Ubicom Holdings,Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.98B
• Operating Income: ¥665M
• Net Income: ¥568M
• EPS: ¥46.77

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

Ubicom Holdings delivered a solid FY2026 Q2 with margin-led earnings despite a top-line decline. Revenue fell 5.2% YoY to 29.75, but operating income rose 12.6% YoY to 6.65 and net income increased 27.9% YoY to 5.66, indicating strong cost discipline and mix improvement. Gross profit was 12.43, translating to a gross margin of 41.8%. Operating margin reached roughly 22.4%, up sharply from an estimated 18.8% a year ago, implying about 353 bps of expansion. Net margin improved to 19.0% from an estimated 14.1% last year, a roughly 490 bps expansion, aided by tight SG&A and low non-operating drag. Ordinary income was 6.76 (+7.5% YoY), with non-operating items netting a modest positive contribution (0.27 income vs 0.16 expenses). The effective tax rate was 21.8%, supportive of bottom-line growth. Cash generation was healthy: operating cash flow of 6.52 exceeded net income (OCF/NI 1.15x), supporting earnings quality. The balance sheet is very strong with net cash: cash and deposits of 49.42 against short-term loans of 1.03 and current liabilities of 17.34. Liquidity is ample (current ratio 375%), and interest coverage is exceptionally high (164x), limiting solvency risk. Comprehensive income (4.95) trailed net income due to negative OCI, likely from market movements on investment securities. While SG&A detail was unreported, the absolute level (5.77) versus sales points to good operating leverage. Revenue contraction remains the key watch item into H2; sustaining the improved margin profile will depend on mix and utilization. With an indicated payout ratio at 86.6%, shareholder returns appear generous, though above typical sustainability benchmarks and should be balanced against reinvestment needs. Overall, the quarter shows improving profitability, robust cash conversion, and a fortress balance sheet, with the main near-term question being reacceleration of the top line.

Profitability Analysis

ROE decomposes to Net Profit Margin (19.0%) × Asset Turnover (0.386) × Financial Leverage (1.39x) = ~10.2%. The biggest driver of ROE is the sharp improvement in profitability (margin expansion), not leverage or asset turnover. Operating margin rose to ~22.4% from ~18.8% last year (≈+353 bps), and net margin rose to ~19.0% from ~14.1% (≈+490 bps), while leverage remains modest at 1.39x and asset turnover at 0.386 suggests a service-heavy, people-intensive model with moderate asset intensity. Business drivers for margin gains likely include favorable revenue mix, improved delivery efficiency/utilization, and SG&A control (SG&A 5.77 vs lower sales still enabled operating profit growth). The sustainability of margin gains will hinge on maintaining pricing, utilization, and mix; some improvement appears structural (cost discipline), but part could be cyclical or mix-related. Watch for any sign of SG&A growth outpacing revenue; for this quarter, operating income growth (+12.6%) outpaced revenue (-5.2%), indicating positive operating leverage rather than cost slippage.

Growth Assessment

Revenue declined 5.2% YoY to 29.75, signaling near-term softness; however, profit growth was strong with operating income +12.6% and net income +27.9% YoY, driven by margin expansion. Non-operating contributions were small and stable, with interest income of 0.06 and low interest expense (0.04), implying earnings growth was core-driven rather than financial. The gross margin at 41.8% supports the view of enhanced mix/efficiency. With OCF exceeding NI and minimal capex (0.10), core cash earnings underpin profit quality. Outlook hinges on restoring top-line momentum in H2 while protecting the improved margin profile; if revenue stabilizes, current cost structure suggests further operating leverage. Risks to growth include potential demand variability in key verticals and wage/FX pressures in delivery locations, but the cash buffer provides flexibility for selective investment.

Financial Health

Liquidity is very strong: current assets 65.07 vs current liabilities 17.34 yields a current ratio of 375%, and quick ratio is likewise 375% given minimal inventories reported. No warning on current ratio (<1.0) or D/E (>2.0); D/E stands at 0.39x with substantial net cash (cash 49.42 vs short-term loans 1.03). Interest coverage is robust at ~164x, indicating low refinancing or interest-rate sensitivity. Maturity mismatch risk is low: cash and receivables (63.23) comfortably exceed all current liabilities (17.34). Noncurrent liabilities are modest at 4.12. Off-balance sheet obligations were not disclosed; no specific commitments were reported in the data provided.

Cash Flow Quality

OCF/Net Income is 1.15x (>1.0), indicating solid earnings cash conversion. Using a proxy FCF measure (OCF minus reported capex), FCF is approximately 6.42, suggesting ample capacity to fund dividends and small-scale investments; note that full investing CF detail is unreported, so this proxy may understate other investment outflows. Working capital appears well-managed: receivables of 13.81 against H1 revenue imply DSO around ~83 days, reasonable for project/service billing though worth monitoring if sales decelerate. No signs of aggressive working-capital management are evident (no spike in payables reported; accounts payable at 0.81 is small relative to cost base). Overall cash flow quality is good, with minimal non-operating reliance.

Dividend Sustainability

The calculated payout ratio of 86.6% is high versus a <60% sustainability benchmark, warranting monitoring if profit growth moderates. While dividend details (DPS, total dividends paid) are unreported, cash generation (OCF 6.52 and proxy FCF ~6.42) suggests capacity to fund current payouts in the near term given the strong net-cash position. However, sustaining an ~87% payout through cycles could constrain reinvestment and M&A flexibility if revenue softness persists. Policy signals are not provided, but a balanced approach aligning payout with earnings visibility and growth opportunities would be prudent.

Risk Assessment

Business Risks:

• Top-line softness (-5.2% YoY) raises risk of underutilization and pricing pressure if demand weakens further.
• Delivery cost inflation and talent retention risks in offshore/nearshore operations could erode margins.
• Customer concentration risk typical of small-cap IT/services could amplify volatility (not disclosed but common).
• Execution risk in maintaining utilization and project delivery quality to sustain high margins.

Financial Risks:

• High payout ratio (86.6%) may pressure cash if earnings dip or if investment needs increase.
• Market valuation swings on investment securities (3.11) can impact OCI and equity.
• FX fluctuations affecting overseas delivery costs/revenues could introduce earnings volatility.

Key Concerns:

• Sustainability of margin expansion amid declining sales.
• Potential normalization of the effective tax rate from 21.8% could trim net margins.
• Limited disclosure on SG&A breakdown, R&D, and investing cash flows reduces visibility into structural cost drivers and capital allocation.

Investment Implications

Key Takeaways:

• Earnings beat revenue trends: operating income +12.6% and net income +27.9% YoY despite a 5.2% sales decline.
• Material margin expansion: operating margin up ~353 bps; net margin up ~490 bps YoY.
• Quality of earnings is solid with OCF/NI at 1.15x and minimal interest burden.
• Balance sheet is fortress-like with significant net cash and a 375% current ratio.
• Dividend payout appears high (~86.6%), sustainable near term but a watch point if growth slows.

Metrics to Watch:

• H2 revenue trajectory and order intake/backlog (to confirm top-line stabilization).
• Gross and operating margins by segment (to gauge sustainability of mix and efficiency gains).
• SG&A ratio and hiring/wage trends (to assess operating leverage durability).
• OCF/NI and DSO (working-capital discipline amid changing demand).
• OCI movements tied to investment securities and effective tax rate changes.
• Capital allocation disclosures (capex, M&A) versus dividend policy.

Relative Positioning: Within Japan small-cap IT/services peers, Ubicom stands out for high margins and a strong net-cash balance sheet, but lags on near-term revenue growth; maintaining elevated profitability while reigniting sales will be key to sustaining its advantage.

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