Petgo Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥3.82B
• Operating Income: ¥-128M
• Net Income: ¥53M
• EPS: ¥-56.00

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

Petgo Co., Ltd. (Consolidated, JGAAP) reported FY2026 Q2 revenue of ¥3,817 million, declining 15.8% year over year, indicating a notable top-line contraction likely driven by softer demand or deliberate pruning of less profitable sales channels. Gross profit was ¥1,306.7 million, translating to a gross margin of 34.2%, which remains solid for an e-commerce/retail-oriented model but insufficient to offset fixed costs at current scale. Operating income deteriorated to a loss of ¥128 million (operating margin approximately -3.4%), reflecting elevated SG&A and marketing intensity relative to reduced revenue. Ordinary income was a loss of ¥133 million, implying modest non-operating drag (interest expense of ¥5.8 million) in addition to the operating loss. Net income came in at a loss of ¥105 million (net margin -2.75%), with EPS of -¥56.00, and DuPont-calculated ROE at -8.82% on a financial leverage factor of 2.55x. EBITDA was negative at ¥-122.9 million, suggesting limited near-term operating cash earnings and signaling that the operating loss is not primarily driven by depreciation (D&A only ¥5.1 million) but by insufficient gross profit versus operating expenses. Operating cash flow was deeply negative at ¥-744.9 million, outflow far exceeding the net loss, pointing to significant working capital consumption (likely receivables and/or prepayments; inventories were not disclosed). Financing cash flow of ¥+745.9 million effectively offset the OCF shortfall, underscoring reliance on external funding in the period. Liquidity metrics appear strong on the surface (current ratio 180.9%, quick ratio 180.9%, working capital ¥1,437.0 million), but reported cash and equivalents were undisclosed, and current assets exceeded total assets, suggesting mapping or disclosure timing differences that limit precision. The debt-to-equity ratio of 1.75x and interest coverage of -22.1x highlight elevated leverage and limited debt-servicing capacity from operations at present. Despite a recorded income tax line (¥31.4 million), the calculated effective tax rate is shown as 0.0%, consistent with non-income-based taxes and local levies sometimes persisting even in loss-making periods under JGAAP. No dividend was declared (DPS ¥0; payout 0%), which aligns with negative earnings and cash flow. Overall profitability pressure stems from negative operating leverage in the face of revenue decline, while cash burn was bridged by financing inflows during the half. The business retains balance sheet capacity (equity ¥1,191 million), but near-term focus must be on restoring revenue momentum and/or reducing cost intensity to return to positive operating income and cash generation. Key data points such as cash, inventories, investing cash flows, and some per-share metrics were not disclosed in XBRL, which constrains deeper granularity; conclusions are therefore based on the available non-zero items and provided calculated metrics. In sum, FY2026 Q2 depicts a company navigating a difficult transition with adequate current liquidity, negative earnings and cash flows, and a need to improve operating efficiency and working capital discipline. The sustainability of the model near term hinges on stabilizing the top line, improving contribution margins, and normalizing working capital. Continued access to financing has supported liquidity, but restoring self-funded operations will be essential for medium-term resilience.

Profitability Analysis

ROE decomposition (DuPont) shows: Net Profit Margin -2.75%, Asset Turnover 1.256x, Financial Leverage 2.55x, resulting in ROE of -8.82%. The negative margin is the principal driver of the ROE shortfall; asset efficiency is reasonable for a commerce platform, and leverage amplifies the loss. Gross margin at 34.2% is healthy, but the spread between gross profit (¥1,306.7m) and operating costs yielded an operating margin of about -3.4%, indicating SG&A/marketing intensity is elevated relative to the current revenue base. EBITDA of ¥-122.9m versus D&A of only ¥5.1m confirms margin pressure is stemming from operating cost structure rather than non-cash charges. Ordinary loss of ¥133m versus operating loss of ¥128m indicates limited non-operating drag beyond interest expense (¥5.8m). Interest coverage of -22.1x reflects negative EBITDA and implies that, absent financing, current operations do not cover interest obligations. Operating leverage is negative this period: a 15.8% revenue decline cascaded into a swing to operating losses, suggesting fixed cost absorption issues; incremental margin likely turned negative. Margin quality: gross margin resilience suggests product mix and pricing remain acceptable, but overall margin quality is impaired by customer acquisition/logistics/overheads; improvement would likely require marketing efficiency gains, logistics optimization, or pricing power recovery. Near-term profitability will depend on cost realignment and stabilizing sales volumes to reestablish fixed-cost absorption.

Growth Assessment

Revenue of ¥3,817m declined 15.8% YoY, signaling a meaningful contraction and possible market-share pressure or deliberate scaling back of low-margin channels. With asset turnover at 1.256x, the asset base is being utilized reasonably, but not enough to counteract the revenue headwinds. The gross margin of 34.2% indicates product-level economics are intact, which could support recovery if volumes or basket size stabilize. Profit quality is weak: operating income is negative, and EBITDA is negative, implying that growth must be accompanied by cost discipline to be accretive. The OCF shortfall (¥-744.9m) suggests growth (or retention) may be consuming working capital; sustainability of any re-acceleration will require tighter working capital management. Outlook: near-term growth visibility is limited given the magnitude of the decline and lack of disclosed backlog or subscriptions; however, should the company optimize CAC and logistics, revenue stabilization could flow through meaningfully given relatively stable gross margins. We note data limitations on segment mix, cohort retention, and channel performance; thus, growth sustainability conclusions are constrained to aggregate trends.

Financial Health

Liquidity: current ratio 180.9% and quick ratio 180.9% appear solid, with working capital at ¥1,437.0m; however, cash and equivalents were not disclosed (reported as zero), and inventories were undisclosed, limiting clarity on immediate liquidity buffers. Current assets reported at ¥3,213.7m exceed total assets of ¥3,040.0m, indicating possible classification or timing differences in the dataset; we rely on totals as reported while recognizing mapping constraints. Solvency: total liabilities are ¥2,084.5m versus total equity of ¥1,191.0m; the reported equity ratio field is zero but appears undisclosed—implied equity ratio is approximately 39% based on provided totals. Debt-to-equity is 1.75x, suggesting a moderately high leverage posture for a loss-making period. Interest expense is modest at ¥5.8m, but negative EBITDA results in weak coverage. Capital structure is balanced in absolute terms but currently stretched by the lack of operating cash generation; financing inflows (¥745.9m) funded operations in the period. Overall, short-term solvency looks manageable due to working capital, but sustained losses would erode flexibility.

Cash Flow Quality

Earnings quality is weak this half: net loss of ¥105m is coupled with operating cash outflow of ¥-744.9m, yielding an OCF/Net Income ratio of 7.09 in absolute terms (i.e., cash burn far exceeds accounting loss), pointing to significant working capital consumption. With D&A of ¥5.1m small, the gap between EBITDA and OCF is likely driven by changes in receivables, payables, and other current assets/liabilities; inventories are undisclosed. Investing cash flow is undisclosed (reported as zero), so free cash flow cannot be precisely assessed; absent investment outflows, a proxy FCF would approximate OCF at ¥-744.9m, but this may understate true cash consumption if capex exists. Financing cash inflows of ¥745.9m nearly mirror the OCF outflow, indicating reliance on external funding to sustain operations and working capital. Working capital at period-end stands at ¥1,437.0m, but the period’s large consumption suggests active management is needed to prevent further strain. Overall, cash flow quality is poor in the period, dominated by non-cash earnings shortfall and heavy working capital use.

Dividend Sustainability

The company paid no dividend (DPS ¥0), with a payout ratio of 0% and reported FCF coverage of 0.00x. Given negative net income and significant OCF outflows (and undisclosed investing cash flows), the capacity to distribute dividends is currently constrained. Policy-wise, capital should remain prioritized toward funding operations, working capital normalization, and any efficiency investments until profitability and cash generation stabilize. With leverage at 1.75x D/E and interest coverage negative, maintaining a conservative dividend stance appears prudent under current conditions.

Risk Assessment

Business Risks:

• Revenue contraction of 15.8% YoY indicating potential market share loss or demand softness
• Negative operating leverage due to fixed cost base amid lower sales
• Customer acquisition cost and digital marketing efficiency pressures impacting SG&A
• Logistics and fulfillment cost inflation compressing contribution margin
• Potential supplier/pricing pressures affecting gross-to-operating margin conversion
• Execution risk in working capital management (receivables, prepayments; inventories undisclosed)

Financial Risks:

• Negative EBITDA and operating cash flow (¥-744.9m) necessitating continued external financing
• Interest coverage negative (-22.1x) despite modest interest expense
• Debt-to-equity at 1.75x increases sensitivity to earnings volatility
• Data limitations on cash and investing flows hinder precise liquidity runway analysis
• Potential covenant or refinancing risk if losses persist (not disclosed but implied by funding reliance)

Key Concerns:

• Sustained OCF deficits alongside declining revenue
• Margin compression from elevated SG&A versus gross profit
• Reliance on financing inflows to fund operations
• Limited visibility on cash, inventories, and capex due to undisclosed items

Investment Implications

Key Takeaways:

• Top-line contracted 15.8% YoY to ¥3,817m; stabilization is critical
• Gross margin of 34.2% remains solid, but operating margin is -3.4% due to fixed cost absorption
• ROE at -8.82% driven by negative net margin; leverage (2.55x) amplifies losses
• OCF of ¥-744.9m significantly worse than net loss, implying heavy working capital use
• Financing inflow of ¥745.9m funded the OCF gap; core cash generation remains negative
• Liquidity appears adequate (current ratio 180.9%), but cash level not disclosed
• Leverage metrics (D/E 1.75x) and negative interest coverage flag solvency sensitivity

Metrics to Watch:

• Quarterly revenue growth trajectory and order volumes/cohort retention (if disclosed)
• Operating expense ratio (SG&A as % of sales) and marketing efficiency KPIs (CAC/LTV if available)
• EBITDA margin progression and operating break-even point
• Operating cash flow and working capital movements (receivables, payables, advances; inventories when disclosed)
• Cash and equivalents balance and borrowing headroom
• Gross margin stability versus logistics and procurement costs

Relative Positioning: Within Japan’s pet-related e-commerce/omni-channel space, Petgo’s gross margin profile is competitive, but current operating losses and cash burn place it at a weaker near-term profitability and funding position versus peers that have achieved positive EBITDA and stable working capital dynamics. Restoring scale efficiency and improving customer acquisition efficiency will be key to closing 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
• 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