Oricon Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.80B
• Operating Income: ¥726M
• Net Income: ¥448M
• EPS: ¥34.85

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

Verdict: Solid top-line growth with resilient operating performance, but net margin compressed due to a higher tax burden; cash flow and balance sheet strength remain key positives. Revenue rose 19.5% YoY to 27.99, with operating income up 15.6% to 7.26 and ordinary income up 21.4% to 7.25, while net income declined slightly by 1.2% to 4.47. Gross profit reached 17.86, and SG&A was 10.59, supporting an operating margin of 25.9%. Using growth back-solves, operating margin likely compressed by about 90 bps YoY (from ~26.8% to 25.9%). Net margin contracted by roughly 338 bps YoY to 16.0%, driven primarily by a high effective tax rate of 38.3% and limited non-operating contribution. Ordinary income margin expanded modestly by about 44 bps, helped by non-operating income (interest income 0.20) offsetting small non-operating expenses. Earnings quality is strong: operating cash flow of 6.04 is 1.35x net income, indicating good cash conversion. The balance sheet is very conservative with net cash of ~38.9 (cash 40.54 minus total debt 1.62) and a current ratio of 394%, minimizing financial risk. Interest coverage is exceptionally high at ~338x, reflecting minimal leverage and strong operating earnings. ROE is 8.0%, underpinned by a high net margin and modest leverage, while asset turnover remains conservative at 0.40x. SG&A intensity at 37.8% of sales warrants monitoring as operating income growth lagged revenue growth. Dividend payout (calculated) of 121.8% looks elevated versus earnings; however, cash generation and net cash provide near-term flexibility pending clarity on full-year policy. Capex is light at 0.20, consistent with an asset-light model and supporting free cash generation. Working capital appears healthy with low inventories and manageable receivables. Forward-looking, maintaining revenue momentum while normalizing the tax rate would be the biggest levers to stabilize net margins and lift ROE. Overall, the quarter shows solid core execution with temporary net margin headwinds and strong financial resilience.

Profitability Analysis

ROE decomposition (DuPont): ROE 8.0% = Net Profit Margin (16.0%) × Asset Turnover (0.400) × Financial Leverage (1.25x). The component with the most notable change vs last year is the Net Profit Margin, which compressed by roughly 338 bps (derived from back-solved prior NI and revenue), despite stable operating performance. Business drivers include a high effective tax rate (38.3%) and a small net non-operating drag (non-op income 0.24 vs non-op expense 0.25), offsetting operating gains. Ordinary income margin expanded modestly (~+44 bps) on improved non-operating balance, but did not carry through to net due to taxes. Asset turnover of 0.40x reflects an asset-light, cash-rich balance sheet; given revenue growth outpaced asset changes (prior period assets not disclosed), turnover is likely stable to slightly higher, though data is limited. Financial leverage remains low at 1.25x, keeping ROE constrained but risk low; this is structurally sustainable given the net cash position. SG&A growth likely exceeded gross profit growth (operating income growth +15.6% vs revenue +19.5%), implying mild negative operating leverage; salaries at 2.52 within SG&A should be monitored for wage inflation or hiring ramp.

Growth Assessment

Revenue growth of +19.5% YoY indicates healthy demand across core services, with operating income up +15.6% showing solid but slightly lagging operating leverage. Ordinary income growth (+21.4%) exceeded revenue growth, aided by higher interest income (0.20) on a larger cash balance, partly offset by non-operating expenses (0.25). Net income fell -1.2%, primarily due to a higher effective tax rate (38.3%), overshadowing operational gains. Gross margin is high at 63.8%, consistent with a content/data-driven, asset-light model; durability depends on pricing power and cost control in content production/acquisition. Operating margin of 25.9% remains robust in absolute terms, though down ~90 bps YoY on our back-solve; further SG&A efficiency will be key to re-accelerate profit growth relative to sales. With capex low (0.20), the growth model is not capex-intensive, supporting cash conversion. Outlook hinges on sustaining subscription/advertising growth and managing content and personnel costs; normalization of the tax rate would be a meaningful upside to net profit. Near-term growth quality appears good given OCF/NI > 1.0 and minimal reliance on non-recurring gains.

Financial Health

Liquidity is very strong: current ratio 394% and quick ratio 394% (no warning flags). The company is in a net cash position of ~38.9 (cash 40.54 vs total debt 1.62), and D/E is a conservative 0.25x. Interest coverage is extremely robust at ~338x, reflecting low interest expense (0.02) and high EBITDA (7.71). Maturity mismatch risk is negligible: short-term loans (1.00) are dwarfed by cash and current assets (51.18). No off-balance sheet obligations are disclosed in the provided data. Equity stands at 56.18 with BVPS ~437.66 JPY, supporting capital resilience. No solvency concerns identified.

Cash Flow Quality

OCF/Net Income of 1.35x indicates high-quality earnings with good cash conversion. Working capital is healthy: accounts receivable 6.22 vs half-year revenue 27.99 implies roughly ~40 DSO, and inventories are negligible (0.04), reducing risk of inventory-related cash timing. Capex is modest at 0.20, suggesting structurally strong pre-financing free cash generation; investing CF beyond capex was unreported, so total FCF cannot be precisely calculated. Financing CF was -5.52, reflecting outflows for buybacks (-0.52) and likely dividends or debt-related cash flows (dividends unreported). No signs of working capital manipulation from the disclosed balances; cash increased or remained stable after capex and financing on the strength of OCF, though exact period-end C&E was unreported.

Dividend Sustainability

The calculated payout ratio of 121.8% exceeds the 60% sustainability benchmark, indicating potential pressure if maintained; however, the company’s strong OCF (6.04) and large net cash buffer provide near-term funding flexibility. Dividend amounts and timing are not disclosed, limiting precision on FCF coverage; buybacks totaled 0.52 in the period. Given light capex requirements (0.20), recurring FCF capacity appears supportive over a full year, assuming stable operating trends and absent large investing outflows. Policy outlook will depend on full-year earnings trajectory and tax rate normalization; a payout aligned closer to cash earnings would improve sustainability metrics.

Risk Assessment

Business Risks:

• Margin pressure from rising personnel costs (salaries 2.52 in SG&A) and content/data acquisition costs
• Potential softness in advertising-related revenues or subscription churn affecting topline growth
• High effective tax rate (38.3%) depressing net margins
• Dependence on brand/data credibility; reputational risks could impact demand

Financial Risks:

• Limited: very low leverage with net cash position reduces refinancing and liquidity risks
• Equity market volatility could affect returns on investment securities (7.68) and OCI
• Tax policy or audit adjustments could sustain elevated tax rates, pressuring net income

Key Concerns:

• Net margin compression (~-338 bps YoY) despite strong operating trends
• Operating margin compression (~-90 bps YoY) as SG&A grew faster than operating profit
• Goodwill (4.18) and intangibles (5.07) introduce potential impairment risk if growth slows
• Dividend payout (calculated) above earnings suggests potential need for adjustment if cash flows weaken

Investment Implications

Key Takeaways:

• Strong revenue growth (+19.5% YoY) with resilient operating performance (OP +15.6%)
• Net margin pressured by high tax rate; ordinary margin modestly improved
• Earnings quality high with OCF/NI at 1.35x and minimal capex
• Balance sheet exceptionally strong: net cash ~38.9 and current ratio ~394%
• Payout ratio (calc) >100% warrants monitoring versus cash generation and full-year guidance

Metrics to Watch:

• Effective tax rate trajectory and drivers
• SG&A ratio to sales and salary cost trend
• Operating margin progression and pricing power
• OCF/NI and working capital turns (DSO)
• Dividend policy disclosures and total shareholder returns
• Non-operating income sensitivity to interest rates (interest income 0.20)

Relative Positioning: A cash-rich, asset-light Japanese media/data company with strong operating margins and high cash conversion; low financial risk but net profits currently constrained by tax rate and mild operating margin compression. Not a trading company; equity-method income is not a driver here.

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