QB Net Holdings Co.,Ltd. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥6.81B
• Operating Income: ¥603M
• Net Income: ¥379M
• EPS: ¥28.74

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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

QB Net Holdings (65710) delivered a solid FY2026 Q1, with revenue of 68.09 billion yen-equivalent (6.809 billion yen; values in 100 million) up 6.9% YoY and operating income of 6.03 (+11.2% YoY), indicating positive operating leverage. Gross profit was 15.17 with a gross margin of 22.3%, while SG&A of 9.69 grew slower than revenue, supporting margin expansion at the operating level. Net income rose 10.1% to 3.79, translating to a net margin of 5.6% and basic EPS of 28.74 yen. DuPont decomposition shows a calculated ROE of 2.6% for the quarter, driven by a 5.6% net margin, 0.200x asset turnover, and 2.32x financial leverage; on a simple annualized view, this would imply low double-digit ROE, though quarterly seasonality should be considered. Cash generation was strong: operating cash flow (OCF) of 9.85 was 2.60x net income, and free cash flow (FCF) was 7.09 after 2.51 of capital expenditures, indicating high earnings quality. The balance sheet remains moderately leveraged with total assets of 340.55 and equity of 146.86 (equity ratio 43.1%), and interest-bearing loans of 88.21 (short-term 6.92, long-term 81.29) corresponding to a reported debt-to-equity of 1.33x. Profit before tax was 5.49 and the effective tax rate was 27.9%, consistent with standard domestic tax burdens. EBITDA totaled 14.55 (margin 21.4%), providing a meaningful buffer above operating profit for debt service, even though interest expense was unreported. Liquidity assessment is constrained due to missing current liabilities and cash details; current assets were 68.84 and cash and deposits were unreported, so standard current and quick ratios are not calculable. Dividend disclosure was limited (DPS unreported), but calculated payout ratio is 122.4% and FCF coverage 1.53x, suggesting cash flow can fund dividends despite a high payout on reported earnings in the quarter. Working capital is presented as 68.84 but likely reflects current assets only due to missing current liabilities; treat with caution. Overall, the quarter exhibits healthy topline growth, improving operating efficiency, and robust cash conversion, partially offset by limited disclosure in key areas (non-operating items, interest expense, and liquidity details). The company’s asset-heavy store network (reflected in D&A of 8.52) supports stable EBITDA but keeps operating margins in the high-single digits. Strategic focus on standardized, high-throughput services likely underpins steady asset turnover at 0.200x for the quarter. Key watchpoints include wage and utility cost pressures, store expansion economics, and overseas performance, all of which can influence margins and capex needs. In sum, profitability trends and cash flow quality are favorable, solvency is acceptable, and the dividend appears serviceable by FCF, though data gaps limit precision on liquidity and coverage metrics.

Profitability Analysis

ROE decomposition (DuPont): Net margin 5.6% x Asset turnover 0.200 x Financial leverage 2.32x = ROE 2.6% for the quarter. Operating margin is approximately 8.9% (6.03/68.09), reflecting good cost discipline as SG&A growth lagged revenue growth. Gross margin of 22.3% indicates moderate pricing power and cost pass-through, with room for improvement via mix and efficiency. EBITDA margin of 21.4% versus operating margin of 8.9% highlights a large D&A burden (8.52), consistent with a capex-intensive store base and suggesting operating leverage primarily flows through after absorbing fixed depreciation. The YoY delta (+6.9% revenue vs. +11.2% operating income) evidences positive operating leverage, implying better fixed-cost absorption and/or procurement efficiencies. Net margin expansion (+10.1% NI growth) roughly tracks operating income growth, indicating limited drag from non-operating items given unreported interest/other income. Tax burden at 27.9% is in line with expectations and not a major swing factor. Overall profitability quality is sound, supported by strong OCF/NI and stable EBITDA, though further margin gains may hinge on controlling labor and rental costs.

Growth Assessment

Revenue grew 6.9% YoY to 68.09, a healthy pace for a mature, standardized service model. Operating income growth of 11.2% outpaced sales, reflecting efficiency gains and scale benefits; this suggests underlying momentum rather than one-off effects. Net income rose 10.1%, indicating minimal deterioration from below-the-line items (despite non-operating details being unreported). Sustainability: The model benefits from high customer frequency and affordable price points, which can be resilient in mixed macro environments; however, wage inflation and utilities could pressure margins if price increases lag. D&A of 8.52 implies ongoing investment and a growing depreciable base; returns will depend on same-store traffic and new store payback periods. Asset turnover at 0.200x for the quarter is consistent with the format; improvement would signal better utilization. Outlook: If revenue momentum persists and SG&A discipline holds, operating margin could trend toward high-single-digit/low-double-digit levels on an annualized basis. Key dependencies include labor availability, store network optimization, and any overseas expansion contribution. Data gaps around segment and geographic mix limit granularity of the growth drivers.

Financial Health

Total assets 340.55 and equity 146.86 yield an equity ratio of 43.1%, indicative of a balanced capital structure for a service retailer. Debt consists of 6.92 short-term loans and 81.29 long-term loans (total 88.21), aligning with a reported debt-to-equity ratio of 1.33x; leverage is moderate but manageable given EBITDA of 14.55 in the quarter. Liquidity assessment is constrained: current assets are 68.84 but current liabilities and cash balances are unreported; therefore, current and quick ratios are not calculable. Working capital is shown as 68.84, but with current liabilities unreported, this likely approximates current assets rather than a true net figure. Accounts receivable of 12.92 and inventories of 1.21 are small relative to revenue, consistent with a largely cash-based retail service model, which typically supports liquidity. Interest coverage cannot be computed due to missing interest expense; however, operating income of 6.03 and EBITDA of 14.55 suggest adequate coverage capacity. Solvency appears sound with leverage anchored by tangible operating cash flow generation.

Cash Flow Quality

OCF of 9.85 versus net income of 3.79 (OCF/NI 2.60x) indicates high earnings quality and favorable non-cash add-backs/working capital movements. FCF of 7.09 after capex of 2.51 underscores internal funding capacity for dividends and reinvestment. Investing cash flow was -2.76, slightly larger than capex, suggesting minor additional investments (e.g., intangibles or deposits). The D&A of 8.52 is materially above capex this quarter, which boosts OCF relative to NI; sustainability depends on whether capex normalizes toward maintenance levels over the year. Working capital specifics are limited due to unreported current liabilities and cash; however, the low inventory level (1.21) and modest receivables (12.92) fit the business model and typically reduce cash flow volatility. Overall, cash conversion is strong and supports both debt service and shareholder returns.

Dividend Sustainability

Dividend disclosures are limited (DPS unreported), but the calculated payout ratio is 122.4% for the period, which is elevated on a quarterly earnings basis and may reflect timing effects (e.g., payment of prior-year dividends). FCF coverage of dividends is 1.53x, indicating cash generation exceeded dividend outflows in the quarter despite the high earnings-based payout ratio. Dividends paid were 3.54 (354 million yen), which, against average shares of ~13.21 million, implies a cash outflow equivalent to roughly 26-27 yen per share in the period; this should be interpreted cautiously given potential seasonality. Policy outlook: Given robust OCF and moderate leverage, maintaining dividends appears feasible, but long-term sustainability will depend on full-year earnings alignment with dividend levels and capex plans. Without reported DPS guidance or DOE, we cannot assess target payout frameworks; monitoring announcements will be important.

Risk Assessment

Business Risks:

• Labor cost inflation pressuring margins in a service-intensive model
• Utility and rent cost increases impacting fixed-cost base
• Traffic volatility due to macro conditions or competitive pricing
• Execution risk in new store openings and overseas expansion
• Brand perception and service quality consistency across locations

Financial Risks:

• Moderate leverage (D/E 1.33x) with unreported interest expense obscuring coverage
• Potential capex upcycles to refurbish/expand store network
• Limited liquidity visibility due to unreported current liabilities and cash
• Dividend timing vs. quarterly earnings creating payout strain if earnings underperform

Key Concerns:

• Data gaps on non-operating items and liquidity metrics constrain analysis precision
• High D&A relative to capex may not persist; capex normalization could lower FCF
• Elevated calculated payout ratio (122.4%) on quarterly basis

Investment Implications

Key Takeaways:

• Healthy topline growth (+6.9% YoY) with stronger operating profit growth (+11.2%) indicates operating leverage
• Margins: gross 22.3%, operating ~8.9%, EBITDA 21.4%; improving cost efficiency
• Strong cash conversion (OCF/NI 2.60x) and positive FCF (7.09) support balance sheet and distributions
• Moderate leverage (D/E 1.33x; equity ratio 43.1%) appears manageable given EBITDA
• Dividend appears cash-covered this quarter (FCF coverage 1.53x) despite high earnings-based payout ratio
• Data limitations on liquidity and non-operating items warrant cautious interpretation

Metrics to Watch:

• Same-store traffic and ticket trends versus wage and utility inflation
• Operating margin trajectory and SG&A growth vs. sales
• Capex run-rate vs. D&A and store expansion payback
• Interest expense and coverage once disclosed
• Cash and current liabilities disclosure to refine liquidity assessment
• Dividend policy guidance and payout framework

Relative Positioning: Within Japanese consumer service retailers, QB Net exhibits steady growth and strong cash conversion with moderate leverage; profitability is anchored by standardized operations, producing high EBITDA margins relative to operating margins due to sizable depreciation, while data gaps limit full comparability on liquidity and coverage.

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