infoNet inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥884M
• Operating Income: ¥-112M
• Net Income: ¥-137M
• EPS: ¥-67.60

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

Verdict: FY2026 Q2 was weak operationally with a continued operating loss, but cash generation surprised on the upside, easing immediate liquidity concerns. Revenue declined 3.5% YoY to 8.84, reflecting demand softness and/or project timing effects. Gross profit was 3.10 with a gross margin of 35.1%, while SG&A of 4.22 exceeded gross profit, driving an operating loss of -1.12 (operating margin -12.7%). Ordinary income was -1.14 (+56.7% YoY as reported, but YoY growth on a negative base is not economically meaningful), and net income widened to -1.37 (+356.7% YoY on a negative base). Non-operating items were small (income 0.01, expenses 0.04), with interest expense at 0.04. Depreciation and amortization totaled 0.46, implying EBITDA of -0.66 and an EBITDA margin of -7.4%. Operating cash flow was positive at 1.18 despite the net loss, implying an OCF/NI ratio of -0.86 (flagged by the rule-of-thumb, though the negative denominator makes interpretation tricky). With capex of 0.71, implied free cash flow was roughly +0.47, supporting the balance sheet. Total assets were 19.50, equity 9.70 (BVPS ~481 JPY), and the current ratio was 135%, modestly below the 150% comfort level but above 100%. Interest-bearing loans were about 3.27 (short 1.00, long 2.27), against cash of 5.65, implying net cash and limited refinancing pressure. ROE is calculated at -14.1% (NPM -15.5%, asset turnover 0.453x, leverage 2.01x), indicating losses with modest balance sheet leverage. ROIC is deeply negative (-15.3%), highlighting poor capital efficiency, compounded by a high intangible/goodwill load (intangible assets 7.27, goodwill 2.78). Margins appear roughly flat YoY at the operating level given both revenue and operating income declined by 3.5%, but more detailed margin deltas are not available. Forward-looking, the company must either expand gross margin or rein in SG&A to restore operating breakeven, while the positive OCF suggests scope for self-funding near-term initiatives. Liquidity is adequate; earnings quality requires monitoring due to the gap between accounting loss and positive cash generation.

Profitability Analysis

ROE decomposition: ROE (-14.1%) = Net Profit Margin (-15.5%) × Asset Turnover (0.453x) × Financial Leverage (2.01x). The largest drag is the negative net profit margin, reflecting an operating margin of -12.7% and limited non-operating offset. Asset turnover at 0.453x is low, consistent with a service/solution model with sizeable intangibles and WIP timing; it does not compensate for negative margins. Financial leverage at ~2.0x is moderate and not the primary driver of ROE volatility. Business reason: SG&A (4.22) exceeds gross profit (3.10), indicating insufficient scale and/or elevated cost base (personnel, development, and selling costs) relative to revenue. Sustainability: Without SG&A rebase or gross margin expansion, negative margin pressure is likely to persist; cash generation this quarter appears aided by working capital but does not resolve structural P/L deficits. Watch for concerning trends: revenue contracted 3.5% YoY while SG&A remains elevated (no breakdown disclosed), implying negative operating leverage; this is unsustainable if revenue does not re-accelerate.

Growth Assessment

Top-line contracted 3.5% YoY to 8.84, suggesting softness in new bookings or delays in project recognition. Gross margin at 35.1% provides some cushion but is insufficient against SG&A intensity. Operating income declined to -1.12, with ordinary and net losses reflecting limited non-operating relief. The quality of growth is weak given negative EBITDA (-0.66) and negative operating margin (-12.7%). However, positive OCF (1.18) implies near-term cash efficiency, likely from collection discipline or milestone timing; sustainability is uncertain without recurring revenue evidence. Outlook hinges on cost actions (SG&A normalization) and revenue catalysts (new product wins, cross-sell, or pricing). Near-term, focus on achieving operating breakeven through mix shift and utilization improvements; medium-term recovery requires improving asset turnover and ROIC from the current -15.3%. Data gaps (no SG&A breakdown, R&D, or backlog) limit visibility on the durability of any growth reacceleration.

Financial Health

Liquidity: Current ratio 135% and quick ratio 135% exceed the 1.0 threshold but are below the 1.5 comfort benchmark; immediate liquidity is acceptable. Working capital is 2.35, with cash 5.65 and receivables 3.03 versus current liabilities 6.71, indicating adequate coverage of short-term obligations. Solvency: Debt-to-equity 1.01x is within a conservative range for non-capex-heavy businesses. Interest-bearing loans total ~3.27 against cash 5.65, implying a net cash position, which mitigates refinancing risk. Interest coverage is -30.05x (warning), but this is driven by operating losses rather than high interest; absolute interest burden is small (0.04). Maturity mismatch risk appears limited given cash plus receivables exceed current liabilities. No off-balance sheet obligations were disclosed in the data provided. Explicit warnings: Current ratio is above 1.0 (no immediate red flag); D/E below 2.0 (no leverage warning).

Cash Flow Quality

OCF/Net Income is -0.86x, which triggers a quality flag by rule, but interpretation is distorted by a negative net income denominator. Positive OCF (1.18) despite a net loss (-1.37) suggests non-cash charges (D&A 0.46) and favorable working capital movements; precise drivers cannot be confirmed due to lack of detail. Implied FCF is approximately +0.47 (OCF 1.18 minus capex 0.71), sufficient to cover modest financing outflows this quarter. Sustainability: If OCF strength is driven by timing of collections and payables, it may not recur; monitor OCF relative to EBITDA in subsequent quarters. No signs of aggressive working capital manipulation can be confirmed or refuted given missing inventories and payables turnover data. Financing cash outflow was -0.17, including share repurchases of -0.32, which appears funded by existing cash and OCF.

Dividend Sustainability

Dividend data were unreported; given negative net income and negative ROE, capacity for cash dividends is likely constrained. With implied positive FCF (~0.47) this quarter and a net cash position, a small dividend could be technically fundable, but sustainability would be poor absent a return to operating profitability. Payout ratio cannot be calculated; policy visibility is limited. Priority should remain on restoring positive operating margin and ROIC before committing to sustained distributions.

Risk Assessment

Business Risks:

• Revenue decline (-3.5% YoY) indicating potential demand softness or project timing delays
• Negative operating margin (-12.7%) and EBITDA (-7.4%) reflecting an unscaled cost base
• High intangible and goodwill concentration (intangible 7.27, goodwill 2.78; ~51% of assets) elevates impairment risk
• Execution risk in scaling sales while controlling SG&A absent detailed breakdown
• Potential customer concentration and project acceptance risks typical for solution/IT service models

Financial Risks:

• Interest coverage -30.05x due to operating losses (warning threshold breach)
• ROIC -15.3% indicates poor capital efficiency and value erosion if sustained
• Liquidity below comfort benchmark (current ratio 135%) though above 1.0
• Earnings quality uncertainty: OCF positive vs NI negative; dependence on working capital timing

Key Concerns:

• Sustained operating losses with limited evidence of margin inflection
• Need to rebase SG&A or accelerate revenue to restore breakeven
• Intangible-heavy balance sheet increases downside if growth stalls
• Data gaps (no SG&A breakdown, investing CF) limit transparency into cost drivers and capex needs

Investment Implications

Key Takeaways:

• Operational underperformance persisted: operating margin -12.7% with revenue down 3.5% YoY
• Cash generation outperformed earnings: OCF 1.18 enabled implied positive FCF of ~0.47
• Balance sheet is buffered by cash (5.65) exceeding interest-bearing loans (~3.27), limiting refinancing risk
• Capital efficiency weak: ROE -14.1% and ROIC -15.3% necessitate restructuring or growth reacceleration
• Margin trajectory roughly flat YoY given similar rates of decline in revenue and operating income
• High intangibles/goodwill (~51% of assets) raise impairment sensitivity if outlook weakens

Metrics to Watch:

• Quarterly operating margin and EBITDA trend toward breakeven
• OCF versus EBITDA to assess sustainability of cash generation
• SG&A growth relative to revenue (operating leverage)
• Bookings/backlog and churn/retention indicators (if disclosed)
• Goodwill impairment tests and amortization impacts on P/L
• Net cash position and any changes in short-term borrowing

Relative Positioning: Versus domestic small-cap IT/solution peers, infonet exhibits below-average operating profitability and ROIC but maintains a decent liquidity buffer and net cash; the path to competitiveness relies on improving operating leverage and monetizing its intangible asset base without further balance sheet strain.

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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