TORICO Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.44B
• Operating Income: ¥-77M
• Net Income: ¥-85M
• EPS: ¥-9.86

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

TORICO’s FY2026 Q2 shows a weak quarter with revenue contraction and a return to operating loss, despite a very strong liquidity buffer. Revenue fell to 14.35 (−24.4% YoY), with gross profit of 5.45 and SG&A of 6.22, resulting in operating income of −0.77. Gross margin printed at 38.0%, while operating margin was −5.4% (−0.77/14.35). Ordinary income was −0.76 and net income was −0.84, translating to a basic EPS of −9.86 yen. Cash flow from operations was −0.28, covering only 33% of the net loss (OCF/NI 0.33x), indicating low earnings quality this quarter. Financing cash inflow of 5.52 materially bolstered cash to 11.55, suggesting reliance on external financing (likely equity issuance, given the jump in outstanding vs average shares). The balance sheet remains liquid: current assets of 18.20 against current liabilities of 4.50 (current ratio 404.5%). Leverage is moderate (D/E 0.61x; long-term loans 1.14; interest expense 0.05), but interest coverage is negative due to operating loss. ROE is −7.2% per DuPont, driven chiefly by a negative net margin (−5.8%) and sub‑1.0x asset turnover (0.761), while financial leverage is only moderate at 1.61x. ROIC is deeply negative at −59.1%, signaling poor capital efficiency. SG&A at 6.22 exceeded gross profit (5.45), highlighting deleveraging from the revenue decline and a cost base misaligned with current scale. To reach operating break-even at the current 38% gross margin, TORICO needs roughly +2.03 in sales (+14% vs Q2 revenue) or commensurate SG&A reduction. Liquidity provides runway for near-term restructuring, but sustainability hinges on revenue stabilization and SG&A control. Lack of segment details and D&A disclosure limits deeper margin and capex analysis. Near-term focus should be on demand recovery, cost re-basing, and maintaining cash discipline as external financing cannot be a recurring solution.

Profitability Analysis

ROE decomposition: ROE (−7.2%) = Net Profit Margin (−5.8%) × Asset Turnover (0.761) × Financial Leverage (1.61x). The largest negative driver is the net margin turning/remaining negative, as operating loss (−0.77) drove ordinary loss (−0.76) and net loss (−0.84). Asset turnover below 1.0 indicates underutilized assets given the revenue contraction to 14.35 on an asset base of 18.85. Financial leverage at 1.61x is not extreme and did not amplify returns meaningfully; instead, it limits both upside and downside. Business reason: SG&A of 6.22 exceeded gross profit of 5.45 due to fixed cost burden amid a 24.4% YoY revenue drop, creating negative operating leverage. With D&A unreported, reported EBITDA equals operating income, but true cash costs may differ slightly; the core issue remains scale vs cost base. Sustainability: Without a revenue rebound or SG&A right-sizing, the margin pressure is likely to persist; break-even requires ~+14% revenue uplift or SG&A cuts of roughly 0.8. Concerning trends: cost base (SG&A/revenue ≈ 43.3%) is high relative to gross margin (38%), structurally producing losses at current scale; revenue contraction outpacing any visible cost reduction suggests deleveraging pressure.

Growth Assessment

Revenue declined 24.4% YoY to 14.35, indicating demand softness and/or product/channel headwinds. Gross margin at 38.0% suggests pricing/mix is not the primary issue; the main drag is insufficient volume to cover fixed costs. Operating income of −0.77 reflects negative operating leverage as SG&A (6.22) exceeded gross profit (5.45). Non-operating items netted near zero (0.13 income vs 0.12 expenses), so core operations explain the loss. With OCF at −0.28, cash generation is not supporting growth investment organically. Near-term growth sustainability is weak without demand recovery or cost resets; a ~14% revenue uplift at current margin would restore operating break-even. Outlook hinges on execution of cost initiatives, marketing efficiency to restore traffic/ARPU, and possibly portfolio pruning to improve mix. Given the strong cash buffer (11.55), the company has bandwidth to invest in targeted growth or restructuring, but continued external financing would dilute returns.

Financial Health

Liquidity is strong: current assets 18.20 vs current liabilities 4.50 (current ratio 404.5%; quick ratio equivalently strong given large cash balance). No warning on current ratio (<1.0) or D/E (>2.0); D/E is 0.61x, conservative. Cash and deposits are 11.55 (≈61% of total assets), providing meaningful flexibility. Maturity profile appears manageable: current liabilities 4.50 covered well by cash alone; long-term loans 1.14 and total noncurrent liabilities 2.64 are modest. Interest expense is 0.05; however, negative EBIT results in weak debt service capacity this quarter (interest coverage negative). No off-balance sheet obligations are disclosed; data limitations may obscure leases or guarantees. Working capital is ample at 13.70, with AR of 2.02 and AP of 1.47 roughly balanced relative to sales/COGS; inventory data is not disclosed.

Cash Flow Quality

OCF of −0.28 vs net income of −0.84 yields OCF/NI of 0.33x, flagging low earnings quality this quarter (below 0.8 benchmark). Free cash flow, approximated as OCF (−0.28) minus capex (0.03), is about −0.31; investing CF is otherwise unreported, so true FCF may differ slightly. Financing CF of +5.52 was the primary source of liquidity, likely reflecting equity issuance in light of the gap between outstanding and average shares. Working capital indicators do not signal aggressive manipulation: AR days ~25 and AP days ~30 (based on H1 activity), though lack of inventory disclosure limits full assessment. With negative OCF and negative FCF, dividend funding and capex rely on existing cash or external financing; absent improvement, this is not sustainable.

Dividend Sustainability

Dividend data is unreported. Given negative EPS (−9.86 yen) and negative FCF (≈ −0.31), capacity to pay dividends from internal cash generation is weak this quarter. The large cash balance (11.55) could technically fund payouts short term, but doing so while loss-making would erode equity (already with retained earnings at −3.11). Without a return to positive OCF and operating profit, sustainable dividends are unlikely; policy outlook cannot be inferred from disclosures. FCF coverage and payout ratios are not calculable from reported data.

Risk Assessment

Business Risks:

• Demand softness leading to −24.4% YoY revenue decline and negative operating leverage
• High SG&A intensity (≈43% of sales) vs gross margin (38%) causing structural operating loss at current scale
• Execution risk in implementing cost reductions or revenue recovery to reach break-even (+14% sales needed at current margin)
• Product/channel mix and pricing risk despite stable headline gross margin

Financial Risks:

• Earnings quality risk: OCF/NI at 0.33x indicates cash conversion issues
• Debt service risk: negative interest coverage this quarter despite low leverage
• Capital efficiency risk: ROIC at −59.1% signals value erosion if conditions persist
• Reliance on external financing (FinCF +5.52) to support liquidity while operations consume cash

Key Concerns:

• Sustained operating losses if revenue does not recover or SG&A is not reduced
• Potential dilution or increased leverage if external funding continues
• Limited visibility due to unreported D&A, inventory, and investing CF data
• Macro sensitivity to consumer discretionary spending (industry-specific), which could prolong weak top line

Investment Implications

Key Takeaways:

• Top line down 24.4% YoY; core operations in loss with operating margin −5.4%
• Gross margin 38% is adequate, but SG&A exceeds gross profit; break-even requires ~+14% sales or ~0.8 cost reduction
• OCF/NI 0.33x and FCF ≈ −0.31 point to weak earnings quality
• Balance sheet liquidity is strong (cash 11.55; current ratio 404.5%) and leverage moderate (D/E 0.61x)
• ROE −7.2% and ROIC −59.1% underscore poor returns on capital at current scale
• Financing inflow +5.52 suggests reliance on equity/debt; not a durable funding model

Metrics to Watch:

• Quarterly revenue trajectory and gross margin stability
• SG&A as % of sales and absolute cost reduction progress
• OCF and FCF trends; working capital movements (AR, AP, inventory once disclosed)
• Interest coverage recovery with operating performance
• Equity and debt issuance activity affecting dilution and leverage
• Retention of cash balance vs burn rate

Relative Positioning: Relative to small-cap consumer/content peers, TORICO maintains stronger-than-average liquidity but exhibits weaker operating leverage and cash conversion, leaving returns and capital efficiency below peer norms until scale or costs are adjusted.

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