FLIGHT SOLUTIONS Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.27B
• Operating Income: ¥-193M
• Net Income: ¥-206M
• EPS: ¥-17.55

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

Flight Solutions (TSE: 3753) reported FY2026 Q2 (non-consolidated, JGAAP) revenue of ¥1,266 million, down 9.7% YoY, indicating softer demand and/or delayed project recognition. The company remained loss-making with operating loss of ¥193 million and net loss of ¥206 million; YoY change is indicated as +0.0% for operating and net income, suggesting essentially flat losses versus the prior-year period. DuPont decomposition points to a deeply negative ROE of -56.3%, driven primarily by a -16.27% net margin and amplified by high financial leverage (assets/equity 3.96x). Gross margin is shown at 10.9%, but there is a disclosed inconsistency between revenue, cost of sales, and gross profit figures; this likely reflects classification differences or partial disclosure rather than a calculation error. EBITDA was -¥108.9 million, in line with operating loss and reported depreciation of ¥84.1 million, highlighting limited operating leverage at the current revenue run-rate. Ordinary loss of ¥205 million and low interest expense (¥4.6 million) indicate financing costs are not the immediate driver of losses; core operations are. Operating cash flow was significantly negative at -¥477.1 million, more than double the net loss, implying substantial working capital outflows or cash costs not reflected in accrual earnings. Liquidity ratios appear adequate on paper (current ratio 142%, quick ratio 124%), and working capital stands at ¥270 million, but the magnitude of negative OCF tempers comfort. Balance sheet leverage is elevated (liabilities/equity 2.75x), increasing sensitivity to continued losses and any funding disruptions. Asset turnover of 0.874x and revenue contraction suggest capacity underutilization and/or weaker execution in the period. No dividends were paid (DPS ¥0), which is appropriate given the losses and cash outflows; payout ratio is 0% by definition. Financing cash inflow of ¥131 million likely reflects new borrowings or other funding, partially offsetting operating cash burn; however, reported cash and cash equivalents are undisclosed, limiting visibility on runway. Key data fields such as equity ratio, cash balance, investing cash flows, and share counts show as zero, which reflects non-disclosure, not actual zeros; this constrains precision in solvency and per-share analyses. Overall, earnings quality is weak this half, with negative margins, cash burn, and high leverage, while liquidity appears adequate but challenged by OCF. Near-term focus should be on stabilizing revenue, improving gross margin through mix and pricing, and tightening expense and working capital discipline to reduce cash burn.

Profitability Analysis

ROE is -56.28% per DuPont: Net Profit Margin (-16.27%) x Asset Turnover (0.874x) x Financial Leverage (3.96x). The dominant driver is the negative margin, with leverage magnifying equity erosion. Gross margin is shown at 10.9%, but disclosed revenue and cost of sales imply a much lower gross profit, indicating presentation or classification differences; we rely on the reported gross profit figure while acknowledging this limitation. Operating margin is -15.2% (operating loss ¥193m / revenue ¥1,266m), reflecting inadequate scale and/or pricing power relative to fixed costs. EBITDA margin is -8.6%, suggesting some operating deleverage eased by modest depreciation (¥84.1m, ~6.6% of revenue). Interest expense (¥4.6m) is small; interest coverage is -42x (EBIT/interest), negative due to operating loss, but the absolute interest burden is not the core issue. Ordinary loss (-¥205m) closely tracks operating loss, indicating limited non-operating drag. Given revenue decline, the company is operating below break-even; incremental revenue growth could provide high flow-through if gross margin is preserved, but current negative EBITDA implies low operating leverage benefit at present volumes.

Growth Assessment

Revenue of ¥1,266m declined 9.7% YoY, signaling demand softness or project timing slippage. With operating and net loss essentially flat YoY (both +0.0% YoY indicated), the company has not yet improved profitability despite cost base adjustments or mix changes. The gross margin figure (10.9%) suggests limited value-add or discounting pressure; however, given the cost/gross profit mismatch, margin precision is uncertain. Depreciation at ¥84m implies a relatively light capital intensity, so growth will primarily depend on order intake and service utilization rather than heavy asset additions. Ordinary loss trajectory indicates no material improvement in non-operating items. The negative OCF relative to net loss implies unfavorable working capital dynamics (e.g., receivable build, inventory increase, or advance payments to suppliers), which can accompany revenue decline and complicate growth execution. Near-term growth sustainability hinges on converting pipeline to recognized revenue, improving pricing/mix in payments/IT solutions, and reducing project delays. Without a rebound in top line or structural margin improvements, profit growth is unlikely near term. Outlook remains cautious: to restore profitability, revenue likely needs to recover above the current run-rate and/or gross margin must improve through mix, service attachment, or procurement normalization.

Financial Health

Total assets ¥1,448m; total liabilities ¥1,006m; total equity ¥366m, yielding liabilities/equity of 2.75x and financial leverage (assets/equity) of 3.96x. The reported equity ratio shows as 0.0% due to non-disclosure; based on available figures, an implied equity ratio is roughly 25% (equity/assets), though we treat the official field as undisclosed. Liquidity appears adequate on a static basis: current ratio 142.1%, quick ratio 123.5%, working capital ¥270m. However, the significant negative OCF (-¥477m) reduces comfort, as it can rapidly erode liquidity if persistent. Interest burden is modest (¥4.6m), suggesting limited near-term cash interest pressure, but continued operating losses are the principal threat to solvency. Financing inflow of ¥131m indicates access to external funding during the period. Cash and equivalents are undisclosed (reported as 0), limiting assessment of cash runway and covenant headroom. Overall, capital structure is stretched for a loss-making entity, and sustainability depends on curbing cash burn or securing continued funding.

Cash Flow Quality

Operating cash flow was -¥477.1m versus net loss of -¥206.0m, yielding an OCF/NI ratio of 2.32 (both negative). This points to weaker cash earnings than accrual earnings, likely due to working capital outflows (e.g., higher receivables, inventory build of ¥119.8m on balance sheet, or lower payables/prepayments). EBITDA of -¥108.9m indicates that cash burn is not only working capital related but also from the core operations. Investing cash flow is undisclosed (shown as 0), so Free Cash Flow cannot be reliably computed; mechanically, FCF would be at least -¥477m before capex if capex exists but is unreported. Financing cash inflow of ¥131.4m partly offsets OCF, implying reliance on external funds to support operations. The gap between OCF and net income suggests earnings quality is weak this half, with cash conversion negative. Monitoring AR days, AP days, and inventory turns will be critical to determine whether the OCF shortfall is timing-related or structural.

Dividend Sustainability

DPS is ¥0.00 and payout ratio 0.0%, consistent with a net loss and negative OCF. With undisclosed investing cash flows and cash balance, and OCF of -¥477m, free cash flow coverage of dividends cannot be assessed precisely but is effectively non-existent. Given leverage of 2.75x liabilities/equity and continuing losses, retention of cash appears prudent. The company’s policy likely prioritizes balance sheet preservation and reinvestment over distributions until profitability and positive OCF resume. Any future dividend resumption would require sustained positive earnings, improved cash conversion, and clearer visibility on liquidity.

Risk Assessment

Business Risks:

• Revenue contraction (-9.7% YoY) and potential project timing delays in payments/IT solutions
• Weak gross margin (reported 10.9%) with disclosure inconsistency, implying pricing/mix uncertainty
• Negative operating leverage at current scale (EBITDA margin -8.6%)
• Execution risk in order intake, delivery, and client acceptance
• Supply chain and procurement risk for devices/hardware tied to solutions
• Customer concentration typical of enterprise projects (not disclosed but industry-relevant)

Financial Risks:

• Sustained operating losses (operating loss ¥193m; net loss ¥206m)
• Significant negative OCF (-¥477m) despite moderate working capital on balance sheet
• Elevated leverage (liabilities/equity 2.75x; assets/equity 3.96x)
• Liquidity visibility constraints due to undisclosed cash balance and investing cash flows
• Potential covenant or refinancing risk if cash burn persists
• ROE deeply negative (-56.3%), accelerating equity erosion

Key Concerns:

• Ability to stem cash burn and restore positive OCF in the next 1–2 quarters
• Gross margin stability and resolution of disclosure inconsistencies in COGS/gross profit
• Dependence on external financing (¥131m inflow this period) amid ongoing losses
• Preservation of equity base (¥366m) under continued negative ROE
• Visibility on order backlog and pipeline conversion to revenue

Investment Implications

Key Takeaways:

• Top-line declined 9.7% YoY to ¥1,266m; operating loss remained sizable at ¥193m
• DuPont ROE -56.3% driven by negative margin and high leverage (3.96x)
• OCF of -¥477m indicates cash earnings materially worse than accrual earnings
• Liquidity ratios are acceptable (current 142%, quick 124%) but undermined by cash burn
• Financing inflow of ¥131m suggests external funding reliance during the period
• Data gaps (cash, investing CF, equity ratio detail) limit precision in solvency analysis

Metrics to Watch:

• Order backlog and quarterly bookings vs. revenue recognition
• Gross margin by segment/product and overall COGS trends
• Operating cash flow, AR/AP days, and inventory turnover
• EBITDA trend and breakeven revenue threshold
• Leverage and liquidity (net debt, cash balance, covenant headroom)
• Any equity or debt financing activities and terms

Relative Positioning: Versus domestic small-cap IT/payment solution peers, Flight Solutions is currently weaker on profitability and cash conversion, with higher financial leverage and negative ROE, offset by moderate on-paper liquidity but lower visibility due to disclosure gaps.

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