VIS co.ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥6.87B
• Operating Income: ¥644M
• Net Income: ¥640M
• EPS: ¥49.53

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

VIS Co., Ltd. (50710) reported FY2026 Q2 consolidated results under JGAAP showing a top-line contraction and amplified profit pressure, but with robust cash generation and a solid balance sheet. Revenue declined 13.8% YoY to ¥6.87bn, while operating income fell 34.0% YoY to ¥0.64bn, indicating negative operating leverage as fixed costs weighed on profitability amid softer sales. Net income contracted 35.3% YoY to ¥0.41bn (EPS ¥49.53), with ordinary income equal to operating income, implying minimal non-operating gains/losses. Despite the earnings decline, gross margin was a healthy 33.8% and EBITDA margin stood at 10.2%, reflecting an asset-light model supported by low depreciation (¥58.6m). DuPont decomposition points to a moderate ROE of 5.96%, driven by a 6.02% net margin, asset turnover of 0.658x, and financial leverage of 1.51x. The company’s cash conversion was strong: operating cash flow reached ¥0.98bn, equivalent to 2.37x net income, highlighting conservative revenue recognition and/or favorable working capital movements. Liquidity remains sound, with a current ratio of 203.7% and working capital of ¥3.81bn; quick ratio matches current ratio given inventories are unreported. Based on reported total equity of ¥6.94bn and total assets of ¥10.45bn, the implied equity ratio is approximately 66.4%, despite the reported metric field showing 0.0% (unreported). Leverage looks prudent with a debt-to-equity ratio of 0.56x and extraordinary interest coverage of ~20,125x due to negligible interest expense (¥32k). Dividend distribution remains suspended (DPS ¥0; payout 0%), consistent with reinvestment or cash preservation during earnings normalization. The reported income tax expense (¥330.7m) versus ordinary income (¥644m) suggests a high apparent tax burden; however, the effective tax rate metric listed as 0.0% is clearly an unreported placeholder—users should treat tax-rate interpretation with caution. The absence of disclosed investing cash flows and cash balance limits visibility on capital intensity and FCF, though OCF strength indicates underlying cash earnings resilience. Operationally, the sharper decline in operating profit versus revenue points to demand headwinds and/or temporary cost rigidities typical of design/construction service cycles. Overall, VIS pairs near-term growth and margin pressure with strong liquidity, conservative leverage, and good cash conversion, positioning the company to navigate cyclical softness while maintaining financial flexibility.

Profitability Analysis

ROE of 5.96% is explained by: net profit margin 6.02% × asset turnover 0.658× × financial leverage 1.51×. The margin profile shows a 33.8% gross margin and 10.2% EBITDA margin, but operating income contracted 34.0% YoY on a 13.8% YoY revenue decline, indicating negative operating leverage and cost absorption issues. Depreciation of ¥58.6m is small relative to EBITDA (¥702.6m), supporting an asset-light model and limited non-cash drag. Ordinary income equals operating income (¥644m), implying negligible non-operating gains/losses this period. Net margin at 6.02% is respectable for a design/office-fit-out oriented business but down YoY given the sharper drop in operating profit. Interest expense is de minimis (¥32k), so financing costs did not pressure margins. The apparent tax burden (¥330.7m) versus ordinary income suggests an elevated effective tax on a pre-tax base (exact rate not reliable due to reporting nuances), contributing to net margin compression. Overall profitability remains positive but cyclically pressured, with fixed-cost intensity exposing earnings to revenue swings.

Growth Assessment

Revenue fell 13.8% YoY to ¥6.87bn, signaling demand softness and/or project timing effects. Operating income decreased 34.0% YoY, indicating revenue pressure amplified by cost rigidity. Net income dropped 35.3% YoY to ¥0.41bn, reflecting both operating deleverage and a heavy tax burden in the period. Given ordinary income equals operating income, growth headwinds are operational rather than financial. Gross margin (33.8%) remains solid, suggesting pricing/mix resilience; the compression likely stems more from overhead absorption than severe pricing erosion. EBITDA margin at 10.2% supports continued cash generation despite weaker profits. Sustainability hinges on order intake, project conversion, and utilization rates; absent disclosed backlog or segment detail, forward growth visibility is limited. Near-term outlook is cautious until revenue re-acceleration or cost flexing improves operating leverage. Medium term, the asset-light profile and strong liquidity provide capacity to invest for growth as market conditions normalize.

Financial Health

Liquidity is strong: current ratio 203.7%, quick ratio 203.7%, and working capital ¥3.81bn. While cash and equivalents are undisclosed, current assets of ¥7.49bn comfortably exceed current liabilities of ¥3.68bn. Solvency metrics are healthy: using reported totals, equity/asset implies ~66.4% equity ratio (¥6.94bn/¥10.45bn), despite the equity ratio field being unreported at 0.0%. Debt-to-equity of 0.56x indicates moderate leverage; combined with negligible interest expense (¥32k), refinancing risk appears low. Interest coverage is exceptionally high (~20,125x on operating income), underscoring minimal financial risk from borrowing costs. Asset base efficiency is moderate (asset turnover 0.658x). Overall capital structure is conservative and provides ample cushion against cyclical volatility.

Cash Flow Quality

Operating cash flow of ¥982m (2.37x net income) indicates strong earnings quality, likely supported by disciplined billing/collections and restrained working capital outflows. Depreciation is modest (¥58.6m), suggesting limited non-cash inflation of profits; cash conversion from EBITDA to OCF appears strong. Investing cash flow is unreported (0 placeholder), preventing a precise free cash flow estimate; thus, the listed FCF of 0 should be disregarded. Financing cash flow was an outflow of ¥293m, consistent with debt reduction, dividends (none this period), or other financing uses; details are not disclosed. Working capital management appears favorable given OCF strength, but the lack of breakdown (receivables/payables/unbilled positions) limits diagnostic depth. On balance, cash flow quality is solid, with OCF comfortably exceeding accounting earnings in the period.

Dividend Sustainability

The company paid no dividend (DPS ¥0), with a reported payout ratio of 0%. Given positive net income (¥414m) and strong OCF (¥982m), capacity to resume dividends exists, but management appears to prioritize reinvestment or balance sheet strength amid earnings softness. FCF coverage cannot be assessed due to unreported investing cash flows and cash balance; therefore, mechanical FCF coverage metrics showing 0.00x are placeholders. With moderate leverage (D/E 0.56x), robust liquidity, and negligible interest burden, the balance sheet can support future distributions when profit trajectory stabilizes. Policy outlook is likely conservative near term until revenue and operating leverage improve.

Risk Assessment

Business Risks:

• Revenue cyclicality tied to office fit-out/branding and broader capex sentiment
• Negative operating leverage from fixed cost base during demand downturns
• Project timing and backlog conversion risk affecting quarterly volatility
• Pricing pressure from competitive design/build market
• Client concentration risk (common in project-based businesses; not disclosed here)

Financial Risks:

• Working capital swings impacting cash flow despite overall strong OCF
• Potential tax rate volatility given discrepancy between reported tax expense and metrics
• Limited disclosure of cash and investing flows reduces visibility on FCF
• Exposure to credit risk from receivables in a project-driven model

Key Concerns:

• Sharp YoY decline in operating income (-34.0%) versus revenue (-13.8%)
• Unreported items (equity ratio, cash, investing CF) constrain full assessment
• High apparent tax burden weighing on net income
• Sustainability of margins without evidence of backlog recovery

Investment Implications

Key Takeaways:

• Top-line down 13.8% YoY; operating income down 34.0% YoY signals negative operating leverage
• ROE at 5.96% with net margin 6.02%, asset turnover 0.658x, leverage 1.51x
• Strong cash conversion: OCF ¥982m equals 2.37x net income
• Balance sheet conservative: implied equity ratio ~66.4%, D/E 0.56x, interest expense negligible
• Margins remain respectable (gross 33.8%, EBITDA 10.2%) despite cyclical pressure
• Dividend suspended; capacity exists but likely contingent on profit stabilization

Metrics to Watch:

• Order intake/backlog and book-to-bill (not disclosed here)
• Revenue growth reacceleration and utilization rates
• Operating margin trajectory and cost flexibility
• Working capital days (DSO/DPO) to sustain OCF
• Capex/investing cash flows to gauge true FCF
• Effective tax rate normalization

Relative Positioning: Within Japan’s office design/fit-out and related services space, VIS exhibits an asset-light, cash-generative profile with stronger-than-average liquidity and low financing risk, but current-period profitability is under pressure from negative operating leverage; sustained recovery hinges on demand normalization and backlog conversion.

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
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