SAXA,Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥22.20B
• Operating Income: ¥1.17B
• Net Income: ¥822M
• EPS: ¥141.90

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

Verdict: FY2026 Q2 was a mixed quarter with resilient top-line profitability but weakening bottom-line quality and capital efficiency, as net income fell sharply and cash conversion lagged earnings. Revenue reached 222.02 (100M JPY), generating gross profit of 66.88 and operating income of 11.67 (-5.7% YoY), while ordinary income was 12.29 (-0.7% YoY) and net income declined to 8.22 (-27.1% YoY). Operating margin stands at 5.3% and net margin at 3.7%, supported by gross margin of 30.1%. Non-operating income of 0.94 (11.4% of operating profit) included 0.57 in dividend income and 0.02 in interest income, offering a small cushion to ordinary profit. Cash flow quality deteriorated: operating cash flow was 5.77, only 0.70x net income, signaling weaker earnings conversion. Balance sheet strength remains a clear positive with current ratio at 263% and net cash position effectively covering short-term borrowings (cash 85.18 vs short-term loans 9.90). Leverage is conservative (D/E 0.41x) and interest coverage is very strong at 64.8x. However, capital efficiency is soft: ROE is 2.7% and ROIC is 3.3% (below the 5% warning threshold). The effective tax rate was 30.8%, adding to net income pressure relative to operating trends. Reported payout ratio of 212.7% appears elevated relative to earnings and likely above internally generated free cash flow, raising sustainability questions absent special factors. Free cash flow for the period, approximated as OCF minus capex, was about 3.13, implying limited headroom for aggressive shareholder returns alongside debt reduction. Margin trajectory likely compressed given the operating income decline, but exact basis point changes cannot be quantified due to missing prior-period revenue and margin data. Forward-looking, the company needs to enhance cash conversion and ROIC while protecting margins, as the current mix of moderate operating profit and weak cash generation is unlikely to support outsized distributions. Near-term priorities likely include tighter working capital, disciplined SG&A, and focused capex to lift ROIC above cost of capital.

Profitability Analysis

DuPont decomposition: ROE 2.7% = Net Profit Margin (3.7%) × Asset Turnover (0.508x) × Financial Leverage (1.41x). The weakest components are net margin and asset turnover; leverage is modest and not a driver. The largest implied change YoY stems from net margin compression, as net income fell 27.1% while operating income fell only 5.7%, suggesting higher below-OP headwinds (tax burden and/or non-operating balance) and/or mix effects. Business drivers include a 30.1% gross margin and operating margin of 5.3% amid SG&A of 55.21, indicating limited operating leverage; ordinary income was supported by 0.94 in non-operating gains, dominated by dividend income. Sustainability: net margin weakness looks partly cyclical (tax rate at 30.8%) and partly structural given low operating margin, so without mix improvement or cost control, sustained ROE uplift is unlikely. Watch for SG&A growth outpacing revenue (we lack YoY SG&A and revenue growth data, but the decline in operating profit implies deleverage risk). Overall, ROE is constrained by low margins and modest turnover; absent higher asset efficiency or cost discipline, returns are likely to remain below peer medians.

Growth Assessment

Top-line scale is solid at 222.02, but earnings momentum has slowed as operating income fell 5.7% and net income dropped 27.1% YoY. Non-operating income contributes a modest buffer but is not large enough to change the trajectory. Revenue sustainability cannot be fully assessed due to missing YoY sales and segment detail; however, ordinary income resilience (-0.7% YoY) versus operating income suggests non-operating support offsetting core softness. Profit quality is mixed: EBITDA margin at 7.1% is thin and operating margin at 5.3% leaves little room for shocks. Outlook hinges on cost control (SG&A) and working capital normalization to restore OCF/NI above 1.0, alongside maintaining gross margin near 30%. Near-term growth will likely be constrained by the need to prioritize cash generation and ROIC improvement over expansionary investment.

Financial Health

Liquidity is strong: current ratio 263.1% and quick ratio 244.5%, with cash and deposits of 85.18 versus current liabilities of 103.91 and short-term loans of 9.90. Solvency is conservative: total liabilities 127.44 against equity 309.37 (D/E 0.41x), and interest coverage is 64.83x, indicating low refinancing risk. Maturity mismatch risk appears low: current assets 273.42 comfortably exceed current liabilities, and cash substantially covers short-term debt. No off-balance sheet obligations are disclosed in the provided data. There are no explicit warning thresholds breached (Current Ratio well above 1.0; D/E well below 2.0).

Cash Flow Quality

OCF/Net Income is 0.70x (<0.8), indicating weaker cash conversion and a potential earnings quality issue. Estimated free cash flow is approximately 3.13 (OCF 5.77 minus capex 2.64), positive but modest relative to financing outflows of -16.58. Without detailed working capital bridges, the OCF shortfall versus NI likely relates to receivable buildup or other WC timing (AR 84.29 and inventories 19.37 levels are not comparable without prior-period data). There are no clear signs of working capital manipulation in the disclosed data, but the low OCF/NI ratio warrants monitoring. Sustaining dividends and debt repayment from internal cash may be challenging if OCF does not improve.

Dividend Sustainability

The calculated payout ratio of 212.7% is well above the <60% benchmark and appears unsustainable if it reflects recurring policy rather than a one-off. With estimated FCF of 3.13 and financing CF of -16.58 (likely including dividends and debt service), internal cash generation likely does not fully cover shareholder returns plus repayments. Dividends paid are unreported; therefore precise coverage cannot be computed, but the elevated payout ratio signals risk of adjustment unless earnings and OCF normalize. Policy outlook likely shifts toward balancing returns with ROIC improvement and cash preservation.

Risk Assessment

Business Risks:

• Margin pressure in core operations given 5.3% operating margin and flat ordinary income backdrop
• Execution risk on SG&A control amid modest operating leverage
• Demand variability and project timing impacting cash conversion (OCF/NI 0.70x)
• Supply chain and component cost volatility that could erode 30.1% gross margin

Financial Risks:

• Earnings quality risk from weak cash conversion (OCF/NI < 0.8)
• Dividend sustainability risk given a 212.7% payout ratio versus modest FCF
• ROIC at 3.3% below 5% threshold, implying value creation risk if WACC exceeds ROIC
• Refinancing and interest rate risk are low but present; short-term loans 9.90 versus cash 85.18

Key Concerns:

• Low ROE (2.7%) and ROIC (3.3%) relative to benchmarks
• Net income down 27.1% YoY despite smaller decline in operating income
• Reliance on small but non-core non-operating income (0.94) to support ordinary profit
• Insufficient data on segment trends and YoY revenue limits visibility into core growth drivers

Investment Implications

Key Takeaways:

• Core profitability is intact but thin: operating margin 5.3%, gross margin 30.1%
• Bottom-line deterioration (-27.1% NI) and OCF/NI of 0.70x raise quality concerns
• Balance sheet is robust (current ratio 263%, D/E 0.41x) providing downside protection
• Capital efficiency is subpar (ROE 2.7%, ROIC 3.3%), requiring operational improvements
• Dividend sustainability is questionable if payout ratio remains above 200%

Metrics to Watch:

• OCF/NI ratio trending back above 1.0
• SG&A trajectory versus revenue growth
• Working capital turns (DSO, DPO, inventory) and asset turnover improvement
• ROIC uplift toward 5–7% via margin and asset efficiency gains
• Effective tax rate normalization and stability of non-operating income

Relative Positioning: Within electronics/communications solution peers, the company exhibits stronger balance sheet liquidity and lower leverage than average, but lags on capital efficiency and cash conversion; sustaining shareholder returns will depend on improving OCF and operating margin rather than financial engineering.

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