ROUND ONE Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥91.98B
• Operating Income: ¥14.95B
• Net Income: ¥8.85B
• EPS: ¥33.75

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: Solid Q2 under IFRS with resilient top-line growth and stable operating profitability, offset by mild net margin compression and elevated leverage. Revenue grew 6.9% YoY to 919.85, with operating income up 7.4% to 149.49, evidencing steady operating leverage. Gross profit reached 195.86, implying a 21.3% gross margin in line with the business’ post-pandemic run-rate. Operating margin is approximately 16.3%, improving by about 6 bps YoY based on implied prior-year figures, indicating good cost discipline. Net income increased 1.8% YoY to 88.52, translating to a net margin of 9.6% and an estimated margin compression of roughly 49 bps YoY, likely driven by a higher effective tax rate (33.7%) and below-the-line items. Cash generation was a standout: operating cash flow of 267.54 was 3.0x net income, and free cash flow of 155.80 comfortably funded dividends and capex. EBITDA was 358.43 (39.0% margin), supported by sizeable non-cash D&A (208.94), consistent with a capital-intensive, lease-heavy format. Balance sheet shows an equity ratio of 27.2% and D/E of 2.68x, indicating high leverage that warrants attention despite robust cash flows. Liquidity appears adequate with cash and equivalents at 602.57, but current liabilities detail is not disclosed, limiting a granular short-term liquidity check. Dividend outlays remain conservative (payout 26.1%, interim DPS of 4 JPY in Q1 and Q3), well-covered by FCF (6.7x), implying sustainability. Equity-method income is small (2.04; 1.5% of profit), confirming earnings are primarily operating in nature rather than investment-driven. ROE is a healthy 12.0% on DuPont math (9.6% margin × 0.339 asset turnover × 3.68 leverage), and reported ROIC of 13.4% is strong versus typical 7–8% targets. Earnings quality is high (OCF materially exceeds NI), with no evident working-capital red flags in disclosed data. Forward-looking, management appears to be balancing disciplined capex (~109.9) with shareholder returns while navigating wage, energy, and tax headwinds. Key watch items are same-store traffic, energy cost normalization, and leverage trajectory, particularly if expansion accelerates.

Profitability Analysis

ROE decomposition (DuPont): ROE 12.0% = Net profit margin 9.6% × Asset turnover 0.339 × Financial leverage 3.68x. Relative contribution: profitability (NPM) and leverage remain the dominant drivers; asset turnover is modest given a capital-intensive model. Change driver: implied slight operating margin expansion (+~6 bps) helped operating income, but net margin compressed (~49 bps) as the effective tax rate (33.7%) and below-the-line effects weighed on bottom line. Business context: revenue growth (+6.9% YoY) outpaced any visible SG&A growth (aggregate SG&A 39.76 not comparable YoY), and high D&A reflects continued investment and lease impacts; EBITDA margin of 39.0% underscores strong unit economics. Sustainability: operating margin stability looks sustainable near term given scale effects and cost management, but net margin is sensitive to tax rate and financing costs. Flags: net income growth (+1.8%) lagged revenue (+6.9%), indicating operating leverage did not fully translate to the bottom line. With many SG&A line items unreported, we cannot verify whether labor or utilities grew faster than sales, but the small operating margin expansion suggests cost control remains effective.

Growth Assessment

Top-line: Revenue +6.9% YoY to 919.85 reflects steady demand in amusement/entertainment; absent segment disclosure, growth appears broad-based. Quality: Operating income +7.4% slightly exceeded sales growth, indicating positive operating leverage; net income +1.8% lagged due to tax/other below-OP impacts. Mix/one-offs: Equity-method income is minimal (2.04), and non-operating items are largely unreported; results appear driven by core operations rather than one-off gains. Efficiency: Asset turnover at 0.339 is typical for a capex- and lease-intensive format; ROIC at 13.4% signals solid investment returns. Outlook: With strong OCF and controlled capex (109.9), the company has room to continue selective expansion and refurbishments without stressing the balance sheet. Watch for utility cost trends, wage inflation, and FX on overseas operations; these could sway net margin more than operating margin.

Financial Health

Leverage: D/E at 2.68x is high (warning threshold >2.0), while equity ratio stands at 27.2%, indicating a leveraged capital structure consistent with lease- and asset-heavy retail/entertainment. Liquidity: Cash & equivalents of 602.57 provide a cushion; however, current ratio and quick ratio are not calculable due to unreported current liabilities. Maturity mismatch: Short-term debt and lease maturity breakdowns are not disclosed here, limiting assessment of near-term refinancing risk; cash levels mitigate some of this risk. Coverage: Interest coverage is not calculable given unreported interest expense; EBITDA at 358.43 suggests headroom, but we cannot quantify. Solvency: Total assets 2,717.35 vs equity 737.77 indicates material leverage; continued FCF generation is important for de-risking.

Cash Flow Quality

Earnings quality: OCF/NI is 3.02x (>1.0 benchmark), a strong indicator that earnings are cash-backed. Free cash flow: FCF of 155.80 after capex of 109.90 and OCF of 267.54 comfortably funds dividends (22.28) and allows optionality for debt paydown or growth capex. Working capital: Specific components are limited (AR 19.24; inventories 57.79), and with current liabilities unreported, we cannot fully assess working-capital swings; no manipulation signs are evident from the high OCF/NI ratio. Sustainability: With EBITDA 358.43, recurring cash generation appears robust; barring a material step-up in capex or a downturn in traffic, FCF should remain positive.

Dividend Sustainability

Policy and payout: Interim DPS of 4 JPY in Q1 and Q3 (total 8 JPY so far) corresponds to a conservative payout ratio of 26.1%. Coverage: FCF coverage is 6.74x, indicating ample headroom to sustain and potentially grow dividends within earnings/FCF growth. Balance sheet context: Despite high D/E (2.68x), current dividend levels are modest and well-supported by OCF; management retains flexibility to prioritize deleveraging or reinvestment. Outlook: Given strong ROIC (13.4%) and cash generation, steady-to-incremental DPS progression appears feasible, contingent on macro demand and cost pressures.

Risk Assessment

Business Risks:

• Demand sensitivity to consumer discretionary spending and weather/seasonality affecting visitation.
• Input cost pressures, notably utilities and wage inflation, potentially compressing margins.
• Execution risk on new store openings/renovations and overseas expansion (unit economics, ramp periods).
• Health/safety or incident risk at venues leading to reputational and legal exposure.
• Competitive intensity from alternative leisure/entertainment formats.

Financial Risks:

• High leverage (D/E 2.68x) and potential exposure to rising interest rates; interest coverage not disclosed.
• Lease-related obligations under IFRS 16 elevating fixed-cost base and operating leverage.
• Refinancing/maturity concentration risk not assessable due to unreported current liabilities and debt tenor.
• Tax rate volatility (effective tax 33.7%) impacting net margins.

Key Concerns:

• Net margin compression (~49 bps YoY) despite operating margin stability.
• Data gaps on interest expense, detailed SG&A, and current liabilities limit precise risk quantification.
• Sensitivity of earnings to macro cycles and energy prices.

Investment Implications

Key Takeaways:

• Core operations are healthy: revenue +6.9% and operating income +7.4% with slight operating margin expansion.
• Earnings quality is strong: OCF/NI 3.0x and FCF 155.8 provide strategic flexibility.
• Net margin under pressure from tax/other below-operating items; NI growth +1.8% trails sales.
• Leverage elevated (D/E 2.68x) but mitigated by cash (602.6) and robust OCF.
• Dividend is conservative and well-covered (payout 26%, FCF coverage 6.7x).
• ROE 12% and ROIC 13.4% indicate efficient capital deployment.

Metrics to Watch:

• Same-store sales/traffic and utilization per center.
• Operating margin trend versus utility and labor cost inflation.
• Effective tax rate normalization and below-the-line impacts.
• Capex cadence and returns (payback/ROIC by project).
• Leverage trajectory (D/E, lease liabilities) and interest coverage once disclosed.
• OCF/NI ratio sustainability and inventory/AR turns.

Relative Positioning: Within domestic leisure/entertainment peers, profitability metrics (ROE ~12%, ROIC ~13%) are solid, supported by robust cash generation; leverage, however, is higher than conservative benchmarks, making cost control and steady traffic critical to maintain resilience.

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