TAC CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥10.35B
• Operating Income: ¥861M
• Net Income: ¥579M
• EPS: ¥30.26

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

TAC Co., Ltd. (43190) reported FY2026 Q2 consolidated results under JGAAP showing modest top-line growth and resilient operating profitability, offset by a decline in bottom-line earnings. Revenue rose 2.1% year over year to ¥10.35bn, with gross profit of ¥4.30bn and a healthy gross margin of 41.5%, suggesting stable pricing and cost control within its education and training offerings. Operating income increased 4.7% YoY to ¥0.86bn, lifting the operating margin to approximately 8.3%, indicating some positive operating leverage and SG&A discipline. Ordinary income of ¥0.81bn implies small non-operating net losses relative to operating income (about ¥54m difference), including interest expense of ¥19m and other non-operating items. Net income declined 5.1% YoY to ¥0.55bn, implying pressure below the ordinary line and/or tax timing effects; EPS was ¥30.26. DuPont analysis indicates ROE of 8.14% driven by a 5.29% net margin, asset turnover of 0.519x, and financial leverage of 2.96x; ROE is supported by reasonable margins but moderated by relatively low asset turnover typical of content- and classroom-based models. Cash generation was solid with operating cash flow (OCF) of ¥0.81bn, yielding an OCF/Net Income ratio of 1.48x, which supports earnings quality in the period. Liquidity is tight but adequate, with a current ratio of 100.3% and quick ratio of 94.6%; working capital was positive at ¥39m, highlighting limited buffer and the importance of seasonal cash inflows. The balance sheet shows total assets of ¥19.95bn and total liabilities of ¥14.71bn, for a debt-to-equity ratio of 2.18x, indicating a relatively leveraged posture (though the mix of interest-bearing vs. operating liabilities is not fully disclosed here). Interest coverage is strong at 44.6x (operating income to interest expense), suggesting manageable financing costs under current conditions. EBITDA was approximately ¥1.03bn, with an EBITDA margin of about 10.0%, consistent with stable operating fundamentals. The effective tax rate metric is shown as 0.0%, but given income tax expense of ¥266m and ordinary income of ¥807m, the actual effective tax rate is likely in the low-30% range; the provided 0.0% appears to be an undisclosed metric rather than a true zero. Several cash flow and balance sheet line items (e.g., investing cash flows, cash & equivalents, equity ratio) are shown as zero and should be treated as not disclosed rather than zero values; this limits full assessment of free cash flow and capital intensity. Dividend data also appear undisclosed in this snapshot; thus, we cannot infer a payout policy from the zeros presented. Overall, the company demonstrates steady operational traction and good cash conversion, but operates with thin liquidity headroom and higher financial leverage, which warrants monitoring in a cyclical and seasonal education market.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 5.29%
• asset_turnover: 0.519
• financial_leverage: 2.96
• calculated_ROE: 8.14%
• commentary: ROE of 8.14% is primarily a function of a mid-single-digit net margin and moderate leverage; low asset turnover, typical in education/content businesses, constrains overall ROE. margin_quality:
• gross_margin: 41.5%
• operating_margin: 8.3%
• ordinary_margin: 7.8%
• net_margin: 5.29%
• ebitda_margin: 10.0%
• observations: Gross margin indicates stable content economics and delivery efficiency. The drop from operating to ordinary income (~¥54m) reflects modest non-operating costs. Net margin compression YoY despite higher operating income suggests below-the-line headwinds (e.g., taxes or non-operating items). operating_leverage:
• evidence: Operating income grew faster than revenue (+4.7% vs. +2.1%), indicating positive operating leverage.
• drivers: Likely SG&A discipline and utilization gains in instruction capacity and content amortization; specifics by segment not disclosed.
• sustainability: Sustainable if enrollment mix and pricing hold, but sensitive to demand seasonality and fixed classroom/teacher cost base.

Growth Assessment

revenue_sustainability: Top-line growth of 2.1% YoY suggests steady demand across core certification and training programs. Sustainability depends on exam cycle timing, new course launches, digital content penetration, and corporate training uptake. profit_quality: Operating profit growth exceeded sales growth, implying efficiency gains. However, net profit decline (-5.1% YoY) signals that non-operating and/or tax items offset operating improvements, which may be timing-related rather than structural. outlook: Maintaining high-30s to low-40s gross margins and ~8% operating margins appears achievable if enrollment levels and pricing remain stable. Key swing factors are student intake for peak certification seasons, digital delivery mix (which can lift margins), and cost inflation in instructors and facilities.

Financial Health

liquidity:

• current_ratio: 100.3%
• quick_ratio: 94.6%
• working_capital_yen: 38580000
• assessment: Liquidity is tight with minimal buffer; positive but slim working capital underscores reliance on timely collections and seasonality. Monitoring cash conversion cycles is important. solvency_and_capital_structure:
• total_assets_yen: 19953000000
• total_liabilities_yen: 14711188000
• total_equity_yen: 6733000000
• debt_to_equity: 2.18x
• interest_coverage: 44.6x
• assessment: Leverage is elevated on a liabilities-to-equity basis, but strong interest coverage indicates manageable financial risk at current earnings and rates. The composition of liabilities (interest-bearing vs. operating) is not fully disclosed here. additional_notes: Equity ratio was shown as 0.0% (undisclosed). Cash and equivalents not disclosed in this snapshot, limiting a full liquidity assessment.

Cash Flow Quality

earnings_quality:

• ocf_to_net_income: 1.48
• interpretation: OCF exceeding net income indicates good cash realization of earnings, suggesting limited accrual build in the period. free_cash_flow_analysis:
• fcf: Not determinable from provided data
• capex_discussion: Investing cash flow was shown as 0 (undisclosed), and capital expenditure details are not available; therefore FCF cannot be reliably computed.
• ebitda_to_ocf_crosscheck: EBITDA of ~¥1.03bn vs. OCF of ~¥0.81bn suggests working capital absorption or non-cash items; specifics not disclosed. working_capital_dynamics:
• notes: Current assets roughly match current liabilities; inventories of ¥685m indicate material course material/books. Receivables, payables, and deferred revenue balances are not detailed here, but seasonality likely drives intra-year swings.

Dividend Sustainability

payout_ratio_assessment: The reported payout ratio and DPS are shown as 0.00 (treated as undisclosed here). With net income of ¥548m and solid OCF, the company could support dividends in principle; however, no policy or actual payments can be inferred from this dataset. fcf_coverage: FCF coverage cannot be assessed due to lack of investing cash flow/capex disclosure. policy_outlook: Absent disclosure, we assume management prioritizes stable financial footing and investment in digital/content capabilities; visibility on payout policy would improve once dividend and capex data are available.

Risk Assessment

Business Risks:

• Enrollment volatility tied to exam schedules and macro employment trends
• Competition from online/digital-first education platforms and free content
• Course/pass-rate reputation risk affecting demand elasticity and pricing
• Product mix shifts between high- and low-margin certifications
• Instructor capacity and quality management amid cost inflation
• Dependence on corporate training budgets and public-sector programs
• Seasonality of cash flows around exam cycles and tuition collections
• Content update requirements due to regulatory/certification changes

Financial Risks:

• Tight liquidity with current ratio near 1.0x and limited working capital buffer
• Relatively high liabilities-to-equity (2.18x) increasing sensitivity to downturns
• Potential increases in interest rates (though current coverage is strong at 44.6x)
• Limited disclosure on cash balance and capex, obscuring FCF resilience
• Non-operating income volatility affecting net income and ROE

Key Concerns:

• Sustainability of operating leverage if enrollment growth slows
• Visibility on capital expenditure needs for digital transformation
• Balance sheet flexibility given thin liquidity and higher leverage

Investment Implications

Key Takeaways:

• Steady revenue growth (+2.1% YoY) with improving operating profit (+4.7% YoY) underscores operational discipline
• Gross margin at 41.5% and operating margin ~8.3% indicate a stable core business
• Net income decline (-5.1% YoY) highlights sensitivity to non-operating/tax items
• ROE at 8.14% is supported by margin and leverage, tempered by low asset turnover
• OCF/NI of 1.48x signals decent earnings quality
• Liquidity is tight (current ratio 1.00x; quick ratio 0.95x), necessitating close cash management
• Interest coverage is strong (44.6x), partially offsetting leverage concerns
• Data gaps (cash, investing CF, dividend) limit full FCF and payout assessment

Metrics to Watch:

• Enrollments/bookings and deferred revenue as leading indicators
• Segment-level margins (classroom vs. online vs. corporate training)
• SG&A efficiency and instructor utilization rates
• Working capital turns and OCF/NI ratio sustainability
• Capex and content development spend (to gauge FCF)
• Leverage (liabilities/equity) and interest coverage under different rate scenarios
• Effective tax rate normalization and below-the-line items

Relative Positioning: Profitability and ROE appear mid-range for domestic education/training peers, with stronger interest coverage but higher leverage and tighter liquidity; digital mix and enrollment momentum will be key differentiators.

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