Data Applications Company,Limited FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.03B
• Operating Income: ¥70M
• Net Income: ¥31M
• EPS: ¥8.45

Income Statement

Balance Sheet

Cash Flow Statement

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

Data Applications Co., Ltd. (3848) reported strong top-line growth for FY2026 Q2, with revenue of ¥2,032 million, up 81.3% year on year, signaling robust demand and/or successful project deliveries. Operating income rose 162.0% YoY to ¥70 million, evidencing operating leverage despite still modest operating margin levels. Ordinary income reached ¥97 million, exceeding operating income, implying positive non-operating contributions more than offset small interest expenses. Net income was ¥53 million, up 70.1% YoY, translating to a net margin of 2.61% at the half-year stage. DuPont analysis indicates a calculated ROE of 1.06%, driven by low asset turnover of 0.294 and modest financial leverage of 1.38, reflecting a conservative balance sheet. Gross margin is stated at 37.1%, and the EBITDA margin at 5.0%, both suggesting room for improvement as scale benefits and mix optimization progress. Interest coverage is very strong at 71.0x (EBIT/interest), consistent with low debt and minimal financial risk. Liquidity is ample with a current ratio of 371.4% and working capital of ¥3,087 million, supporting delivery on order backlogs and ongoing development. The debt-to-equity ratio stands at 0.28x, underscoring a solid solvency profile. Operating cash flow was ¥21.8 million, which is 0.41x of net income, indicating weaker cash conversion in this period and the need to watch receivables and billing timing. Free cash flow is shown as zero given the absence of disclosed investing cash flows, which limits visibility on capex and development investment. Dividend payments are not disclosed for the period (DPS and payout ratio both 0.00), leaving capital return policy for FY2026 yet to be clarified. Equity ratio is not disclosed in the dataset (shown as 0.0%), but the low leverage and large equity base imply a high underlying equity buffer. Cash and equivalents are not disclosed in the cash flow section; liquidity analysis relies on current assets and liabilities. Overall, the company demonstrates accelerated growth and improved profitability momentum, supported by strong liquidity and low leverage, but cash conversion and margin quality should be closely monitored. Data limitations (undisclosed items shown as zeros) constrain line-by-line reconciliation; the analysis focuses on the disclosed, non-zero figures.

Profitability Analysis

ROE is 1.06% via DuPont: net margin 2.61% × asset turnover 0.294 × financial leverage 1.38. The modest ROE is primarily constrained by low asset turnover and thin net margins, despite low leverage. Operating margin is approximately 3.45% (¥70m OI on ¥2,032m sales), improving with scale but still low for a software/integration business, indicating ongoing cost absorption or a services-heavy mix. Ordinary income margin (~4.8%) above operating margin implies positive non-operating contributions (e.g., interest income or investment gains) offsetting minor interest expense. EBITDA of ¥101.98m (margin ~5.0%) suggests limited operating leverage realized to date; further improvement would come from higher recurring revenue share, pricing power, and utilization. Gross margin is cited at 37.1%, implying a sizeable cost of delivery (personnel, subcontracting) and scope for efficiency gains. The sharp YoY growth and 162% increase in operating income evidence operating leverage, but the margin base remains low and sensitive to utilization and project mix. Effective tax burden appears modest in the period (income tax ¥10.6m vs. profitability), though the provided effective tax rate metric reads 0.0%, which may reflect calculation limitations in the dataset.

Growth Assessment

Revenue expanded by 81.3% YoY to ¥2,032m, a strong acceleration that likely reflects robust order intake, delivery timing, and/or new product traction. Operating income rose 162% YoY to ¥70m, indicating positive operating leverage; however, the absolute margin remains modest, suggesting growth is still investment-intensive. Ordinary income at ¥97m reinforces that non-operating items aided profits; core growth quality is best gauged by operating income trajectory. Net income increased 70.1% YoY to ¥53m, with a 2.61% net margin; sustaining this growth will require continued cost discipline and mix improvements. Given the low asset turnover (0.294), the model appears asset-rich or revenue recognition lagging the asset base; better utilization could lift ROA and ROE. The reported gross and EBITDA margins leave headroom for efficiencies (automation, standardization, cloud delivery, and recurring revenue expansion). Near-term outlook hinges on backlog conversion, hiring/productivity balance, and recurring revenue penetration; if revenue growth moderates, protecting margins will be key. Cash conversion lag (OCF/NI = 0.41) suggests timing effects in collections or working capital; normalization would support sustainability of growth. With leverage low, the company has balance sheet capacity to invest in R&D and go-to-market to sustain growth. The absence of disclosed investing cash flows limits visibility into capex/softwarization investments; sustained top-line growth without commensurate opex/capex creep would affirm scalability.

Financial Health

Liquidity is strong: current assets ¥4,225m vs. current liabilities ¥1,138m yield a current ratio of 371.4% and ample working capital of ¥3,088m. Quick ratio equals the current ratio given inventories are shown as unreported; this indicates reliance on cash, receivables, and other current assets for liquidity. Solvency appears sound with total liabilities of ¥1,403m against equity of ¥4,993m, implying a debt-to-equity ratio of 0.28x and low financial risk. Interest expense is minimal at ¥0.99m, and interest coverage is a robust 71.0x, indicating negligible refinancing pressure. Total assets are ¥6,908m, supported largely by equity; financial leverage is 1.38x, consistent with a conservative capital structure. The equity ratio is not disclosed in the dataset (shown as 0.0%), but based on liabilities and equity, the economic equity buffer appears high. No cash balance is disclosed in the cash flow section; however, high current assets suggest adequate cash and receivables to meet obligations.

Cash Flow Quality

Operating cash flow is ¥21.83m versus net income of ¥53.00m, giving an OCF/NI ratio of 0.41, which indicates weak cash conversion in this half and potential working capital build (e.g., receivables from strong sales). Free cash flow is listed as zero because investing cash flows are undisclosed; true FCF cannot be precisely determined without capex/R&D capitalization details. EBITDA of ¥101.98m vs. OCF of ¥21.83m suggests cash drains from working capital or tax/prepaid items in the period. Interest expense is negligible and does not explain the OCF gap. Monitoring DSO, unbilled revenues, and contract assets is important given the growth surge. Financing cash flow of -¥161.07m indicates net outflows (e.g., debt repayment, share repurchase, or dividends not disclosed as paid), but specifics are not provided. Overall, earnings quality is mixed: profits improved materially, but cash realization lagged; normalization in collections would improve cash flow quality.

Dividend Sustainability

Dividend per share is undisclosed for the period (DPS shown as 0.00) and payout ratio is 0.0%, indicating no payout recognized in the dataset. With operating cash flow positive but modest and investing cash flows undisclosed, free cash flow coverage of dividends cannot be fully assessed. The balance sheet is conservative (D/E 0.28x) with strong liquidity, providing capacity for distributions if policy allows. However, given growth investments and the need to improve cash conversion, retaining earnings to fund expansion and working capital could remain a priority. Without guidance on dividend policy or historical payout cadence for FY2026, the outlook for distributions is uncertain. Should cash conversion strengthen and margins expand, sustainable payouts would be more readily supported by operating cash flow.

Risk Assessment

Business Risks:

• Execution risk in large projects leading to delivery delays and margin slippage
• Revenue mix skewed to services may cap gross margins versus software subscription
• Customer concentration and renewal risk in enterprise middleware/integration
• Talent acquisition and wage inflation potentially pressuring operating margin
• Competition from global integration platforms and cloud-native providers
• Transition risk in shifting to recurring revenue or cloud offerings
• Dependence on domestic IT spending cycles and budget timing

Financial Risks:

• Weaker cash conversion (OCF/NI 0.41) indicating working capital sensitivity
• Potential receivables build from rapid growth affecting liquidity timing
• Limited disclosure on investing cash flows obscures FCF and capex needs
• Non-operating income contributions to ordinary income may be volatile
• Small absolute profit base increases sensitivity to revenue shortfalls

Key Concerns:

• Sustaining margin expansion from a low operating margin base (~3.45%)
• Improving asset utilization (asset turnover 0.294) to lift ROA/ROE
• Normalizing cash conversion through better billing and collections
• Visibility on capex/R&D capitalization to assess true FCF

Investment Implications

Key Takeaways:

• Top-line growth accelerated sharply (+81.3% YoY) with operating income up +162%, indicating operating leverage.
• Profitability remains modest (OP margin ~3.45%, EBITDA margin 5.0%), leaving room for margin expansion.
• ROE is low at 1.06% due to thin margins and low asset turnover despite conservative leverage.
• Liquidity and solvency are strong (current ratio 371%, D/E 0.28x, interest coverage 71x).
• Cash conversion lagged (OCF/NI 0.41), suggesting working capital absorption during growth.
• Disclosure gaps (equity ratio, cash, investing CF) limit precision on FCF and capital intensity.

Metrics to Watch:

• Order backlog and recurring revenue ratio
• Operating margin and gross margin progression
• OCF/NI and receivables days (DSO)
• Capex and development investment (investing CF disclosure)
• Asset turnover and ROIC trends
• Ordinary-to-operating income gap (stability of non-operating gains)

Relative Positioning: The company combines strong growth momentum with a conservative balance sheet, but its profitability and cash conversion trail best-in-class software and integration peers; improving margin quality and working capital discipline are key to closing the gap.

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