BlueMeme Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.70B
• Operating Income: ¥111M
• Net Income: ¥69M
• EPS: ¥19.94

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

Verdict: Solid Q2 FY2026 with strong top-line growth and clear operating leverage, underpinned by high-quality cash conversion. Revenue rose 56.2% YoY to 17.0, with operating income surging 379.9% YoY to 1.11 and ordinary income up 627% to 1.09, signaling substantial margin recovery from a low base. Gross profit reached 7.58, implying a 44.6% gross margin, while operating margin expanded to 6.5%. Based on growth math, prior-year operating income was roughly 0.23 on 10.9 revenue, implying an operating margin near 2.1%, so operating margin expanded by about 441 bps YoY. Ordinary margin improved from roughly 1.4% to 6.4%, a c.503 bps expansion YoY. Net income was 0.66, with a net margin of 3.9% and EPS (basic) of 19.94 yen; effective tax rate stood at 36.4%. Earnings quality is strong: OCF of 1.57 exceeds net income by 2.37x, suggesting clean conversion and favorable working capital dynamics. The balance sheet is conservative with a current ratio of 262%, cash of 18.33, and modest borrowings (total loans 0.33), resulting in ample liquidity and negligible interest burden (interest coverage >280x). ROE calculated at 2.5% (NPM 3.9% × AT 0.422 × leverage 1.55x) is modest but improving alongside margins. SG&A of 6.47 equates to 38.1% of revenue; the large OPM expansion indicates SG&A grew slower than revenue, evidencing operating leverage. Shareholder returns were directed to buybacks (0.76) alongside positive financing cash inflows (0.33), while capex remained minimal (0.01), preserving cash. While several disclosures are unreported (receivables, dividend data, full investing CF), available signals suggest sustainable growth capacity with room for further margin gains as scale builds. Forward-looking, maintaining revenue momentum while holding SG&A discipline should support additional OPM expansion; tax rate normalization and continued cash conversion can further lift ROE. Key watchpoints are project mix, delivery capacity, and potential wage/cost inflation that could pressure the 44.6% gross margin.

Profitability Analysis

ROE decomposition (DuPont): ROE 2.5% = Net Profit Margin 3.9% × Asset Turnover 0.422 × Financial Leverage 1.55x. The biggest YoY driver was margin expansion: operating margin improved from ~2.1% to 6.5% (+441 bps), and ordinary margin from ~1.4% to 6.4% (+503 bps), indicating operating leverage as revenue scaled faster than fixed/semi-fixed SG&A. Business reason: strong revenue growth in higher-value services/software with controlled SG&A growth (SG&A/revenue 38.1%) allowed a higher drop-through to operating profit; negligible interest burden also kept non-operating drag minimal. Sustainability: Revenue scale effects and a light capex model support maintaining improved operating margins, but sustaining a 44.6% gross margin will depend on mix (subscription/services vs. lower-margin delivery) and utilization rates; thus, we view part of the improvement as structural (scale) and part as mix/timing-sensitive. Concerning trends: None acute in the quarter; given OPM widening and high OCF/NI, there is no sign that SG&A growth exceeded revenue growth. Monitor any re-acceleration in hiring or sales investments that could outpace revenue and compress OPM.

Growth Assessment

Top-line growth was robust at +56.2% YoY, indicating strong demand momentum. Operating income growth (+379.9% YoY) far outpaced sales, evidencing positive operating leverage from scale. Revenue sustainability will hinge on backlog conversion and pipeline for low-code/automation projects (not disclosed), but high margins and cash conversion suggest healthy execution. Profit quality is solid with net margin at 3.9% and OCF/NI at 2.37x; tax rate at 36.4% is a headwind to net leverage but likely within a normal range. Outlook: If revenue growth remains >20–30% with SG&A discipline, OPM can trend toward high-single digits in coming periods; ROE should lift accordingly. Key dependencies: maintaining utilization, securing skilled talent without sharply raising unit costs, and preserving a favorable project/product mix.

Financial Health

Liquidity is strong: current ratio 261.8% and quick ratio 261.8% (cash 18.33 vs current liabilities 13.54). No warnings for Current Ratio (<1.0) or D/E (>2.0): D/E is reported at 0.55x and loans total 0.33 against equity of 25.97, implying conservative leverage. Maturity mismatch risk is low given cash exceeds current borrowings and sizeable working capital of 21.91. Interest burden is negligible (interest expense ~0.00, coverage ~282x). Off-balance sheet obligations are not disclosed; absent data may mask lease commitments or purchase obligations, but no explicit flags are reported. Overall solvency and liquidity appear resilient.

Cash Flow Quality

OCF/Net Income at 2.37x indicates high-quality earnings with strong conversion. While full investing CF is unreported, capex was minimal at 0.01, implying an asset-light model and likely positive FCF if we approximate FCF ≈ OCF − capex (~1.56), noting data limitations. Financing CF was +0.33 while share repurchases were 0.76, suggesting buybacks funded primarily from internal cash and modest financing inflows; dividends were unreported. Working capital: Given large accounts payable (10.42) and strong OCF, cash generation may have benefited from payables; receivables and inventories are unreported, limiting deeper diagnosis. No clear signs of manipulation; cash generation outpacing earnings is a positive signal.

Dividend Sustainability

Dividend data (DPS, total dividends paid) are unreported, so payout ratios cannot be calculated. Cash generation is solid (estimated FCF ~1.56) and balance sheet is cash-rich, which would typically support either dividends or continued buybacks. The company executed share repurchases of 0.76 in the period, well covered by OCF; ongoing capacity for shareholder returns appears supported by current cash flow and low capex needs. Policy outlook cannot be inferred without explicit guidance; monitor future disclosures for DPS initiation/changes.

Risk Assessment

Business Risks:

• Project mix and utilization risk affecting the 44.6% gross margin
• Talent acquisition and wage inflation potentially lifting SG&A and COGS
• Execution risk on rapid growth (+56% YoY) leading to delivery bottlenecks
• Competitive pressure in low-code/platform integration markets impacting pricing
• Customer concentration and timing of large projects (not disclosed but typical for the segment)

Financial Risks:

• Tax rate volatility (current effective tax rate 36.4%) affecting net margin
• Working capital reliance on high accounts payable; receivables not disclosed
• Limited disclosure on investing CF and off-balance sheet commitments (leases, purchase obligations)
• Small absolute profit base (NI 0.66) increasing sensitivity to revenue fluctuations

Key Concerns:

• Sustainability of operating margin gains after a large YoY step-up
• Potential need for higher headcount and sales investments to sustain growth
• Data gaps (receivables, dividends, full investing CF) reduce visibility on cash conversion durability

Investment Implications

Key Takeaways:

• Material operating leverage: OPM expanded ~441 bps YoY to 6.5% on +56% sales
• High-quality cash: OCF/NI 2.37x with minimal capex (0.01)
• Strong liquidity: cash 18.33 vs current liabilities 13.54; current ratio 262%
• Conservative leverage and negligible interest burden; interest coverage >280x
• ROE modest at 2.5% but poised to improve with margin expansion and scale
• Active capital return via buybacks (0.76) funded by internal cash flows

Metrics to Watch:

• Order backlog and book-to-bill (not disclosed) as leading indicator for revenue sustainability
• Gross margin trajectory vs. mix and utilization
• SG&A growth vs. revenue growth to confirm ongoing operating leverage
• OCF/NI ratio and working capital movements (receivables/payables) to validate cash quality
• Tax rate normalization and its impact on net margins and ROE
• Headcount/productivity KPIs and attrition rates

Relative Positioning: Within Japan software/IT services peers, BlueMeme exhibits above-peer revenue growth with improving profitability and superior cash conversion, supported by a cash-rich, low-leverage balance sheet; continued scale and disciplined SG&A are key to converging margins toward best-in-class levels.

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