OLYMPUS CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥454.35B
• Operating Income: ¥46.13B
• Net Income: ¥29.19B
• EPS: ¥26.00

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

Olympus (7733) reported FY2026 Q2 consolidated IFRS results with revenue of 4,543.5 (100M JPY), down 4.2% YoY, indicating a softer top line likely driven by volume or pricing pressure and/or FX headwinds. Despite the revenue decline, gross profit remained high at 3,229.6, translating to a robust gross margin of 71.1% consistent with the company’s premium positioning in medical endoscopy and related devices. Operating income fell 34.6% YoY to 461.3, compressing the operating margin to approximately 10.2%, highlighting considerable operating deleverage as SG&A (2,379.1) did not flex down with revenue. Net income decreased 40.4% YoY to 291.9, with an elevated effective tax rate of 43.6% exacerbating the bottom-line decline. EBITDA was 792.2 (margin 17.4%), implying substantial non-cash costs and the weight of SG&A in the model. DuPont analysis indicates a calculated ROE of 4.0%, driven by a 6.4% net margin, low asset turnover of 0.328x, and modest financial leverage of 1.89x; this ROE is below medtech peers’ mid-to-high single digits or double digits, underscoring pressured profitability. Operating cash flow was strong at 937.1, or 3.21x net income, reflecting solid cash conversion supported by non-cash add-backs (D&A 330.9) and likely favorable working capital dynamics. Free cash flow of 636.9 and a sizable ending cash balance of 2,525.3 reinforce liquidity despite substantial shareholder returns. Financing cash outflows totaled -1,567.4, including dividends (-209.8) and large share repurchases (-564.7), suggesting management commitment to capital returns even amid earnings softness. The balance sheet remains sound with an equity ratio of 53.0% and liabilities/equity of 0.93x; however, interest-bearing debt and current liabilities are unreported, limiting precision on leverage and liquidity ratios. Accounts receivable (2,041.8) and inventories (1,871.5) are sizable, consistent with a global medtech supply chain footprint and potentially longer cash conversion cycles. The payout ratio is high at 78.1% on earnings but amply covered by FCF (2.80x), indicating dividend capacity is supported by cash generation. The elevated tax rate and lower revenue were key drivers of net profit pressure; normalization of the effective tax rate would be a tailwind to EPS. Overall, Olympus retains strong gross margin economics and cash generation but faces margin headwinds from operating leverage and a higher tax burden this period. Data limitations are material for several line items (e.g., non-operating income/expenses, current liabilities, interest-bearing debt, R&D), but available data are sufficient to assess near-term profitability, cash flow, and balance sheet resilience.

Profitability Analysis

ROE_decomposition: Net margin 6.4% x Asset turnover 0.328x x Financial leverage 1.89x = ROE ~4.0% (matches reported). The modest leverage and low asset turnover constrain ROE; margin compression from operating deleverage is the main drag YoY. margin_quality: Gross margin is strong at 71.1%, consistent with premium endoscopy franchise. Operating margin compressed to ~10.2% as SG&A (2,379.1) absorbed the impact of a 4.2% revenue decline. EBITDA margin of 17.4% indicates a sizeable non-cash expense base (D&A 330.9) and high fixed cost intensity. operating_leverage: Revenue declined 4.2% YoY while operating income fell 34.6% YoY, signaling negative operating leverage. Fixed cost absorption and mix likely drove the disproportionate EBIT contraction.

Growth Assessment

revenue_sustainability: Revenue of 4,543.5 declined 4.2% YoY. Given Olympus’s exposure to global procedure volumes and capital equipment cycles, near-term sustainability hinges on demand recovery in GI endoscopy and continued adoption of therapeutic devices; FX can also be a swing factor. No segment granularity is available to parse mix effects. profit_quality: EBITDA of 792.2 vs EBIT of 461.3 and OCF 937.1 suggest earnings are supported by cash conversion and non-cash add-backs. However, the elevated tax rate (43.6%) depressed net profit, and the decline in EBIT indicates underlying margin pressure. outlook: Key upward drivers would include stabilization of procedure volumes, new product cycles, and normalization of the effective tax rate. Risks include pricing pressure, competition, and potential continued cost inflation in components and logistics. With limited disclosed detail on regional/segment performance and R&D, visibility is moderate.

Financial Health

liquidity: Cash and equivalents are 2,525.3, and operating cash flow of 937.1 provides strong internal liquidity. Current ratio and quick ratio are not calculable due to unreported current liabilities and cash, so we cannot quantify short-term coverage, but the equity ratio is healthy at 53.0%. solvency: Total liabilities/equity is 0.93x (6,815.4 / 7,335.8). Interest-bearing debt and interest expense are unreported, preventing calculation of net debt and interest coverage; nonetheless, balance sheet leverage appears moderate given equity capitalization. capital_structure: Assets 13,847.9 vs equity 7,335.8 imply financial leverage of 1.89x. Significant shareholder returns (dividends and buybacks totaling ~774.5) were funded alongside positive FCF, with the remainder likely from cash on hand and/or debt reduction not disclosed in detail.

Cash Flow Quality

earnings_quality: OCF/Net income of 3.21x indicates high cash conversion. D&A of 330.9 and likely working capital tailwinds supported cash flow despite lower earnings. FCF_analysis: FCF of 636.9 (OCF 937.1 + Investing CF -300.2) is solid; Capex was contained at -207.4, suggesting continued investment discipline. OCF comfortably covered both capex and dividends with room for buybacks, though total financing outflows exceeded FCF. working_capital: Inventories (1,871.5) and receivables (2,041.8) are sizable; accounts payable is 614.2, implying a net working capital commitment typical for medtech. Period-to-period changes are not disclosed, limiting a turnover analysis.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio is 78.1%, elevated relative to depressed earnings this period; sustainability improves if the effective tax rate normalizes and EBIT stabilizes. FCF_coverage: FCF coverage at 2.80x indicates dividends are well-covered by cash generation. OCF less capex also appears to cover dividends handily. policy_outlook: Given strong cash flow and a solid equity base (equity ratio 53%), maintaining the dividend appears feasible. However, the combination of high payout on earnings and significant buybacks suggests ongoing scrutiny of earnings durability and cash conversion is warranted.

Risk Assessment

Business Risks:

• Pricing pressure and reimbursement changes in key markets for endoscopy and therapeutic devices
• Competitive intensity from global medtech peers and innovation cycles
• Regulatory and quality risks, including product recalls and compliance
• FX volatility impacting reported revenue and margins
• Supply chain constraints and component cost inflation
• Procedure volume sensitivity to hospital capacity/utilization and macro conditions

Financial Risks:

• Elevated effective tax rate (43.6%) compressing net income and EPS
• Unreported interest-bearing debt and interest expense obscure leverage and coverage metrics
• Large shareholder returns (buybacks/dividends) relative to earnings could pressure balance sheet if cash flows weaken
• Working capital intensity (high AR and inventories) exposes cash flow to collection and inventory risks

Key Concerns:

• Negative operating leverage given a 4.2% revenue decline vs a 34.6% EBIT drop
• High payout ratio on earnings amid profit pressure
• Limited visibility due to unreported items (non-operating income/expense, current liabilities, R&D, debt)

Investment Implications

Key Takeaways:

• Top line down 4.2% YoY; gross margin resilient at 71.1% but operating margin compressed to ~10.2%
• ROE at 4.0% reflects low asset turnover and margin pressure
• Cash generation strong: OCF 937.1, FCF 636.9; cash balance 2,525.3
• Capital returns sizable: dividends -209.8 and buybacks -564.7
• Balance sheet solid with equity ratio 53% and liabilities/equity 0.93x, though debt specifics are unreported
• Effective tax rate elevated at 43.6%, materially suppressing net income

Metrics to Watch:

• Operating margin recovery and SG&A efficiency
• Effective tax rate normalization trajectory
• OCF conversion and working capital movements (AR, inventory, AP turns)
• Order trends and revenue growth in core endoscopy and therapeutic devices
• R&D investment intensity and new product cadence (currently unreported)
• Pace of share repurchases relative to FCF

Relative Positioning: Within medtech, Olympus maintains a high gross margin profile supported by a leading endoscopy franchise but currently lags best-in-class peers on operating margin and ROE. Balance sheet strength and cash generation are competitive, while revenue softness and tax headwinds weigh on near-term earnings quality.

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