CASIO COMPUTER CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥132.65B
• Operating Income: ¥9.49B
• Net Income: ¥8.04B
• EPS: ¥35.30

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 Financial Analysis

Executive Summary

Verdict: FY2026 Q2 was a mixed quarter for Casio—revenues and operating profit declined YoY, but ordinary income and net income rose sharply on stronger non-operating gains and a lower comparative base. Revenue came in at 1,326.5 (100M JPY), down 3.1% YoY, reflecting softer demand and/or product mix headwinds. Gross profit was 573.5 with a gross margin of 43.2%, indicating still-solid value capture in core categories. Operating income fell 8.2% YoY to 94.9, implying some deleveraging as SG&A remained heavy relative to sales. However, ordinary income rose 8.1% YoY to 107.3, supported by non-operating income of 16.3 (notably 8.45 of interest income), while non-operating expenses were limited at 3.88. Net income surged 124.9% YoY to 80.5, aided by non-operating gains and a lighter comparison; effective tax rate was 31.5%. Operating margin was 7.2% (94.9/1,326.5), contracting by roughly 41 bps YoY (from ~7.6%), indicating moderate margin pressure. DuPont ROE was 3.6% (Net margin 6.1% × Asset turnover 0.394 × Leverage 1.50x), underscoring capital efficiency challenges. ROIC stood at 4.4%—below the 5% warning threshold—suggesting that incremental investments are not yet earning above the cost of capital. Earnings quality was solid with OCF/Net Income at 1.42x and estimated FCF (OCF–Capex) of about 90.8, indicating cash conversion outpaced accounting profit. The balance sheet remains very strong: current ratio 3.78x, net cash estimated at ~758 (cash 1,141 minus debt ~383), and interest coverage at 34.4x. Financial flexibility is ample, but capital efficiency and operating leverage remain the key issues. Non-operating contributions (notably interest income) played an unusually important role in lifting ordinary profit, reflecting the large cash balance in a higher-rate environment. Payout ratio is shown as 132.9%, which looks high against H1 earnings; however, DPS details are not disclosed, so interpret with caution. Looking ahead, sustaining profit will depend on stabilizing revenue, tighter SG&A discipline, and better asset turnover while preserving pricing power. A return to ROIC above 7-8% will likely require mix improvement (premium timepieces), disciplined inventory/working capital, and focused capex allocation.

Profitability Analysis

ROE decomposition (DuPont): ROE 3.6% = Net Profit Margin 6.1% × Asset Turnover 0.394 × Financial Leverage 1.50x. The component exerting the greatest drag is asset turnover (0.394), indicating relatively heavy asset intensity versus sales for the period. Operating margin compression of ~41 bps YoY (to 7.2%) shows mild negative operating leverage as SG&A did not flex down as much as revenue (-3.1% YoY sales vs -8.2% YoY operating profit). The increase in ordinary income (+8.1% YoY) was driven by higher non-operating gains, mainly interest income (8.45), highlighting that profit growth was not purely operational. Business reasons: softer top-line and potentially adverse product/geographic mix, with fixed SG&A absorption weighing on OPM; higher interest yields on substantial cash balances lifted non-operating lines. Sustainability: margin pressure is reversible with mix/pricing and tighter cost control, but the benefit from interest income is partly rate-dependent and may normalize if cash is deployed or rates decline. Watch for SG&A discipline—lack of SG&A detail limits diagnosis, but the divergence between sales (-3.1%) and operating profit (-8.2%) suggests SG&A growth or insufficient cost flexing relative to revenue.

Growth Assessment

Revenue declined 3.1% YoY to 1,326.5, implying demand softness or mix headwinds in core categories (timepieces, education, musical instruments). Operating income decreased 8.2% YoY to 94.9, underperforming sales and indicating negative operating leverage. Ordinary income rose 8.1% YoY to 107.3, and net income jumped 124.9% YoY to 80.5, driven by non-operating gains (notably interest income) and a favorable comparison. EBITDA was 143.9 with a margin of 10.8%, offering some buffer but still pointing to modest operating leverage. With ROIC at 4.4%, incremental growth investments need tighter hurdle controls or a richer mix to create value. Outlook hinges on stabilizing revenues via premiumization (e.g., higher ASP watches), geographic recovery, and product launches, while curbing fixed cost drag. Non-operating tailwinds (interest income) should persist near-term given the large net cash, but are not a structural substitute for operating improvement.

Financial Health

Liquidity is very strong: current ratio 377.8% and quick ratio 377.8% (inventories not disclosed), with working capital of 1,797.8. No warning on liquidity (Current Ratio >> 1.0). Solvency conservative: Debt-to-Equity 0.50x; interest coverage 34.4x indicates very low refinancing risk. Balance sheet shows cash and deposits of 1,141.5 versus total loans of about 382.9 (short 2.9, long 380.0), implying substantial net cash (~758). Maturity mismatch risk appears low: current assets of 2,444.9 comfortably exceed current liabilities of 647.1. No off-balance sheet obligations are disclosed in the provided data. Equity is robust at 2,241.5 with retained earnings of 1,286.4. There are no thresholds breached (D/E well below 2.0).

Cash Flow Quality

OCF/Net Income is 1.42x, indicating high-quality earnings with strong cash conversion. Estimated FCF (OCF 113.95 minus capex 23.16) is approximately 90.79, comfortably positive and sufficient to fund routine shareholder returns and selective investments. Financing cash flow was -61.88, which appears fully covered by FCF; share repurchases were negligible (-0.02). Working capital details are incomplete (inventories unreported), but the strong OCF versus NI suggests no apparent working capital stress or aggressive pull-forward. No signs of cash flow manipulation are evident from the available figures.

Dividend Sustainability

Payout ratio (calculated) is shown at 132.9%, which would be elevated and potentially unsustainable if measured against current period earnings alone; however, DPS and total dividend paid are not disclosed, so this ratio likely reflects an assumption or timing effect and should be interpreted cautiously. With estimated FCF of ~90.8 and substantial net cash, balance sheet capacity can temporarily support dividends even if payout exceeds earnings in a half-year. For sustainability, targeting a payout ratio below ~60% against full-year NI and FCF coverage >1.0x would be prudent. Policy outlook likely favors stable to progressive dividends supported by net cash, but medium-term sustainability depends on restoring operating profit growth and ROIC > WACC.

Risk Assessment

Business Risks:

• Demand volatility in core categories (timepieces, education calculators, musical instruments) impacting revenue (-3.1% YoY).
• Operating margin pressure (~41 bps YoY contraction) due to negative operating leverage and potential fixed-cost rigidity.
• Low ROIC (4.4%) indicating suboptimal capital efficiency versus management hurdle rates.
• Product and geographic mix risk affecting ASPs and margins.

Financial Risks:

• Earnings reliance on non-operating items (interest income 8.45) to support ordinary profit growth.
• Potential normalization of interest income if cash is deployed or rates decline.
• Limited disclosure on inventories and detailed SG&A may mask cost or working capital pressures.

Key Concerns:

• ROE at 3.6% with asset turnover of 0.394 highlights structural efficiency challenges.
• Payout ratio shown at 132.9% raises a flag on sustainability if reflective of actual policy; DPS not disclosed.
• Revenue softness against high fixed costs could further compress margins if demand weakens.

Investment Implications

Key Takeaways:

• Top line and operating income declined YoY, but ordinary and net income improved on non-operating tailwinds.
• Operating margin compressed ~41 bps to 7.2%, evidencing mild negative operating leverage.
• Cash conversion is strong (OCF/NI 1.42x) and FCF is solid (~90.8), underpinned by large net cash.
• Capital efficiency remains the primary weakness: ROIC 4.4% and ROE 3.6%.
• Balance sheet resilience (current ratio 3.78x; D/E 0.50x; interest cover 34x) provides strategic flexibility.

Metrics to Watch:

• Revenue trajectory and ASP/mix in premium timepieces and growth categories.
• SG&A ratio and operating margin progression by quarter.
• ROIC and asset turnover improvement toward >7–8% ROIC target range.
• Non-operating income sensitivity to interest rates and cash deployment.
• Working capital metrics (DSO/DPO/DIO) once inventory details are disclosed.

Relative Positioning: Versus domestic electronics peers (e.g., watch and precision makers), Casio exhibits stronger liquidity and net cash but lags on capital efficiency (ROIC/ROE). Profit resilience currently leans on non-operating income, whereas best-in-class peers show steadier operating leverage; execution on mix upgrade and SG&A discipline is needed to close the gap.

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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