Solvvy Inc. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥1.53B
• Operating Income: ¥201M
• Net Income: ¥327M
• EPS: ¥21.50

Income Statement

Balance Sheet

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

Solvvy株式会社 (73200) reported FY2026 Q1 consolidated results under JGAAP with modest top-line growth but significant operating margin compression. Revenue rose 4.1% year over year to ¥1,534.0 million, while operating income fell 48.9% to ¥201.0 million, indicating sizable SG&A cost expansion despite a robust gross profit margin. Gross profit was ¥1,081.5 million, implying a high gross margin of 70.5%, consistent with a service- or fee-heavy model. Operating margin dropped to approximately 13.1%, versus an implied prior-year level near 26.6%, reflecting pronounced operating deleverage. Ordinary income of ¥377.0 million significantly exceeded operating income, suggesting substantial non-operating gains (e.g., investment securities, equity-method, or FX), which supported earnings this quarter. Net income declined 24.2% YoY to ¥247.0 million, implying a prior-year net income around ¥325–326 million. Based on EPS of ¥21.50, implied shares outstanding are approximately 11.49 million, although share data were unreported in XBRL. DuPont analysis indicates a calculated ROE of 5.43%, driven by a solid net margin of 16.1%, low asset turnover of 0.051x, and high financial leverage of 6.66x. The balance sheet shows total assets of ¥30,297.0 million and total equity of ¥4,549.0 million, implying an equity ratio near 15.0% (vs. a reported 0.0% that reflects non-disclosure), and a debt-to-equity ratio of 5.59x. Liquidity appears comfortable with a current ratio of 173.2% and working capital of ¥4,096.5 million, though cash and cash flows were not disclosed. Interest expense was modest at ¥5.08 million, yielding strong interest coverage of 39.6x at the operating level. The effective tax rate recalculated from disclosed figures is approximately 38–39% (income taxes of ¥153.7 million on an implied pretax of ~¥400.7 million), despite an automated metric showing 0.0% due to data gaps. Cash flow statements (operating, investing, financing) and depreciation/amortization were not reported, limiting assessment of earnings quality and capex intensity; EBITDA cannot be reliably inferred. The company did not pay a dividend (DPS ¥0), resulting in a payout ratio of 0%, consistent with capital retention amid margin pressure. Overall, Q1 shows resilient gross profitability and healthy liquidity but weaker operating earnings quality and reliance on non-operating items, with leverage and low asset turnover tempering the ROE profile. Data limitations (notably cash flows, D&A, share count, and equity ratio disclosure) constrain precision and call for caution in interpreting cash conversion and capital intensity.

Profitability Analysis

ROE_decomposition: Reported DuPont ROE is 5.43% = Net margin 16.10% × Asset turnover 0.051 × Financial leverage 6.66. The ROE is moderate, supported by high leverage and decent net margin but held back by very low asset turnover. margin_quality: Gross margin is high at 70.5% (¥1,081.5m GP on ¥1,534.0m revenue), indicating strong unit economics/pricing in a likely service-oriented mix. Operating margin compressed to ~13.1% (¥201.0m OI), versus an implied prior-year OI ~¥393m, highlighting substantial SG&A inflation. Ordinary margin improved to ~24.6% (¥377.0m), evidencing a material contribution from non-operating gains; sustainability of these items is uncertain. Net margin of 16.1% is healthy but inflated by non-operating factors relative to operating performance. operating_leverage: Revenue grew +4.1% YoY, but operating income fell -48.9% YoY, signaling negative operating leverage. Using an implied prior-year revenue of ~¥1,474.5m and gross margin similar to current, prior SG&A is approximated at ~¥648m versus current ~¥881m, indicating ~+36% YoY SG&A growth. This step-up, likely due to investments in growth, headcount, or marketing, sharply reduced operating profit despite stable gross margins.

Growth Assessment

revenue_sustainability: Top-line growth of +4.1% YoY to ¥1,534.0m is modest; with a high gross margin profile, incremental revenue typically leverages well if SG&A growth normalizes. The absence of segment or customer mix data limits visibility on sustainability. profit_quality: Ordinary income (¥377.0m) exceeded operating income by ¥176.0m, indicating reliance on non-operating sources to support bottom-line performance. Net income of ¥247.0m includes a recalculated tax rate of ~38–39%, consistent with normal taxation but cash tax is not verifiable without OCF. outlook: If SG&A intensity remains elevated, operating profit will remain pressured. Conversely, stabilizing SG&A could allow revenue growth to translate into margin recovery given the high gross margin. Near-term earnings trajectory depends on the persistence of non-operating gains; normalization there would reduce ordinary and net income absent an operating rebound.

Financial Health

liquidity: Current assets ¥9,694.2m vs. current liabilities ¥5,597.7m imply a current ratio of 173.2% and working capital of ¥4,096.5m, suggesting adequate near-term liquidity. Quick ratio equals current ratio due to undisclosed inventories. solvency: Total liabilities ¥25,428.6m vs. equity ¥4,549.0m yield a debt-to-equity ratio of 5.59x and an inferred equity ratio of ~15.0% (vs. reported 0.0% non-disclosure). Interest expense is low (¥5.08m), and operating interest coverage is strong at 39.6x. However, high balance-sheet leverage increases sensitivity to funding conditions. capital_structure: Financial leverage of 6.66x (Assets/Equity) is elevated. The liability structure composition (interest-bearing vs. non-interest-bearing) is not disclosed; the low interest burden suggests a portion may be non-interest-bearing or low-cost liabilities.

Cash Flow Quality

earnings_quality: Cash flow statements were not disclosed (OCF, ICF, FCF all shown as 0 due to non-reporting). As a result, OCF/Net Income and FCF-based assessments cannot be performed. Earnings quality is uncertain, particularly given the contribution of non-operating gains to ordinary income. FCF_analysis: Free cash flow cannot be calculated due to missing OCF and capex data (D&A unreported). With high gross margins but rising SG&A, internal cash generation is unclear. working_capital: Working capital is positive at ¥4,096.5m. Receivables and other current asset details are not provided; without OCF, changes in working capital cannot be evaluated.

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0.00 and payout ratio is 0.0%, indicating retention of earnings amid margin pressure and potentially ongoing investment needs. FCF_coverage: Not assessable due to undisclosed cash flows; the reported FCF coverage of 0.00x reflects non-reporting rather than true coverage. policy_outlook: Given elevated leverage (~15% equity ratio inferred) and current operating margin compression, a conservative dividend stance appears consistent with balance-sheet protection and reinvestment. Future distributions likely hinge on improving operating cash generation and visibility on recurring operating profit.

Risk Assessment

Business Risks:

• Cost escalation and SG&A growth outpacing revenue, compressing operating margins
• Dependence on non-operating gains to support ordinary income, which may be non-recurring or volatile
• Low asset turnover (0.051x) limiting ROE and signaling potential capital inefficiency
• Potential client or product concentration risk (not disclosed) in a high-margin services model
• Regulatory or compliance changes impacting fee-based economics (sector unknown due to limited disclosure)

Financial Risks:

• High leverage (Assets/Equity 6.66x; D/E 5.59x) despite currently low interest burden
• Refinancing and interest rate risk if a greater share of liabilities is interest-bearing than disclosed by expense
• Limited visibility on liquidity buffers due to undisclosed cash and cash flow statements
• Potential earnings volatility if non-operating income normalizes downward
• Tax rate variability (~38–39% recalculated), with cash tax impacts unknown without OCF

Key Concerns:

• Operating income down 48.9% YoY despite revenue growth, implying negative operating leverage
• Ordinary income materially above operating income, raising sustainability questions
• Cash flow non-disclosure prevents validation of earnings-to-cash conversion
• Equity ratio likely ~15%, indicating a thin capital base relative to assets

Investment Implications

Key Takeaways:

• Resilient gross margin (70.5%) but sharp operating margin compression to ~13.1%
• Ordinary income supported by non-operating gains (+¥176m vs. operating), elevating reported profitability
• Moderate ROE (5.43%) driven by leverage amid very low asset turnover
• Healthy near-term liquidity (current ratio 173.2%) but elevated balance-sheet leverage (D/E 5.59x)
• Cash flow and D&A unreported; EBITDA and FCF cannot be reliably assessed

Metrics to Watch:

• SG&A ratio (SG&A ≈ ¥880.5m in Q1) and trajectory versus revenue growth
• Operating margin recovery and gap vs. ordinary margin (non-operating reliance)
• OCF/Net income conversion and FCF once disclosed
• Equity ratio progression (inferred ~15%) and any changes in interest-bearing debt
• Effective tax rate stability and any one-off gains/losses below operating line

Relative Positioning: Within high-margin, service-oriented peers, Solvvy shows strong gross margins but weaker operating leverage and heavier reliance on non-operating income this quarter. Balance-sheet leverage appears above typical service peers, while liquidity is adequate. Lack of cash flow disclosure places it at a relative disadvantage for transparency and earnings quality assessment.

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