Kudan Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥400M
• Operating Income: ¥-416M
• Net Income: ¥-554M
• EPS: ¥-29.21

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

Kudan Co., Ltd. reported FY2026 Q2 consolidated results under JGAAP showing strong top-line momentum but continued substantial operating losses. Revenue reached 400 million yen, rising 170.2% year on year, indicating accelerating commercialization of its computer vision/SLAM technology. Despite this, operating income remained a loss at -416 million yen (flat YoY), reflecting persistent cost intensity and limited operating leverage so far. Ordinary income improved to -287 million yen, suggesting non-operating gains or lower non-operating losses narrowed the gap versus operating loss. Net income was -329 million yen with EPS of -29.21, keeping the company in a loss-making phase. Gross profit is disclosed at 116.6 million yen, implying a 29.1% gross margin; however, cost of sales of 31.6 million yen does not arithmetically reconcile with the reported gross profit, so line-item definitions or allocations may differ. EBITDA was -415.9 million yen, and the EBITDA margin was -104.0%, underscoring that revenue scale is still insufficient to absorb fixed costs. Liquidity is very strong: current assets of 2.88 billion yen versus current liabilities of 273 million yen yield a current ratio above 1,000%, supported by substantial financing cash inflows of 1.85 billion yen in the period. The balance sheet is conservative, with total liabilities of 280 million yen against total assets of 3.03 billion yen; this implies an equity ratio near 89.5% based on the disclosed totals, despite a reported equity ratio of 0.0% (likely undisclosed in XBRL). Operating cash flow was -434 million yen, worse than net loss (OCF/NI ratio of 1.32 on an absolute basis), indicating working capital and cash costs outpaced the accrual loss. Free cash flow is not observable because investing cash flows were undisclosed (0 reported), but the absence of investing outflows in disclosure limits FCF assessment. Interest expense was modest at 2.05 million yen and the debt-to-equity ratio stood at 0.10x, confirming low financial risk from leverage. Working capital is a substantial 2.61 billion yen, suggesting a multi-year cash runway at the current burn rate. No dividends were declared (DPS 0), consistent with the company’s investment phase and negative earnings. Overall, Kudan exhibits robust revenue growth and a fortified capital position, but profitability remains distant, cash burn persists, and margin quality needs to improve for a sustainable path to breakeven. Data limitations around cash, investing flows, and per-share base constrain certain ratio interpretations; analysis focuses on disclosed non-zero items and internally derived metrics.

Profitability Analysis

ROE via DuPont: net margin -82.25%, asset turnover 0.132x, and financial leverage 1.12x result in a calculated ROE of -12.11% (consistent with reported). The highly negative net margin is the primary drag; leverage is low and not amplifying returns. Gross margin is disclosed at 29.1%, which is modest for software-like businesses and suggests either hardware/pass-through elements, early-stage pricing, or elevated cost allocations; note that gross profit does not reconcile arithmetically with revenue and cost of sales, implying classification differences. Operating expenses remain heavy relative to revenue, keeping operating margin deeply negative (operating loss of 416 million yen vs revenue of 400 million yen). EBITDA margin of -104.0% confirms limited coverage of fixed costs; R&D and SG&A intensity likely dominate. The flat YoY operating loss despite a 170% revenue surge indicates weak operating leverage so far; cost bases grew or savings lagged, and incremental margins were not captured. Ordinary loss (-287 million yen) narrower than operating loss implies some support from non-operating items (e.g., FX gains, subsidies, or investment-related gains). Effective tax rate is effectively nil given losses. Interest coverage is deeply negative (-202.9x on EBITDA basis), but this reflects operating losses rather than debt service pressure given low absolute interest expense. Overall, profitability hinges on materially improving gross margin quality and curbing opex growth as revenues scale.

Growth Assessment

Revenue expanded to 400 million yen (+170.2% YoY), signaling stronger commercialization and partner/customer traction. The step-up likely reflects project wins, licensing progress, or milestone recognition typical for deep-tech software adoption cycles. However, operating income remained at -416 million yen (flat YoY), indicating growth was not accretive to operating profit due to cost growth or low incremental margins. Gross profit of 116.6 million yen suggests limited contribution margin; improving pricing mix, recurring license components, and reducing delivery costs will be critical. The improvement from operating to ordinary loss (-416 million yen to -287 million yen) may not be repeatable if driven by non-core items; sustainable growth requires operating margin uplift. With annualized revenue run-rate around 0.8 billion yen based on H1, scalability into FY H2 is a key watchpoint given project timing risks. The business remains early-stage; pipeline conversion, ARR mix, and partner channel productivity will drive durability. Outlook depends on converting pilots/PoCs to production deployments and expanding unit economics per customer. Given the loss profile, external financing in H1 strengthened the capacity to invest in growth. Near-term, we expect continued volatility in quarterly revenues due to project recognition and the mix of license vs services. Medium-term profit quality will improve if recurring software revenue share increases and delivery costs compress. Data gaps on backlog and segment composition limit a granular sustainability assessment, but disclosed growth is a positive signal if margins can follow.

Financial Health

Liquidity is very strong: current assets 2,882 million yen vs current liabilities 273 million yen, yielding a current ratio of 1,055% and quick ratio of 1,041%. Working capital stands at 2,609 million yen, providing a sizeable buffer for operations. Total assets are 3,033 million yen against total liabilities of 280 million yen; implied equity is 2,716 million yen and the implied equity ratio is about 89.5% (based on totals; the reported 0.0% is likely non-disclosure). Leverage is low with debt-to-equity at 0.10x and interest expense of only 2.05 million yen, limiting solvency risk. Interest-bearing debt appears minimal, and ordinary losses rather than financing costs drive net losses. The 1,850.9 million yen financing inflow materially strengthened the balance sheet during the period. With operating cash outflow of 434 million yen for the half, the company appears to have multiple half-years of liquidity runway, subject to working capital movements. No near-term refinancing pressure is evident from the disclosed liabilities structure. Asset base is largely current, which supports flexibility but may also reflect cash balances not separately disclosed in XBRL.

Cash Flow Quality

Operating cash flow was -434 million yen versus net loss of -329 million yen, yielding an OCF/NI ratio of 1.32 in absolute terms; cash burn exceeded the accrual loss, indicating negative working capital dynamics or higher cash costs than recognized expenses in the period. Free cash flow is indeterminable because investing cash flows were undisclosed (reported as 0), and capex/intangible investments could be material for a deep-tech software company. Depreciation and amortization of 69 thousand yen is negligible relative to operating losses, implying non-cash charges do not drive results; cash expenses (personnel, development, and go-to-market) dominate. Interest paid (2.05 million yen) is small, consistent with low leverage. The large financing cash inflow of 1,850.9 million yen suggests equity issuance or similar instruments funded operations and growth. Working capital: inventories are modest at 39.8 million yen; the burn is more likely from receivables growth and operating expenses rather than inventory build. Given the scale of current assets, cash and equivalents are likely significant despite being undisclosed; interpretation of period-end cash is constrained by disclosure format.

Dividend Sustainability

No dividend was declared (DPS 0), and payout ratio is 0%, appropriate given negative earnings and ongoing investment. With operating losses and cash burn, distributable capacity is intentionally conserved. Free cash flow coverage is not measurable due to undisclosed investing cash flows, but negative OCF alone would preclude sustainable dividends. The implied capital allocation policy prioritizes funding R&D, commercialization, and runway over shareholder distributions. Until the company achieves positive and stable OCF, dividend initiation appears unlikely. Any future policy would depend on achieving breakeven, visibility into recurring cash generation, and capital needs for growth.

Risk Assessment

Business Risks:

• Commercialization risk: converting pilots/PoCs into scaled, recurring deployments may take longer than expected.
• Margin risk: low disclosed gross margin and high opex intensity could delay breakeven.
• Customer concentration and order timing risk typical of deep-tech enterprise sales.
• Competitive risk from global computer vision/SLAM and autonomy software providers.
• Technology execution risk, including maintaining performance leadership and roadmap delivery.
• Pricing and mix risk between license/subscription vs. lower-margin services or NRE.
• Partner/channel dependency risk for integration and distribution.
• FX risk if a meaningful portion of sales or costs are non-JPY.

Financial Risks:

• Cash burn risk: OCF (-434 million yen in H1) exceeding net loss indicates sustained cash requirements.
• Financing risk: reliance on external capital (1.85 billion yen raised) if losses persist.
• Working capital risk: potential receivable build and collection timing affecting cash.
• Valuation risk from earnings volatility and limited operating leverage to date.
• Disclosure risk: limited visibility on cash, investing flows, and equity ratio in reported fields.

Key Concerns:

• Operating leverage remains weak despite 170% YoY revenue growth; operating loss unchanged at -416 million yen.
• Gross margin quality is modest at 29.1% and underlying cost allocations are unclear.
• OCF is more negative than net income, signaling heavier cash burn than accruals.
• Heavy dependence on external financing to fund runway.
• Limited disclosure on cash and investing cash flows constrains FCF and runway precision.

Investment Implications

Key Takeaways:

• Top-line growth accelerated to 400 million yen, but profitability remains distant.
• Balance sheet strength is high with implied equity ratio ~89.5% and low leverage.
• Cash burn is substantial; runway appears multi-half-year but depends on continued discipline.
• Non-operating items partially mitigated losses at the ordinary level; sustainability uncertain.
• Improving gross margin and operating efficiency are critical for breakeven trajectory.

Metrics to Watch:

• Order backlog, ARR/recurring revenue mix, and cohort retention.
• Gross margin progression and project vs. license revenue mix.
• Operating expense growth vs. revenue growth (incremental margin).
• Operating cash flow and working capital movements (DSO, unbilled receivables).
• Cash balance and additional financing activity.
• Conversion rate from PoC to production deployments and partner-led wins.

Relative Positioning: Within TSE Growth/tech peers, Kudan exhibits stronger recent revenue growth but weaker margin and operating leverage, balanced by a fortified equity-rich balance sheet and low financial leverage; the company remains in an investment phase relative to more mature software peers.

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