Advantage Risk Management Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥4.56B
• Operating Income: ¥280M
• Net Income: ¥-125M
• EPS: ¥11.89

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

Advantage Risk Management (TSE:8769) reported FY2026 Q2 consolidated results under JGAAP showing strong top-line expansion and improved operating leverage. Revenue was ¥4,559 million, up 35.7% year over year, indicating robust demand across its services. Operating income rose 76.9% YoY to ¥280 million, outpacing revenue growth and demonstrating positive operating leverage. Net income was ¥186 million (+4.8% YoY), with the smaller growth vs. operating income likely reflecting a higher tax burden and/or non-operating movements. Based on disclosed gross profit of ¥2,334 million, the gross margin was 51.2%, supporting the view of a service-heavy model with attractive unit economics. EBITDA reached ¥646 million, translating to a 14.2% EBITDA margin, and operating margin stood at approximately 6.1%. DuPont decomposition indicates a calculated ROE of 4.54% driven by a 4.08% net margin, 0.493x asset turnover, and 2.26x financial leverage. Operating cash flow was strong at ¥1,137 million, yielding an OCF/Net Income ratio of 6.11x and signaling high earnings cash conversion in the period. Liquidity appears adequate with a current ratio of 1.28x and working capital of approximately ¥813 million. The capital structure is balanced: total liabilities of ¥4,764 million versus equity of ¥4,096 million implies a debt-to-equity ratio of 1.16x and an equity ratio around the mid-40% range by calculation. Interest expense was minimal at ¥1.49 million, yielding an exceptionally high interest coverage of roughly 188x, and financial risk from interest costs appears low. Ordinary income of ¥283 million was slightly above operating income, indicating a modest net non-operating gain. The effective tax rate implied by income tax expense (¥57 million) and ordinary income suggests roughly 20% for the period, despite the “0.0%” metric presented in the summary. Several disclosures are unreported in XBRL (e.g., cash and equivalents, investing cash flow, DPS), constraining full free cash flow and dividend assessments. Overall, the company’s growth trajectory and cash conversion are favorable, but ROE remains modest and the low operating margin leaves some sensitivity to cost inflation or demand volatility. Data limitations, including certain zeros that reflect non-disclosure rather than actual zero values, should be noted when interpreting coverage and payout metrics.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 4.08%
• asset_turnover: 0.493
• financial_leverage: 2.26
• calculated_ROE: 4.54%
• commentary: ROE of 4.54% reflects modest profitability on a moderate asset base and average leverage. ROA approximates 2.0% (NPM × AT), with equity multiplier lifting overall ROE. margin_quality:
• gross_margin: 51.2% (based on gross profit of ¥2,334m and revenue of ¥4,559m)
• ebitda_margin: 14.2%
• operating_margin: 6.1%
• net_margin: 4.08%
• notes: Disclosed gross profit and gross margin imply a high-value service mix. The provided cost of sales figure appears inconsistent with gross profit; analysis relies on the disclosed gross profit and margin. operating_leverage: Revenue grew 35.7% YoY while operating income grew 76.9% YoY, indicating positive operating leverage from scale and cost control. Depreciation of ¥366m suggests a meaningful fixed cost base; nonetheless, incremental margins improved this quarter. other_observations: Ordinary income slightly exceeded operating income (+¥3m), suggesting limited non-operating distortion. Interest expense is negligible, so margins are not flattered by capitalized interest or low financing costs.

Growth Assessment

revenue_sustainability: The 35.7% YoY revenue growth indicates strong momentum, likely driven by expanded client adoption and increased utilization of EAP/stress-check and related services. Sustainability will hinge on client retention, contract renewals, and cross-sell within existing corporate accounts. profit_quality: OCF of ¥1,137m versus net income of ¥186m (OCF/NI = 6.11x) points to strong cash realization of earnings in the half, possibly aided by favorable working capital inflows. EBITDA growth and improved operating leverage support the quality of earnings. outlook: With operating leverage evident and non-operating items minor, incremental profitability could continue if revenue growth persists and cost discipline holds. Key sensitivities include HR cost inflation (counselors/clinicians), contract timing, and regulatory-driven demand cadence. Near-term outlook is cautiously favorable, subject to normalization of working capital.

Financial Health

liquidity:

• current_ratio: 1.28x
• quick_ratio: 1.28x (no inventories disclosed)
• working_capital: ¥813m
• commentary: Adequate short-term coverage with room to absorb seasonal swings in receivables and payables. solvency:
• total_assets: ¥9,253m
• total_liabilities: ¥4,764m
• total_equity: ¥4,096m
• equity_ratio_calculated: ≈44.3% (Total equity / Total assets)
• debt_to_equity: 1.16x (liabilities to equity)
• interest_coverage: ≈188x
• commentary: Balance sheet is conservatively positioned with moderate leverage and high interest coverage. The reported equity ratio of 0% is not reflective of actual solvency; it appears unreported rather than zero. capital_structure: Leverage is primarily from non-interest-bearing and/or low-cost liabilities; minimal interest expense suggests limited bank debt burden. Positive financing cash flow indicates capital activity in the period (details not disclosed).

Cash Flow Quality

earnings_quality: High in-period cash conversion with OCF/NI at 6.11x. The gap likely reflects working capital inflows and non-cash charges (¥366m depreciation). free_cash_flow_analysis: Investing cash flow is unreported, preventing a reliable FCF calculation. The summary figure of FCF = 0 should be treated as ‘not disclosed’ rather than economically zero. working_capital: Strong OCF suggests favorable receivables collection or deferred revenue inflows this half. Sustainability of working capital tailwinds should be monitored, as reversals could temper cash conversion in subsequent periods.

Dividend Sustainability

payout_ratio_assessment: EPS was ¥11.89. Dividend per share and payout ratio are unreported in this dataset (values shown as 0.00 indicate non-disclosure). Therefore, a precise payout assessment cannot be made. fcf_coverage: Free cash flow is not derivable due to unreported investing cash flows; FCF coverage of dividends cannot be assessed this quarter. policy_outlook: Without disclosed DPS or stated policy updates, dividend stance remains unclear. If management prioritizes growth and maintains positive financing cash flows, capital may be directed toward investment or balance sheet flexibility in the near term.

Risk Assessment

Business Risks:

• Client concentration and renewal risk in corporate EAP/stress-check contracts.
• Regulatory changes affecting mental health/stress-check requirements and reimbursement frameworks.
• Demand sensitivity to employment conditions and corporate HR budgets.
• Execution risk in scaling counselors/clinicians while maintaining service quality.
• Data privacy and cybersecurity risks due to handling sensitive personal information.
• Pricing pressure and competition from HR-tech/healthcare service providers.
• Project/seasonality timing risk affecting quarterly revenue recognition and cash collections.

Financial Risks:

• Working capital volatility; current period OCF strength may normalize or reverse.
• Dependence on positive financing cash flow this period indicates active capital transactions; lack of detail introduces uncertainty.
• Potential interest rate exposure on any floating-rate borrowings, albeit current interest expense is very low.
• Limited disclosure on cash and equivalents and investing flows reduces visibility into liquidity buffers and capex needs.

Key Concerns:

• Modest ROE (4.54%) despite strong growth suggests room for profitability enhancement.
• Operating margin (6.1%) leaves sensitivity to cost inflation and wage pressures.
• Incomplete disclosures (cash, investing CF, dividends) restrict full assessment of FCF and payout capacity.

Investment Implications

Key Takeaways:

• Strong top-line growth (+35.7% YoY) with evidence of operating leverage (+76.9% YoY OI).
• Healthy gross margin (51.2%) and solid EBITDA margin (14.2%) support unit economics.
• Robust cash conversion (OCF/NI = 6.11x) in the half, likely aided by working capital.
• Balance sheet resilience with calculated equity ratio ≈44% and interest coverage ~188x.
• ROE remains modest at 4.54%, indicating profitability improvement is a key lever.
• Data gaps (cash, investing CF, DPS) limit full FCF and shareholder return analysis.

Metrics to Watch:

• Order intake/renewal rates and client churn.
• Per-customer revenue and service utilization (counseling sessions, stress-check participants).
• Operating margin progression and SG&A efficiency.
• Receivables days, deferred revenue, and OCF sustainability.
• Capex/investing cash flows and any M&A outlays.
• Leverage trajectory and financing cash flow composition.
• Effective tax rate normalization vs. implied ~20%.

Relative Positioning: Within Japan’s EAP/HR-wellness peer set, ARM exhibits attractive gross margins and solid cash conversion but currently modest ROE and operating margins; execution on scale efficiencies and disciplined cost control will be key to improving returns.

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