IwaiCosmo Holdings,Inc. FY2026 FY Earnings Report

Financial Highlights

• Operating Income: ¥13.01B
• Net Income: ¥5.38B
• EPS: ¥444.61

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

---

AI Financial Analysis

Executive Summary

Verdict: A strong earnings beat with double-digit profit growth, margin expansion, and solid ROE, offset by weak cash conversion and a back-end loaded cash flow profile. Operating income rose 50.4% YoY to 130.1 billion yen-equivalent (13.01 billion JPY), driving ordinary income up 48.1% to 135.5 and net income to 104.4, up 55.3% YoY. Segment external revenue increased to 3,226.0 (hundred million JPY basis), with fee income up 18.0% and trading gains up 30.6%, underscoring robust market activity and stronger client flow. Operating margin improved to about 4.0%, up roughly 67 bps YoY, while net margin rose to about 3.2%, up roughly 63 bps YoY. ROE printed 14.7%, at the high end of the “good” band and nearing “excellent,” supported by healthy asset turnover (~1.6x) and modest financial leverage (2.87x). Interest burden above 1.0 reflects net interest income characteristics of a broker, a structural positive for ordinary profit. Extraordinary income of 13.75 from gains on sale of investment securities contributed to EBT, though the core uplift came from operating momentum. Cash flow quality was weak: operating cash flow of 23.05 equated to only 0.22x of net income, and OCF/EBITDA of 0.17x, signaling a sizable accruals component and timing effects. Free cash flow of 16.05 covered only about 29% of dividends, implying reliance on balance sheet liquidity this year. Liquidity remained acceptable with a current ratio of 147% and cash/short-term debt of 1.51x, while solvency was strong with Debt/EBITDA at 0.40x and interest coverage near 60x. Capital intensity remained very low (CapEx/Depreciation 0.08x), consistent with the brokerage model but indicating minimal reinvestment needs rather than growth capex. Segment profit at the core securities subsidiary grew ~50% YoY to 13,222 (million JPY), substantiating the operating leverage from higher volumes and spreads. Equity increased to 742.9, with retained earnings up 12.9%, reflecting strong profit retention despite a higher dividend. The dividend was raised to 225 yen DPS (payout ~54%), balancing shareholder return with capital retention amid earnings volatility. Looking ahead, results are sensitive to market turnover and spreads; sustaining current profitability depends on maintaining client activity and stable trading conditions. Near-term focus should be on normalizing cash conversion, managing short-term funding prudently, and preserving capital flexibility in a cyclical market.

Profitability Analysis

ROE decomposition (DuPont 3-factor): ROE 14.7% ≈ Net Profit Margin (~3.24%) × Asset Turnover (~1.58x) × Financial Leverage (2.87x). The largest YoY improvement came from Net Profit Margin, which expanded by roughly 63 bps as operating income rose 50% on the back of stronger fee and trading revenues. Business drivers: higher client activity lifted fee income (+18%) and trading gains (+31%), while SG&A discipline (188.5 vs revenue growth) allowed operating leverage to flow through. Interest burden (>1.0) indicates net interest income tailwind at the ordinary profit layer, typical for securities houses in a higher rate environment. Sustainability: revenue mix improvements (fees, trading, financial income) are cyclical and sensitive to market turnover; margin gains should persist as long as volumes and spreads remain healthy, but may normalize with market conditions. Cost discipline appears intact; however, if SG&A were to outpace revenue in a weaker market, operating leverage could reverse. No signs of cost bloat relative to revenue growth in this period.

Growth Assessment

Top-line momentum was broad-based, with external revenue at 32,260 (million JPY) vs 25,750, supported by fee income (+18.0%) and trading gains (+30.6%). Operating income growth of +50.4% and ordinary income +48.1% demonstrate strong throughput from higher activity levels. Net income grew +55.3%, aided by operating leverage and a modest contribution from extraordinary gains (13.75). EBITDA increased to 136.5, aligning with the operating uptick and providing ample interest coverage. Growth quality is cyclically driven by market volumes and trading conditions; the uplift is credible but inherently non-linear. Retained earnings rose 12.9% to 532.5, reinforcing capital for future cycles. With capital intensity low and debt modest, the platform can accommodate cyclical swings without over-leverage. Near-term outlook hinges on sustaining client flow and spreads; a normalization in trading revenue would temper growth but fee resilience and financial income can partially offset. Management does not provide full-year guidance; thus, quarterly trajectory and market indicators (turnover, volatility) are the key leading signals.

Financial Health

Liquidity: Current ratio 147.3% and quick ratio 147.3% indicate a comfortable buffer against short-term obligations. Solvency: Debt/EBITDA 0.40x and interest coverage ~60x are robust; Debt/Capital at 6.8% is conservative for a broker with predominantly current assets. Capital structure: D/E at 1.87x remains below the 2.0x caution line; equity increased to 742.9, driven by profit retention. Maturity profile: Short-term debt ratio is 100% (54.0 short-term loans), fully covered by cash and deposits of 81.6 (cash/short-term debt 1.51x); rollover risk exists by structure but is mitigated by liquid balance sheet and low absolute leverage. Off-balance sheet: none highlighted in the provided data. Notable shifts: intangible assets decreased sharply (-81.6%), short-term loans increased (+54.3%), and retained earnings rose (+12.9%), consistent with a cycle-up in activity and internal capital build.

Notable B/S Changes

Intangible Assets: -1.02bn (-81.6%) - Amortization and rationalization of software assets; minimal impact on operating capacity given low capital intensity. Short-term Loans: +1.9bn (+54.3%) - Higher activity-driven funding needs; monitor rollover and funding costs. Retained Earnings: +60.98bn (+12.9%) - Profit retention boosted equity, enhancing loss-absorption capacity.

Cash Flow Quality

OCF of 23.05 vs net income of 104.43 yields OCF/NI of 0.22x, a clear quality flag this year. Cash conversion (OCF/EBITDA) at 0.17x also indicates heavy accruals and timing effects common in securities businesses (e.g., tax payments, interest/dividend classification effects, and working capital flows). Free cash flow of 16.05 after modest capex suggests operating cash generation lagged earnings despite strong profitability. Drivers: larger current tax payments, interest/dividend cash flow presentation effects, and a rise in provisions (+9.12) influenced OCF; realized gains on investments (extraordinary income) are non-operating cash contributors. Sustainability: cash conversion should improve if working capital normalizes; however, volatility is inherent to the model. No indications of aggressive working capital manipulation; movements align with market-driven balance fluctuations.

Dividend Sustainability

DPS totaled 225 yen, implying a payout ratio of approximately 53.9%, within a sustainable band relative to EPS. However, FCF coverage was 0.29x, indicating dividends exceeded free cash generation this year and were supported by balance sheet liquidity. With cash/short-term debt at 1.51x and low Debt/EBITDA (0.40x), near-term dividend capacity is underpinned by liquidity and earnings, but continuity at the current level depends on restoring cash conversion. Policy signals are conservative, with future DPS for the next fiscal year undisclosed; management retains flexibility to adjust to market conditions.

Risk Assessment

Business risks include Market activity dependence: fee and trading revenues are sensitive to equity market turnover and volatility., Revenue mix cyclicality: trading gains (+30.6% YoY) may normalize, compressing margins., Execution risk in sustaining client acquisition and wallet share in a competitive brokerage landscape..

Financial risks include Refinancing profile: 100% short-term debt reliance, albeit with low absolute leverage and cash coverage (1.51x)., Weak cash conversion: OCF/NI 0.22x and OCF/EBITDA 0.17x increase reliance on working capital normalization., Dividend coverage: FCF coverage of 0.29x indicates dependence on balance sheet liquidity in a downcycle..

Key concerns include EARNINGS_QUALITY flag: Low OCF/NI (0.22x) suggests earnings are not translating to cash this period; typical timing for brokers but heightens caution if prolonged., LOW_CASH_CONVERSION flag: OCF/EBITDA 0.17x reinforces cash quality concerns; monitoring quarter-on-quarter normalization is essential., UNDERINVESTMENT flags: CapEx/Depreciation at 0.08x reflects low capital intensity; while normal for brokers, persistent underinvestment could constrain platform upgrades if not offset by opex/IT spend., REFINANCING_RISK flag: 100% short-term debt ratio could raise rollover risk in stressed liquidity conditions; mitigated by low Debt/EBITDA (0.40x) and cash buffer (cash/STD 1.51x)..

Investment Implications

Key takeaways include Earnings strength is broad-based with fee and trading tailwinds, delivering a 50%+ uplift in profits and ROE of 14.7%., Margins expanded ~60–70 bps YoY, supported by operating leverage and net interest income within ordinary profit., Cash conversion is notably weak this year; sustainability of dividends depends on OCF normalization., Balance sheet remains liquid and conservatively leveraged, cushioning cyclicality., Extraordinary gains (13.75) helped EBT but the core driver was operating momentum..

Metrics to watch include Client activity indicators: retail/wholesale turnover, trading spreads, and fee pipelines., OCF/NI and OCF/EBITDA recovery trajectory., Short-term funding costs and rollover tenor mix., Segment profit at the securities subsidiary and mix between fees, trading, and financial income., Dividend coverage by FCF amid market normalization..

Regarding relative positioning, Within Japan’s brokerage peer set, profitability and ROE are competitive, leverage is conservative, and interest coverage is strong; the main relative weakness is cash conversion in the current period, which is a common but not universal trait across cycles.