GLORY LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥153.89B
• Operating Income: ¥6.85B
• Net Income: ¥7.95B
• EPS: ¥61.39

Income Statement

Balance Sheet

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

Glory Ltd. (TSE:6457) reported FY2026 Q2 consolidated JGAAP results marked by a sharp top-line contraction and significant margin compression at the operating level. Revenue declined 16.9% year over year to 153.9 billion yen, indicating weaker demand and/or project timing effects across its cash handling and related businesses. Operating income fell 65.2% YoY to 6.85 billion yen, highlighting pronounced negative operating leverage as fixed costs weighed on earnings amid lower volumes. Net income decreased 57.1% YoY to 3.37 billion yen, with ordinary income at 5.95 billion yen, reflecting the drag of 1.40 billion yen in interest expense. DuPont metrics underscore the profitability reset: net profit margin is 2.19%, asset turnover is 0.359x, and financial leverage is 1.89x, yielding a modest calculated ROE of 1.49%. Despite earnings pressure, balance sheet strength remains adequate with total assets of 428.2 billion yen and total equity of 227.0 billion yen; the reported equity ratio field shows 0.0% (likely undisclosed), but a simple estimate suggests roughly 53% equity-to-asset ratio. Liquidity appears solid with a current ratio of 195.4% and a quick ratio of 158.7%, and working capital of 106.6 billion yen. Interest coverage remains acceptable at 4.9x (operating income to interest expense), though clearly weaker than in better trading conditions. Gross margin is indicated at 54.2%, consistent with a reported gross profit of 83.47 billion yen; however, the reported cost of sales figure appears inconsistent with this margin, suggesting a likely classification/reporting discrepancy. Cash flow statements and depreciation are unreported in this data set, so EBITDA and OCF-based analytics are not meaningful here and should not be interpreted as zeros. Inventory of 41.03 billion yen suggests meaningful working capital tied in operations, and inventory discipline will be important if demand softness persists. EPS is 61.39 yen, but share count data are not disclosed, limiting per-share cross-checks. The company reported no dividend (DPS 0) and a 0% payout ratio for the period, signaling a conservative cash stance during a weaker earnings phase. Overall, the period reflects cyclical and structural pressures on the core franchise with adequate liquidity and solvency, but earnings visibility is constrained by the top-line decline and incomplete cash flow disclosures. Management’s ability to stabilize revenue, control fixed costs, and convert earnings to cash will be key to restoring returns.

Profitability Analysis

ROE is 1.49%, decomposed into a 2.19% net margin, 0.359x asset turnover, and 1.89x financial leverage per the DuPont framework. The compression in operating income (-65.2% YoY) versus revenue (-16.9% YoY) evidences negative operating leverage, implying a relatively high fixed-cost base or reduced absorption. Gross margin is cited at 54.2%, aligning with reported gross profit of 83.47 billion yen; the cost of sales figure provided appears inconsistent with this margin, so the margin metric is likely more reliable for analysis. Ordinary income at 5.95 billion yen sits below operating income due to 1.40 billion yen of interest expense and other non-operating factors, indicating financing costs are a meaningful headwind at current earnings levels. The interest coverage ratio of 4.9x is acceptable but down from typical levels in stronger years, reflecting diminished profit cushions. EBITDA is not assessable due to unreported depreciation and amortization; the indicated 0% EBITDA margin is not meaningful and should be disregarded. Profit quality at the bottom line is moderated by the low net margin (2.19%) and the impact of financing costs, suggesting limited room for error until revenue stabilizes. Overall, profitability has reset to a lower level for the period, pending demand recovery, mix improvement, and cost actions.

Growth Assessment

Revenue declined 16.9% YoY to 153.9 billion yen, signaling broad-based demand softness and/or timing delays in installations and projects. Operating income decreased 65.2% YoY, a much steeper drop than sales, underscoring negative operating leverage and indicating that variable cost adjustments and fixed-cost absorption lagged the revenue decline. Net income fell 57.1% YoY to 3.37 billion yen, with financing costs absorbing a larger share of profits. Without segment or geographic detail, the sustainability of revenue is uncertain; however, the structural shift toward cashless transactions and uneven capex by financial/retail customers may be dampening growth in core cash handling hardware, partially offset by service/maintenance revenue. The reported gross margin (54.2%) suggests mix effects or pricing may still be supportive at the gross level despite weaker volumes. Near-term growth visibility appears limited until order intake, backlog, and systems installation schedules normalize. FX could also be a factor given overseas exposure, but such effects are not disclosed here. On outlook, stabilizing macro conditions in key end-markets, recurring service revenue, and any product refreshes will be important to halt the revenue contraction. Cost rationalization and productivity initiatives will be required to restore operating margins if demand recovery is gradual.

Financial Health

Total assets are 428.2 billion yen and total equity 227.0 billion yen, implying an estimated equity ratio near 53%, despite the reported equity ratio field showing 0.0% (likely undisclosed). Total liabilities of 205.1 billion yen indicate moderate leverage, with a reported debt-to-equity ratio of 0.90x. Liquidity is strong: current assets of 218.3 billion yen and current liabilities of 111.7 billion yen yield a current ratio of 195.4% and a quick ratio of 158.7%. Working capital stands at 106.6 billion yen, providing a sizable buffer for operations and seasonality. Interest expense of 1.40 billion yen against operating income of 6.85 billion yen results in 4.9x interest coverage, manageable but weaker than ideal in a downturn. Inventory of 41.03 billion yen suggests tangible working capital exposure to demand cycles; careful inventory and receivables management will be necessary if sales softness persists. Cash and equivalents are undisclosed in this dataset, limiting precise liquidity evaluation beyond current ratio proxies.

Cash Flow Quality

Operating, investing, and financing cash flows are undisclosed in this dataset (reported as 0, which here indicates not reported). As a result, OCF/Net Income and free cash flow metrics cannot be interpreted; the shown 0.00 ratios are not meaningful. Earnings quality assessment must therefore rely on accrual-based figures, which are inherently less reliable than cash-based corroboration. The sizeable working capital position (106.6 billion yen) and inventory level (41.0 billion yen) point to potential cash flow volatility if sales decelerate further or if receivables stretch. Depreciation and amortization are not disclosed, preventing reconciliation to EBITDA and assessment of non-cash expense contributions to earnings. In sum, cash conversion cannot be assessed from the provided data; monitoring subsequent disclosures for OCF, capex, and working capital movements will be critical.

Dividend Sustainability

DPS is reported as 0 and payout ratio 0%, indicating no dividend for the period or non-disclosure of interim distributions; with positive earnings (EPS 61.39 yen), the stance appears conservative. Free cash flow coverage is shown as 0.00x due to unreported cash flows, so true coverage cannot be determined. Without OCF and capex data, we cannot evaluate dividend affordability from cash generation. From a balance sheet standpoint, the estimated equity ratio near 53% and ample working capital provide capacity, but management may prioritize balance sheet flexibility given earnings compression. Policy outlook appears cautious until visibility on revenue recovery and cash conversion improves.

Risk Assessment

Business Risks:

• End-market cyclicality in financial institutions and retail customers affecting equipment demand
• Structural shift toward cashless payments potentially dampening core cash handling hardware growth
• Project timing and installation delays creating quarter-to-quarter revenue volatility
• Price competition and mix shifts compressing margins
• Supply chain and component cost fluctuations impacting gross margin
• FX volatility affecting overseas revenues and costs

Financial Risks:

• Diminished interest coverage (4.9x) heightens sensitivity to earnings shortfalls
• Working capital intensity (inventories 41.0 billion yen) can pressure cash if sales weaken
• Leverage exposure with debt-to-equity at 0.90x amid lower profitability
• Lack of disclosed OCF/FCF obscures cash generation and liquidity trajectory
• Potential covenant headroom uncertainty without detailed debt disclosure

Key Concerns:

• Revenue down 16.9% YoY and operating income down 65.2% YoY indicate material negative operating leverage
• Low net margin (2.19%) and ROE (1.49%) point to subdued returns
• Inconsistency between reported cost of sales and gross margin suggests classification/reporting issues in cost lines
• Undisclosed cash flows and D&A limit assessment of earnings quality and investment needs
• Dividend suspension (DPS 0) underscores a conservative stance amid earnings pressure

Investment Implications

Key Takeaways:

• Top-line contraction and steep margin compression have reset profitability near term
• Liquidity remains solid with a current ratio of 195% and working capital of 106.6 billion yen
• Interest coverage at 4.9x is adequate but leaves less cushion if conditions deteriorate
• DuPont indicates low ROE driven by slim net margins despite moderate leverage and asset intensity
• Cash flow visibility is limited due to undisclosed OCF and capex, constraining conviction on earnings quality

Metrics to Watch:

• Order intake, backlog, and book-to-bill for demand recovery signals
• Operating margin trajectory and SG&A control to gauge operating leverage normalization
• Working capital turns (inventory days, receivable days) and OCF conversion
• Capex and D&A disclosures to assess maintenance vs. growth investment needs
• Interest-bearing debt levels and interest coverage development
• Dividend policy updates contingent on cash generation

Relative Positioning: Within Japanese industrials focused on transaction automation and cash handling, Glory’s near-term profitability is under pressure versus peers with more resilient service/recurring mixes, but its balance sheet and liquidity appear comparatively sound; recovery in orders and improved cash conversion will be pivotal to narrow the 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