ASTERIA Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.61B
• Operating Income: ¥523M
• Net Income: ¥430M
• EPS: ¥25.23

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

Verdict: Asteria delivered a strong FY2026 Q2 with a sharp profitability inflection despite modest top-line growth. Revenue grew 4.0% YoY to 16.08, while operating income surged 622.8% YoY to 5.23, lifting operating margin to 32.5%. Net income reached 4.18, implying a net margin of 26.0% and EPS of 25.23 JPY. Gross profit was 14.12 with an 87.8% gross margin, indicating a highly accretive mix and/or effective cost of sales control. Using the reported growth rate, prior-year operating income is estimated at ~0.72, implying operating margin expansion of about 2,780 bps YoY (from ~4.7% to 32.5%). EBITDA was 6.67, yielding a solid 41.5% EBITDA margin, demonstrating strong operating leverage. Cash generation was decent with operating cash flow of 3.27, though OCF/Net Income was 0.78x, a flag for near-term earnings quality. Free cash flow came in at 3.60, which comfortably covered dividends of 1.34 but did not fully cover total shareholder returns including 3.01 of buybacks. The balance sheet remains conservative with an equity ratio of 77.7% and D/E of 0.26x; short-term loans are only 1.00 against current assets of 30.27. ROE calculated at 6.4% reflects high margin offset by low asset turnover (0.196) and modest leverage (1.26x). ROIC of 7.2% sits at the lower end of a typical target range for software-oriented businesses and suggests disciplined capital use. The effective tax rate of 8.6% boosted net income, and normalization poses a potential headwind to bottom-line run-rate. Equity method income was minimal at 0.04 (0.8% of profit), implying results are driven by the core business rather than affiliates. With non-operating items mostly unreported, core operating performance appears to be the primary driver of the quarter. Forward-looking, sustaining a >30% operating margin will depend on revenue acceleration and SG&A efficiency, while closing the OCF/NI gap will be important for earnings quality and the capacity to fund continued buybacks.

Profitability Analysis

ROE decomposition (DuPont): ROE 6.4% = Net Profit Margin 26.0% × Asset Turnover 0.196 × Financial Leverage 1.26x. The largest swing factor vs last year was operating margin, with operating income up 622.8% on 4.0% revenue growth, implying dramatic operating margin expansion (~2,780 bps YoY to ~32.5%). Business drivers likely include disciplined SG&A, improved gross margin mix (gross margin 87.8%), and operating leverage on a largely fixed-cost base. Sustainability: some margin gains look structural (high gross margin, scale benefits), but the pace of expansion is unlikely to repeat without stronger revenue growth; a low effective tax rate (8.6%) may not be sustainable and could dilute net margin. Constraint to ROE: low asset turnover (0.196) and modest leverage (1.26x) cap ROE despite the high net margin. Watchpoints: if SG&A growth outpaces revenue in coming quarters, operating leverage could reverse; current data do not disclose SG&A YoY change, so we cannot verify cost discipline durability.

Growth Assessment

Top-line grew 4.0% YoY to 16.08, a steady but unspectacular pace relative to the sharp profit improvement. Operating income rose to 5.23, driven by margin uplift, not volume expansion. Gross margin at 87.8% suggests accretive product mix or improved cost management. Equity method income contributed only 0.04, confirming minimal reliance on affiliates for growth. With OCF/NI at 0.78x, cash conversion lagged profit growth, pointing to working capital or accrual effects; this may temper near-term reinvestment capacity if it persists. Outlook hinges on sustaining SG&A efficiency and translating pipeline into higher revenue growth to defend >30% operating margin. Near-term earnings could normalize if the tax rate rises from the unusually low 8.6% level. Absent detailed segment data or one-off disclosures, we treat the quarter’s profitability as primarily operating in nature, but repeatability needs confirmation in Q3–Q4.

Financial Health

Liquidity is strong by assets-to-liabilities with an equity ratio of 77.7%, though current ratio is not calculable due to unreported current liabilities. There is no explicit warning threshold breach reported (Current Ratio <1.0 not assessable; D/E is a comfortable 0.26x). Maturity mismatch risk appears low: short-term loans are 1.00 versus current assets of 30.27, and cash & equivalents are 27.17, suggesting ample coverage even without detailed current liability disclosure. Interest-bearing debt detail is limited, but total liabilities are modest at 16.77 against equity of 65.15. No off-balance sheet obligations are disclosed in the dataset. Overall solvency is conservative, and refinancing risk looks limited.

Cash Flow Quality

OCF of 3.27 versus net income of 4.18 results in OCF/NI of 0.78x, triggering a quality flag. Potential drivers include working capital build (receivables timing) or non-cash accruals; specifics are not disclosed. Free cash flow of 3.60 (supported by low capex at -0.05) is healthy for a software-centric model and covered dividends (1.34) by 2.57x. However, total shareholder returns (dividends 1.34 + buybacks 3.01 = 4.35) exceeded FCF, requiring use of cash on hand and/or other financing (financing CF -4.65). Cash & equivalents at 27.17 provide a buffer, but sustaining elevated buybacks would require ongoing solid OCF or balance sheet drawdown. No clear signs of working capital manipulation are visible from the limited disclosures, but the OCF/NI shortfall warrants monitoring in subsequent quarters.

Dividend Sustainability

The calculated payout ratio is 33.5%, comfortably below the <60% benchmark, indicating room to maintain dividends under current earnings. FCF coverage of the dividend is strong at 2.57x this quarter. While dividends appear sustainable on FCF, concurrent buybacks (3.01) pushed total distributions above FCF; continued buybacks at this pace would rely on cash reserves or improved cash generation. Policy visibility is limited due to unreported DPS details, but current profitability and balance sheet strength support dividend stability near-term.

Risk Assessment

Business Risks:

• Revenue growth of 4.0% may be insufficient to sustain >30% operating margin without continued cost discipline
• Potential normalization of the effective tax rate from 8.6% could pressure net margin
• Dependence on high gross margins (87.8%)—any pricing pressure or mix shift could compress profitability
• Execution risk in scaling while maintaining SG&A efficiency

Financial Risks:

• Earnings quality flag with OCF/NI at 0.78x indicates weaker cash conversion
• Total shareholder returns (4.35) exceeded FCF (3.60), implying reliance on cash balance for buybacks
• Limited disclosure on current liabilities and interest expense obscures short-term liquidity and coverage analysis

Key Concerns:

• Sustainability of the step-change in operating margin (estimated +2,780 bps YoY) with only modest revenue growth
• Potential volatility if low tax rate reverts closer to normal levels
• Data gaps on non-operating items and SG&A breakdown limit identification of one-offs

Investment Implications

Key Takeaways:

• Sharp profitability inflection: operating margin ~32.5% on 4% revenue growth
• ROE 6.4% constrained by low asset turnover (0.196) and modest leverage (1.26x) despite high net margin
• Earnings quality mixed: OCF/NI at 0.78x, but FCF positive at 3.60
• Balance sheet conservative with equity ratio 77.7% and D/E 0.26x
• Dividend well covered; buybacks exceeded FCF this quarter
• ROIC 7.2% aligns with target range, indicating disciplined capital use

Metrics to Watch:

• OCF/Net Income and working capital movements (receivables, payables)
• Operating margin trajectory and SG&A-to-sales ratio
• Revenue growth re-acceleration to support margin sustainability
• Effective tax rate normalization
• ROIC versus cost of capital
• Cash balance trend versus shareholder return outlays

Relative Positioning: Within software-oriented peers, Asteria’s margin profile this quarter is strong, balance sheet leverage is low, and ROIC sits at the target threshold; however, cash conversion lags and revenue growth is modest, placing execution emphasis on sustaining efficiencies while improving top-line momentum.

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