organic needs; however, actual FCF depends on capex and investment in intangibles. working_capital: High OCF alongside declining revenues suggests cash inflow from reduced receivables or payables timing. Sustainability is uncertain if revenue stabilizes or grows, potentially reversing the working capital benefit.

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0 and the payout ratio is reported as 0.0%, consistent with earnings retention. With net income at ¥32 million and modest ROE, internal reinvestment or balance sheet strengthening appears prioritized. FCF_coverage: FCF coverage is reported as 0.00x due to undisclosed investing flows. Based on OCF alone (¥192 million), the company could theoretically fund dividends; however, absent capex/intangible spend data, reliable coverage cannot be concluded. policy_outlook: Given small absolute earnings, moderate leverage, and focus on operational stabilization, a conservative dividend stance is likely to continue until profitability and free cash flow visibility improve.

Risk Assessment

Business Risks:

• Hit-driven revenue model in content/mobile services, leading to volatility in sales.
• Dependence on partner IPs and platform policies that can change monetization dynamics.
• Project pipeline execution risk, including development delays and acceptance risk.
• Customer concentration risk if a few titles or clients contribute outsized revenue.
• Regulatory changes in digital content and monetization (e.g., gacha mechanics).
• Competitive intensity in domestic mobile gaming/entertainment markets.

Financial Risks:

• Thin net margin (2.94%) leaves limited buffer against shocks.
• Moderate leverage (D/E 1.28x) adds sensitivity to earnings volatility.
• OCF likely boosted by working capital; potential reversion could strain cash generation.
• Interest rate and refinancing risk if debt reprices higher.
• Limited disclosure on cash balance and capex complicates liquidity and FCF assessment.

Key Concerns:

• Top-line decline of 10.6% YoY while net margin remains sub-3%.
• Sustainability of operating cost savings without impairing growth initiatives.
• Reliance on working capital tailwinds to produce elevated OCF.

Investment Implications

Key Takeaways:

• Revenue contracted to ¥1,087 million (-10.6% YoY) but operating income increased 3.5% YoY, indicating effective cost control.
• ROE is modest at 4.43%, constrained by low net margins despite reasonable asset efficiency and leverage.
• Liquidity is solid (current ratio 156%, quick ratio 154.5%) with working capital of ¥465 million.
• Interest coverage at 6.6x suggests manageable financial risk at current earnings.
• OCF is strong at ¥192 million (6.0x net income), but likely aided by working capital movements.
• Dividend remains suspended (DPS ¥0), consistent with reinvestment and balance sheet priorities.

Metrics to Watch:

• Quarterly revenue trajectory and pipeline updates for titles/projects.
• Operating margin and SG&A ratio to assess sustainability of cost efficiencies.
• OCF versus changes in receivables/payables to gauge working capital normalization.
• Capex and intangible investments (currently undisclosed) to refine FCF.
• Debt levels, interest expense trend, and interest coverage.
• ROE progression toward double digits via margin and turnover improvements.

Relative Positioning: Within Japan’s small-cap digital content/mobile services cohort, Comseed exhibits better-than-peers cost discipline in a down quarter and maintains a moderate leverage/liquidity profile; however, its growth visibility and ROE are below larger, hit-driven peers with stronger IP pipelines.

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
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