Advanced Media,Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥3.17B
• Operating Income: ¥490M
• Net Income: ¥655M
• EPS: ¥41.95

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: A mixed quarter—topline flat and core operating profit down sharply, but bottom-line grew on below-the-line support, while liquidity and cash generation remained strong. Revenue was 31.75 (億円), up a modest 0.3% YoY, indicating demand was broadly stable rather than accelerating. Gross profit was 23.15 (億円) with a robust gross margin of 72.9%, evidencing healthy unit economics. Operating income declined 30.4% YoY to 4.90 (億円), implying notable operating deleverage and/or higher SG&A intensity. Ordinary income fell 27.9% YoY to 5.48 (億円), but profit before tax printed materially higher at 9.58 (億円), suggesting significant extraordinary gains not detailed in the XBRL. Net income rose 19.9% YoY to 6.55 (億円), highlighting that bottom-line strength was driven by non-operating/extraordinary items rather than core operations. Operating margin in the quarter stands at 15.4% (4.90/31.75); YoY basis-point change cannot be calculated due to lack of prior-period margin disclosure. Similarly, gross margin bps change is indeterminable from the provided dataset, although the current 72.9% level is high for a software/AI solutions mix. Earnings quality is solid on cash terms: OCF was 16.97 (億円), 2.59x net income, indicating strong cash conversion. Liquidity is very strong with a current ratio of 338% and cash of 64.28 (億円), comfortably exceeding current liabilities of 25.89 (億円). Leverage remains conservative with D/E of 0.24x and an implied equity ratio of ~80% (129.03/160.37). Capital efficiency is a watch-point: ROE is a modest 5.1% and ROIC is 4.9% (below the 5% warning threshold), held back by low asset turnover (0.198x). The calculated payout ratio is 77.2%, above a typical sustainability comfort zone, though high OCF provides near-term coverage. Forward-looking, management likely needs to rein in SG&A growth and lift asset turnover (e.g., via recurring cloud/AI deployments and better utilization) to improve ROIC while maintaining cash discipline. Overall, near-term cash and balance sheet strength offset weaker core profitability, but medium-term value creation hinges on restoring operating momentum and capital efficiency.

Profitability Analysis

Step 1 (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 20.6% × 0.198 × 1.24 ≈ 5.1%. Step 2: The primary constraint on ROE is the very low asset turnover (0.198x), while leverage is conservative (1.24x) and the net margin appears elevated, aided by non-operating/extraordinary items. Step 3: Operating income fell 30.4% YoY despite flat revenue, implying higher SG&A intensity; the uplift from non-operating/extraordinary items boosted net margin and masked weaker operating profitability. Step 4: The margin boost from below-the-line factors is unlikely to be recurring; sustainability depends on restoring operating margin through cost control and revenue mix improvements (higher recurring/usage-based AI services). Step 5: Concerning trends: (i) Core operating deleverage with revenue +0.3% vs operating income -30.4% is negative. (ii) SG&A growth versus revenue cannot be verified due to missing YoY SG&A data, but the spread between gross profit and operating income suggests expense pressure. (iii) ROIC at 4.9% is below a typical cost of capital proxy, indicating value creation pressure unless profitability or turnover improves.

Growth Assessment

Revenue growth was essentially flat (+0.3% YoY to 31.75 億円), pointing to a pause in demand acceleration for speech/AI offerings. Gross profit held at a strong level (72.9% margin), indicating pricing and mix remain supportive. Operating profit fell 30.4% YoY to 4.90 億円, signaling operating deleverage—likely from higher personnel, sales, or development-related expenses. Ordinary income declined 27.9% YoY, but PBT (9.58 億円) and NI (6.55 億円, +19.9% YoY) benefitted from non-operating/extraordinary gains and a normalized tax burden (effective tax rate 31.6%). With EBITDA at 8.16 億円 (25.7% margin), cash earnings remain sound, yet core momentum needs attention. Outlook-wise, sustainable growth will require converting pipeline into recurring revenues (SaaS/usage-based AI), stabilizing SG&A intensity, and expanding enterprise/public sector deployments. Given high cash on hand (64.28 億円), the company has capacity to invest in product/GTMs without balance sheet strain, but returns must exceed the current 4.9% ROIC. Key watchpoints: order intake/backlog, ARR growth, churn, and large project timing that can swing quarterly results.

Financial Health

Liquidity is strong: current assets 87.46 億円 vs current liabilities 25.89 億円 (current ratio 337.8%; quick ratio 336.0%). No warning on current ratio (<1.0) or leverage; D/E at 0.24x is conservative. Equity/asset ratio is ~80.4% (129.03/160.37), indicating a robust capital base. Cash and deposits of 64.28 億円 exceed all current liabilities, limiting near-term refinancing risk. Interest-bearing debt detail is limited, but long-term loans total 3.85 億円; interest coverage is very strong at 63.75x. Maturity mismatch risk appears low: liquidity comfortably covers short-term obligations. Investment securities are sizable at 40.64 億円, adding market valuation exposure to the balance sheet. No off-balance sheet obligations are disclosed in the provided data.

Cash Flow Quality

OCF of 16.97 億円 is 2.59x net income, indicating high-quality earnings and strong cash conversion. Investing CF is unreported; however, disclosed capex was 4.43 億円, implying a proxy FCF from operations of roughly 12.54 億円 (OCF − capex), subject to other investing flows not disclosed. Financing CF was -14.32 億円, likely reflecting dividends and/or debt repayment; exact components are unreported. With OCF comfortably covering capex, organic investment is sustainable. OCF/NI > 1.0 clears the quality threshold; no clear signs of working capital manipulation can be assessed due to lack of period-over-period changes in AR/AP/inventory. Cash on hand (64.28 億円) further underpins flexibility for R&D and GTM spend.

Dividend Sustainability

The calculated payout ratio is 77.2%, above the typical <60% comfort zone, implying moderate-to-high payout risk if operating weakness persists. DPS and total dividends paid are unreported, limiting precision. On cash terms, proxy FCF (OCF − capex ≈ 12.54 億円) suggests dividends could be covered near term if dividend cash outlay is modest; however, sustained coverage depends on stabilizing operating profit. With a strong net cash position and minimal leverage, the company has capacity to maintain dividends in the near term, but improving ROIC and core margins would be prudent to underpin policy over the medium term. Dividend policy outlook: expect management to balance shareholder returns with reinvestment in AI productization; a payout calibrated to cash earnings would be more sustainable than one based on NI flattered by non-recurring items.

Risk Assessment

Business Risks:

• Operating deleverage: operating income -30.4% YoY on flat revenue indicates cost pressure.
• Competitive intensity in speech/AI (pricing pressure, rapid model commoditization).
• Execution risk in scaling recurring/usage-based revenues to lift asset turnover.
• Project timing and concentration risk with large enterprise/public-sector deals.
• Talent and R&D cost inflation potentially outpacing revenue growth.

Financial Risks:

• Capital efficiency risk: ROIC at 4.9% below warning threshold.
• Earnings mix risk: elevated non-operating/extraordinary contribution to PBT and NI.
• Market risk from investment securities of 40.64 億円 (valuation volatility).
• Dividend coverage risk if payout remains ~77% and operating profit stays weak.

Key Concerns:

• Low asset turnover (0.198x) constraining ROE to 5.1%.
• Unspecified extraordinary gains implied by PBT >> ordinary income.
• Limited disclosure on SG&A breakdown and YoY trends restricts margin diagnostics.
• Investing cash flows unreported, obscuring true FCF after all investments.

Investment Implications

Key Takeaways:

• Core profitability weakened (OP -30.4% YoY) despite stable revenue; cost control and mix shift are priorities.
• Bottom-line growth (+19.9% NI) was supported by non-operating/extraordinary factors, not core operations.
• Cash generation and liquidity are strong (OCF 16.97 億円; current ratio 338%; net cash position).
• Capital efficiency is subpar (ROIC 4.9%, ROE 5.1%) due to low asset turnover and conservative leverage.
• Dividend payout (~77%) looks elevated vs normalized earnings power, though near-term cash cover is adequate.

Metrics to Watch:

• Operating margin trajectory and SG&A intensity vs revenue growth.
• ARR/recurring revenue growth, churn, and large-deal pipeline conversion.
• ROIC uplift from improved turnover or margin expansion.
• OCF/NI ratio sustainability and full investing CF (including acquisitions/PP&E).
• Valuation changes in investment securities and any realized gains/losses.
• Extraordinary items disclosure bridging ordinary income to PBT.

Relative Positioning: Versus domestic software/AI peers, the company exhibits strong gross margins and a very solid balance sheet but lags on capital efficiency and operating momentum this quarter; restoring core operating leverage and clarifying the role of non-recurring items are key to improving its relative standing.

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