ZUU Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.28B
• Operating Income: ¥-180M
• Net Income: ¥-39M
• EPS: ¥-48.12

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 was weak operationally with a deeper operating loss, partially cushioned by sizable non-operating gains and OCI, leaving capital structure liquid but earnings quality mixed. Revenue declined 9.7% YoY to 12.83, while gross profit was 7.66 for a 59.7% gross margin. SG&A reached 9.46 (73.7% of revenue), driving operating income to -1.80 (operating margin roughly -14.0%). Ordinary loss narrowed to -0.71, aided by 1.13 in non-operating income (8.8% of revenue), including 0.03 interest income; other items were unreported but likely include investment-related gains. Net loss widened to -2.28 (net margin -17.8%), but total comprehensive income turned positive at 6.35, indicating large unrealized valuation gains in OCI. Operating cash flow was -4.34, worse than net income, but the OCF/NI ratio prints at 1.90x due to both figures being negative; in economic terms, cash conversion remains weak. The balance sheet is liquid with cash and deposits of 33.08 versus current liabilities of 26.58, yielding a current ratio of 228.7% and a cash ratio of 124%. Total assets were 114.55, supported by 51.09 in investment securities; total equity was 85.20, but owners’ equity is only 13.30, implying net assets are largely valuation/translation reserves (unrealized). Financial leverage is low at 1.34x, and D/E is a modest 0.34x, but interest coverage is deeply negative given operating losses. EBITDA was -1.79 (margin -13.9%), highlighting structural operating inefficiency amid a revenue decline. ROIC is -3.2%, below a 5% warning threshold, signaling value destruction at current run rate. Margin directionality: we cannot quantify YoY basis-point changes due to absent prior-period margin disclosure, but current operating and ordinary margins remain negative despite YoY improvement in ordinary income. Earnings quality is a concern: core operations are loss-making, cash burn persists, and profitability is heavily dependent on non-operating and OCI valuation effects. Financing cash inflow of 14.07 indicates reliance on external funding (likely equity), masking cash burn from operations. Forward-looking, the company needs material SG&A discipline and revenue re-acceleration to restore operating breakeven; reliance on investment securities and OCI introduces P&L/BS volatility tied to market conditions.

Profitability Analysis

Step 1 (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = (-17.8%) × 0.112 × 1.34 ≈ -2.7%. Step 2: The largest drag is the net profit margin, driven by operating losses; asset turnover is low and leverage is modest. Step 3: Net margin weakness stems from SG&A at 73.7% of revenue outstripping gross profit (59.7% margin), partially offset by non-operating gains; revenue decline (-9.7% YoY) reduced operating leverage. Step 4: Sustainability: cost structure appears fixed-heavy (e.g., salaries 2.99, 31% of revenue), so absent revenue growth or cost cuts, margin recovery is not yet sustainable; non-operating/OCI gains are market-dependent and non-recurring by nature. Step 5: Concerning trends: SG&A (9.46) exceeds gross profit (7.66), indicating negative core contribution; revenue contraction alongside elevated fixed costs suggests adverse operating leverage and continued ROIC pressure.

Growth Assessment

Revenue fell 9.7% YoY to 12.83, indicating near-term demand softness or strategic pruning of lower-margin lines. Gross margin at 59.7% remains solid for an asset-light/contents/fintech model, but scale deleverage offset this benefit. Operating income improved YoY in level terms (loss narrowed vs prior year based on +614.3% YoY), yet remains negative at -1.80, implying execution progress is incomplete. Ordinary income improved to -0.71 supported by 1.13 in non-operating income, suggesting investment-related items cushioned core weakness. Net loss widened to -2.28 due to tax expense of 0.27 despite pre-tax loss (-0.12), resulting in a negative effective tax rate; this may reflect non-deductible items or valuation allowance movements. Profit quality is mixed: positive comprehensive income (6.35) was driven by OCI valuation gains, not operations. Outlook requires either a revenue re-acceleration or SG&A reduction to restore breakeven; with cash on hand, there is runway, but dependence on market-driven gains raises volatility. Overall growth sustainability is unproven near term given top-line contraction and negative ROIC.

Financial Health

Liquidity is strong: current ratio 228.7% and cash/current liabilities 124% (33.08/26.58). No warning on current ratio (<1.0) or D/E (>2.0); D/E is 0.34x, conservative. Short-term loans are 3.00, well-covered by cash (≈11x), limiting near-term refinancing risk. Total liabilities are 29.34 versus total equity 85.20, indicating low balance-sheet risk. Maturity mismatch risk appears limited given high cash and low short-term borrowings; accounts payable are small (0.29). Notably, owners’ equity is only 13.30 versus total equity 85.20, implying heavy reliance on valuation and translation adjustments (unrealized gains) within net assets—this cushions solvency but can reverse with market declines. No explicit off-balance sheet obligations were disclosed in the provided data.

Cash Flow Quality

OCF is -4.34 against net income of -2.28, yielding a mechanical OCF/NI ratio of 1.90x; however, both are negative, so cash conversion is weak in substance. Capex was de minimis (≈0), so FCF mirrors OCF and is negative; investing CF was unreported, limiting full FCF assessment. Financing CF was +14.07, suggesting equity issuance or other financing filled the cash burn, indicating reliance on external funding. Working capital movements were not disclosed in detail; nonetheless, the divergence between OCF and NI suggests either increased receivables, other current asset builds, or non-cash income items. No clear signs of working capital manipulation are identifiable from the limited breakdown, but persistent negative OCF is a caution flag for earnings quality.

Dividend Sustainability

No dividend data were reported; with negative net income and OCF, capacity to pay dividends from internally generated cash is limited. Given negative ROIC (-3.2%) and ongoing operating losses, any dividend initiation would likely be unsustainable without a turnaround or continued financing inflows. Policy outlook cannot be inferred from the dataset; prudent stance would prioritize reinvestment and liquidity preservation over distributions until core profitability and positive OCF are established.

Risk Assessment

Business Risks:

• Revenue contraction (-9.7% YoY) amid high fixed-cost base, increasing operating leverage risk
• Dependence on non-operating income and OCI valuation gains to support results
• Execution risk in reducing SG&A or reigniting growth to reach breakeven
• Potential customer acquisition cost inflation pressuring margins in fintech/media services
• Regulatory and platform policy changes affecting financial content/fintech businesses

Financial Risks:

• Negative OCF (-4.34) requiring external financing (+14.07) to fund operations
• Interest coverage deeply negative due to operating losses
• Owners’ equity is small (13.30) relative to total equity (85.20), with large unrealized valuation reserves that may reverse
• Equity dilution risk if financing dependence persists

Key Concerns:

• Core operations are loss-making: SG&A (9.46) exceeds gross profit (7.66)
• ROIC -3.2% signals value destruction at current trajectory
• Effective tax rate distortion (-220.6%) complicates earnings predictability
• Large exposure to investment securities (51.09) introduces market valuation volatility

Investment Implications

Key Takeaways:

• Core profitability remains negative despite YoY improvement in ordinary income
• Liquidity is adequate with a strong current ratio and cash coverage, reducing near-term solvency risk
• Earnings and equity are highly sensitive to market-driven valuation gains (OCI) tied to investment securities
• Operating deleverage from revenue decline and elevated SG&A is the principal drag on ROE and ROIC
• External financing has bridged cash burn, implying possible dilution risk if turnaround lags

Metrics to Watch:

• Revenue growth trajectory and customer acquisition costs
• SG&A as a percentage of revenue and progress on fixed-cost reductions
• Operating margin and EBITDA margin returning toward breakeven
• OCF turning positive without reliance on working capital swings
• Size and volatility of non-operating income and OCI related to investment securities
• ROIC improvement toward >5% as a first milestone

Relative Positioning: Within Japan’s small-cap fintech/media cohort, ZUU’s balance-sheet liquidity is a relative strength, but profitability and cash generation lag peers focused on recurring, subscription-like models; results appear more market-sensitive due to large investment securities and OCI reliance.

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