J ESCOM HOLDINGS,INC. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥719M
• Operating Income: ¥46M
• Net Income: ¥-57M
• EPS: ¥2.01

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

For FY2026 Q2, ジェイ・エスコムホールディングス (consolidated, JGAAP) delivered strong top-line momentum with revenue of ¥719.0 million, up 20.2% YoY, while profit growth was muted, with operating income flat at ¥46.0 million and net income flat at ¥23.0 million. Gross profit rose to ¥439.1 million, implying a robust gross margin of 61.1%, but operating margin compressed to 6.4% as SG&A and other operating costs absorbed most of the incremental gross profit. Ordinary income of ¥44.0 million reflects modest financial costs (interest expense ¥5.7 million) and limited non-operating gains/losses. EPS printed at ¥2.01. The DuPont framework indicates a reported ROE of 3.02%, driven by a 3.20% net margin, low asset turnover of 0.377x, and financial leverage of 2.50x. Cash generation was a relative bright spot: operating cash flow reached ¥109.4 million, implying an OCF/Net Income ratio of 4.76x and suggesting earnings quality is currently favorable. EBITDA was ¥55.7 million with a 7.7% margin, and interest coverage stood at a comfortable 8.0x, indicating near-term debt service capacity is adequate despite elevated leverage. Liquidity appears reasonable with a current ratio of 125.2% and quick ratio of 125.1%, supported by minimal inventories (¥2.8 million). Working capital is positive at ¥617.4 million. The company did not pay a dividend (DPS ¥0.00; payout 0%), which conserves cash given the leverage profile. Balance sheet line items show apparent inconsistencies (e.g., current assets and total liabilities exceeding reported total assets), likely due to disclosure scope or taxonomy mapping; therefore, this analysis relies on the provided calculated metrics for solvency and efficiency. Debt-to-equity is indicated at 3.23x, signaling a leveraged capital structure, while the DuPont financial leverage of 2.50x suggests moderate balance-sheet gearing relative to equity when using calculated figures. The effective tax rate is indicated as 0.0% alongside a negative income tax line (¥-14.8 million), implying tax credits or timing effects that boosted net income. Financing cash flow was an outflow of ¥-250.8 million, suggesting debt repayment, lease outflows, or equity-related distributions (details not disclosed), while investing cash flow is unreported in the dataset. Overall, the quarter shows strong revenue execution but limited operating leverage, solid cash generation, and a balance sheet that warrants monitoring due to leverage. Near-term priorities appear to be stabilizing margins, preserving cash, and prudently managing debt. Data limitations (zeros indicating undisclosed items and line-item inconsistencies) constrain precision, but the direction of travel is clear: growth is solid, profitability is constrained by costs, and cash conversion is currently supportive.

Profitability Analysis

ROE is 3.02% per DuPont, decomposed into a 3.20% net margin, 0.377x asset turnover, and 2.50x financial leverage. Gross margin is high at 61.1% (¥439.1m GP on ¥719.0m revenue), indicating pricing power or a service-heavy mix, but operating margin is only 6.4% (¥46.0m OI), highlighting elevated SG&A or increased personnel/subcontracting costs offsetting gross profit gains. Ordinary margin is 6.1% (¥44.0m), modestly reduced by interest and non-operating items. EBITDA margin is 7.7%, only slightly above operating margin, consistent with low D&A intensity (¥9.7m D&A), suggesting a relatively light asset base. The flat operating income despite 20.2% revenue growth signals weak operating leverage this quarter; incremental margins were likely pressured by wage inflation, recruitment, or project delivery costs. Interest coverage at 8.0x is adequate, so financial expense is not the primary profit constraint; the bottleneck is operating cost absorption. The effective tax rate registers at 0.0% due to a negative income tax line, implying non-recurring tax benefits or NOL utilization that flattered bottom-line margin; normalized net margin could be lower absent these effects. Overall profitability quality is mixed: healthy gross margin quality but constrained operating leverage and low ROE due to modest margins and low asset turnover.

Growth Assessment

Revenue expanded 20.2% YoY to ¥719.0m, indicating strong demand or expanded scope with existing clients. However, flat operating income (¥46.0m) and net income (¥23.0m) point to cost growth pacing ahead of revenue, suggesting near-term growth is not yet translating into profit scaling. Gross profit growth implies the core offering retains value-add, but SG&A intensity is rising; sustainability hinges on whether recent cost increases are investment-like (e.g., staffing, sales capacity) that can yield future operating leverage. Ordinary income (¥44.0m) shows limited drag from financing, keeping the path clear for profit recovery if costs normalize. EPS of ¥2.01 is stable but lacks acceleration. With OCF at ¥109.4m significantly outpacing net income, cash conversion is robust, which supports continuing growth initiatives without undue financing reliance. Outlook hinges on margin recapture: if management can restrain SG&A growth and improve utilization, incremental margins should improve alongside revenue. Absent disclosure on backlog, order intake, or segment mix, we infer revenue sustainability is reasonable given the strength of the quarter, but profit quality needs improvement to confirm durable earnings growth.

Financial Health

Liquidity is acceptable with a current ratio of 125.2% and a quick ratio of 125.1%, aided by very low inventories (¥2.8m). Working capital is positive at ¥617.4m, supporting operational flexibility. Interest coverage of 8.0x indicates adequate ability to service interest from operating earnings. The capital structure appears leveraged: debt-to-equity is cited at 3.23x, while DuPont leverage (assets/equity) is 2.50x, both pointing to meaningful reliance on liabilities. Reported balance sheet line items show inconsistencies (e.g., current assets and total liabilities exceeding total assets), likely due to reporting taxonomy or period alignment; we therefore anchor on provided solvency metrics rather than the raw lines. Equity is reported at ¥761.0m. Overall solvency is acceptable near term given coverage metrics, but leverage levels suggest sensitivity to profit volatility and interest rate conditions.

Cash Flow Quality

Operating cash flow of ¥109.4m versus net income of ¥23.0m yields an OCF/NI ratio of 4.76x, indicating strong cash conversion and suggesting earnings quality is currently favorable (working capital likely released or collections improved). EBITDA of ¥55.7m translates into positive cash generation even after interest, with low D&A indicating limited non-cash earnings inflation. Free cash flow is not computable from the dataset (investing cash flow and capex not disclosed; a reported FCF of 0 should be treated as undisclosed rather than zero). Financing cash flow was an outflow of ¥-250.8m, possibly reflecting debt repayment or other financing uses; without detail, we cannot assess structural de-leveraging versus routine outflows. Working capital appears well-managed given liquidity ratios and the OCF strength; however, sustainability of this cash conversion depends on receivables and payables timing, which are not disclosed.

Dividend Sustainability

The company paid no dividend (DPS ¥0.00; payout 0%), conserving cash. With dividends suspended or not declared, payout ratio analysis is not applicable this period. FCF coverage cannot be assessed because capex/investing cash flows are undisclosed; the displayed FCF of 0.00x reflects missing data rather than true capacity. Given leverage (D/E ~3.23x by provided metric) and the need to stabilize profitability, a cautious stance on distributions appears consistent with balance-sheet priorities. Policy outlook depends on restoring operating leverage and visibility on sustainable free cash flow; absent that, resumption or initiation of dividends may be deferred.

Risk Assessment

Business Risks:

• Margin pressure from wage inflation and subcontracting costs reducing operating leverage despite revenue growth
• Execution risk in scaling projects or services leading to utilization shortfalls
• Customer concentration or contract renewal risk typical for small-cap service-oriented businesses (not disclosed but relevant)
• Pricing pressure if competition intensifies in core offerings
• Potential volatility from project timing and revenue recognition under JGAAP

Financial Risks:

• Elevated leverage (Debt-to-Equity ~3.23x) increases sensitivity to earnings volatility and refinancing conditions
• Reliance on working capital dynamics; cash conversion could normalize lower if receivables stretch
• Interest rate risk impacting interest coverage (currently 8.0x) if rates rise or debt increases
• Data limitations on cash balances and capex obscure true FCF and liquidity buffers

Key Concerns:

• Flat operating profit despite 20.2% revenue growth signals weak operating leverage
• Low ROE at 3.02% driven by modest margins and low asset turnover (0.377x)
• Apparent inconsistencies in reported balance sheet lines necessitate reliance on calculated metrics
• Undisclosed investing cash flows impede assessment of sustainable free cash flow
• Negative tax line inflates net income; normalized earnings may be lower absent tax benefits

Investment Implications

Key Takeaways:

• Strong top-line growth (+20.2% YoY) but profits flat; margin recapture is key
• Gross margin strong (61.1%) but SG&A absorption keeps operating margin at 6.4%
• ROE low at 3.02% due to low asset turnover (0.377x) and modest net margin (3.20%)
• Cash conversion robust (OCF/NI 4.76x), supporting near-term liquidity
• Leverage elevated (D/E ~3.23x) with acceptable interest coverage (8.0x)
• Dividend not paid; capital likely prioritized for strengthening the balance sheet
• Data gaps (capex, cash, share counts) limit precision; monitor disclosures

Metrics to Watch:

• Operating margin progression and SG&A ratio
• Order backlog/ARR or book-to-bill (if disclosed) to validate revenue sustainability
• Receivables days and payables days to gauge cash conversion durability
• Capex and investing cash flows to derive true free cash flow
• Net debt, cash balances, and debt maturity profile
• Tax normalization effects on net margin
• Asset turnover improvements via utilization and mix

Relative Positioning: Relative to small-cap TSE peers in services/IT, revenue growth appears above average, profitability is below peer medians due to constrained operating leverage, leverage is higher than typical, and cash conversion in the quarter is comparatively strong.

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