TOSHIBA TEC CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥257.65B
• Operating Income: ¥-1.07B
• Net Income: ¥26.50B
• EPS: ¥-186.63

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 Integrated Analysis

Analysis integrating XBRL data (GPT-5) and PDF earnings presentation (Claude)

Executive Summary

Toshiba Tec (6588) reported FY2026 Q2 consolidated results under JGAAP showing revenue of ¥257.7bn, down 10.9% YoY, indicating a meaningful slowdown versus the prior-year period. Despite a reported gross profit margin of 44.6%, operating income was a loss of ¥1.1bn (operating margin approximately -0.4%), though this represented a 60.3% YoY improvement in losses, suggesting some progress on costs or mix. Ordinary income deteriorated to -¥3.4bn, implying net non-operating losses on top of the operating loss; interest expense was ¥0.6bn, so the gap to ordinary loss likely reflects other non-operating items. Net income was a loss of ¥9.9bn (EPS -¥186.63), broadly flat YoY per the disclosure. EBITDA was ¥7.8bn (3.0% margin), highlighting that depreciation/amortization (¥8.9bn) is a meaningful drag from EBITDA to EBIT. Operating cash flow was a positive ¥7.0bn despite the net loss, resulting in an OCF/Net income ratio of -0.71, which signals cash earnings outperformed accounting earnings this half. Reported DuPont metrics indicate a net margin of -3.84%, asset turnover of 0.761x, and financial leverage of 3.22x, yielding a calculated ROE of -9.40%. Balance sheet strength appears moderate: total assets were ¥338.4bn and total equity ¥105.2bn, implying an equity ratio of roughly 31.1% despite the reported equity ratio showing 0.0% (likely undisclosed in XBRL). Liquidity is acceptable with a current ratio of 123.5% and quick ratio of 97.3%, supported by working capital of ¥39.9bn and inventories at ¥44.5bn. The company remains leveraged (debt-to-equity 2.19x), and interest coverage is negative (-1.7x) given the operating loss, pointing to elevated financial risk if profitability does not recover. Dividend payments were suspended (DPS ¥0), with a payout ratio of 0% reflecting the net loss and cautious capital policy. Free cash flow is not derivable from the data provided (FCF shown as 0 indicates lack of disclosure for investing cash flows/capex), limiting visibility on long-term cash generation. The mix of healthy gross margin and weak operating margin suggests high SG&A intensity and negative operating leverage amid revenue decline. The positive OCF despite losses provides a near-term liquidity cushion, but sustainability depends on revenue stabilization and expense control. Data gaps (cash and equivalents, investing cash flows, share count) constrain precision, so conclusions are based on the available non-zero data and disclosed calculated metrics.

From Earnings Presentation: Toshiba Tec's interim results for fiscal year 2025 showed an operating loss of 1.1 billion yen due to U.S. tariff impacts, but Q2 achieved profitability of 1.0 billion yen, improving 3.1 billion yen from Q1. While first-half tariff impact was 7.9 billion yen, second-half impact is expected to shrink to 3.1 billion yen through price revisions and production site optimization. The company maintains its full-year operating profit guidance of 12.0 billion yen, planning 13.1 billion yen for the second half. Domestic Retail will begin convenience store rollouts in the second half, Overseas Retail expects recovery of deferred demand and doubling of ELERA sales, and Workplace anticipates price revision effects to materialize in the second half. Year-end dividend is forecast at 20 yen. ELERA is expected to achieve fiscal 2025 sales of $50 million (approximately 7.0 billion yen), more than double year-over-year growth, with adoption by 13 of the world's top retailers and expanding deployment across over 30 countries. Domestic ELERA has also expanded to 490 companies and 7,000 stores, with a target of 50% recurring business ratio by fiscal 2030.

Financial Analysis

Profitability

ROE_decomposition: DuPont indicates: Net margin -3.84%, Asset turnover 0.761x, Financial leverage 3.22x, yielding ROE -9.40%. The primary drag is margin compression into a net loss, while asset efficiency is moderate and leverage amplifies the loss. margin_quality: Gross margin is reported at 44.6%, which is robust for the sector and implies value-add in solutions/hardware mix. However, EBITDA margin is 3.0% and operating margin is approximately -0.4%, indicating substantial SG&A and R&D burden offsetting gross profitability. Ordinary loss (-¥3.4bn) versus operating loss (-¥1.1bn) suggests additional non-operating costs/losses beyond interest expense (¥0.6bn), potentially FX or other items not detailed. operating_leverage: With revenue down 10.9% YoY and operating income still negative (though improved), the company exhibits negative operating leverage: fixed costs are not fully flexing with volume declines. The improvement in operating loss YoY implies some cost actions, yet current scale is insufficient to breakeven at the H1 run rate.

Growth

revenue_sustainability: Revenue contracted 10.9% YoY to ¥257.7bn, signaling softer end-market demand or normalization post prior-year strength. Given the half-year period, the annualized run-rate would require a stronger H2 to avoid full-year contraction. profit_quality: Despite a healthy gross margin, profit quality is weak at the operating and net levels. D&A of ¥8.9bn depresses EBIT from a modest EBITDA base (¥7.8bn), and non-operating losses further widen the gap to net loss. The negative interest coverage (-1.7x) underscores insufficient operating earnings to service financing costs. outlook: Recovery hinges on demand stabilization in core segments and disciplined SG&A control to restore operating margin. The YoY improvement in operating loss is a positive sign, but absent visibility on order backlog, pricing, and H2 seasonality, the near-term earnings outlook remains cautious.

Financial Health

liquidity: Current ratio 123.5% and quick ratio 97.3% indicate adequate short-term liquidity, though the near-1.0 quick ratio warrants monitoring. Working capital is ¥39.9bn, and inventories are ¥44.5bn (roughly 21% of current assets), implying some inventory intensity. solvency: Total equity of ¥105.2bn on total assets of ¥338.4bn implies an equity ratio near 31.1% (reported 0.0% likely reflects non-disclosure). Financial leverage is 3.22x (Assets/Equity) and debt-to-equity is 2.19x, signifying a moderately levered balance sheet. capital_structure: Interest expense is ¥0.6bn for the half, and interest coverage is negative (-1.7x) due to operating losses. If losses persist, refinancing and covenant headroom could tighten; improvement in operating earnings is key to easing financial risk.

Cash Flow

earnings_quality: Operating cash flow of ¥7.0bn versus net income of -¥9.9bn yields an OCF/NI ratio of -0.71, indicating cash exceeded accounting earnings this period (beneficial). This often reflects working capital release or non-cash charges (e.g., D&A), though detailed drivers are not disclosed. FCF_analysis: Free cash flow cannot be assessed accurately as investing cash flows/capex were not disclosed (reported as 0). Given EBITDA of ¥7.8bn and positive OCF, pre-investment cash generation appears positive, but capex requirements for hardware-intensive businesses could be material. working_capital: Inventories at ¥44.5bn and a quick ratio near 1.0 suggest working capital management is a key lever. The positive OCF despite losses implies either receivables collection or inventory drawdown, but exact components are not provided.

Dividend Sustainability

payout_ratio_assessment: With net income at -¥9.9bn and DPS at ¥0, the payout ratio is 0%. Given negative earnings and negative interest coverage, distributions appear prudently suspended. FCF_coverage: FCF coverage cannot be evaluated due to undisclosed investing cash flows (FCF shown as 0 indicates missing data, not true zero). OCF alone would not justify resumption without sustained profitability. policy_outlook: Assuming a conservative capital policy amid losses and leverage, maintenance of a no-dividend stance is likely until profitability and interest coverage normalize and FCF visibility improves.

Business Outlook

The company maintains its full-year guidance of sales of 550.0 billion yen (down 27.0 billion yen year-over-year) and operating profit of 12.0 billion yen (down 8.3 billion yen). Second half plans call for sales of 292.3 billion yen and operating profit of 13.1 billion yen, expecting significant improvement from the first-half operating loss of 1.1 billion yen. U.S. tariff impact will shrink from 7.9 billion yen in the first half to 3.1 billion yen in the second half through price revisions, production site optimization, and demand recovery. Retail Solutions full-year sales of 344.0 billion yen (down 2.7 billion yen) and operating profit of 6.0 billion yen (down 1.9 billion yen), with domestic convenience store rollout beginning and overseas benefiting from recovery of deferred demand and improved mix from increased ELERA sales. Workplace Solutions full-year sales of 215.0 billion yen (down 22.4 billion yen) and operating profit of 6.0 billion yen (down 6.3 billion yen), with tariff countermeasures (price revisions and production site optimization) expected to materialize in the second half. Exchange rate assumptions for the second half are US$145/yen and EUR165/yen. Dividend forecast is 20 yen for year-end (20 yen annual, down 25 yen year-over-year).

Management Guidance

Management acknowledges the first-half difficulties while emphasizing Q2 return to profitability and significant second-half improvement (operating profit of 13.1 billion yen). Although tariff impact worsened slightly from Q1 estimates to Q2 (first-half 7.9 billion yen vs. previous forecast of 7.0 billion yen, an increase of 0.9 billion yen), they express confidence that countermeasures will reduce second-half impact to 3.1 billion yen. They position domestic Retail convenience store rollout, overseas ELERA doubling ($50 million), and Workplace price revision effects as second-half growth drivers. ELERA has been adopted by 13 of the world's top retailers with potential for over 15,000 stores, and is expected to be a mid-to-long-term growth engine. The company has set a target to raise the recurring business ratio to 50% by fiscal 2030, with a policy to improve earnings quality through accumulation of recurring revenue. Dividends forecast at 20 yen based on second-half performance recovery, demonstrating commitment to shareholder returns.

Strategic Initiatives

• ELERA® platform expansion: Overseas sales doubled ($50 million), domestic expansion to 490 companies and 7,000 stores, 120 API partnership agreements
• Recurring business enhancement: Fiscal 2030 target of 50% sales ratio (data business, maintenance, software), cloud-based POS 'Tech Coupon Deli' operating at 410 stores
• U.S. tariff countermeasures: Price revisions and production site optimization (1.5 billion yen effect in first half, 4.0 billion yen in second half), limiting direct tariff impact to 5.7 billion yen in second half
• Domestic Retail: Convenience store rollout beginning (second half), ELERA-linked service 'OrderLinkage' surpassing 2,000 stores
• Overseas Retail: Recovery of deferred demand, improved mix from increased ELERA sales, strengthened proposal capabilities through Deloitte partnership
• Workplace: Increasing negotiations for AI-powered workflow 'elevate sky WORKFLOW', office and Auto-ID solution sales volume +20%, MPS acquisition strengthening cloud/AI solutions
• Leveraging global touchpoints: Platform business deployment with top 10 retailers as customers in Japan (8 companies), U.S. (7 companies), and Europe (4 companies)

Risk Assessment

Business Risks:

• Demand volatility in retail automation and office equipment end-markets affecting volume and pricing
• Negative operating leverage from fixed SG&A under revenue pressure
• Product mix shifts and potential margin pressure in hardware sales
• Supply chain and component cost fluctuations impacting gross margin
• Execution risk in cost-reduction and transformation initiatives

Financial Risks:

• Negative interest coverage (-1.7x) amid operating losses
• Moderate leverage (debt-to-equity 2.19x; financial leverage 3.22x)
• Potential covenant pressure if losses persist
• Working capital intensity (inventories ¥44.5bn) and cash conversion risk
• Non-operating losses widening ordinary loss beyond operating loss

Key Concerns:

• Sustained revenue decline (-10.9% YoY) with operating loss
• Ordinary loss (-¥3.4bn) larger than operating loss, implying non-operating drags
• Data limitations on cash and investing flows reduce FCF visibility
• Close-to-1.0 quick ratio, requiring ongoing vigilance on liquidity
• Need for H2 margin recovery to restore positive interest coverage

Risk Factors from Presentation:

• Ongoing impact of U.S. tariffs (full-year 11.0 billion yen, second-half 3.1 billion yen) and policy change risks
• Uncertainty in overseas Retail deferred demand recovery (dependent on investment appetite and economic environment)
• Risk of delays in Workplace price revision effects (customer acceptance, competitive environment)
• Foreign exchange fluctuations (second-half assumptions US$145/yen, EUR165/yen; ±1 yen results in US$1.8 billion/EUR0.3 billion sales variation)
• Risk of delays in ELERA deployment pace (retailer DX investment cycles, competitive dynamics)
• Execution cost and delay risks for tariff countermeasures (production site optimization)

Investment Implications

Key Takeaways:

• Top-line contraction of 10.9% YoY pressured utilization and margins despite a solid 44.6% gross margin
• Operating loss narrowed YoY but remains negative; EBITDA margin is thin at 3.0%
• Ordinary loss outpaced operating loss, indicating additional non-operating headwinds
• Liquidity is adequate (current ratio 1.24x; quick ratio 0.97x), but interest coverage is negative
• Positive OCF (¥7.0bn) provides a buffer; FCF not assessable due to missing investing data
• Equity ratio is around 31% by calculation, suggesting some balance-sheet resilience
• Dividend remains suspended; restoration likely contingent on profit recovery and FCF clarity

Metrics to Watch:

• H2 revenue trajectory and order intake to gauge demand recovery
• Operating margin and SG&A ratio to confirm cost discipline and operating leverage
• Ordinary income components (FX, equity-method, other non-operating items)
• Working capital turns (inventory and receivables days) and OCF sustainability
• Interest coverage and net debt trends to assess financial flexibility
• Capex and investing cash flows to determine true FCF

Relative Positioning: Within Japan-listed retail solutions and office equipment peers, Toshiba Tec shows comparatively strong gross margin but weaker operating profitability and interest coverage in this period, reflecting higher operating cost intensity and negative operating leverage amid a revenue downturn.

Supplementary Insights (Key Highlights)

• Q2 operating profit of 1.0 billion yen returned to profitability, improving 3.1 billion yen from Q1 (Domestic Retail +0.8 billion yen, Overseas Retail +1.3 billion yen, Workplace +1.1 billion yen)
• U.S. tariff impact to shrink from 7.9 billion yen in first half to 3.1 billion yen in second half, expecting full-year 11.0 billion yen (after countermeasures)
• Overseas ELERA sales of $50 million (approximately 7.0 billion yen) in fiscal 2025, more than double year-over-year; domestic ELERA expanded to 490 companies and 7,000 stores (+80 companies, +700 stores)
• Domestic convenience store rollout to begin in second half; overseas expects recovery of deferred demand and improved ELERA mix
• Workplace office and Auto-ID solution sales volume +20%, increasing negotiations for AI-powered workflow 'elevate sky WORKFLOW'
• Customer base includes 8 of Japan's top 10 retailers, 7 in the U.S., and 4 in Europe; deploying platform business leveraging global touchpoints
• Fiscal 2030 target of 50% recurring revenue ratio (25% in fiscal 2024), promoting accumulation of data business, maintenance, and software
• Year-end dividend forecast of 20 yen, changed from undecided to 20 yen anticipating second-half performance recovery

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
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