RVH Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥572M
• Operating Income: ¥-96M
• Net Income: ¥-114M
• EPS: ¥-4.50

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: RVH’s FY2026 Q2 (cumulative) shows a weak quarter with shrinking sales and persistent operating losses leading to a net loss and pressured leverage. Revenue declined 15.2% YoY to 5.72, while gross profit was 1.63, implying a gross margin of 28.4%. SG&A of 2.59 exceeded gross profit by 0.96, resulting in an operating loss of -0.96 and an operating margin of -16.8%. Non-operating income of 0.42 (including 0.12 dividends and 0.03 interest) partially offset the operating loss, narrowing ordinary loss to -0.55. Net income was -1.13, equating to a net margin of -19.8% and EPS of -4.50 yen. The DuPont breakdown indicates ROE of -17.7% driven primarily by a deeply negative net margin, with asset turnover at 0.252 and financial leverage at 3.56x amplifying the loss. Liquidity is adequate on paper (current ratio 141.9%, quick ratio 139.4%), supported by cash and deposits of 5.31, but solvency is stretched (D/E 2.56x) despite modest loans (short-term 0.45, long-term 1.46). Operating cash flow was negative at -0.19, only 0.17x of net loss in absolute terms, flagging earnings quality concerns. Financing cash flow of +0.87 appears to have supported liquidity, while investing CF was not disclosed; reported capex was -0.21. EBITDA was -0.92 (margin -16.2%), and interest coverage is negative (-55.1x), underscoring weak debt-servicing capacity from operations. Retained earnings are deeply negative (-13.89), keeping book value per share low at 25.16 yen and constraining capital policy flexibility. ROIC is severely negative at -32.3%, highlighting poor capital efficiency and the urgency for either margin repair or asset rationalization. YoY margin comparisons in basis points are not determinable due to lack of prior-period margin disclosures, but the current cost structure (SG&A at 45.3% of sales) is misaligned with gross margin, driving operating losses. Earnings quality is weak given OCF/NI of 0.17 and reliance on financing inflows. Near-term focus must be on SG&A reduction, revenue stabilization, and maintaining lender confidence to manage upcoming obligations. Forward-looking, the company must restore operating breakeven through cost measures and sales mix optimization; otherwise, leverage and negative ROIC pose ongoing risks to equity value.

Profitability Analysis

ROE decomposition (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = (-19.8%) × 0.252 × 3.56 ≈ -17.7%. The dominant driver of negative ROE is the net margin at -19.8%, as both turnover (0.252) and leverage (3.56x) are secondary contributors. The business reason is that SG&A (2.59) exceeds gross profit (1.63) by 0.96, producing an operating loss, while only limited non-operating income (0.42) partially offsets it. Financial leverage at 3.56x magnifies the loss to equity given low profitability. Asset turnover at 0.252 suggests underutilized assets relative to sales scale. Sustainability: current margin pressure appears structural given the SG&A-to-sales ratio (45.3%) and gross margin (28.4%); without material cost reduction or revenue recovery, losses could persist. Operating leverage is currently negative—declining revenue (-15.2% YoY) against a relatively fixed SG&A base intensifies losses. Concerning trend flags: SG&A burden materially exceeds gross profit; although we lack YoY SG&A growth data, the ratio indicates cost structure misalignment.

Growth Assessment

Revenue declined 15.2% YoY to 5.72, signaling demand softness or business contraction. Gross margin stands at 28.4%; absent YoY margin disclosure, we cannot quantify basis-point change, but current levels are insufficient to cover SG&A at 45.3% of sales. Non-operating income of 0.42 softened ordinary loss, but it is not a substitute for core earnings recovery. EBITDA margin of -16.2% highlights weak operating throughput. With no segment or product mix detail provided, sustainability of sales is uncertain; the immediate task is cost rationalization to regain operating breakeven. Outlook hinges on stabilizing top line and raising contribution margin (pricing, mix, or COGS improvements). Any incremental revenue should carry high drop-through if fixed costs are trimmed; conversely, further sales declines would deepen losses given negative operating leverage. Absent disclosed backlog or order indicators, visibility is low.

Financial Health

Liquidity: Current ratio 141.9% and quick ratio 139.4% indicate adequate short-term liquidity; working capital is 6.13. Cash and deposits of 5.31 provide a buffer. Solvency: Debt-to-equity is high at 2.56x (warning), reflecting significant liabilities relative to equity despite modest loans (ST 0.45, LT 1.46). Interest coverage is negative (-55.1x), indicating operating earnings do not cover interest expense (0.02). Maturity mix: Short-term loans (0.45) are covered by cash (5.31), and current assets (20.75) exceed current liabilities (14.62), suggesting limited immediate refinancing stress; however, maintaining lender support is key given operating losses. Potential net cash versus loans is approximately +3.40 (cash 5.31 - total loans 1.91), but total liabilities remain heavy, driving the elevated D/E. Off-balance sheet obligations: none disclosed in the provided data.

Cash Flow Quality

OCF was -0.19 versus net income -1.13, yielding OCF/NI of 0.17x, which flags low earnings quality and weak cash conversion. Non-operating income supported the P/L but not cash flows; reliance on financing CF (+0.87) to sustain liquidity is evident. With capex at -0.21, a proxy FCF (OCF - capex) is approximately -0.40; full FCF cannot be confirmed due to unreported investing CF details. Working capital details are limited, but the gap between accounting loss and modest OCF outflow suggests non-cash charges and/or timing benefits; sustainability is uncertain. No explicit signs of working capital manipulation are visible from the summary data, but monitoring receivables (1.24) and payables (0.09) turnover will be important given the small base.

Dividend Sustainability

Dividend data are not disclosed; payout ratios are not calculable. Given negative net income (-1.13), negative EBITDA, and proxy negative FCF, distributable capacity appears constrained. Retained earnings are -13.89, and book value per share is low (25.16 yen), which typically argues for capital preservation over distributions. Unless profitability and free cash flow turn positive, sustaining dividends would be challenging; policy signals are absent in the provided data.

Risk Assessment

Business Risks:

• Revenue decline of 15.2% YoY indicating demand softness or competitive pressure
• Cost structure misalignment: SG&A at 45.3% of sales versus 28.4% gross margin
• Negative ROIC (-32.3%) signaling value-destructive deployment of capital
• Potential goodwill (0.51) and intangible (0.64) impairment risk if losses persist
• Operational deleveraging risk if sales decline further

Financial Risks:

• High leverage: D/E 2.56x despite modest loans, raising solvency concerns
• Negative interest coverage (-55.1x) and EBITDA (-0.92) weaken debt-servicing capacity
• Reliance on financing CF (+0.87) to support liquidity amid negative OCF
• Retained earnings deficit (-13.89) constraining equity cushion and capital policy
• Refinancing and covenant risk if lenders tighten terms due to losses

Key Concerns:

• Earnings quality: OCF/NI at 0.17x (<0.8 threshold)
• Sustained operating losses (operating margin -16.8%)
• Low asset turnover (0.252) suggests underutilized assets
• Limited visibility: lack of segment or backlog disclosure impedes forecasting
• Sensitivity to any further sales decline given negative operating leverage

Investment Implications

Key Takeaways:

• Core operations unprofitable: SG&A exceeds gross profit by 0.96, driving operating loss
• Leverage elevated at 2.56x D/E despite net cash versus loans, due to large non-debt liabilities
• Cash cushion of 5.31 and current ratio of 142% offer short-term liquidity comfort
• Earnings quality weak (OCF/NI 0.17x) with reliance on financing inflows
• ROE -17.7% and ROIC -32.3% underline urgent need for restructuring or margin repair

Metrics to Watch:

• Monthly/quarterly sales trend and order intake
• Gross margin and SG&A-to-sales ratio (targeting sub-30% SG&A to approach breakeven)
• Operating cash flow and OCF/NI ratio (aiming >1.0x)
• Interest coverage and EBITDA trajectory
• Debt-to-equity and any changes in loan balances or covenant disclosures
• Cash and deposits versus near-term obligations
• Impairment charges on goodwill/intangibles

Relative Positioning: Versus small-cap domestic peers in services/consumer-related niches, RVH exhibits weaker profitability (negative operating and net margins), higher balance-sheet leverage (D/E 2.56x), but comparatively adequate near-term liquidity (current ratio ~142%). Turnaround hinges on rapid cost actions and stabilization of top line.

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