Japan Techno-Lab Co., Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥169M
• Operating Income: ¥-101M
• Net Income: ¥-69M
• EPS: ¥-42.83

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

Verdict: FY2026 Q2 was weak operationally with sharp top-line contraction and a sizable operating loss, partially offset by positive operating cash flow and a very strong balance sheet. Revenue fell to 1.69 (−43.6% YoY), while gross profit was 1.35, yielding a high gross margin of roughly 79.7%. SG&A of 1.72 exceeded gross profit, driving operating income to −1.01 and ordinary income to −1.00. Operating margin stood at approximately −5,980 bps and net margin at −4,080 bps, indicating severe margin pressure; the precise YoY margin delta is not disclosed, but given the revenue decline, compression is highly likely. Non-operating items were negligible (income 0.01; expenses 0.00), so losses stem from the core business rather than financial items. Net income was −0.69 (EPS −42.83 JPY), while the effective tax rate appears elevated at about 33.6% due to losses and tax effects. Despite the loss, operating cash flow was positive at 0.59, implying a working capital tailwind or cash collection benefits this quarter. The OCF/NI ratio is −0.86 (flagged by our threshold), reflecting a divergence that warrants monitoring of working capital sustainability. Liquidity is a clear strength: cash and deposits of 6.02, current assets of 10.09 versus current liabilities of 0.97, yielding a current ratio of 1,043% and quick ratio of 1,017%. Leverage is low with total liabilities at 1.69 and a D/E of 0.15x, providing ample solvency buffer. ROE was −6.3% per DuPont (−40.8% net margin × 0.132 asset turnover × 1.18x leverage), with negative profitability the dominant driver. ROIC was reported at −13.7%, well below a 5% warning threshold, underscoring capital inefficiency at current earnings levels. Capex was modest at 0.13, enabling a proxy FCF (OCF − capex) of 0.46, which helps fund operations despite the accounting loss. Dividend data were not disclosed, and with negative earnings, near-term payout capacity would rely on cash and OCF rather than profits. Forward-looking, the key questions are revenue stabilization/recovery and SG&A discipline to restore operating leverage, as balance-sheet strength affords time but not a structural solution.

Profitability Analysis

ROE decomposition: ROE = Net Profit Margin × Asset Turnover × Financial Leverage = (−40.8%) × 0.132 × 1.18 ≈ −6.3%. The component exerting the largest negative impact is Net Profit Margin, given the deep operating loss and minimal non-operating contribution. Business driver: SG&A (1.72) exceeded gross profit (1.35) amid a steep revenue decline (−43.6% YoY), leading to negative operating leverage and a swing to operating loss. Sustainability assessment: The margin pressure appears cyclical/volume-driven rather than structural in cost base alone; normalization requires revenue recovery and/or cost resizing. Financial leverage is modest (1.18x), so leverage is not amplifying ROE materially—improvements must come from margins and turnover. Concerning trend flags: SG&A as a percentage of sales is very high (approx. 102% of revenue), and absolute SG&A exceeded gross profit, indicating insufficient scale at current volumes; while we lack YoY SG&A growth, this cost/revenue mismatch is a key red flag.

Growth Assessment

Revenue declined 43.6% YoY to 1.69, indicating a material demand slowdown or timing slippage in orders/projects. Profitability deteriorated to an operating loss of −1.01 with net margin at −40.8%, driven by negative operating leverage. Non-operating items were small, so profit quality is tied to core operations rather than financial gains. With no segment or order backlog disclosure, the sustainability of revenue is uncertain; recovery hinges on project wins, conversion of pipeline, and retention of existing customers. Gross margin remains high (≈80%), suggesting pricing/pure mix is not the primary issue; the challenge is insufficient volume to cover fixed costs embedded in SG&A. Near-term outlook: focus on stabilizing sales and cost control to narrow losses; given positive OCF this quarter, improved collections or working capital management may continue to cushion cash needs, but that is not a substitute for restoring operating profit.

Financial Health

Liquidity is exceptionally strong: current assets 10.09 vs current liabilities 0.97 imply a current ratio of 10.4x and quick ratio of 10.2x (no warning; both well above thresholds). Cash and deposits of 6.02 cover total liabilities of 1.69 by 3.6x. Solvency: D/E is 0.15x; no interest-bearing debt is reported, and noncurrent liabilities are modest at 0.72. There is no sign of a maturity mismatch—current assets significantly exceed short-term obligations. Off-balance sheet obligations are not disclosed, so we assume none material based on available data. Equity remains high at 10.92, with ample working capital of 9.12.

Cash Flow Quality

OCF was +0.59 against net income of −0.69, yielding OCF/NI of −0.86, which triggers our quality alert due to the ratio threshold; however, the positive OCF alongside negative earnings suggests a working capital release or strong collections. Investing CF is unreported, but capex was modest at 0.13; proxy FCF (OCF − capex) was approximately +0.46, indicating cash self-funding capacity for operations and small investments. Financing CF was −0.20, including share repurchases of −0.04, implying disciplined capital returns despite losses. Working capital signals: inventories are small at 0.25, reducing inventory-related risk; receivables/payables details are unreported, so we cannot confirm if OCF strength is driven by payables stretching or receivables collection. No clear signs of aggressive working capital manipulation can be asserted from available data, but sustainability of OCF requires confirmation in subsequent quarters.

Dividend Sustainability

Dividend disclosures (DPS, total dividends) are not available. Calculated payout ratio is −25.1%, which is not meaningful given negative earnings. With NI negative but OCF positive and a strong cash position, the company could theoretically fund a modest dividend from cash flow; however, sustainability would depend on maintaining positive OCF and narrowing losses. In absence of disclosed policy, we view dividend visibility as low near-term until profitability improves or explicit guidance is provided.

Risk Assessment

Business Risks:

• Demand weakness or project timing slippage evidenced by −43.6% YoY revenue decline
• Negative operating leverage: SG&A exceeds gross profit at current scale
• Customer concentration risk (common in small-cap tech/services; not disclosed but plausible)
• Execution risk on sales recovery and cost realignment
• Potential pricing pressure despite current high gross margin if volumes remain weak

Financial Risks:

• Sustained operating losses eroding retained earnings if revenue recovery lags
• Cash flow reliance on working capital release, which may be non-recurring
• ROIC at −13.7% indicating value destruction if maintained
• Potential need to curtail investments or returns if OCF weakens

Key Concerns:

• Sharp revenue contraction with lack of segment/backlog visibility
• Operating margin deeply negative (≈−59.8%) due to high fixed cost absorption
• OCF/NI ratio flagged (−0.86), necessitating scrutiny of working capital drivers
• Limited disclosure (many items unreported), constraining transparency on drivers

Investment Implications

Key Takeaways:

• Severe top-line decline (−43.6% YoY) led to an operating loss of −1.01
• Gross margin remains high (~80%), indicating the issue is scale/SG&A coverage
• ROE −6.3% and ROIC −13.7% reflect poor returns at current earnings levels
• Balance sheet strength (cash 6.02; D/E 0.15x) provides ample runway
• Positive OCF of 0.59 and proxy FCF of ~0.46 offer near-term cash resilience

Metrics to Watch:

• Quarterly revenue run-rate and order backlog/bookings (not disclosed)
• SG&A to revenue ratio and fixed cost actions
• Operating margin trajectory and break-even sales level
• OCF sustainability vs NI; receivables/payables turnover once disclosed
• Cash balance and equity ratio amid ongoing losses

Relative Positioning: Versus Japan micro-cap IT/services peers, profitability and growth momentum appear weaker this quarter due to a sharp revenue decline and negative operating leverage, while liquidity and leverage metrics are stronger than peers, providing a longer cash runway to execute a turnaround.

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