JSS CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥4.34B
• Operating Income: ¥247M
• Net Income: ¥150M
• EPS: ¥39.64

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

JSS Co., Ltd. reported FY2026 Q2 consolidated results under JGAAP with steady top-line growth and stronger operating profitability. Revenue came in at ¥4.344bn, up 3.2% YoY, while operating income rose 18.0% YoY to ¥247m, indicating effective cost control and operating leverage. Net income was ¥159m (+6.5% YoY), translating to a net margin of 3.66%. The EBITDA margin was 8.3%, and interest coverage was a very comfortable 39.3x, underscoring a low burden from financing costs. DuPont-calculated ROE was 5.07%, driven by a 3.66% net margin, asset turnover of 0.58x, and financial leverage of 2.39x. Gross margin is reported at 16.5%; however, cost of sales and gross profit figures are internally inconsistent (reported cost of sales implies a higher gross profit), which limits precision in margin diagnostics. Liquidity is tight, with a current ratio of 72.5% and negative working capital of ¥549m, suggesting reliance on short-term funding or favorable payables terms. Balance sheet totals also show inconsistency between assets and the sum of liabilities and equity, so solvency ratios should be interpreted with caution. Operating cash flow was ¥103m, equating to 0.65x net income, which is acceptable but not robust and points to some earnings-to-cash conversion drag. Investing cash flow was not disclosed, constraining free cash flow assessment; reported FCF as 0 reflects nondisclosure, not actual zero. Financing cash inflow of ¥294m indicates external funding support, but the mix (debt vs equity) is not disclosed. The equity ratio is shown as 0.0% due to nondisclosure, not an actual zero, and cash and equivalents were also not disclosed. Dividend per share is indicated at ¥0 and payout at 0%, suggesting retention of earnings amid limited cash flow visibility and tight liquidity. Overall, results show healthy operating improvement and solid coverage of interest, but liquidity pressure and disclosure gaps warrant monitoring. The outlook hinges on sustaining revenue growth while improving cash conversion and working capital discipline. Data limitations (notably in cash, investing flows, and share data) constrain precision of valuation and per-share analyses.

Profitability Analysis

ROE of 5.07% via DuPont reflects: net margin 3.66% × asset turnover 0.58x × financial leverage 2.39x. Net margin improved alongside an 18.0% YoY rise in operating income, indicating operating leverage on modest 3.2% revenue growth. Operating margin stands at about 5.7% (¥247m/¥4,344m), up YoY given operating profit outpaced sales. EBITDA margin of 8.3% suggests a reasonable contribution from non-cash charges (D&A ¥112m), and provides cushion over the operating line. Gross margin is reported at 16.5%, but cost of sales and gross profit figures are inconsistent; using the disclosed gross profit yields 16.5%, while using cost of sales implies a higher margin, so gross margin trends should be treated cautiously. Interest expense is low at ¥6.3m, giving interest coverage of 39.3x, confirming minimal financial drag on operating results. Ordinary income margin is 5.6%, broadly aligned with operating margin, suggesting limited non-operating items. Effective tax rate calculated from disclosed figures is approximately 24% (¥58m tax on ~¥241m pretax), despite the tabular “0.0%” label. Overall profitability quality is improving, with better cost discipline and operating leverage evident, though confirmation of gross margin would benefit from clarified cost of sales disclosure.

Growth Assessment

Revenue growth of 3.2% YoY indicates steady demand, likely driven by core service activity rather than pricing alone (detail not disclosed). Operating income growth of 18.0% YoY signals positive operating leverage, implying fixed-cost absorption and/or efficiency gains. Net income increased 6.5% YoY, lagging operating profit growth due to tax normalization and small changes in non-operating items. Asset turnover at 0.58x suggests moderate capital intensity; scope exists to enhance turnover via utilization and working capital optimization. Sustainability of revenue growth appears reasonable near term, but confirmation requires backlog, membership/contract metrics, or site count, which are not provided. Margin sustainability will depend on maintaining utilization and controlling labor/energy/lease costs, typical cost drivers in service operations. With interest costs low, most profit volatility will stem from operating performance rather than financing. Outlook is cautiously constructive given margin momentum, but constrained by limited disclosure on growth initiatives, pipeline, and capex needs.

Financial Health

Total assets are reported at ¥7,496m, liabilities at ¥4,510m, and equity at ¥3,134m; these do not sum precisely, indicating a reporting inconsistency, so solvency analysis should be interpreted cautiously. Using the provided debt-to-equity ratio of 1.44x as a proxy (likely total liabilities/equity), leverage appears moderate. The interest burden is low (¥6.3m), and coverage is strong at 39.3x, suggesting manageable debt service. Liquidity is tight: current assets ¥1,450m versus current liabilities ¥2,000m gives a current ratio of 72.5% and negative working capital of ¥549m. The quick ratio equals the current ratio because inventories are undisclosed; hence, actual quick liquidity may differ. Cash and equivalents are undisclosed, limiting visibility on immediate liquidity buffers. Equity ratio is shown as 0.0% due to nondisclosure and should not be interpreted as zero. Overall, solvency looks acceptable given strong coverage, but near-term liquidity pressure and reliance on short-term liabilities merit attention.

Cash Flow Quality

Operating cash flow of ¥102.6m is 0.65x net income, indicating moderate conversion; working capital movements likely consumed cash given negative working capital. EBITDA of ¥358.7m versus OCF implies meaningful cash tied in receivables/payables timing or other working capital items; detailed breakdown is not provided. Investing cash flows are undisclosed (shown as 0), preventing assessment of maintenance capex and thus true free cash flow. Reported FCF of 0 should be treated as unknown, not zero. Financing cash inflow of ¥293.7m suggests reliance on external funding to support operations or investments during the period. Earnings quality appears fair but not robust, pending confirmation of sustainable cash conversion and normalized working capital. Monitoring OCF/NI trending toward or above 1.0x would enhance confidence in earnings quality.

Dividend Sustainability

Dividend per share is reported at ¥0 with a 0% payout ratio, implying full retention of earnings. With OCF at 0.65x of net income and investing cash flows undisclosed, visibility on free cash flow coverage is limited; the displayed FCF coverage of 0.00x reflects nondisclosure rather than true capacity. Given tight liquidity (current ratio 72.5%) and negative working capital, a conservative dividend stance appears consistent with preserving balance sheet flexibility. Future dividend capacity will depend on improving operating cash conversion, stabilizing working capital, and clarity on maintenance capex needs. Absent capex disclosure and cash balance, we cannot assess sustainable payout levels with precision. Policy outlook likely prioritizes internal reinvestment and liquidity until cash flow visibility improves.

Risk Assessment

Business Risks:

• Modest top-line growth (3.2% YoY) increases reliance on cost control for profit expansion
• Potential wage, utilities, and rent inflation pressuring margins in service operations
• Execution risk in maintaining utilization and membership/contract retention (KPIs not disclosed)
• Competitive intensity potentially limiting pricing power and growth

Financial Risks:

• Tight liquidity: current ratio 72.5% and negative working capital of ¥549m
• Dependence on external financing in the period (financing CF +¥294m)
• Disclosure gaps on cash, investing CF, and debt composition hinder risk assessment
• Inconsistencies in reported financial statement line items (e.g., gross profit vs cost of sales; assets vs liabilities+equity)

Key Concerns:

• Earnings-to-cash conversion at 0.65x indicates working capital drag
• Undisclosed investing cash flows impede free cash flow analysis and capex planning
• Balance sheet and margin inconsistencies reduce confidence in precise ratio diagnostics

Investment Implications

Key Takeaways:

• Solid operating leverage: operating income +18% on sales +3.2%
• ROE of 5.07% supported by improving margins and moderate leverage
• Very strong interest coverage (39.3x) indicates low financing risk
• Liquidity remains a weak point with negative working capital and sub-1.0x current ratio
• Cash flow visibility limited: OCF/NI 0.65x and undisclosed capex
• Data inconsistencies necessitate caution in granular margin and solvency interpretation

Metrics to Watch:

• OCF/Net income ratio and working capital movements
• Maintenance and growth capex levels (investing CF disclosure)
• Operating margin and gross margin trend (with clarified cost of sales)
• Asset turnover and utilization KPIs
• Net debt and liquidity buffers (cash balance, short-term debt mix)

Relative Positioning: Operationally improving with margin gains and strong interest coverage, but relatively weaker on liquidity and cash conversion versus peers with clearer free cash flow profiles; disclosure quality lags best-in-class, constraining confidence in detailed comparability.

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