LEADER ELECTRONICS CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.89B
• Operating Income: ¥-46M
• Net Income: ¥-294M
• EPS: ¥-14.31

Income Statement

Balance Sheet

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

Leader Electronics Co., Ltd. reported FY2026 Q2 consolidated results under JGAAP showing modest top-line growth but persistent operating and bottom-line losses. Revenue rose 2.4% YoY to ¥1,888 million, while gross profit reached ¥1,132.9 million, implying a strong gross margin of 60.0%. Despite the healthy gross margin, operating income was a loss of ¥46 million, essentially flat YoY, highlighting a cost base that remains slightly above the current gross profit run-rate. Ordinary income improved relative to operating income to a loss of ¥11 million, indicating positive non-operating contributions of roughly ¥35 million that partially offset operating losses. Net income was a loss of ¥48 million, with EPS at -¥14.31. Operating margin stood at -2.4% and net margin at -2.5%, underscoring that opex levels and fixed costs are the primary drag on profitability rather than gross margin compression. Liquidity appears robust with a current ratio of 415% and a quick ratio of 351%, supported by current assets of ¥3,571 million versus current liabilities of ¥861 million. The balance sheet is conservatively structured: total assets of ¥4,544 million and equity of ¥3,064 million imply a liabilities-to-equity ratio of 0.43x and an equity ratio of approximately 67% (computed from disclosed totals). Asset turnover is 0.415x, consistent with a specialized, lower-volume instrumentation business. DuPont analysis yields an ROE of -1.57% (net margin -2.54% × asset turnover 0.415 × leverage 1.48), with losses driven mainly by margin rather than asset efficiency or leverage. Inventory of ¥555 million suggests roughly 142 days of inventory on hand based on period COGS, which is reasonable for a configurable, project-driven product set but bears monitoring. The company did not disclose cash flow figures this quarter (values show as zero), limiting assessment of operating cash conversion and free cash flow. No dividends were reported (DPS ¥0), which is prudent given the net loss and missing cash flow data. Overall, Leader Electronics maintains a strong gross margin franchise and a solid balance sheet, but needs modest incremental revenue growth or opex discipline—on the order of 4% revenue uplift at current mix—to reach operating breakeven. We acknowledge data limitations, particularly on cash flow and per-share balance sheet metrics (shares and BVPS unreported), which constrain the depth of earnings quality and coverage analysis.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: -0.0254
• asset_turnover: 0.415
• financial_leverage: 1.48
• calculated_ROE: -0.0157
• ROA_estimate: -0.0105 margin_quality:
• gross_margin: 0.6
• operating_margin: -0.0244
• ordinary_margin: -0.0058
• net_margin: -0.0254
• commentary: A high 60% gross margin indicates strong product value-add and pricing in niche test/measurement segments. The operating loss is due to opex exceeding gross profit by approximately ¥46 million. Non-operating items added roughly ¥35 million to bridge operating to ordinary income, partially mitigating losses. operating_leverage:
• sg_and_a_plus_r_and_d_implied: 1178.9
• breakeven_revenue_estimate: 1964.8
• revenue_shortfall_to_breakeven: 76.8
• interpretation: At a 60% gross margin, approximately ¥77 million (+4.1% vs. current H1 revenue) of additional revenue or equivalent opex savings is needed to reach operating breakeven, suggesting meaningful operating leverage to modest volume increases.

Growth Assessment

revenue_sustainability: Revenue grew 2.4% YoY to ¥1,888 million, indicating steady demand. Given the product profile (professional measurement and broadcast equipment), revenue can be lumpy, but current growth is positive. profit_quality: Gross margin robustness suggests product mix and pricing are intact. However, flat YoY operating loss indicates that fixed costs offset top-line gains; incremental gross profit did not translate into operating profit. outlook: With asset turnover at 0.415x and high gross margin, modest volume growth or tighter opex control could restore profitability. Currency, project timing, and product refresh cycles remain key external drivers. Near-term trajectory hinges on backlog conversion and expense discipline.

Financial Health

liquidity:

• current_ratio: 4.15
• quick_ratio: 3.505
• working_capital_yen: 2710.76
• assessment: Very strong liquidity with ample buffer versus short-term obligations; cash and receivables details are undisclosed, but inventories represent a manageable share of current assets. solvency:
• total_assets_yen: 4544.0
• total_liabilities_yen: 1327.788
• total_equity_yen: 3064.0
• debt_to_equity: 0.43
• equity_ratio_estimate: 0.674
• interest_coverage_EBIT_over_interest: -38.2
• assessment: Low leverage and high equity buffer provide solvency strength. Negative interest coverage reflects operating loss rather than financial strain; absolute interest expense is modest (¥1.2 million). capital_structure: Primarily equity-funded (estimated 67% equity ratio) with limited financial leverage (1.48x). Capacity exists to weather near-term losses without balance sheet stress.

Cash Flow Quality

earnings_quality: Cash flow figures were not disclosed this quarter (reported as zero placeholders), so accrual-to-cash conversion cannot be evaluated. Net loss alongside strong gross margin suggests operating issues are primarily opex-related rather than working capital drag, but this cannot be confirmed without OCF. free_cash_flow_analysis:

• ocf_yen: None
• capex_proxy_yen: None
• fcf_yen: None
• commentary: Free cash flow was not disclosed. Depreciation was also undisclosed (zero placeholder), preventing an EBITDA reconciliation and capex proxy. working_capital_dynamics:
• inventories_yen: 555.132
• cogs_yen: 710.206
• estimated_days_inventory: 142
• notes: Inventory levels equate to roughly 142 days based on period COGS, acceptable for engineered products but warrants monitoring for obsolescence or project delays. Receivables and payables not disclosed.

Dividend Sustainability

payout_ratio_assessment: No dividend declared (DPS ¥0; payout ratio 0%) aligns with a net loss and prudent capital preservation. fcf_coverage: Not assessable due to non-disclosure of OCF and capex; reported zero values are placeholders. policy_outlook: Given a solid equity base and low leverage, dividends could resume when profitability and cash generation normalize. Near-term priority likely remains restoring operating profitability.

Risk Assessment

Business Risks:

• Project timing and order lumpiness in professional measurement/broadcast equipment
• Product cycle and R&D execution risk affecting gross margin and competitiveness
• Channel and export exposure, including potential FX volatility impacts on demand and pricing
• Inventory obsolescence risk given specialized SKUs and technology cycles

Financial Risks:

• Operating losses persisting if revenue growth stalls or opex is not adjusted
• Limited visibility on cash generation due to undisclosed cash flow statements
• Potential working capital swings (receivables and payables data unavailable) affecting liquidity
• Negative interest coverage (driven by operating loss) if losses extend

Key Concerns:

• Breakeven sensitivity: need ~¥77 million incremental revenue or equivalent cost savings to reach operating breakeven
• Reliance on non-operating gains (~¥35 million) to narrow losses
• Incomplete cash flow disclosure impedes assessment of earnings quality and FCF sustainability

Investment Implications

Key Takeaways:

• Top-line grew 2.4% YoY to ¥1,888 million with a strong 60% gross margin
• Operating loss of ¥46 million persists, but breakeven is within reach with modest revenue uplift
• Ordinary loss narrowed versus operating loss due to positive non-operating items (~¥35 million)
• Balance sheet is strong: equity ratio ~67%, D/E 0.43x, current ratio 4.15x
• Cash flow data not disclosed, limiting visibility into cash conversion and FCF

Metrics to Watch:

• Quarterly operating margin trajectory and opex run-rate
• Order intake, backlog, and book-to-bill for revenue visibility
• Inventory turns and days inventory to monitor demand-supply alignment
• Non-operating items (forex, dividends, other income) that influenced ordinary income
• Disclosure of OCF and capex to assess FCF and dividend capacity

Relative Positioning: Relative to small-cap Japanese test and measurement peers, Leader Electronics exhibits strong gross margins and a conservative balance sheet but lags on scale-driven operating efficiency, with profitability hinging on incremental revenue growth and disciplined cost control.

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