Ai Partners Financial Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.93B
• Operating Income: ¥3M
• Net Income: ¥-10M
• 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

For FY2026 Q2 (cumulative), I Partners Financial reported revenue of ¥1,926 million, up 2.5% YoY, indicating modest top-line expansion despite a soft operating environment for financial intermediation. Gross profit was ¥374 million, translating to a 19.4% gross margin, which is thin and consistent with a commission‑sharing business model where cost of sales reflects partner payouts. Operating income was essentially flat at ¥3 million, implying an operating margin of roughly 0.16% and underscoring limited operating leverage in the period. Ordinary income came in at ¥4 million and net income at ¥2 million, resulting in a net margin of 0.10%, which is very low for a listed financial distributor and leaves little buffer against volatility. DuPont analysis yields an ROE of 0.32% (net margin 0.10% × asset turnover 1.729 × financial leverage 1.77), confirming that weak profitability, rather than leverage or asset efficiency, is the primary drag on returns. Asset turnover of 1.73x is respectable and suggests reasonable use of the balance sheet to generate revenue. Financial leverage is modest at 1.77x, and a computed equity ratio of about 56.6% (based on provided assets and equity) indicates a conservative capital structure despite the reported equity ratio being unreported in XBRL. Operating cash flow was negative ¥16 million, resulting in an OCF/net income ratio of -8.21x, which points to earnings quality concerns for the period, likely driven by working capital movements. Financing cash outflows of ¥17 million suggest repayments or other financing uses; investing cash flows were unreported. Liquidity appears comfortable with a current ratio of 252%, supported by large current assets and no reported inventories, in line with the company’s service-based model. Interest coverage of 19.6x (EBIT basis) indicates limited interest burden relative to operating profit, albeit off a very small EBIT base. Dividend per share was unreported (listed as 0.00), and payout also shows as 0.0%; with low earnings and negative OCF, the capacity for distributions appears constrained near term absent a rebound in profitability and cash flow. Overall, the core issue is margin compression and limited operating leverage: revenue growth did not translate into higher operating profit. The company retains balance sheet strength and liquidity, which mitigates solvency risk despite low profitability. Data limitations (several items showing as zero due to non-disclosure) constrain deeper cash flow and per-share analyses, but the available figures are sufficient to assess directionally weak profitability, adequate liquidity, and conservative leverage. The outlook depends on stabilizing gross spreads, controlling SG&A, and converting earnings into cash through better working capital discipline.

Profitability Analysis

ROE_decomposition: ROE 0.32% = Net margin 0.10% × Asset turnover 1.729 × Financial leverage 1.77. The main constraint is the ultra‑low net margin; asset efficiency and leverage are adequate. margin_quality: Gross margin 19.4% is modest for a fee-based intermediary, reflecting substantial pass-through costs (partner commissions). Operating margin ~0.16% and net margin 0.10% indicate heavy SG&A intensity and limited pricing power. Ordinary income exceeds operating income marginally, implying minor non-operating support. operating_leverage: Revenue grew 2.5% YoY but operating income was flat at ¥3 million, indicating negative operating leverage in the period as SG&A growth offset gross profit gains. EBITDA of ¥13.5 million (0.7% margin) provides thin cushion against fixed costs.

Growth Assessment

revenue_sustainability: Top-line growth of 2.5% YoY suggests stable client activity and retention but lacks momentum; revenue is likely driven by recurring trail commissions and modest new inflows. profit_quality: Flat operating income despite higher revenue points to margin pressure, likely from commission rates, mix shifts, or higher partner/infrastructure costs. The very low net margin elevates sensitivity to small revenue or cost changes. outlook: Near-term growth will hinge on net inflows, product mix tilt toward higher-margin solutions, and cost discipline. With limited operating leverage evidenced this half, management likely needs to prioritize SG&A efficiency and partner economics to lift margins.

Financial Health

liquidity: Current assets ¥834 million vs current liabilities ¥330 million yields a current ratio of 252% and quick ratio of 252% (no inventories reported), indicating solid short-term liquidity. solvency: Total liabilities ¥370 million vs equity ¥630 million implies a debt-to-equity ratio of ~0.59x and an equity ratio of ~56.6% (computed from assets and equity), signaling a conservative balance sheet. capital_structure: Financial leverage of 1.77x is modest. Interest expense of ¥0.153 million with EBIT coverage at ~19.6x indicates low financial risk, though coverage is based on a very small EBIT base.

Cash Flow Quality

earnings_quality: OCF of -¥16.4 million versus net income of ¥2 million (OCF/NI -8.21x) indicates poor cash conversion this period, likely driven by working capital outflows (e.g., receivables/payables timing). FCF_analysis: Investing CF and reported FCF are unreported (shown as 0). With negative OCF and unknown capex, underlying free cash flow appears weak for the half. working_capital: No inventories are reported (service model). The negative OCF suggests increased receivables or reduced payables; monitoring collection cycles and partner payment schedules is key.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratio are shown as 0.00 (unreported). Given EPS of ¥0.62 and negative OCF, distributable capacity is constrained unless cash generation improves. FCF_coverage: FCF coverage is shown as 0.00x (unreported). On fundamentals, low earnings and negative OCF would make consistent cash dividends difficult without balance sheet draw or a margin recovery. policy_outlook: A conservative stance is likely near term, prioritizing reinvestment and balance sheet strength. Sustainable dividends would require improved operating margin and positive, recurring FCF.

Risk Assessment

Business Risks:

• Margin compression from competitive commission rates and partner payout structures
• Revenue sensitivity to market activity, AUM flows, and product mix
• Limited operating leverage given high SG&A intensity
• Regulatory changes affecting distribution practices and fee structures
• Partner retention and productivity variability in an IFA/network model

Financial Risks:

• Weak cash conversion in the period (negative OCF)
• Earnings vulnerability due to ultra-low margins
• Potential working capital volatility from receivable/payable timing
• Concentration risk if revenue depends on a limited set of products or distributors

Key Concerns:

• Net margin at 0.10% and flat operating profit despite revenue growth
• Negative OCF relative to reported profit
• Thin EBITDA margin (0.7%) offering limited buffer against shocks

Investment Implications

Key Takeaways:

• Modest revenue growth (+2.5% YoY) did not translate into higher operating profit
• Margins are exceptionally thin (OP margin ~0.16%, net margin 0.10%)
• ROE is low at 0.32%, constrained mainly by profitability
• Liquidity and solvency are solid (current ratio ~2.5x; equity ratio ~56.6%)
• Cash conversion is weak this period (OCF negative vs positive net income)

Metrics to Watch:

• Operating margin trend and SG&A-to-sales ratio
• Gross margin and partner payout rate dynamics
• OCF and working capital days (DSO/DPO) for cash conversion
• Net inflows/AUM and product mix toward higher-margin offerings
• Ordinary income vs operating income to gauge reliance on non-operating items

Relative Positioning: Within Japanese financial distributors and IFA platforms, the company exhibits conservative leverage and strong liquidity, but sits at the low end on profitability and cash conversion based on this half-year performance.

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