ADR120S,Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥18M
• Operating Income: ¥-332M
• Net Income: ¥-433M
• EPS: ¥-14.69

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

For FY2026 Q2 (JGAAP, consolidated), 株式会社ＡＤＲ１２０Ｓ reported severe losses with Operating Income of -332,000,000 and Net Income of -131,000,000, indicating continued operating strain. Revenue was 18,000,000 (-80.0% YoY), pointing to a sharp contraction in topline activity, while Ordinary Income was -347,000,000, reflecting additional non-operating burdens, including interest expense of 37,467,000. The DuPont bridge shows a Net Profit Margin of -727.78%, Asset Turnover of 0.030, and Financial Leverage of 2.10, yielding a calculated ROE of -45.64%, which is consistent with the reported ROE; this quantifies a highly loss-making quarter on very low asset productivity. Despite significant losses, the current ratio stands at 105.2% (Current Assets 517,163,000 vs. Current Liabilities 491,751,000), suggesting narrowly adequate near-term liquidity. Operating cash flow was deeply negative at -420,752,000, indicating cash burn that exceeds the accounting loss, and financing cash flow was also negative at -101,591,000, implying net outflows to capital providers during the period. Reported gross profit of 37,053,000 versus revenue of 18,000,000 implies non-standard classification (e.g., other operating income or reclassifications) because the arithmetic would otherwise not reconcile, so gross margin metrics should be treated with caution. EBITDA was -305,400,000 and the interest coverage ratio was -8.9x, underscoring unsustainable coverage from current earnings. The equity base is shown at 287,000,000 against total assets of 603,000,000 (implying leverage of about 2.1x by DuPont), yet total liabilities are reported at 2,907,056,000, which does not reconcile with the asset/equity figures; this indicates data gaps or differing reporting bases rather than true balance sheet identity failure. Tax expense was minimal (778,000) given the loss, resulting in an effective tax rate that is not meaningful in this context. Depreciation and amortization were 26,600,000, modest relative to the operating loss, implying that cash burn is driven by operating losses and working capital rather than non-cash charges. Working capital was positive at 25,412,000, but the magnitude is small relative to the operating cash outflow, which raises liquidity management concerns if cash burn persists. Dividend DPS was 0 with a 0.0% payout ratio, consistent with preservation of cash under losses. Several key datapoints are unreported or inconsistent (e.g., cash and equivalents, investing cash flow, equity ratio, shares outstanding), constraining precision in solvency and per-share analysis. Overall, the quarter reflects a business under significant operating and cash flow pressure, with very weak profitability and low asset utilization, modest short-term liquidity, and uncertain solvency due to incomplete liability detail. Outlook hinges on stabilizing revenue, restoring operating leverage, and shoring up liquidity, given the pace of cash burn and interest burden.

Profitability Analysis

ROE decomposition indicates -45.64% driven by extremely negative net margin (-727.78%), very low asset turnover (0.030x), and moderate financial leverage (2.10x). The core driver of value destruction is the margin, not leverage. Operating Income of -332,000,000 on revenue of 18,000,000 signals severe negative operating leverage: fixed costs and expenses are not aligned with the current revenue base. EBITDA of -305,400,000 confirms losses even before depreciation and interest, indicating a structurally loss-making quarter rather than a depreciation-driven effect. Interest expense of 37,467,000 exacerbates Ordinary loss (-347,000,000), indicating that financing costs meaningfully burden results. The reported gross profit of 37,053,000 exceeds revenue, implying material other operating income/reclassifications; thus, the stated gross margin (205.8%) is not decision-useful and should not be relied upon for cost efficiency assessment. Effective tax is negligible relative to losses, as expected. Overall, profitability is impaired across all levels (operating, ordinary, net) with margin quality distorted by classification effects and weak underlying operating scale.

Growth Assessment

Revenue declined 80.0% YoY to 18,000,000, indicating severe contraction and likely loss of demand, contracts, or product/segment declines. The sharp drop in topline, coupled with large operating losses, suggests revenue is not currently covering the cost base, and the business lacks operating leverage at the present scale. Profit quality is weak: the gap between Net Income (-131,000,000) and OCF (-420,752,000) implies higher cash burn than accounting losses, driven by working capital or other cash expenses. With Ordinary Income at -347,000,000 and negative interest coverage, near-term growth will likely be constrained by funding capacity unless expenses are reduced or revenues recover. No segment or order backlog data is available; therefore, sustainability of revenue cannot be assessed beyond noting the steep YoY decline. Outlook depends on management’s ability to restore revenue run-rate and/or execute cost restructuring to reduce cash losses; absent these, continued contraction is a risk.

Financial Health

Liquidity is marginally adequate on a snapshot basis with a current ratio of 105.2% and working capital of 25,412,000, but this is overshadowed by OCF of -420,752,000 indicating rapid consumption of liquid resources. Quick ratio equals current ratio (105.2%), consistent with no reported inventories; note that inventories may be unreported rather than truly zero. Solvency assessment is constrained: total equity is 287,000,000 and total assets 603,000,000 (implied leverage ~2.1x by assets/equity), but reported total liabilities of 2,907,056,000 conflict with the accounting identity, suggesting reporting differences or missing items. The debt-to-equity ratio of 10.13x is likely based on the reported liabilities figure and should be interpreted cautiously. Interest expense of 37,467,000 with negative EBITDA produces an interest coverage of -8.9x, indicating dependence on external funding or asset monetization. Absent cash balance disclosure (cash & equivalents unreported), true liquidity runway cannot be determined.

Cash Flow Quality

Earnings quality is weak, as OCF (-420,752,000) is substantially more negative than Net Income (-131,000,000), signaling cash outflows from working capital or other operating cash uses beyond the recognized loss. Depreciation and amortization of 26,600,000 are small relative to the operating loss, so the gap between EBITDA and OCF likely reflects working capital movements and cash restructuring costs (not disclosed). Investing CF is unreported (0), so Free Cash Flow cannot be reliably quantified; however, with OCF deeply negative, underlying FCF is likely negative even before any capex. Financing CF was -101,591,000, indicating net repayments or dividends/fees; with DPS at 0, this likely reflects debt repayments or financing fees, but details are not provided. The OCF/Net Income ratio of 3.21 (based on the provided metric) reflects more negative cash flow than earnings, reinforcing low cash conversion quality.

Dividend Sustainability

DPS is 0.00 and payout ratio is 0.0%, aligning with capital preservation amid losses. Given negative Net Income (-131,000,000) and significantly negative OCF (-420,752,000), dividends would not be covered by earnings or operating cash flow. Investing CF is unreported, so precise FCF coverage cannot be computed, but the directionality implies insufficient free cash capacity. With interest coverage at -8.9x and uncertain solvency metrics, reinstating dividends near term appears unlikely under current fundamentals. Dividend policy outlook thus hinges on restoring profitability and positive OCF.

Risk Assessment

Business Risks:

• Severe revenue contraction (-80.0% YoY) indicating potential loss of key customers, contracts, or competitive position
• Negative operating leverage with fixed costs not aligned to reduced scale
• Execution risk around restructuring and cost reductions needed to stem cash burn
• Potential market or product obsolescence risk given low asset turnover (0.030x)

Financial Risks:

• Sustained negative OCF (-420,752,000) leading to liquidity strain
• Negative interest coverage (-8.9x) implying reliance on external funding
• Inconsistent balance sheet disclosures (liabilities vs. assets/equity) complicate solvency assessment
• Potential covenant or refinancing risk if indebtedness is material (exact debt detail not disclosed)

Key Concerns:

• Ability to stabilize revenue and regain scale
• Cash runway given lack of disclosed cash balance and large quarterly cash burn
• Balance sheet clarity and true leverage level amid inconsistent liability reporting
• Need for capital measures if operating losses persist

Investment Implications

Key Takeaways:

• ROE of -45.64% primarily driven by extraordinarily negative margins; asset productivity is also very low
• Operating and ordinary losses are large relative to the revenue base, pointing to structural issues
• Operating cash burn (-420,752,000) exceeds accounting losses, stressing liquidity despite a 105.2% current ratio
• Interest burden (37,467,000) is material with no earnings coverage
• Financial statement inconsistencies and unreported items limit precision, necessitating caution in ratio interpretation

Metrics to Watch:

• Quarterly revenue trajectory and order intake/repeat business indicators
• Operating income and EBITDA progression vs. cost reduction initiatives
• Operating cash flow and working capital movements (receivables/payables) to track cash burn
• Cash and equivalents, undrawn facilities, and maturity profile (once disclosed)
• Clarity on total liabilities and net debt to gauge true leverage

Relative Positioning: Relative to typical TSE-listed peers, the company exhibits significantly weaker profitability (negative EBITDA and ROE), inferior cash conversion (OCF far below NI), and higher perceived financial risk (negative coverage), with only marginally adequate short-term liquidity; the lack of complete disclosures further impairs comparability.

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