BTM,Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.83B
• Operating Income: ¥52M
• Net Income: ¥31M
• EPS: ¥11.05

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

Verdict: Solid top-line growth but margin compression and a near-zero operating cash inflow temper the quality of FY2026 Q2 results. Revenue grew 22.4% YoY to 28.29, highlighting healthy demand and successful execution in core businesses. Operating income increased 12.4% YoY to 0.52, and net income rose 9.8% YoY to 0.31, both positive but lagging revenue growth. Gross margin stood at 15.5%, indicating a cost-heavy model consistent with human resource-intensive or project-based delivery. Operating margin is approximately 1.84% (0.52/28.29), implying thin profitability. We estimate operating margin compressed by roughly 16 bps YoY (from ~2.00% to ~1.84%) given revenue and operating income growth differentials. Net margin similarly compressed by about 12 bps YoY (from ~1.22% to ~1.10%). SG&A of 3.87 equates to 13.7% of revenue, suggesting limited operating leverage this quarter as cost growth outpaced gross profit expansion. Ordinary income grew 9.8% YoY to 0.48, aided marginally by 0.01 in interest income, offset by 0.03 in interest expense. The effective tax rate was 36.3%, modestly high, limiting after-tax conversion. Cash earnings quality is weak: operating cash flow was approximately zero to slightly negative (OCF/NI = -0.01x), indicating profit-to-cash conversion issues likely driven by working capital consumption (higher receivables with strong sales). Liquidity is sound with a current ratio of 185.7% and cash of 8.10 versus short-term loans of 2.50, but leverage is not immaterial (D/E 1.52x). ROE computed via DuPont is 4.5%, constrained by low net margin despite decent asset turnover (1.626x) and moderate leverage (2.52x). ROIC of 10.7% (as reported) suggests invested capital efficiency is better than equity returns due to balance sheet leverage and tax drag, but should be validated as definitions vary. Forward-looking, sustaining growth while stabilizing margins and improving cash conversion will be key to raising ROE above the cost of equity. Overall, the company is growing but needs tighter cost control and better working capital discipline to translate growth into stronger, higher-quality earnings and cash flow.

Profitability Analysis

DuPont decomposition: ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 1.10% × 1.626 × 2.52 = ~4.5%. The weakest link is net profit margin (1.10%), while asset turnover is healthy and leverage is moderate. The largest change component this quarter appears to be margin compression, inferred from revenue growing faster than operating and net income. Business drivers likely include wage inflation, higher subcontracting costs, and SG&A growth related to headcount and sales capacity investments. Non-operating items were small (net -0.03) and do not explain the margin movement. Sustainability: revenue growth looks durable, but the current margin pressure could persist near term if labor and SG&A costs continue to rise faster than gross profit; productivity and pricing improvements are needed. Watch for concerning trends: SG&A as a share of revenue at 13.7% looks elevated for a low-margin model; operating income growth (+12.4%) lagging revenue (+22.4%) indicates negative operating leverage this quarter.

Growth Assessment

Top-line expansion of 22.4% YoY to 28.29 indicates robust demand and/or increased delivery capacity. Operating profit growth of 12.4% and net profit growth of 9.8% are positive but show dilution from rising costs and taxes. Gross profit of 4.40 implies gross margin of 15.5%, consistent with people-intensive delivery; scaling requires utilization and pricing discipline. Non-operating income/expense netted to a small drag, so growth is primarily operational. Outlook hinges on converting backlog and maintaining utilization while controlling SG&A. Given thin margins, small adverse cost moves can materially affect earnings; pricing power and mix (higher-value services) will be important. With cash at 8.10 and financing CF of 0.81 (likely incremental borrowing), the company has resources to fund growth, but improved OCF is needed to self-fund sustainably.

Financial Health

Liquidity is healthy: current ratio 185.7% and quick ratio 185.7%, supported by cash 8.10 and receivables 7.90 against current liabilities 8.70. No warning on current ratio (<1.0) or excessive D/E (>2.0); D/E at 1.52x is near the conservative threshold and warrants monitoring. Maturity profile: short-term loans (2.50) are well covered by cash (8.10) and receivables (7.90); limited maturity mismatch risk in the near term. Long-term loans of 1.80 underpin total interest-bearing debt levels; interest coverage is strong at 15.29x, mitigating immediate solvency risk. Equity totals 6.90, with retained earnings 3.44; BVPS is ~245 JPY. No disclosures on off-balance sheet obligations; absence of data does not imply absence of risk.

Cash Flow Quality

OCF/NI is -0.01x, flagging low earnings quality this quarter as profits did not translate into cash. Given OCF ≈ -0.00 and capex of -0.03, proxy free cash flow is approximately -0.03, indicating slight cash burn before financing. Likely driver is working capital consumption, most plausibly higher accounts receivable tied to the strong revenue growth; no inventory data is reported. Interest expense (0.03) is modest and well covered but contributes to cash outflow. No signs of aggressive working capital manipulation are evident from reported data, but monitor DSO given receivables (7.90) relative to revenue scale. Sustained negative or near-zero OCF would pressure funding needs if growth continues without better cash conversion.

Dividend Sustainability

Dividend information is unreported; payout ratio and FCF coverage are not calculable. With near-zero OCF and small negative FCF (~-0.03), capacity for cash dividends would depend on available cash (8.10) and continued access to financing (financing CF +0.81). Policy outlook cannot be inferred from the data; if a dividend exists, sustainability would require OCF normalization above capex and interest. Until OCF/NI improves toward >1.0, a conservative stance on incremental shareholder returns would be prudent.

Risk Assessment

Business Risks:

• Margin pressure from wage inflation and subcontracting costs in a people-intensive model
• Utilization and pricing risk leading to thin operating margin (~1.84%)
• Receivables collection timing risk with AR at 7.90 and rapid sales growth
• Project execution and cancellation risks typical of IT/outsourcing services
• Customer concentration risk (not disclosed but common in small-cap service firms)

Financial Risks:

• Leverage at D/E 1.52x; sensitivity to interest rate increases despite current coverage
• Weak cash conversion (OCF/NI -0.01x) increasing reliance on external funding
• Short-term borrowing dependence (2.50) despite adequate cash today
• Potential tax rate volatility (effective rate 36.3%) impacting net profit

Key Concerns:

• Negative operating leverage this quarter (OI growth < revenue growth)
• Sustained low net margin (1.10%) constraining ROE (4.5%)
• Working capital absorption likely behind near-zero OCF

Investment Implications

Key Takeaways:

• Strong revenue growth (+22.4% YoY) but margins compressed ~12–16 bps
• ROE of 4.5% constrained by low net margin; asset turnover healthy
• Liquidity solid (current ratio 186%) but leverage not trivial (D/E 1.52x)
• Earnings quality weak this quarter (OCF/NI -0.01x); FCF approx -0.03
• Interest coverage strong at 15.3x; near-term solvency risk low

Metrics to Watch:

• OCF/Net income and free cash flow trajectory
• DSO and receivables growth versus revenue
• Gross margin and SG&A ratio to assess operating leverage
• Debt/EBITDA and interest coverage as rates normalize
• ROE versus ROIC to gauge value creation gap
• Headcount, utilization, and pricing/mix where disclosed

Relative Positioning: Within domestic small-cap human capital/IT services peers, the company exhibits above-average revenue growth but below-average margins and middling ROE, supported by solid liquidity yet somewhat elevated leverage; improving cash conversion and cost discipline are needed to close the profitability and quality gap.

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