G-NEXT Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥351M
• Operating Income: ¥-71M
• Net Income: ¥-72M
• EPS: ¥-13.35

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

GNEXT Co., Ltd. (4179) reported FY2026 Q2 standalone results under JGAAP with strong top-line growth but continued operating losses. Revenue rose 38.0% year over year to ¥351 million, indicating demand growth or expanded deployments. Gross profit was ¥72.0 million, implying a gross margin of 20.5%, which is modest for a software/services model and suggests either significant implementation/service mix or pricing pressure. Operating income remained a loss at ¥-71 million, essentially flat year over year, indicating limited operating leverage despite higher revenue. Ordinary income and net income were both ¥-72 million, reflecting no non-operating offset and confirming sustained losses at the bottom line. EPS was ¥-13.35, consistent with the reported net loss (note: outstanding shares were not disclosed in the data set). The DuPont analysis shows a net margin of -20.51%, asset turnover of 0.867x, and leverage of 4.22x, resulting in a calculated ROE of -75.0%. The EBITDA margin was -20.2%, with EBITDA at ¥-70.8 million, highlighting that core operating cash generation remains negative. Operating cash flow was ¥-122.6 million, outflow larger than accounting loss, pointing to working capital or cash collection pressures. Financing cash inflow of ¥197.5 million bridged the operating burn, implying reliance on external funding (debt or equity). The current ratio of 204% and quick ratio of 204% indicate ample short-term liquidity buffer, though cash and equivalents were not disclosed and current assets appear inconsistent with total assets, suggesting reporting classification issues. Total assets were ¥405 million and total equity ¥96 million, implying an equity ratio of roughly 23.7% (despite a reported 0.0%), so solvency is tight but not distressed. Debt-to-equity was 3.76x and interest expense ¥1.59 million, with an interest coverage of -44.6x, consistent with a loss-making profile. Working capital stood at ¥265.1 million, supporting near-term operations but funded partly by external capital. No dividend was declared (DPS ¥0), appropriate given negative earnings and cash burn. Several line items show zeros (cash, investing CF, equity ratio, shares) likely due to non-disclosure rather than actual zeros; conclusions are therefore drawn from the available non-zero metrics and cross-checked ratios.

Profitability Analysis

ROE is deeply negative at -75.0%, driven primarily by a -20.51% net profit margin, partially offset by moderate asset turnover (0.867x) and amplified by leverage (4.22x). The gross margin of 20.5% is low for a software/customer-experience platform and indicates either a services-heavy mix, high cost of delivery, or early-stage pricing and scale inefficiencies. Operating margin remains deeply negative, with operating income at ¥-71 million; however, the flat operating loss alongside 38% revenue growth suggests some underlying opex discipline or improving unit economics offset by margin constraints. EBITDA margin of -20.2% shows limited near-term operating cash generation capacity. Interest burden is small in absolute yen terms (¥1.59 million) but not meaningful given negative EBIT; interest coverage is -44.6x. Margin quality appears pressured by delivery costs; to improve, the company likely needs mix shift toward higher-margin subscription revenues and better utilization. Operating leverage is not yet evident: despite strong revenue growth, losses did not narrow, implying either reinvestment in growth (sales, R&D) or gross margin headwinds. Effective tax rate appears 0% due to loss-making status.

Growth Assessment

Revenue increased 38.0% YoY to ¥351 million, a robust pace suggesting healthy demand and possibly higher customer acquisition or upselling. Sustainability will depend on the recurring revenue base (ARR/MRR), logo additions, churn, and net retention, which are not disclosed here. Profit quality lags revenue growth: gross margin at 20.5% and negative EBITDA indicate that scaling benefits have yet to materialize, or mix is tilted toward lower-margin services. With operating loss flat YoY, the company may be reinvesting to capture market share; this is common for early-stage SaaS-like businesses but extends the path to breakeven. Outlook hinges on improving gross margin (pricing, delivery efficiency) and stabilizing working capital collections to support growth without excessive external funding. Near-term, growth appears volume-led rather than margin-led, which can be positive for traction but raises execution risk if conversion to profitability is delayed.

Financial Health

Liquidity appears adequate on headline ratios: current ratio 204% and quick ratio 204%, with no inventories disclosed. However, current assets (¥520.1 million) exceed total assets (¥405 million), suggesting classification or timing discrepancies in reported subtotals; caution is warranted in interpreting absolute levels. Working capital is ¥265.1 million, providing a buffer. Solvency is mixed: total equity is ¥96 million versus total assets ¥405 million, implying an equity ratio near 23.7% (reported 0.0% likely non-disclosed), while debt-to-equity stands at 3.76x indicating a leveraged position relative to the small equity base. Interest expense is modest (¥1.59 million), but recurring operating losses imply weak capacity to absorb additional financial liabilities. Financing CF inflow of ¥197.5 million underscores dependence on capital markets or lenders. Overall, liquidity is serviceable in the short term, but solvency relies on either improving profitability or continued funding access.

Cash Flow Quality

Earnings quality is weak with OCF of ¥-122.6 million exceeding the net loss of ¥-72.0 million; the OCF/NI ratio of 1.70 (both negative) indicates heavier cash burn than accounting loss, often due to working capital outflows (e.g., slower collections or higher contract costs). Depreciation and amortization are minimal at ¥0.183 million, so EBITDA is a close proxy for operating cash performance, reinforcing the cash burn picture. Investing CF is reported as ¥0 (likely nondisclosure or minimal capex), implying that most cash usage stems from operations rather than investment. Reported free cash flow is ¥0, but based on OCF and Investing CF, underlying FCF is likely negative, approximately in line with OCF. The business currently depends on financing inflows (¥197.5 million) to fund operations. Monitoring receivables, deferred revenue, and contract acquisition costs will be essential to assess whether cash conversion improves as scale increases.

Dividend Sustainability

No dividends were paid (DPS ¥0) and the payout ratio is 0%, which is appropriate given negative earnings and operating cash outflows. With EBITDA and OCF both negative, free cash flow coverage for any prospective dividends is currently insufficient. Near-term policy is likely to prioritize reinvestment and liquidity over distributions until breakeven is achieved. Future dividend capacity would require sustained positive OCF, improved gross margins, and a materially stronger equity base.

Risk Assessment

Business Risks:

• Execution risk in scaling a low gross margin model to profitability
• Dependence on continued high growth to absorb fixed costs and improve operating leverage
• Potential pricing pressure or services-heavy mix suppressing gross margins
• Customer concentration and churn risk (KPIs not disclosed)
• Competitive intensity in CX/enterprise software markets

Financial Risks:

• Ongoing operating cash burn (OCF ¥-122.6 million) requiring external financing
• High leverage relative to equity base (D/E 3.76x) and negative interest coverage
• Reporting inconsistencies in balance sheet subtotals, complicating ratio analysis
• Potential dilution risk if equity financing is used to fund operations
• Sensitivity to working capital swings given small scale

Key Concerns:

• Gross margin at 20.5% insufficient to support a scalable software-like model
• Operating loss flat despite 38% revenue growth, indicating limited operating leverage so far
• Reliance on financing inflows (¥197.5 million) to cover operating burn
• Data limitations (undisclosed cash, shares, equity ratio) reduce visibility

Investment Implications

Key Takeaways:

• Strong top-line growth (+38% YoY) but profitability remains elusive
• Gross margin (20.5%) and EBITDA margin (-20.2%) point to weak unit economics
• Operating loss unchanged YoY suggests reinvestment but limited leverage
• Cash burn significant (OCF ¥-122.6 million); funding risk mitigated short term by ¥197.5 million inflow
• Solvency acceptable on computed equity ratio (~23.7%) but leverage is high (D/E 3.76x)
• Liquidity ratios are strong, though balance sheet subtotals show inconsistencies
• No dividend capacity until cash flow turns positive

Metrics to Watch:

• Gross margin progression and mix shift to recurring subscription revenue
• Operating expense growth vs. revenue growth (path to operating breakeven)
• Operating cash flow trend and working capital (receivables days, deferred revenue)
• Customer KPIs: ARR/MRR, net retention, churn, ARPU, new logos
• Financing needs and dilution/leverage trajectory
• Contract acquisition costs and payback periods

Relative Positioning: Within small-cap Japanese software/services peers, GNEXT demonstrates above-average growth but below-peer margins and cash conversion, positioning it as a higher-growth, higher-burn name that must improve gross margin and operating leverage to converge toward sustainable profitability.

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