USS Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥53.98B
• Operating Income: ¥28.71B
• Net Income: ¥18.32B
• EPS: ¥42.67

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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

USS (4732) reported solid FY2026 Q2 consolidated results under JGAAP, with revenue of ¥53,979 million (+7.0% YoY) and operating income of ¥28,709 million (+9.4% YoY), indicating healthy operating leverage. Net income grew 10.0% YoY to ¥19,951 million, outpacing revenue growth and reflecting margin expansion and disciplined cost control. Gross profit of ¥31,392 million implies a gross margin of 58.2%, underscoring the high-margin, fee-based nature of the business. Operating margin is very strong at approximately 53.2%, and ordinary income of ¥29,041 million was slightly above operating income, suggesting minor positive non-operating contributions. The DuPont analysis shows a robust net margin of 36.96% and conservative financial leverage of 1.26x, resulting in a reported ROE of 9.94%, which matches the calculated figure. Asset turnover of 0.214x is modest and consistent with a balance sheet carrying significant liquid assets and property required for operations. Liquidity remains excellent with a current ratio of 282.8% and quick ratio of 279.5%, reflecting ample short-term coverage. The balance sheet is strong: total assets are ¥252,738 million and total equity is ¥200,681 million, implying an equity ratio around 79.4% (the reported 0.0% is an unreported placeholder). Debt-to-equity of 0.30x and negligible interest expense (¥4 million) yield an extraordinary interest coverage ratio of 7,177x, highlighting minimal financial risk. Operating cash flow was ¥15,105 million, equating to 0.76x net income, which suggests some working capital absorption or timing effects; depreciation and capex data are not disclosed, limiting free cash flow evaluation. Investing cash flow is shown as ¥0 and cash and equivalents are shown as ¥0, which should be treated as undisclosed rather than actual values. Financing cash outflows of ¥10,139 million indicate continued shareholder returns and/or debt servicing, but the dividend per share and payout ratio fields are undisclosed. Overall, USS demonstrates resilient earnings, strong margins, and a fortress balance sheet, with the main analytical constraints stemming from unreported items (D&A, cash, investing cash flows, shares, DPS). The combination of high profitability, low leverage, and ample liquidity supports medium-term stability. Key watchpoints include sustainability of auction volumes, fee dynamics, and the normalization of OCF relative to net income. Given the limited disclosure of certain cash flow and capital allocation details, interpretations of free cash flow and dividend sustainability require caution. Despite these limitations, the trajectory in revenue, operating income, and net income is favorable. USS appears well positioned to navigate cyclical fluctuations given its strong unit economics and conservative capital structure.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 36.96%
• asset_turnover: 0.214x
• financial_leverage: 1.26x
• calculated_ROE: 9.94%
• commentary: ROE is driven predominantly by a very high net margin, while asset turnover is modest and leverage is conservative. Incremental ROE improvement is most likely to come from sustaining high margins and improving asset utilization. margin_quality:
• gross_margin: 58.2% (Gross profit ¥31,392m on revenue ¥53,979m)
• operating_margin: ≈53.2% (Operating income ¥28,709m)
• ordinary_margin: ≈53.8% (Ordinary income ¥29,041m)
• net_margin: 36.96% (Net income ¥19,951m)
• tax_rate_observation: The automated metric shows 0.0%, but using disclosed figures, an approximate effective tax rate is ~29% (¥8,263m tax vs. pre-tax near ordinary income), subject to undisclosed minority interests/adjustments. operating_leverage: Revenue grew 7.0% YoY while operating income grew 9.4% YoY and net income grew 10.0% YoY, indicating positive operating leverage from scale benefits and cost discipline. High fixed-cost absorption in the auction platform likely contributed to margin expansion.

Growth Assessment

revenue_sustainability: Top-line growth of 7.0% YoY is solid and likely reflects healthy auction volumes and/or higher fee realization. The business model’s recurring fee structure supports defensibility, though volumes are sensitive to used-car supply/demand cycles. profit_quality: Operating income growth outpacing revenue suggests quality improvements via mix and operating efficiency. Net margin strength and minimal interest burden indicate clean earnings, though the OCF/NI ratio of 0.76 points to timing/working capital factors that should be monitored. outlook: With strong margins and a conservative balance sheet, USS is positioned to sustain mid-term earnings, contingent on vehicle turnover, membership activity, and fee stability. Key growth determinants include macro conditions affecting used vehicle supply, and competitive dynamics from digital auction platforms.

Financial Health

liquidity:

• current_ratio: 282.8%
• quick_ratio: 279.5%
• working_capital: ¥93,490 million
• commentary: Ample near-term liquidity with significant cushion to meet obligations; working capital management remains a lever for cash conversion improvement. solvency:
• total_assets: ¥252,738 million
• total_equity: ¥200,681 million
• total_liabilities: ¥59,993 million
• equity_ratio: ≈79.4% (derived; reported 0.0% is undisclosed)
• debt_to_equity: 0.30x
• interest_coverage: ≈7,177x
• commentary: Low leverage and extremely high interest coverage indicate very strong solvency and low refinancing risk. capital_structure: Equity-heavy structure provides resilience. Limited reliance on interest-bearing debt (interest expense only ¥4m) suggests capacity for continued shareholder returns or investment without compromising stability.

Cash Flow Quality

earnings_quality: OCF of ¥15,105m vs. net income of ¥19,951m (OCF/NI = 0.76) indicates lower cash conversion this period, likely due to working capital outflows or timing effects. Depreciation and amortization are undisclosed, constraining accruals analysis. FCF_analysis: Investing cash flow is shown as ¥0 (undisclosed), so Free Cash Flow cannot be reliably computed. Using OCF alone is insufficient to infer sustainable FCF without capex information. working_capital: Strong current ratios suggest headroom, but the lower OCF/NI points to incremental investment in receivables or other operating assets. Monitoring changes in receivables, payables, and deferred revenues is recommended.

Dividend Sustainability

payout_ratio_assessment: Payout ratio and DPS are undisclosed in this dataset. Historical policy is not provided; therefore, we cannot quantify payout discipline from this period alone. FCF_coverage: With investing cash flows undisclosed, FCF is indeterminable. However, OCF of ¥15.1bn and financing outflows of ¥10.1bn suggest capacity for shareholder returns if capex is moderate; this is contingent on actual capex needs. policy_outlook: Given strong margins and low leverage, the company appears structurally capable of supporting distributions while funding operations, subject to capex and working capital demands. Greater disclosure on DPS, buybacks, and capex would enhance visibility.

Risk Assessment

Business Risks:

• Cyclicality in used car supply/demand affecting auction volumes and fee revenue
• Competitive pressure from alternative auction platforms and digital marketplaces
• Pricing and take-rate sensitivity among members/dealers
• Operational disruptions (IT system outages, cybersecurity, or physical site interruptions)
• Natural disasters or logistical constraints impacting auction schedules
• Regulatory or tax changes affecting automotive recycling/transactions

Financial Risks:

• Working capital volatility impacting cash conversion (OCF/NI at 0.76)
• Potential capex requirements not disclosed, creating uncertainty in FCF
• Concentration of income in high-margin fee streams vulnerable to volume shocks
• Interest rate moves are a limited direct risk given minimal interest expense, but could affect macro demand

Key Concerns:

• Insufficient disclosure on D&A, capex, cash balances, and DPS complicates FCF and dividend assessment
• Sustainability of recent margin gains if volumes normalize
• Asset turnover of 0.214x indicates room for efficiency improvement

Investment Implications

Key Takeaways:

• Strong revenue growth (+7.0% YoY) with superior operating leverage (+9.4% YoY OI, +10.0% YoY NI)
• Exceptional margin profile: ~53% operating margin and 36.96% net margin
• Conservative balance sheet with derived equity ratio ~79.4% and D/E 0.30x
• Cash conversion below earnings this period (OCF/NI 0.76), warranting monitoring
• Interest burden negligible; interest coverage >7,000x reduces solvency risk
• DuPont ROE of 9.94% driven by high margins rather than leverage

Metrics to Watch:

• Auction volumes, member activity, and average fee per vehicle
• OCF/Net income and changes in working capital (receivables/payables)
• Capex and investing cash flows to refine FCF outlook
• Operating margin sustainability and cost structure rigidity
• Capital allocation (dividends, share buybacks) and financing cash flows
• Asset turnover trends and utilization of cash/idle assets

Relative Positioning: Within Japanese listed service-oriented peers, USS exhibits above-average profitability and a stronger balance sheet, with ROE supported by exceptional margins and low leverage rather than financial risk-taking.

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