Finatext Holdings Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥4.46B
• Operating Income: ¥363M
• Net Income: ¥292M
• EPS: ¥9.66

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

Finatext Holdings (44190) posted strong top-line momentum in FY2026 Q2 with revenue of ¥4,464m, up 29.4% YoY, indicating healthy demand across its fintech/insurtech platforms. Despite the robust growth, operating income declined 10.8% YoY to ¥363m, signaling margin compression likely driven by increased growth investments and/or higher operating expenses. Gross profit margin is reported at a solid 49.1%, suggesting favorable unit economics even as operating leverage was negative this quarter. EBITDA was ¥413m with a 9.3% margin, modestly above operating margin, reflecting limited D&A (¥50m) and indicating a relatively asset-light profile. Ordinary income (¥348m) was slightly below operating income, with minimal interest burden (¥5.7m) and strong interest coverage of 64x, underscoring manageable financing costs. Net income rose sharply by 72.5% YoY to ¥495m and net margin reached 11.1%, implying the presence of non-operating or extraordinary gains and/or tax benefits. The effective tax rate is reported as 0%, which is consistent with use of loss carryforwards or non-taxable gains under JGAAP but may not be repeatable. DuPont analysis shows a calculated ROE of 4.8% based on net margin of 11.09%, asset turnover of 0.235, and financial leverage of 1.84; given this is a half-year period, the simple annualized perspective would be higher, though such extrapolation assumes stable second-half performance. The balance sheet appears conservative with equity of ¥10,303m and total assets of ¥18,976m, implying an equity ratio around the mid-50% range despite a reported 0% figure in disclosures (zeros reflect non-reported items). Liquidity is strong, with a current ratio of 204.8% and working capital of ¥9,254m, supported by large current assets. Operating cash flow of ¥1,928m is robust at 3.9x net income, indicating high cash conversion this period and likely favorable working capital dynamics. Financing cash flow was an inflow of ¥693m, while investing cash flow and cash balances were not disclosed in the dataset, limiting free cash flow interpretation (FCF shown as 0 only due to missing investing data). The company pays no dividend (DPS ¥0), consistent with a growth-oriented reinvestment stance at this stage. The mix of strong revenue growth, compressed operating margin, and unusually high net income suggests non-recurring items impacted the bottom line, which investors should normalize when assessing run-rate profitability. Overall, Finatext demonstrates solid growth and cash generation capacity with conservative leverage, but the sustainability of net profit levels and the path to restoring operating margin are key focal points for the remainder of the fiscal year.

Profitability Analysis

ROE_decomposition: ROE 4.80% = Net Margin 11.09% × Asset Turnover 0.235 × Financial Leverage 1.84. The low asset turnover dampens ROE despite a strong net margin, and leverage is moderate. margin_quality: Gross margin at 49.1% indicates healthy unit economics. Operating margin is 8.1% (¥363m/¥4,464m), down YoY, reflecting higher SG&A or growth investments. Net margin at 11.1% is elevated versus operating margin, likely aided by non-operating/extraordinary items and a 0% reported tax rate; this is unlikely to be fully recurring. operating_leverage: Top-line grew 29.4% YoY but operating income declined 10.8% YoY, implying negative operating leverage in the period. The gap between gross margin and operating margin suggests rising fixed costs or strategic spend in product, sales, or compliance.

Growth Assessment

revenue_sustainability: 29.4% YoY revenue growth suggests strong demand and customer traction, consistent with SaaS/platform expansion dynamics. Sustainability will hinge on retention, ARPU expansion, and pipeline conversion. profit_quality: Operating profit contracted despite revenue growth, indicating near-term reinvestment pressure. Net profit growth (+72.5% YoY) appears assisted by below-the-line items and tax effects; core profit quality is better proxied by operating/EBITDA trends. outlook: If growth investments translate into scaling effects, operating margin can recover in subsequent periods. However, normalization of non-recurring gains and tax effects would likely reduce net margin from current levels. Focus should be on stabilizing operating margin while maintaining mid- to high-teen to 20%+ revenue growth.

Financial Health

liquidity: Current assets ¥18,080m vs current liabilities ¥8,826m imply a current ratio of 204.8% and ample liquidity; quick ratio is the same given no inventories disclosed. solvency: Total liabilities ¥9,400m vs equity ¥10,303m implies liabilities/equity of ~0.91x and an implied equity ratio of ~54.3% (computed), reflecting moderate leverage and solid solvency. capital_structure: Financial leverage at 1.84x (Assets/Equity) is conservative. Interest expense is low (¥5.7m) with 64x coverage, suggesting capacity to absorb rate or credit cost volatility.

Cash Flow Quality

earnings_quality: OCF/Net Income of 3.90 indicates strong cash conversion, likely driven by favorable working capital and low non-cash charges beyond D&A (¥50m). Net income exceeds operating income, so cash-based measures are preferable for assessing quality. FCF_analysis: Free cash flow is shown as 0 only because investing cash flow was undisclosed. Without investing cash outflows (e.g., capitalized development, intangibles, or M&A), true FCF cannot be determined from the provided data. working_capital: Large working capital (¥9,254m) and high OCF suggest collection and billing dynamics were favorable in the half. Sustainability depends on receivables timing, contract advances, and deferred revenue movements, which are not disclosed here.

Dividend Sustainability

payout_ratio_assessment: Payout ratio is 0% with EPS of ¥9.66 and no dividends; policy appears reinvestment-focused. FCF_coverage: FCF coverage cannot be assessed due to missing investing cash flows; the displayed 0.00x is not meaningful. policy_outlook: Given growth investments and modest ROE (4.8% on a half-year basis), continued retention of earnings is likely until scale efficiencies raise core profitability and cash requirements stabilize.

Risk Assessment

Business Risks:

• Margin compression from accelerated SG&A and R&D to drive growth
• Client concentration or project timing risk typical in fintech/insurtech solutions
• Regulatory and compliance changes in financial services impacting product rollouts
• Competitive pressure from larger incumbents and emerging SaaS players
• Execution risk in scaling platforms while maintaining service quality

Financial Risks:

• Potential normalization of a 0% effective tax rate, reducing net margins
• Dependence on non-operating/extraordinary items that boosted net income in the period
• Working capital volatility affecting OCF in subsequent quarters
• Limited visibility on investing cash flows (capitalized development, intangibles) constrains FCF assessment

Key Concerns:

• Sustainability of net income given divergence from operating income
• Path to restoring/improving operating margin as revenue scales
• Lack of disclosed investing cash flow and cash balance, limiting cash runway visibility

Investment Implications

Key Takeaways:

• Strong revenue growth (+29.4% YoY) but negative operating leverage with operating income down 10.8% YoY
• Healthy gross margin (49.1%) and moderate leverage (Assets/Equity 1.84; liabilities/equity ~0.91x)
• Net income boosted by below-the-line factors and 0% tax; not necessarily recurring
• Robust cash conversion (OCF/NI 3.90) provides comfort on near-term funding of operations
• Liquidity is ample (current ratio 205%) with sizable working capital (¥9.25bn)

Metrics to Watch:

• Operating margin trajectory and SG&A intensity
• Recurring EBITDA margin versus reported net margin
• OCF stability and working capital movements (receivables, contract liabilities)
• Investing cash flow disclosures (capex, capitalized development, M&A) to clarify FCF
• Effective tax rate normalization and any extraordinary gains/losses

Relative Positioning: Relative to Japan-listed fintech/platform peers, Finatext exhibits competitive growth and solid gross margins with conservative leverage, but trails best-in-class names on operating margin consistency; clarity on investing cash flows and normalization of below-the-line items will be important for comparability.

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