Techno Mathematical Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥281M
• Operating Income: ¥-50M
• Net Income: ¥-53M
• EPS: ¥-20.69

Income Statement

Balance Sheet

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

Techno Mathematical Co., Ltd. (37870) reported FY2026 Q2 (non-consolidated, JGAAP) revenue of ¥281.0m, up 49.3% YoY, marking a strong top-line rebound. Despite the sharp revenue increase, operating income remained at a loss of ¥50.0m (flat YoY), indicating that higher operating expenses offset the gross profit expansion. Gross profit was ¥168.9m, implying a high gross margin of 60.1%, which underscores solid unit economics or favorable mix/pricing in the period. Ordinary income was a loss of ¥52.0m and net income was a loss of ¥53.0m, with EPS of -¥20.69. The company recorded income tax expense of ¥1.47m despite a pretax loss, likely due to non-deductible items, permanent differences, or minimum taxes under JGAAP. Balance sheet strength is notable: total assets were ¥1,819.0m against total liabilities of ¥81.0m, resulting in equity of ¥1,726.0m and an implied equity ratio of approximately 94.9% (equity/assets), despite the equity ratio field being unreported. Liquidity appears very robust, with current assets of ¥1,013.5m versus current liabilities of ¥81.0m, supporting a current ratio of 12.5x and a quick ratio of 11.8x. Working capital stood at ¥932.4m, suggesting ample runway to fund operations and near-term investment. DuPont decomposition indicates a negative ROE of -3.07%, driven by a negative net margin (-18.86%), low asset turnover (0.154x on the reported base), and minimal financial leverage (1.05x). The combination of a high gross margin and a persistent operating loss points to operating leverage that has yet to inflect positively; operating expenses are estimated around ¥218.9m for the half (gross profit minus operating income). Cash flow statements are unreported in this disclosure (zeros indicate nondisclosure), limiting assessment of earnings-to-cash conversion and FCF. No dividend was reported (DPS ¥0), and payout metrics are not meaningful given the net loss and undisclosed cash flows. Overall, the quarter reflects a company with strong gross profitability and an extremely conservative balance sheet, but still in the midst of achieving scale/sustained profitability. The path to break-even likely hinges on continued revenue growth and cost discipline, given the demonstrated gross margin profile. Data limitations (notably cash flows, EBITDA detail, and per-share base) constrain deeper analysis, so conclusions focus on the disclosed non-zero figures and derived ratios.

Profitability Analysis

ROE decomposition (DuPont): Reported ROE of -3.07% stems from net profit margin of -18.86%, asset turnover of 0.154x, and financial leverage of 1.05x. The negative margin is the primary drag, as leverage is intentionally low and asset turnover is modest for a software/intangible-heavy model. Gross margin of 60.1% suggests strong pricing power or a favorable revenue mix. Using the disclosed figures, operating expenses are inferred at roughly ¥218.9m (¥168.9m gross profit minus -¥50.0m operating income), implying that SG&A/R&D intensity remains high relative to current scale. Operating leverage is present but has not yet turned accretive; with revenue up 49.3% YoY, operating loss remained unchanged, indicating cost growth roughly in line with gross profit expansion. Ordinary loss (¥52.0m) is close to operating loss, consistent with minimal non-operating items, which aligns with the negligible leverage (interest expense unreported) and conservative financing. The negative EPS (-¥20.69) tracks the net loss of ¥53.0m. The effective tax rate is not meaningful given a pretax loss with small tax expense. Margin quality appears sound at the gross level; the key issue is scale and fixed cost absorption rather than product-level economics.

Growth Assessment

Top-line growth was robust at +49.3% YoY to ¥281.0m, signaling improved demand or execution. However, profit growth lagged materially; operating loss remained at ¥50.0m (flat YoY), indicating limited operating leverage in the period. With gross margin at 60.1%, incremental gross profit was likely offset by increases in operating expenses (e.g., personnel, development, or go-to-market costs). Revenue sustainability will depend on order visibility, customer concentration, and pipeline conversion; these are not disclosed here, so we cannot quantify backlog or recurring components. Profit quality is mixed: gross margins are healthy, non-operating items are limited, but bottom-line losses persist. Near-term outlook depends on maintaining double-digit revenue growth while moderating opex growth; given the strong liquidity, the company has runway to invest while pursuing break-even. If 1H (Q2 cumulative) revenue scale can be sustained or expanded in 2H with stable gross margins, operating losses could narrow; conversely, any slowdown would delay profitability. Data constraints (no segment detail, no cash flow) limit visibility into the durability of growth drivers.

Financial Health

Total assets of ¥1,819.0m and total liabilities of ¥81.0m yield equity of ¥1,726.0m and an implied equity ratio of ~94.9%. Liquidity is strong: current assets of ¥1,013.5m against current liabilities of ¥81.0m produce a current ratio of 12.5x and a quick ratio of 11.8x; working capital is ¥932.4m. Low leverage is evident with a debt-to-equity ratio of ~0.05x (using total liabilities as a proxy given lack of breakdown), and interest expense is unreported/immaterial, supporting low financial risk. The capital structure is equity-heavy, providing resilience to operating losses and flexibility to invest. Solvency and liquidity metrics indicate substantial headroom to withstand continued losses while pursuing growth. Equity per share and share count are undisclosed, so per-share capitalization analysis cannot be performed.

Cash Flow Quality

Cash flow statements (operating, investing, financing) are unreported in this period, so we cannot assess OCF/NI, FCF generation, or cash conversion cycles from disclosed numbers. The presented OCF/NI ratio of 0.00 and FCF of 0 reflect nondisclosure, not actual zero cash flows. Given the net loss and high working capital position, the quality of earnings cannot be cross-validated by cash metrics. Working capital appears ample (¥932.4m), with inventories of ¥56.7m; however, receivables and payables details are not disclosed, limiting any assessment of collection efficiency or supplier terms. Absent cash flow data, we cannot determine whether losses are cash-intensive or primarily accounting-driven. Future disclosures should be monitored for OCF trajectory, capex intensity, and any capitalization of development costs under JGAAP.

Dividend Sustainability

No dividend was reported for the period (DPS ¥0), and payout/FCF coverage metrics are not meaningful due to net losses and undisclosed cash flows. With negative earnings and an investment phase implied by persistent opex, distributing dividends would typically be deprioritized. The balance sheet provides substantial equity (¥1,726.0m) and liquidity, which supports long-term financial stability but does not, by itself, justify distributions absent sustainable profitability. Company policy on dividends is not provided; near-term sustainability of any prospective dividend would depend on achieving positive OCF and stable profitability. Until cash flow disclosure resumes, dividend capacity should be viewed as contingent on earnings recovery and cash generation.

Risk Assessment

Business Risks:

• Execution risk in scaling revenue to absorb high fixed costs, given persistent operating losses.
• Potential customer concentration or order volatility typical of niche software/technology providers (not disclosed).
• R&D and product roadmap risk, including timing of commercialization and investment payback.
• Pricing pressure or mix shifts that could erode the currently high gross margin.
• Talent retention and hiring costs impacting SG&A/R&D efficiency.
• Dependence on a limited number of projects or partners, leading to quarter-to-quarter variability.

Financial Risks:

• Sustained operating losses eroding retained earnings over time if growth underperforms.
• Limited visibility into cash flows due to nondisclosure, constraining assessment of cash burn and runway.
• Potential working capital swings (receivables, unbilled revenue) that could consume liquidity despite high current ratios.
• Tax expense despite losses (¥1.47m) indicating possible non-deductible items or minimum taxes.

Key Concerns:

• Operating loss unchanged YoY despite 49.3% revenue growth, signaling limited operating leverage to date.
• Low asset turnover (0.154x reported), implying underutilized asset base or large cash holdings relative to revenue.
• Cash flow data not disclosed, preventing verification of earnings quality and FCF.

Investment Implications

Key Takeaways:

• Top-line recovery is strong (+49.3% YoY) with a high gross margin of 60.1%.
• Operating losses persist (-¥50.0m), indicating scale and cost discipline are critical to break-even.
• Balance sheet is very conservative (implied equity ratio ~94.9%, current ratio 12.5x), reducing financial risk.
• DuPont shows ROE pressure driven by negative margins rather than leverage; improving margin is the key lever.
• Data gaps (cash flows, EBITDA details, share data) limit depth of analysis this quarter.

Metrics to Watch:

• Order backlog and revenue visibility (book-to-bill, renewal rates if applicable).
• Operating expense run-rate (SG&A and R&D) versus gross profit growth.
• Gross margin stability and mix/pricing dynamics.
• Operating cash flow and free cash flow upon disclosure.
• Working capital efficiency (DSO, DPO, inventory turns) when detailed data becomes available.
• Progress toward operating break-even in 2H.

Relative Positioning: The company exhibits strong gross margins and an exceptionally solid balance sheet relative to many small-cap Japan tech peers, but lags on profitability due to elevated operating expenses and modest asset turnover; near-term positioning hinges on converting revenue growth into operating leverage while maintaining margin integrity.

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