Basis Corporation FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥1.92B
• Operating Income: ¥5M
• Net Income: ¥4M
• EPS: ¥0.89

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

ベイシス株式会社 (TSE: 40680) reported FY2026 Q1 consolidated results under JGAAP with modest revenue growth but a sharp contraction in profitability. Revenue was ¥1,919 million, up 1.2% YoY, while operating income fell 63.2% to ¥5 million, indicating negative operating leverage in the quarter. Gross profit was ¥426 million with a gross margin of 22.2%, suggesting the core delivery margin remains positive but pressured below the SG&A line. Net income was ¥1 million (EPS ¥0.89), implying a net margin of 0.05% and a very low quarterly ROE of roughly 0.05% per the DuPont decomposition provided. The DuPont profile shows asset turnover of 0.506x and financial leverage of 1.85x, reinforcing that profitability, not balance sheet utilization, is currently the key drag on ROE. Interest expense of ¥1.6 million against operating income of ¥5 million yields an interest coverage of about 3.1x, adequate but thin if operating profits remain subdued. Liquidity appears strong with a current ratio of 212.9% and working capital of approximately ¥1,598 million, supported by current assets of ¥3,014 million versus current liabilities of ¥1,415 million. Total assets were ¥3,795 million and total equity was ¥2,052 million; while the reported equity ratio field shows 0.0% (likely undisclosed), the balance sheet implies an equity ratio around 54%. Cash flow statement items are not disclosed this quarter in the XBRL (reported as zeros), limiting assessment of operating cash conversion and free cash flow. The company did not pay dividends (DPS ¥0), consistent with its earnings level and a focus on preserving liquidity. The sharp YoY decline in operating income despite higher revenue points to either weaker project mix, higher subcontracting or labor costs, or elevated SG&A investment, which warrants monitoring. Given the project-based nature of the business, timing of revenue recognition and collection can amplify quarterly volatility in earnings. The tax line (¥5.1 million) versus net income suggests a high effective tax burden this quarter when estimated off pre-tax income around ¥6.1 million, although the provided “effective tax rate: 0.0%” appears non-informative due to data mapping. Overall, the quarter shows resilient top line but significant profit compression, reasonable solvency and liquidity, and incomplete cash flow disclosure, necessitating caution in extrapolating near-term trends. Key watchpoints include order backlog visibility, gross margin trajectory, SG&A normalization, and working capital turns.

Profitability Analysis

ROE is approximately 0.05% for the quarter, driven by: Net profit margin of 0.05% × asset turnover of 0.506 × financial leverage of 1.85. The margin is the principal constraint: operating margin is ~0.26% (¥5m/¥1,919m), well below the 22.2% gross margin, indicating that SG&A and/or other operating items absorbed most of gross profit. Negative operating leverage is evident as revenue rose 1.2% YoY while operating income dropped 63.2% YoY. Interest expense (¥1.6m) reduces ordinary income resilience; interest coverage is ~3.1x, leaving limited buffer if operating profits soften further. The estimated effective tax burden appears high based on NI and tax expense (tax of ¥5.1m with NI of ¥1.0m implies pre-tax ~¥6.1m and an implied tax rate in the low-80% range), which further compresses net margin, though the reported “0.0%” tax rate metric is not meaningful. Overall profitability quality is weak this quarter, with margin pressure below gross profit and limited absorption of fixed costs.

Growth Assessment

Revenue grew 1.2% YoY to ¥1,919 million, signaling stable demand but not sufficient to offset cost pressures. The sustainability of revenue hinges on project backlog, client capex cycles (e.g., telecom infrastructure rollout), and execution capacity; these data were not disclosed here. Profit growth quality is poor: operating income and net income fell sharply despite higher sales, suggesting either less favorable project mix, price competition, or increased labor/subcontractor costs and SG&A. Without cash flow data, we cannot validate revenue quality via cash conversion this quarter; reliance on receivables typical of project businesses could introduce timing risk. Outlook depends on normalization of SG&A and improved utilization; if gross margins can be stabilized and SG&A disciplined, operating leverage could turn positive given relatively steady top line. Near-term, guidance (not provided) and order intake trends will be critical to assess whether the margin compression is transitory or structural.

Financial Health

Liquidity is strong: current assets ¥3,013.7m vs current liabilities ¥1,415.3m yields a current ratio of ~213% and quick ratio of ~213% (inventories not disclosed). Working capital stands at ~¥1,598.4m, providing a buffer for project execution. Total liabilities are ¥1,670.9m against equity of ¥2,052.0m, implying a debt-to-equity of ~0.81x (as provided) and an implied equity ratio near 54% based on the balance sheet (the reported equity ratio field of 0.0% appears undisclosed rather than truly zero). Interest expense is modest, but given thin operating profits, coverage is only ~3.1x. Solvency therefore is acceptable at present leverage levels, but sustained low profitability could erode cushions over time.

Cash Flow Quality

Operating, investing, and financing cash flows are not disclosed for the quarter (reported as zeros in the feed), so OCF/Net Income and free cash flow cannot be assessed from the provided dataset. As such, earnings quality cannot be corroborated through cash conversion this quarter. Working capital remains sizable, and in project-based models, swings in receivables and unbilled revenue often drive OCF volatility; absent disclosure, we cannot quantify this. Depreciation is also undisclosed, preventing EBITDA and non-cash charge analysis. We therefore treat reported profit as low-verification quality for this quarter and recommend monitoring subsequent disclosures for OCF and FCF.

Dividend Sustainability

The company paid no dividend (DPS ¥0) and has a payout ratio of 0%. With quarterly net income of ¥1m and undisclosed free cash flow, assessing prospective coverage is not possible from this dataset. Given low profitability this quarter and an emphasis on liquidity, maintaining a non-dividend stance appears consistent with capital preservation. Future dividend capacity would depend on restoring operating margins and generating consistent positive OCF; policy signals were not provided here.

Risk Assessment

Business Risks:

• Margin compression from unfavorable project mix and/or higher subcontracting and labor costs.
• Negative operating leverage if SG&A remains elevated against modest revenue growth.
• Project timing and revenue recognition risk typical of infrastructure/services delivery models.
• Customer concentration and telecom capex cycle exposure (industry context).
• Pricing pressure in competitive bids potentially squeezing gross margins.

Financial Risks:

• Thin interest coverage (~3.1x) leaves limited buffer if operating income weakens further.
• Cash flow visibility is limited this quarter due to undisclosed OCF/FCF.
• High apparent tax burden this quarter further depresses net margin.
• Working capital intensity and potential receivables collection timing risk.

Key Concerns:

• Sharp YoY decline in operating income (-63.2%) despite slight revenue growth.
• Very low net margin (0.05%) and ROE (~0.05%).
• Lack of cash flow disclosure prevents validation of earnings quality.
• Need to confirm whether SG&A step-up is temporary (e.g., hiring, systems) or structural.

Investment Implications

Key Takeaways:

• Top line stable (+1.2% YoY) but profitability deteriorated materially at the operating and net levels.
• Gross margin of 22.2% remains positive, but SG&A absorption drove operating margin down to ~0.26%.
• Balance sheet liquidity is solid (current ratio ~213%, working capital ~¥1.6bn).
• Leverage is moderate (D/E ~0.81x), but interest coverage is thin (~3.1x).
• Cash flow metrics are not disclosed this quarter, limiting confidence in earnings quality.

Metrics to Watch:

• Order backlog and book-to-bill to gauge revenue sustainability.
• Gross margin trend and subcontractor cost ratio.
• SG&A as a percentage of sales and operating margin recovery.
• OCF/Net income and FCF once disclosed to validate cash conversion.
• Receivables days and overall working capital turns.
• Interest coverage and tax burden normalization.

Relative Positioning: Within project-based telecom/infrastructure service peers, the company shows adequate liquidity and moderate leverage but weaker near-term profitability and earnings visibility this quarter due to margin compression and undisclosed cash flows.

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