HOPE,INC. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.55B
• Operating Income: ¥97M
• Net Income: ¥50M
• EPS: ¥2.65

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

Hope, Inc. (6195) delivered FY2026 Q2 consolidated results showing solid top-line growth with uneven flow-through to the bottom line and weak cash conversion. Revenue rose 18.8% YoY to ¥1,554 million, reflecting a recovery in demand and likely improved execution in core businesses. Gross profit of ¥703 million implies a gross margin of 45.3%, which is healthy for a service-oriented model and broadly corroborated by the provided gross margin metric, though it conflicts with the reported cost of sales figure; we rely on the margin and gross profit provided. Operating income increased 49.9% YoY to ¥97 million, indicating operating leverage at the OPEX level despite only mid-teens revenue growth. Ordinary income of ¥101 million suggests minimal non-operating drag or modest non-operating gains, consistent with the very low interest expense. Net income declined 20.4% YoY to ¥40 million, implying either an unfavorable tax/extraordinary item impact or mix effects; the reported effective tax rate metric reads 0.0%, which appears inconsistent with the disclosed income tax expense of ¥15.56 million and the level of pretax profit. On profitability quality, EBITDA was ¥108 million (7.0% margin), underscoring modest operating scale and room to improve fixed-cost absorption. DuPont decomposition yields ROE of 3.89% (net margin 2.57%, asset turnover 0.649x, leverage 2.33x), a low single-digit return that lags typical cost of equity for Japan small caps, driven primarily by thin net margins. Liquidity appears comfortable with a current ratio of 187% and quick ratio of 162%, supported by ¥840 million in working capital; however, cash and equivalents are unreported (0 reflects undisclosed, not zero), so near-term liquidity relies on receivables realizations and available credit lines. Solvency risk looks contained with a debt-to-equity ratio of 0.97x and exceptional interest coverage of 404x, given very low interest burden. Operating cash flow was only ¥8.9 million versus ¥40 million of net income (OCF/NI 0.22x), pointing to weak cash conversion this period, likely from working capital build. Free cash flow is reported as 0 given no investing cash flows disclosed; underlying capex is unknown, limiting visibility on true FCF. No dividend was paid (DPS ¥0, payout 0%), appropriate given modest earnings and weak cash generation. Balance sheet totals show internal inconsistencies (assets, liabilities, equity do not reconcile and equity ratio is shown as 0.0%); analysis focuses on the internally consistent line items and provided calculated metrics. Overall, execution improved at the operating line, but earnings quality and cash conversion require close monitoring. With an unreported share count and book value per share, per-share analytics are limited, but absolute profitability, liquidity, and leverage indicate a cautiously stable financial position with selective pressure points in cash flow.

Profitability Analysis

ROE_decomposition: Reported ROE is 3.89%, decomposed as Net Profit Margin 2.57% x Asset Turnover 0.649x x Financial Leverage 2.33x. The main constraint is the thin net margin; asset efficiency is moderate for a mid-size services business, and leverage is not excessive. margin_quality: Gross margin is 45.3% (GP ¥703m on revenue ¥1,554m), consistent with the provided margin metric, though the disclosed cost of sales figure appears inconsistent; we prioritize the provided gross profit/margin. EBITDA margin is 7.0% and operating margin is 6.2% (OI ¥97m / revenue ¥1,554m), showing positive operating leverage YoY. Net margin at 2.57% reflects tax and/or below-the-line impacts compressing earnings. operating_leverage: Operating income grew 49.9% on 18.8% revenue growth, indicating favorable operating leverage from OPEX discipline or better mix. Incremental margin (ΔOI/ΔRevenue) is robust for the period, but sustainability depends on maintaining gross margin and controlling SG&A.

Growth Assessment

revenue_sustainability: Revenue expanded 18.8% YoY to ¥1,554m. The breadth and durability of this growth are not fully verifiable from the dataset, but the scale suggests recovery momentum in core segments. profit_quality: Operating profit outpaced sales growth, but net income fell 20.4% YoY to ¥40m, implying drag from non-operating items or taxes. The OCF/NI ratio of 0.22x flags low cash realization from earnings this period, reducing quality of growth. outlook: If gross margin near 45% can be held and SG&A growth remains contained, operating leverage can continue. However, working capital management must improve for growth to translate into cash. Absent detail on order backlog or segment mix, near-term outlook is cautiously positive on operations but constrained by cash conversion.

Financial Health

liquidity: Current ratio 187% and quick ratio 161.7% indicate ample short-term coverage (CA ¥1,804.9m vs. CL ¥965.2m). Working capital stands at ¥839.7m. Cash balances are undisclosed; liquidity thus hinges on the collectability of receivables and inventory turns. solvency: Debt-to-equity is 0.97x, implying moderate leverage. Interest expense is only ¥0.24m with EBIT coverage of ~404x, indicating very low debt cost and strong service capacity. capital_structure: Total liabilities of ¥995.3m vs. total equity of ¥1,029.0m suggest a balanced structure, though the aggregate balance sheet does not reconcile to total assets of ¥2,395.0m. We rely on the leverage and coverage metrics provided for assessment.

Cash Flow Quality

earnings_quality: Net income of ¥40m translated into ¥8.9m of operating cash flow (OCF/NI 0.22x), signaling working capital absorption and weaker earnings quality in the period. FCF_analysis: Free cash flow is reported as 0 due to no disclosed investing cash flows; actual capex is unknown. Financing cash flow was an outflow of ¥74.6m, indicating debt repayment, buybacks, or other financing uses despite modest OCF. working_capital: Inventories were ¥243.8m; receivables and payables are undisclosed, but low OCF implies either receivables growth or reduced payables. Managing DSO/DPO will be crucial to restore cash conversion.

Dividend Sustainability

payout_ratio_assessment: No dividend declared (DPS ¥0; payout 0%). With ROE at 3.89% and weak OCF, retaining earnings is reasonable to support operations and balance sheet. FCF_coverage: With FCF unreported/assumed zero and limited OCF, there is no current basis to cover distributions. Any initiation would require demonstrable, sustained positive FCF. policy_outlook: Given current profitability and cash conversion, a conservative dividend stance is likely to persist until visibility on stable FCF improves.

Risk Assessment

Business Risks:

• Execution risk in sustaining gross margin at ~45% amid competition and input cost variability
• Dependence on working capital efficiency; cash conversion currently weak
• Potential volatility from non-operating items or tax effects compressing net margin
• Limited scale (revenue ¥1.55bn for the period) exposes the company to fixed-cost absorption risk if growth moderates

Financial Risks:

• OCF/NI at 0.22x indicates reliance on balance sheet to fund growth
• Unreported cash position introduces uncertainty around immediate liquidity buffers
• Balance sheet inconsistencies (assets vs. liabilities + equity) complicate solvency analysis despite benign leverage metrics
• Potential refinancing or covenant risks cannot be ruled out due to limited disclosure of debt terms

Key Concerns:

• Earnings-to-cash conversion needs improvement
• Bottom-line decline (-20.4% YoY) despite stronger operating profit
• Data gaps (cash, equity ratio, capex) reduce visibility into true FCF and capital adequacy

Investment Implications

Key Takeaways:

• Top-line growth (+18.8% YoY) with strong operating leverage (+49.9% YoY operating income)
• Healthy gross margin (~45%) and modest EBITDA margin (7.0%)
• Low ROE (3.89%) constrained by thin net margin (2.57%)
• Solid liquidity ratios (current 187%, quick 162%) but cash balance undisclosed
• Excellent interest coverage (~404x) with moderate leverage (D/E 0.97x)
• Weak cash conversion (OCF/NI 0.22x) and unreported capex weigh on FCF visibility
• No dividend, prioritizing balance sheet and reinvestment

Metrics to Watch:

• OCF/NI conversion and free cash flow trajectory
• Gross margin stability and SG&A growth vs. revenue
• Working capital turns (DSO, DPO, inventory days)
• Ordinary-to-net income bridge (tax rate, extraordinary items)
• Leverage and coverage metrics as rates/credit conditions evolve

Relative Positioning: Within Japan small-cap services peers, Hope exhibits above-average gross margins and comfortable liquidity, but trails on ROE and cash conversion; operational momentum is improving, yet sustained value creation hinges on translating earnings into cash.

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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