Double Standard Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥3.06B
• Operating Income: ¥762M
• Net Income: ¥815M
• EPS: ¥37.81

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

Double Standard Co., Ltd. (TSE: 3925) reported FY2026 Q2 consolidated results under JGAAP showing revenue of ¥3,060,000,000, down 16.1% year over year, and operating income of ¥762,000,000, down 35.3% year over year. Net income was ¥511,000,000 (−37.1% YoY), implying a net margin of 16.7%, consistent with the provided DuPont inputs. Profitability remains solid in absolute terms, with an operating margin of approximately 24.9% and an EBITDA margin of 25.5%, but negative operating leverage is evident given the steeper decline in operating profit versus revenue. Gross margin is indicated at 57.0%, suggesting pricing power and/or a favorable mix despite topline contraction. Ordinary income of ¥766,000,000 closely tracks operating income, consistent with a low financial income/expense profile. The effective tax burden inferred from income tax expense (¥374,191,000) versus pretax proxy (ordinary income) is roughly 48%–49%, indicating a high tax rate in the period. The balance sheet is strong: total assets ¥6,792,000,000, total equity ¥6,082,000,000, and total liabilities ¥1,143,272,000, yielding an equity ratio of about 89.6% (computed) and a low debt-to-equity of 0.19x. Liquidity is ample, with current assets of ¥6,402,871,000 and current liabilities of ¥1,095,537,000 producing a current ratio of 5.85x and working capital of ¥5,307,334,000. Cash generation was robust: operating cash flow reached ¥930,660,000, or 1.82x net income, supporting the quality of earnings. Financing cash flow was an outflow of ¥742,808,000, which likely reflects shareholder returns (e.g., buybacks) or other financing uses, given DPS is zero; detailed breakdown is not provided. DuPont analysis indicates ROE of 8.40%, decomposed into a 16.70% net margin, 0.451x asset turnover, and modest financial leverage of 1.12x; thus, ROE softness is mainly from lower margins and slower turnover rather than leverage. The company’s low depreciation (¥18,563,000) implies limited capital intensity or timing of asset recognition; however, capex and investing cash flows were not disclosed in the period’s summary. Key data limitations include missing details for cash and equivalents, investing cash flows, share count, and dividend/buyback components, which constrain deeper FCF and per-share analyses. Overall, the quarter exhibits resilient absolute profitability, strong liquidity and solvency, and high-quality cash conversion, but with meaningful topline pressure and negative operating leverage that merit close monitoring. Revenue stability, mix of recurring versus project-based sales, and pricing discipline will be central to near-term earnings trajectory. The capital structure provides strategic flexibility to absorb short-term volatility while funding selective growth initiatives or shareholder returns.

Profitability Analysis

ROE_decomposition: ROE 8.40% = Net Profit Margin 16.70% × Asset Turnover 0.451 × Financial Leverage 1.12. ROA (margin × turnover) is approximately 7.5%, with low leverage providing a modest uplift to equity returns. margin_quality: Gross margin is indicated at 57.0% (implying strong value-add and/or favorable mix), operating margin ~24.9% (¥762,000,000 / ¥3,060,000,000), EBITDA margin 25.5%, and net margin 16.7%. The gap between gross and operating margin suggests meaningful opex intensity (SG&A, R&D, personnel) but remains within a high-margin profile for data/analytics services. Note: the reported gross profit (¥1,742,712,000) is not arithmetically consistent with the reported cost of sales; we rely on the supplied gross margin for analysis. operating_leverage: Revenue declined 16.1% YoY while operating income fell 35.3% YoY, indicating negative operating leverage as fixed costs did not adjust proportionately. The margin compression from operating to net level is moderate, reflecting a limited impact from non-operating items.

Growth Assessment

revenue_sustainability: The 16.1% YoY revenue decline signals demand softness, project timing shifts, or client budget constraints. Sustainability will depend on recurring revenue share, contract renewals, and new logo wins. profit_quality: Despite topline pressure, net margin of 16.7% and EBITDA margin of 25.5% indicate resilient unit economics. OCF/NI of 1.82x underscores good earnings-to-cash conversion. outlook: Near-term growth hinges on pipeline conversion and stabilization in client IT/data spending. With high margins and strong liquidity, the company can invest in sales capacity and product while absorbing volatility; however, absent reacceleration in bookings and backlog, operating leverage may remain a headwind.

Financial Health

liquidity: Current assets ¥6,402,871,000 vs. current liabilities ¥1,095,537,000; current ratio 5.85x and quick ratio 5.85x (no inventories reported). Working capital is ¥5,307,334,000, providing ample cushion. solvency: Total liabilities ¥1,143,272,000 vs. equity ¥6,082,000,000; debt-to-equity 0.19x. Computed equity ratio is ~89.6% (equity/total assets), indicating a conservatively financed balance sheet. capital_structure: Minimal financial leverage (DuPont leverage 1.12x) and no reported interest expense. The structure supports flexibility for investment and potential shareholder returns.

Cash Flow Quality

earnings_quality: Operating cash flow of ¥930,660,000 versus net income of ¥511,000,000 yields OCF/NI of 1.82x, indicating strong cash realization and limited accrual risk in the period. FCF_analysis: Investing cash flow is not disclosed in the period summary; therefore, free cash flow cannot be reliably calculated. Depreciation is modest at ¥18,563,000, suggesting low capital intensity, but actual capex may differ from depreciation. working_capital: High OCF suggests favorable working capital dynamics (collections and/or payables), but detailed movements in receivables and payables are not provided. Elevated liquidity and working capital support ongoing operations without external funding.

Dividend Sustainability

payout_ratio_assessment: Annual DPS is reported as ¥0.00 with a payout ratio of 0.0%. Withholding dividends preserves cash amid revenue pressure. FCF_coverage: FCF coverage cannot be assessed due to absent investing cash flow and capex disclosure. On a cash generation basis, OCF of ¥930,660,000 would likely support distributions if desired, subject to capex needs. policy_outlook: Given strong balance sheet and cash generation but near-term earnings pressure, maintaining financial flexibility appears prudent. Shareholder returns may be skewed to buybacks (financing CF outflow of ¥742,808,000) rather than dividends, but details are not disclosed.

Risk Assessment

Business Risks:

• Revenue concentration in key clients or verticals leading to volatility in project-based sales.
• Timing risk in large data/analytics projects and onboarding cycles affecting quarterly revenue.
• Competitive intensity from domestic and global data platform, AI, and analytics vendors.
• Pricing pressure or mix shift away from higher-margin bespoke solutions.
• Talent acquisition and retention for engineers and data scientists in a tight labor market.
• Regulatory and compliance risks related to data privacy, security, and usage rights.
• Macroeconomic IT spending slowdowns impacting new bookings and renewals.

Financial Risks:

• Negative operating leverage if revenue softness persists, compressing margins.
• Working capital swings, particularly receivables collection and billing milestones.
• Limited disclosure of capex/investing cash flows obscures true FCF profile.
• Potential reliance on buybacks (financing outflows) reducing cash reserves if cash generation slows.
• High effective tax burden reducing net profitability.

Key Concerns:

• Topline decline of 16.1% YoY with operating income down 35.3% YoY.
• Evidence of negative operating leverage despite strong gross and EBITDA margins.
• Data limitations including absent investing CF/capex and cash balance details.
• Inconsistency between reported gross profit and cost of sales; reliance on provided margin figures for analysis.

Investment Implications

Key Takeaways:

• High-margin business model persists (gross margin ~57%, operating margin ~25%) despite revenue contraction.
• Strong cash conversion (OCF/NI 1.82x) supports earnings quality.
• Very robust liquidity and low leverage (equity ratio ~90%, D/E 0.19x) provide resilience.
• ROE at 8.4% is driven primarily by margin and turnover rather than leverage; improvement hinges on growth and utilization.
• Negative operating leverage is the main near-term headwind; stabilization of revenue is critical.

Metrics to Watch:

• Quarterly bookings, backlog, and recurring revenue mix.
• Revenue growth reacceleration and client churn/retention metrics.
• Gross margin trend and operating expense discipline (personnel and R&D).
• OCF/NI ratio, DSO/receivables turns, and working capital movements.
• Capex and investing cash flows to clarify FCF and capital intensity.
• Shareholder return mix (buybacks vs. dividends) and share count changes.

Relative Positioning: Within Japan’s data/analytics and digital solutions space, Double Standard exhibits superior balance sheet strength and healthy margins but currently lags on growth momentum; sustained bookings recovery would be necessary to reassert outperformance on returns.

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