Virtualex Holdings,Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥3.33B
• Operating Income: ¥101M
• Net Income: ¥-1M
• EPS: ¥35.60

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

Virtulex Holdings (TSE:6193) delivered a solid FY2026 Q2 performance with revenue of ¥3,329m, rising 6.4% YoY, and a sharp recovery in profitability. Gross profit reached ¥725m, translating to a gross margin of 21.8%, while operating income rose 144.1% YoY to ¥101m, implying meaningful operating leverage and cost control. Ordinary income of ¥132m exceeded operating income, indicating positive non-operating contributions that more than offset interest expense of ¥5.3m. Net income improved 80.2% YoY to ¥100m, with EPS of ¥35.60. DuPont analysis indicates an ROE of 5.48%, driven by a 3.0% net margin, 0.874x asset turnover, and 2.09x financial leverage. Despite better earnings, cash conversion was weak: operating cash flow (OCF) was -¥23m, with an OCF/Net Income ratio of -0.23, suggesting working capital absorption or collection timing effects. Liquidity is adequate with a current ratio of 167% and working capital of ¥1,079m. Capital structure appears balanced; total liabilities of ¥2,013m against equity of ¥1,824m imply a liabilities-to-equity ratio of 1.10x and an implied equity ratio near 48% (despite a reported 0% equity ratio metric, which is likely undisclosed). Interest coverage is robust at 19.2x, underscoring manageable financial risk. EBITDA of ¥148m equates to a 4.4% margin, indicating room for further scale benefits if revenue growth persists. Tax expense was negative (¥-5.5m), producing an effective tax rate metric of 0%, likely reflecting tax credits or deferred tax adjustments. Financing cash inflow of ¥195m suggests incremental borrowings or other financing to support growth and working capital. The company did not pay a dividend (DPS ¥0), retaining earnings to reinforce the balance sheet and fund operations. Several data items were undisclosed in the feed (e.g., cash balance, investing cash flow, equity ratio metric), so conclusions lean on derived ratios from available non-zero data. Overall, the quarter signals improved profitability and operating leverage, offset by weaker cash conversion and reliance on financing inflows.

Profitability Analysis

ROE_decomposition: Reported/Calculated ROE: 5.48% = Net margin (3.00%) × Asset turnover (0.874x) × Financial leverage (2.09x). The ROE uplift versus prior year is primarily margin-led given operating income growth (+144% YoY) outpacing revenue (+6.4% YoY). margin_quality: Gross margin at 21.8% supports improved unit economics; operating margin at ~3.0% (¥101m/¥3,329m) indicates tighter SG&A and delivery efficiencies. Ordinary income (¥132m) above operating income suggests non-operating gains or other income net of ¥5.3m interest expense; quality of earnings is therefore somewhat reliant on items outside core operations this quarter. operating_leverage: Revenue +6.4% YoY versus operating income +144.1% YoY implies strong operating leverage from a largely fixed cost base or post-restructuring benefits. EBITDA margin of 4.4% and D&A of ¥46.8m (32% of EBIT) indicate room for further operating margin scaling if top-line growth continues.

Growth Assessment

revenue_sustainability: Top-line growth of 6.4% YoY appears steady but not outsized; sustainability likely hinges on backlog and project ramp in the core BPO/CRM/consulting segments (not disclosed here). profit_quality: Profit expansion was significantly margin-driven; ordinary income benefited from non-operating items, and taxes were negative, which may not recur. Normalized profit growth pace may be lower than headline rates. outlook: If demand remains resilient and cost discipline holds, mid-single-digit revenue growth could translate into higher incremental margins due to operating leverage. However, cash conversion needs to improve to underpin durable earnings quality.

Financial Health

liquidity: Current assets ¥2,679m vs. current liabilities ¥1,600m yield a current ratio of 167% and working capital of ¥1,079m; quick ratio equals current ratio given undisclosed inventories. Liquidity appears adequate despite negative OCF this period. solvency: Interest coverage is strong at 19.2x (EBIT/interest), indicating manageable debt service. Negative tax expense and positive non-operating income slightly bolster near-term coverage but may not be structural. capital_structure: Total assets ¥3,809m and equity ¥1,824m imply an equity ratio of ~47.9% (derived), and liabilities-to-equity of 1.10x. Financing cash inflow of ¥195m indicates incremental leverage or other funding to support working capital.

Cash Flow Quality

earnings_quality: OCF/Net Income of -0.23 suggests weak cash conversion, likely driven by accounts receivable growth or reduced advance billings. Given ordinary income > operating income and negative taxes, the quality of earnings contains non-core and timing effects. FCF_analysis: Investing CF was undisclosed; therefore, reported FCF of 0 should be treated as not available. Based on OCF alone (-¥23m), cash generation did not cover growth or working capital needs in the period. working_capital: Working capital is ample in level terms (¥1,079m), but the period’s negative OCF points to a build in receivables/unbilled work or a reduction in payables. Monitoring DSO/DPO would be critical.

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0 and payout ratio 0%, indicating retention of earnings. With net income of ¥100m and OCF negative, a conservative stance is reasonable. FCF_coverage: FCF not disclosed; given OCF negative, prospective dividend coverage from internal cash flow would be weak in this quarter. policy_outlook: Absent evidence of steady positive FCF and improved cash conversion, continuation of a retained-earnings policy appears consistent. Any future dividend initiation would likely depend on sustained OCF and visibility on working capital cycles.

Risk Assessment

Business Risks:

• Execution risk in securing and ramping new BPO/CRM mandates to sustain growth.
• Pricing pressure and wage inflation impacting gross margins.
• Project timing and mix effects creating volatility in quarterly profitability.
• Dependence on non-operating items this quarter to lift ordinary income.

Financial Risks:

• Negative OCF despite higher earnings, indicating working capital strain.
• Reliance on financing inflows (¥195m) to support operations/wc in the period.
• Potential normalization of negative tax expense and non-operating gains reducing net profit.
• Limited disclosed detail on cash balances and investing flows constrains visibility.

Key Concerns:

• Cash conversion: OCF/NI at -0.23 needs improvement.
• Sustainability of margin gains if non-operating tailwinds fade.
• Balance of growth investment vs. leverage given financing inflows.

Investment Implications

Key Takeaways:

• Revenue grew 6.4% YoY to ¥3,329m with strong operating leverage; operating income +144% YoY.
• ROE at 5.48% driven by better margins and moderate leverage (2.09x).
• Cash conversion weak (OCF -¥23m), indicating working capital absorption.
• Capital structure balanced with implied equity ratio ~48% and interest coverage 19.2x.
• Non-operating contributions and negative taxes boosted bottom line; may normalize.

Metrics to Watch:

• OCF/NI and working capital turns (DSO/DPO).
• Operating margin and EBITDA margin progression.
• Ordinary income composition: recurring vs. non-recurring items.
• Leverage and financing cash flows (net debt trajectory).
• Tax rate normalization effects on net income.

Relative Positioning: Within domestic BPO/CRM peers, Virtulex shows improving operating leverage and adequate solvency, but trails best-in-class operators on cash conversion and EBITDA margin; sustained revenue growth with stable pricing would be needed to close the margin 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