SOCIALWIRE CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.51B
• Operating Income: ¥69M
• Net Income: ¥85M
• EPS: ¥9.02

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

Socialwire Co., Ltd. (3929) reported FY2026 Q2 consolidated results under JGAAP with modest top-line growth and notable margin improvement at the operating level. Revenue was ¥1,510 million, up 2.9% YoY, while operating income rose 37.8% to ¥69 million, evidencing operating leverage despite the modest sales growth. Gross profit of ¥925 million implies a high gross margin of 61.3%, consistent with a service-centric model with limited cost of goods. Operating margin expanded to approximately 4.6%, still modest but improving. Ordinary income (¥54 million) trailed operating income, reflecting non-operating costs including ¥13.9 million of interest expense. Net income of ¥105 million grew 23.3% YoY and exceeded ordinary income, implying the presence of non-operating/extraordinary gains and/or tax effects (effective tax near zero) during the period. DuPont metrics show ROE of 6.21% (net margin 6.95%, asset turnover 0.476x, leverage 1.87x), indicating acceptable returns largely supported by healthy margins and moderate leverage. The balance sheet appears conservative: total assets ¥3,169 million and total liabilities ¥946 million imply an equity ratio around 53% (equity ¥1,691 million), notwithstanding an unreported equity ratio field. Liquidity is strong, with a current ratio of 248% and sizable working capital of ¥1,159 million. Interest coverage at roughly 5.0x suggests manageable financial risk at current earnings levels. Cash flow statements, depreciation, cash balance, and dividends were not disclosed (zeros indicate unreported), limiting assessments of earnings quality and capital intensity. The lack of reported depreciation renders EBITDA and EBITDA margin figures not meaningful, though operating income remains a valid profitability anchor. With no dividend data disclosed, payout policy and cash returns cannot be confirmed; however, earnings and liquidity suggest theoretical capacity for distributions subject to cash flow. Overall, the company shows improving profitability on stable revenue, a solid capital structure, and adequate debt service capacity, but visibility into cash generation and non-recurring items is limited in this dataset. Key watch points include sustainability of the operating margin gains, the drivers behind net income exceeding ordinary income, and the trajectory of financing costs. Given the limited disclosure of cash flow and certain balance sheet details, conclusions should be treated as preliminary and contingent on the full quarterly report and presentation materials.

Profitability Analysis

ROE_decomposition: Reported/Calculated ROE 6.21% = Net Profit Margin 6.95% × Asset Turnover 0.476 × Financial Leverage 1.87. Net margin benefited from extraordinary/non-operating items and a near-zero effective tax rate. Asset turnover is modest for a service provider, reflecting balance sheet size relative to sales. Leverage (Assets/Equity) at ~1.87x is moderate and provides some ROE uplift without excessive balance-sheet risk. margin_quality: Gross margin at 61.3% is strong and consistent with a low-COGS, service-led model. Operating margin of ~4.6% improved meaningfully YoY (operating income +37.8% vs revenue +2.9%), pointing to cost discipline and operating efficiency gains. Ordinary margin (~3.6%) was pressured by interest and other non-operating factors. Net margin (6.95%) exceeded ordinary margin, indicating non-recurring gains and/or favorable tax effects; sustainability of this uplift is uncertain. operating_leverage: Significant operating leverage is evident: a 2.9% revenue increase translated into a 37.8% rise in operating income, implying fixed-cost absorption and/or SG&A efficiencies. Further scale could support incremental margin expansion, but sensitivity to revenue growth reversals should be considered.

Growth Assessment

revenue_sustainability: Revenue growth of 2.9% YoY is modest and suggests a stable core business without strong acceleration. Sustainability appears reasonable given the high gross margin profile, but the dataset lacks segment detail to assess mix or pricing effects. profit_quality: Operating profit growth outpaced sales, implying efficiency gains, yet net income exceeded ordinary income and the effective tax rate was near zero, pointing to non-recurring or non-operating items supporting bottom-line growth. Without cash flow data, underlying earnings quality cannot be validated. outlook: If operating discipline persists, incremental revenue could continue to lift operating margins. However, normalization of extraordinary items and taxes could compress net margin. Monitoring sequential trends, cost structure rigidity, and interest expense trajectory will be key.

Financial Health

liquidity: Current assets ¥1,941 million vs current liabilities ¥782 million yields a current ratio of ~248% and quick ratio of ~248% (no inventories reported). Working capital stands at ¥1,159 million, indicating strong short-term liquidity. solvency: Total liabilities ¥946 million vs equity ¥1,691 million imply a debt-to-equity (liabilities/equity) of ~0.56x and an equity ratio near 53% (computed), indicating a conservative capital structure. Interest coverage around 5.0x (operating income/interest expense) is adequate. capital_structure: Leverage is moderate (assets/equity ~1.87x). The firm appears to rely primarily on equity with manageable financial obligations; however, the absence of detailed debt maturity profiles and cash balances limits a full solvency assessment.

Cash Flow Quality

earnings_quality: Operating cash flow is unreported; OCF/Net Income ratio shown as 0.00 reflects missing data, not cash generation weakness. Net income exceeded ordinary income, suggesting potential one-off gains and low taxes, which may not recur. FCF_analysis: Investing and financing cash flows are also unreported, preventing calculation of free cash flow or assessment of reinvestment needs. Depreciation was unreported, limiting visibility into capital intensity and the non-cash component of expenses. working_capital: High liquidity and working capital are positives, but without OCF and balance sheet detail (e.g., receivables/payables turnover), we cannot evaluate working capital efficiency or its contribution to cash generation.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio were not disclosed (zeros indicate unreported). With EPS at ¥9.02 for the period, capacity for distributions depends on cash generation and full-year results. FCF_coverage: Free cash flow data are unavailable; therefore, coverage of any hypothetical dividends cannot be assessed from this dataset. policy_outlook: In the absence of disclosed dividend policy or historical DPS, we cannot infer policy direction. Given solid liquidity and moderate leverage, the balance sheet could accommodate distributions, subject to sustaining operating cash flow and avoiding one-off dependent earnings.

Risk Assessment

Business Risks:

• Modest top-line growth limits operating leverage benefits if cost discipline weakens
• Dependence on service revenues with potential pricing pressure and client churn risk
• Potential exposure to macro cycles that affect marketing/communication spending and occupancy-related services
• Execution risk in cost control and SG&A efficiency to sustain operating margin gains

Financial Risks:

• Interest expense meaningfully impacts ordinary income; coverage ~5x could compress if rates rise or earnings soften
• Net income reliance on non-operating gains and low taxes may not be repeatable
• Limited visibility into cash flows and cash balances constrains assessment of liquidity under stress
• Potential refinancing and maturity profile unknown due to data gaps

Key Concerns:

• Net income exceeds ordinary income, indicating non-recurring items or tax effects
• Cash flow statements and depreciation are unreported, hindering earnings quality assessment
• Equity ratio reported as 0.0% in the data table conflicts with computed ~53%; reliance on computed figures is necessary
• Low revenue growth rate raises questions about medium-term growth drivers

Investment Implications

Key Takeaways:

• Operating leverage evident: operating income +37.8% on revenue +2.9%
• High gross margin (61.3%) supports profitability potential
• Ordinary income diluted by interest costs; interest coverage ~5x
• Net income boosted by non-operating/tax factors; sustainability uncertain
• Strong liquidity and moderate leverage provide balance-sheet resilience
• Material disclosure gaps (cash flows, depreciation, DPS) limit conviction on cash conversion

Metrics to Watch:

• Sequential operating margin and SG&A ratio
• Ordinary income versus net income gap and recurring versus non-recurring items
• Interest expense trend and coverage ratio
• Operating cash flow and free cash flow once disclosed
• Receivables/payables days and working capital turns
• Equity ratio (computed) and any changes in leverage
• Revenue growth acceleration or client acquisition/retention indicators

Relative Positioning: Within service-oriented TSE small caps, the company shows above-average gross margins, improving operating efficiency, and a conservative balance sheet, but trails peers with faster top-line growth and clearer cash flow disclosure; visibility into recurring earnings quality is comparatively lower until cash flows and one-off items are clarified.

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