ATOM CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥15.00B
• Operating Income: ¥-185M
• Net Income: ¥-340M
• EPS: ¥-1.81

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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

Verdict: FY2026 Q2 was weak, with a double‑digit revenue decline and an operating loss, partially cushioned by positive operating cash flow but overshadowed by high leverage. Revenue fell 17.6% YoY to 149.96, driving an operating loss of -1.85 and an ordinary loss of -2.15. Net income deteriorated to -3.40 (−99.4% YoY), implying a net margin of −2.3% and a calculated ROE of −7.0%. Gross profit was reported at 117.53, implying a high gross margin of 78.4%, but SG&A of 120.83 fully consumed gross profit and pushed EBIT negative. EBITDA was modest at 2.84 (1.9% margin), insufficient to cover interest of 0.33 on an EBIT basis (interest coverage −5.61x). The effective tax rate appears distorted (−47.7%) as the company recognized tax expense despite a pre‑tax loss (PBT −3.48), likely due to non‑deductible items or valuation allowance movements. On the balance sheet, total assets were 163.78 with equity of 48.60 (financial leverage 3.37x), and debt-to-equity is elevated at 2.40x. Liquidity is adequate but not strong: current ratio 112.2% and quick ratio 108.6%, with working capital of 9.35. Operating cash flow was positive at 1.05 despite the net loss, likely supported by depreciation (4.69) and working capital effects; however, after capex (−3.26), proxy FCF is negative (~−2.21). OCF/NI is −0.31x, flagging low earnings quality this quarter (cash generation lagging reported losses). ROIC is reported at −8.0%, well below typical cost of capital, highlighting capital inefficiency. High leverage, negative EBIT, and weak interest coverage raise solvency and refinancing concerns if profitability does not recover. With dividends unreported, capital returns remain uncertain; internal funding capacity looks constrained given negative proxy FCF. Forward-looking, margin recovery will hinge on traffic stabilization, pricing, and SG&A discipline; without a rebound in sales and cost control, leverage could become a binding constraint.

Profitability Analysis

ROE decomposition (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = (−2.3%) × 0.916 × 3.37 ≈ −7.0%. The dominant driver of the negative ROE is the net margin turning negative (net loss of −3.40 on 149.96 revenue), while asset turnover is moderate at 0.916 and leverage is high at 3.37x. Business rationale: revenue fell 17.6% YoY and SG&A (120.83) exceeded gross profit (117.53), leading to negative operating leverage and an operating loss (−1.85). Non-operating items were roughly neutral (income 0.99, expenses 0.86), not enough to offset operating weakness, and tax expense despite losses deepened the net loss. Sustainability: current net margin pressure stems from demand softness and cost structure rigidity (labor, rent, utilities), which is partly cyclical but requires active cost management; without SG&A reduction or pricing/traffic recovery, the loss risk persists. Margin structure: EBITDA margin is 1.9% and EBIT margin is −1.2%, indicating thin cushion against cost shocks. Warning signs: SG&A consumed 102.8% of gross profit (120.83 vs 117.53), a clear red flag; negative EBIT plus interest expense yields negative coverage (−5.61x). Operating leverage is unfavorable this quarter: a ~18% revenue drop translated into a swing to operating loss, demonstrating fixed-cost sensitivity.

Growth Assessment

Top-line contracted by 17.6% YoY to 149.96, suggesting weaker customer traffic and/or store rationalization; no segment detail was disclosed. Profit deterioration outpaced sales decline due to negative operating leverage, with SG&A not flexing down commensurately. Non-operating results were modest and did not change the trajectory (net −0.13 between income and expense). Given the restaurant industry backdrop (input cost inflation, wage increases, energy costs), near-term revenue recovery likely depends on menu pricing, promotional effectiveness, and footfall normalization. The high reported gross margin (78.4%) suggests product mix and/or accounting classification effects; however, the key constraint is overhead intensity. Outlook: absent cost actions, EBIT recovery requires mid- to high-single-digit SSS improvement or footprint optimization; management guidance was not provided here. Investment income and one-offs are not material in this period, thus recovery must be operational. Capex at −3.26 indicates ongoing maintenance/refresh; with OCF of 1.05, growth capex appears constrained until earnings normalize.

Financial Health

Liquidity is adequate but tight: current ratio 1.12 (>1.0 but <1.5) and quick ratio 1.09, supported by cash of 67.03 versus current liabilities of 76.62. No immediate maturity mismatch red flag: cash (67.03) plus receivables (10.79) and inventories (2.74) cover current liabilities. Solvency is a concern: D/E is 2.40x (warning threshold >2.0), and financial leverage is high at 3.37x. Interest-bearing loans total at least 41.65 (short-term 12.00, long-term 29.65), with interest expense 0.33; EBIT-based coverage is negative, indicating vulnerability if rates rise or lenders tighten. Equity is 48.60, implying limited cushion against further losses. Off-balance sheet obligations were not disclosed; lease and guarantee exposures, common in the restaurant sector, may add to fixed commitments but are unreported here. Conclusion: Liquidity is manageable near term, but solvency metrics require earnings recovery to avoid refinancing risk.

Cash Flow Quality

OCF was 1.05 against net income of −3.40, yielding OCF/NI of −0.31x, which flags low quality (cash generation not supporting accounting losses). The positive OCF likely reflects non-cash depreciation (4.69) and potential working capital release; however, details by line item are not available. Capex was −3.26; using OCF − Capex as a proxy, FCF ≈ −2.21, indicating external funding needs for investments. Financing CF was +3.73, suggesting reliance on debt or related-party funding to bridge cash shortfalls. No signs of aggressive WC manipulation can be confirmed due to lack of period-over-period WC details, but cash reliance on non-cash add-backs (D&A) is evident. Sustainability: With EBIT negative and proxy FCF negative, ongoing dividends or expansionary capex would be difficult to fund without improved OCF or additional financing.

Dividend Sustainability

Dividend data is unreported for the period. With net income negative (−3.40) and proxy FCF negative (~−2.21), internal coverage for potential dividends appears weak this quarter. Payout ratio and FCF coverage cannot be calculated from disclosures. Policy outlook is uncertain; given leverage (D/E 2.40x) and negative EBIT, preserving liquidity would typically take precedence over cash distributions until profitability stabilizes.

Risk Assessment

Business Risks:

• Demand softness evidenced by −17.6% YoY revenue, exposing high fixed-cost leverage.
• Input cost inflation (food, energy) and rising labor costs compressing margins.
• Competitive pressure in casual dining leading to discounting and lower ticket size.
• Operational risks: food safety incidents or supply disruptions could amplify downside.

Financial Risks:

• High leverage (D/E 2.40x) with negative EBIT and interest coverage of −5.61x.
• Refinancing and covenant risk if losses persist and lenders tighten terms.
• Cash flow shortfall: proxy FCF ≈ −2.21 necessitating external funding.
• Tax expense despite losses (−47.7% effective rate) adds P&L volatility.

Key Concerns:

• ROIC at −8.0% indicates capital inefficiency relative to cost of capital.
• SG&A exceeding gross profit (120.83 vs 117.53) points to structural cost issues.
• Data gaps (segment details, SG&A breakdown, investing CF, dividend policy) limit visibility.
• Potential accounting classification inconsistencies between reported COGS and gross profit.

Investment Implications

Key Takeaways:

• Revenue decline (−17.6% YoY) triggered negative operating leverage and an EBIT loss.
• Net margin (−2.3%) and ROE (−7.0%) reflect profitability stress; ROIC (−8.0%) is below threshold.
• Liquidity is adequate short term (current ratio 1.12), but solvency is pressured (D/E 2.40x).
• OCF positive but insufficient after capex; proxy FCF ≈ −2.21 and financing inflows of 3.73 bridge the gap.
• Interest coverage is negative, highlighting urgency of margin recovery or cost cuts.

Metrics to Watch:

• Same-store sales growth and traffic/ticket trends
• SG&A-to-sales ratio and fixed-cost reduction progress
• OCF/Net income and working capital movements
• EBITDA margin and EBIT break-even trajectory
• Interest coverage and D/E ratio (refinancing cadence)
• Capex pace vs. OCF to assess FCF trajectory

Relative Positioning: Within Japan’s casual dining/restaurant peer set, the company currently sits on the weaker end for profitability (negative EBIT, −2.3% net margin) and capital efficiency (ROIC −8%), with leverage above many peers; near-term positioning hinges on rapid cost normalization and sales recovery.

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
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