Kokopelli Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥866M
• Operating Income: ¥-148M
• Net Income: ¥-113M
• Earnings per Unit (EPU): ¥-14.93

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Unit Information

Distribution 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: FY2026 Q2 was weak, with a sharp revenue decline and a deeper operating loss despite a strong liquidity position. Revenue fell to 8.66 (−17.7% YoY), and operating income deteriorated to −1.48, driving ordinary income to −1.47 and net income to −1.13. Gross profit was 3.75, implying a gross margin of 43.3%, but SG&A of 5.23 exceeded gross profit by 1.48, resulting in negative operating leverage. The operating margin printed at roughly −17.1% (−1.48/8.66), and EBITDA was −0.52 (EBITDA margin −6.0%), indicating that losses persist even before depreciation and amortization. ROE was −6.2%, driven by a deeply negative net margin (−13.1%) and low asset turnover (0.394), with only modest leverage (1.21x). ROIC was −11.7%, well below management KPI benchmarks for software/platform businesses, signaling value destruction in the period. Cash flow from operations was −2.33, more negative than net income (−1.13), suggesting cash burn above accrual losses due mainly to working capital and timing effects. Liquidity remains robust with cash and deposits of 9.29 and a current ratio of 469%, mitigating near-term solvency concerns. Leverage is conservative (D/E 0.21x), and interest expense is minimal (0.01), though interest coverage is a headline negative (−150.1x) because of the operating loss rather than debt load. Intangible assets (7.33) and goodwill (2.07) together represent a sizable proportion of total assets (≈43%), raising impairment sensitivity if growth does not re-accelerate. EPS (basic) was −14.93 JPY; diluted EPS shows 4.83 JPY but is not economically meaningful given losses. Margin comparisons in basis points versus prior periods are not available due to missing YoY margin disclosures; however, the negative operating margin and revenue contraction indicate margin pressure. With OCF more negative than NI, earnings quality is mixed; reported OCF/NI of 2.06x is not a comfort given both figures are negative. Forward-looking, the company must restore top-line growth and narrow the SG&A gap to gross profit to approach break-even; with 9.29 in cash and an implied H1 operating cash burn of 2.33, runway appears sufficient for near-term restructuring and growth initiatives. Overall, the quarter underscores execution challenges on revenue and cost discipline, but balance sheet strength provides time to adjust.

Profitability Analysis

ROE decomposition (DuPont): ROE (−6.2%) = Net Profit Margin (−13.1%) × Asset Turnover (0.394) × Financial Leverage (1.21x). The most impactful driver is the net profit margin, which is deeply negative due to revenue contraction and SG&A exceeding gross profit by 1.48. Asset turnover is low for a software/platform model with sizable intangibles, reflecting subdued sales relative to the asset base. Financial leverage is modest (1.21x), so leverage neither amplifies returns nor risks meaningfully. Business reason: gross margin at 43.3% is below many SaaS peers, and with SG&A of 5.23, fixed costs (notably personnel and go-to-market) outweigh contribution margin at current scale. Sustainability: without re-acceleration in revenue and SG&A rebalancing, negative margin pressure is likely to persist; margin improvement would require either higher ARPU/engagement or lower customer acquisition costs. Concerning trends: revenue declined 17.7% YoY while SG&A of 5.23 did not flex down enough, implying operating deleverage; EBITDA negative (−0.52) shows limited buffer even before D&A (0.96).

Growth Assessment

Revenue contracted 17.7% YoY to 8.66, indicating pressure on customer growth, ARPU, or both. Gross margin at 43.3% leaves limited room to absorb fixed SG&A at current scale, leading to a −17.1% operating margin. Ordinary income (−1.47) and net income (−1.13) confirm continued loss-making status. With EBITDA at −0.52, cash profitability is not yet in sight without additional scale or cost optimization. The lack of disclosed R&D and segment data limits insight into product investment intensity versus sales spending. Near-term outlook hinges on restoring top-line momentum (new logos, upsell, retention) and tightening expense discipline. Absent a rebound, achieving break-even would require material SG&A rationalization or structural gross margin improvements (pricing, mix, or cost of delivery).

Financial Health

Liquidity is strong: current assets 12.41 vs current liabilities 2.64 yield a current ratio of 469% and quick ratio equivalent given limited inventories. Cash and deposits of 9.29 cover total liabilities (3.86) comfortably, indicating low refinancing risk. Solvency is conservative with D/E of 0.21x and long-term loans of 1.04; there is no warning on D/E > 2.0. Interest coverage is −150.1x due to operating losses, not high interest burden; still, sustained losses could erode equity over time. Maturity mismatch risk appears low: cash 9.29 and working capital 9.76 exceed near-term obligations. No off-balance sheet obligations were disclosed in the data provided. Intangibles (7.33) and goodwill (2.07) together are significant (≈43% of assets), elevating impairment risk if performance weakens.

Cash Flow Quality

OCF was −2.33 versus net income of −1.13, yielding an OCF/NI ratio of 2.06x; however, both are negative, so the ratio is not indicative of high quality. The larger cash burn versus accrual loss suggests adverse working capital movements or upfront cash costs (e.g., collections timing, prepayments) in the half. Capex outflow was modest at −0.03, implying that cash burn is driven primarily by operations rather than investment. Free cash flow cannot be fully calculated due to unreported investing CF, but operating cash burn is the dominant factor. With cash of 9.29 and H1 OCF of −2.33, a simple run-rate implies roughly 1.5–2.0 years of runway before drawing on financing, assuming no improvement and similar H2 seasonality. No signs of working capital manipulation are evident from disclosed aggregates, but lack of receivables/deferred revenue details constrains assessment.

Dividend Sustainability

Dividend data were not disclosed. Given negative earnings (−1.13) and negative OCF (−2.33), any cash distributions would be economically unwarranted; the prudent stance is capital preservation. With capex minimal (−0.03) and ample cash reserves (9.29), liquidity is adequate, but sustained losses would diminish capacity for dividends. Policy outlook cannot be inferred without explicit guidance; given current loss profile, a non-dividend stance appears consistent with reinvestment and stabilization priorities.

Risk Assessment

Business Risks:

• Revenue contraction (−17.7% YoY) indicating demand softness, customer churn, or pricing pressure.
• Operating deleverage as SG&A (5.23) exceeds gross profit (3.75), delaying break-even.
• Lower gross margin (43.3%) versus typical SaaS benchmarks, limiting scalability at current cost structure.
• Execution risk in sales efficiency (potentially high CAC) and retention (churn risk) not disclosed.
• Product/segment concentration risk if growth depends on a limited set of services or partners.

Financial Risks:

• Negative OCF (−2.33) exceeding net loss (−1.13), accelerating cash burn.
• Impairment risk on goodwill (2.07) and intangibles (7.33) totaling ≈43% of assets.
• Headline interest coverage (−150.1x) reflects susceptibility to ongoing operating losses.
• Potential dilution risk if equity financing is needed should cash runway shorten without improvement.

Key Concerns:

• ROIC of −11.7% indicates value destruction and subscale operations.
• ROE of −6.2% driven by negative net margin (−13.1%) and low asset turnover (0.394).
• Lack of detailed disclosures (SG&A breakdown, ARR, churn, deferred revenue) obscures forward visibility.

Investment Implications

Key Takeaways:

• Top-line decline (−17.7% YoY) and negative operating margin (≈−17.1%) are the core issues.
• OCF burn (−2.33) outpaces accrual loss, pressuring cash despite a strong starting balance (9.29).
• ROIC (−11.7%) and ROE (−6.2%) highlight underutilized assets and an uneconomic cost base.
• Balance sheet strength (current ratio 469%, D/E 0.21x) provides runway for restructuring and growth efforts.
• Intangible-heavy balance sheet raises impairment sensitivity if momentum does not recover.

Metrics to Watch:

• ARR growth and net retention (if disclosed) to gauge demand recovery.
• Gross margin trajectory vs CAC/SG&A efficiency (sales productivity, LTV/CAC).
• Operating margin and EBITDA path to break-even.
• OCF and working capital drivers (receivables, deferred revenue) for cash burn visibility.
• Impairment indicators for goodwill/intangibles and any changes in amortization.
• Cash runway vs quarterly burn; any financing or cost-reduction initiatives.

Relative Positioning: Versus domestic SaaS/platform peers, Kokopelli shows weaker growth (−17.7% YoY) and subscale margins, but maintains a stronger liquidity buffer and conservative leverage, offering time to execute a turnaround.

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