ReproCELL Incorporated FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥974M
• Operating Income: ¥-546M
• Net Income: ¥-104M
• 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

Reprocell (TSE: 4978) reported FY2026 Q2 consolidated results under JGAAP with revenue of ¥974 million, down 26.2% year over year, indicating a sharp top-line contraction. Despite the revenue decline, the reported gross profit of ¥706.6 million implies a high gross margin of 72.5%, suggesting a product/service mix skewed to higher-value offerings or strong pricing in core segments. Operating income was a loss of ¥546 million (essentially flat YoY per the +0.0% indicator), pointing to limited progress in cost containment relative to the revenue drop. Ordinary loss was ¥483 million and net loss was ¥486 million (EPS -¥5.14), translating to a net margin of -49.9%. The DuPont bridge shows ROE of -5.6%, driven by a deeply negative margin, very low asset turnover (0.104x), and low financial leverage (1.08x). Liquidity appears ample: current ratio is 764% and quick ratio 744%, supported by ¥4.26 billion of working capital and modest liabilities (total liabilities ¥686 million vs. equity ¥8.675 billion). Cash flow from operations was negative at ¥131 million, but materially better than the accounting loss, yielding an OCF/NI ratio of 0.27, which suggests some non-cash charges and/or working capital release partially cushioning cash burn. Financing cash inflow of ¥681 million indicates the company accessed external capital, which, alongside the strong equity base, supports near-term runway. EBITDA was -¥526 million (margin -54.0%), consistent with the operating loss and low operating leverage at current scale. Several data fields are undisclosed in XBRL (e.g., cash balance, investing cash flows, equity ratio field, interest expense, shares outstanding), which limits precision on cash runway and capital structure granularity; zeros should be read as unreported, not actual zeros. There is an internal inconsistency between the reported cost of sales and gross profit; however, the provided gross margin metric (72.5%) aligns with revenue and gross profit figures and is used in this analysis. The balance sheet shows a predominantly equity-financed structure, implying low solvency risk despite ongoing losses. The dividend remains suspended (DPS ¥0), appropriate given negative earnings and operating cash outflows. Overall, the quarter reflects pressure on scale and continued losses offset by strong liquidity and external financing, with medium-term outlook contingent on revenue recovery and SG&A discipline. Key watchpoints are revenue trajectory in core iPS cell/drug discovery support lines, gross margin durability, and the pace of cash burn. Absent visibility into investing cash flows and cash on hand, we infer runway more from working capital and low leverage than from cash balances. In sum, Reprocell remains subscale relative to its cost base but is not immediately constrained by balance sheet capacity.

Profitability Analysis

ROE of -5.6% decomposes into a net margin of -49.9%, asset turnover of 0.104x, and financial leverage of 1.08x, indicating that losses at the operating line are the primary driver of negative equity returns rather than leverage. Operating margin is -56.1% (operating loss of ¥546 million on revenue of ¥974 million), which, coupled with EBITDA margin of -54.0%, shows limited operating leverage at current revenue scale. The reported gross margin is high at 72.5%, implying solid unit economics or a revenue mix dominated by higher-margin products/services; however, SG&A and R&D intensity more than offset this advantage. Ordinary margin of -49.6% is slightly better than operating margin, suggesting minimal financial burden (consistent with low leverage and unreported but likely small interest expense). The effective tax rate reads 0% due to losses, albeit with ¥0.96 million tax expense likely reflecting non-deductible items or local taxes. Margin quality is mixed: gross margins are attractive, but the gap between gross margin and operating margin is wide, highlighting fixed-cost absorption issues and potentially elevated R&D and commercialization costs. With EBITDA close to operating loss (given modest D&A of ¥20.4 million), the business is not yet benefiting from scale efficiencies; incremental revenue growth should flow through at higher contribution if SG&A is held flat. Profit stabilization will require either a rebound in revenue volumes or structural cost actions.

Growth Assessment

Revenue declined 26.2% YoY to ¥974 million, signaling demand softness or project timing delays in core business lines. The magnitude of the decline suggests either loss of sizable contracts, push-outs in drug discovery-related services, or normalization after a one-off high base. Despite the contraction, the 72.5% gross margin indicates that pricing and mix remain supportive, which is a positive for future scaling if volumes recover. Operating loss was flat YoY (per +0.0%), implying that the company has held operating expenses roughly constant; this creates operating leverage potential if revenue rebounds. Ordinary and net losses narrowed slightly versus operating loss, consistent with a light financial burden. Profit quality is constrained at present: EBITDA is negative and OCF is also negative, though OCF outperformed net income, suggesting some working capital tailwinds or non-cash charges. Outlook hinges on pipeline conversion in higher-margin services and product lines within iPS/stem cell tools and drug discovery support; recovering volumes would likely improve absorption and margins. Given the strong working capital position, the company has time to execute on business development without immediate solvency risk. However, absent evidence of bookings growth or backlog, near-term visibility is low. Monitoring sequential revenue trends and order intake will be key to assessing sustainability.

Financial Health

Liquidity is strong with a current ratio of 764.4% and quick ratio of 743.6%, supported by current assets of ¥4.90 billion versus current liabilities of ¥0.64 billion. Working capital stands at ¥4.26 billion, providing a cushion for operating needs. Total liabilities are ¥685.8 million against total equity of ¥8.675 billion, implying low leverage (debt-to-equity ~0.08x using total liabilities as a proxy). While the equity ratio field is undisclosed (0.0% placeholder), balance sheet math implies an equity ratio near 92.7% (equity/total assets), indicating very conservative financing. Interest expense is undisclosed (0), and the interest coverage ratio is listed as 0.0x; practically, limited debt suggests low interest burden. Solvency risk appears low given the sizable equity base and modest liabilities. The financing cash inflow of ¥680.7 million in the period demonstrates access to external capital (likely equity or subsidies/loans), which further supports liquidity. The absence of disclosed cash and investing cash flows limits precision on cash runway and capex commitments, but the overall capital structure is robust.

Cash Flow Quality

Operating cash flow was -¥131.2 million versus net income of -¥486.0 million, yielding an OCF/NI ratio of 0.27, which indicates cash losses are materially smaller than accounting losses due to non-cash expenses and/or working capital movements. EBITDA of -¥525.6 million is close to the operating loss, consistent with modest D&A (¥20.4 million) and reinforces that cash burn is primarily driven by operating scale rather than non-cash charges. Free cash flow is reported as 0 due to undisclosed investing cash flows; given negative OCF, economic FCF is likely negative, but cannot be quantified from the provided data. Working capital dynamics appear favorable relative to the income statement, given OCF outperformance versus net income; however, without detail on receivables/payables, sustainability of this benefit is uncertain. Financing inflows of ¥680.7 million covered the operating cash deficit and added to liquidity. Absence of cash balance disclosure prevents calculation of months of runway; thus, we rely on strong current assets and low liabilities as proxies. Overall earnings quality is weak due to persistent negative EBITDA but not deteriorating further compared to last year’s operating loss (flat YoY), and cash conversion is better than the P&L would suggest.

Dividend Sustainability

The company paid no dividend (DPS ¥0) and has a payout ratio of 0% due to losses, which is appropriate given negative earnings and operating cash flow. With OCF negative and FCF undisclosed but likely negative, there is no coverage for dividends from internal cash generation. The capital allocation priority is presumably funding operations and growth initiatives over distributions. Given the strong equity base and recent financing inflow, the company retains flexibility, but sustaining dividends would not be feasible until consistent positive EBITDA/OCF is achieved. No explicit dividend policy details are provided; the near-term policy outlook is a continued suspension until profitability and cash generation improve.

Risk Assessment

Business Risks:

• Revenue volatility due to project-based demand and timing in drug discovery support/services
• Commercial execution risk in scaling iPS/stem cell product lines to cover fixed costs
• Customer concentration risk if a few pharma/biotech clients drive a large share of sales
• Regulatory and ethical considerations around cell-based products impacting commercialization timelines
• Technology obsolescence and IP challenges in competitive biomedical tools markets
• Pricing pressure from global competitors and distributors
• FX exposure if a meaningful portion of sales or costs are non-JPY

Financial Risks:

• Sustained negative EBITDA and operating cash flow leading to ongoing external financing needs
• Potential equity dilution given reliance on financing inflows (¥680.7 million this period)
• Limited visibility on cash and investing cash flows, complicating runway assessments
• Working capital reversals if receivables collection lengthens or advance billings unwind
• Key person and R&D pipeline dependency impacting future monetization

Key Concerns:

• Sharp revenue decline (-26.2% YoY) without offsetting cost reductions
• Large gap between gross margin and operating margin indicating insufficient scale
• Negative OCF despite improvement versus net income
• Data limitations (undisclosed cash, capex, and equity ratio field) hindering full assessment

Investment Implications

Key Takeaways:

• Top line contracted significantly (-26.2% YoY) to ¥974 million, pressuring operating leverage
• Gross margin remains high at 72.5%, suggesting favorable unit economics if scale returns
• Operating loss of ¥546 million was flat YoY, highlighting the need for either revenue recovery or cost actions
• Balance sheet is predominantly equity-financed (liabilities ¥686 million vs. equity ¥8.675 billion), reducing solvency risk
• OCF (-¥131 million) outperformed net loss (-¥486 million), but cash burn persists
• Financing inflow of ¥681 million supports liquidity and indicates market access
• Multiple disclosures are missing (cash, investing CF, equity ratio, shares), requiring caution in interpreting some ratios

Metrics to Watch:

• Quarterly revenue growth and order backlog in core services/products
• EBITDA trajectory and SG&A as a percentage of sales
• Operating cash flow and working capital turns (DSO/DPO/DIO) to gauge cash conversion
• Gross margin stability and product/service mix shifts
• Financing activities and potential dilution (equity issuances or convertibles)
• Cash and equivalents balance when disclosed to refine runway analysis

Relative Positioning: Within Japanese life science tools and cell-based services peers, Reprocell exhibits strong gross margins and a conservative balance sheet but remains subscale with persistent losses; near-term positioning depends on restoring revenue momentum to unlock operating leverage while preserving liquidity.

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