LANCERS,INC. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.49B
• Operating Income: ¥36M
• Net Income: ¥48M
• EPS: ¥2.67

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

Lancers Co., Ltd. (44840) reported FY2026 Q2 consolidated results under JGAAP with revenue of ¥2.486bn, up 10.2% YoY, indicating ongoing topline momentum. Despite double-digit growth, profitability compressed: operating income was ¥36m, down 26.9% YoY, and net income was ¥43m, down 9.2% YoY, reflecting negative operating leverage. The reported gross profit margin was 40.9%, indicating decent unit economics for a platform/service model, but the EBITDA margin remained thin at 3.7%, suggesting elevated SG&A and/or investment spend. DuPont analysis yields a net margin of 1.73%, asset turnover of 0.693x, and financial leverage of 2.55x, resulting in an ROE of 3.06%, modest for a growth-oriented platform business. Liquidity appears solid with a current ratio of 178% and working capital of approximately ¥1.095bn, providing near-term operating flexibility. Leverage is moderate with a debt-to-equity ratio of 1.37x and financial leverage of 2.55x, while interest coverage is comfortable at 17x given very low interest expense. Ordinary income of ¥41m and a reported effective tax rate of 0.0% (with tax expense disclosed) indicate limited tax burden this period. Cash flow quality is weak: operating cash flow was negative at ¥-92m, producing an OCF/NI of -2.14, implying earnings were not cash-convertive this quarter due to working capital movements or timing effects. Investing cash flow and cash balance are shown as zero in the dataset, which should be treated as unreported items rather than actual zeros; thus, free cash flow is not reliably determinable despite the table showing 0. The company paid no dividend (DPS ¥0), consistent with a reinvestment stance and the need to improve cash generation before considering distributions. The YoY decline in operating income despite higher revenue implies cost inflation, mix shifts, or strategic spend (e.g., product, salesforce, or marketing) outweighed gross profit gains. Asset efficiency (0.693x turnover) is reasonable for this scale but will need to improve, or margins must expand, to lift ROE above the cost of equity. Overall, the quarter shows healthy demand but pressure on margins and cash conversion, with balance sheet liquidity offering a buffer. Data limitations exist around several zero-reported line items (cash, investing CF, equity ratio, share counts), which should be interpreted as undisclosed rather than literal zero.

Profitability Analysis

ROE of 3.06% decomposes into net margin 1.73% × asset turnover 0.693 × financial leverage 2.55, indicating modest profitability primarily constrained by a thin net margin. Gross margin at 40.9% suggests acceptable pricing/take-rate dynamics, but the EBITDA margin of 3.7% and operating margin of 1.4% (¥36m/¥2,486m) point to heavy SG&A or investment drag. Operating income declined 26.9% YoY despite a 10.2% revenue increase, indicating negative operating leverage this period; fixed cost absorption did not keep pace with revenue growth. Interest burden is minimal (interest expense ¥2.1m; interest coverage ~17x), so below-the-line impacts are limited. The drop from gross margin to operating margin is steep, implying the primary margin pressure sits in operating expenses rather than cost of sales. Ordinary income of ¥41m exceeded operating income modestly, reflecting minor financial income/expense effects. Effective tax rate is shown as 0.0% in the metrics despite tax expense being disclosed; we assume a low tax burden this period. Sustained profitability improvement will require either SG&A efficiency gains, improved cohort monetization, or higher take rates to translate revenue growth into operating leverage.

Growth Assessment

Revenue grew 10.2% YoY to ¥2.486bn, indicating resilient demand for Lancers' platform and related services. The topline trend appears positive, but the conversion to profit weakened: operating income fell 26.9% YoY and net income declined 9.2% YoY, suggesting elevated spending or cost pressures. Gross margin of 40.9% is consistent with a services/platform model, but EBITDA margin at 3.7% highlights limited scalability realized in the period. The quality of growth is mixed due to negative OCF (¥-92m), implying working capital consumption—potentially higher receivables or timing of payables/escrow flows common in marketplace models. Sustainability will depend on stabilizing unit economics (take rate, churn/retention of enterprise accounts, and order frequency) and disciplining SG&A. With interest costs low and balance sheet liquidity healthy, the company has runway to pursue growth initiatives. In the near term, the outlook hinges on improving operating leverage in H2, better cash conversion, and maintaining double-digit revenue growth while curbing expense growth.

Financial Health

Liquidity: Current ratio 178.4% and quick ratio 178.4% (inventories undisclosed) indicate strong short-term solvency; working capital stands at ~¥1,094.9m. Cash and equivalents show as zero in the dataset (treated as undisclosed), so precise liquidity headroom cannot be quantified, but current assets of ¥2.492bn provide comfort against current liabilities of ¥1.397bn. Solvency: Debt-to-equity is 1.37x and financial leverage 2.55x, suggesting moderate balance-sheet leverage. Interest coverage is robust at ~17x due to low interest expense (¥2.1m), limiting refinancing risk in the near term. Capital structure: Total assets ¥3.589bn against equity ¥1.407bn and liabilities ¥1.922bn; the equity ratio is shown as 0.0% in the dataset and should be treated as undisclosed rather than literal zero; implied equity ratio by the provided balances is roughly 39%. Overall, the company appears adequately capitalized with manageable leverage, though sustained negative OCF would erode flexibility over time.

Cash Flow Quality

Earnings quality is weak this period: OCF/Net income is -2.14, indicating that reported profits did not translate into cash due to working capital movements or timing effects. Operating CF was ¥-92.1m despite net income of ¥43m and D&A of ¥55.5m, pointing to a material outflow in non-cash working capital (e.g., receivables growth, settlement timing typical of marketplace models, or other current assets). Investing CF is shown as 0 (undisclosed), so we cannot reliably compute free cash flow; the table’s FCF value of 0 should be treated as non-informative rather than actual zero. EBITDA of ¥91.5m versus OCF of ¥-92.1m underscores the magnitude of working capital drag. Sustained negative OCF would pressure liquidity despite current asset buffers; monitoring collections, payables cycles, and any escrow-related balances is critical. The low interest burden mitigates cash outflows below the line, but cash generation from core operations needs improvement to support reinvestment without incremental funding.

Dividend Sustainability

The company paid no dividend (DPS ¥0; payout ratio 0.0%). Given thin profitability (net margin 1.73%, ROE 3.06%) and negative operating cash flow in the period, retention of earnings is sensible. Free cash flow is not ascertainable due to undisclosed investing cash flows and capex; thus, FCF coverage metrics are not meaningful despite the table showing 0. Absent a clear, sustained positive FCF trajectory and stronger margins, initiating or increasing dividends would be challenging. Policy-wise, management is likely to prioritize reinvestment and balance sheet stability over distributions in the near term, contingent on progress in operating leverage and cash conversion.

Risk Assessment

Business Risks:

• Margin compression from elevated SG&A and customer acquisition costs reducing operating leverage
• Competitive intensity in freelance/gig and HR-tech marketplaces pressuring take rates and growth
• Macroeconomic slowdown reducing client project budgets and transaction volumes
• Regulatory/labor law changes affecting contractor classification, fees, or compliance costs
• Client concentration or cohort fatigue affecting repeat usage and revenue predictability
• Platform trust and payment-flow risks (escrow timing, disputes) impacting user experience and cash cycles

Financial Risks:

• Negative operating cash flow driven by working capital outflows and timing effects
• Moderate leverage (D/E ~1.37x) could constrain flexibility if profitability weakens
• Potential need for external financing if cash conversion does not improve
• Limited visibility on cash balance and capex due to undisclosed items
• Exposure to interest rate normalization on any floating-rate obligations, albeit current interest expense is low

Key Concerns:

• Operating income down 26.9% YoY despite 10.2% revenue growth (negative operating leverage)
• OCF/NI of -2.14 indicates weak earnings-to-cash conversion
• Thin EBITDA margin at 3.7% with significant SG&A burden
• Dependence on working capital dynamics common to marketplace models

Investment Implications

Key Takeaways:

• Topline momentum (+10.2% YoY) but margin compression led to lower operating and net income
• ROE of 3.06% is constrained by a 1.73% net margin; leverage and turnover are not the primary bottlenecks
• Liquidity appears solid (current ratio 178%) but negative OCF is a watchpoint
• Interest burden is minimal (17x coverage), limiting downside from financing costs
• Data limitations on cash, capex, and equity ratio require cautious interpretation of FCF and solvency metrics

Metrics to Watch:

• Operating expense growth vs. revenue (to assess operating leverage inflection)
• Cash conversion cycle: receivables days, payables days, and any escrow-related working capital
• Take rate and gross margin stability
• EBITDA margin progression and SG&A efficiency
• OCF trajectory and disclosure of capex/investing CF to assess true FCF
• Customer retention/cohort revenue and enterprise penetration

Relative Positioning: Within Japan’s HR-tech/gig-economy and platform peers, Lancers demonstrates healthy revenue growth but lags on profitability and cash conversion. Balance sheet liquidity is adequate, and leverage is moderate, providing runway to improve unit economics and operating leverage; near-term execution on SG&A efficiency and working capital discipline will be critical to closing the profitability gap.

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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