Disruptors Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.54B
• Operating Income: ¥357M
• Net Income: ¥235M
• EPS: ¥11.51

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

FY2026 Q2 was a materially stronger quarter with a decisive rebound in profitability and cash generation. Revenue rose 20.6% YoY to 25.38, while operating income surged 136.0% YoY to 3.57 and net income climbed 257.7% YoY to 2.35. Operating margin improved to 14.1% (3.57/25.38) from about 7.2% a year ago, implying roughly 690 bps expansion. Net margin improved to 9.3% from about 3.1% YoY, an expansion of roughly 620 bps. Gross margin remained very high at 64.6%, supporting robust operating leverage. Earnings quality was strong: OCF of 3.88 exceeded net income by 1.65x, indicating cash conversion strength and limited accrual risk. Balance sheet resilience is evident with a current ratio of 176.6%, cash and deposits of 11.11 exceeding current liabilities of 9.93, and D/E of 0.67x. Long-term loans stand at 5.19, and interest coverage is extremely high at 178.5x, underscoring low financial stress. Asset efficiency improved, with asset turnover at 0.666 and ROE at 10.3%, supported principally by margin expansion rather than leverage. ROIC is a healthy 14.1%, above typical 7–8% targets for Japanese corporates, suggesting value-accretive deployment of capital. Intangibles are sizable at 18.89 (goodwill 3.34), implying some impairment risk if growth slows, but current momentum mitigates near-term concerns. Non-operating items were small and slightly negative (net -0.04), so earnings were mainly driven by core operations. Dividend details were not disclosed, but the calculated payout ratio of 44.7% appears manageable given OCF. Investing cash flows were not disclosed; using CapEx of only 0.04 as a proxy suggests ample room to fund dividends and growth, though unreported investing outflows could change this view. Overall, forward implications are positive: improved operating leverage and strong cash conversion point to continued profit growth if demand holds and cost discipline remains. Key watchpoints include sustainability of high gross margins, the trajectory of SG&A versus sales, and any future amortization/impairment drag from intangibles.

Profitability Analysis

ROE decomposition (DuPont): ROE 10.3% = Net Profit Margin (9.3%) × Asset Turnover (0.666) × Financial Leverage (1.67x). The largest change YoY was net margin expansion: net income rose 257.7% vs revenue +20.6%, lifting net margin from ~3.1% to 9.3% (+~620 bps). Operating margin rose from ~7.2% to 14.1% (+~690 bps), indicating significant operating leverage from high gross margin (64.6%) and improved SG&A efficiency versus sales. Asset turnover at 0.666 is moderate for a services-oriented business and appears stable; leverage at 1.67x is modest, so ROE uplift was margin-led rather than leverage-driven. Business drivers: revenue scale and mix likely boosted gross profit per unit while SG&A growth lagged sales, converting more gross profit to operating income. Non-operating effects were negligible (net -0.04), so ordinary profitability explains the improvement. Sustainability: the degree of margin expansion suggests operating leverage; it should be partly sustainable if revenue growth persists and pricing/mix remain favorable, but it may normalize if growth slows or if reinvestment lifts SG&A. No evidence of SG&A growth outpacing revenue from disclosed data, but lack of SG&A breakdown limits deeper diagnosis.

Growth Assessment

Top-line growth of 20.6% YoY to 25.38 demonstrates solid demand. Operating income grew 136.0% YoY to 3.57, well ahead of sales, confirming strong operating leverage. Net income rose 257.7% YoY to 2.35, aided primarily by operating improvement rather than non-operating gains. Gross margin at 64.6% and EBITDA margin at 18.1% indicate healthy unit economics. Ordinary income growth (+135.3% YoY to 3.54) aligns with operating trends, underscoring core performance quality. With ROIC at 14.1%, the company appears to be creating value above typical cost of capital. Outlook hinges on sustaining revenue momentum while keeping SG&A growth in check; given the cash conversion and balance sheet strength, the company has capacity to invest in growth. Lack of disclosure on segment mix and SG&A components constrains visibility on the durability of margin gains. Near-term growth should remain favorable if the demand environment and pricing hold, but watch for normalization of margins from current elevated levels.

Financial Health

Liquidity is strong: current ratio 176.6% and quick ratio 176.6% indicate ample near-term coverage; no warning thresholds breached. Cash and deposits (11.11) exceed current liabilities (9.93), and accounts receivable (5.62) further bolster coverage, suggesting low maturity mismatch risk. Solvency is solid with D/E of 0.67x and interest coverage of 178.5x. Long-term loans total 5.19; no short-term loans were reported. Total equity is 22.85 vs total assets 38.13, implying an equity ratio of roughly 59.9% (calculated), a conservative capital structure. No off-balance sheet obligations were disclosed in the provided data. There is no indication of refinancing pressure in the period; sensitivity to interest rate increases exists but is likely limited given low interest burden.

Cash Flow Quality

OCF of 3.88 exceeds net income of 2.35 (OCF/NI 1.65x), indicating high-quality earnings and favorable working capital dynamics. Investing CF was not disclosed; however, reported CapEx was modest at 0.04. A proxy FCF (OCF − CapEx) is approximately 3.84, implying ample internal funding capacity, though this excludes other potential investing outflows (e.g., intangibles, M&A) that were not reported. No signs of working capital strain are evident: cash increased capacity versus current liabilities, and interest expense (0.02) is minimal. With EBITDA at 4.60 and Debt/EBITDA at about 1.13x, leverage is comfortably serviceable from operating cash flows.

Dividend Sustainability

Dividend inputs were largely unreported; however, the calculated payout ratio is 44.7%, which is within a generally sustainable range (<60%). Using proxy FCF of ~3.84 (OCF − CapEx) suggests dividends would be covered by internally generated cash, assuming no large unreported investing needs. Retained earnings of 17.82 provide a cushion to maintain dividends through cycles. Policy outlook cannot be inferred due to lack of DPS disclosure, but current cash generation and balance sheet strength support sustainability. Key caveat: full investing CF and total dividends paid were not disclosed, which may affect true coverage.

Risk Assessment

Business Risks:

• Margin normalization risk after a sharp expansion (+~690 bps in operating margin YoY).
• Dependence on maintaining high gross margin (64.6%); adverse mix or pricing pressure could compress profitability.
• Execution risk in scaling operations without SG&A re-acceleration.
• Intangible-asset heavy model (intangibles 18.89; goodwill 3.34) raises impairment risk if growth underperforms.

Financial Risks:

• Interest rate risk on 5.19 of long-term loans, though current interest burden is low.
• Potential undisclosed investing outflows (M&A, software capitalization) could reduce true FCF.
• Goodwill/intangible amortization and potential impairment could weigh on GAAP earnings and equity.

Key Concerns:

• Limited disclosure on SG&A breakdown and investing cash flows constrains transparency.
• Sustainability of operating leverage if revenue growth slows below current +20.6% pace.
• Concentration risk (customers or products) cannot be assessed from provided data but is a typical mid-cap risk.

Investment Implications

Key Takeaways:

• Strong margin-led earnings inflection: OI +136% on revenue +20.6%, operating margin ~14.1%.
• High cash conversion: OCF/NI 1.65x; proxy FCF robust given low CapEx.
• Healthy balance sheet: equity ratio ~59.9%, D/E 0.67x, interest coverage 178.5x.
• ROE 10.3% and ROIC 14.1% indicate efficient capital deployment.
• Non-operating items immaterial; core operations drive results.

Metrics to Watch:

• Operating margin trajectory and SG&A-to-sales ratio.
• Gross margin sustainability and revenue mix.
• Investing cash flows (M&A, intangible investments) and their impact on true FCF.
• Working capital trends (AR days vs revenue growth).
• Any guidance on dividend policy and DPS to validate payout sustainability.

Relative Positioning: Versus typical Japan mid-cap service peers, the company currently shows above-average profitability (ROIC ~14%), strong balance sheet conservatism, and superior cash conversion; sustainability hinges on maintaining growth and controlling SG&A as scale increases.

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