OKWave Inc. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥64M
• Operating Income: ¥-28M
• Net Income: ¥-44M
• EPS: ¥-0.73

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

For FY2026 Q1, 株式会社オーケーウェブ reported strong top-line momentum with revenue of ¥64.0 million, up 47.8% year over year, but remained loss-making at the operating and bottom lines. Operating income was a loss of ¥28.0 million (flat YoY) and net income was a loss of ¥35.0 million (flat YoY), indicating that despite demand recovery or expansion, the cost base has not yet adjusted to deliver operating leverage. The provided calculated gross margin is 20.6%, implying modest unit economics and competitive pricing pressure or a cost structure that remains elevated relative to revenue scale. Net profit margin stood at -54.69%, highlighting that non-operating items and/or fixed costs continue to weigh on profitability. DuPont analysis shows a calculated ROE of -6.10%, decomposed into a negative net margin (-54.69%), low asset turnover (0.034), and relatively high financial leverage (3.29x), signaling that leverage amplifies losses rather than returns at the current profitability level. Total assets were ¥1,886.0 million against total equity of ¥574.0 million and liabilities of ¥1,352.8 million, implying an equity ratio around 30% based on balance sheet figures (the 0.0% equity ratio shown should be treated as undisclosed). Liquidity is tight with a current ratio of 43.8% and negative working capital of ¥-744.7 million, suggesting short-term funding pressure. The debt-to-equity ratio of 2.36x indicates a leveraged balance sheet, which raises refinancing and covenant risks if losses persist. Cash flow statement items were shown as zero, which should be interpreted as not disclosed for the quarter, limiting direct assessment of operating cash conversion and free cash flow. EPS was -¥0.73; share count was not disclosed, constraining per-share diagnostics beyond EPS itself. Interest expense was shown as zero (undisclosed), and the interest coverage metric is therefore not meaningful this quarter. The company paid no dividends (DPS shown as 0), consistent with preserving liquidity amid losses. Overall, the quarter demonstrates improving revenue traction but insufficient margin improvement to achieve breakeven, with the balance sheet and liquidity needing close monitoring. Key near-term priorities include stabilizing gross margin, reducing fixed costs, and improving working capital to mitigate short-term funding risk. Data limitations around cash flows and certain line items require caution in interpreting earnings quality and sustainability.

Profitability Analysis

ROE (-6.10%) per DuPont equals Net Margin (-54.69%) × Asset Turnover (0.034) × Financial Leverage (3.29). The negative net margin is the dominant driver of poor ROE; low asset turnover also constrains returns, while leverage amplifies the negative result. Gross margin is 20.6%, indicating limited value capture relative to cost of sales; sustaining double-digit revenue growth will require either pricing power or structural cost improvements to lift gross margin. Operating income of -¥28.0m on ¥64.0m revenue implies an operating margin around -43.8%, reflecting high SG&A or fixed costs relative to scale. Ordinary and net losses of -¥35.0m suggest additional non-operating burdens or limited non-operating income to offset operating losses. With D&A not disclosed (shown as 0), EBITDA cannot be reliably computed; however, the provided EBITDA margin of 0.0% should be treated as not meaningful given missing inputs. Operating leverage remains negative: revenue grew +47.8% YoY while operating loss did not improve, implying little to no incremental margin at current scale. To turn operating leverage positive, the company needs either higher gross margin or a lower cost base per unit of revenue. Effective tax rate appears near 0% (loss position); the ¥271k tax line is de minimis and not indicative of cash tax burden.

Growth Assessment

Revenue growth of +47.8% YoY indicates strong demand or successful product/service expansion, albeit off a small base (¥64.0m quarterly revenue). Sustainability hinges on retention and monetization rather than just acquisition-driven growth; low gross margin suggests limited pricing power or high delivery costs that could hinder scalable growth. Profit growth quality is weak: operating loss was unchanged YoY despite higher revenue, implying poor incremental margins and suggesting variable costs or necessary growth investments are absorbing gains. With asset turnover at 0.034, capital intensity relative to revenue is high at the current stage; scaling revenue without proportionate asset growth will be needed to improve efficiency. Outlook: near-term growth may continue if commercial momentum holds, but breakeven timing is uncertain without visible gross margin uplift and SG&A discipline. Absence of disclosed cash flow data limits validation of whether growth is cash generative or cash consumptive; working capital strain (negative working capital) implies growth could require external funding absent improvements. Monitoring cohort profitability, churn, and unit economics will be critical to judge sustainability.

Financial Health

Total assets ¥1,886.0m; total equity ¥574.0m; total liabilities ¥1,352.8m. Recalculated equity ratio is approximately 30.4% (574.0/1,886.0), as the displayed 0.0% appears undisclosed. Current ratio 43.8% (¥580.1m CA / ¥1,324.8m CL) and quick ratio 43.8% (no inventories disclosed) indicate tight liquidity and reliance on short-term funding. Working capital is negative at ¥-744.7m, raising near-term refinancing and rollover risks. Debt-to-equity is 2.36x, reflecting a leveraged capital structure that could constrain flexibility if losses persist. Interest expense was shown as zero (undisclosed), so interest burden cannot be assessed; however, with leverage elevated, potential future interest costs remain a risk if rates rise or credit spreads widen. No granular breakdown of liabilities was provided, limiting visibility into maturity profiles and covenant headroom. Equity base remains positive, providing some buffer, but continued quarterly losses will erode it unless offset by capital raises or profitability.

Cash Flow Quality

Cash flow statement items (OCF, investing CF, financing CF, cash balance) were shown as zero and should be treated as not disclosed, preventing direct earnings-to-cash reconciliation this quarter. OCF/Net Income and FCF metrics presented as 0.00 should not be interpreted as actual zero performance. Inference from the balance sheet suggests liquidity pressure (negative working capital), which can indicate either strong payables funding or collection/timing risks; without AR/AP breakdown, working capital movements cannot be quantified. Earnings quality is therefore indeterminate this quarter; the persistence of operating losses raises the bar for future cash generation. Key proof points needed: positive operating cash flow seasonality, stabilization in payables reliance, and visibility on capex requirements.

Dividend Sustainability

Annual DPS is shown as 0.00, indicating no dividend during the period; payout ratio and FCF coverage metrics displayed as 0.0x reflect undisclosed cash flows and are not decision-useful. Given negative net income (¥-35.0m) and tight liquidity (current ratio 43.8%), capacity for distributions appears limited in the near term. There is no disclosed dividend policy update; prudence suggests preservation of cash until breakeven and cash flow positivity are achieved. A sustainable dividend would require consistent positive net income and operating cash flow alongside normalized working capital.

Risk Assessment

Business Risks:

• Margin pressure given low gross margin (20.6%) and negative operating margin
• Execution risk in scaling revenue while improving unit economics
• Customer concentration or platform traffic dependency (typical for digital service models)
• Competitive intensity potentially constraining pricing power
• Product/technology refresh risk and high pace of innovation

Financial Risks:

• Tight liquidity: current ratio 43.8% and working capital ¥-744.7m
• Leverage risk: debt-to-equity 2.36x and financial leverage 3.29x
• Refinancing/covenant risk if losses persist
• Potential dilution risk if external equity financing is needed
• Interest rate/spread risk on future borrowings; interest expense undisclosed this quarter

Key Concerns:

• Negative ROE (-6.10%) driven by large net losses
• Operating loss unchanged YoY despite +47.8% revenue growth
• Undisclosed cash flow data impedes assessment of cash burn and runway
• Reliance on short-term liabilities to fund operations
• Visibility on timing to breakeven remains limited

Investment Implications

Key Takeaways:

• Top-line growth is robust (+47.8% YoY) but not yet translating into operating leverage
• Gross margin at 20.6% suggests limited pricing power or high delivery costs
• Liquidity is tight (current ratio 43.8%; working capital negative), elevating near-term funding risk
• Leverage is high (D/E 2.36x), amplifying earnings volatility and refinancing sensitivity
• Cash flow metrics are undisclosed, limiting validation of earnings quality and runway

Metrics to Watch:

• Quarterly gross margin progression and SG&A-to-sales ratio
• Operating margin and path toward breakeven
• Operating cash flow and free cash flow once disclosed
• Accounts receivable/payable days and changes in working capital
• Cash and equivalents balance and near-term debt maturities
• Asset turnover improvement as revenue scales
• Any updates to financing plans or capital policy

Relative Positioning: Within small-cap, loss-making digital/service peers on the TSE, the company shows above-average near-term revenue growth but weaker operating leverage and tighter liquidity, positioning it as higher risk until margins and cash flow improve.

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