internet infinity INC. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.95B
• Operating Income: ¥203M
• Net Income: ¥135M
• EPS: ¥25.46

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

Verdict: Solid top-line growth with margin compression; earnings quality is sound but operating leverage weakened. Revenue grew 12.5% YoY to 29.46, while operating income fell 9.2% to 2.03, indicating cost pressure despite scale gains. Gross profit reached 11.96, implying a gross margin of 40.6% this quarter. Operating margin was 6.9% (2.03/29.46), down from an estimated 8.5% a year ago, a compression of roughly 162 bps. Ordinary income rose 1.5% YoY to 2.31, helped by net non-operating gains (0.43 income vs 0.16 expenses), partially offsetting weaker core margin. Net income declined 5.4% YoY to 1.35, translating to a net margin of 4.6%. ROE calculated via DuPont stands at 8.3%, supported by asset turnover of 0.666 and leverage of 2.72x. Operating cash flow was strong at 2.24, exceeding net income by 66%, signaling good earnings quality and cash conversion. Capex was modest at 0.21, suggesting disciplined investment and likely positive FCF around the OCF-capex differential. Liquidity remains adequate with a current ratio of 135.8% and quick ratio the same due to limited inventories reported. Leverage is moderate with D/E at 1.72x and Debt/EBITDA at 4.39x, within manageable levels given the 13.3x interest coverage. Intangibles are material (intangible assets 9.11, including goodwill 5.19), raising future impairment sensitivity but currently supported by positive ROIC of 9.3%. Non-operating income contributes meaningfully (non-operating income ratio 32.0%), warranting monitoring of recurring vs one-off elements. The effective tax rate is elevated at 41.5%, constraining net margin despite healthy ordinary income. Shareholder returns include share repurchases of 1.03, and the calculated payout ratio is 48.2%, implying balanced capital allocation given the cash generation. Forward-looking, management needs to restore operating leverage by controlling SG&A and enhancing productivity; if achieved, ROE can sustain at high single digits with scope to improve.

Profitability Analysis

ROE (8.3%) decomposition: Net Profit Margin (4.6%) × Asset Turnover (0.666) × Financial Leverage (2.72x). The biggest change YoY appears to be margin compression at the operating level: operating margin declined to 6.9% from an estimated 8.5% (≈162 bps compression), despite revenue growth of 12.5%. Business drivers likely include wage inflation and higher SG&A (9.93; 33.7% of sales) to support growth in service delivery and platform operations. Non-operating gains helped ordinary income (+1.5% YoY) but do not fully offset weaker core margin. Sustainability: wage and rent pressures could persist; margin recovery depends on pricing, mix (higher-margin services), and utilization efficiency. Flags: SG&A growth likely outpaced revenue growth (given OI down while revenue up), indicating negative operating leverage in the period.

Growth Assessment

Top-line growth of 12.5% indicates healthy demand or footprint expansion. However, operating profit decline (-9.2%) shows growth is not yet translating to earnings scale. Non-operating gains supported ordinary income (+1.5%), but reliance on these is not a durable growth driver. EBITDA of 2.96 (10.1% margin) suggests room to improve fixed-cost absorption. With ROIC at 9.3% (>8% benchmark), underlying project/unit returns are acceptable; sustaining this hinges on disciplined capital deployment and improving unit economics. Outlook: focus on cost control (labor efficiency, overhead discipline), pricing where permissible, and service mix optimization. If SG&A intensity normalizes and tax rate moderates, net profit growth can re-accelerate.

Financial Health

Liquidity is adequate: current ratio 135.8% and quick ratio 135.8%. No explicit warning thresholds breached (Current Ratio >1.0, D/E <2.0). Capital structure shows D/E at 1.72x and Debt/EBITDA at 4.39x—manageable given 13.32x interest coverage but above a conservative 1.5x benchmark. Maturity profile: short-term loans of 7.50 are covered by cash and deposits of 16.43 and receivables of 9.79, reducing near-term refinancing risk. Total liabilities stand at 27.94 against equity of 16.27; leverage supports ROE but elevates sensitivity to rate hikes. Intangible assets (9.11, including goodwill 5.19) are sizeable versus equity, implying some impairment risk if growth underperforms. No off-balance sheet obligations were disclosed in the provided data.

Cash Flow Quality

OCF/Net Income is 1.66x, indicating high-quality earnings and healthy cash conversion. With capex at 0.21, implied FCF is likely positive (OCF - capex ≈ 2.03), supporting both deleveraging and shareholder returns. Financing cash flow was -2.27, including share repurchases of 1.03; remaining outflows likely debt service or dividends (unreported). Working capital appears supportive (cash 16.43, receivables 9.79 vs current liabilities 20.74), and the strong OCF suggests no evident working-capital-driven earnings inflation this quarter. No signs of aggressive working capital manipulation are evident from available figures.

Dividend Sustainability

Calculated payout ratio is 48.2%, within a generally sustainable range (<60%). Although total dividends and FCF coverage were unreported, implied FCF (~2.03) comfortably covers an estimated dividend outflow consistent with a ~48% payout on net income of 1.35 (~0.65), suggesting headroom even after buybacks of 1.03. Balance sheet liquidity is sufficient, but sustainability depends on maintaining OCF above net income and preserving capex discipline. Policy outlook: with ROE at 8.3% and ROIC at 9.3%, continued balanced returns (moderate DPS plus opportunistic buybacks) appear feasible, subject to margin recovery.

Risk Assessment

Business Risks:

• Margin pressure from labor cost inflation and staffing shortages in care/health services
• Regulatory/reimbursement changes that could limit pricing or reduce service fee schedules
• Execution risk in scaling services and platforms without proportional SG&A increases
• Competition in digital platforms and community care services affecting customer acquisition costs
• Potential service mix shifts toward lower-margin offerings

Financial Risks:

• Moderate leverage (D/E 1.72x; Debt/EBITDA 4.39x) increasing sensitivity to interest rate rises
• High effective tax rate (41.5%) dampening net margins and cash available for reinvestment
• Intangible asset and goodwill impairment risk (intangibles 9.11; goodwill 5.19) relative to equity
• Dependence on non-operating income (non-operating income ratio 32.0%) for ordinary profit support

Key Concerns:

• Operating margin compression of ~162 bps YoY despite 12.5% revenue growth
• SG&A intensity at 33.7% of sales suggests negative operating leverage this period
• Short-term debt reliance (7.50) requires continued strong OCF to mitigate refinancing risk
• Visibility limited by unreported breakdowns of SG&A and non-operating items

Investment Implications

Key Takeaways:

• Top-line momentum is solid, but cost discipline must improve to restore operating leverage
• Earnings quality is strong (OCF/NI 1.66x), underpinning ongoing shareholder returns
• ROIC of 9.3% exceeds common targets, supporting value creation despite margin pressure
• Balance sheet is liquid; leverage is manageable but should not rise materially from here
• Monitor the elevated tax rate and the contribution of non-operating items to ordinary income

Metrics to Watch:

• Operating margin and SG&A-to-sales ratio trend
• OCF/Net Income and working capital days
• Debt/EBITDA and short-term loan balance
• ROIC by segment (if disclosed) and capital deployment pace
• Effective tax rate trajectory and any one-off items in non-operating income

Relative Positioning: Within domestic care/health-service peers, the company shows above-target ROIC and healthy cash conversion, but operates with higher SG&A intensity and moderate leverage; near-term outperformance hinges on regaining margin traction while sustaining growth.

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