Image Information Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥375M
• Operating Income: ¥-88M
• Net Income: ¥35M
• EPS: ¥-72.04

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

Revenue grew 40.7% year over year to 375,000,000, indicating strong top-line momentum despite a continued operating loss. Gross profit was 45,931,000, implying a gross margin of 12.2%, which is relatively low for a software/services-oriented business and suggests pricing pressure, unfavorable mix, or elevated delivery costs. Operating income remained negative at -88,000,000 (essentially flat YoY per disclosure), indicating that the significant revenue growth has not yet translated into operating scale benefits. Ordinary income improved slightly versus operating income (by about 2,000,000), suggesting modest non-operating gains or lower non-operating expense. Net income was -145,000,000, with EPS of -72.04, reflecting persistent losses in the first half and implying a challenging path to profitability unless margins improve. EBITDA was -82,691,000 with an EBITDA margin of -22.1%, highlighting that core cash earnings remain negative before non-cash charges. The DuPont profile shows a net profit margin of -38.67%, asset turnover of 0.671, and financial leverage of 3.73x, leading to a calculated ROE of -96.67%; the drag comes primarily from negative margins, not asset efficiency. Liquidity appears ample: current assets of 437,175,000 versus current liabilities of 117,632,000 translate to a current ratio of 371.6% and quick ratio of 371.6%. Solvency is mixed: total liabilities of 306,286,000 against total equity of 150,000,000 yields a debt-to-equity ratio of 2.04x; the equity ratio inferred from the balance sheet is approximately 26.8% (150,000,000 / 559,000,000), despite the reported 0.0% equity ratio datapoint. Operating cash flow was positive at 47,461,000, which is notable given the reported net loss; this implies a favorable working capital swing or non-cash expense support. Investing cash flow is shown as 0 and cash and equivalents as 0, which we interpret as unreported rather than actual zeros; hence, free cash flow and cash runway cannot be fully assessed. Interest expense remains modest at 343,000, and the effective tax rate appears immaterial given losses. Dividend payments were 0, consistent with loss-making and preservation of liquidity. Overall, the company delivered strong revenue growth but continues to face profitability challenges, with low gross margins and negative operating income offset by healthy liquidity and positive operating cash flow in the half. Execution on cost control and mix improvement will be key to converting growth into earnings. Given partial disclosures (notably cash, investing cash flows, and share data), conclusions should be treated as provisional and focused on the non-zero reported items.

Profitability Analysis

ROE decomposition indicates margin is the primary headwind: net profit margin -38.67% x asset turnover 0.671 x financial leverage 3.73 ⇒ ROE -96.67%. Gross margin is 12.2% (45,931,000 / 375,000,000), which is thin and suggests limited pricing power or high delivery costs. Operating margin is -23.5% (-88,000,000 / 375,000,000), reflecting insufficient scale and elevated SG&A/R&D relative to revenue. EBITDA margin is -22.1%, showing that even excluding depreciation and amortization, core earnings are negative. The flat YoY operating loss alongside a 40.7% revenue increase implies negative operating leverage in the period (cost base grew roughly in line with or faster than gross profit). Ordinary income slightly better than operating income indicates minor non-operating support but not enough to change the loss profile. Interest burden is low (interest expense 343,000), so financing costs are not the main issue; the challenge sits squarely in gross margin and operating efficiency.

Growth Assessment

Revenue growth of +40.7% YoY to 375,000,000 is robust and indicates healthy demand or contract wins/expansion. However, gross profit of 45,931,000 suggests gross profit growth lagging revenue (implied by the low 12.2% margin), pointing to less favorable mix or cost pressures. The unchanged operating loss despite higher revenue indicates that incremental contribution from growth is not yet covering fixed costs, implying weak incremental margins in 1H. Sustainability of growth will depend on retention of new business and improvement in delivery efficiency; absent margin expansion, top-line gains may not translate into earnings. Profit quality remains weak given negative operating income and EBITDA, though ordinary income being slightly better than operating income provides minor relief. Outlook hinges on cost discipline, pricing actions, and potential shift toward higher-margin services/products. With limited disclosure on backlog, segment mix, or recurring revenue, growth durability cannot be confirmed; monitoring 2H seasonality and order trends is important.

Financial Health

Liquidity is strong: current assets 437,175,000 vs current liabilities 117,632,000 yields a current ratio of 3.72x and quick ratio of 3.72x. Working capital stands at 319,543,000, providing an operational buffer. Solvency is moderate: total liabilities 306,286,000 and total equity 150,000,000 imply a debt-to-equity ratio of 2.04x. The equity ratio based on the balance sheet is approximately 26.8%, indicating a modest capital cushion; the reported equity ratio of 0.0% is treated as an uninformative placeholder. Interest expense is low at 343,000, limiting near-term interest burden risk. Asset turnover of 0.671 indicates modest efficiency typical of a small-cap services firm, but profitability constraints reduce internal capital generation. Absent disclosed cash and investment activity, near-term funding headroom and runway cannot be precisely assessed, though strong working capital suggests some resilience.

Cash Flow Quality

Operating cash flow of 47,461,000 is positive despite a net loss of -145,000,000, producing an OCF/NI ratio of -0.33 (positive OCF against negative NI), indicative of supportive working capital movements and non-cash charges (e.g., depreciation 5,309,000). EBITDA is negative, so OCF strength likely reflects timing effects (collections, payables) rather than core earnings power. Investing cash flow is shown as 0, which likely reflects nondisclosure; therefore, free cash flow calculated from OCF less capex cannot be reliably determined. The reported Free Cash Flow of 0 should be interpreted as missing rather than actual zero. Without cash balance data (displayed as 0 but treated as undisclosed), we cannot assess cash conversion cycle or cash buffer precisely. Overall, earnings quality is weak as accounting losses persist; cash flow quality for the half is better than earnings due to working capital tailwinds that may not repeat.

Dividend Sustainability

Annual DPS is 0.00 with a payout ratio of 0.0%, consistent with ongoing losses (net income -145,000,000) and a prudent stance to preserve liquidity. Given negative operating income and EBITDA, distributions would not be supported by earnings. Positive OCF in the half is not sufficient evidence for sustainable free cash generation because investing cash flows and capex are undisclosed. FCF coverage cannot be evaluated (reported as 0.00x due to missing FCF). Policy-wise, resumption of dividends would likely require a return to positive operating income and improved gross margins. Until profitability normalizes and FCF visibility improves, dividend capacity remains constrained.

Risk Assessment

Business Risks:

• Sustained low gross margin (12.2%) indicating pricing pressure or unfavorable cost structure
• Execution risk in scaling operations given operating loss despite 40.7% revenue growth
• Potential customer concentration or project timing risk (not disclosed) affecting revenue visibility
• Competitive intensity in IT/services leading to margin compression
• Dependence on hiring and utilization to achieve operating leverage

Financial Risks:

• Negative EBITDA and operating loss pressuring internal funding capacity
• Moderate leverage (debt-to-equity 2.04x) with limited equity cushion (~26.8% equity ratio inferred)
• OCF reliance on working capital movements that may reverse
• Limited visibility on cash position and capex due to undisclosed cash and investing CF
• Potential covenant or refinancing risk if losses persist (not disclosed but relevant)

Key Concerns:

• Conversion of strong top-line growth into sustainable margins
• Stabilization and improvement of gross margin above current 12.2%
• Maintaining positive operating cash flow absent working capital tailwinds
• Preserving solvency if losses persist through 2H

Investment Implications

Key Takeaways:

• Top-line growth is strong (+40.7% YoY), but profitability remains negative across EBIT and EBITDA
• Gross margin at 12.2% is the primary constraint; operating leverage remains unfavorable
• Liquidity is ample (current ratio ~3.7x), providing near-term cushion
• Solvency moderate with debt-to-equity 2.04x and inferred equity ratio ~26.8%
• OCF positive in 1H, but driven likely by working capital; FCF not assessable due to missing investing CF

Metrics to Watch:

• Gross margin trend and project/pricing mix
• Operating margin and EBITDA trajectory in 2H
• Order backlog and recurring revenue indicators (if disclosed)
• OCF sustainability and working capital movements (DSO/DPO if available)
• Equity ratio and net debt/cash once cash balances are disclosed

Relative Positioning: Compared to typical small-cap IT/services peers, revenue growth is strong, but profitability lags materially with a notably lower gross margin and negative EBITDA; liquidity is stronger than average, while solvency is moderate.

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