Feedforce Group Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.37B
• Operating Income: ¥916M
• Net Income: ¥706M
• EPS: ¥28.83

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: A strong FY2026 Q2 with robust margin expansion and excellent ROE, tempered by weaker cash conversion and a front-loaded short-term debt profile. Revenue grew 13.7% YoY to 23.71, while operating income rose 37.4% to 9.16 and net income surged 76.3% to 7.06, evidencing significant operating leverage. Operating margin expanded to 38.6% from 32.0% a year ago, a +665 bps improvement. Net margin improved to 29.8% from 19.2%, a +1,060 bps expansion, aided by scale efficiencies and modest non-operating drag. Gross margin printed at 70.7%, consistent with an asset-light, software-heavy mix. ROE reached 20.1% (DuPont: NPM 29.8% × ATO 0.297 × leverage 2.28x), well above the 15% “excellent” threshold. Liquidity is solid with a 200% current ratio and cash of 43.26 versus short-term loans of 13.00 (cash/short-term debt 3.33x). Leverage is moderate (D/E 1.28x; Debt/EBITDA 2.32x) and interest coverage very strong (70–76x). Earnings quality, however, is mixed: OCF of 5.48 trails net income (OCF/NI 0.78) and cash conversion (OCF/EBITDA 0.55) is weak, indicating working capital drag and/or timing effects. CapEx is low at 0.23 (CapEx/Depreciation 0.31), flagging potential underinvestment if sustained, though consistent with an asset-light model. Capital returns accelerated with 4.00 of buybacks and an implied DPS of ¥10 (payout ~34.6%), which appears covered by OCF. Forward-looking, margin momentum and Rule of 40 of ~52.3 (13.7% growth + 38.6% op margin) support a favorable operating outlook if growth can be maintained. Key watch items are receivables collection, sustainability of the SG&A ratio, and refinancing of short-term debt. With ample cash and strong profitability, the company is positioned to invest for growth; however, persistent low cash conversion or continued underinvestment could constrain medium-term scalability. Absent segment/ARR disclosures, we assume subscription-heavy revenue supports resiliency, but verification via NRR/ARR would strengthen the thesis.

Profitability Analysis

ROE decomposition (DuPont 3-factor): ROE 20.1% = Net Profit Margin 29.8% × Asset Turnover 0.297 × Financial Leverage 2.28x. The biggest driver this quarter is net margin expansion (+1,060 bps YoY), far exceeding plausible changes in asset turnover or leverage. Business drivers likely include operating leverage from revenue growth outpacing SG&A and a favorable revenue mix with high gross margin (70.7%). The tax burden (0.758) and interest burden (1.017) indicate minimal drag from taxes and financing, reinforcing that operating performance is the core driver. Sustainability: while some SG&A efficiency can persist, the step-change in margins may partially be timing/scale-related; sustaining near-40% operating margin will require continued mix/price discipline and stable customer acquisition costs. Concerning trend check: SG&A/revenue is 32.1%, but without YoY SG&A details we cannot confirm whether SG&A grew slower than revenue; that said, operating margin improvement implies SG&A intensity fell or gross margin improved.

Growth Assessment

Revenue growth of 13.7% YoY is healthy for an IT/SaaS-like model and, combined with 38.6% operating margin, yields a Rule of 40 of ~52.3—above the 40% benchmark. Operating income growth of 37.4% and net income growth of 76.3% indicate strong operating leverage and cost discipline. Gross margin at 70.7% aligns with software-enabled services, suggesting stickier, higher-quality revenue mix. Absent ARR/NRR/churn disclosures, sustainability of double-digit growth cannot be confirmed; watch renewal rates and net retention. Non-operating items were immaterial (net -0.12), keeping earnings quality focused on core operations. Depreciation (0.74) vs CapEx (0.23) implies low capital intensity; growth likely depends more on opex (R&D/sales) and M&A than on capex. Outlook hinges on maintaining unit economics (CAC payback, LTV/CAC) and receivables discipline to convert earnings to cash.

Financial Health

Liquidity is strong: current ratio 200% and quick ratio 200%, with 43.26 in cash against 33.56 in current liabilities and 13.00 in short-term loans (cash/short-term debt 3.33x). Solvency is moderate: D/E 1.28x, Debt/Capital 39.6%, Debt/EBITDA 2.32x—within investment grade-like covenants; interest coverage is very strong at 70–76x. Maturity profile shows a short-term debt ratio of 56.5%—a refinancing concentration risk—but mitigated by cash on hand and positive OCF. No explicit off-balance sheet obligations were reported. There is no warning on current ratio (<1.0) or extreme leverage (D/E >2.0).

Cash Flow Quality

OCF/Net Income is 0.78, below the 0.8 threshold, indicating lower cash conversion this quarter; potential drivers include receivables build (AR 19.33) and timing effects, though prior-period working capital levels are unavailable to confirm. Cash conversion (OCF/EBITDA) is 0.55, reinforcing the working capital drag signal. Proxy FCF (OCF − CapEx) is approximately 5.25, but full investing CF is unreported, so true FCF may differ. CapEx/Depreciation of 0.31 suggests low reinvestment this period; sustained underinvestment could risk future growth capacity if product development relies on capitalizable intangibles (intangible additions unreported). No overt signs of manipulation are evident, but the OCF lag behind NI warrants monitoring of receivable cycles and billing terms.

Dividend Sustainability

The company declared an interim and year-end DPS of ¥5 each (total ¥10). Calculated payout ratio is ~34.6%, comfortably below the 60% sustainability benchmark. Estimated cash dividend outlay is ~2.45 (based on 24.45M shares), covered ~2.2x by OCF of 5.48. Given proxy FCF of ~5.25, dividends appear covered even after CapEx; however, buybacks of 4.00 materially increase total cash returns and rely on ongoing OCF and existing cash. With cash of 43.26 and modest leverage, current dividend policy looks sustainable; future increases should consider cash conversion improvements and investment needs.

Risk Assessment

Business Risks:

• Revenue growth durability without disclosed ARR/NRR; potential deceleration if customer acquisition slows
• Margin sustainability at near-40% operating levels amid potential increases in talent costs and marketing spend
• Dependence on receivables collection cycles; extended billing terms could pressure OCF
• Technology and product obsolescence risk in IT/marketing SaaS

Financial Risks:

• Short-term debt concentration (56.5% of total debt) raises refinancing timing risk
• Underinvestment signal (CapEx/Depreciation 0.31) if persistent could impair capacity
• Cash conversion weakness (OCF/NI 0.78; OCF/EBITDA 0.55) may constrain internal funding

Key Concerns:

• Earnings quality flagged by sub-0.8 OCF/NI
• Refinancing risk despite ample cash due to high short-term debt share
• Limited disclosure on R&D, ARR/NRR, and investing cash flows restricts visibility

Investment Implications

Key Takeaways:

• Strong topline growth and substantial margin expansion drove ROE to 20.1%
• Rule of 40 at ~52.3 indicates a healthy growth-profitability balance
• Liquidity is ample and leverage moderate; interest coverage is very strong
• Earnings-to-cash conversion is weak this quarter and needs improvement
• Low CapEx is consistent with asset-light model but raises underinvestment questions if prolonged
• Capital returns (¥10 DPS and 4.00 buybacks) are well-covered currently by cash and OCF

Metrics to Watch:

• ARR/NRR, churn, and ARPU trends (disclosure request)
• OCF/Net Income and OCF/EBITDA quarterly trajectory
• Receivables days and billing/collection terms
• SG&A ratio vs revenue growth to gauge operating leverage persistence
• Debt maturity schedule and refinancing plans for short-term loans
• R&D and product investment intensity, including intangible additions

Relative Positioning: Versus domestic SaaS/IT services peers, Feedforce Group shows superior current operating margin and ROE with comparable gross margin and a Rule of 40 above benchmark, offset by weaker cash conversion and higher short-term debt concentration; overall competitive but with cash flow execution to prove.

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