Fuller,Inc. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥484M
• Operating Income: ¥4M
• Net Income: ¥10M
• EPS: ¥5.99

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

Fuller Inc. (387A0) reported FY2026 Q1 standalone results under JGAAP showing steady top-line growth but thin operating profitability and unusual below-the-line/tax dynamics. Revenue was ¥484.0 million, up 11.1% YoY, with gross profit of ¥163.8 million and a gross margin of 33.8%. Operating income was ¥4.0 million (+5.4% YoY), implying an operating margin of roughly 0.8%, indicating that SG&A intensity remains high relative to gross profit. Ordinary income was a ¥4.0 million loss, suggesting non-operating items (including interest expense of ¥1.06 million) and/or other below-operating factors weighed on earnings. Net income nevertheless reached ¥10.0 million (−18.8% YoY), supported by a tax benefit (income tax expense reported at −¥15.04 million), which is unlikely to be a structural driver of earnings. On a DuPont basis, the company’s ROE was 0.94%, decomposed into a 2.07% net margin, 0.273x asset turnover, and 1.66x financial leverage—solid balance sheet leverage but profitability and efficiency are the key constraints on returns. Liquidity appears strong: current assets of ¥1,653.3 million versus current liabilities of ¥456.4 million yield a current ratio of 362.2% and working capital of ¥1,196.8 million. Balance sheet solvency also looks sound with total liabilities of ¥845.0 million against equity of ¥1,067.0 million, implying a debt-to-equity ratio of 0.79x and an equity-to-asset ratio of approximately 60.1% (computed from disclosed assets and equity). Cash flow statements were not disclosed this quarter in the provided XBRL (zeros indicate unreported), limiting direct assessment of earnings quality and free cash flow. No dividend was declared (DPS ¥0), consistent with a reinvestment phase and the modest earnings base. Interest coverage at the operating level is 3.8x, adequate but not robust given the slim operating margin. The mix of positive net profit despite an ordinary loss, driven by tax benefits, raises sustainability questions for bottom-line performance in coming quarters. Revenue growth remains a relative bright spot, but conversion to operating and ordinary income is the key execution challenge. The company enters FY2026 with ample liquidity to support operations and potential investment but must improve cost efficiency to translate growth into durable returns. Data gaps around cash flows, depreciation, and share metrics constrain a fuller quality-of-earnings and per-share analysis, and we focus on the available non-zero datapoints. Overall, the quarter shows a growing top line, thin core profitability, non-operating pressure, and a one-off tax lift.

Profitability Analysis

ROE is 0.94%, driven by a 2.07% net margin, 0.273x asset turnover, and 1.66x financial leverage. Gross margin of 33.8% suggests acceptable pricing/payload on services but not yet sufficient to offset opex intensity. Operating margin is approximately 0.8% (¥4.0m OI on ¥484.0m revenue), indicating limited operating leverage realization in the quarter. YoY, operating income grew +5.4% on +11.1% revenue, implying a modest negative mix or cost pressure (incremental margin weaker than ideal). Ordinary income was −¥4.0m, meaning non-operating items (including ¥1.06m interest) more than consumed operating profit. Net income was ¥10.0m due to a ¥15.04m tax benefit; this distorts margin quality and is not indicative of recurring profitability. Interest coverage is 3.8x at the operating level (¥4.0m/¥1.06m), leaving a narrow cushion if operating earnings were to soften. With an equity-to-asset ratio of roughly 60.1%, leverage is moderate; the limiting factors for ROE are margin and turnover. Asset turnover of 0.273x indicates low quarterly efficiency against the asset base; improving utilization (e.g., higher billable rates, better capacity absorption) would uplift ROE. In sum, margin quality is weak at the operating and ordinary levels, and the current ROE relies on non-operating/tax items rather than core operations.

Growth Assessment

Revenue increased 11.1% YoY to ¥484.0m, evidencing demand resilience in Q1. Gross profit of ¥163.8m (33.8% margin) provides a base for operating leverage, but the translation to OI was limited (¥4.0m). The smaller growth in operating income (+5.4% YoY) relative to revenue implies rising SG&A or pricing/mix headwinds dampening incremental margins. Ordinary income turned negative (−¥4.0m), reflecting pressure from non-operating factors; sustainable growth requires restoring positive ordinary profit. Net income declined 18.8% YoY to ¥10.0m, and benefited from a tax credit (−¥15.0m), suggesting weaker underlying earnings momentum than the top line implies. Without disclosed cash flows, we cannot confirm whether growth is cash generative (OCF/NI ratio shown as 0.00 reflects non-disclosure, not actual cash conversion). Near-term growth outlook hinges on improving utilization, containing labor and subcontracting costs, and stabilizing non-operating items. If revenue growth persists around low-double digits while SG&A is contained, operating leverage could emerge; conversely, continued ordinary losses would cap net growth. Given the healthy working capital position, the company appears able to fund growth internally, subject to cash conversion. Overall, revenue momentum looks sustainable near term, but profit quality must improve for durable earnings growth.

Financial Health

Total assets were ¥1,776.0m, equity ¥1,067.0m, and liabilities ¥845.0m, implying a computed equity ratio of ~60.1% (reported 0.0% reflects non-disclosure). Current assets were ¥1,653.3m versus current liabilities of ¥456.4m, delivering a current ratio of 362.2% and quick ratio of 362.2% (no inventories reported), and working capital of ¥1,196.8m. Debt-to-equity is 0.79x (using total liabilities as a proxy for interest-bearing plus other liabilities), indicating moderate leverage. Interest expense was ¥1.06m; with ¥4.0m operating income, interest coverage is 3.8x—adequate but exposed if operating income dips. The asset base is highly liquid (current assets are 93% of total assets), supporting near-term obligations and investment needs. Absence of disclosed cash and cash flow statements limits precision on the cash buffer and covenant headroom, but the balance sheet mix suggests prudent solvency.

Cash Flow Quality

Cash flow data (operating, investing, financing) were not disclosed in the provided feed; zeros are placeholders, not actual values. Therefore, OCF/Net Income and FCF cannot be reliably assessed this quarter. Earnings quality signals from the P/L are mixed: net income was positive while ordinary income was negative and tax expense was a benefit (−¥15.0m), indicating bottom-line reliance on non-operating/tax effects. Depreciation and amortization were not disclosed, preventing EBITDA construction; the reported EBITDA of 0.0% is not meaningful. Working capital appears ample (¥1,196.8m), but without OCF disclosure, the direction of receivables, payables, and accrued income cannot be assessed. Given the slim operating margin (0.8%), sustained positive OCF will likely depend on disciplined receivables collection and controlled subcontracting/labor outflows. We will reassess cash conversion once cash flow statements are available.

Dividend Sustainability

No dividend was declared (DPS ¥0, payout ratio 0%). With net income of ¥10.0m and undisclosed free cash flow, coverage cannot be evaluated this quarter. Given modest profitability, negative ordinary income, and the company’s apparent growth phase, internal reinvestment priority is consistent with withholding dividends. Balance sheet strength (equity ~60% of assets; working capital ¥1.20bn) provides capacity for investment but does not by itself justify distributions while operating margins remain below 1%. Future dividend capacity will hinge on stabilizing ordinary income, normalizing tax effects, and demonstrating positive, repeatable free cash flow.

Risk Assessment

Business Risks:

• Thin operating margin (0.8%) leaves limited buffer against cost shocks.
• Dependence on non-operating/tax items to achieve positive net income in the quarter.
• Potential wage inflation and hiring/retention costs pressuring SG&A.
• Project timing/mix risk affecting utilization and gross margin.
• Customer concentration risk typical of smaller-scale service businesses (not disclosed but relevant).
• Pricing pressure in competitive digital/IT services market.
• Execution risk in scaling delivery while maintaining quality.

Financial Risks:

• Ordinary income negative (−¥4.0m) despite positive operating income.
• Interest coverage only 3.8x at operating level; vulnerability if OI declines.
• Cash flow non-disclosure this quarter limits visibility on liquidity trajectory.
• Tax benefit (−¥15.0m) inflating net income; potential reversal risk.
• Potential working capital swings impacting OCF given high current asset base.

Key Concerns:

• Sustainability of net income absent tax benefits.
• Need to improve SG&A efficiency to lift operating margin above 1%.
• Restoring positive ordinary income to underpin earnings quality.

Investment Implications

Key Takeaways:

• Top-line growth of 11.1% YoY demonstrates demand resilience.
• Operating leverage not yet evident; operating margin ~0.8% remains thin.
• Ordinary loss and tax benefit-driven net profit indicate weak earnings quality this quarter.
• Balance sheet is liquid and moderately leveraged (D/E 0.79x; current ratio 362%).
• Cash flow data not disclosed; reassessment needed when OCF/FCF are available.

Metrics to Watch:

• Operating margin and SG&A-to-revenue ratio.
• Ordinary income and non-operating expense trends (including interest).
• Gross margin stability and utilization/billable mix.
• Receivables days and OCF/NI once cash flow data are disclosed.
• Tax normalization and effective tax rate on a pre-tax profit base.

Relative Positioning: Versus domestic small-cap IT/digital services peers, Fuller’s revenue growth is respectable, but profitability lags with sub-1% operating margin and negative ordinary income; balance sheet liquidity is a relative strength, while earnings quality and cash flow visibility are weaker this quarter due to non-disclosure.

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