Convano Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥3.85B
• Operating Income: ¥1.84B
• Net Income: ¥1.26B
• EPS: ¥2.83

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

Convano Co., Ltd. (6574) reported FY2026 Q2 consolidated IFRS results showing very strong topline expansion and exceptional reported profitability, alongside weak cash conversion and limited disclosure granularity. Revenue was 38.54 billion yen-equivalent units (100 million yen basis), up 154.7% YoY, indicating a step-change in scale. Operating income was 18.42, implying a high operating margin on the period’s revenue despite a reported gross profit figure that appears incongruent with other line items. Net income was 12.62, translating to a net margin of 32.8% and basic EPS of 2.83 yen on an average share count of 445.7 million. DuPont decomposition shows ROE of 9.5%, driven primarily by an unusually high net profit margin and modest asset turnover of 0.242x, with low financial leverage of 1.20x. The balance sheet is conservative with an equity ratio of 83.2% and debt-to-equity of 0.11x, supported by limited interest-bearing debt (short-term loans 0.50, long-term loans 3.08). Total assets were 159.43 and equity 132.59, indicating ample solvency headroom. Cash and equivalents were 8.06, but operating cash flow was only 0.03, and free cash flow was negative at -0.16, signaling poor cash conversion in the period. Capex was modest at 0.09, and financing cash flow was an outflow of -1.35, suggesting some deleveraging or shareholder-related outflows. The effective tax rate was reported as 0.0%, likely reflecting deferred tax assets or loss carryforwards, but tax sustainability needs verification. Several key items are unreported (non-operating items, current liabilities, dividends), and the income statement subtotals present internal inconsistencies (e.g., gross profit of 5.27 vs cost of sales of 9.87 and operating income of 18.42). These inconsistencies suggest possible XBRL mapping differences rather than actual margin structure. Despite disclosure gaps, the company’s reported profitability and capital structure appear strong for the quarter, though the quality of earnings is weakened by minimal operating cash flow. Revenue momentum appears robust, but visibility on recurring vs one-off drivers is limited without segment or non-operating detail. Overall, the results portray a high-margin, low-leverage profile with strong ROE mechanics this quarter but with cash flow quality and disclosure depth as key watchpoints.

Profitability Analysis

ROE_decomposition: ROE 9.5% = Net margin 32.8% x Asset turnover 0.242 x Financial leverage 1.20x. The ROE is predominantly margin-driven, with only modest contribution from leverage and low asset turnover consistent with a capital-light or early-stage scale dynamic. margin_quality: Reported operating income of 18.42 on revenue of 38.54 implies a very high operating margin, inconsistent with the reported gross profit of 5.27 and SG&A of 6.34. Given EBITDA of 19.70 and D&A of 1.28, operating income reconciles mechanically. The low reported effective tax rate (0.0%) further boosts net margin to 32.8%. The discrepancy in gross profit suggests classification or XBRL mapping differences; we therefore place greater weight on operating income, EBITDA, and net income for margin assessment. operating_leverage: SG&A of 6.34 grew well below the increase in revenue (+154.7% YoY), implying significant operating leverage in the period. EBITDA margin of 51.1% underscores strong drop-through; sustainability will depend on the mix of fixed vs variable costs and whether the revenue surge is recurring.

Growth Assessment

revenue_sustainability: Revenue expanded 154.7% YoY to 38.54, indicating either aggressive expansion, a recovery from prior constraints, or possible consolidation effects. Without segment or store-count data, sustainability is uncertain; however, the magnitude suggests structural growth rather than marginal pricing effects. profit_quality: Profitability is elevated, with operating income 18.42 and net income 12.62. However, the negligible operating cash flow (0.03) versus net income indicates weak cash conversion this quarter, potentially due to working capital build or timing effects. The 0% tax charge also inflates bottom-line growth; normalization of taxes could reduce net margin. outlook: Assuming continued demand momentum and partial normalization of working capital, the company could maintain above-peer margins near term. Key constraints to the outlook are the low asset turnover and the lack of visibility on non-operating items, tax normalization, and any one-off profit contributions.

Financial Health

liquidity: Cash and equivalents were 8.06. Current assets were 13.84; current liabilities were unreported, preventing calculation of current and quick ratios. Working capital is presented as 13.84 (equal to current assets due to missing current liabilities), so true liquidity buffer is unclear. solvency: Total liabilities were 14.21 against equity of 132.59 (equity ratio 83.2%). Interest-bearing debt reported via loans totals 3.58 (ST 0.50, LT 3.08), yielding a debt-to-equity ratio of 0.11x, indicating low balance-sheet risk. capital_structure: Assets 159.43 and equity 132.59 imply financial leverage of 1.20x, consistent with DuPont. The structure is equity-heavy with minimal leverage, providing flexibility for investment and resilience against earnings volatility.

Cash Flow Quality

earnings_quality: Net income was 12.62 while operating CF was 0.03, indicating very low cash conversion in the period. This suggests significant working capital consumption or timing of receipts/payments. The reported effective tax rate of 0% and unreported non-operating items further cloud the underlying cash earnings quality. FCF_analysis: Free cash flow was -0.16, reflecting marginal OCF and modest capex of 0.09 alongside other investing outflows (investing CF -0.19). Financing CF was -1.35, indicating debt repayment or shareholder returns; dividends were unreported. working_capital: Accounts receivable stood at 4.56 and inventories at 0.61, while accounts payable was 1.40. Given the revenue surge, higher receivables are plausible, contributing to the weak OCF. Current liability details are missing, limiting a precise cash conversion cycle assessment.

Dividend Sustainability

payout_ratio_assessment: Dividend data are unreported; payout ratio is not calculable from disclosures. With EPS at 2.83 yen and positive earnings, theoretical capacity exists, but absent policy/disclosure, assessment must be deferred. FCF_coverage: Free cash flow was negative at -0.16, implying no coverage for hypothetical dividends in the period. However, this may be timing-related; sustained negative FCF would challenge distributions. policy_outlook: No dividend guidance or DOE is available. Given low leverage and strong equity ratio, the balance sheet could support a conservative dividend if cash generation normalizes, but current disclosure does not permit conclusions.

Risk Assessment

Business Risks:

• Revenue concentration risk if growth is driven by a limited number of channels or locations (not disclosed).
• Sustainability of exceptionally high margins amid potential normalization of demand and cost inflation.
• Execution risk in scaling operations after a 154.7% YoY revenue increase.
• Dependence on favorable tax treatment or loss carryforwards given a 0% effective tax rate.

Financial Risks:

• Weak cash conversion (OCF 0.03 vs NI 12.62) indicating working capital and timing risk.
• Potential tax normalization headwind to net margins and ROE.
• Disclosure gaps on current liabilities, non-operating items, and dividend policy.
• Sensitivity to refinancing or interest changes is low given debt-to-equity 0.11x, but cash flow volatility could constrain flexibility.

Key Concerns:

• Apparent inconsistency between reported gross profit (5.27) and operating income (18.42), suggesting possible XBRL mapping differences.
• Minimal operating CF despite strong earnings, leading to negative FCF.
• Lack of visibility on non-operating income/expenses and ordinary income.
• Unreported current liabilities limit liquidity assessment accuracy.

Investment Implications

Key Takeaways:

• Strong topline growth (+154.7% YoY) and very high reported profitability (EBITDA margin 51.1%, net margin 32.8%).
• Low leverage and high equity ratio (83.2%) provide balance-sheet strength.
• Cash flow quality is weak this quarter (OCF 0.03; FCF -0.16), likely tied to working capital.
• Effective tax rate at 0% boosts net income; normalization would reduce ROE and margins.
• Disclosure inconsistencies in gross profit and missing current liabilities warrant caution in interpreting margins.

Metrics to Watch:

• Operating cash flow to net income conversion and working capital movements (AR, AP, inventory turns).
• Underlying operating margin ex any one-off items; reconciliation of gross profit vs operating profit.
• Tax rate trajectory and utilization of loss carryforwards/deferred tax assets.
• Revenue sustainability indicators (same-store growth, unit expansion, repeat customer metrics if disclosed).
• Leverage and liquidity trends (cash balance, refinancing, current liability disclosure).

Relative Positioning: On reported figures, the company presents above-average profitability and below-average leverage versus typical TSE small-cap consumer/service peers, but with below-average cash conversion and below-average disclosure depth for this quarter.

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