Bleach (9162) FY2026 Q2 Earnings Report

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Executive Summary

During the six-month period, the Company reported an operating loss of 0.10B yen, with the profitability of its core business remaining near the breakeven point. Revenue was 87.34B yen, operating income was negative 0.10B yen (a decrease in profit year on year), ordinary income was negative 0.07B yen, and net income was 0.16B yen. The net profit was largely attributable not to core operating earnings but to a gain on the sale of investment securities of 0.38B yen, indicating limited earnings quality.

Factors Affecting Performance

【Revenue】Revenue was 87.34B yen, of which the sharing-based integrated marketing business accounted for 85.28B yen, or 97.6% of total revenue. Revenue from Kabushiki Kaisha R, a single customer, was 30.49B yen, accounting for 34.9% of consolidated revenue, indicating a high degree of customer concentration. The gross profit margin remained at 11.3%, indicating limited earning power relative to the scale of revenue.

【Profit and Loss】Selling, general and administrative expenses of 9.97B yen were nearly equal to gross profit of 9.87B yen, resulting in an operating loss of 0.10B yen. Ordinary income deteriorated further from operating income due to interest expense, resulting in a negative 0.07B yen. Profit before tax of 0.30B yen was primarily attributable to a gain on the sale of investment securities of 0.38B yen; excluding this gain, the Company would also have been in the red at the pre-tax level. Although net income of 0.16B yen was recorded, the earnings structure involved offsetting an operating loss with a temporary extraordinary gain. Overall, the Company is in a revenue growth but profit decline phase with earnings-structure issues resembling a decline in revenue and profit, reflecting deterioration in core business profitability.

Segment Analysis

The core sharing-based integrated marketing business generated revenue of 85.28B yen (97.6% of total revenue) and a segment loss of 0.01B yen, remaining near the breakeven point. Other businesses generated revenue of 2.06B yen and a segment loss of 0.29B yen, with a profit margin of negative 14.1%, representing a substantial loss and weighing on consolidated profitability. Total segment income was negative 0.30B yen, and after incorporating adjustments of 0.20B yen, the consolidated operating loss was 0.10B yen.

Key Financial Indicators

【Profitability】The operating margin was negative 0.1%, the net profit margin was 0.2%, annualized ROE was 0.3%, and annualized ROIC was negative 0.4%, all remaining at low levels. The SG&A ratio of 11.4% was nearly equal to the gross profit margin of 11.3%, meaning that even a slight improvement in gross profit or containment of SG&A expenses could determine operating profitability.【Cash Flow Quality】Operating Cash Flow (OCF) was negative 9.12B yen, representing a significant divergence from net income of 0.16B yen, and the OCF/net income ratio was negative 56.99x, indicating weak cash support for earnings. The accrual ratio was 7.1%.【Investment Efficiency】Annualized total asset turnover was 1.341x, maintaining a certain level, but the low profit margin was depressing ROIC.【Financial Soundness】The Company had a robust liquidity position, with an equity ratio of 73.4%, a current ratio of 450.1%, and a quick ratio of 434.0%. Interest-bearing debt was 7.20B yen, and the debt-to-equity ratio was 0.36x, indicating a conservative capital structure. On the other hand, interest coverage was negative 0.79x, meaning that the Company had not secured sufficient capacity to service interest expenses through operating income.

Cash Flow Analysis

OCF was negative 9.12B yen, investing cash flow was positive 0.25B yen, and financing cash flow was negative 3.58B yen, primarily due to 3.60B yen in debt repayments, resulting in free cash flow of negative 8.86B yen. The primary factors behind the deterioration in OCF were an increase in advances paid of 6.71B yen, an increase in trade receivables of 1.57B yen, and an increase in inventories of 1.05B yen, which were not fully offset by an increase in trade payables of 0.43B yen and other items. Investing cash flow was positive because proceeds from the sale of investment securities of 0.42B yen exceeded capital expenditures of 0.11B yen. Financing cash flow was negative due to repayments of long-term borrowings, and cash and cash equivalents decreased by 12.45B yen from the end of the same period of the previous year to 76.55B yen. Although cash accounted for 58.8% of total assets and the Company retained a substantial cash position, continued monitoring of the pace of decline is necessary if working capital continues to consume funds.

Earnings Quality

Of profit before tax of 0.30B yen, a gain on the sale of investment securities of 0.38B yen was recorded as an extraordinary gain; excluding this gain, the Company was in the red at the pre-tax level. Net income of 0.16B yen reflected a structure in which the operating loss of 0.10B yen was offset by a temporary gain on asset sales and therefore did not reflect recurring earnings power. Non-operating income and expenses were nearly balanced, with non-operating income of 0.16B yen, primarily consisting of interest and dividend income, against non-operating expenses of 0.14B yen, primarily interest expense. OCF was negative 9.12B yen, substantially diverging from net income, while the expansion of working capital through increases in advances paid, trade receivables, and inventories appeared in earnings ahead of cash realization as accruals. Comprehensive income was 0.17B yen, nearly equal to net income of 0.16B yen, indicating a limited impact from valuation differences on other securities.

Shareholder Returns

The Q2 dividend was ¥0 per share, with no dividend paid, and the payout ratio was 0%. Given that OCF was negative 9.12B yen and free cash flow was also negative 8.86B yen, the Company was unable to secure funds for dividends through internally generated funds during the six-month period, and the absence of a dividend was consistent with prioritizing liquidity preservation. No disclosure regarding share repurchases was made, and the total return ratio was not calculated.

Risk Factors

1. Risk of deterioration in the profitability of the core business: The sharing-based integrated marketing business accounts for 97.6% of consolidated revenue but recorded a segment loss of 0.01B yen. Even a slight deterioration in the gross profit margin or an increase in SG&A expenses could expand the consolidated operating loss.

2. Customer concentration risk: Revenue from Kabushiki Kaisha R accounts for 34.9% of consolidated revenue, creating a structure in which changes in the budget or contractual terms of a major customer directly affect business performance.

3. Risk of cash outflows due to increases in working capital: OCF was negative 9.12B yen due to an increase in advances paid of 6.71B yen, an increase in trade receivables of 1.57B yen, and an increase in inventories of 1.05B yen. Although the cash balance of 76.55B yen remains substantial, it decreased by 12.45B yen from the end of the same period of the previous year, requiring close monitoring of the persistence of cash consumption.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

Compared with the median for the IT and telecommunications industry, both the operating margin and net profit margin are substantially below industry levels.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. With an operating margin of negative 0.1% and annualized ROIC of negative 0.4%, improving the profitability of the core business is the most significant issue identified in the financial results. As the gross profit margin of 11.3% and SG&A ratio of 11.4% are nearly equal, even slight changes could determine operating profitability.

2. Net income of 0.16B yen depended on a gain on the sale of investment securities of 0.38B yen. The fact that the Company would have reported a pre-tax loss excluding this temporary factor is important when assessing earnings quality.

3. Although the financial foundation is robust, with a current ratio of 450.1% and an equity ratio of 73.4%, OCF was negative 9.12B yen, and increases in working capital (advances paid, trade receivables, and inventories) were the primary cause of cash outflows. Trends in cash conversion will therefore require monitoring going forward.

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This report is an automatically generated earnings analysis document produced by AI based on XBRL earnings summary data. It does not recommend investment in any specific security. Industry benchmarks are reference information compiled by the Company based on publicly available earnings data. Investment decisions should be made at your own discretion and responsibility, and you should consult a professional as necessary.

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