NexTone Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥10.27B
• Operating Income: ¥587M
• Net Income: ¥199M
• EPS: ¥38.58

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

NexTone (7094) delivered solid FY2026 Q2 consolidated results under JGAAP, combining mid‑single digit top-line growth with outsized profit expansion. Revenue reached ¥10,267m, up 9.0% YoY, while operating income rose 55.4% YoY to ¥587m, indicating strong operating leverage and improved cost efficiency. Gross profit of ¥2,287m implies a gross margin of 22.3%, consistent with a scalable, service/royalty-driven model. Operating margin expanded to 5.7% (operating income/revenue), reflecting better utilization of fixed costs and likely improved mix and platform scale efficiencies. Net income was ¥376m (+28.4% YoY), translating to a net margin of 3.66%. DuPont decomposition shows ROE of 6.14%, driven by asset turnover of 0.70x and financial leverage of 2.39x, with moderate net margins. Cash generation was robust: operating cash flow (OCF) of ¥1,067m implies OCF/Net Income of 2.84x, suggesting strong cash conversion and favorable working capital dynamics. Liquidity is sound with a current ratio of 143% and working capital of ¥3,702m, providing flexibility to fund growth. The balance sheet shows total assets of ¥14,616m and total equity of ¥6,123m, with liabilities of ¥9,116m (D/E 1.49x), indicating moderate leverage for an asset-light business. Effective tax rate appears closer to low‑30% based on income tax of ¥192m relative to pre‑tax earnings (ordinary income ¥599m), despite a reported metric of 0.0% which reflects disclosure limitations. Reported zero values for interest expense, investing CF, financing CF, cash and equivalents, equity ratio, and share counts are treated as non-disclosures rather than actual zeros; conclusions are therefore based on available non-zero items. EBITDA was ¥956m (9.3% margin), and D&A of ¥369m points to continued investment in intangibles/systems, consistent with a platform/operator model. Free cash flow cannot be reliably derived due to missing investing cash flow disclosures, though positive OCF suggests internal funding capacity. Dividend payout is reported as zero, consistent with reinvestment to support scale, catalog expansion, and system capabilities. Overall, the company is exhibiting healthy profit momentum, improving operating efficiency, and strong cash conversion, albeit with moderate leverage and data gaps that limit full ratio granularity. Key watchpoints include sustainability of take rates, working capital discipline, and potential cost inflation in content acquisition and platform fees. Given the asset-light nature and scaling dynamics, the outlook hinges on maintaining growth in managed works, collection efficiency, and stable platform economics.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 3.66% (¥376m/¥10,267m)
• asset_turnover: 0.70x (¥10,267m/¥14,616m)
• financial_leverage: 2.39x (¥14,616m/¥6,123m)
• calculated_ROE: 6.14% (consistent with provided DuPont output)
• commentary: ROE is primarily supported by decent asset turnover and moderate leverage; net margin remains modest but is improving alongside operating leverage. margin_quality:
• gross_margin: 22.3% (¥2,287m/¥10,267m)
• operating_margin: 5.7% (¥587m/¥10,267m)
• EBITDA_margin: 9.3% (¥956m/¥10,267m)
• net_margin: 3.66%
• tax_rate_note: Effective tax rate inferred ~32% (¥192m tax / ~¥599m pre-tax) vs reported 0.0% metric due to disclosure limitations. operating_leverage: Revenue grew 9.0% YoY while operating income rose 55.4% YoY, evidencing significant operating leverage and fixed-cost absorption. The step-up from gross profit to operating profit improved, indicating better SG&A efficiency and scale benefits.

Growth Assessment

revenue_sustainability: Top-line growth of 9.0% YoY suggests steady expansion, likely driven by increased managed catalog, higher collection volumes, and continued digital distribution growth. Sustainability depends on ongoing catalog intake, client retention, and stable platform relationships. profit_quality: Profit growth outpaced revenue on the back of operating leverage. EBITDA expansion and stable gross margin imply improved mix and cost control rather than one-offs. The OCF/NI ratio of 2.84x supports earnings quality. outlook: Near-term outlook is supported by scale dynamics and digital consumption trends. Risks include potential normalization of operating leverage, pricing pressure from platforms, and investment needs in systems and content administration.

Financial Health

liquidity:

• current_ratio: 143.2% (¥12,272m / ¥8,570m)
• quick_ratio: 143.2% (no inventories reported)
• working_capital: ¥3,702m
• commentary: Adequate short-term liquidity headroom to meet obligations and support growth. solvency:
• debt_to_equity: 1.49x (¥9,116m / ¥6,123m)
• equity_ratio_note: Reported equity ratio 0.0% reflects non-disclosure; actual equity is ¥6,123m, indicating a moderate capitalization.
• interest_coverage: Interest expense reported as 0 (non-disclosed). With positive operating income, coverage is de facto ample in practice. capital_structure: Moderate leverage supports ROE without overburdening liquidity. Balance sheet appears asset-light with working capital being the primary use of capital.

Cash Flow Quality

earnings_quality: OCF of ¥1,067m versus net income of ¥376m (OCF/NI 2.84x) signals strong cash conversion and limited accrual build. FCF_analysis: Free cash flow cannot be computed due to undisclosed investing cash flows (reported as 0). D&A of ¥369m indicates ongoing investment needs; however, positive OCF suggests capacity to fund capex internally. working_capital: Given high OCF, there was likely favorable working capital movement (collections exceeding payouts). Monitoring receivables and payables is key given the royalty collection/remittance cycle.

Dividend Sustainability

payout_ratio_assessment: Payout ratio is reported as 0.0% with DPS at ¥0. This aligns with a reinvestment phase focused on scaling operations and systems. FCF_coverage: Not assessable due to missing investing cash flow data; OCF is strong, implying potential flexibility, but capital allocation favors growth. policy_outlook: With improving profitability and cash generation, the company could build capacity for future shareholder returns; timing depends on growth opportunities and working capital needs inherent in the royalty business.

Risk Assessment

Business Risks:

• Platform dependency and potential changes in take rates or fee structures by major digital platforms
• Variability in royalty collection timing and potential delays in remittances
• Content/catalog acquisition costs and competitive bidding for rights
• Regulatory and legal risks related to copyright management and licensing
• Client concentration risk among key labels, publishers, or high-volume creators
• Technology and system reliability risk affecting tracking and collection accuracy

Financial Risks:

• Working capital swings due to receivable and payable timing in royalty cycles
• Moderate leverage (D/E 1.49x) increasing sensitivity to downturns
• Potential need for ongoing investment in IT and data infrastructure
• Limited disclosed detail on cash balances and investing/financing cash flows

Key Concerns:

• Sustainability of operating leverage as growth normalizes
• Pressure on margins from platform negotiations and revenue mix shifts
• Data limitations (cash balance, capex) complicate full cash flow assessment

Investment Implications

Key Takeaways:

• Healthy top-line growth (+9% YoY) with outsized operating profit expansion (+55% YoY) indicates strong operating leverage.
• ROE of 6.14% is supported by solid asset turnover (0.70x) and moderate leverage (2.39x financial leverage).
• Robust cash conversion (OCF/NI 2.84x) underscores earnings quality and supports self-funding growth.
• Liquidity is comfortable (current ratio 143%) with ¥3.7bn working capital, though leverage is moderate (D/E 1.49x).
• Dividend remains nil, consistent with reinvestment priorities in systems and catalog scale.
• Data gaps (cash balance, investing/financing CF, share counts) limit precision in FCF and per-share analyses.

Metrics to Watch:

• Operating margin trajectory and SG&A efficiency
• OCF/Net Income and working capital days (DSO/DPO) to track cash conversion
• Gross margin stability and take-rate dynamics with major platforms
• Catalog growth (managed works) and client retention metrics
• Capex/investment in systems (proxy via D&A and disclosed capex when available)
• Leverage (D/E) and any introduction of interest-bearing debt

Relative Positioning: Within Japan’s music rights administration and digital distribution ecosystem, NexTone appears asset-light with improving scale efficiencies, positioning it favorably versus more asset-heavy entertainment peers while remaining exposed to platform economics and working capital cyclicality.

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