Asahi Net,Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥6.72B
• Operating Income: ¥1.02B
• Net Income: ¥725M
• EPS: ¥27.72

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

Verdict: A mixed quarter—top-line growth of 3.5% YoY but sharp profit compression, with net income down 25.8% and margins materially lower. Revenue reached 67.25, while operating income fell to 10.17 (-19.6% YoY) and ordinary income to 10.29 (-19.3% YoY), signaling operating pressure despite modest sales growth. Net income declined to 7.25 (-25.8% YoY), driving the net margin to 10.8%. Operating margin is 15.1% this quarter, implying a contraction from roughly 19.5% a year ago—about 435 bps of compression. Net margin likely compressed by approximately 426 bps (from ~15.0% to 10.8%) given the revenue and profit YoY changes. Gross profit margin stands at 34.3%, but lack of prior-period gross data limits precise YoY analysis at the gross level. Ordinary income trails profit before tax by a wide gap (10.29 vs 14.11), implying the presence of non-operating or extraordinary items that lifted PBT, though details are unreported. The effective tax rate is 30.7%, consistent with a normalized tax profile. ROE is 5.6% on low financial leverage (1.13x), while ROIC is reported at 8.1%, broadly at the lower end of management-type targets for asset-light telecom/internet service models. Liquidity is very strong: current ratio 526% and cash and deposits of 41.61 cover 2.5x current liabilities. Balance sheet risk is low with total liabilities only 16.96 and owners’ equity of 128.73. Earnings quality can’t be fully assessed due to unreported cash flows; however, receivables of 21.20 versus half-year revenue imply an estimated DSO in the high-50 days, which appears reasonable for the business. Dividend payout looks elevated at a calculated 108.1% for the period, implying distribution above earnings and necessitating strong cash generation or use of cash on hand. Absent cash flow disclosure, the sustainability of this payout level is uncertain despite ample liquidity. Forward-looking, cost discipline and stabilization of operating margin are key, as even small revenue growth was not sufficient to offset cost pressures. Monitoring whether the operating margin recovers toward the mid-to-high teens and whether non-recurring items influenced PBT will shape the outlook for the second half.

Profitability Analysis

DuPont decomposition: ROE (5.6%) = Net Profit Margin (10.8%) × Asset Turnover (0.462) × Financial Leverage (1.13x). The dominant change driver appears to be net profit margin, given revenue grew 3.5% YoY while net income fell 25.8% and leverage remained low and stable. Operating margin compressed by ~435 bps YoY (from ~19.5% to 15.1%), indicating adverse operating leverage likely from higher cost of sales and/or increased SG&A intensity; SG&A reported at 10.41 but YoY detail is unreported. The business rationale likely includes higher network access/wholesale line costs, customer acquisition/retention spend, or amortization of intangibles (intangible assets stand at 30.20) pressuring operating income. The PBT lift versus ordinary income suggests extraordinary gains; however, since net income still fell materially YoY, the underlying margin weakness is operational rather than one-off. Sustainability: the margin compression is potentially reversible if cost discipline improves, but near-term headwinds (competitive pricing, input cost pass-through to customers) could persist. Watch for SG&A growth outpacing revenue; with revenue +3.5% and operating income -19.6%, implied operating cost growth exceeded sales, a negative operating leverage signal.

Growth Assessment

Revenue grew 3.5% YoY to 67.25, indicating modest expansion in the core business. However, profit contraction across operating (-19.6%), ordinary (-19.3%), and net (-25.8%) metrics points to deteriorating operating leverage. The gross margin is 34.3%; without YoY gross data, we cannot pinpoint mix vs cost drivers, but the magnitude of operating margin compression suggests either higher cost of sales or elevated SG&A per unit of revenue. Non-operating income is small (0.11) and not a driver; the disparity between ordinary income (10.29) and PBT (14.11) suggests extraordinary effects this quarter, which are not sustainable sources of growth. ROIC of 8.1% sits near the typical target band for capital-light service providers but leaves limited buffer if margins slip further. Outlook hinges on stabilizing churn, ARPU resilience, and managing wholesale access and marketing costs; even low-single-digit revenue growth will require cost containment to protect margins. Near-term growth quality is mixed: recurring revenue appears intact, but profitability quality weakened.

Financial Health

Liquidity is robust: current assets 89.24 vs current liabilities 16.96 yield a current ratio of 526% and quick ratio of 526% (no inventories reported). Cash and deposits of 41.61 alone cover 2.5x current liabilities, minimizing short-term refinancing risk. Total liabilities are 16.96 against equity of 128.73, implying very conservative leverage (D/E ~0.13x on a total-liabilities basis). No interest-bearing debt is disclosed; the liability structure appears predominantly trade and other payables (accounts payable 4.02). No warning on current ratio (<1.0) or D/E (>2.0) triggers. Maturity mismatch risk is low given all liabilities are current yet comfortably covered by liquid assets. Off-balance sheet obligations are unreported; no commitments data provided.

Cash Flow Quality

Operating cash flow data is unreported; OCF/Net Income cannot be assessed and thus earnings quality cannot be validated through cash conversion. Free cash flow is likewise unreported, limiting visibility on self-funding capacity for dividends and capex. Working capital indicators: accounts receivable are 21.20 versus half-year revenue of 67.25; estimating annualized revenue at ~134.5 (twice the half-year), DSO approximates ~58 days, which seems reasonable and does not suggest aggressive revenue recognition. No indications of inventory-related manipulation (none reported for this business). Given the gap between ordinary income and PBT, we note possible non-recurring gains; absent cash flow detail, we cannot ascertain their cash nature.

Dividend Sustainability

The calculated payout ratio is 108.1%, implying dividends exceed earnings for the period, which is not sustainable over the long term without strong free cash flow or drawing on cash balances. FCF coverage is unreported, making assessment incomplete. Balance sheet liquidity (cash 41.61 and minimal liabilities) provides near-term flexibility to maintain dividends, but continued payout above earnings would erode cash over time. Policy outlook should prioritize aligning dividends with run-rate earnings and cash generation, especially given margin compression. Key watchpoints: full-year payout vs full-year earnings, OCF after working capital, and any capex or investment outlays tied to intangible platform development.

Risk Assessment

Business Risks:

• Margin pressure from higher wholesale access/network costs and competitive pricing in ISP/telecom-related services
• Customer acquisition and retention costs elevating SG&A per revenue
• Dependence on intangible assets/platforms (intangible assets 30.20) with amortization burden
• Potential one-off items affecting PBT vs ordinary income, obscuring underlying trends

Financial Risks:

• Dividend payout (108.1%) above earnings for the period, risking cash depletion if continued
• Limited operating leverage cushion if revenue growth remains low-single-digit
• Concentration in current liabilities (all liabilities current) though well covered by liquidity

Key Concerns:

• Operating margin compressed by ~435 bps YoY despite revenue growth
• Net income down 25.8% YoY, indicating weakened profitability quality
• Lack of cash flow disclosure (OCF/FCF) hinders validation of earnings quality and dividend coverage

Investment Implications

Key Takeaways:

• Top-line growth of 3.5% YoY did not translate to profit growth; operating income down 19.6%
• Operating margin ~15.1% vs ~19.5% a year ago (≈435 bps compression)
• Net margin fell to 10.8%; ROE modest at 5.6% on low leverage
• ROIC at 8.1% is near target but vulnerable if margin pressure persists
• Balance sheet is very strong with cash covering 2.5x current liabilities
• Dividend payout above earnings (108.1%) raises sustainability questions without FCF support

Metrics to Watch:

• Operating margin trend and cost of sales/SG&A intensity
• OCF and FCF (cash conversion vs net income) once disclosed
• Churn, ARPU, and subscriber growth (drivers of revenue sustainability)
• Receivables and DSO stability (~58-day estimate)
• Extraordinary items bridge (ordinary income to PBT) and their recurrence
• ROIC and ROE trajectory into 2H

Relative Positioning: Financially conservative balance sheet and adequate ROIC provide resilience versus peers, but current-period profitability underperformed relative to revenue growth, and elevated payout heightens capital allocation scrutiny.

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