TEN ALLIED Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥6.01B
• Operating Income: ¥-26M
• Net Income: ¥69M
• EPS: ¥-1.69

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

Ten Allied Co., Ltd. (TSE: 82070) reported FY2026 Q2 consolidated results under JGAAP showing modest top-line growth but continued bottom-line losses. Revenue rose 2.6% YoY to ¥6,008 million, indicating some demand resilience. Gross profit is disclosed at ¥4,209 million, corresponding to a high gross margin of 70.1%, which suggests a cost structure where a large portion of expenses is classified below cost of sales (typical for service-heavy restaurant operators with significant occupancy and labor costs captured in SG&A). Operating income remained a slight loss at -¥26 million (flat YoY per disclosure), with ordinary income at -¥24 million and net income at -¥67 million (EPS -¥1.69). Despite the net loss, EBITDA was positive at ¥98 million, supported by ¥124 million of depreciation and amortization, implying some operational cash generation capacity. The DuPont framework indicates a negative net margin of -1.12%, asset turnover of 0.818x, and financial leverage of 2.40x, resulting in a calculated ROE of -2.19% (consistent with the reported figure). Operating cash flow was modestly positive at ¥10.8 million, but the OCF/Net income ratio of -0.16 highlights volatility and weaker earnings-to-cash translation this period. The balance sheet shows total assets of ¥7,341 million and total equity of ¥3,055 million; while the reported equity ratio is 0.0% (undisclosed), the implied equity-to-asset ratio is approximately 41.6% based on provided line items. Liquidity appears adequate with a current ratio of 151.1% and a quick ratio of 144.5%, supported by ¥1,372 million of working capital. Financing cash flow was a large outflow at -¥892 million, pointing to material repayments or other financing uses this half; cash and equivalents are not disclosed in this dataset. Interest expense was ¥16.9 million and EBIT-based interest coverage is -1.5x, underscoring that profitability is not yet sufficient to cover financing costs from operations. The company paid no dividend (DPS ¥0), consistent with a loss-making period and the need to preserve liquidity following sizable financing outflows. While revenue growth and positive EBITDA are constructive, sustained improvements in operating margin and cash conversion are needed to return to profitability. Data limitations exist (e.g., cash balance, investing cash flows, equity ratio, share-related metrics), so several interpretations rely on disclosed non-zero items and implied calculations.

Profitability Analysis

ROE at -2.19% is driven primarily by a negative net margin (-1.12%), partially mitigated by modest asset turnover (0.818x) and moderate financial leverage (2.40x). The gross margin is disclosed at 70.1% (gross profit ¥4,209m on revenue ¥6,008m), suggesting that the bulk of operating costs are below COGS in SG&A and occupancy, consistent with food-service sector accounting under JGAAP. Operating margin is slightly negative (operating loss ¥26m), indicating that fixed costs and labor/occupancy inflation likely offset revenue growth. EBITDA of ¥98m and EBITDA margin of 1.6% show thin underlying operating earnings before non-cash charges, leaving limited buffer against shocks. Ordinary income of -¥24m is only marginally better than operating income, implying minimal non-operating support this period. Interest expense was ¥16.9m; with EBIT negative, interest coverage is -1.5x, highlighting that interest is not yet covered from core earnings. Effective tax rate is not meaningful in a loss context despite ¥22.5m income tax line, which can reflect non-deductible items or timing differences under JGAAP. Operating leverage appears high: a small operating loss despite positive EBITDA indicates fixed-cost absorption remains a headwind, and incremental revenue needs to be paired with tight cost control to swing to profit. Margin quality would improve if labor efficiency and store-level fixed costs decline as a share of sales; current results suggest only partial pass-through of cost pressures.

Growth Assessment

Revenue growth of +2.6% YoY to ¥6,008m indicates steady but modest topline momentum. Given the sector context, this growth likely stems from traffic recovery and pricing/mix, but the leakage to operating loss implies growth is not yet translating into profit scale. Gross profit increased in absolute terms (¥4,209m), but the operating loss suggests SG&A and other operating costs are still elevated. Profit quality remains weak: net loss of ¥67m and negative operating income offset positive EBITDA, pointing to insufficient operating scale or continued cost inflation. Sustainability of revenue growth will depend on same-store sales, store network optimization, and pricing discipline; with asset turnover at 0.818x, productivity is moderate and could benefit from improved utilization. Outlook hinges on margin expansion rather than aggressive expansion, as leverage and interest costs constrain flexibility. Near-term, incremental improvements in labor scheduling, procurement, and rent renegotiations could drive operating leverage. Non-operating items provided little help this period, so earnings recovery must be operational. Absent disclosure on store openings/closures and investing activities, growth capex signals are unclear in this dataset.

Financial Health

Total assets are ¥7,341m and total liabilities ¥4,650m, yielding total equity of ¥3,055m. The reported equity ratio is undisclosed (0.0%), but the implied equity-to-asset ratio is about 41.6%, indicating a moderate capitalization. Debt-to-equity is 1.52x when using total liabilities as a proxy for debt, reflecting a leveraged but not extreme balance sheet for the sector. Liquidity appears adequate: current assets ¥4,057m vs current liabilities ¥2,685m produce a current ratio of 151.1% and a quick ratio of 144.5%, with working capital of ¥1,372m. Interest expense of ¥16.9m versus negative EBIT leads to weak interest coverage, which is the primary solvency pressure point. The sizable financing cash outflow (-¥892m) suggests repayments or lease-related settlements, which may improve future interest burden but reduce liquidity unless offset by cash reserves (cash balance not disclosed here). Inventory stands at ¥176m, small relative to current assets, consistent with a food-service model and limiting inventory risk. Overall solvency is acceptable by equity buffer, but ongoing operating losses and interest coverage require close monitoring.

Cash Flow Quality

Operating cash flow was ¥10.8m, positive but modest relative to negative net income of -¥67m, producing an OCF/Net Income ratio of -0.16 (distorted by the negative denominator). With D&A of ¥124.1m, the bridge from net loss to OCF implies a material working capital outflow and/or cash taxes/interest that offset non-cash add-backs. Free cash flow is listed as 0 due to undisclosed investing cash flows (Investing CF reported as 0 indicates not disclosed), so true FCF cannot be reliably assessed from this dataset. Financing cash flow was a large outflow of -¥891.5m, implying debt reduction, lease payments, or other financing uses; without cash balance disclosure, the net liquidity impact is uncertain. Earnings quality is mixed: positive EBITDA and OCF suggest some cash generation capability, but low conversion relative to D&A highlights pressure from working capital or other operating cash items. Working capital management will be a key lever; given inventories are modest, receivables and payables timing likely drove the outflow. Overall, cash flow quality is tentative and sensitive to operating recovery and WC normalization.

Dividend Sustainability

The company paid no dividend (DPS ¥0) and reports a payout ratio of 0.0%, appropriate given the -¥67m net loss and thin cash generation. With investing cash flow undisclosed and FCF listed as 0 in this dataset, FCF coverage of dividends cannot be meaningfully evaluated; however, zero DPS removes near-term cash distribution pressure. Financing outflows of -¥892m suggest a priority on balance sheet management over shareholder distributions. Sustained dividends would require a clear return to positive operating income and stronger OCF after working capital. Policy-wise, maintaining suspension appears prudent until profitability and cash conversion improve. Future reinstatement would depend on achieving positive ROE and adequate interest coverage.

Risk Assessment

Business Risks:

• Thin operating margin and ongoing operating loss (-¥26m) despite revenue growth indicate high operating leverage and sensitivity to sales fluctuations.
• Cost inflation in labor, utilities, and occupancy may continue to compress margins if not offset by pricing and efficiency.
• Execution risk around store portfolio optimization and cost control needed to translate EBITDA into operating profit.
• Competitive intensity in the Japanese restaurant sector pressures pricing power and traffic.
• Potential demand volatility from macro conditions and consumer sentiment.

Financial Risks:

• Negative interest coverage (-1.5x) indicates inability to cover interest from current earnings.
• Large financing cash outflow (-¥892m) reduces financial flexibility unless accompanied by sufficient cash reserves (cash balance undisclosed).
• Leverage of 1.52x (liabilities/equity) introduces refinancing and covenant risks if losses persist.
• Limited visibility on cash and investing flows due to data not disclosed in this period.

Key Concerns:

• Sustained negative net income (-¥67m) and flat operating loss trajectory.
• Weak cash conversion relative to D&A, implying working capital or other cash drags.
• Dependence on operational improvements to achieve interest coverage and positive ROE.

Investment Implications

Key Takeaways:

• Top-line grew 2.6% YoY to ¥6,008m, but operating income remained slightly negative.
• EBITDA positive at ¥98m, yet insufficient to deliver operating profit after fixed costs.
• Interest coverage negative (-1.5x); profitability must improve to de-risk capital structure.
• Liquidity is adequate (current ratio 151%), with implied equity ratio around 41.6%.
• Financing outflow of -¥892m suggests deleveraging or lease-related payments, reducing flexibility near term.

Metrics to Watch:

• Same-store sales growth and ticket/traffic mix driving revenue sustainability.
• Operating margin progression (EBIT margin) and labor/occupancy cost ratio.
• OCF and working capital movements versus D&A to gauge cash conversion.
• Interest coverage and trend in interest expense following financing outflows.
• Store count changes and capex (investing cash flows) once disclosed.

Relative Positioning: Within Japan’s casual dining/food-service peer set, Ten Allied exhibits modest revenue recovery and positive EBITDA but lags on operating margin and interest coverage; balance sheet capitalization appears reasonable, yet ongoing losses place it toward the weaker end on earnings quality until operational leverage improves.

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