bBreak Systems Company,Limited FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥323M
• Operating Income: ¥7M
• Net Income: ¥8M
• EPS: ¥5.17

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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

Beebright Systems (TSE: 3986, standalone JGAAP) reported FY2026 Q1 revenue of ¥323.0m, down 5.2% YoY, with operating income of ¥7.0m (-58.9% YoY) and net income of ¥8.0m (-43.2% YoY). Gross profit was ¥153.8m, implying a robust gross margin of 47.6%, but operating margin compressed to 2.2% as SG&A absorbed most of the gross profit. Ordinary income of ¥10.0m exceeded operating income by roughly ¥3.0m, indicating non-operating gains (likely interest income or other income) supported bottom line. Net profit margin was 2.48%, consistent with the DuPont inputs provided. Balance sheet strength remains a highlight: total assets were ¥2,281.0m, equity ¥1,695.0m, and liabilities ¥577.8m, implying an equity ratio of roughly 74.3% (despite the disclosed 0.0% field) and a conservative debt-to-equity of ~0.34x (using total liabilities as a proxy for debt). Liquidity is ample with current assets of ¥2,127.9m versus current liabilities of ¥368.5m, yielding a current ratio of ~5.8x and working capital of ¥1,759.4m. DuPont decomposition shows low quarterly ROE of 0.47% driven by thin margins (2.48%), low asset turnover (0.142x), and modest leverage (1.35x). The sharp decline in operating income versus a modest revenue decline suggests elevated operating leverage and/or project mix/price pressure in the quarter. Tax expense was reported at ¥3.823m; against ordinary income of ¥10.0m, the implied effective tax rate is around the high-30% range, although the provided effective tax ratio field shows 0.0% and should be disregarded. Cash flow data (OCF/ICF/FCF) and cash balance were not disclosed (zeros indicate unreported), limiting cash conversion and FCF assessment. Depreciation and interest expense were also undislosed, so EBITDA and interest coverage metrics are not meaningful here. Dividend fields indicate DPS and payout at 0; we treat this as undisclosed policy rather than confirmed zero distribution. Overall, the company maintains a very strong balance sheet and liquidity, but earnings volatility and margin compression in Q1 warrant close monitoring. Given typical seasonality in SI/service businesses, Q1 can be softer; sustained gross margins and recovery in operating leverage will be key for the rest of FY2026. Data gaps in cash flow and share information constrain precision in per-share and cash-based analyses, and conclusions are therefore based on the available non-zero items.

Profitability Analysis

DuPont ROE = Net margin (2.48%) × Asset turnover (0.142x) × Financial leverage (1.35x) ≈ 0.47% for the quarter. Gross margin was strong at 47.6%, indicating healthy pricing/mix at the project level, but the operating margin compressed to ~2.2% (¥7.0m / ¥323.0m), highlighting elevated SG&A or lower utilization. Ordinary margin was ~3.1% (¥10.0m / ¥323.0m), aided by non-operating gains of roughly ¥3.0m. The steep drop in operating income (-58.9% YoY) against a modest revenue decline (-5.2% YoY) suggests high operating leverage and potential fixed cost pressure (personnel, subcontracting minima, or R&D/marketing). Net margin at 2.48% remains thin for a services model and leaves limited buffer for adverse mix shifts. Asset turnover at 0.142x (quarterly) reflects a large cash/working capital base relative to quarterly revenue, typical for cash-rich, low-leverage SI firms. Low financial leverage (assets/equity ~1.35x) provides resilience but caps ROE in the absence of higher margins or turnover. Non-operating income improved ordinary income by c. ¥3.0m, but reliance on non-core items underscores the need to restore operating profitability. Depreciation and EBITDA could not be assessed due to nondisclosure; margin quality comments therefore focus on gross-to-operating spread rather than EBITDA dynamics.

Growth Assessment

Revenue declined 5.2% YoY to ¥323.0m, indicating a softer demand or project timing in Q1. The resilience of gross margin (47.6%) implies core delivery economics remain intact, but SG&A absorption curtailed operating profit, hinting at cost growth ahead of revenue or underutilization. The mismatch between revenue (-5.2%) and operating income (-58.9%) points to heightened operating leverage; incremental revenue recovery would likely drive outsized operating profit if fixed costs are well managed. Ordinary income benefited from non-operating items (~¥3.0m), which is not a sustainable growth driver. Given typical seasonality in SI/services (Q1 softness), subsequent quarters will be important to assess run-rate revenue and utilization recovery. Without cash flow disclosure, we cannot validate cash conversion of growth or working capital investment needs. Medium-term growth will depend on backlog, win rates in higher-margin projects, and headcount productivity; none of these are disclosed here. Near-term outlook: cautious, as the quarter shows pressure on operating profit despite healthy gross profitability; operating discipline and demand normalization will be needed to re-expand margins.

Financial Health

Liquidity is very strong: current assets of ¥2,127.9m versus current liabilities of ¥368.5m imply a current ratio of ~5.8x and quick ratio likely similar (inventories undisclosed). Working capital stands at ¥1,759.4m, providing ample buffer for project execution and receivables cycles. Solvency is solid with total liabilities of ¥577.8m against equity of ¥1,695.0m, implying a liabilities-to-equity of ~0.34x; equity ratio is approximately 74.3% (computed), far from the 0.0% shown (undisclosed). Financial leverage (assets/equity) is ~1.35x, conservative. Interest expense is undisclosed, but low leverage and strong liquidity suggest minimal refinancing risk. Cash and equivalents were not disclosed, preventing net cash assessment, but the size of current assets relative to liabilities points to a likely net cash position. Overall, the balance sheet provides significant resilience to earnings volatility.

Cash Flow Quality

Operating, investing, and financing cash flows are undisclosed (zeros), so we cannot compute OCF/NI, FCF, or cash conversion cycle metrics. The reported OCF/NI ratio of 0.00 and FCF of 0 should be treated as not available rather than actual zeros. With net income of ¥8.0m and a strong working capital base, cash generation would normally be evaluated via receivables and accrued costs movements; these details are absent. Depreciation was undisclosed, limiting EBITDA-to-cash bridge analysis. Given the services profile and high current assets, revenue recognition timing and receivables collection are key to cash quality; absent data, we cannot confirm. We therefore withhold judgment on earnings quality from a cash perspective and flag this as a material data gap.

Dividend Sustainability

Dividend per share and payout ratio are shown as 0.00/0.0%, which we interpret as undisclosed rather than confirmed zeros. With net income of ¥8.0m and a strong equity base of ¥1,695.0m, the company would have capacity to consider dividends, but sustainability depends on recurring free cash flow, which is not disclosed. FCF coverage metrics cannot be evaluated without OCF and capex. Policy outlook is therefore indeterminate from this dataset; historically, small-cap SI firms prioritize reinvestment and stability over high payouts, but no company-specific guidance is provided here.

Risk Assessment

Business Risks:

• Demand variability and project timing in SI/services leading to quarterly revenue swings
• High operating leverage causing outsized profit sensitivity to small revenue changes
• Potential pricing pressure or unfavorable project mix compressing operating margins
• Dependence on non-operating gains to support ordinary income in weak quarters
• Talent retention and utilization risk impacting delivery capacity and margins

Financial Risks:

• Limited visibility on cash flows due to nondisclosure of OCF/ICF/FCF
• Working capital concentration in receivables could create collection risk (not disclosed)
• Tax rate volatility around the high-30% range affecting net margins
• Potential hidden lease or off-balance obligations not visible in the dataset

Key Concerns:

• Operating income decline of 58.9% YoY despite only a 5.2% revenue decline
• Thin net margin (2.48%) and low quarterly ROE (0.47%)
• Absence of cash flow and cash balance disclosures limits assessment of earnings quality
• Reliance on non-operating income (~¥3.0m) to lift ordinary income above operating income

Investment Implications

Key Takeaways:

• Top-line softness (-5.2% YoY) with significant operating margin compression to ~2.2%
• Gross margin remains strong at 47.6%, indicating intact unit economics at delivery level
• Very strong balance sheet with an estimated ~74% equity ratio and ~5.8x current ratio
• Low leverage (liabilities/equity ~0.34x) but correspondingly low ROE (0.47% for the quarter)
• Material data gaps in cash flow and share information constrain valuation and FCF analysis

Metrics to Watch:

• Operating margin recovery and SG&A trajectory in Q2–Q4
• Order backlog, utilization, and headcount productivity (if disclosed)
• Receivables days and OCF to net income conversion once cash flows are reported
• Mix of fixed-price versus time-and-materials projects affecting margin stability
• Non-operating income components to gauge sustainability of ordinary income

Relative Positioning: Within Japan’s small-cap SI cohort, the company exhibits stronger-than-average liquidity and conservative leverage, but weaker short-term profitability and ROE due to operating leverage and margin compression in the quarter.

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