IPS,Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥7.85B
• Operating Income: ¥2.35B
• Net Income: ¥1.31B
• EPS: ¥123.95

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

For FY2026 Q2, 株式会社アイ・ピー・エス delivered modest top-line and operating profit growth, with revenue up 1.4% year on year to ¥7,854 million and operating income up 0.5% to ¥2,351 million. Despite the muted operating growth, net income surged 67.2% YoY to ¥1,607 million, indicating supportive below-operating line dynamics and/or a lighter tax burden versus the prior year. Profitability remains strong at the gross and EBITDA levels, with a gross margin of 53.6% and an EBITDA margin of 36.3%, evidencing a high-value-added service mix and good operating efficiency. Ordinary income of ¥2,314 million trails operating income slightly, implying small net non-operating costs, consistent with interest expense of ¥219 million and limited non-operating gains. The DuPont framework indicates an ROE of 7.83%, driven by a healthy net margin of 20.46%, relatively low asset turnover of 0.187x, and moderate financial leverage of 2.05x. The margin profile suggests the company captures strong unit economics; however, asset intensity and/or low asset turnover constrain ROE upside. Liquidity is adequate with a current ratio of 141.1% and positive working capital of ¥6,890 million, supporting near-term obligations. Leverage appears moderate with a debt-to-equity ratio of 1.03x, and interest coverage is solid at 10.7x based on operating income, indicating manageable financing costs. Operating cash flow of ¥291 million is notably lower than net income (OCF/NI of 0.18), pointing to working capital absorption or timing factors; this gap warrants monitoring for earnings quality. Reported effective tax rate was listed at 0.0%; however, the presence of ¥278 million in tax expense suggests a low but positive effective tax rate on a pre-tax base near the ordinary income level. Several balance sheet and cash flow disclosures are unreported in the dataset (e.g., equity ratio, cash and equivalents, investing cash flows, share count), which limits precision on capital structure granularity and free cash flow assessment. Dividend per share is reported as zero with a payout ratio of 0.0%, indicating either a non-dividend stance or timing effects; without investing cash flow detail, dividend capacity cannot be fully evaluated. Overall, IPS demonstrates resilient margins and stable operating performance, with ROE in the high single digits and an acceptable leverage profile. Key areas to watch are the sustainability of margin strength amid modest revenue growth, conversion of earnings into operating cash, and the trajectory of non-operating items and taxes that influenced the strong net profit growth. While the financial position appears sound, the low asset turnover and weak OCF/earnings conversion are the principal drags on efficiency and earnings quality. Data limitations—particularly around cash, investing flows, and equity ratio—temper the certainty of conclusions and necessitate caution in extrapolating free cash flow and capital allocation capacity.

Profitability Analysis

ROE_decomposition: Reported ROE is 7.83%, aligned with DuPont components: net profit margin 20.46% × asset turnover 0.187 × financial leverage 2.05 ≈ 7.83%. The ROE is supported primarily by strong margins, with weaker asset turnover dampening overall returns. margin_quality: Gross margin is 53.6% and EBITDA margin 36.3%, indicating robust unit economics and cost discipline. Operating margin is approximately 29.9% (2,351/7,854), essentially flat YoY given operating income growth of 0.5% vs revenue +1.4%. Net margin at 20.46% is elevated, aided by limited non-operating drag and a comparatively light tax burden this period. operating_leverage: Revenue growth of +1.4% versus operating income +0.5% implies limited operating leverage in the half, suggesting either cost inflation or deliberate reinvestment offsetting top-line growth. Stable to slightly compressing operating margins point to controlled but not expanding fixed-cost absorption.

Growth Assessment

revenue_sustainability: Top-line growth of 1.4% YoY suggests stable but subdued demand. Given the high gross margin, revenue quality appears solid, though low asset turnover indicates a capacity/utilization or business mix constraint. profit_quality: Operating income growth (+0.5%) lagged revenue, suggesting mild pressure on operating leverage. Net income growth (+67.2%) far outpaced operating trends, driven by below-the-line items (lighter tax burden and modest non-operating costs). This divergence indicates net profit growth is not purely operational. outlook: Assuming stable demand and pricing, margins can remain healthy; however, sustained profit growth will require either acceleration in revenue or improved asset turnover. Monitoring tax normalization and non-operating items is critical, as these supported net income growth in the period.

Financial Health

liquidity: Current ratio 141.1% and quick ratio 141.1% indicate adequate near-term liquidity with working capital of ¥6,890 million. Inventories are unreported (0), consistent with a services-heavy model. solvency: Debt-to-equity ratio of 1.03x suggests moderate leverage. Interest coverage of 10.7x (operating income/interest expense) indicates comfortable capacity to service debt. capital_structure: Total assets are ¥42,042 million and total equity ¥20,527 million, implying financial leverage of ~2.05x. The reported equity ratio of 0.0% is unreported in this dataset; using provided equity and assets implies an equity ratio near 48.8%, but exact regulatory equity ratio cannot be confirmed from the dataset.

Cash Flow Quality

earnings_quality: OCF/Net Income is 0.18, indicating weak conversion in the period, likely due to working capital outflows or timing differences. Depreciation and amortization of ¥502 million support non-cash add-backs, but this did not translate into strong OCF. FCF_analysis: Free cash flow is reported as 0 due to unreported investing cash flows; thus, FCF cannot be reliably computed. The limited visibility on capex distorts assessment of true cash generation after investment needs. working_capital: With working capital at ¥6,890 million and positive operating margins, the low OCF implies temporary absorption in receivables/payables or collection timing. Sustained low OCF relative to earnings would be a concern if it persists beyond seasonal patterns.

Dividend Sustainability

payout_ratio_assessment: Annual DPS is reported as ¥0.00 and payout ratio 0.0%, implying no distribution for the period. Given positive net income, the lack of payout may reflect a reinvestment stance or timing (interim vs year-end). FCF_coverage: FCF coverage cannot be assessed due to unreported investing cash flows and reported FCF of 0. OCF of ¥291 million is insufficient alone to support a meaningful payout without considering cash balances and capex needs. policy_outlook: Without disclosure of dividend policy trends and investing requirements, sustainability and future distributions are indeterminate. Balance sheet capacity appears reasonable, but cash conversion needs to improve for consistent payouts.

Risk Assessment

Business Risks:

• Subdued revenue growth (+1.4% YoY) limiting scale benefits
• Dependence on high margins; any pricing pressure could materially impact profitability
• Low asset turnover (0.187x) constraining ROE and capital efficiency
• Potential exposure to specific customer segments or geographies (not disclosed in dataset)
• Regulatory and telecom/service-related competitive dynamics (industry assumption)

Financial Risks:

• Weak OCF relative to net income (0.18x) indicating earnings quality risk
• Moderate leverage (D/E 1.03x) exposes earnings to interest rate and refinancing conditions
• Non-operating items and tax rate variability influencing bottom-line volatility
• Limited visibility on investing cash flows and cash balances due to unreported items

Key Concerns:

• Earnings-to-cash conversion gap in the period
• Sustainability of net income growth given limited operating growth
• Potential normalization of effective tax rate reducing net margins

Investment Implications

Key Takeaways:

• Robust margin structure (GPM 53.6%, EBITDA margin 36.3%) underpins profitability
• ROE of 7.83% is margin-led but constrained by low asset turnover
• Operating leverage was limited; operating income growth (+0.5%) lagged revenue
• OCF/NI at 0.18 indicates weak cash conversion this period
• Interest coverage 10.7x and D/E 1.03x denote manageable solvency risk
• Net income growth (+67.2% YoY) was aided by below-the-line factors

Metrics to Watch:

• Working capital movements and OCF/NI recovery toward 0.7–1.0x
• Revenue growth trajectory and churn/pricing indicators
• Operating margin stability amid cost trends
• Effective tax rate normalization (implied ~12% vs reported 0.0% metric)
• Capex and investing cash flows to assess true FCF
• Interest expense trend and coverage

Relative Positioning: Within service-oriented TSE small/mid-cap peers, IPS exhibits stronger-than-average margins and acceptable leverage, but trails on asset turnover and near-term cash conversion, resulting in a mid-tier ROE profile driven more by profitability than by efficiency.

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
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