Tsubota Laboratory Incorporated FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥102M
• Operating Income: ¥-351M
• Net Income: ¥-333M
• EPS: ¥-12.98

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

Tsubota Laboratory (4890) reported FY2026 Q2 standalone JGAAP results marked by steep top-line contraction and continued operating losses, consistent with an early-stage, R&D-centric business model. Revenue was 102 million yen, down 78.9% YoY, indicating a sharp decline in commercial activity or the absence of milestone/licensing revenues booked in the prior year. Operating income was a loss of 351 million yen, worsening by 15.1% YoY, while net loss was 333 million yen, a 27.1% YoY deterioration, implying limited cost flexibility against a lower revenue base. The reported gross profit of 485 million yen exceeds revenue, which is atypical and suggests non-standard classification (e.g., grants/other operating income included above the operating line) or differing definitions under company-specific JGAAP presentation; therefore, gross margin should not be interpreted in the conventional sense. DuPont analysis shows ROE at -25.79%, driven primarily by a deeply negative net margin (-326.47%) and low asset turnover (0.054), with only moderate financial leverage (1.46x). EBITDA was -335.8 million yen and the EBITDA margin -329.2%, highlighting a heavy fixed-cost and R&D burden relative to a small revenue base. Operating cash flow was -505.8 million yen in the half, larger in magnitude than the accounting loss (OCF/NI of 1.52), indicating cash burn exceeding accrual losses due to working capital movements and non-cash items. Liquidity appears ample on the face of ratios (current ratio 288.8%, quick ratio 288.8%), supported by reported working capital of 1.599 billion yen, though the balance sheet presentation has inconsistencies that limit precision. Total assets were 1.888 billion yen against total liabilities of 915.9 million yen and total equity of 1.291 billion yen; these figures do not reconcile cleanly (A ≠ L + E), indicating disclosure or mapping issues rather than true imbalances. Interest expense was minimal at 0.6 million yen with an extremely negative interest coverage ratio due to negative EBITDA, but absolute interest burden is not a near-term risk. No dividends were paid (DPS 0), which is appropriate given negative earnings and cash burn. Free cash flow could not be derived from disclosed investing cash flows (reported as zero, likely undisclosed), limiting assessment of investment intensity. The equity ratio was shown as 0.0%, which should be treated as undisclosed rather than zero; reported equity suggests the company is equity-funded, consistent with an R&D-stage profile. Overall, results reflect a company still pre-scale, investing in development with limited revenue visibility and meaningful cash outflows. The principal concerns are revenue sustainability, the path to monetization, and the runway to reach breakeven given negative OCF. Data limitations (several zero placeholders and inconsistent line items) constrain granular ratio analysis; conclusions rely on the provided non-zero metrics and directional trends.

Profitability Analysis

ROE of -25.79% is explained by a -326.47% net profit margin, 0.054x asset turnover, and 1.46x financial leverage (DuPont). The dominant driver is margin pressure: revenue fell 78.9% YoY to 102 million yen while operating loss stayed large at -351 million yen. The reported gross profit of 485 million yen, exceeding revenue, indicates classification effects (likely subsidies/other operating income captured above operating income) and prevents using the gross margin (475.7%) as a quality indicator. EBITDA of -335.8 million yen and an EBITDA margin of -329.2% reflect substantial fixed costs (notably R&D and SG&A) against a small revenue base, implying high operating leverage. With such leverage, revenue volatility translates disproportionately into operating results; the 78.9% revenue decline likely explains much of the YoY deterioration in operating loss (-15.1%). Ordinary loss (-333 million yen) is close to operating loss, implying limited non-operating income/expenses in the period. Interest expense is negligible (0.6 million yen) and not a profitability constraint. Effective tax rate analysis is not meaningful here given losses and reporting anomalies (tax expense reported but effective tax rate shown as 0%). Overall, profitability is constrained by early-stage commercialization, heavy R&D, and low asset turnover rather than financing costs.

Growth Assessment

Revenue contracted 78.9% YoY to 102 million yen, suggesting lumpy commercialization or the absence of non-recurring income recognized in the prior year. Operating loss widened by 15.1% YoY to -351 million yen, and net loss widened 27.1% to -333 million yen, indicating limited ability to flex costs downward with revenue. Given the scale of the decline, near-term growth visibility is weak; recovery likely depends on pipeline progress, regulatory milestones, licensing, or initial product sales ramp. The anomalous gross profit level relative to revenue indicates other operating income/grants may be material; growth could therefore hinge on securing continued grants or collaboration income in addition to product revenues. Asset turnover is very low (0.054x), consistent with limited commercialization; improving turnover will require scaling sales without proportional asset growth. Outlook near term is cautious: absent a clear catalyst for revenue normalization, losses are likely to persist, and operating leverage could magnify revenue swings. Monitoring sequential revenue trends, order backlog, and partnership updates will be key to assessing sustainability.

Financial Health

Liquidity appears strong on headline ratios: current ratio 288.8% and quick ratio 288.8%, with working capital of 1,598.7 million yen. This suggests ample near-term capacity to meet obligations despite operating losses. Leverage is moderate with a debt-to-equity ratio of 0.71x and minimal interest expense (0.6 million yen), indicating limited financial risk from debt service. However, several balance sheet items are inconsistent or undisclosed: current assets (2,445.3 million yen) exceed total assets (1,888.0 million yen), equity ratio is shown as 0.0% despite reported equity of 1,291.0 million yen, and cash is undisclosed. These constraints limit precision in solvency analysis. Based on the provided totals, the capital structure appears equity-heavy with manageable liabilities, consistent with R&D-stage funding. Sustained negative OCF, if continued, will gradually erode liquidity unless offset by financing or revenue inflection.

Cash Flow Quality

Operating cash flow was -505.8 million yen for the half, against a net loss of -333.0 million yen (OCF/NI of 1.52), indicating cash burn exceeds accrual losses—typically due to working capital outflows and timing differences. EBITDA was -335.8 million yen, yet OCF was more negative, implying additional cash outlays beyond core operating expenses (e.g., increased receivables, reduced payables, or R&D payments). Investing cash flow is undisclosed (reported as zero), preventing a full free cash flow analysis and obscuring capex intensity. Financing cash flow was modest at -14.3 million yen (likely lease repayments or fees), indicating no material capital raising in the period. With cash and equivalents undisclosed, runway cannot be quantified; however, large working capital and low interest burden partly mitigate near-term liquidity risk. Overall earnings quality is weak in cash terms, as losses translate into deeper cash outflows, and the business remains dependent on external funding or future commercialization to sustain operations.

Dividend Sustainability

No dividends were paid (DPS 0), with a payout ratio of 0%. Given negative earnings (EPS -12.98) and negative operating cash flow (-505.8 million yen), dividend capacity is absent. Free cash flow coverage cannot be assessed due to undisclosed investing cash flow, but operating cash burn alone precludes distributions. The appropriate policy stance is capital preservation to support R&D and commercialization. Until the company achieves consistent positive OCF or substantial recurring revenues, dividend sustainability is not applicable.

Risk Assessment

Business Risks:

• Commercialization risk from a small and volatile revenue base (revenue -78.9% YoY).
• Dependence on R&D outcomes, regulatory milestones, and potential grants or partnerships.
• High operating leverage: fixed costs drive large losses when revenue dips.
• Customer concentration or milestone lumpiness risk (implied by revenue volatility).
• Market adoption uncertainty for pipeline/technologies in ophthalmology-related fields.

Financial Risks:

• Sustained operating cash burn (-505.8 million yen in the half) eroding liquidity over time.
• Data limitations on cash and investing flows complicate runway assessment.
• Moderate leverage (debt-to-equity 0.71x) could rise if external funding is required.
• Negative interest coverage due to negative EBITDA, albeit with low absolute interest costs.

Key Concerns:

• Revenue sustainability and visibility after a steep YoY decline.
• Path to reducing cash burn and achieving operating breakeven.
• Balance sheet disclosure inconsistencies (A ≠ L + E; equity ratio undisclosed; cash undisclosed) that limit analytical precision.

Investment Implications

Key Takeaways:

• Top-line fell 78.9% YoY to 102 million yen; losses widened at operating and net levels.
• ROE -25.79% reflects very weak margins and low asset turnover; leverage is only a minor factor.
• EBITDA margin -329.2% underscores high fixed cost intensity relative to scale.
• Operating cash burn (-505.8 million yen) exceeds the accounting loss, pressuring liquidity over time.
• Headline liquidity is strong (current ratio 288.8%; working capital 1.60 billion yen), but cash is undisclosed.
• Balance sheet and income statement contain classification anomalies; interpret gross margin and equity ratio with caution.

Metrics to Watch:

• Sequential revenue and backlog/contract wins to gauge commercialization traction.
• Operating cash flow and working capital movements to track burn and liquidity.
• R&D spend trajectory and milestone/regulatory updates that can drive non-recurring income.
• Capital raising activity and debt levels (debt-to-equity currently 0.71x).
• Clarity on cash and investing cash flows to assess runway and capex needs.

Relative Positioning: Relative to Japanese early-stage biotech/medtech peers, the company exhibits typical features of pre-scale operations: low asset turnover, heavy R&D expense, negative EBITDA, and dependence on external funding or milestones; liquidity appears comparatively comfortable on reported working capital, but disclosure gaps are wider than average, complicating peer benchmarking.

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