Ai Partners Financial Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.93B
• Operating Income: ¥3M
• Net Income: ¥2M
• EPS: ¥0.62

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

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 subdued quarter with razor-thin profitability but solid liquidity and very strong cash conversion. Revenue reached 19.26, up 2.5% YoY, with gross profit of 3.83 and SG&A at 3.79, yielding operating income of 0.03 and net income of 0.02. Gross margin printed at 19.9%, while operating margin was approximately 0.16% and net margin around 0.10%. Margin comparison in basis points versus last year cannot be assessed due to missing prior-period margin disclosures; however, the current SG&A-to-gross-profit ratio (~99%) indicates minimal operating leverage. Ordinary income was 0.04, with non-operating income of 0.01, implying a non-operating contribution that is meaningful relative to very low operating profit. OCF was a robust 0.26 against NI of 0.02, producing an OCF/NI of 13.24x, signaling high earnings quality this quarter from a cash conversion standpoint. The effective tax rate was elevated at 55.1%, likely distorted by small profit levels and non-deductible items or minimum taxes. Balance sheet strength remains a bright spot: current ratio 211.7%, quick ratio 211.7%, and working capital of 5.00. Leverage is modest with a reported D/E of 0.77x, though interest-bearing debt details were not disclosed. ROIC is weak at 1.2% (quality alert), reflecting thin margins and underutilized capital. EBITDA was 0.12, translating to a 0.6% EBITDA margin, reinforcing the low operating efficiency. Dividend data are largely unreported, but a calculated payout ratio of 707% suggests potential misalignment with earnings sustainability; further confirmation of DPS is needed. With revenue growth positive but profitability constrained by cost intensity, near-term focus should be on SG&A discipline and monetization efficiency to lift ROIC. Forward-looking, sustaining revenue growth while restoring margin headroom is critical for improving returns and supporting any shareholder return policy.

Profitability Analysis

ROE decomposition (DuPont): ROE ≈ Net Profit Margin × Asset Turnover × Financial Leverage = 0.10% × 1.729 × 1.77 ≈ 0.3% (matches reported). The largest drag is the net profit margin at ~0.10%, while asset turnover at 1.729 is reasonably healthy and leverage at 1.77x is moderate. Business driver: SG&A nearly consumed gross profit (3.79 vs 3.83), leaving minimal operating income and exposing results to small swings in non-operating items and taxes. Sustainability: absent structural cost actions or pricing/mix improvements, margins at this level are not sustainably supportive of ROE expansion; the current leverage is not excessive and unlikely to drive ROE meaningfully without margin improvements. Concerning trends: SG&A growth relative to revenue cannot be quantified YoY due to missing breakdowns, but the SG&A-to-sales ratio (~19.7%) nearly equals gross margin (~19.9%), highlighting limited operating leverage and vulnerability to any topline softness.

Growth Assessment

Revenue grew 2.5% YoY to 19.26, indicating modest topline momentum. Profit growth is constrained: operating income (0.03) and net income (0.02) are extremely small versus sales, implying growth is not translating into earnings due to cost intensity. The gross margin at 19.9% suggests tight unit economics, and with SG&A nearly equal to gross profit, earnings remain sensitive to minor cost or revenue shifts. Non-operating income (0.01) contributed a meaningful share of ordinary income (0.04), which is not a durable driver for profit growth. Outlook hinge points: improving SG&A efficiency, stabilizing/improving gross margin, and maintaining cash conversion. Given ROIC at 1.2%, incremental growth without margin uplift risks value dilution; management focus should be on return-accretive growth or cost restructuring. Near-term, expect earnings to remain subdued unless expense controls or pricing/volume mix improve.

Financial Health

Liquidity is strong: current ratio 211.7% and quick ratio 211.7%, with current assets of 9.47 exceeding current liabilities of 4.47, and working capital of 5.00. No warning for current ratio (<1.0) and no maturity mismatch risk evident given cash (5.01) plus receivables (4.09) cover current liabilities (4.47). Solvency appears conservative with total liabilities of 4.84 vs equity of 6.30 (reported D/E 0.77x), though interest-bearing debt details are unreported; interest coverage is robust at 39.47x given minimal interest expense. Off-balance sheet obligations are not disclosed; no explicit guarantees or commitments reported in the dataset.

Cash Flow Quality

OCF of 0.26 versus NI of 0.02 yields an OCF/NI of 13.24x, indicating high-quality earnings this quarter. The strong conversion likely reflects favorable working capital movements and/or non-cash charges (D&A 0.09), though detailed drivers are unreported. Capex was modest at 0.02; using a simple proxy, OCF–Capex ≈ 0.24 suggests capacity to self-fund basic investment needs, but full FCF cannot be confirmed because other investing cash flows are unreported. No clear signs of working capital manipulation can be inferred from the limited data; receivables (4.09) and payables (3.75) are sizable but within a balanced profile relative to revenue and cost of sales. Sustainability will depend on maintaining positive OCF as profits scale and avoiding adverse shifts in receivable collections or payables.

Dividend Sustainability

Dividend data are largely unreported; however, a calculated payout ratio of 707% indicates potential misalignment with current earnings capacity if accurate. With NI at 0.02 and OCF at 0.26, cash generation presently exceeds accounting profit, but sustaining a payout implied by 707% would likely be unsupportable absent a rebound in earnings. FCF coverage cannot be fully assessed due to missing investing cash flow details; a proxy OCF–Capex of ~0.24 suggests some room for distributions, but policy prudence is warranted. Outlook: Unless earnings normalize to a higher run rate, a conservative dividend stance would be more consistent with the company’s low ROIC (1.2%) and thin margins.

Risk Assessment

Business Risks:

• Margin compression risk: SG&A nearly equals gross profit, leaving little buffer.
• Execution risk on cost controls and operating leverage realization.
• Revenue sensitivity: modest topline growth (+2.5% YoY) may not offset cost pressure.
• Pricing/mix risk impacting a thin 19.9% gross margin.
• Regulatory/compliance risk inherent to financial services/intermediary businesses (licensing, suitability, disclosure).

Financial Risks:

• Low ROIC at 1.2% indicates capital inefficiency and potential value dilution.
• Earnings volatility risk due to high effective tax rate variability at low profit levels.
• Dividend policy risk given an indicated payout ratio of 707% versus low earnings.
• Dependence on working capital dynamics for OCF with limited profit buffer.

Key Concerns:

• Sustainability of profitability at sub-1% operating margin.
• Limited disclosure on interest-bearing debt and detailed SG&A components.
• Reliance on non-operating income (0.01) relative to very small operating income.
• Data gaps (investing CF, dividend amounts) constrain full assessment of FCF and payout capacity.

Investment Implications

Key Takeaways:

• Topline grew 2.5% YoY, but profitability remains extremely thin (operating margin ~0.16%, net margin ~0.10%).
• OCF quality is strong this quarter (OCF/NI 13.24x), cushioning weak earnings.
• ROIC at 1.2% flags capital efficiency concerns and the need for margin uplift.
• Balance sheet/liquidity are solid (current ratio 211.7%, D/E 0.77x).
• Dividend sustainability is questionable if the 707% payout ratio proxy is accurate.

Metrics to Watch:

• Gross margin and SG&A-to-sales ratio
• Operating margin progression (bps) and EBITDA margin
• ROIC improvement trajectory
• OCF vs. NI and working capital turns (receivable days, payable days)
• Effective tax rate normalization
• Any disclosed DPS/payout policy updates

Relative Positioning: Versus Japan small-cap financial intermediaries/advisory peers, the company shows stronger liquidity and low leverage but lags on profitability and ROIC; near-term performance hinges on cost discipline and monetization efficiency rather than balance sheet strength.

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