Synchro Food Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.85B
• Operating Income: ¥362M
• Net Income: ¥394M
• EPS: ¥7.46

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

For FY2026 Q2, Synchro Food (39630) posted revenue of ¥1,852 million, declining 5.8% YoY, with operating income of ¥362 million down a steeper 38.2% YoY, indicating notable negative operating leverage. Gross profit of ¥1,649.9 million implies an exceptionally high gross margin of 89.1%, consistent with an asset-light, platform/marketplace-driven model. Despite the resilient gross margin, operating margin compressed to 19.5% as fixed and semi-fixed costs did not adjust proportionally to the lower top line. Ordinary income was ¥319 million (17.2% margin), below operating income, suggesting a net non-operating expense drag, including interest expense of ¥3.9 million and likely other non-operating items. Net income fell 46.9% YoY to ¥209 million, with a net margin of 11.29%, evidencing pressure further down the P&L. DuPont analysis shows ROE of 4.44% (net margin 11.29%, asset turnover 0.158x, financial leverage 2.48x), which is subdued for an internet/services business and reflects low asset turnover and margin compression. EBITDA was ¥371.3 million (20.0% margin) with minimal D&A of ¥9.3 million, reinforcing the asset-light nature and limited capital intensity. Cash generation was strong relative to earnings: operating cash flow (OCF) of ¥412.7 million implies OCF/Net Income of 1.97x, supportive of earnings quality. The balance sheet is conservative with total assets of ¥11,695 million, liabilities of ¥805 million, and current assets of ¥5,683 million; liquidity is ample (current ratio 735.6%) and leverage modest (debt-to-equity 0.17x). Working capital stands at ¥4,910.6 million, providing cushion for operating needs and potential investment. Interest coverage is robust at 93.9x, indicating minimal refinancing or solvency stress under current conditions. Reported effective tax rate appears at 0.0% in the calculated metrics, but tax expense of ¥192.1 million is disclosed; therefore, the 0.0% figure should be treated as a data artifact. Dividend per share is reported at ¥0.00 with a payout ratio of 0.0%, suggesting retention of earnings for reinvestment or prudence amid earnings pressure. Several items (e.g., cash balance, investing cash flows, equity ratio) are shown as zero or missing, which under this dataset signals non-disclosure rather than true zero; conclusions rely on available items only. Overall, the company remains financially sound and cash-generative, but faces near-term profitability headwinds due to revenue contraction and operating cost stickiness.

Profitability Analysis

ROE is 4.44%, decomposed into net margin of 11.29%, asset turnover of 0.158x, and financial leverage of 2.48x, indicating that low asset turnover is the primary drag, with additional pressure from reduced margins. Operating margin of 19.5% (¥362m/¥1,852m) materially contracted versus revenue decline, underscoring negative operating leverage as fixed SG&A did not flex down with sales. Gross margin is very high at 89.1%, consistent with a digital platform/media model; thus, cost of sales dynamics are not the issue—rather, opex intensity is. EBITDA margin of 20.0% aligns with operating margin levels, and minimal D&A (¥9.3m) suggests limited depreciation headwinds. Ordinary margin of 17.2% (¥319m/¥1,852m) is slightly below operating margin due to net non-operating expenses (including ¥3.9m interest). Net margin at 11.29% remains healthy in absolute terms but is down YoY alongside net income decline, implying either higher opex ratio or softer monetization per user/customer. Operating leverage is currently unfavorable; a 5.8% revenue decrease translated into a 38.2% operating income drop, implying significant fixed cost absorption. With interest coverage at 93.9x, financing costs are not a profitability constraint; the focus is on restoring revenue growth and optimizing SG&A.

Growth Assessment

Revenue declined 5.8% YoY to ¥1,852 million, indicating softness in demand or monetization in core services during the period. The magnitude of the operating income decline (−38.2% YoY) relative to revenue indicates that the growth algorithm has turned adverse due to cost rigidity. Given the asset-light model and minimal D&A, growth historically likely depends on user base expansion, ARPU improvements, and new service launches; the current revenue gap suggests either macro weakness in end-markets (e.g., food service) or competitive pressure. Net income declined 46.9% YoY to ¥209 million, reinforcing that profit growth is more sensitive than revenue growth under current cost structures. Cash generation remains strong (OCF/NI ~2x), which supports reinvestment capacity to reignite growth if attractive opportunities exist. Outlook hinges on reacceleration in top-line through product, pricing, or segment expansion; in the near term, margin recovery requires tighter SG&A control if revenue headwinds persist. Sustainability of revenue will depend on customer retention in restaurant/food service segments, advertising demand, recruiting volumes, and seasonality; absent disclosed segment data, we assume broad-based pressure. With ordinary income below operating income, non-operating items are a minor drag but not a key growth determinant.

Financial Health

Liquidity is very strong: current assets of ¥5,683.2 million versus current liabilities of ¥772.6 million yields a current ratio of 735.6% and a quick ratio of 733.7%, providing ample short-term coverage. Working capital is ¥4,910.6 million, offering significant operating flexibility. Total liabilities are only ¥804.6 million against total assets of ¥11,695 million, indicating low balance sheet risk; debt-to-equity is 0.17x, consistent with modest leverage. Interest expense is small at ¥3.9 million, and the interest coverage ratio of 93.9x points to minimal solvency risk. The reported equity ratio is shown as 0.0% in the dataset but should be treated as undisclosed; using reported totals, equity is ¥4,708 million, implying a healthy equity base. Overall, the capital structure is conservative, with substantial headroom for investment or shock absorption.

Cash Flow Quality

Earnings quality appears solid: OCF of ¥412.7 million is 1.97x net income (¥209 million), suggesting that accruals are not inflating earnings. Low D&A (¥9.3 million) indicates that EBITDA is close to operating cash earnings; there is limited risk of large capital reinvestment needs based on current disclosures. Free cash flow is shown as ¥0 in the dataset, but investing cash flows are undisclosed (0 indicates not reported), so FCF cannot be reliably determined; however, given positive OCF, underlying pre-investment FCF was likely positive. Working capital appears to be a source or neutral in aggregate given the OCF strength relative to net income, but itemized movements are not disclosed; the large working capital base provides flexibility to navigate demand fluctuations. Financing cash flow was an outflow of ¥185.9 million, potentially reflecting dividends, share repurchases, or debt changes; specifics are not available. Cash and equivalents are not disclosed in the dataset (listed as 0), so period-end liquidity must be inferred from current assets.

Dividend Sustainability

Annual DPS is reported at ¥0.00 with a payout ratio of 0.0%, implying no cash dividends recognized for the period. With net income of ¥209 million and OCF of ¥412.7 million, capacity exists to fund distributions in principle, but management appears to prioritize retention or has not declared dividends in this timeframe. FCF coverage cannot be assessed because investing cash flows and capex are undisclosed; the reported FCF of ¥0 reflects data limitations rather than economic cash generation. Given the conservative balance sheet and strong liquidity, sustainability of any future dividend would hinge more on policy and growth investment needs than on solvency. Absent a stated policy, we assume a flexible stance aligned with growth reinvestment and maintaining high cash buffers amid earnings volatility.

Risk Assessment

Business Risks:

• Demand softness in core restaurant/food service and recruitment/advertising markets impacting revenue.
• High operating leverage from fixed SG&A leading to disproportionate profit swings on small revenue changes.
• Competitive pressure from larger platforms and SEO/algorithm changes impacting traffic and monetization.
• Customer concentration or cohort churn risk in SME restaurant clientele.
• Macroeconomic sensitivity (consumer spending, labor market tightness, food service openings/closures).
• Regulatory and data privacy compliance related to digital platform operations.
• Product innovation risk if new services fail to scale or cannibalize existing revenue.

Financial Risks:

• Margin compression due to cost rigidity amid revenue declines.
• Low asset turnover (0.158x) constraining ROE despite low leverage.
• Potential variability in non-operating items affecting ordinary income.
• Limited visibility on capex/investing needs due to undisclosed investing cash flows.
• Potential working capital swings affecting OCF despite strong current ratios.

Key Concerns:

• Revenue decline (−5.8% YoY) with outsized drop in operating income (−38.2% YoY).
• Subdued ROE at 4.44% versus typical expectations for asset-light platforms.
• Dependence on restoring top-line growth to recover operating margins.

Investment Implications

Key Takeaways:

• Top line decreased 5.8% YoY to ¥1,852m, pressuring profitability.
• Operating margin fell to 19.5%, with operating income down 38.2% YoY, evidencing negative operating leverage.
• Gross margin remains exceptionally high at 89.1%, consistent with an asset-light model.
• ROE is modest at 4.44% due to low asset turnover (0.158x) and margin compression.
• OCF was strong at ¥412.7m (OCF/NI 1.97x), supporting earnings quality.
• Balance sheet is conservative with low leverage (D/E 0.17x) and ample liquidity (current ratio 735.6%).
• Dividend is not paid in the period (DPS ¥0), with policy and FCF not fully assessable due to undisclosed investing cash flows.

Metrics to Watch:

• Quarterly revenue growth and ARPU/monetization metrics by service line (if disclosed).
• SG&A ratio and opex elasticity to revenue changes.
• EBITDA and operating margins for signs of operating leverage normalization.
• OCF conversion and working capital movements (receivables, payables).
• Investing cash flows and capex/new product investment levels.
• Customer acquisition/retention KPIs and traffic/SEO dependencies.
• Non-operating gains/losses impacting ordinary income.

Relative Positioning: Asset-light, high-gross-margin digital platform serving the food service ecosystem, with strong liquidity and low leverage but currently lagging on growth and ROE versus typical internet/service 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