ReproCELL Incorporated FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥974M
• Operating Income: ¥-546M
• Net Income: ¥-486M
• EPS: ¥-5.14

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: FY2026 Q2 was weak with steep top-line contraction and deep operating losses, partially cushioned by non-operating income, while liquidity remained very strong. Revenue fell to 9.74 (−26.2% YoY), indicating demand softness and/or project delays in core businesses. Gross profit was 3.87 with a gross margin of 39.7%, but SG&A of 9.34 overwhelmed gross profit, driving operating income to −5.46 and an operating margin of −56.1%. Ordinary income improved modestly versus operating loss due to 0.88 in non-operating income (notably 0.41 interest income) against 0.24 in non-operating expenses, narrowing the loss to −4.83. Net income was −4.86 and EPS was −5.14 JPY. Non-operating gains covered roughly 12% of the operating shortfall (0.64 net non-operating profit vs. −5.46 OI), highlighting reliance on financial income while core operations remain loss-making. Margin comparison in basis points versus prior year is not possible due to missing prior-period margin data; however, the current operating margin of −5,610 bps versus a 3,970 bps gross margin underscores severe operating deleverage. EBITDA was −5.13 (−52.7% margin), indicating losses even before D&A. Cash flow quality was mixed: OCF was −3.42 vs. net loss −4.86 (OCF/NI = 0.70x), flagging weaker cash conversion. Liquidity is a clear positive: cash and deposits of 26.35 and current assets of 65.53 comfortably cover current liabilities of 5.92 (current ratio 1,107%; quick ratio 1,084.7%). The balance sheet is conservatively financed with total liabilities of 6.88 and total equity of 86.75 (D/E 0.08x; equity ratio ~92.7%), providing substantial runway. Working capital is sizable at 59.61, aided by low payables (1.48) and meaningful financial assets (investment securities 24.54). ROE was −5.6% driven by a negative net margin (−49.9%), very low asset turnover (0.104), and modest leverage (1.08x). ROIC printed at −9.0%, firmly below the 5% warning threshold, pointing to subscale operations and underutilized asset base. Forward-looking, restoring operating leverage will require either material revenue recovery or structural SG&A reduction; otherwise, persistent cash burn will continue despite the strong liquidity. With dividends unreported and retained earnings negative (−4.28), shareholder returns appear unlikely near-term. Overall, the quarter underscores a stabilization priority: protect cash, tighten costs, and refocus on higher-margin, faster-turn products/services to enhance asset turnover.

Profitability Analysis

Step 1 (DuPont): ROE (−5.6%) = Net Profit Margin (−49.9%) × Asset Turnover (0.104) × Financial Leverage (1.08x). Step 2: The dominant driver is the sharp negative net margin; asset turnover is also low, while leverage is modest and not a meaningful driver. Step 3: The negative margin stems from a mismatch where SG&A (9.34) far exceeds gross profit (3.87), resulting in an operating margin of −56.1%; revenue contraction (−26.2% YoY) reduced scale and operating leverage. Step 4: Sustainability: Some elements appear structural (high fixed SG&A relative to revenue scale), though margin could partially recover with revenue normalization and cost actions; non-operating gains (interest income 0.41) are unlikely to sustainably offset core losses. Step 5: Concerning trends: SG&A is 95.9% of revenue and 2.41x gross profit, indicating inefficient cost absorption; asset turnover at 0.104 signals underutilized assets (notably cash and investment securities totaling ~50.9 of assets), suppressing returns.

Growth Assessment

Revenue declined 26.2% YoY to 9.74, pointing to demand softness and/or project timing issues. Gross margin at 39.7% suggests the product mix retains underlying contribution potential, but scale was insufficient to cover overhead. Operating income of −5.46 and EBITDA margin of −52.7% show material negative operating leverage. Non-operating income (0.88, with 0.41 interest income) partially mitigated losses, indicating reliance on financial income from large cash/investment balances, not operating growth. Without prior-period segment or backlog data, visibility on near-term revenue recovery is limited. Near-term growth hinges on reacceleration in core tools/services and potential contract wins; otherwise, cost rightsizing is needed to narrow losses. Outlook: Expect focus on SG&A control and mix improvement to stabilize margins; absent a revenue rebound, profitability recovery may be gradual.

Financial Health

Liquidity is very strong: current ratio 1,107% and quick ratio 1,084.7%; cash ratio ≈445% (26.35 cash ÷ 5.92 current liabilities). No explicit warning triggers (Current Ratio < 1.0 or D/E > 2.0) are present. Solvency is robust with D/E 0.08x and an equity ratio of ~92.7% (86.75/93.63). Maturity mismatch risk is low: current assets 65.53 far exceed current liabilities 5.92, and accounts receivable (3.29) plus cash (26.35) comfortably cover payables (1.48). Interest-bearing debt figures are unreported, but overall liabilities are small (6.88). Investment securities are sizable at 24.54, providing an additional liquidity cushion subject to market risk. No off-balance sheet obligations are disclosed in the provided data.

Cash Flow Quality

OCF was −3.42 versus net loss −4.86, yielding OCF/NI of 0.70x (below the 0.8 threshold), indicating weaker cash conversion and potential working capital or accrual pressure. Capex was −0.34; approximated FCF (OCF − Capex) is −3.76 for the period, implying continued cash burn absent financing. Financing CF was +6.81, likely from capital raising, which offset the operating deficit and boosted liquidity. Working capital appears conservative with low payables (1.48) relative to receivables (3.29) and inventories (1.32), but the negative OCF suggests either operating losses or WC outflows dominated. No explicit signs of aggressive WC management (e.g., unusually low inventories) are evident from the limited data; however, detailed WC component changes are not provided.

Dividend Sustainability

Dividends are unreported, and retained earnings are negative (−4.28), while net income is −4.86 and FCF approximates −3.76. Given losses and cash burn, internal coverage for dividends is not available. Policy-wise, priority is likely capital preservation and reinvestment over distributions until profitability and positive FCF are restored. Outlook: Dividends appear unlikely near-term; any future consideration would require sustained positive OCF and a reversal of accumulated deficits.

Risk Assessment

Business Risks:

• Revenue contraction (−26.2% YoY) indicating demand softness or project delays
• High operating leverage with SG&A at 95.9% of revenue, risking persistent losses at current scale
• Product mix/price pressure potentially capping gross margin around 40%
• Execution risk in achieving cost reductions without impairing growth capabilities
• Customer budget cyclicality in life science/biotech end markets

Financial Risks:

• Negative OCF (−3.42) and negative FCF (~−3.76) requiring ongoing financing or asset monetization
• Reliance on non-operating income (interest income 0.41) to offset core losses
• Market risk on investment securities (24.54) affecting comprehensive income and liquidity
• Potential equity dilution risk, given +6.81 financing CF amidst losses
• Low asset turnover (0.104) depressing ROE/ROIC (−9.0%)

Key Concerns:

• EBITDA margin −52.7% and operating margin −56.1% signal deep core losses
• OCF/NI at 0.70x (quality flag) indicates weaker cash conversion
• ROIC −9.0% below the 5% warning threshold
• Accumulated deficit (retained earnings −4.28) limits dividend capacity and flexibility

Investment Implications

Key Takeaways:

• Core operations are significantly loss-making; non-operating income partially offsets but is not a substitute for operational turnaround
• Liquidity is ample with cash 26.35 and current assets 65.53 vs. current liabilities 5.92, reducing near-term solvency risk
• Cost structure is misaligned with current scale (SG&A 2.41x gross profit), necessitating cost actions or rapid revenue recovery
• Asset-heavy balance sheet (cash and securities ~54% of assets) depresses asset turnover and returns
• ROE −5.6% and ROIC −9.0% require margin and turnover improvements to normalize

Metrics to Watch:

• Quarterly revenue trajectory and order/backlog trends
• Gross margin mix progression from 39.7% toward higher contribution levels
• SG&A-to-revenue ratio (currently ~96%) and absolute SG&A reduction
• OCF and FCF trends; cash burn rate vs. cash and securities balance
• Utilization or monetization of investment securities; impact on comprehensive income
• Equity issuance or other financing activity (potential dilution)

Relative Positioning: Versus domestic life science tools and small-cap biotech services peers, the company shows weaker profitability and cash conversion but superior liquidity and a conservative balance sheet; near-term positioning is defensive, hinging on cost discipline and revenue stabilization to restore operating leverage.

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