Institution for a Global Society Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥319M
• Operating Income: ¥-46M
• Net Income: ¥-35M
• EPS: ¥-7.83

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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 shows healthy top-line growth but continued operating losses, with liquidity remaining strong. Revenue rose 21.5% YoY to 3.19, demonstrating solid demand momentum. Gross profit was 1.76, implying a robust gross margin of 55.3%, but SG&A of 2.23 exceeded gross profit, resulting in an operating loss of -0.46. Non-operating income of 0.13 partially offset operating losses, but ordinary income remained negative at -0.34 and net income was -0.35 (EPS -7.83 yen). The operating margin was approximately -14.3%, and EBITDA was -0.46 given unreported depreciation/amortization. ROE calculated at -5.2% is driven primarily by a negative net margin of -11.0%, despite moderate asset turnover (0.377) and low financial leverage (1.26x). Liquidity is a clear strength with a current ratio of 471.7%, cash and deposits of 4.09, and low balance-sheet risk (D/E 0.26x). Operating cash flow was positive at 0.91 despite the accounting loss, indicating that cash generation benefited from working capital dynamics. That said, the OCF/Net Income ratio is mechanically negative because net income is negative; this should be interpreted as a cash flow–earnings divergence rather than low quality per se. Receivables are sizable at 2.80 versus H1 revenue of 3.19, implying receivable intensity that merits monitoring of collection timing. Equity remains sound at 6.70 despite accumulated deficits (retained earnings -3.90), supported by capital surplus of 9.83. With limited leverage (long-term loans 0.24) and strong cash, near-term solvency risk is low. Margin trend comparisons in basis points versus prior periods are not available due to limited disclosures; however, the current margin structure suggests the need to align SG&A with scale. Forward-looking, sustaining 20%+ revenue growth while controlling SG&A should be the path to breakeven; cash reserves provide runway to execute. Overall, the quarter underscores a transition phase: growth is intact, profitability is not yet achieved, and cash liquidity is sufficient to support continued investment.

Profitability Analysis

ROE decomposition: ROE (-5.2%) = Net Profit Margin (-11.0%) × Asset Turnover (0.377) × Financial Leverage (1.26x). The largest driver is the negative net margin, as operating loss (-0.46) emerged from SG&A (2.23) exceeding gross profit (1.76). Asset turnover of 0.377 is modest for a software/education services model with cash-rich balance sheet and investment securities (1.03), which dilutes turnover. Leverage is low (assets/equity ~1.26x), providing little ROE uplift (and appropriately low risk). Business rationale: the company appears to be prioritizing growth (revenue +21.5% YoY) with elevated operating expense intensity (notably salaries and allowances of 0.60) ahead of scale efficiencies, depressing near-term margins. Sustainability: the gross margin at 55.3% looks structurally healthy; the negative operating margin seems primarily driven by opex scale rather than pricing or cost of sales pressure, suggesting improvement is achievable if SG&A growth moderates versus revenue. Concerning trends: operating costs currently exceed gross profit; without evidence of deceleration in SG&A intensity, operating leverage remains negative. Due to lack of YoY SG&A breakdown, we cannot confirm whether SG&A growth outpaced revenue, but the current opex envelope implies profitability hinges on cost discipline and mix shift to higher-margin offerings.

Growth Assessment

Revenue expanded 21.5% YoY to 3.19, indicating solid demand traction across the company’s offerings. Gross profit of 1.76 (55.3% margin) suggests the core unit economics remain sound, providing room for operating leverage once scale is reached. The operating loss of -0.46 highlights that growth is currently investment-driven; the non-operating income contribution (0.13) is supportive but not sufficient to offset the opex load. AR of 2.80 relative to H1 revenue implies back-ended billing/collection, consistent with enterprise/education contract seasonality; conversion of AR to cash will be key to sustaining growth without external funding. Profit quality is mixed: accounting loss contrasts with positive OCF (0.91), which is a constructive signal for cash conversion but may include timing effects. Outlook hinges on maintaining >20% growth while narrowing the SG&A-to-sales ratio; with cash of 4.09 and low leverage, the company has runway to prioritize growth and product development. Given limited disclosures, we cannot parse segment or product drivers; monitoring win rates, renewal/churn, and pricing will be critical for assessing sustainability.

Financial Health

Liquidity is strong: current assets 7.24 vs current liabilities 1.53 yield a current ratio of 471.7% and a similar quick ratio given negligible inventories reported. No warning triggers (Current Ratio well above 1.0; D/E at 0.26x is conservative). Cash and deposits of 4.09 cover total current liabilities (1.53) by 2.7x, minimizing short-term refinancing risk. Solvency: total liabilities 1.77 vs equity 6.70 implies low leverage; long-term loans are modest at 0.24. Maturity mismatch risk is low as liquid assets (cash + receivables totaling ~6.89) comfortably exceed current liabilities. Off-balance sheet obligations are not disclosed; we assume none material based on available data but acknowledge this as a limitation.

Cash Flow Quality

Operating cash flow of 0.91 versus net income of -0.35 yields an OCF/NI ratio of -2.60x; because net income is negative, this ratio mechanically flags but should be interpreted as positive cash conversion rather than poor quality. The positive OCF suggests working capital inflows or strong collections despite the accounting loss; however, with investing cash flows and capex unreported, free cash flow cannot be assessed. Given AR of 2.80, part of OCF may reflect timing (e.g., deferred revenue or payables) rather than structural cash generation; without details, we cannot confirm. Dividend and buyback cash outflows are unreported, but accumulated deficits make distributions unlikely. Overall, earnings quality is acceptable from a cash standpoint this quarter, but sustainability depends on consistent collections and eventual operating profitability.

Dividend Sustainability

No dividends are reported. Retained earnings are negative at -3.90, indicating accumulated losses and limiting distributable amounts under JGAAP constraints. With operating losses and unreported free cash flow, any near-term dividends would be imprudent; policy focus is likely on growth investment and achieving breakeven. Cash and deposits (4.09) and low leverage support operations but should not be viewed as dividend capacity until sustained profitability is achieved. Outlook: expect a conservative stance on shareholder returns until the company demonstrates positive operating income and positive FCF.

Risk Assessment

Business Risks:

• Execution risk in scaling revenue while reducing SG&A intensity from current levels that exceed gross profit
• Receivables concentration and collection timing given AR of 2.80 versus H1 revenue of 3.19
• Dependence on enterprise/education procurement cycles and seasonality (potential H2 skew)
• Product-market fit and pricing risk if growth moderates or competitive pressure intensifies

Financial Risks:

• Sustained operating losses could erode equity if cash conversion weakens
• Potential need for external financing or dilution if growth investments accelerate without corresponding cash generation
• Valuation risk on investment securities (1.03) affecting non-operating results and equity through OCI

Key Concerns:

• Negative ROE (-5.2%) driven by negative net margin (-11.0%) despite healthy gross margin
• Operating expenses (2.23) exceeding gross profit (1.76), delaying breakeven
• Limited disclosure on investing cash flows and capex, obscuring FCF visibility

Investment Implications

Key Takeaways:

• Top-line growth robust at +21.5% YoY to 3.19 with a solid gross margin of 55.3%
• Operating loss persists (-0.46) as SG&A outweighs gross profit; path to breakeven depends on opex control
• Positive OCF (0.91) despite net loss indicates supportive cash dynamics this quarter
• Balance sheet is conservative with D/E 0.26x and ample liquidity (current ratio ~472%)
• ROE negative (-5.2%) due primarily to margin pressure; leverage is not a factor

Metrics to Watch:

• SG&A-to-sales ratio and salaries/allowances trajectory
• Operating margin improvement and breakeven timeline
• Accounts receivable days and collection patterns
• Recurring revenue/retention indicators (ARR, churn) if disclosed
• Investing cash flows and capex to gauge FCF
• Gross margin stability as mix scales

Relative Positioning: Versus small-cap TSE Growth/edtech peers, the company shows above-market revenue growth with below-peer profitability; liquidity and low leverage are strengths, while operating leverage execution remains the key differentiator to close the profitability gap.

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