Institution for a Global Society Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥319M
• Operating Income: ¥-46M
• Net Income: ¥-186M
• 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

Institution for a Global Society (42650) reported FY2026 Q2 consolidated results under JGAAP showing solid top-line momentum but continued operating losses. Revenue rose 21.5% YoY to ¥319 million, indicating healthy demand or successful expansion of services. Despite the growth, profitability remains negative, with operating income at -¥46 million (flat YoY) and net income at -¥35 million (flat YoY), suggesting limited operating leverage so far. The reported gross profit margin is 17.3%, which is modest for a software/technology-driven model and points to either pricing pressure, higher delivery costs, or an evolving product mix. EBITDA was -¥39.9 million, with an EBITDA margin of -12.5%, highlighting the ongoing gap to breakeven. Ordinary loss of -¥34 million was slightly better than operating loss, implying a small net positive non-operating contribution. DuPont analysis shows a net margin of -10.97%, asset turnover of 0.377x, and financial leverage of 1.26x, producing a calculated ROE of -5.22%. The ROE aligns with the reported figure, reinforcing the negative return profile but with low balance sheet leverage cushioning the impact. Liquidity appears very strong: a current ratio and quick ratio of 1,060% and working capital of ¥614.9 million indicate ample near-term runway. Total liabilities are ¥64.0 million against total assets of ¥847.0 million and total equity of ¥670.0 million, implying a conservative capital structure. Interest expense is negligible at ¥13 thousand, and the interest coverage ratio is negative due to operating losses rather than financing strain. Operating cash flow was -¥71.5 million, larger in magnitude than the net loss (OCF/NI ratio 2.04), indicating cash burn exceeds accounting losses—typical in a scaling phase with investment in working capital and growth. Free cash flow is not meaningfully disclosed (FCF shown as 0 in the dataset), and capex details are not available, limiting cash conversion analysis. The company did not pay a dividend (DPS ¥0; payout 0%), which is appropriate given losses and investment needs. Several fields in the dataset show zeros that likely reflect non-disclosure (e.g., cash and equivalents, shares outstanding, BVPS), and one reported ratio (equity ratio 0.0%) appears non-informative; using the provided non-zero assets and equity suggests an implied equity ratio around the high 70% range. Overall, the company demonstrates robust growth and a strong liquidity buffer, but the path to sustainable profitability and positive operating cash flow remains the key execution challenge.

Profitability Analysis

ROE decomposition via DuPont indicates: net profit margin -10.97%, asset turnover 0.377x, and financial leverage 1.26x, yielding ROE -5.22%. The negative ROE is driven primarily by the negative margin; low leverage limits both downside and upside amplification. Gross margin is 17.3%, which is relatively low for a platform/solutions model and suggests cost of delivery or mix effects are constraining unit economics. Operating margin remains negative (operating loss -¥46 million) despite 21.5% YoY revenue growth, implying limited operating leverage achieved in the period. EBITDA margin of -12.5% evidences continued pressure from operating expenses (sales, R&D, G&A) relative to scale. Ordinary loss (-¥34 million) being narrower than operating loss suggests small net non-operating gains or subsidies offsetting part of operating deficits. Interest burden is immaterial (¥13 thousand), so financing costs are not the source of losses. Effective tax rate is reported as 0.0% in the metrics, with income tax expense of ¥1.145 million despite a loss, possibly reflecting non-deductible items or minimum local taxes. Profitability quality requires improvement at the gross margin level and tighter opex control to translate growth into operating breakeven.

Growth Assessment

Revenue grew 21.5% YoY to ¥319 million, indicating sustained demand and likely successful customer acquisition or expansion. However, operating income and net income were flat YoY at negative levels, indicating that incremental revenue has not yet translated into proportionate profit expansion. The modest gross margin (17.3%) suggests that mix, pricing, or cost of delivery are dampening incremental contribution margins; enhancing gross margin is key for durable growth. Ordinary loss improved versus operating loss, hinting at minor non-operating tailwinds, but core operating momentum is the determinant for medium-term profitability. Depreciation and amortization of ¥6.1 million are modest, consistent with a relatively light asset base and supporting scalability if gross margins can improve. Asset turnover at 0.377x indicates early-stage scale relative to the balance sheet; as revenue grows, there is room for efficiency gains. Outlook hinges on the company’s ability to improve unit economics (pricing, utilization, product mix) and to calibrate opex growth below revenue growth to realize operating leverage. With liquidity headroom, management has time to pursue growth initiatives, but investor focus should be on visibility to operating breakeven and cash flow inflection.

Financial Health

Liquidity is strong: current assets of ¥678.9 million versus current liabilities of ¥64.0 million produce a current and quick ratio of 1,060% and working capital of ¥614.9 million. Total liabilities of ¥64.0 million are low relative to total assets of ¥847.0 million and total equity of ¥670.0 million, implying a conservative balance sheet and low solvency risk. The reported equity ratio field shows 0.0%, but using the non-zero asset and equity figures suggests an implied equity ratio in the high 70% range. Debt-to-equity is just 0.10x (based on total liabilities), underscoring minimal leverage. Interest expense is negligible (¥13 thousand), and solvency is not a concern; losses are driven by operations rather than financing. The capital structure provides flexibility to continue investing in growth, but persistent operating losses will gradually consume liquidity if not addressed.

Cash Flow Quality

Operating cash flow was -¥71.5 million, exceeding the net loss of -¥35.0 million in magnitude, resulting in an OCF/NI ratio of 2.04. This indicates that cash burn outpaced accounting losses, often due to working capital outflows (e.g., receivables growth or deferred revenue declines) or cash costs not mirrored in accrual earnings. Depreciation and amortization were ¥6.1 million, modest relative to revenue, and non-cash charges alone did not bridge the gap to positive OCF. Investing cash flow is shown as 0 and free cash flow as 0 in the dataset; capex detail is not disclosed, limiting a definitive FCF assessment. Given the negative OCF and lack of disclosed capex, underlying FCF is likely negative in the period. Working capital appears sizable (¥614.9 million), and changes therein are likely a key driver of OCF variability; without line-item detail (inventories undisclosed, receivables/payables timing), precise attribution is constrained. Overall earnings quality is weak in the period given cash outflows, but this can be consistent with growth investments; future quarters should be assessed for cash conversion improvements.

Dividend Sustainability

The company paid no dividend (DPS ¥0; payout 0%) and remains loss-making, making distributions unlikely near term. With OCF negative and FCF not disclosed (shown as 0), cash coverage for dividends is not present. Balance sheet liquidity is strong, but capital is better allocated to achieving profitability and funding growth at this stage. Absent a clear path to sustained positive earnings and OCF, dividend initiation or increases are not indicated by current data. The implicit policy appears to prioritize reinvestment over returns of capital.

Risk Assessment

Business Risks:

• Low gross margin (17.3%) suggests pricing/mix or delivery cost pressure limiting unit economics.
• Operating leverage not yet materializing despite 21.5% YoY revenue growth.
• Dependence on continued top-line growth to offset ongoing operating losses.
• Potential customer concentration or contract renewal risk (not disclosed).
• Execution risk in scaling sales while improving margin profile.

Financial Risks:

• Negative operating cash flow (-¥71.5 million) increasing cash burn.
• Profitability risk with persistent operating and net losses.
• Working capital swings may further pressure short-term cash flows.
• Data limitations on cash and equivalents and capex obscure true runway length.

Key Concerns:

• Path to breakeven given negative EBITDA (-¥39.9 million) and operating loss (-¥46 million).
• Cash conversion weakness (OCF/NI 2.04 with both negative).
• Gross margin improvement needed to support sustainable profitability.

Investment Implications

Key Takeaways:

• Revenue growth is strong at +21.5% YoY, but profitability remains negative.
• ROE is -5.22%, driven by a -10.97% net margin; low leverage limits balance-sheet risk.
• Liquidity is ample (current ratio ~1,060%; working capital ~¥615 million).
• Operating cash burn (-¥71.5 million) exceeds net loss, highlighting cash conversion challenges.
• Gross margin at 17.3% is a key lever for improving unit economics and operating leverage.

Metrics to Watch:

• Gross margin trajectory and cost of sales efficiency.
• Operating margin and EBITDA margin progression toward breakeven.
• Quarterly operating cash flow and working capital movements (receivables/payables).
• Revenue growth sustainability and cohort/retention metrics (if disclosed).
• Cash and equivalents balance and any capex disclosures to assess runway and FCF.

Relative Positioning: The company exhibits above-peer top-line growth for early-stage TSE-listed tech/services names but lags on margin profile and cash conversion; balance sheet conservatism and liquidity are relative strengths, while gross margin and operating leverage are areas of relative weakness.

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