Geolocation Technology Inc. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥180M
• Operating Income: ¥3M
• Net Income: ¥-0
• Earnings per Unit (EPU): ¥-0.52

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Unit Information

Distribution 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

Verdict: A mixed FY2026 Q1 with resilient top-line growth but a sharp profitability squeeze, resulting in a materially weaker core earnings profile. Revenue grew 9.2% YoY to 1.80, indicating continued demand for the company’s location-related solutions. Gross profit was reported at 1.05, implying a gross margin of 58.3%, which is healthy for a software/data-oriented business. SG&A rose to 0.92, equating to a high SG&A ratio of 51.1%, leaving limited room for operating leverage this quarter. Operating income fell to 0.03 (−75.6% YoY), translating to an operating margin of 1.7%. Based on YoY deltas, prior-year operating margin is estimated around 7.5%, implying ~580 bps of margin compression YoY. Ordinary income was also 0.03 (−70.8% YoY), while profit before tax was higher at 0.13, suggesting non-recurring/extraordinary gains or unreported non-operating items bridged the gap. Income tax of 0.04 implies an effective tax rate of 32.4% on reported PBT. Net income was unreported (with a −27.0% YoY indicator), and EPS prints were conflicting (basic −0.52 JPY; diluted 5.68 JPY), pointing to special items and/or share-based effects; earnings quality cannot be confirmed. The balance sheet remains very strong: cash and deposits of 6.21 and current assets of 7.38 comfortably cover current liabilities of 1.69. Current ratio stands at 437.5% and D/E at 0.29x, indicating low solvency risk. Asset turnover was 0.229 and financial leverage 1.34x; with net margin unreported, ROE is not calculable, but reported ROIC was −5.6%, flagging sub-par capital efficiency. Operating cash flow was unreported, so we cannot reconcile accrual earnings with cash generation this quarter. Overall, Q1 shows solid revenue momentum but significant margin pressure and reliance on non-core items to lift PBT, raising questions on the durability of earnings. Going forward, restoring operating margin via gross margin stability and tighter SG&A discipline will be key, with a focus on converting revenue growth into cash and ROIC improvements.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin × Asset Turnover × Financial Leverage. Net Profit Margin is not calculable due to unreported net income; Asset Turnover is 0.229 (Revenue 1.80 / Assets 7.86); Financial Leverage is 1.34x (Assets 7.86 / Equity 5.85). The largest change driver this quarter is the compression in operating profitability, evidenced by operating income −75.6% YoY and operating margin down to 1.7% from an estimated ~7.5% in the prior year (≈−580 bps). Business drivers likely include higher SG&A (51.1% of sales) outpacing revenue growth and potential gross margin softness versus internal expectations despite the reported 58.3% level. Given revenue growth of 9.2% YoY, the negative operating leverage suggests cost creep (personnel, marketing, development, or cloud infrastructure) or timing of expenses. Sustainability: without SG&A moderation or higher-margin revenue mix, the current margin is not sustainable for adequate returns; improvement would require cost control and/or pricing/mix gains. Concerning trends: SG&A growth appears to have exceeded revenue growth (implied by margin compression), and core profit (operating/ordinary) weakened despite top-line expansion.

Growth Assessment

Top-line grew 9.2% YoY to 1.80, indicating healthy demand. However, core profit growth was negative: operating income −75.6% YoY and ordinary income −70.8% YoY, highlighting deteriorating operating leverage. Gross margin at 58.3% is acceptable, but the SG&A ratio at 51.1% constrained margin conversion. PBT at 0.13 vs ordinary income at 0.03 suggests non-recurring items supported bottom-line before tax; this is not a sustainable growth driver. Absent disclosed segment data, we cannot attribute growth to specific products/services. Outlook depends on cost discipline (headcount, marketing) and maintaining pricing and mix in data/location services. With asset turnover at 0.229 and ROIC at −5.6%, reinvestment efficiency is currently weak; management likely needs to prioritize higher-ROIC initiatives.

Financial Health

Liquidity is strong: current ratio 437.5% and quick ratio 437.5% driven by cash of 6.21 against current liabilities of 1.69. No warning on current ratio (<1.0) or D/E (>2.0); D/E is a conservative 0.29x. Maturity mismatch risk appears low given cash and receivables (0.81) exceed current obligations by a wide margin; working capital is 5.69. Interest-bearing debt was unreported, but total liabilities are modest at 1.71, with noncurrent liabilities only 0.02. No off-balance sheet obligations were disclosed in the provided data. Equity base is solid at 5.85, supporting resilience.

Cash Flow Quality

Operating cash flow, investing cash flow, and free cash flow were not disclosed; OCF/Net Income and FCF coverage cannot be assessed. Because NI is unreported and PBT benefited from non-core items, earnings quality is uncertain. With high cash on hand, near-term liquidity is ample, but sustainability of funding dividends/capex cannot be confirmed without OCF/FCF data. No clear signs of working capital manipulation can be evaluated due to missing cash flow detail; receivables of 0.81 vs revenue of 1.80 do not appear excessive for a single quarter, but trend data is needed.

Dividend Sustainability

Dividend metrics (DPS, payout, total dividends) were unreported. With OCF and FCF also unreported, coverage cannot be evaluated. Balance sheet cash provides capacity, but with ROIC at −5.6% and operating margin at 1.7%, sustaining cash returns would depend on improving core profitability and cash generation. Policy outlook cannot be inferred from the current dataset.

Risk Assessment

Business Risks:

• Margin pressure from SG&A expansion outpacing revenue growth
• Potential pricing pressure or mix shift reducing operating leverage
• Execution risk in scaling location/data services while maintaining gross margin
• Regulatory/privacy changes impacting location data collection and monetization
• Customer concentration or churn risk typical for niche B2B data platforms (not disclosed but plausible)

Financial Risks:

• Earnings volatility due to reliance on non-operating/extraordinary items to lift PBT
• Low ROIC (−5.6%) indicating weak capital efficiency
• Limited visibility on cash generation due to unreported OCF/FCF
• Potential dilution effects suggested by conflicting EPS prints

Key Concerns:

• Operating margin compressed ~580 bps YoY despite 9.2% revenue growth
• Ordinary income materially below PBT, implying one-time items in PBT
• Net income and cash flow statements unreported, limiting quality assessment
• ROIC below 5% benchmark (actual −5.6%), signaling return shortfall
• Effective tax rate of 32.4% on small PBT magnifies net earnings risk

Investment Implications

Key Takeaways:

• Top-line resilience (+9.2% YoY) but severe deterioration in core earnings (OP −75.6% YoY)
• Operating margin fell to 1.7% from an estimated ~7.5% YoY, driven by elevated SG&A
• PBT uplift versus ordinary income suggests non-recurring support; underlying profit is weak
• Balance sheet is robust with cash 6.21 and current ratio 437.5%
• Capital efficiency is sub-par (ROIC −5.6%), requiring margin and asset productivity improvements

Metrics to Watch:

• Operating margin and SG&A-to-sales ratio trend
• Gross margin stability and pricing/mix in core offerings
• OCF and FCF once disclosed; OCF/NI ratio for earnings quality
• AR days and billings growth as leading indicators
• ROIC trajectory and capex discipline
• Clarity on extraordinary items bridging ordinary income to PBT

Relative Positioning: Versus domestic small-cap IT/data peers, the company exhibits superior liquidity and low leverage but lags on profitability and capital efficiency this quarter; sustained improvement hinges on restoring operating leverage and demonstrating cash conversion.

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