SOCIALWIRE CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.51B
• Operating Income: ¥69M
• Net Income: ¥105M
• Earnings per Unit (EPU): ¥9.02

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Unit Information

Distribution 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: A solid profitability rebound in FY2026 Q2 with operating leverage and a one-time tax benefit lifting net income, while liquidity remains strong and leverage moderate. Revenue grew 2.9% YoY to 15.10, and operating income rose 37.8% YoY to 0.69, indicating improved cost discipline and operating efficiency. Gross margin printed at 63.2% (9.54/15.10), and operating margin was 4.6% (0.69/15.10). Using implied prior-period figures, operating margin likely expanded by roughly 115–120 bps YoY (from ~3.4% to ~4.6%). Ordinary income surged 154.5% YoY to 0.54 despite non-operating expenses (0.27) exceeding non-operating income (0.11), as core operating gains absorbed the drag. Net income increased 23.3% YoY to 1.05, aided by a negative tax expense of -0.37, yielding an abnormally low effective tax rate of -54.3%. ROE was 6.2% via DuPont (Net Margin 7.0% × Asset Turnover 0.476 × Leverage 1.87x), a reasonable level but still below a mid-to-high single-digit target that would reflect stronger capital efficiency. Balance sheet quality is conservative: current ratio 194%, quick ratio 194%, D/E 0.87x, and interest coverage 26.65x, underpinned by cash of 11.41 and working capital of 8.40. Intangibles (11.90) including goodwill (6.71) are sizable versus total assets (31.69), implying impairment sensitivity if growth or margins falter. Retained earnings remain negative (-2.73) despite positive equity of 16.91, reflecting historical losses and reliance on capital surplus (19.14). Cash flow data were not disclosed this quarter, limiting earnings quality assessment and FCF visibility. Dividend information is unreported; thus, payout sustainability cannot be assessed. Forward-looking, continued operating margin improvement and normalization of the tax rate will be key for sustaining EPS growth; confirmation via operating cash flow is essential. Overall, the quarter shows improving core profitability with healthy liquidity, but quality of earnings needs validation once cash flows are disclosed, and the outsized tax benefit is unlikely to recur.

Profitability Analysis

ROE decomposition (DuPont): ROE 6.2% = Net Profit Margin 7.0% × Asset Turnover 0.476 × Financial Leverage 1.87x. The biggest driver this quarter appears to be margin improvement, evidenced by operating income growth (+37.8% YoY) far outpacing revenue growth (+2.9% YoY), implying operating margin expanded by roughly 115–120 bps YoY to ~4.6%. Business reason: better operating efficiency/SG&A discipline and favorable mix, as gross margin held strong at 63.2% while opex intensity eased. Net margin (7.0%) was further amplified by a one-off negative tax expense (-0.37), which boosted bottom-line profitability beyond core operations. Sustainability: operating margin gains can be partially sustainable if efficiency initiatives persist; the tax tailwind is likely non-recurring, so reported net margin should normalize higher than last year but lower than this quarter’s level. Watchpoints: without SG&A breakdown, we can’t confirm whether reductions came from personnel, rent, or marketing, but the spread between revenue growth and operating profit growth suggests positive operating leverage. Also, non-operating expenses (0.27) exceeded non-operating income (0.11), so financial/other costs remain a drag outside of operations. Concerning trends to monitor: if SG&A growth re-accelerates above revenue or if gross margin compresses, the current ROE uplift would fade given only moderate asset turnover (0.476) and leverage (1.87x).

Growth Assessment

Top-line growth was modest at +2.9% YoY to 15.10, while operating income surged +37.8% YoY to 0.69, indicating healthy operating leverage. Ordinary income jumped +154.5% YoY to 0.54, despite a negative non-operating gap (0.11 vs 0.27), implying core improvement offset non-operating headwinds. Net income rose +23.3% YoY to 1.05, but this includes a significant tax benefit (-0.37), which is unlikely to recur at the same magnitude. Revenue sustainability: given the small absolute growth, durability will depend on demand in the company’s core services (press release distribution and serviced offices), pricing power, and customer retention. Profit quality: the operating margin improvement is the main quality driver; however, the bottom line is flattered by tax. Outlook: near-term EPS may moderate as the tax rate normalizes; sustaining mid-single-digit operating margins would support continued ROE improvement. Growth constraints include high intangible base that requires ongoing monetization and the need to maintain utilization/occupancy and AR collections to avoid working capital drag.

Financial Health

Liquidity is strong: current ratio 194.4% and quick ratio 194.4%, with current assets (17.31) comfortably covering current liabilities (8.91). No warning for Current Ratio (<1.0) or D/E (>2.0): D/E is 0.87x, a moderate leverage profile for a service business. Interest coverage is robust at 26.65x, indicating ample buffer against interest expense (0.03). Cash and deposits of 11.41 provide flexibility; working capital stands at 8.40. Maturity profile: noncurrent liabilities are 5.88 (including long-term loans of 5.52), and short-term loans were unreported; based on disclosed items, there is no evident maturity mismatch as liquidity exceeds near-term obligations. Asset quality: intangibles (11.90) including goodwill (6.71) represent a significant portion of assets (31.69), raising impairment sensitivity in downturns. Off-balance sheet: none reported in the provided data. Capital structure is supported by large capital surplus (19.14) offsetting negative retained earnings (-2.73).

Cash Flow Quality

Operating cash flow, investing cash flow, and free cash flow were unreported; thus, OCF/Net Income and FCF coverage cannot be assessed. As a result, we cannot validate earnings conversion or the sustainability of capex plus any shareholder returns. Given improving operating profit, we would expect OCF to trend positively absent working capital deterioration; however, with accounts receivable at 3.84 and no inventories, collection discipline is the key variable. No signs of working capital manipulation are detectable from the limited data, but confirmation must await CF disclosure. Until then, we treat earnings quality as unverified.

Dividend Sustainability

Dividend data were unreported (DPS, total dividends, payout ratio, and FCF coverage all N/A). Given the negative retained earnings (-2.73) but overall positive equity (16.91) and adequate liquidity, the capacity to pay modest dividends may exist, yet policy intent and sustainability cannot be judged without OCF/FCF and board guidance. For prudence, we await cash flow disclosure and any management commentary on capital allocation before assessing payout stability.

Risk Assessment

Business Risks:

• Demand sensitivity for PR distribution/marketing services to SME budgets and macro cycles
• Serviced office (occupancy/price) volatility affecting utilization and margins
• High intangible and goodwill balance (11.90 and 6.71) raises impairment risk if growth underperforms
• Competitive pressure in digital PR and coworking markets impacting pricing power
• Customer concentration or churn risk (not disclosed but typical in niche B2B services)

Financial Risks:

• Tax normalization risk: current quarter benefited from a negative tax expense (-0.37); future periods likely see higher effective tax
• Moderate leverage (D/E 0.87x) with long-term loans (5.52) requires sustained cash generation for servicing
• Cash flow visibility is limited due to unreported OCF/FCF; potential working capital swings via accounts receivable (3.84)
• Non-operating expenses (0.27) exceeding non-operating income (0.11) could persist as a drag

Key Concerns:

• Earnings quality unverified in absence of cash flow statements
• Intangible-heavy balance sheet susceptible to impairment charges if performance slows
• Net income inflated by one-time tax benefit, masking underlying run-rate profitability

Investment Implications

Key Takeaways:

• Core profitability improved: operating income +37.8% YoY vs revenue +2.9% indicates operating leverage
• Operating margin expanded to ~4.6% (up roughly 115–120 bps YoY on an implied basis)
• Net income growth (+23.3% YoY) aided by non-recurring negative tax; expect normalization
• Balance sheet is liquid (current ratio 194%) with moderate leverage (D/E 0.87x) and strong interest coverage (26.65x)
• High intangibles/goodwill heighten impairment sensitivity; sustaining growth is critical

Metrics to Watch:

• Operating margin trajectory and SG&A intensity
• Effective tax rate normalization path
• Operating cash flow and OCF/NI once disclosed
• Accounts receivable days and cash conversion cycle
• Goodwill/intangible impairment indicators and segment profitability
• Debt amortization schedule and interest costs

Relative Positioning: Within small-cap Japanese B2B service peers, the company shows improving operating efficiency and solid liquidity, though cash flow transparency is currently lacking and an elevated intangible asset base increases downside sensitivity compared to asset-light peers.

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