ENECHANGE Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.98B
• Operating Income: ¥323M
• Net Income: ¥-229M
• EPS: ¥-5.38

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: Core operations returned to profitability at the operating level, but heavy non-operating losses drove an ordinary and net loss in FY2026 Q2, with liquidity remaining very strong. Revenue grew 33.0% YoY to 29.80, indicating solid topline momentum in the energy-tech platform business. Gross profit reached 26.08, implying an 87.5% gross margin that underscores a high-asset-light model. SG&A was 22.85, yielding operating income of 3.23 and an operating margin of 10.8%. Ordinary income swung to a loss of -2.67 due to sizable non-operating expenses of 6.03, despite only 0.13 in non-operating income. Net income was -2.29 (EPS -5.38 JPY), reflecting the drag from non-operating items and minimal tax expense (0.03). Earnings quality mixed: operating cash flow was positive at 2.57, exceeding accounting net loss (OCF/NI -1.12 given negative NI), which is better than a cash burn scenario but still flagged by the quantitative screen. Balance sheet is robust with total assets 65.32, cash and deposits 40.58, and net cash position versus total loans of 4.57. Current ratio is 284.1% and D/E 0.50x, signaling ample liquidity and conservative leverage. Working capital is strong at 33.55 with limited short-term borrowing (1.00). EBITDA was 3.31 (margin 11.1%), and interest coverage was a comfortable 35.9x. Capex was modest at 0.33, allowing an estimated FCF of about 2.24 this quarter, even after financing outflows of -4.15 (likely debt repayment). Margin trend analysis is constrained by missing prior-period margin disclosures, so we cannot quantify basis point changes YoY. The key issue is concentration of earnings volatility in non-operating items; controlling these will be essential to translate operating profit into bottom-line profit. Forward-looking, if revenue growth persists and SG&A scales, operating margin can expand, but minimizing investment/FX-related non-operating losses will be pivotal for sustained profitability.

Profitability Analysis

ROE decomposition (DuPont): ROE (-5.3%) = Net profit margin (-7.7%) × Asset turnover (0.456) × Financial leverage (1.50x). The dominant negative driver is the net profit margin, which turned negative due to sizable non-operating expenses (6.03) overwhelming operating profit (3.23). Asset turnover at 0.456 is modest, consistent with an asset-light, cash-heavy platform balance sheet; leverage at 1.50x is low and not a major swing factor. Business reason: losses below operating income likely stem from investment-related valuation/FX losses or other non-operating charges under JGAAP rather than core execution, as gross margin (87.5%) and operating margin (10.8%) were healthy. Sustainability: the operating margin appears more sustainable if revenue scale continues and SG&A (76.7% of revenue) is managed; non-operating losses look episodic but could recur if market/FX volatility persists. Concerning trends: SG&A grew faster than we can verify against revenue due to lack of YoY SG&A disclosure, but current SG&A intensity is high at 76.7%, leaving limited cushion if growth slows. Operating leverage is positive (gross margin high and OPEX mostly fixed), suggesting incremental revenue should lift operating margin, but this is contingent on disciplined cost control and benign non-operating items.

Growth Assessment

Revenue growth of +33.0% YoY to 29.80 demonstrates solid demand for the company's energy platform/services. Gross margin at 87.5% indicates strong pricing and favorable mix, supporting scalable unit economics. Operating income turned positive at 3.23, but we lack prior-period profit comps to assess the magnitude of improvement. Growth quality is mixed: core profitability improved, yet bottom-line loss reflects external/financial items rather than operational weakness. Non-operating expense of 6.03 is the main headwind; absent this, ordinary/net results would have been positive. The cost base (SG&A 22.85) remains heavy relative to revenue, implying runway for efficiency gains as scale builds. Outlook: if topline growth sustains near the current trajectory and SG&A growth is kept below revenue growth, operating margins can expand. However, the company’s bottom line will remain sensitive to investment and FX-related non-operating items until exposure is reduced or hedged. With strong cash reserves (40.58), the company can continue investing in growth (capex only 0.33) without stressing liquidity. Near-term catalysts include stabilization of non-operating items and improved operating leverage from continued customer acquisition and monetization.

Financial Health

Liquidity is strong: current assets 51.77 vs current liabilities 18.22 yield a current ratio of 284.1% (well above the >150% benchmark). Quick ratio is also 284.1%, reflecting a cash-rich position (cash and deposits 40.58). Solvency: total liabilities 21.79 against equity 43.53 gives D/E of 0.50x; interest-bearing debt totals 4.57 (short-term 1.00, long-term 3.57), easily covered by cash, implying net cash of roughly 36.0. No warnings triggered for Current Ratio (<1.0) or D/E (>2.0). Maturity mismatch risk appears low given current assets comfortably exceed current liabilities, and near-term debt is minimal relative to cash. Interest coverage is strong at 35.9x (EBITDA/interest), indicating ample buffer against rate increases. Off-balance sheet obligations are not disclosed; no data on leases or guarantees was provided, so contingent exposures cannot be assessed.

Cash Flow Quality

OCF was +2.57 versus net income of -2.29, producing an OCF/NI ratio of -1.12 (flagged by the quantitative screen), but qualitatively positive OCF alongside an accounting loss is supportive. Estimated FCF was about +2.24 (OCF 2.57 minus capex 0.33), given investing CF details are otherwise unreported. This FCF comfortably covers zero reported dividends and supports ongoing growth investments. Working capital drivers are not disclosed; however, positive OCF in a growth quarter could reflect healthy collections (AR 7.98) and limited reliance on trade payables (AP 0.28). There is no evidence of aggressive working capital manipulation from the limited data, but absence of detail on deferred revenue or other accruals constrains judgment. Financing CF was -4.15, likely debt repayment or other financing outflows; with net cash remaining large, liquidity is not at risk. Sustainability: if operating profitability sustains and growth capex remains modest, FCF should remain positive; risk stems from potential reemergence of non-operating losses that could signal future cash impacts if they relate to realized losses rather than mark-to-market.

Dividend Sustainability

No dividends are reported for the period, and payout ratios are not calculable. With net income negative and retained earnings at -0.98 but substantial capital surplus (42.26), capital adequacy is supported by past equity financing. Given positive OCF and modest capex, the company could in theory fund a small dividend, but current policy appears focused on reinvestment, which is appropriate for a growth-stage profile. FCF coverage of dividends is thus a non-issue this quarter. Outlook: any future dividend initiation would require consistent bottom-line profitability and predictable cash generation; monitoring stabilization of non-operating items will be key before considering distributions.

Risk Assessment

Business Risks:

• Execution risk in scaling the platform while reducing SG&A intensity (SG&A at 76.7% of revenue).
• Customer acquisition and churn management risk that could pressure operating leverage.
• Regulatory and policy risk in electricity/gas retail markets that affect switching demand and monetization.
• Dependence on continued 33%+ revenue growth to sustain operating profitability.

Financial Risks:

• Non-operating expense volatility (6.03) driving ordinary and net losses despite operating profit.
• Potential valuation or FX-related losses tied to investment securities (8.32) under JGAAP.
• Negative retained earnings (-0.98) despite strong capital surplus, limiting near-term distributable capacity.
• Interest rate risk is limited but present; however, interest coverage is strong and net cash large.

Key Concerns:

• Ordinary income loss (-2.67) despite a 10.8% operating margin highlights below-the-line headwinds.
• Earnings quality flag (OCF/NI -1.12) per screen, though cash generation is positive.
• Limited disclosure in SG&A breakdown and non-operating item components reduces visibility on recurring vs one-time impacts.
• Reliance on growth to absorb high fixed cost base; any slowdown could compress margins quickly.

Investment Implications

Key Takeaways:

• Core business is profitable at the operating level with an 87.5% gross margin and 10.8% operating margin.
• Bottom-line losses are driven by sizeable non-operating expenses; managing investment/FX exposures is critical.
• Liquidity is ample (current ratio 284%, net cash ~36.0), enabling continued investment without balance sheet strain.
• Positive OCF (2.57) and modest capex (0.33) produced positive estimated FCF (~2.24).
• SG&A intensity at 76.7% suggests room for operating leverage as scale advances.

Metrics to Watch:

• Breakdown and trajectory of non-operating expenses (FX, valuation losses, other financial items).
• SG&A/revenue ratio and hiring/marketing efficiency to confirm operating leverage.
• Revenue growth rate versus customer metrics (acquisition, churn, AR collection).
• Cash balance and net cash, including any changes in financing CF.
• Operating margin trend and OCF conversion (OCF/operating income).

Relative Positioning: Versus domestic SaaS- and platform-like peers in energy/utility tech, ENECHANGE exhibits superior gross margins and a strong net cash position, but shows higher earnings volatility below operating income and a heavier SG&A burden; sustained scale and reduced non-operating volatility are needed to close the gap to consistently profitable peers.

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