CUC Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥26.29B
• Operating Income: ¥1.71B
• Net Income: ¥566M
• EPS: ¥20.89

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

Verdict: Strong top-line growth but sharp profit compression and weak capital efficiency characterize FY2026 Q2 for CUC (9158). Revenue rose 21.7% YoY to 262.91, demonstrating healthy demand expansion. Despite a gross profit of 120.84 and a solid gross margin of 46.0%, operating income fell 43.9% YoY to 17.11, indicating significant operating deleverage. The operating margin contracted to 6.5% from roughly 14.1% a year ago, implying about 760 bps of compression. Net income dropped 69.5% YoY to 6.12, with the net margin shrinking to 2.3% from an estimated 9.3% last year, about 700 bps of compression. Profit before tax was 13.97, and the effective tax rate was elevated at 59.5%, further depressing bottom line results. Gross profit (120.84) minus SG&A (106.98) implies 13.86, yet operating income is 17.11, suggesting about 3.25 of other operating income helped cushion results. Finance-related headwinds are likely, as operating income exceeded PBT by 3.14, implying net financial/other costs. Balance sheet shows total assets of 941.40 and equity of 307.23 (equity ratio 32.0%), implying high leverage (liabilities-to-equity 2.06x). Intangibles are substantial: goodwill 136.24 and other intangible assets 41.41 (combined 177.65), equating to about 18.9% of assets and 57.8% of equity, raising impairment sensitivity. Asset turnover is low at 0.279, and with financial leverage of 3.06x, the DuPont ROE computes to 2.0%, aligning with the reported figure. ROIC is weak at 1.4% (below the 5% warning threshold), indicating returns are currently below a typical cost of capital. Cash and equivalents are 133.24, but operating and free cash flows are unreported, limiting earnings quality assessment. Forward-looking, stabilization of the tax rate, tighter SG&A control, and improvement in ROIC and asset turnover will be critical, while monitoring goodwill impairment risk and cost of debt in a higher leverage context.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin (2.3%) × Asset Turnover (0.279) × Financial Leverage (3.06x) = ~2.0% ROE, matching the reported 2.0%. The largest adverse change appears in the net margin: net income fell 69.5% YoY despite 21.7% revenue growth, compressing the net margin by roughly 700 bps (from ~9.3% to 2.3%). Operating margin also contracted materially from ~14.1% to ~6.5% (~760 bps), indicating operating deleverage, as SG&A (106.98; ~40.7% of sales) and other costs outpaced gross profit growth. Business drivers likely include higher personnel and platform costs to support growth, integration costs, and lower-than-expected realized scale efficiencies; additionally, the 59.5% effective tax rate compounded bottom-line pressure. Financial leverage (3.06x assets/equity) is high enough to magnify earnings volatility but did not offset the margin deterioration. Sustainability assessment: the elevated tax rate looks non-structural and could normalize, partially lifting net margins; however, the step-up in SG&A versus revenue suggests underlying cost pressure that requires management action to be sustainable. Concerning trends: revenue grew strongly (+21.7%) while operating income declined (-43.9%), a classic sign of negative operating leverage; SG&A intensity (~40.7% of sales) is high, and operating income benefited from ~3.25 of other operating income, suggesting some reliance on non-core items.

Growth Assessment

Revenue growth of +21.7% YoY to 262.91 indicates solid demand and likely continued share gains or service expansion. However, profit growth quality is weak: operating income fell 43.9% YoY to 17.11 and net income fell 69.5% to 6.12, reflecting significant cost pressure and/or mix headwinds. Gross margin is healthy at 46.0%, but operating margin deterioration to 6.5% implies SG&A growth outpaced gross profit growth. The ~3.25 of other operating income supporting OI highlights non-core help this quarter; underlying operating profitability looks softer. With a 59.5% effective tax rate depressing net, a normalization in taxes could provide a partial uplift near term. Absent cash flow data, the sustainability of growth is uncertain; scaling efficiency and cost discipline are needed to translate top-line momentum into earnings. Near-term outlook depends on SG&A control, pricing/mix improvements, and stabilization of financial/other expenses; medium term requires ROIC improvement from 1.4% toward or above the 7–8% benchmark.

Financial Health

Liquidity: Current assets are 272.61; current liabilities are unreported, so the current ratio cannot be computed (no warning flagged solely from missing data). Cash and equivalents total 133.24, offering a liquidity buffer, though near-term obligations visibility is limited. Solvency: Total liabilities are 634.17 against equity of 307.23, yielding liabilities-to-equity of 2.06x (warning threshold >2.0 crossed). Interest-bearing debt totals at least 316.54 (short-term 30.54 + long-term 286.00); net debt is approximately 183.30 after cash, implying net D/E of ~0.60x. Maturity profile: some short-term debt (30.54) exists; with current assets of 272.61, immediate refinancing risk looks contained, but absence of current liabilities detail limits assessment of maturity mismatch. Asset quality: high goodwill (136.24) and intangibles (41.41) comprise ~57.8% of equity, heightening impairment and covenant sensitivity. Off-balance sheet obligations: none disclosed in provided data.

Cash Flow Quality

Operating cash flow, free cash flow, and capital expenditures are unreported, preventing OCF/Net Income and FCF assessments. Earnings quality flags cannot be conclusively raised, but the divergence between strong revenue growth (+21.7%) and declining operating income (-43.9%) suggests underlying cost pressure that could translate into weaker cash generation if not managed. With elevated tax expense (effective rate 59.5%) and net financial/other costs (~3.14 between OI and PBT), cash conversion could be challenged absent offsetting working capital inflows. Working capital metrics (receivables 129.46; inventories 1.82) suggest a receivables-heavy model; monitoring DSO and collections is important. Without OCF data, signs of working capital manipulation cannot be assessed.

Dividend Sustainability

Dividend data (DPS, payout ratio, total dividends) are unreported, so a payout assessment is not calculable. With ROE at 2.0% and ROIC at 1.4%, internal returns are low; prudent distributions would typically track sustainable FCF, which is also unreported. Net debt of ~183.30 and a liabilities-to-equity ratio of 2.06x argue for balance sheet caution until profitability and cash generation improve. Policy outlook cannot be inferred from the provided data; watch for guidance on shareholder returns tied to FCF and leverage targets.

Risk Assessment

Business Risks:

• Operating deleverage: SG&A intensity (~40.7% of sales) drove OPM down to 6.5% despite 46.0% gross margin.
• Tax rate volatility: effective tax rate at 59.5% depressed net margin to 2.3%.
• Execution risk on scaling: strong revenue growth not translating into profit growth.
• Intangible asset concentration: goodwill 136.24 and intangibles 41.41 increase impairment risk.
• Receivables concentration: accounts receivable 129.46 suggests cash conversion risk if collections slow.

Financial Risks:

• High leverage: liabilities-to-equity 2.06x (above 2.0 warning).
• Net financial/other costs: ~3.14 drag between operating income and PBT.
• ROIC at 1.4% below typical cost of capital, risking value dilution if sustained.
• Partial reliance on other operating income (~3.25) to support OI in the quarter.

Key Concerns:

• Sustained margin pressure could keep ROE near 2% and constrain reinvestment capacity.
• Potential goodwill impairment if performance underwhelms or discount rates rise.
• Limited visibility on liquidity without current liabilities and OCF data.
• Sensitivity to credit conditions given net debt ~183.30 and long-term loans 286.00.

Investment Implications

Key Takeaways:

• Top-line strength (+21.7% YoY) offset by sharp profit compression (OP -43.9% YoY; NI -69.5% YoY).
• Operating margin contracted ~760 bps to 6.5%; net margin down ~700 bps to 2.3%.
• ROE at 2.0% and ROIC at 1.4% indicate weak capital efficiency.
• Leverage elevated: liabilities-to-equity at 2.06x; net debt ~183.30.
• High effective tax rate (59.5%) exaggerated bottom-line decline; potential normalization is a lever.
• Goodwill/intangibles equal ~58% of equity, raising impairment sensitivity.
• Other operating income (~3.25) supported OI; underlying cost base remains heavy.

Metrics to Watch:

• Operating margin and SG&A-to-sales ratio trend each quarter.
• Effective tax rate normalization path and drivers.
• Operating cash flow, FCF, and DSO/receivables turnover once disclosed.
• Net debt trajectory and interest coverage once interest expense/EBITDA are reported.
• ROIC progression versus 7–8% benchmark and any segment-level returns.
• Any signs of goodwill impairment or reassessment of cash-generating units.

Relative Positioning: Versus domestic healthcare/service peers, CUC shows stronger revenue growth but materially weaker operating leverage and capital efficiency this quarter, with higher balance sheet leverage and heavier intangible intensity, leaving it more sensitive to execution on cost control and cash conversion.

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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